The Richest Man Who Ever Lived

The Life and Times of Jacob Fugger

Greg Steinmetz

• Publisher: Simon & Schuster
• Year: 2015
• ISBN:
  9781451688573
• Topic: Business
• Subtopic: Business Biographies
• Index: Business

"A colorful introduction to one of the most influential businessmen in history" ( The New York Times Book Review ), Jacob Fugger—the Renaissance banker "who wrote the playbook for everyone who keeps score with money" (Bryan Burrough, author of Days of Rage ). In the days when Columbus sailed the ocean and Da Vinci painted the Mona Lisa, a German banker named Jacob Fugger became the richest man in history.Fugger lived in Germany at the turn of the sixteenth century, the grandson of a peasant. By the time he died, his fortune amounted to nearly two percent of European GDP. In an era when kings had unlimited power, Fugger dared to stare down heads of state and ask them to pay back their loans—with interest. It was this coolness and self-assurance, along with his inexhaustible ambition, that made him not only the richest man ever, but a force of history as well. Before Fugger came along it was illegal under church law to charge interest on loans, but he got the Pope to change that. He also helped trigger the Reformation and likely funded Magellan's circumnavigation of the globe. His creation of a news service gave him an information edge over his rivals and customers and earned Fugger a footnote in the history of journalism. And he took Austria's Habsburg family from being second-tier sovereigns to rulers of the first empire where the sun never set."Enjoyable…readable and fast-paced" ( The Wall Street Journal ), The Richest Man Who Ever Lived is more than a tale about the most influential businessman of all time. It is a story about palace intrigue, knights in battle, family tragedy and triumph, and a violent clash between the one percent and everybody else. "The tale of Fugger's aspiration, ruthlessness, and greed is riveting" ( The Economist ).

1

SOVEREIGN DEBT

In Renaissance Germany, few cities matched the energy and excitement of Augsburg. Markets overflowed with everything from ostrich eggs to the skulls of saints. Ladies brought falcons to church. Hungarian cowboys drove cattle through the streets. If the emperor came to town, knights jousted in the squares. If a murderer was caught in the morning, a hanging followed in the afternoon for all to see. Augsburg had a high tolerance for sin. Beer flowed in the bathhouses as freely as in the taverns. The city not only allowed prostitution but maintained the brothel.

Jacob Fugger was born here in 1459. Augsburg was a textile town and Fugger’s family had grown rich buying cloth made by local weavers and selling it at fairs in Frankfurt, Cologne and over the Alps, in Venice. Fugger was youngest of seven boys. His father died when he was ten and his mother took over the business. She had enough sons to work the fairs, bribe highway robbers, and inspect cloth in the bleaching fields, so she decided to take him away from the jousts and bathhouses and put him on a different course. She decided he should be a priest.

It’s hard to imagine that Fugger was happy about it. If his mother got her way and he went to the seminary, he would have to shave his head and surrender his cloak for the black robes of the Benedictines. He would have to learn Latin, read Aquinas and say prayers eight times a day, beginning with matins at two in the morning. The monks fended for themselves, so Fugger, as a monk, would have to do the same. He would have to thatch roofs and boil soap. Much of the work was drudgery, but if he wanted to become a parish priest or, better yet, a secretary in Rome, he had to pay his dues and do his chores.

The school was in a tenth-century monastery in the village of Herrieden. Near Nuremburg, Herrieden was a four-day walk from Augsburg or two days for those lucky enough to have a horse. Nothing ever happened in Herrieden and, even if it did, Fugger wouldn’t be seeing it. Benedictines were an austere bunch and seminarians stayed behind the walls. While there, Fugger would have to do something even more difficult than getting a haircut or comb wool. He would have to swear to a life of celibacy, obedience and, in the ultimate irony considering his future, poverty.

There were two types of clerics. There were the conservatives, who blindly followed Rome, and reformers like Erasmus of Rotterdam, the greatest intellectual of the age, who sought to eradicate what had become an epidemic of corruption. We will never know what sort of priest Fugger would become because just before it was time for him to join the monks, Fugger’s mother reconsidered. Fugger was now fourteen and she decided she could use him after all. She asked the church to let Fugger out of his contract, freeing him for an apprenticeship and a life in trade. Years later, when Fugger was already rich, someone asked how long he planned to keep working. Fugger said no amount of money would satisfy him. No matter how much he had, he intended “to make profits as long as he could.”

In doing so, he followed a family tradition of piling up riches. In an age when the elite considered commerce beneath them and most people had no ambitions beyond feeding themselves and surviving the winter, all of Fugger’s ancestors—men and women alike—were strivers. In those days, no one went from nothing to superrich overnight. A person had to come from money—several generations of it. Each generation had to be richer than the one before. But the Fuggers were a remarkably successful and driven bunch. One after the other added to the family fortune.

Jacob’s grandfather, Hans Fugger, was a peasant who lived in the Swabian village of Graben. In 1373, exactly a century before Jacob started in business, Hans abandoned his safe but unchanging life in the village for the big city. The urban population in Europe was growing and the new city dwellers needed clothing. Augsburg weavers filled the demand with fustian, a blend of domestic flax and cotton imported from Egypt. Hans wanted to be one of them. It’s hard to imagine from our perspective, but his decision to leave the village took incredible courage. Most men stayed put and earned their living doing the exact same job as their father and grandfather. Once a miller, always a miller. Once a smith, always a smith. But Hans couldn’t help himself. He was a young man with a Rumpelstiltskin fantasy of spinning gold from a loom. Dressed in a gray doublet, hose and laced boots, he made his way to the city, twenty miles down the Lech River, on foot.

Augsburg is now a pleasant but small city fabled for its puppet theater. A long but doable commute to Munich, it is no more significant in world affairs than, say, Dayton, Ohio. Its factories, staffed by the sort of world-class engineers that keep Germany competitive, make trucks and robots. If not for a university and the attendant bars, coffeehouses and bookstores, Augsburg would risk obscurity as a prosperous but dull backwater. But when Hans arrived it was on its way to becoming the money center of Europe, the London of its day, the place where borrowers looking for big money came to press their case. Founded by the Romans in AD 14 in the time of Augustus, from whom it takes its name, it sits on the ancient road from Venice to Cologne. In AD 98, Tacitus described the Germans as combative, filthy and often drunk, and remarked on their “fierce blue eyes, tawny hair and huge bodies.” But he praised Augsburgers and declared their city “splendidissima.”

A bishop controlled the city when, in the eleventh century, the European economy rose from the Dark Ages and merchants set up stalls near his palace. As their numbers grew, they bristled at the bishop telling them what to do and they chased him to a nearby castle. Augsburg became a free city where the citizens arranged their own affairs and reported to no authority other than the remote and distracted emperor. In 1348, the Black Death hit Europe and killed at least one in three Europeans but miraculously spared Augsburg. This enormous stroke of good fortune allowed Augsburg and other cities of southern Germany to replace ravaged Italy as the focal point of European textile production.

As Hans Fugger approached the city gates and first saw the turrets of the fortification wall, he could be forgiven if he thought Augsburgers did nothing but make fabrics. Bleaching racks covered with cloth spread in every direction. Once inside the gates, he would have been struck by all the priests. The bishop was gone, but Augsburg still had nine churches. Franciscans, Benedictines, Augustinians and Carmelites were everywhere, including the bars and brothels. Hans would also have noticed swarms of beggars. The rich, living in gilded town houses on the high ground of the city’s center, had nine tenths of Augsburg’s wealth and all the political power. They found the beggars unsightly—if not menacing—and passed laws to keep them out. But when the gates opened in the morning and peasants from the countryside streamed in to earn a few pennies sweeping streets or plucking chickens, the guards failed to sort out who was who. The beggars darted by.

Hans registered at City Hall. When he got there, he told the scribe his name. Germans used Latin for official documents and the scribe thought for a moment before coming up with the proper translation for Fugger. He wrote down the letters as they came to him: F-u-c-k-e-r. The registration, now in the city archives, reads Fucker Advenit or Fugger arrives. Fugger historians have enjoyed the laugh ever since.

Hans prospered and soon had enough money to leave the spinning to others. He became a wholesaler, buying cloth from other weavers and selling it at trade fairs. He began a family tradition of advantageous matches by marrying Clara Widolf, the daughter of the head of the weaver’s guild. The weavers were the most powerful commercial group in town. They showed their teeth in 1478 when they forced the execution of a mayor sympathetic to the poor. After Clara died, Hans married the daughter of another guild boss. This woman, Elizabeth Gfatterman, had an astonishing head for trade. She took over the family business after Hans died and ran it for twenty-eight years. It’s interesting to think how far she might have gone if society had given her a fair chance. Women had no political rights and were considered the legal subjects of their parents or husbands. If they engaged in business without a husband, they had to work through front men. As difficult as it was, Gfatterman still managed to bargain with suppliers, negotiate with customers and invest in real estate while, at the same time, raising her children. She made sure her two boys, Andreas and Jacob the Elder, received the training to take her place. Not wanting to dilute the inheritance, she never remarried. She was one of the largest taxpayers in Augsburg when she died.

Augsburg minted its own coins and Fugger’s other grandfather, Franz Basinger, ran the mint. He grew rich watching workers pour molten silver into molds and cast coins one at a time. Jacob the Elder married Basinger’s daughter Barbara. Just months after the wedding, authorities caught Basinger diluting the silver coins—a capital offense in some places—and threw him in jail. Jacob helped pay his debts and get him out. It all worked out for Basinger. Sprung from jail, he fled to Austria and, despite his criminal past, became master of the mint in a city outside the Tyrolean capital of Innsbruck.

Barbara had the same gift for business as her mother-in-law Elizabeth. She and Elizabeth were so remarkable that one can easily argue that they, more than the Fuggers’ male ancestors, gave him his talents. Like Elizabeth, Barbara outlived her husband by nearly thirty years and took the challenging course of remaining a widow. Like Elizabeth, she took the Fugger business to the next level by reinvesting the profits and buying and selling even more cloth than her husband. This would come later. Her immediate job after getting married was to have children.

The Fuggers lived in a three-story town house at the corner where the old Jewish quarter met the commercial center. It stood across from the hall of the weavers’ guild. A street called Jew Hill sloped down behind the house, ending at a canal. The Romans had dug the canals and lined them with wooden beams. At night, when all was quiet, one could hear water running through.

Barbara gave birth to Fugger on March 6, 1459. Jacob the Elder had resisted naming any of his other sons after himself. He yielded with number seven. He didn’t spend much time with his namesake; he died when young Jacob was ten. By then, some of the boys—Ulrich, Peter and George—were already working in the business. Another brother, Markus, was a priest climbing the ranks of the Vatican bureaucracy. Two other brothers had died young. As for the girls—Jacob had three sisters—Barbara was preparing them for good matches.

Fugger looked up to his brothers and envied them and their adventures on the road. His own chance for his adventure came soon enough. After dropping the idea of the church for Fugger, Barbara secured him an apprenticeship in Venice. Venice was the most commercially minded city on earth. It was the way station that linked the Silk Road with the Rhine, where French wine found its way onto boats to Alexandria and Constantinople and where traders swapped pepper, ginger and cotton from the East for horn, fur and metal from the West. Venice was founded on commerce and businessmen ran the place. Money was all anyone talked about. Venetians, wrote the banker and diarist Girolamo Pruili, “have concentrated all their force for trading.” Venice made Augsburg look like a village. Hot, loud and crowded, its population of 200,000 made it one of the largest cities in Europe. Traders shouted at each other from the warehouses that lined the canals. “Who could count the many shops, so well furnished that they look like warehouses,” the priest Pietro Casola wrote in his travel journal. “They stupefy the beholder.” Everyone in Venice prospered. The chronicler Sansovino described how the locals slept on walnut beds behind silk curtains. They ate with silver. Added Casola: “Here wealth flows like water in a fountain.”

The spice trade made it happen. Europeans loved spices, especially pepper, to liven up bland meals and mask the taste of rotten meat. Arabs bought it in India and hauled it to Levantine ports by camel. Venice monopolized the business. Owing to its fortunate location far up the Adriatic coast, it offered the most economical way to reach the rest of the continent. Venice grew wealthy as a middleman. Fugger had no way of knowing it, but he would one day play a role in the system’s destruction.

Naturally enough, Venice became the place where young men went to learn about trade. Well-to-do families sent their children there to discover the secrets of commerce and to make contacts. Fugger said good-bye to his family and set off over the Alps, probably through the Brenner Pass. It took him about two weeks to reach Mestre. From there, he boarded a boat and crossed the lagoon to the main island. After the crossing, Fugger headed to the Fondaco dei Tedeschi, a warehouse where Venetians insisted all the Germans conduct their affairs. They wanted them under one roof to more easily hit them for taxes.

Located smack on the Rialto, the Fondaco was a crowded bazaar with goods piled to the ceilings. “I saw there merchandise of all kind,” wrote the visiting knight Arnold von Hanff. Wrote Casola: “The Fondaco at Venice is so rich in merchandise that it might supply the whole of Italy.” In 1505, well after Fugger’s time in Venice, a fire destroyed the building. When the city rebuilt it, Titian and Giorgione painted murals on the wall facing the Grand Canal and made the Fondaco a destination for art lovers. But in Fugger’s time, the Germans not only worked there but lived there, too. Fugger slept beside his countrymen on a straw-covered floor in the attic. In addition to learning about importing and exporting, he might have made himself useful by packing crates, making deliveries and copying letters. Approaching St. Mark’s from the Ponte della Paglia, Fugger could watch the galleys sailing in from the Bosporus and the Holy Land. He could wonder about the African slaves—the household servants of the rich—in the squares or join other Germans as they hawked pearls and stones at astronomical markups along the Riva degli Schiavoni, the city’s famous promenade. He could hear the trumpets that announced the arrival of every foreign ship.

We know little of Fugger’s years in Venice other than the marks they left. The marks were few but profound. Some were stylistic. Here Fugger picked up a love for the gold beret that became his signature. And it was in Venice that he began to sign letters in the Latin way. He went to Italy as Jacob, knowing only how to read and write. He came back as Jacobo, an international businessman intent on making a splash.

More importantly, it was during this time that he learned about banking. Fugger was to become many things in the ensuing years—an industrialist, a trader and at times a speculator—but he was foremost a banker. He learned everything he needed to know about banking in Venice. The Italians invented it, as shown by our borrowing of the words credito, debito and even banca. Venice also exposed him to the advantageous craft of accounting. Most of the merchants back in Germany were still jotting down numbers on paper scraps that were never organized. Italians had moved beyond that. Needing more robust methods to handle large, multinational enterprises, Italians developed double-entry bookkeeping, so named because each entry had a corresponding entry to make the books balance. It let them understand a complex business in a quick glance by summarizing the highlights and condensing the value of an enterprise to a single figure, its net worth. Years after Fugger left Venice, the mathematician friar Luca Pacioli wrote the first accounting textbook. Fugger knew all the tricks before Pacioli’s book went to press. He converted his brothers to the system and brought a new level of sophistication to the family business. He gave the rest of Augsburg no choice but to follow. The fact that Fugger, as a teenager, already understood the importance of bookkeeping and how it gave him an edge says something about his intuitive grasp of business. He knew that those who kept sloppy books and overlooked details left money on the table, something he considered unconscionable.

A Venetian ambassador, years later, heard that Fugger had learned his craft in Venice. He replied that Fugger had learned more than Venice could teach: “If Augsburg is the daughter of Venice, then the daughter has surpassed her mother.”

In the same year that Fugger left for Venice, something happened in Augsburg that had monumental consequences for him and his family: The family made its first contact with the Habsburgs, the royal house of Austria. In time, the Habsburgs became Fugger’s biggest customer and Fugger became their counselor and unrivaled financial backer. The relationship was never easy and it almost collapsed several times. But the bond held and became the greatest private-public partnership the world had ever known.

That spring, just after the snow in the Alpine passes melted, the emperor Frederick III left Innsbruck for an important diplomatic mission to Trier on the French border. Frederick rode to meet Charles the Bold, the fantastically rich archduke of Burgundy, and stopped in Augsburg on the way. In addition to serving as emperor, Frederick was the archduke of Austria and the Habsburg family patriarch. The Habsburgs had their roots in Switzerland where, in the eleventh century, a warlord named Radbot of Klettgau built the Castle of the Hawk—“Habsburg” in German—on the road from Zurich to Basel. Europe had dozens of royal families and the Habsburgs were minor leaguers until 1273, when one of their number, Rudolf, became king of the Germans and the inevitable pick to become Holy Roman emperor. Three years later, the family took Vienna, giving them a more pleasant address than the lonely castle in Switzerland. But even then, the family remained weak compared to the great houses of Europe. Rudolf died before becoming emperor, but, truth be told, “emperor” was a grand title that meant little.

Napoleon was supposedly the one who said the Holy Roman Empire was none of the three. It was too debauched to be holy, too German to be Roman and too weak to be an empire. But to make sense of Fugger’s life, it helps to understand how he could exploit this odd creation and why the emperor needed a banker. On paper, the empire united Christian Europe along the lines of the Roman Empire with the emperor serving as the secular equivalent and partner of the pope. But only Charlemagne, the first emperor, approached mastery of Europe. After he died, Europe split into kingdoms that further split into principalities, duchies or whatever other entities had enough military power to stay independent.

By the time Frederick was emperor, the boundaries of the Holy Roman Empire had narrowed to just the eastern part of Charlemagne’s realm and included little more than Germany. It was still big, but the emperor received no funding except from his own estates and thus could only field a small army. This made him easy to ignore, and most everyone did just that. Even in Germany, where the people called him king of the Germans, he was weak because, unlike in the centralized states of France and England, Germany’s provincial lords clung to their independence. The job of emperor was an elected position like the papacy, but the emperor was more of an empty suit than a king. If France or the Turks attacked Germany, the German lords might ask the emperor to lead the defense. But for the most part, th...