Corporate Investments
In October 1877, the master of American oil—Standard Oil—sent over a dividend of record-breaking size.
“Five hundred sixty-two thousand five hundred dollars… two million three hundred fifty thousand marks?”
In the original history, Standard Oil had posted a terrifying payout of 13.38 million marks on a capital of only 14.7 million. Here the figures were even more staggering. The vast Texas oil fields Waldemar had delivered lifted the company’s entire earnings; total dividends reached 18.54 million marks, and Waldemar’s own share came to 2.35 million.
The Klondike gold mine, settling its accounts temporarily that same October, sent him another 4.2 million marks. With Aspirin royalties and gold-mine profits both poised to explode, Waldemar’s liquid fortune could only grow larger, never smaller.
The Congo expedition required no more than 420,000 marks. He therefore decided to put the remainder to aggressive work.
Where should I invest?
He weighed the possibilities with care. Best of all would be a stake in the Nobel brothers’ company—sit back and rake in money hand over fist. Unfortunately their firm, like Standard Oil, was unlisted. Every oil monopoly, it seemed, preferred to stay private. A pity.
Ah.
A clever thought struck him. In 1877 the Nobels were already pouring capital into experimental oil tankers and other bold expansions; outside money would be welcome. Why not Russian capital? Because their most important partner, the Russian government, was strained by the cost of the Russo-Turkish War and by the ruble’s collapse on the international markets. Exactly the situation Waldemar had counted on when he set his sights on the firm.
If I offer capital on decent terms right now, even the high-nosed Nobels will not refuse.
Pay a premium if he must; once the shares were his they could never lose money. A company that would one day pump half the world’s oil running at a loss? The world itself would end first.
He went to his mother and told her he wished to invest in the Nobel company. He always sought her out for the simplest of reasons: she was the only adult who listened to him seriously and stood behind him. Victoria, Princess Royal, promised to discuss the matter with the Crown Prince.
Done.
With all due respect to his father, Friedrich III was a man who lived inside his wife’s skirts. If she wanted the deal, the chance of opposition was virtually zero.
A few days later a servant of the Crown Prince conveyed the proposal to the Russian ambassador and returned with word of a favorable reply from St. Petersburg. Waldemar waited impatiently for that reply to turn into action, yet nothing happened. Only after a full month did Ludwig Nobel, principal shareholder of the company, present himself at the Crown Prince’s palace.
“This time, Mother, I would like the palace itself to handle the negotiations.”
Waldemar entrusted the talks to her. They shared no blood with the Russians as they did with the British; any detail that might invite condescension in business had to be eliminated. The palace’s property agent therefore fought the Nobel side tooth and nail over every clause.
The company planned to list the following year, 1878, with a fixed capital of three million rubles—6.48 million marks. Waldemar’s side offered 3.24 million marks for a thirty-percent stake; the Nobels refused outright. After prolonged haggling the two parties settled on the same 3.24 million marks for a twenty-five-percent share. It was, in effect, buying a ticket at a premium, yet no loss. Once the Baku fields were fully running, that stake would be unobtainable at any price.
Waldemar was satisfied and praised the manager. The conscientious Hohenzollern steward, however, remained thoroughly displeased, convinced he had allowed his master to be cheated.
“Your Highness, no matter how I turn it over in my mind, this is a losing transaction.”
“On the contrary—it is an extremely profitable one.”
Waldemar saw no need to explain. Time would prove the result; there was no point wearing out his tongue.
He next sought another target worthy of his capital.
Investing in Edison and sticking a straw into the light-bulb business would be ideal… but that fellow is far too greedy.
Edison had taken three hundred thousand dollars from investors under the pretext of patents, given them a mere sixteen percent, and kept the rest for himself. Extracting profit from such a man was nearly impossible. He was less an inventor than a businessman—closer to a Gilded Age robber baron than to any pure scientist.
Waldemar turned the problem over and over until a new idea formed.
Why not invent the light bulb in Germany?
German technical skill was certainly no inferior to American. Through the eyes of the Crown Prince’s palace he searched the German electrical industry.
“This is it.”
Siemens—the living emblem of German electrical prowess—swam into view.
If I help these people develop the tungsten filament, the light-bulb market is as good as mine.
For a moment he dreamed of conquering the world with electric light. But a dream remained a dream. Tungsten filament was defeated by one stubborn fact: the raw metal was ruinously expensive.
Solve the processing of tungsten and I can open the mines myself.
A tungsten deposit already existed—the Mittersill mine in Austria, Europe’s largest, producing twelve hundred tons a year. After further reflection he changed course and settled on the carbon filament Edison himself had chosen.
I already know bamboo fiber is the answer; no need to wander.
He prepared a complete light-bulb development plan and a business prospectus, then invited Ernst Werner von Siemens, founder of the firm, under the name of the Crown Prince’s palace.
“Why has the Crown Princess summoned me?”
Siemens set out for the palace wearing a puzzled expression. In truth he had not the slightest desire to go, yet offending the woman who would one day rule Germany was unwise; he carefully arranged his features into something pleasant.
“Welcome, Doctor.”
In the reception room Siemens found only a young boy.
“Ah… yes.”
He answered absently, still expecting the Crown Princess. The person he was to meet, however, was not her but the boy Waldemar.
“Have you come on account of my mother?”
“Yes. Your Highness summoned me.”
Waldemar smiled.
“You are mistaken, Doctor. I am the one who invited you.”
Siemens’s face flushed.
“Your Highness, you must be joking.”
“I am not.”
Before the doctor’s temper could rise further, Waldemar placed the business plan and the light-bulb development papers before him.
“Before you grow angry, please read these once. If you are still angry afterward, I will invest one hundred thousand dollars in you with no conditions whatever.”
Financial medicine never failed. Dr. Siemens swallowed his irritation and began to scan the documents the boy had handed him. At first his eyes were casual. As the minutes passed they grew intense. At last, after reading the papers through again, he lifted his gaze to the boy.
“Who wrote this?”
“I did, Doctor.”
With those two words the doctor revised his entire opinion of Waldemar—from a merely wealthy child to a partner who actually understood electricity. He discarded his earlier sullenness and faced the prince with genuine seriousness.
“Does Your Highness truly mean to entrust this light-bulb enterprise you have conceived to me?”
“Of course. Otherwise I would never have invited you.”
Siemens did not hesitate. Before he was an engineer he was an excellent businessman; he grasped the full value of the light-bulb trade at once.
“Very well. I accept Your Highness’s proposal. How large an investment will you make?”
To that clean decision Waldemar answered with equal generosity.
“Let us begin with one million six hundred eighty thousand marks.”
Converted, four hundred thousand dollars.
In 1877 Siemens was still a personal partnership; even a generous valuation of its assets did not exceed five million marks. To Siemens himself, 1.68 million was nearly half the firm’s entire worth. With that much fresh capital pouring in, he could manufacture not merely light bulbs but their ancestors.
Conversation soon turned to equity. On this point Waldemar chose to yield.
Even without the light bulb, Siemens will be a company capitalized at thirty-five million marks in twenty years. Call the extra a premium.
He asked only twenty-five percent for his 1.68 million marks—astonishingly generous terms from Siemens’s viewpoint. One additional condition, however, accompanied the deal: whenever Siemens required further capital, Waldemar’s funds were to be accepted first.
“I agree.”
They reached accord with surprising ease. Waldemar could scarcely imagine how vast Siemens would become once it held the light bulb, the radio, and everything that followed.
Calling it the Nvidia or Google of this age would not be exaggeration.
In time he might raise several such giants. Would the capitalists of Britain and America simply watch Germany grow?
Perhaps my interference will only hasten the day Germany finds itself isolated in the international community.
The thought crossed Waldemar’s mind unbidden.