Financial History 143 Fall 2022 - Page 14

Thrift : The Concealed Weapon of the Value Investor
“ The cause of panics invariably was a lack of money , and , from 1865 to the end of her days , she never lacked money .”
— Boyden Sparkes and Samuel Taylor Moore
Hetty Green ’ s thriftiness was legendary . Despite her exceptional wealth , she spent much of her life renting rooms in modest boarding houses in Brooklyn and Hoboken . Her business headquarters consisted of little more than an unreserved rolltop desk at the Chemical Bank , and she spent almost nothing on accessories .
Her critics failed to appreciate the important principle underlying her thrift — a principle she learned from her father . She explained it by recounting how she once saw her father reject a gift of a 10-cent cigar . When asked why , he replied , “ I smoke four-cent cigars and I like them . If I were to smoke better ones , I might lose my taste for the cheap ones that I now find quite satisfactory .” The principle embedded in this response is that luxuries provide no satisfaction until one becomes conditioned to their presence .
Thrift is a powerful weapon for investors . Those who practice it experience little fear during financial panics because they know they can live comfortably on almost no income . High society women mocked Hetty ’ s aversion to luxuries , yet many wished they had adopted her habits when they were forced to sell their possessions during financial panics . On such occasions , Green was among the few individuals with spare cash . For this reason , investors , companies and even city governments relied on her as a lender of last resort during hard times .
Portrait of Hetty Green , dated 1897 .
the family business . Each day , Hetty read them aloud to Gideon , and she later credited much of her business education to these daily sessions . Gideon passed away when Hetty was 13 , at which point Hetty ’ s perfect eyesight and burgeoning financial acumen attracted her father ’ s attention . She immediately became her father ’ s eyes , while also learning the practical elements of business management by shadowing him on his daily visits to the New Bedford docks . By the time Hetty turned 15 , her financial acumen rivaled that of her father .
A Fish Out of Water
In her late teens , Hetty attended multiple boarding and finishing schools . The consistent theme during her late childhood was her rejection of societal norms . She cared little for her appearance , preferring to dress in old clothes . Her behavior frustrated her mother and Aunt Sylvia , as they feared what the future held for a woman who only felt at home on the docks of New Bedford .
When Hetty turned 20 , Sylvia pressured her to find a spouse . Begrudgingly , Hetty journeyed to New York City to mingle with the upper crust of New York society . She attended many lavish balls but expressed little interest in finding a husband . Her relatives were exasperated when Hetty returned several months early to New Bedford with no wedding prospects .
Library of Congress Prints and Photographs Division
Her father , however , was unable to contain his delight upon learning that Hetty spent only $ 200 out of her $ 1,200 budget , investing the remainder in high-quality bonds .
Within a few years of her return to New Bedford , Hetty ’ s father exited the whaling business and relocated to New York City . Hetty spent the next six years shuttling between New York and New Bedford . While residing in New York , she met her future husband , Edward Henry Green , who had amassed a substantial fortune of his own . Her father encouraged the marriage , as he was worried about Hetty ’ s ability to manage the family business independently when he was gone . In May 1865 , Hetty and Edward announced their engagement , and they were married two years later .
The Princess of Whales
Soon after her engagement , Hetty ’ s father and Aunt Sylvia passed away . Although Hetty was the primary beneficiary on both estates , most of the assets were placed into trust , entitling Hetty only to the income . This enraged Hetty because she knew she could invest the assets more effectively and at much lower cost . She was especially angered by Sylvia ’ s will , and she initiated a drawn-out court case disputing its legitimacy . Although never proven , evidence strongly suggests that Hetty forged the signature on an addendum to Sylvia ’ s will , which claimed that Hetty was the direct beneficiary of almost the entire estate . The court rejected Hetty ’ s claim . Exasperated by the lawsuits , Hetty and Edward Green moved to London soon after their wedding in July 1867 .
During her six-year stay in London , Hetty honed her investment skills . One of her more successful investments was in US railroad bonds . It was in this area that her meticulous due diligence proved especially valuable . During the decade following the Civil War , British investors were enamored with American railroad securities , but few could differentiate sound investments from worthless paper . In contrast , Hetty was not easily fooled by slick salesman , nor was she tempted by abnormally high yields .
As if her investment activities were not enough , Hetty also gave birth to two children , Ned and Sylvia . The press would later criticize her parenting , but evidence suggests Hetty cared deeply for
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