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Speaker 1: Pushkin too quick, No, it's perfect, push kid stop, you

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Speaker 1: got it.

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Speaker 2: Once upon a time, in the ancient Swedish town of Kalmar,

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Speaker 2: should I.

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Speaker 3: Put on my pajamas again? Into bed? This is a

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Speaker 3: great story.

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Speaker 2: There lived a man named Ivar Krueger. It is a

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Speaker 2: great story and if you need to get comfortable, get

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Speaker 2: comfortable well. Ivar Krueger went into the family business matches

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Speaker 2: wood matches made I think from the aspen trees in

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Speaker 2: the local forest, though I'm not sure that they were

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Speaker 2: aspen trees. And in the next few decades or man,

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Speaker 2: Evar would become not just a matchmaker matchmaker making a match,

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Speaker 2: He would become a financial innovator. He would pioneer financing

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Speaker 2: so clever that you see it in some of the

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Speaker 2: most brilliant companies of our time, Facebook, Google, Okay. Ivar

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Speaker 2: would use these moves not only to become one of

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Speaker 2: the richest men in the world, but to lend hundreds

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Speaker 2: of millions of dollars to the governments of France and

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Speaker 2: Germany and other European countries to help them rebuild after

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Speaker 2: World War One, until in the end everything burned down

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Speaker 2: because of the matches, not because of the matches because

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Speaker 2: of the finance.

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Speaker 3: I'm Jacob Goldstein II Robert Smith, and this is business history.

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Speaker 3: How would you describe it, youac, It's.

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Speaker 2: A show about the history of business exactly today on

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Speaker 2: the show the Match King Ivar Krueger, a man whose

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Speaker 2: story is about economic growth and financial innovation. It's about

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Speaker 2: the relationship between governments and corporations, and it is about

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Speaker 2: the line. Is the a fine line, I don't know,

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Speaker 2: between creative finance and straight up fraud. It's definitely a line.

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Speaker 3: If R.

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Speaker 2: Krueger became one of the richest, most famous businessmen in Europe,

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Speaker 2: but he remained something of a mystery. He never married,

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Speaker 2: he never had kids as far as we know, and

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Speaker 2: even people who knew him felt like, you know, they

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Speaker 2: didn't really know what was going on.

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Speaker 3: Which is very different than the stories that we've told

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Speaker 3: of rich people in the United States who had fan clubs.

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Speaker 2: Thomas would like talk to any reporter who came to

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Speaker 2: the door. Henry Ford wrote an autobiography relatively early in

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Speaker 2: his life that was very popular, So yes, quite different.

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Speaker 2: There's this really nice description of this kind of aura

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Speaker 2: of mystery from one of the key sources of today's show,

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Speaker 2: This is a series of articles that ran in Fortune

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Speaker 2: magazine in the nineteen thirties by the writer Archibald MacLeish.

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Speaker 2: Robert Smith give us a hit of this.

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Speaker 3: The truth was that few of the few who knew

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Speaker 3: him could describe him well. His face faded out of memory.

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Speaker 3: No one seemed to be able to recall his eyes.

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Speaker 3: Survived was not a head, but a manner, a way

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Speaker 3: of twisting the neck, a gracious, gentle courtesy and speech.

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Speaker 3: What survived was a myth, a man who could talk

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Speaker 3: figures in the four languages of the world until his

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Speaker 3: hearers delighted to believe, a man whom the French bankers

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Speaker 3: had called the charmer of birds birds. I did pause.

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Speaker 3: It's a great journalistics, good writer.

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Speaker 2: I mean, Archibelle McLeish's like a writer writer. I did pause.

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Speaker 2: On the four languages of the world. I mean, obviously

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Speaker 2: it's this very old school eurocentric thing, but I was like, English, French, Spanish, Spanish.

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Speaker 2: You think in German, we don't know. I'm assuming he's

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Speaker 2: not counting Swedish.

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Speaker 3: Here's what we know. Here's what we know about Krueger.

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Speaker 3: In spite of the mystery.

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Speaker 2: He was born in eighteen eighty in Kalmar, this small

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Speaker 2: town on the Baltic Sea, and he always dreamed of

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Speaker 2: getting out of his small town, and he did. He

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Speaker 2: went to the Royal Institute of Technology in Stockholm and

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Speaker 2: became an engineer.

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Speaker 3: If you're an ambitious young.

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Speaker 2: Man in Sweden, then, as I would like to think,

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Speaker 2: now you get out of Sweden and you go to

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Speaker 2: New York City.

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Speaker 3: Of course.

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Speaker 2: He got to New York and worked as a construction engineer.

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Speaker 2: Helped to build the Plaza Hotel.

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Speaker 3: Nice and the Flat Iron Building.

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Speaker 2: Oh good one literally two blocks from here, and maybe

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Speaker 2: my favorite, one of my favorites up there with the

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Speaker 2: Chrysler Building.

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Speaker 3: Yeah, I got it.

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Speaker 2: Highly rated but still underrated. He writes to his parents,

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Speaker 2: Wait and see, I shall do great things. I'm bursting

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Speaker 2: with ideas. I'm only wondering which to carry out first.

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Speaker 3: It's like from the musical Hamilton. Yes, just you wait, He's.

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Speaker 2: Gonna strike a match something something. But there's a catch.

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Speaker 2: So he eventually goes home to Sweden. It's nineteen oh seven.

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Speaker 2: He's in his late twenties and he starts a construction

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Speaker 2: company with his friend, a friend named Paul Tole. They

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Speaker 2: call the company Kruger in toll And. He knows how

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Speaker 2: to build buildings because he's been in New York. He's

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Speaker 2: been on the cutting edge. And so the company does well.

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Speaker 2: They build the stadium for the nineteen twelve Stockholm Olympics

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Speaker 2: and the company is growing. But in nineteen thirteen, a

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Speaker 2: few years later, when Krueger is thirty three years old,

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Speaker 2: he decides to join his family's little match business back

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Speaker 2: in Kalmar. And Sweden as a country has a great

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Speaker 2: match industry. They're the great match producing country of the world.

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Speaker 2: It seems odd to me that that would be the case.

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Speaker 3: Well, they got the trees, right, they got a lot

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Speaker 3: of trees. It's mostly trees. It's mostly tree and then

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Speaker 3: you just have to add something to it the business end.

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Speaker 2: Yes, And in fact, the safety match was invented in

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Speaker 2: eighteen forty four by a Swedish professor.

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Speaker 3: And I guess the thing with.

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Speaker 2: The safety match, which I didn't realize before, is you

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Speaker 2: got the special thing on the side of the box

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Speaker 2: where you strike it.

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Speaker 3: And so the idea is.

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Speaker 2: It only lights if you strike it there, so that

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Speaker 2: it doesn't like catch fire in your pocket on the PoTA. Yeah,

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Speaker 2: but the thing is by this point that technology is ubiquitous. Right,

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Speaker 2: So safety matches are a commodity. And one of the

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Speaker 2: great themes of business history, not just the show but

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Speaker 2: the actual history, is you can't make money selling a commodity.

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Speaker 3: It's very hard to make money selling a commodity.

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Speaker 2: Right, You have to have some move otherwise you're just

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Speaker 2: going to get competed down to the marginal costs and

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Speaker 2: you're never gonna make any money. So Krueger has been

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Speaker 2: in America in at the turn of the century. You know,

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Speaker 2: in the early nineteen hundreds, what's going on there? Consolidation, Right,

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Speaker 2: this is the era of JP Morgan, of the trusts,

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Speaker 2: And so he sees, you know what JP Morgan did

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Speaker 2: to create General.

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Speaker 3: Electric and US Steel.

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Speaker 2: He bought up all the companies and made them one

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Speaker 2: big monopolist.

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Speaker 3: And he's thinking, well, if I take all these little

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Speaker 3: matchbooks and these little matchbook makers, maybe I can be

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Speaker 3: the JP Morgan of Sweden.

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Speaker 2: At least of Swedish matches. Yeah, he's gonna roll him up.

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Speaker 2: And so he starts small. He gets a bank loan

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Speaker 2: and buys seven match factories in Kalmar hometown. And you say,

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Speaker 2: seven match factories and it's a little town. And then

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Speaker 2: you remember, like, oh yeah, it's like remember in our

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Speaker 2: Henry Ford show, Right, what is a factory at this point?

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Speaker 2: It's like a room with some guys making matches and

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Speaker 2: they have presumably some amount of machinery, but it is

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Speaker 2: not some big.

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Speaker 3: High tech thing, right.

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Speaker 2: And then he starts vertically integrating, right, not just buying

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Speaker 2: match factories, but buying the inputs.

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Speaker 3: You know.

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Speaker 2: He buys the chemical companies selling the phosphorus that go

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Speaker 2: into those matches, and he buys vast tracts of forests.

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Speaker 2: And once he has.

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Speaker 3: These, he has leverage over the whole industry. Yeah, because

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Speaker 3: he can go to a match company and say, well,

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Speaker 3: you know, you can go it on your own, but

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Speaker 3: I'm not going to sell you the phosphorus, yeah, or

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Speaker 3: the wood. Sorry, good luck. And it works.

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Speaker 2: He gets bigger and bigger, and in nineteen seventeen he

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Speaker 2: issues a bunch of stock and takes over the last

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Speaker 2: big rival in the Swedish match business company whose name

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Speaker 2: I'm going to because I love it, jng Coping.

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Speaker 3: And Vulcan Vulcan. I mean, that's such a great name,

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Speaker 3: Vulcan Matches. He should keep that name. He should keep

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Speaker 3: that name.

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Speaker 2: Although, as I've said before and I'll say again now,

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Speaker 2: I love the old school companies that just say what

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Speaker 2: they are. And if you're a big Swedish match company,

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Speaker 2: you're gonna call it Swedish match.

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Speaker 3: He really called it Swedish match, Swedish match, Swedish match. Okay,

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Speaker 3: Now he's got his monopoly.

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Speaker 2: Now he is the US Steel but for Sweden and matches,

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Speaker 2: which by the way, is like for pennies, but a

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Speaker 2: lot of pennies.

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Speaker 3: It's a lot of pennies.

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Speaker 2: And he's growing, right, he is, you know, rationalizing the business.

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Speaker 2: As they would say later, he's closing some factor, he's

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Speaker 2: modernizing others. And you know, I'll tell you one thing

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Speaker 2: about Kruger, Like I said, we don't you know, he

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Speaker 2: didn't leave a diary or anything like that, so we

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Speaker 2: don't have like a rich inner life of a guy.

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Speaker 2: But maybe he didn't have a rich inner life. One

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Speaker 2: thing that is very clear by watching his outer life,

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Speaker 2: by watching his actions in the world, is wherever he

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Speaker 2: was and whatever he had, he wanted more. He always

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Speaker 2: wants more, and this is going to be a theme

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Speaker 2: through the story up and spoiler alert down. He just

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Speaker 2: more and more and more. He is a hungry ghost.

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Speaker 2: And so around this time, in order to feed this

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Speaker 2: need for growth for more, he makes a shift that

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Speaker 2: in some ways is not obvious, but it's really profound.

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Speaker 2: And that is this He goes from being a guy

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Speaker 2: using finance to grow his match business to being a

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Speaker 2: guy who like kind of happens to be selling matches,

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Speaker 2: but his real thing is finance.

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Speaker 3: I think everyone discovers this eventually, Like it's not hard

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Speaker 3: to make a match, I imagine, but it's so much

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Speaker 3: easier to make money with money. It is tempting to

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Speaker 3: every business I think we've talked about so far, some

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Speaker 3: have gone too far.

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Speaker 2: Yeah, I mean it reminds me, as you're saying that

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Speaker 2: of like there was some famous bank robber and they said,

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Speaker 2: why do you o banks that?

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Speaker 3: He said, that's where the money is, And it's exactly

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Speaker 3: right for business.

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Speaker 2: The business of money is literally where the money is.

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Speaker 2: So so here's Krueger's first move that makes him a

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Speaker 2: real finance guy comes in nineteen nineteen.

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Speaker 3: He creates a syndicate love that word, And basically what

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Speaker 3: happens is this, The syndicate is this entity, and he

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Speaker 3: gets a bunch of bankers to put money into this bucket,

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Speaker 3: into the syndicate, not in his own company, in the

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Speaker 3: separate syndicate exactly. It is a part. They use this

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Speaker 3: word apart.

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Speaker 2: Swedish Match gets to use the money in the syndicate

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Speaker 2: and the banks have an option to get repaid from

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Speaker 2: the money in the syndicate with interest.

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Speaker 3: It's like alone, but crucially it is not alone. It

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Speaker 3: is not alone.

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Speaker 2: It is it is money in a syndicate that Swedish

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Speaker 2: Match can use. But on Swedish Matches books on its

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Speaker 2: balance sheet it is not reflected as a loan. So

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Speaker 2: this is off balance sheet financing.

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Speaker 3: And a lot of companies had problems with this to

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Speaker 3: this day, where they create these entities where they don't

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Speaker 3: really have to report what's going on. It can hide assets,

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Speaker 3: but it can also hide huge debts.

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Speaker 2: Yes, I mean Enron famously did this. It also was

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Speaker 2: a huge deal in the financial crisis of two thousand

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Speaker 2: and eight. Right banks created these SPVs special purpose vehicles.

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Speaker 3: Yeah, we're even seeing a little bit of it now

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Speaker 3: in data center construction. Little obfuscating where the debts lay.

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Speaker 2: And well, here, Robert, I want you to actually read

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Speaker 2: this thing there's this article that came out in The

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Speaker 2: New Yorker decades later about Krueger, and there's a line

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Speaker 2: about him and how he thought about this stuff that

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Speaker 2: actually made me think of you.

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Speaker 3: A balance sheet was simply a canvas on which to

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Speaker 3: paint a picture in the brightest possible colors. Oh, writers

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Speaker 3: were so good back then, and so good.

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Speaker 2: And you know, a balance sheet is like supposed to

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Speaker 2: be just the basic accounting statement of a business.

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Speaker 3: It is an art. And I've said this again and

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Speaker 3: again and again. Accounting is an art form and his

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Speaker 3: practic practitioners are the great artists of our age.

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Speaker 2: So now Krueger has his canvas, he has his money,

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Speaker 2: He's got his syndicate. What does he do with this,

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Speaker 2: with this off balance sheet money, what doesn't he do

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Speaker 2: with it?

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Speaker 3: I feel like at this point, if we had music,

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Speaker 3: it would be like.

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Speaker 2: Like the black him doing this and that he is

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Speaker 2: expanding his business India, He's speculating in currencies, getting into

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Speaker 2: real estate, he gets into film production. Of course, helps

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Speaker 2: promote the career of a young hat clerk in a

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Speaker 2: Stockholm department store who is named Greta Gustafson, who will

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Speaker 2: later be discovered by Louis Meyer in America and become

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Speaker 2: Greta Garbo, one of the great stars of early Hollywood.

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Speaker 1: Amazing.

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Speaker 2: One other thing that he does with the money, and

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Speaker 2: this is going to be crucial for the long term story,

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Speaker 2: he pays really high dividends on the stock of his

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Speaker 2: two now two key companies of the construction company Krueger

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Speaker 2: and Toll, which has become sort of a holding company,

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Speaker 2: and on Swedish match.

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Speaker 3: And we don't talk a lot about dividends these days,

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Speaker 3: but back then, dividends were really the reason that you

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Speaker 3: own stock. And dividends are just a share of the

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Speaker 3: profits for that quarter. And so there were people for

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Speaker 3: whom investing wasn't buy a stock and sell later at

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Speaker 3: a higher price. It was buy a stock, keep the stock,

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Speaker 3: and get a check four times a year in dividends.

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Speaker 2: Yes, And you know, fundamentally, the promise of buying a

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Speaker 2: stock at the most basic level is not you get

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Speaker 2: to sell it for more later. It's you get a

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Speaker 2: share of the profits. We're so old fashioned that way, yeah,

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Speaker 2: I mean, nobody.

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Speaker 3: Thinks that way anymore.

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Speaker 2: But the point of buying a company is, oh, that

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Speaker 2: company is going to make profits.

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Speaker 3: I'm going to get some of those profits.

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Speaker 2: And in a kind of fundamentals way, the reason a

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Speaker 2: stock price goes up today is because people think the

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Speaker 2: profits in the future are going to be even higher

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Speaker 2: and you'll.

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Speaker 3: Get a bigger share of those profits.

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Speaker 2: So he's paying like fifteen or twenty percent dividends, which

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Speaker 2: is wild, wildly high. I ever see it today and

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Speaker 2: is like neighbors should start making you nervous. Maybe it's

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Speaker 2: the first sign.

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Speaker 3: It seems like a lot. And this is one of

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Speaker 3: the problems that happens with dividends is that if everyone's

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Speaker 3: looking at the money they get back four times a year,

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Speaker 3: you are tempted, as someone who runs a company, to

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Speaker 3: kind of goose that a little bit. Yeah right, you

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Speaker 3: want people to buy into your company, you want your

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Speaker 3: dividend to look good, a nice, big, round even number.

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Speaker 3: We saw this even with General Electric. In our General Electric.

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Speaker 2: Earnings, like the version of it today is earnings, and

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Speaker 2: they want to meet earnings what their expectation is for earnings,

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Speaker 2: which are basically profits, right, So it's working for Krueger.

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Speaker 2: He's paying these high dividends. Everybody loves him. By nineteen

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Speaker 2: twenty two, Swedish match is making something like twenty billion

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Speaker 2: boxes of matches a year and selling most of the

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Speaker 2: matches on planet Earth.

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Speaker 3: Somebody's like, I'm long matches.

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Speaker 2: He is very long matches. You know what he wants

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Speaker 2: with a majority of the planet Earth sales of matches,

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Speaker 2: It's always the same. If he wants more, he wants more.

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Speaker 2: So if it's nineteen twenty two and you're the king

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Speaker 2: of the global match business and you figured out how

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Speaker 2: to use finance and you want more, where do you go?

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Speaker 3: You go to Wall Street, You go to New York City. Yeah, NYC.

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Speaker 3: I mean think of it.

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Speaker 2: Iv Ar Krueger and the New York of the nineteen twenties. Oh,

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Speaker 2: perfect match, Oh nicely done.

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Speaker 3: Thank you.

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Speaker 2: Regulation basically doesn't exist yet. It's a last a fair decade.

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Speaker 2: There is no modern stock market regulation, you know, like

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Speaker 2: we have now. Wall Street is doing great. It's the

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Speaker 2: Jesse liverware. Actually, when I got here, I thought of.

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Speaker 3: Your Jesse living Moore. We talked about this, about this

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Speaker 3: era in the twenties when it wasn't just there was

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Speaker 3: all this money to be made, but everybody, every single person,

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Speaker 3: all the way down to the stock clerk, was pouring

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Speaker 3: money into the markets. The people who were investors, traders,

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Speaker 3: were celebrities. They're all over the newspapers. They thought this

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Speaker 3: was the height of American business in the nineteen twenties.

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Speaker 2: So Krueger gets to this New York, this America, this

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Speaker 2: Wall Street, and he meets a banker named Donald Durant,

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Speaker 2: who is going to be a key figure, his key banker.

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Speaker 2: Durant works at a bank called Lee Higginson, which at

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Speaker 2: the time was a big, prestigious bank, and Durant was

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Speaker 2: a star at Lee Higginson. He'd started out as a

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Speaker 2: stock boy and now, at age thirty four, Durant is

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Speaker 2: a partner. So of course Durant knows about Kruger in

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Speaker 2: toll And Swedish match. Here's the Kruger's in town, and

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Speaker 2: Durant and Kruger meet and unsurprisingly, Ivar Krueger has a plan,

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Speaker 2: and his plan is a way that he can combine

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Speaker 2: the match business and finance at this global, almost absurd scale.

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Speaker 2: It's wildly ambitious. Durant loves it and he invites Krueger

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Speaker 2: to present his plan to the partners at the bank

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Speaker 2: at Lee Higginson. So they set up a lunch meeting

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Speaker 2: at headquarters. It's on Broad Street. You and I have

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Speaker 2: walked down there. It's right around the corner from the

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Speaker 2: New York Stock Exchange. Krueger comes in for the meeting.

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Speaker 2: There's this, you know, long conference table set with silver

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Speaker 2: and crystal. And one detail we do know about Krueger

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Speaker 2: that's really interesting is for meetings like this, he would

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Speaker 2: spend hours rehearsing.

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Speaker 3: He would think about what's small talk? Am I gonna make?

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Speaker 3: Who am I going to greet first? What's my exit?

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Speaker 3: When do I leave?

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Speaker 2: He would practice the key phrases.

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Speaker 3: Over and over.

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Speaker 2: So he comes in ready and he gives the bankers

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Speaker 2: his pitch. He starts with this big sort of macro picture. Okay,

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Speaker 2: it's the you know, it's the early nineteen twenties. European

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Speaker 2: governments are broke and trying to rebuild from World War One, crushed,

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Speaker 2: crushed by what happened, incredibly devastating. So European governments need money.

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Speaker 2: US investors are manic. They're pouring money, as you said,

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Speaker 2: into anything they can.

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Speaker 3: So US investors.

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Speaker 2: Want high returns on their money. They see Europe as

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Speaker 2: this sort of growth opportunity. Krueger wants a monopoly. On

359
00:18:32,200 --> 00:18:36,200
Speaker 2: the match business in Europe matches. He's still a match guy.

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Speaker 3: Yeah, yeah, yeah. And so his plan is to tie

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Speaker 3: all of these things together. Here is his plan.

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Speaker 2: He's gonna raise money from US investors, lend it to

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Speaker 2: European governments, and in exchange for the loans, in addition

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00:18:49,640 --> 00:18:53,400
Speaker 2: to interest repayment with interest, he will make the governments

365
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Speaker 2: give him a monopoly on the match business in their countries.

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Speaker 3: Every cigarette that's smoked will be lit by a Krueger match,

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Speaker 3: a Swedish match.

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Speaker 2: And this is it is a weird you know. Today

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00:19:04,200 --> 00:19:07,320
Speaker 2: there's this international bond market and the idea that you

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Speaker 2: would get a monopoly in exchange for a loan is weird,

371
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Speaker 2: But historically it is not weird. Historically this is a

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Speaker 2: normal way that corporations worked. I mean, the one that

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Speaker 2: came to my mind first was the Bank of England,

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Speaker 2: which was chartered in the late sixteen hundreds as a

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Speaker 2: private bank and it was set up by an Act

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Speaker 2: of Parliament. It got a monopoly on certain banking operations

377
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Speaker 2: in London and in exchange it was created to give

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Speaker 2: a loan to the government.

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Speaker 3: Yeah, companies were special back then and required the King

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Speaker 3: or queen to say yes, you are allowed to do.

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Speaker 2: This, and typically it was you have a monopoly on

382
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Speaker 2: this business early on and even later this I didn't

383
00:19:48,119 --> 00:19:50,840
Speaker 2: know until I was working on this story. The French

384
00:19:51,359 --> 00:19:54,000
Speaker 2: government needed money in the eighteen seventies, I believe, after

385
00:19:54,040 --> 00:19:57,880
Speaker 2: the Franco Prussian War, and they created a match monopoly

386
00:19:58,000 --> 00:20:01,320
Speaker 2: in France in the eighteen seventies and essentially leased it

387
00:20:01,359 --> 00:20:05,720
Speaker 2: out in exchange for money. So in this instance, it's

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Speaker 2: good for the government because they can borrow the money.

389
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Speaker 2: It's good for the Natch company because they get a monopoly.

390
00:20:11,720 --> 00:20:13,960
Speaker 2: The this loser is the people paying too much for

391
00:20:14,000 --> 00:20:15,240
Speaker 2: the matches, right, well.

392
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Speaker 3: It's a fraction of a cent, but still, as you say,

393
00:20:17,400 --> 00:20:19,359
Speaker 3: it adds up, it adds up, like they are the

394
00:20:19,680 --> 00:20:24,119
Speaker 3: silent losers here. But Kruger and the bankers and the

395
00:20:24,119 --> 00:20:26,239
Speaker 3: government in this model all get what they want, and

396
00:20:26,280 --> 00:20:30,680
Speaker 3: the bankers love it. They love it. In part because

397
00:20:31,440 --> 00:20:32,560
Speaker 3: Lee Higginson has.

398
00:20:32,480 --> 00:20:36,320
Speaker 2: Never quite been the biggest of the big time lending

399
00:20:36,359 --> 00:20:40,040
Speaker 2: money to governments is that is the top of the game.

400
00:20:40,160 --> 00:20:42,280
Speaker 2: In some ways, a lot of the origin of finance

401
00:20:42,320 --> 00:20:45,440
Speaker 2: over centuries was lending money to the governments and JP Morgan.

402
00:20:46,200 --> 00:20:49,520
Speaker 2: The bank is big. The big player has been the

403
00:20:49,640 --> 00:20:52,360
Speaker 2: large lender, you know, when there have been private lenders,

404
00:20:52,400 --> 00:20:55,880
Speaker 2: And so Liaganson thinks, oh, finally we can like get

405
00:20:55,960 --> 00:21:00,880
Speaker 2: up there. So in nineteen twenty three, with the backing

406
00:21:00,960 --> 00:21:05,040
Speaker 2: of Durant and Lee Higginson, Krueger creates a new corporation

407
00:21:05,280 --> 00:21:08,399
Speaker 2: to carry out his plan. What Swedish Match isn't good enough,

408
00:21:09,040 --> 00:21:12,480
Speaker 2: I think Swedish Match but international.

409
00:21:13,359 --> 00:21:17,280
Speaker 3: Global match, International match, international match.

410
00:21:17,480 --> 00:21:20,320
Speaker 2: Technically controlled by Swedish Match, which in turn is technically

411
00:21:20,320 --> 00:21:23,640
Speaker 2: controlled by Krueger in toll And frankly, Ivar Krueger is

412
00:21:23,680 --> 00:21:26,560
Speaker 2: the only one who really understands what's going on, which

413
00:21:26,600 --> 00:21:28,960
Speaker 2: is going to be important. But the bankers for now

414
00:21:28,960 --> 00:21:31,480
Speaker 2: they don't care. They're happy they're selling the bonds to

415
00:21:31,520 --> 00:21:34,520
Speaker 2: fund international match. That people buying the bonds are happy

416
00:21:34,520 --> 00:21:36,359
Speaker 2: because the bonds are paying six and a half percent.

417
00:21:36,840 --> 00:21:40,400
Speaker 2: And Kruger is happy because he's in control and now

418
00:21:40,440 --> 00:21:45,560
Speaker 2: he has more. And so Evar does what he does best,

419
00:21:46,400 --> 00:21:50,720
Speaker 2: comes up with a new, shady but technically legal kind

420
00:21:50,720 --> 00:21:54,280
Speaker 2: of finance that is going to be really popular for decades,

421
00:21:54,359 --> 00:21:56,760
Speaker 2: maybe a century to come. He's done it already with

422
00:21:56,960 --> 00:21:59,399
Speaker 2: off balance sheet financing, and now he's going to do

423
00:21:59,480 --> 00:22:02,240
Speaker 2: it with offshore tax havens.

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00:22:02,359 --> 00:22:05,920
Speaker 3: Oh what would have been offshore at that time? Not Panama,

425
00:22:06,160 --> 00:22:07,760
Speaker 3: British Virgin Islands.

426
00:22:07,480 --> 00:22:11,280
Speaker 2: Jersey Islands, good guests, Uh Bambas lickten style.

427
00:22:12,119 --> 00:22:18,960
Speaker 3: Classic's more continental. You're thinking Liechtenstein. So don't you even

428
00:22:19,000 --> 00:22:20,960
Speaker 3: say it Liechtenstein. Lichtenstein.

429
00:22:21,240 --> 00:22:26,399
Speaker 2: He creates the Continental Investment Corporation, which, as far as

430
00:22:26,440 --> 00:22:29,760
Speaker 2: I'm concerned, just call it offshore taxhaven Inc. Just call

431
00:22:29,800 --> 00:22:31,120
Speaker 2: it shady but legal. Ink.

432
00:22:31,200 --> 00:22:33,600
Speaker 3: Yeah, there's fourteen people Liechtenstein, and they're all on his

433
00:22:33,920 --> 00:22:34,679
Speaker 3: secret board.

434
00:22:35,440 --> 00:22:37,399
Speaker 2: In fact, he puts an ad in the paper and

435
00:22:37,480 --> 00:22:39,040
Speaker 2: hires some random guy to run it.

436
00:22:39,400 --> 00:22:43,560
Speaker 3: Are you joking? That's what happens to this day, is it?

437
00:22:44,160 --> 00:22:46,400
Speaker 3: This is what happens with the offshore with with offshore

438
00:22:46,480 --> 00:22:49,040
Speaker 3: corporations to this day. There's people who live in these

439
00:22:49,080 --> 00:22:51,840
Speaker 3: tiny island countries who just join everyone's.

440
00:22:51,440 --> 00:22:54,120
Speaker 2: Boards and they got a po box. And to be clear,

441
00:22:54,160 --> 00:22:57,200
Speaker 2: he's doing this because he makes a deal with Lichtenstein

442
00:22:57,440 --> 00:23:00,480
Speaker 2: where he pays low taxes. There right, he has a

443
00:23:00,520 --> 00:23:03,080
Speaker 2: low tax rate, and so to the extent he can

444
00:23:03,160 --> 00:23:07,160
Speaker 2: shift his profits from wherever he's doing his deals to Lichtenstein,

445
00:23:08,400 --> 00:23:09,560
Speaker 2: he lowers.

446
00:23:09,200 --> 00:23:10,200
Speaker 3: His tax exposure.

447
00:23:10,320 --> 00:23:13,679
Speaker 2: And this made me think of Ireland. You know you

448
00:23:13,720 --> 00:23:16,840
Speaker 2: heard about this a lot, maybe ten years ago. I

449
00:23:16,920 --> 00:23:19,919
Speaker 2: was reading this, actually this Brookings Institution report. When I

450
00:23:19,920 --> 00:23:20,920
Speaker 2: was looking at this face.

451
00:23:20,880 --> 00:23:22,960
Speaker 3: Take it back at night, fucked on the hand reading

452
00:23:22,960 --> 00:23:27,479
Speaker 3: the Brookings Institution, Yes, from a few years ago about Apple,

453
00:23:27,520 --> 00:23:28,520
Speaker 3: and it said at one.

454
00:23:28,359 --> 00:23:32,840
Speaker 2: Point sixty percent of the profits that Apple earned outside

455
00:23:32,880 --> 00:23:37,440
Speaker 2: of the US were earned in Ireland somehow magically.

456
00:23:37,600 --> 00:23:40,480
Speaker 3: To be clear, they don't make the iPhone in Ireland, no,

457
00:23:40,480 --> 00:23:43,359
Speaker 3: nor do they sell sixty percent of their xus stuff

458
00:23:43,359 --> 00:23:47,240
Speaker 3: in Ireland. They would move their assets, their intellectual property

459
00:23:47,240 --> 00:23:48,800
Speaker 3: assets which you don't have to put on a ship.

460
00:23:49,200 --> 00:23:50,840
Speaker 3: They would just say, oh, this is part of our

461
00:23:50,960 --> 00:23:55,440
Speaker 3: Irish subsidiary. So any profits made off of this are

462
00:23:55,520 --> 00:23:59,120
Speaker 3: Irish profits and they got a tax deal from the

463
00:23:59,200 --> 00:24:00,200
Speaker 3: Ireland part of it.

464
00:24:00,720 --> 00:24:03,320
Speaker 2: There was a move called the Double Irish where somehow

465
00:24:03,359 --> 00:24:06,520
Speaker 2: there were two different Irish companies that some companies would do.

466
00:24:06,560 --> 00:24:09,400
Speaker 2: There was one the double Irish with a Dutch sandwich,

467
00:24:09,440 --> 00:24:12,080
Speaker 2: where you put a Dutch company in the middle. A

468
00:24:12,560 --> 00:24:15,400
Speaker 2: thing I don't know, you're less about this. Now it's

469
00:24:15,440 --> 00:24:17,760
Speaker 2: not the active thing that it was, but it's it's

470
00:24:17,800 --> 00:24:22,320
Speaker 2: a perennial favorite. So now Krueger sends the money he

471
00:24:22,480 --> 00:24:27,000
Speaker 2: raised from the international match stocks to Continental, uses some

472
00:24:27,080 --> 00:24:31,320
Speaker 2: of the money to pay those high dividends, pay some debts,

473
00:24:31,960 --> 00:24:35,399
Speaker 2: and you know, at this point, it's starting to feel

474
00:24:35,440 --> 00:24:37,320
Speaker 2: like it's not a Ponzi scheme.

475
00:24:37,359 --> 00:24:40,240
Speaker 3: He's selling matches, but it's Ponzi adjacent.

476
00:24:40,359 --> 00:24:43,480
Speaker 2: Right when you're raising money and sticking it here and

477
00:24:43,520 --> 00:24:45,240
Speaker 2: then using your newly raised money.

478
00:24:45,000 --> 00:24:47,720
Speaker 3: To pay off your debts, gets a little gets a

479
00:24:47,720 --> 00:24:48,440
Speaker 3: little worrisome.

480
00:24:48,880 --> 00:24:53,880
Speaker 2: So he's gonna make one more move, another pioneering move

481
00:24:54,440 --> 00:24:56,480
Speaker 2: that this one today doesn't even seem shady when he

482
00:24:56,480 --> 00:24:57,439
Speaker 2: did it, it seems shady.

483
00:24:57,480 --> 00:24:58,120
Speaker 3: And that is this.

484
00:24:59,640 --> 00:25:03,000
Speaker 2: He needs more money, wants to sell stock, not not

485
00:25:03,160 --> 00:25:05,960
Speaker 2: borrow it as debt. But he needs to keep control

486
00:25:06,040 --> 00:25:08,960
Speaker 2: because weird stuff is happening on the books. He can't

487
00:25:08,960 --> 00:25:11,159
Speaker 2: have like somebody buy a PLF of his company and

488
00:25:11,200 --> 00:25:12,480
Speaker 2: be like, I want to see the book, because the

489
00:25:12,480 --> 00:25:14,760
Speaker 2: books aren't looking good at this point. It's a canvas.

490
00:25:15,320 --> 00:25:18,920
Speaker 3: So he sells stock, which obviously means you own part

491
00:25:18,920 --> 00:25:19,399
Speaker 3: of the company.

492
00:25:19,400 --> 00:25:21,199
Speaker 2: But he said, yeah, you can buy the stock, but

493
00:25:21,240 --> 00:25:23,640
Speaker 2: you're not going to get control of the company. You're

494
00:25:23,640 --> 00:25:26,480
Speaker 2: only going to get one one thousandth of a vote

495
00:25:26,520 --> 00:25:28,720
Speaker 2: per share, and I get one vote per share. This

496
00:25:28,760 --> 00:25:30,960
Speaker 2: is called the dual class stock structure.

497
00:25:31,080 --> 00:25:33,160
Speaker 3: This must have been amazing at the time. We accept

498
00:25:33,160 --> 00:25:35,600
Speaker 3: it now with technology companies because we're like, oh, well,

499
00:25:35,600 --> 00:25:38,200
Speaker 3: the genius founder needs to keep control of the company,

500
00:25:38,359 --> 00:25:42,359
Speaker 3: and people are begging to join high technical.

501
00:25:42,000 --> 00:25:45,760
Speaker 2: Facebook and Google, to say, two very big modern companies

502
00:25:45,800 --> 00:25:48,159
Speaker 2: that went public and said you can buy stock, but

503
00:25:48,240 --> 00:25:49,520
Speaker 2: you don't get to tell us what to do with

504
00:25:49,560 --> 00:25:50,040
Speaker 2: the company.

505
00:25:50,280 --> 00:25:53,440
Speaker 3: Seems normal now, but back then then, ye, back then,

506
00:25:53,640 --> 00:25:56,960
Speaker 3: like that was part of the covenant of buying a stock.

507
00:25:57,080 --> 00:26:01,120
Speaker 2: Yeah, and reasonably so you are buying ownership in the company.

508
00:26:01,280 --> 00:26:02,879
Speaker 2: You own part of the company. He's like, yeah, you

509
00:26:02,880 --> 00:26:04,560
Speaker 2: can own part of it, but you don't get to

510
00:26:04,600 --> 00:26:07,200
Speaker 2: tell me what to do. And people love it. People

511
00:26:07,280 --> 00:26:09,520
Speaker 2: think Ivar Krueger is a genius. Like with like with

512
00:26:09,600 --> 00:26:12,240
Speaker 2: tech founders. Today, people buy up these kind of second

513
00:26:12,280 --> 00:26:15,000
Speaker 2: class shares and Kruger doesn't have to tell anybody what

514
00:26:15,080 --> 00:26:18,359
Speaker 2: he's doing, you know, and there are not rules that

515
00:26:18,400 --> 00:26:20,320
Speaker 2: require him to do so. Another thing we're not used

516
00:26:20,320 --> 00:26:20,800
Speaker 2: to today.

517
00:26:20,880 --> 00:26:21,080
Speaker 3: Right.

518
00:26:21,640 --> 00:26:23,520
Speaker 2: There are no rules that say you have to have,

519
00:26:23,920 --> 00:26:26,199
Speaker 2: you know, an outside auditor. There are no rules that

520
00:26:26,280 --> 00:26:28,440
Speaker 2: say you have to put out annual reports that say

521
00:26:28,440 --> 00:26:30,919
Speaker 2: these things. You know, he'll put out reports, but they

522
00:26:30,960 --> 00:26:33,800
Speaker 2: say almost nothing. Nobody knows what's going on.

523
00:26:34,320 --> 00:26:37,160
Speaker 3: Because it's nineteen twenties. We haven't had a problem yet.

524
00:26:36,960 --> 00:26:40,800
Speaker 2: We haven't had the big problem that is coming in

525
00:26:40,920 --> 00:26:44,480
Speaker 2: this story. And for Krueger. So he's doing this for

526
00:26:44,520 --> 00:26:47,560
Speaker 2: a couple of years, and in nineteen twenty five his

527
00:26:47,760 --> 00:26:53,520
Speaker 2: big plan starts working. First he makes a deal with Poland, okay,

528
00:26:53,560 --> 00:26:56,160
Speaker 2: so it's a step, gets a twenty year match monopoly

529
00:26:56,200 --> 00:26:58,720
Speaker 2: in exchange for a six million dollar loan. And then

530
00:26:58,760 --> 00:27:05,160
Speaker 2: in nineteen twenty six France. France has a financial crisis basically,

531
00:27:05,640 --> 00:27:08,280
Speaker 2: and instead of going to JP Morgan, they go to

532
00:27:08,440 --> 00:27:12,640
Speaker 2: Ivar Krueger. This is a much bigger deal. He promises

533
00:27:12,680 --> 00:27:16,320
Speaker 2: to lend France seventy million dollars in exchange for a

534
00:27:16,440 --> 00:27:19,600
Speaker 2: right to control the French match monopoly for twenty years.

535
00:27:20,000 --> 00:27:22,720
Speaker 3: And the French love to smoke. I just want to

536
00:27:22,720 --> 00:27:27,800
Speaker 3: pause for a moment to say entire countries are propped

537
00:27:27,880 --> 00:27:30,000
Speaker 3: up by little wooden matches.

538
00:27:30,920 --> 00:27:34,320
Speaker 2: It's elegant. There's that meme. What is the meme where

539
00:27:34,359 --> 00:27:36,719
Speaker 2: there's like a building falling down or something of one

540
00:27:36,760 --> 00:27:40,200
Speaker 2: little iron bar and a dude's standing beneath the yah. Yeah,

541
00:27:40,240 --> 00:27:41,880
Speaker 2: but in this case it's seat of an iron bar.

542
00:27:42,440 --> 00:27:44,919
Speaker 2: It's like a bunch of little matches instead of a building.

543
00:27:45,000 --> 00:27:48,840
Speaker 2: It's France. And when Kruger is making these deals, he

544
00:27:48,840 --> 00:27:52,280
Speaker 2: doesn't have seventy million, right, he's promising to get seventy million.

545
00:27:52,520 --> 00:27:54,639
Speaker 2: But he's a hero of the American market, and so

546
00:27:54,640 --> 00:27:56,479
Speaker 2: he can just keep going back to the market and

547
00:27:56,520 --> 00:27:59,639
Speaker 2: in one way or another with his banker Durant at

548
00:27:59,720 --> 00:28:02,800
Speaker 2: Lee Higginson, he can raise more money, and more money,

549
00:28:02,840 --> 00:28:03,400
Speaker 2: and more money.

550
00:28:03,400 --> 00:28:05,679
Speaker 3: He wants more, he can get more. And there is

551
00:28:05,720 --> 00:28:09,200
Speaker 3: this letter Durant writes to Krueger around this time that

552
00:28:09,280 --> 00:28:11,720
Speaker 3: is that is explaining this here give it to us.

553
00:28:11,800 --> 00:28:14,960
Speaker 3: For the third time in about three years, you, Kruger,

554
00:28:15,000 --> 00:28:17,199
Speaker 3: have gone to the public and ask them to double

555
00:28:17,280 --> 00:28:20,280
Speaker 3: overnight the amount of their investment in your company. And

556
00:28:20,359 --> 00:28:23,320
Speaker 3: each time this is met with success. We recall no

557
00:28:23,400 --> 00:28:25,880
Speaker 3: other company with such a record. They're saying, you can

558
00:28:25,880 --> 00:28:26,639
Speaker 3: do anything you want.

559
00:28:27,000 --> 00:28:30,399
Speaker 2: One really interesting thing about this moment is you know

560
00:28:30,640 --> 00:28:34,359
Speaker 2: often people hate bankers, right the banker comes in and

561
00:28:34,440 --> 00:28:37,200
Speaker 2: lends money of the government. Everybody is resentful. At this moment,

562
00:28:38,520 --> 00:28:43,440
Speaker 2: the French love Kruger. They perceive him as their savior.

563
00:28:44,120 --> 00:28:46,680
Speaker 2: The French Prime Minister gives him the Grand Cross of

564
00:28:46,720 --> 00:28:49,880
Speaker 2: the Legion of Honor, and one editorial in a French

565
00:28:49,920 --> 00:28:55,520
Speaker 2: paper says, the French miracle has elevated Ivar Kruger to

566
00:28:55,600 --> 00:28:58,680
Speaker 2: the position of superman of finance.

567
00:28:59,160 --> 00:29:02,120
Speaker 3: Oh, I always love this moment. When we do business history,

568
00:29:02,160 --> 00:29:04,760
Speaker 3: we can just revel in at a moment he's superman.

569
00:29:04,920 --> 00:29:08,160
Speaker 3: He saved France. He's a match genius. He has all

570
00:29:08,280 --> 00:29:10,120
Speaker 3: the money he wants or needs.

571
00:29:10,240 --> 00:29:13,080
Speaker 2: And it will all come crashing down on wars. Later

572
00:29:13,160 --> 00:29:40,880
Speaker 2: in the show, we're back from the ads. Ivar Kruger

573
00:29:41,240 --> 00:29:42,280
Speaker 2: is the king of the world.

574
00:29:42,680 --> 00:29:43,360
Speaker 3: You knew anything.

575
00:29:43,360 --> 00:29:49,640
Speaker 2: He's buying up banks, mines, railroads, timber Paper, buys a

576
00:29:49,680 --> 00:29:53,280
Speaker 2: controlling stake in Erickson, the Swedish shown company which I

577
00:29:53,320 --> 00:29:55,760
Speaker 2: may remember from the flip phone era I do. He's

578
00:29:55,760 --> 00:30:00,200
Speaker 2: buying Rolls. Royce's buys a yacht. He buys a private

579
00:30:00,520 --> 00:30:03,720
Speaker 2: island off of Stockholm, to go to on his yacht,

580
00:30:04,400 --> 00:30:07,640
Speaker 2: buys a penthouse in Manhattan with the rooftop garden, buys

581
00:30:07,680 --> 00:30:11,920
Speaker 2: apartments in Paris and Berlin and Warsaw. He actually has

582
00:30:12,480 --> 00:30:16,760
Speaker 2: greenhouses on the roof everywhere. And that Fortune article that

583
00:30:17,120 --> 00:30:19,960
Speaker 2: I mentioned before talks about how he loved flowers.

584
00:30:21,240 --> 00:30:24,720
Speaker 3: Read it the great passion of Krueger's life. This article

585
00:30:24,760 --> 00:30:27,640
Speaker 3: said he loved lilies of the valley, rosebuds, and a

586
00:30:27,760 --> 00:30:30,120
Speaker 3: rose or an orchid in a narrow jar was a

587
00:30:30,160 --> 00:30:32,680
Speaker 3: necessity on any desk where he might work.

588
00:30:32,960 --> 00:30:36,280
Speaker 2: The desk where he worked at this time was at

589
00:30:36,280 --> 00:30:39,880
Speaker 2: the headquarters of Krugeran toll that he had built in

590
00:30:39,960 --> 00:30:45,200
Speaker 2: this magnificent fashion in Stockholm became known as the match Palace.

591
00:30:45,880 --> 00:30:49,200
Speaker 3: I think in Swedish as the matchstick Palace. I love it,

592
00:30:49,480 --> 00:30:51,520
Speaker 3: but not made out of matches, made out of marble

593
00:30:51,960 --> 00:30:55,920
Speaker 3: columns and you know, bronze sculptures. I did imagine it

594
00:30:55,960 --> 00:30:56,960
Speaker 3: made out of wood actually.

595
00:30:57,000 --> 00:31:00,640
Speaker 2: But he has a silent room where he is not

596
00:31:00,680 --> 00:31:02,560
Speaker 2: to be bothered and no one is to speak with him.

597
00:31:03,040 --> 00:31:03,680
Speaker 3: And in the.

598
00:31:03,640 --> 00:31:08,800
Speaker 2: Boardroom there is this giant mural of Prometheus, the figure

599
00:31:08,840 --> 00:31:11,480
Speaker 2: from Greek mythology, on a winged horse flying down a

600
00:31:11,600 --> 00:31:15,200
Speaker 2: rainbow to bring fire to the people in darkness below.

601
00:31:15,280 --> 00:31:18,920
Speaker 3: Prometheus is perfect, stole fire from the gods, brought it

602
00:31:18,960 --> 00:31:19,960
Speaker 3: to humans.

603
00:31:19,720 --> 00:31:22,760
Speaker 2: Got chained to a rock and sentenced to have a

604
00:31:23,120 --> 00:31:25,760
Speaker 2: vulture eat his liver out every day if I recall correctly,

605
00:31:26,160 --> 00:31:29,120
Speaker 2: Fraternity for Eternity, Like, do you think they didn't know

606
00:31:29,240 --> 00:31:29,840
Speaker 2: that part?

607
00:31:30,200 --> 00:31:31,280
Speaker 3: They knew that part.

608
00:31:31,400 --> 00:31:33,640
Speaker 2: Building the tallest building in the world. You know, we've

609
00:31:33,680 --> 00:31:35,960
Speaker 2: talked about don't do that. But I feel like this one,

610
00:31:36,040 --> 00:31:39,360
Speaker 2: it's right there in the story, Like it's right there

611
00:31:39,400 --> 00:31:40,080
Speaker 2: in the story.

612
00:31:40,320 --> 00:31:42,880
Speaker 3: Maybe it'll work out for me better than it did

613
00:31:42,880 --> 00:31:44,760
Speaker 3: for Premier, because it's not gonna work out for it better.

614
00:31:45,160 --> 00:31:48,720
Speaker 2: So the match Palace opens in twenty eight and you

615
00:31:48,760 --> 00:31:51,840
Speaker 2: know what, if our Krueger wants, he wants more, because

616
00:31:51,840 --> 00:31:56,440
Speaker 2: that's all he's ever gonna want. Next year, October of

617
00:31:56,560 --> 00:32:01,520
Speaker 2: nineteen twenty nine, Krueger gets more. He makes his biggest

618
00:32:01,560 --> 00:32:07,640
Speaker 2: deal yet. The German government agrees to a deal where

619
00:32:07,760 --> 00:32:11,080
Speaker 2: Kruger will loan them one hundred and twenty five million

620
00:32:11,120 --> 00:32:16,440
Speaker 2: dollars trunches fifty million in nineteen thirty the rest in

621
00:32:16,520 --> 00:32:19,400
Speaker 2: nineteen thirty one, and Kruger, of course, doesn't have one

622
00:32:19,440 --> 00:32:21,880
Speaker 2: hundred and twenty five million dollars, because that's not though

623
00:32:21,960 --> 00:32:24,200
Speaker 2: he does business. He'll go to the market and get it,

624
00:32:24,240 --> 00:32:28,400
Speaker 2: which is what he's always done. And so on Wednesday,

625
00:32:28,440 --> 00:32:32,360
Speaker 2: October twenty third, nineteen twenty nine, he in fact raises

626
00:32:32,400 --> 00:32:34,200
Speaker 2: some of the money he's going to need for this deal.

627
00:32:35,400 --> 00:32:39,480
Speaker 2: What comes after Wednesday, October twenty third, nineteen twenty nine.

628
00:32:39,280 --> 00:32:43,240
Speaker 3: Well, Thursday always comes after Wednesday. But I feel like

629
00:32:43,280 --> 00:32:44,800
Speaker 3: it was kind of a dark.

630
00:32:44,600 --> 00:32:47,520
Speaker 2: Thursday, very the darkest the Thursday that could be more,

631
00:32:47,680 --> 00:32:51,080
Speaker 2: No darker October twenty fourth, nineteen twenty nine.

632
00:32:51,440 --> 00:32:52,840
Speaker 3: Black Thursday, Black Thursday.

633
00:32:53,120 --> 00:32:56,480
Speaker 2: The stock market crash that you know started started at

634
00:32:56,520 --> 00:32:59,920
Speaker 2: all shares of Kruger in Toll, the company sort of

635
00:32:59,960 --> 00:33:04,200
Speaker 2: at the top of Kruger's empire, actually are not hit

636
00:33:04,400 --> 00:33:09,280
Speaker 2: so hard. They're down like twelve percent, and Kruger cables

637
00:33:09,320 --> 00:33:11,600
Speaker 2: Durant and says, well, it's bed timing. We just did

638
00:33:11,600 --> 00:33:14,800
Speaker 2: this deal yesterday. But he says, I will cover half

639
00:33:14,880 --> 00:33:19,719
Speaker 2: of your bank's exposure if your investment doesn't recover by

640
00:33:19,720 --> 00:33:22,560
Speaker 2: the end of next year, and essentially is saying, look,

641
00:33:22,600 --> 00:33:26,200
Speaker 2: America is panicking, but it's just superficial. You know, things

642
00:33:26,240 --> 00:33:30,600
Speaker 2: are chugging along over here in Europe. My companies are fine.

643
00:33:31,120 --> 00:33:34,440
Speaker 3: We got this deal in Germany. People will always smoke,

644
00:33:34,600 --> 00:33:36,320
Speaker 3: people will always smoke very good.

645
00:33:36,640 --> 00:33:38,160
Speaker 2: So he still needs to come up with a bunch

646
00:33:38,200 --> 00:33:41,960
Speaker 2: of this money in nineteen thirty for the German deal.

647
00:33:42,200 --> 00:33:46,280
Speaker 2: And amazingly, in April of nineteen thirty, the French repay

648
00:33:46,360 --> 00:33:50,280
Speaker 2: their seventy five million dollar loan ahead of schedule, which

649
00:33:50,280 --> 00:33:53,080
Speaker 2: gives Krueger the money he needs to make that fifty

650
00:33:53,120 --> 00:33:56,040
Speaker 2: million dollar loan to Germany. And we just pause for

651
00:33:56,040 --> 00:33:57,800
Speaker 2: a moment. Yeah, think about the mechanics here.

652
00:33:57,840 --> 00:34:01,120
Speaker 3: So France is paying back the money to Kruger, yes,

653
00:34:01,480 --> 00:34:07,000
Speaker 3: And France is getting the money from Germany, who has

654
00:34:07,080 --> 00:34:09,519
Speaker 3: lost World War One and agreed to pay the money

655
00:34:09,520 --> 00:34:13,040
Speaker 3: back to France largely. Yes, right, Ye, Germany needs money

656
00:34:13,040 --> 00:34:15,720
Speaker 3: and they're getting it from Kruger, who just got the

657
00:34:15,760 --> 00:34:16,480
Speaker 3: money from France.

658
00:34:16,640 --> 00:34:18,600
Speaker 2: Yes. You could draw like a circle, right, It is

659
00:34:18,640 --> 00:34:21,480
Speaker 2: a circle. It goes Germany to France, France to Kruger,

660
00:34:21,560 --> 00:34:25,360
Speaker 2: Krueger to Germany. It's a circle like every banker dreams

661
00:34:25,440 --> 00:34:28,240
Speaker 2: of being in the middle of. And it works, It works.

662
00:34:28,719 --> 00:34:32,440
Speaker 2: Kruger at this time is still making more deals. In

663
00:34:32,480 --> 00:34:38,719
Speaker 2: nineteen thirty he adds Bolivia, Bulgaria, Guatemala, Lithuania, Turkey, and

664
00:34:38,840 --> 00:34:44,560
Speaker 2: Yugoslavia to his portfolio of match monopolies. And then comes nineteen.

665
00:34:44,280 --> 00:34:48,680
Speaker 3: Thirty one, which at this point Kruger has survived the

666
00:34:48,760 --> 00:34:50,960
Speaker 3: main part of the financial crash, But of course the

667
00:34:51,000 --> 00:34:55,400
Speaker 3: depression is coming, yes, and that's when every company is vulnerable.

668
00:34:55,680 --> 00:34:58,640
Speaker 2: Yeah, I mean, and we forget often looking back at

669
00:34:58,680 --> 00:35:02,000
Speaker 2: the depression, we sort of telescope it down and just think, oh,

670
00:35:02,440 --> 00:35:05,600
Speaker 2: nineteen twenty nine crash, great depression, But it really wasn't

671
00:35:05,680 --> 00:35:08,279
Speaker 2: like that, right, Like nineteen twenty nine there was a

672
00:35:08,320 --> 00:35:11,360
Speaker 2: stock market crash, but stock market crashed, you know whatever,

673
00:35:11,560 --> 00:35:14,400
Speaker 2: from time to time. And the key thing that happened

674
00:35:14,440 --> 00:35:16,719
Speaker 2: was things got worse after that. And nineteen thirty one

675
00:35:17,360 --> 00:35:22,040
Speaker 2: is when things are getting really bad. And Krueger needs

676
00:35:22,360 --> 00:35:25,759
Speaker 2: another seventy five million dollars to lend to Germany for

677
00:35:25,840 --> 00:35:29,120
Speaker 2: the second trench, the second you know, chunk of that loan.

678
00:35:30,080 --> 00:35:32,719
Speaker 2: But now he can't make the movie he's always done.

679
00:35:32,760 --> 00:35:35,200
Speaker 2: He can't just go to the capital markets and say

680
00:35:35,239 --> 00:35:37,239
Speaker 2: I knew of our Krueger give me some money and

681
00:35:37,280 --> 00:35:39,680
Speaker 2: we'll all do great. He tries, and he doesn't get

682
00:35:39,800 --> 00:35:43,920
Speaker 2: enough money. And this is the moment when, as far

683
00:35:43,960 --> 00:35:47,200
Speaker 2: as I can tell, for the first time, Krueger crosses

684
00:35:47,239 --> 00:35:52,560
Speaker 2: the line from shady finance to just outright fraud. He

685
00:35:52,600 --> 00:35:56,440
Speaker 2: does it in this amazingly direct way. So he's sitting

686
00:35:56,719 --> 00:35:59,640
Speaker 2: in his office at the Match Palace and he forges

687
00:36:00,880 --> 00:36:04,680
Speaker 2: twenty eight million, six hundred and sixty eight five hundred

688
00:36:05,040 --> 00:36:11,520
Speaker 2: pounds British pounds of Italian bond certificates on paper, on paper,

689
00:36:11,680 --> 00:36:12,680
Speaker 2: on person drive.

690
00:36:14,760 --> 00:36:15,720
Speaker 3: Yes, I don't know.

691
00:36:15,840 --> 00:36:18,280
Speaker 2: I know he's forging the signatures. I know he's forging

692
00:36:18,320 --> 00:36:21,520
Speaker 2: the signatures. And so he has these pieces of paper,

693
00:36:21,600 --> 00:36:25,360
Speaker 2: these stock certificates, and he uses them as collateral. He

694
00:36:25,400 --> 00:36:30,200
Speaker 2: gets a loan from a Swedish bank secured by these bonds.

695
00:36:30,000 --> 00:36:33,800
Speaker 3: Which are as good as money in that world. Sovereign bonds.

696
00:36:33,800 --> 00:36:36,280
Speaker 3: Sovereign bonds are a classic solid collateral.

697
00:36:36,320 --> 00:36:38,719
Speaker 2: I mean, it is amazing to think of the state

698
00:36:38,760 --> 00:36:41,200
Speaker 2: of sort of communications at the time that you could

699
00:36:41,200 --> 00:36:42,440
Speaker 2: actually do this right.

700
00:36:42,520 --> 00:36:44,839
Speaker 3: When if the bank showed them a bunch of paper

701
00:36:45,040 --> 00:36:48,560
Speaker 3: signed with some Italian name, and they're like, oh fine,

702
00:36:48,680 --> 00:36:49,240
Speaker 3: have the money.

703
00:36:49,280 --> 00:36:53,520
Speaker 2: But you know the problem with Krueger is his whole

704
00:36:53,760 --> 00:36:56,520
Speaker 2: universe is always needing more money. It's not just like,

705
00:36:56,520 --> 00:36:59,600
Speaker 2: oh now, I'm fine. He needs more money. So he

706
00:36:59,640 --> 00:37:03,319
Speaker 2: decides he's going to sell his stake in Ericson in

707
00:37:03,400 --> 00:37:05,759
Speaker 2: the phone company. You know, it's a real asset, real

708
00:37:05,800 --> 00:37:10,160
Speaker 2: business making money. And he finds a buyer, an American

709
00:37:10,200 --> 00:37:14,480
Speaker 2: company called It and T the other TNT International Telephone

710
00:37:14,480 --> 00:37:17,040
Speaker 2: and Telegraph. They do business in I don't know, in

711
00:37:17,040 --> 00:37:19,200
Speaker 2: Puerto Rico and in Spain. They're like, okay, great, yeah,

712
00:37:19,200 --> 00:37:23,720
Speaker 2: we'll expand to Sweden. And they send auditors to Sweden

713
00:37:23,800 --> 00:37:25,000
Speaker 2: to look at.

714
00:37:25,160 --> 00:37:27,520
Speaker 3: Erickson's books, to you know, study the balance sheet. That

715
00:37:27,600 --> 00:37:30,799
Speaker 3: beautiful painting. They did not appreciate the beautiful painting. It's

716
00:37:30,840 --> 00:37:33,280
Speaker 3: a little too abstract for them. It's a little too modern.

717
00:37:33,360 --> 00:37:36,960
Speaker 3: It's not sufficiently representational. They see the books and they

718
00:37:37,000 --> 00:37:39,520
Speaker 3: cancel the deal. No, we're not buying whatever this is.

719
00:37:40,160 --> 00:37:44,040
Speaker 2: And Durant, the banker, hears about this, and Kruger's like, no, no,

720
00:37:44,080 --> 00:37:46,960
Speaker 2: it's just some problem with translation. It's fine, there's no

721
00:37:47,000 --> 00:37:50,919
Speaker 2: big deal. Then Kruger like turns white and slums down

722
00:37:50,920 --> 00:37:54,240
Speaker 2: in his chair. So Durant calls in a doctor. He knows,

723
00:37:54,280 --> 00:37:57,800
Speaker 2: you know, Kruger is not doing well, and whatever it leaves.

724
00:37:58,800 --> 00:38:01,240
Speaker 2: And Kruger at this point is clearly in bad shape.

725
00:38:01,280 --> 00:38:04,200
Speaker 2: He's he's answering the phone when nobody calls. He's telling

726
00:38:04,239 --> 00:38:05,600
Speaker 2: people to come in when nobody has.

727
00:38:05,560 --> 00:38:08,360
Speaker 3: Knocked, talking to the flowers. Maybe he is talking to

728
00:38:08,360 --> 00:38:09,000
Speaker 3: the flowers.

729
00:38:09,440 --> 00:38:12,280
Speaker 2: At one point, his housekeeper finds a slip of paper

730
00:38:12,640 --> 00:38:16,640
Speaker 2: where he's written, I am too tired to continue. And

731
00:38:16,719 --> 00:38:20,200
Speaker 2: Durant sees that the business is not going so well.

732
00:38:20,560 --> 00:38:24,400
Speaker 2: There's this four million dollar loan that Kruger doesn't repay.

733
00:38:24,920 --> 00:38:29,400
Speaker 2: There's fifty million dollars in German bonds that are supposed

734
00:38:29,440 --> 00:38:32,080
Speaker 2: to be in the bank and they're not there. And

735
00:38:32,600 --> 00:38:35,960
Speaker 2: Kruger is making excuses, you know, saying yes, yes, whatever,

736
00:38:36,040 --> 00:38:36,960
Speaker 2: It's just some error.

737
00:38:36,960 --> 00:38:37,719
Speaker 3: We'll figure it out.

738
00:38:38,320 --> 00:38:42,440
Speaker 2: And on the morning of March twelfth, Krueger closes the

739
00:38:42,480 --> 00:38:46,279
Speaker 2: blinds of his apartment, lays down on the bed, and

740
00:38:46,320 --> 00:38:48,640
Speaker 2: shoots himself an inch below the heart.

741
00:38:49,280 --> 00:38:52,480
Speaker 3: If our Kruger is dead, we'll deal with the aftermath.

742
00:38:52,760 --> 00:39:15,000
Speaker 4: After the break, we're back in the ads.

743
00:39:15,560 --> 00:39:18,080
Speaker 2: Iv Ar Kruger is dead. It's a huge story around

744
00:39:18,080 --> 00:39:21,800
Speaker 2: the world. There are rumors that he may be isn't dead,

745
00:39:22,080 --> 00:39:24,560
Speaker 2: but he's still a live. Newspaper stories talk about like

746
00:39:24,640 --> 00:39:27,000
Speaker 2: detectives going in to see that he actually is dead.

747
00:39:28,000 --> 00:39:35,640
Speaker 2: And interestingly, Krueger dies a hero and you know, he

748
00:39:35,719 --> 00:39:38,400
Speaker 2: had loaned hundreds of millions of dollars to countries around

749
00:39:38,400 --> 00:39:40,719
Speaker 2: Europe at a time when credit had dried up and.

750
00:39:40,680 --> 00:39:41,720
Speaker 3: They needed the money.

751
00:39:42,560 --> 00:39:46,640
Speaker 2: The London Times called Krueger a man of ambition but

752
00:39:46,880 --> 00:39:50,919
Speaker 2: no vanity. Least of all does personal suspicion light upon

753
00:39:51,000 --> 00:39:55,319
Speaker 2: him in his last day. The Economist I kind of

754
00:39:55,320 --> 00:39:57,279
Speaker 2: feel like should have known better, didn't here read what

755
00:39:57,280 --> 00:39:58,319
Speaker 2: the e commas said about him.

756
00:39:58,760 --> 00:40:02,280
Speaker 3: He was a man of great constructive intelligence and wide vision,

757
00:40:02,320 --> 00:40:05,239
Speaker 3: who planned boldly, yet on a basis which seemed to

758
00:40:05,280 --> 00:40:09,439
Speaker 3: be protected by carefully devised safeguards. It's not h twelve.

759
00:40:09,520 --> 00:40:11,319
Speaker 3: They just don't They just don't know yet. And you know,

760
00:40:11,440 --> 00:40:14,279
Speaker 3: maybe part of this was because so many of those

761
00:40:14,600 --> 00:40:18,040
Speaker 3: rich people that failed during this time had lived really

762
00:40:18,120 --> 00:40:22,160
Speaker 3: like gossip calm worthy lives, had cheated on their wives

763
00:40:22,200 --> 00:40:25,239
Speaker 3: where out with showgirls, were just like throwing around their

764
00:40:25,280 --> 00:40:28,160
Speaker 3: wealth and were not respected individuals. And when they lost

765
00:40:28,160 --> 00:40:31,400
Speaker 3: their money. It seemed like maybe they were asking like.

766
00:40:31,400 --> 00:40:34,520
Speaker 2: The Jesse Livermore story, when was it the Ringling Brothers

767
00:40:34,560 --> 00:40:36,280
Speaker 2: circus for his kid's birthday party?

768
00:40:36,320 --> 00:40:39,240
Speaker 3: Whereas in this case, like because he was so quiet

769
00:40:39,239 --> 00:40:41,520
Speaker 3: and people didn't know him, they just knew his deeds.

770
00:40:42,160 --> 00:40:44,680
Speaker 2: Yes, and I do think the lending money to Europe

771
00:40:44,719 --> 00:40:48,600
Speaker 2: was meaningful, right. It was finance actually doing something useful

772
00:40:48,640 --> 00:40:50,960
Speaker 2: in the world after all of just moving money around

773
00:40:50,960 --> 00:40:56,640
Speaker 2: after a war. So his funeral comes a few days later,

774
00:40:56,960 --> 00:41:00,800
Speaker 2: and you know Durant is there, the banker and Durant

775
00:41:00,880 --> 00:41:04,920
Speaker 2: it's clear still believes in Kruger still believes in what

776
00:41:04,960 --> 00:41:07,640
Speaker 2: they have done together. When I read this, I thought

777
00:41:07,680 --> 00:41:12,680
Speaker 2: of the phrase motivated reasoning. We can use reason to

778
00:41:12,760 --> 00:41:16,440
Speaker 2: convince ourselves to believe whatever it is in our interest

779
00:41:16,680 --> 00:41:19,600
Speaker 2: to believe. Right, it should have been clear to Durant

780
00:41:19,600 --> 00:41:21,520
Speaker 2: that something shady was going on, that there was this

781
00:41:21,600 --> 00:41:26,000
Speaker 2: super opaque set of all these different companies, that only

782
00:41:26,080 --> 00:41:28,359
Speaker 2: Krueger knew what was going on, that he kept needing

783
00:41:28,400 --> 00:41:31,560
Speaker 2: to raise more money, but it was in his interest

784
00:41:31,640 --> 00:41:35,440
Speaker 2: to believe otherwise. And we are all subject to this.

785
00:41:35,600 --> 00:41:37,640
Speaker 2: We all think we are rational, but when we need

786
00:41:37,680 --> 00:41:39,759
Speaker 2: to believe something to go on. We believe what we

787
00:41:39,840 --> 00:41:44,080
Speaker 2: need to believe. So Krueger is dead. He's the only

788
00:41:44,120 --> 00:41:47,880
Speaker 2: guy who understood how his empire worked. Somebody needs to

789
00:41:47,960 --> 00:41:50,000
Speaker 2: untangle it. Right, it is a going concern, and there

790
00:41:50,040 --> 00:41:52,440
Speaker 2: are all these companies that have loan money, that are

791
00:41:52,440 --> 00:41:55,760
Speaker 2: selling matches, that have match monopolies. And so the Swedish

792
00:41:55,800 --> 00:42:00,080
Speaker 2: government brings in an accounting firm Price Waterhouse, a famous

793
00:42:00,080 --> 00:42:03,080
Speaker 2: American accounting firm, to investigate.

794
00:42:03,160 --> 00:42:05,839
Speaker 3: And surprise, they find that it's super shady. He read

795
00:42:05,880 --> 00:42:08,120
Speaker 3: us some hits from their thing crearly. The balance sheets

796
00:42:08,160 --> 00:42:11,759
Speaker 3: grossly misrepresent the true financial position of the companies, and

797
00:42:11,800 --> 00:42:15,160
Speaker 3: the fraudulent entries were made under the personal direction of

798
00:42:15,200 --> 00:42:19,319
Speaker 3: the late mister Krueger. They were lies, of course. Yeah.

799
00:42:19,360 --> 00:42:23,680
Speaker 2: The auditors find all these subsidiaries spread around Europe, most

800
00:42:23,680 --> 00:42:26,520
Speaker 2: of which have no you know, practical business function. They're

801
00:42:26,560 --> 00:42:29,400
Speaker 2: just ways for Kruger to move money around to paint

802
00:42:29,760 --> 00:42:33,520
Speaker 2: his canvas of lies and to the public. This is

803
00:42:33,560 --> 00:42:36,080
Speaker 2: all kind of abstract, right, like it's coming out, but

804
00:42:36,120 --> 00:42:38,560
Speaker 2: it's very accounting e and.

805
00:42:40,280 --> 00:42:44,320
Speaker 3: We know this from covering accounting scandal. It's super hard

806
00:42:44,360 --> 00:42:46,560
Speaker 3: to explain, like well wait, why does it matter whether

807
00:42:46,600 --> 00:42:48,680
Speaker 3: this loan was on this book or that book.

808
00:42:48,800 --> 00:42:51,200
Speaker 2: So there is a moment when it becomes less abstract,

809
00:42:51,280 --> 00:42:55,400
Speaker 2: and that is when investigators seize the match palace that

810
00:42:55,480 --> 00:43:01,000
Speaker 2: headquarters in Stockholm and they find those forged Italian bonds.

811
00:43:01,320 --> 00:43:03,920
Speaker 2: There are actual pieces of paper, less abstract than the

812
00:43:04,040 --> 00:43:09,120
Speaker 2: sort of balance sheet, and amazingly so it makes it

813
00:43:09,160 --> 00:43:12,840
Speaker 2: seem so long ago. Sweden's foreign minister, to ascertain the

814
00:43:13,080 --> 00:43:16,520
Speaker 2: veracity of the bonds, takes these pieces of paper, these

815
00:43:16,560 --> 00:43:20,640
Speaker 2: bond certificates, gets on an airplane and flies to Rome

816
00:43:21,280 --> 00:43:25,719
Speaker 2: and meets with Mussolini signature.

817
00:43:26,080 --> 00:43:27,360
Speaker 3: Yeah, it wasn't actually in signature.

818
00:43:28,440 --> 00:43:30,640
Speaker 2: Yeah are these reel and whistle is like no, I've

819
00:43:30,680 --> 00:43:34,000
Speaker 2: never seen those in in my life. And and in

820
00:43:34,080 --> 00:43:36,440
Speaker 2: factlessly like goes and gets some other documents that have

821
00:43:36,480 --> 00:43:39,160
Speaker 2: the actual signatures, and like on some of the documents

822
00:43:39,160 --> 00:43:40,200
Speaker 2: the signatures.

823
00:43:39,719 --> 00:43:40,839
Speaker 3: Are actually misspelled.

824
00:43:41,400 --> 00:43:45,880
Speaker 2: Sloppy workifar come on, and this story is in papers

825
00:43:45,920 --> 00:43:48,240
Speaker 2: around the world, right, there's pictures of the bond certificates.

826
00:43:48,239 --> 00:43:50,319
Speaker 2: I think you can see it's just a lie. Yeah,

827
00:43:50,440 --> 00:43:54,280
Speaker 2: creative financing, it is a lie. And people around Europe

828
00:43:54,360 --> 00:43:58,160
Speaker 2: are are arrested the Prime Minister of Sweden actually has

829
00:43:58,200 --> 00:44:01,480
Speaker 2: to resign because he had cashed a ten thousand dollars

830
00:44:01,560 --> 00:44:03,840
Speaker 2: check from Kruger and then lied and said he hadn't

831
00:44:03,880 --> 00:44:04,319
Speaker 2: cashed it.

832
00:44:04,640 --> 00:44:05,480
Speaker 3: The stock prices of.

833
00:44:05,480 --> 00:44:09,760
Speaker 2: Krueger's companies, you know, collapse, the companies default on their debts,

834
00:44:09,960 --> 00:44:13,040
Speaker 2: and Durant, the banker, is called to testify.

835
00:44:12,680 --> 00:44:15,440
Speaker 3: Before the US Senate. Here's what they wrote. A time face,

836
00:44:15,480 --> 00:44:19,480
Speaker 3: white lips, twitching, nervous voice. Many times Banker Durant failed

837
00:44:19,480 --> 00:44:22,360
Speaker 3: to remember things, always insisting that he and his partners

838
00:44:22,400 --> 00:44:24,920
Speaker 3: had faith in Krueger up to the time of his death.

839
00:44:25,200 --> 00:44:26,600
Speaker 2: One of the things I want to point out about

840
00:44:26,640 --> 00:44:30,000
Speaker 2: this is it's not just a generic hearing that the

841
00:44:30,120 --> 00:44:33,600
Speaker 2: senators are doing to, you know, be morally superior and

842
00:44:33,640 --> 00:44:36,160
Speaker 2: get in the papers and on the radio. Yes, nineteen

843
00:44:36,239 --> 00:44:41,480
Speaker 2: thirty three, Congress is about to write the securities laws

844
00:44:41,840 --> 00:44:46,120
Speaker 2: that still today are the fundamental architecture of the way

845
00:44:46,200 --> 00:44:46,960
Speaker 2: the stock.

846
00:44:46,719 --> 00:44:48,360
Speaker 3: Market works in America.

847
00:44:48,960 --> 00:44:51,560
Speaker 2: They're about to create the Security as an Exchange Commission,

848
00:44:51,600 --> 00:44:55,800
Speaker 2: the sec They're about to require companies to issue audited

849
00:44:55,880 --> 00:45:00,800
Speaker 2: financial statements to follow generally accepted accounting principles stap GAB

850
00:45:01,280 --> 00:45:06,080
Speaker 2: gab generally accepted accounting principles, not universally.

851
00:45:05,280 --> 00:45:05,919
Speaker 4: Accepted, but.

852
00:45:07,400 --> 00:45:10,160
Speaker 2: They're making the rules that companies still have to follow today,

853
00:45:10,200 --> 00:45:13,600
Speaker 2: and they are making these rules in large part because

854
00:45:13,640 --> 00:45:17,680
Speaker 2: of Ivar Krueger. The Committee report for the Securities Act

855
00:45:17,719 --> 00:45:20,920
Speaker 2: of nineteen thirty three has like two hundred and fifty

856
00:45:20,920 --> 00:45:27,200
Speaker 2: pages about Evar Krueger. So maybe his biggest influence today

857
00:45:27,480 --> 00:45:31,080
Speaker 2: arguably is not the two class share structure off balance

858
00:45:31,080 --> 00:45:35,120
Speaker 2: sheet financing, but the structure of securities law in America

859
00:45:35,239 --> 00:45:39,480
Speaker 2: and the matches and the matches, billions of matches. Krueger

860
00:45:40,280 --> 00:45:43,480
Speaker 2: is one of the most famous villains of one of

861
00:45:43,480 --> 00:45:47,399
Speaker 2: the greediest eras in American history. And before I did

862
00:45:47,400 --> 00:45:50,720
Speaker 2: this story, I just thought he ran a Ponzi scheme.

863
00:45:51,480 --> 00:45:52,839
Speaker 2: That was all I knew about him. Guy who ran

864
00:45:52,840 --> 00:45:53,560
Speaker 2: au Ponzi scheme.

865
00:45:53,920 --> 00:45:56,239
Speaker 3: But that's not correct.

866
00:45:56,800 --> 00:46:00,080
Speaker 2: Like his companies were shady and he was a criminal,

867
00:46:00,160 --> 00:46:03,480
Speaker 2: he was a crook, but his companies were real businesses

868
00:46:04,040 --> 00:46:07,279
Speaker 2: and they continued on after his death. The trustees for

869
00:46:07,400 --> 00:46:11,360
Speaker 2: International Match recovered enough to pay shareholders thirty two cents

870
00:46:11,360 --> 00:46:13,800
Speaker 2: on the dollar. Huge loss, but you know it's the depression.

871
00:46:14,400 --> 00:46:17,759
Speaker 2: Kruger in tol got its investors more than half of

872
00:46:17,800 --> 00:46:19,799
Speaker 2: their money back by nineteen thirty seven.

873
00:46:20,239 --> 00:46:21,320
Speaker 3: Again it's the depression.

874
00:46:21,520 --> 00:46:23,520
Speaker 2: You know, they'd been getting those dividends before thirty two.

875
00:46:23,600 --> 00:46:27,480
Speaker 2: They did, They did, okay, And you know, I think

876
00:46:27,520 --> 00:46:32,680
Speaker 2: the lesson in this story is the line between ponzi

877
00:46:32,719 --> 00:46:35,879
Speaker 2: and real business is subtler than we want to think. Yes,

878
00:46:35,960 --> 00:46:39,680
Speaker 2: he was a fraud, but also he created these these businesses.

879
00:46:40,200 --> 00:46:44,040
Speaker 2: And in fact that case is made most strongly by

880
00:46:44,120 --> 00:46:48,800
Speaker 2: Swedish Match, his first big match play. After Krueger died,

881
00:46:49,440 --> 00:46:53,080
Speaker 2: Swedish Match kept making matches. They eventually got into the

882
00:46:53,080 --> 00:46:56,920
Speaker 2: tobacco business. They started making little nicotine pouches that you

883
00:46:57,040 --> 00:46:59,840
Speaker 2: put in your mouth. You know Zin, Yes, yes, the

884
00:46:59,880 --> 00:47:03,640
Speaker 2: passion Yeah yeah, Rise and grind entrepreneurs love, haven't tried it.

885
00:47:03,760 --> 00:47:07,879
Speaker 2: That is Swedish Match, and partly on the strength of Zin.

886
00:47:08,560 --> 00:47:14,160
Speaker 2: In twenty twenty two, Philip Morris bought Swedish Match for

887
00:47:14,360 --> 00:47:18,759
Speaker 2: sixteen billion dollars huh, and the deal went through. The

888
00:47:18,800 --> 00:47:22,640
Speaker 2: company's books were solid. Yuess Kruger would have been proud,

889
00:47:23,200 --> 00:47:28,319
Speaker 2: very special. Thanks to my friend Lucas Contour composer author Financier,

890
00:47:28,760 --> 00:47:31,480
Speaker 2: who suggested that we do a story about The Match King,

891
00:47:31,880 --> 00:47:34,120
Speaker 2: and I should say the other key source for today's

892
00:47:34,120 --> 00:47:36,480
Speaker 2: show besides the series of articles in Fortune, is a

893
00:47:36,520 --> 00:47:39,960
Speaker 2: more recent book called The Match King by Frank Partnoy.

894
00:47:40,560 --> 00:47:43,840
Speaker 2: Today's show was researched and largely written by our producer

895
00:47:43,880 --> 00:47:47,920
Speaker 2: Gabriel Hunter Chang. The video is edited by Matt Nielsen.

896
00:47:48,000 --> 00:47:53,240
Speaker 2: Yes we're on YouTube watch us who We were edited

897
00:47:53,600 --> 00:47:57,640
Speaker 2: by our showrunner Ryan Dilley. The show's engineered by Sarah Bruguer.

898
00:47:58,440 --> 00:48:01,399
Speaker 2: You can email us at business History at pushkin dot

899
00:48:01,440 --> 00:48:06,239
Speaker 2: fm and please do. My favorite frankly email we've gotten

900
00:48:06,320 --> 00:48:09,680
Speaker 2: lately was from Emmanuel in Tanzania. Emmanuel, great to hear

901
00:48:09,719 --> 00:48:11,719
Speaker 2: from you. Thank you for listening in Tanzania.

902
00:48:12,160 --> 00:48:14,239
Speaker 3: We're just talking about all of the rise and fall

903
00:48:14,320 --> 00:48:16,279
Speaker 3: narratives that we've had on this show. If you know

904
00:48:16,360 --> 00:48:19,560
Speaker 3: of a fall and a rise narrative in business history,

905
00:48:19,640 --> 00:48:21,640
Speaker 3: let us know. We'd love to do that too. Yes,

906
00:48:22,080 --> 00:48:23,439
Speaker 3: we want a fall and rise.

907
00:48:23,480 --> 00:48:26,600
Speaker 2: So business History at Pushkin dot fm or I'm on

908
00:48:27,120 --> 00:48:28,719
Speaker 2: Twitter at Jacob Goldstein.

909
00:48:28,880 --> 00:48:32,719
Speaker 3: I'm on LinkedIn. It's me. I'm at Radiosmith and my

910
00:48:32,840 --> 00:48:36,440
Speaker 3: name is Robert Smith. My name is Jacob Goldstein and Robert.

911
00:48:36,440 --> 00:48:37,960
Speaker 2: I think I speak for both of us when I

912
00:48:37,960 --> 00:48:40,600
Speaker 2: say we're extremely grateful to everyone.

913
00:48:40,520 --> 00:48:43,399
Speaker 3: For listening to this show. So thank you. Please tell

914
00:48:43,400 --> 00:48:46,120
Speaker 3: a friend, and we'll be back next week.