In 18th century Germany, a young coin-and-medals dealer and his family started what was to become one of the most renowned family businesses in the world; 250 years later that same business has over 2,800 employees across 38 countries. The Rothschild Group is amongst the oldest family-controlled investment banks with operations in the MENA region, the Americas, Asia, and of course, in Europe. Since the establishment of the business, the family’s values, principles, and philosophy have been handed down from one generation to another. This ethos is captured in the family motto of ‘Concordia, Integritas, Industria’ – harmony, integrity, and hard work – the ingredients of their unity. The name Rothschild has throughout its history inspired confidence and interest.
Europe
In the 18th century, Europe faced turbulent times. The great changes from the cultural renaissance through to religious reformation, had challenged the belief in ‘noblesse oblige’. Political boundaries were shifting constantly and war was looming. In the midst of this uncertainty, new entrepreneurial merchant classes emerged; it was this environment that enabled the Rothschilds to prosper.
History of the Rothschild family
Nearly 250 years ago Mayer Amschel Rothschild, the founder of the Rothschild dynasty, developed innovative strategies to support his business as a dealer in coins and medals. He quickly gained a reputation for honesty and reliability and understood the value of lasting relationships with his clients. The business, in Frankfurt’s Jewish quarter, thrived. The good name of the business would have died with Mayer Amschel himself, had he not taken the decision to form a partnership with his sons, a partnership that the principles of which still exist today.
Mayer Amschel despatched his five sons to settle in five European capital cities, the five brothers set about building their businesses while still continuing to work and support each other in their dealings. The unity of the five brothers is represented to this day in the Rothschild logo – five arrows tied together. What emerged from this co-operation strategy was a genuine multi-national business, with each brother adding specific local expert knowledge and contacts to the partnership. According to their father’s vision they renewed and maintained their business ties, promising to support each other during difficult times and to share the profits of their partnership. Amschel, the eldest son, remained in Frankfurt to manage the fortune of the parent house. Nathan Mayer, the third of Mayer’s sons, established the business in Great Britain, James, the youngest of the five sons, in Paris and by 1820 Salomon and Carl had established branches in Vienna and Naples respectively.
The business continued to develop during the period of the Napoleonic Wars in spite of Europe’s division. In 1806, one of Mayer Amschel’s clients, the Elector of Hesse, had been forced out of his territory by the invading Napoleonic troops. Mayer Amschel was entrusted with the Elector’s assets. Upon his return from exile the Elector was delighted to find that his assets, rather than diminishing in times of war and conflict, had in fact increased under careful management.
The family maintained their business and secure communication network successfully. The Rothschild communication network allowed the family to liaise across borders and military frontlines during times of conflict. One of the earliest examples of this successful strategy is the commission that the Rothschild family accepted from the British Government in 1814 to supply the Duke of Wellington with funds to pay his troops during the campaign leading up to the Battle of Waterloo. The brothers and their agents managed to buy up sufficient coins in small quantities from numerous dealers without advising them on the identity of the ultimate client namely the government. Thus, they ensured that the prices were fair and the markets remained stable.
But it was not just for this reason that the Rothschild business gained its reputation. Nathan Rothschild, who had taken a leading role in the business from his base in London, was the first to receive news of the defeat of Napoleon at the Battle of Waterloo. The news was delivered to St. Swithin’s Lane – still the headquarters of the British bank – by one of the family’s own couriers. Nathan reported this immediately to the Prime Minister, who did not believe him. The government’s own courier took a further 24 hours to deliver the same news. The Rothschilds’ reputation for accessing quick, accurate, and secure information was henceforth set.
The post-Napoleonic war years furthered the Rothschild name as they were commissioned by numerous governments to handle state loans. Their role was that of contractors; they were the intermediary between the state and the investors. Thanks to Nathan’s innovation of arranging for dividends to be paid in Sterling in London, the British public felt more confident in this type of investment and the state was guaranteed a willing set of investors. The investors also increasingly trusted the Rothschilds’ assessment of the creditworthiness of the state – acquired through their network of agents and their own establishments throughout Europe – another factor, which increased confidence in the business.
During the 19th century the Rothschild business houses handled numerous state loans throughout the world. As the business matured, it began to develop expertise in various industrial enterprises. They financed and built great railway systems, creating communication links and opening up markets for goods. They invested in ironworks and natural resources, working with experts in the field to ensure that the investments were viable.
There have been good times and difficult times but the ethos and wisdom of Mayer Amschel can still be felt today. The entrepreneurial spirit, which has never been absent from a business emphasising respect for its traditions and business model, ensured that when the Rothschild bank was nationalised in France in 1981, David and Eric de Rothschild viewed the nationalisation as a challenge. They recreated a business in France, choosing a structure to suit the times.
Since the 1990s the various branches of the banking business have been brought together under the Chairmanship of Baron David de Rothschild. His cousin Baron Eric de Rothschild is head of the private banking and trust business.
Today
Over 2800 employees work for the Rothschild Group in 38 countries. Its advisory model has proven itself and there is growing acceptance of its merits among individuals, corporations and governments globally of obtaining non-conflicted, unbiased advice from a stable source. The history of the Rothschild family has shown the importance of having a flexible approach to operations. Today the business comprises the advisory businesses of investment banking and private banking, and also a more recently formed leg, a merchant banking business, which will look to take minority co-investments in a range of global businesses. This takes the family back to its merchant banker roots.
Throughout the family’s history, members of the different branches of the Rothschild family continue to play an active role in the business alongside non-family members. The process of renewal and constantly seeking excellence continues and today the business looks well placed for another 250 years.
Tharawat Magazine, Issue 5, 2010