While Rockefeller and Carnegie built monopolies, Hetty Green patiently became the wealthiest woman in the world by taking advantage of the Gilded Age’s speculative excess – buying when others panicked and maintaining ready cash for opportunities.
Warren Buffett might have been talking about how Hetty made her fortune when he said, “cash combined with courage in a crisis, is priceless.” Building a fortune is hard, but doing it in an era when women were systematically excluded from business is near impossible.
Janet Wallach’s biography The Richest Woman in America, highlights Hetty’s timeless capital allocation principles and temperament:
“Never losing faith in America’s potential, she ignored the herd mentality and took advantage of financial panics and crises. When everyone else was selling, she bought railroads, real estate, and government bonds. And when everyone was buying and borrowing, she put her money into cash and earned safe returns on her dollars. Men mocker her and women scoffed at her frugal ways, but Hetty turned her back on them and piled up her earnings.”
Hetty had a way of stirring the pot that reminds me of Charlie Munger. Her reputation for harshness was based on her independence, outspokenness, and disdain for the upper crust of society.
Hetty Green refused to yield to the role of Gilded Age socialite. Indeed, she refused to comply with any stereotype. Defiantly independent, she made her own rules and lived by them, even if she sometimes changed them in midstream.
“She was,” writes Wallach, “a woman alone in a world of envious men.” And she certainly wasn’t going to follow the men. One of the remarkable things about Hetty is that she never looked or acted the part.
A passerby might say she looked as poor as a church mouse, but her clothes were merely a costume to conceal her incredible wealth. Standing in front of the granite building was Hetty Green, the richest woman in America.
While everyone was speculating, she was on the sidelines. Of course, when it came crashing down, she was one of the few with ample cash to pick up the bargains.
Everyone but Hetty seemed to be buying. She did not buy industrials, she said, and never bought with borrowed money. Once in a while she cornered a stock like Reading Railroad, but that was the exception, not the norm. “I don’t believe in speculating as a rule, and I don’t speculate as much as people think.” Her approach was far more cautious: “When good things are so low that no one wants them, I buy them and lay them away in the safe; when owing to some new development, they go up and my shares are so needed that men will pay well for them, I am ready to sell.”
Hetty experienced several financial panics during her lifetime. She believed they offered valuable lessons for the future: “exaggerated expectations, wild speculation, and high leverage would lead to disaster.” Indeed, Hetty’s wisdom was well ahead of its time:
“There’s one reason why we have hard times: money easy coming and easy going. American children are not taught how to save money but how to spend it. Everything they want—give it to them so long as you know the price of the credit. That’s the policy of the modern mother and she is raising a nation of spendthrifts whose one thought is to get what they want when they want it.”
A lot of men thought negotiating with Hetty would be easy. A lot of men were wrong. She didn’t easily suffer fools.
The two men from the Richmond Terminal made her an offer that seemed too good to refuse. She had bought the stock at $70; now it was selling at $100. The officers of the railroad offered to buy her 6,400 shares at $115, fifteen dollars over the market; to seal the deal they showed her a certified check. Hetty wrinkled her nose at the cash and declared she would be willing to sell, but only if they paid her more: she would accept the deal at $125 a share. They declined and left, but soon appeared again. This time they said that if she would agree to support their candidate for president of the railroad, they would sign a contract secured by collateral to buy her shares at $125. Oh no, she sniffed, dismissing their bid, she could not do that: their offer was not in cash. If they wanted her vote, they would have to pay her $130. Further negotiations led to triumph: in true Hetty style, she sold her stock for $127.50.
For Hetty, who always seemed properly positioned for whatever happened, panics were opportunities. “I believe in getting in at the bottom and out at the top,” she often said. “I like to buy railroad stock or mortgage bonds. When I see a good thing going cheap because nobody wants it, I buy a lot of it and tuck it away.”
The Wisdom of Hetty Green
Before deciding on an investment seek out every kind of information about it.
Watch your pennies and the dollars will take care of themselves.
After your business is over you may take your colleague to dinner and the theater, or allow him to take you, but wait until the transaction has been closed and the money paid.
Before making a deal, if anyone is fool enough to offer you the full amount, take it. If you are offered less, tell the man you will give him the answer in the morning. Think the matter over carefully in the evening. If you decide that it will be to your advantage to accept the offer, say so the next day.
In business, generally, don’t close a bargain until you have reflected on it overnight.
The secret of good nursing is common sense, just as common sense is the secret of making money.
What man has done, women can do.
It is the duty of every woman to learn to take care of her own business affairs.
An ordinary gift to be bragged about is not a gift in the eyes of the Lord.
Some young women do better in business than men.
A girl ought to be careful about the man she marries, especially if she has money.
A girl oughtn’t to marry until she’s old enough to know what she’s doing.
When good things are so low that no one wants them, I buy them and lay them away in the safe; when owing to some new development, they go up and my shares are so needed that men will pay well for them, I am ready to sell.
I am always buying when everyone wants to sell, and selling when everyone wants to buy.
If one can buy a good thing at lower cost than it has ever sold for before, he may be fairly sure of getting it cheap.
Every girl should be taught the ordinary lines of business investment.
Railroads and real estate are the things I like. Government bonds are good, though they do not pay
very high interest. Still, for a woman safe and low is better than risky and high.
Common sense is the most valuable possession anyone can have.
The Richest Woman in America is an excellent book.
Still curious? If you like Hetty Green, you’ll love Charlie Munger.