#216 Outliers: Andrew Mellon – America’s Secret Banker

0:00:04 I suppose I’m what they call a rich man. They tell me so.
0:00:07 I’m not particularly conscious of it. I don’t use money for myself.
0:00:13 I don’t spend much on myself. I have always just worked. Done what needed to be done in business.
0:00:17 I didn’t try to make money especially. I’m not interested in money.
0:00:38 Welcome to The Knowledge Project. I’m your host, Shane Parrish.
0:00:44 This podcast helps you master the best of what other people have already figured out.
0:00:49 If you want to take your learning to the next level, consider joining our membership program
0:00:56 at fs.blog/membership. As a member, you’ll get my personal reflections at the end of every episode,
0:01:02 early access to episodes, no ads including this, exclusive content, hand edited transcripts,
0:01:05 and so much more. Check out the link in the show notes for more.
0:01:11 This episode is part of our new series, Lessons from Outliers, where we study extraordinary
0:01:15 people to extract timeless principles about business, leadership, and life.
0:01:20 Today’s episode is on Andrew Mellon, the wealthiest member of America’s cabinet
0:01:26 built his fortune by staying invisible. While Carnegie and Rockefeller dominated headlines
0:01:32 and built empires of steel and oil, Andrew Mellon created something far more powerful,
0:01:37 a system for spotting opportunities that others missed and overlooked, and turning
0:01:43 promising ventures into industrial giants. His secret? Staying in the shadows.
0:01:49 The Mellon system transformed American industry. Identified promising ventures provide capital
0:01:55 at precisely the right moment and integrate them into a growing ecosystem of mutually
0:02:01 reinforcing businesses. This deceptively simple approach created industrial giants like Alcoa,
0:02:07 Gulf Oil, and Coppers, companies that still shape American industry today. More importantly,
0:02:11 his systematic approach to spotting and seizing opportunities
0:02:17 offers a blueprint we can apply to our own ventures. It’s time to listen and learn.
0:02:24 This podcast is for entertainment and informational purposes only,
0:02:26 and you should do all of your own research.
0:02:32 Don hadn’t yet broken over Washington, D.C. when Andrew Mellon first walked into
0:02:39 the Treasury building on March 5, 1921. At age 65, when most men were settling into retirement,
0:02:44 America’s most successful and visible billionaire, at least in today’s terms,
0:02:50 stepped into one of the most public roles possible, Secretary of the United States Treasury.
0:02:55 On the surface, it seemed like a bizarre choice. How could someone who’d spent decades amassing
0:03:01 a fortune while avoiding attention succeed in one of the most public roles in government?
0:03:06 But Mellon’s story suggests something counterintuitive. There’s immense power in silence and standing
0:03:11 apart and observing while others shout. One of my good friends, Peter Kaufman,
0:03:16 has a saying that I think about often. He says, “The whale that surfaces gets harpooned.”
0:03:20 There’s a lot of wisdom in this statement. It means staying out of the headlines. It means
0:03:26 moving in silence. It means not bragging. It means not trying to be seen. It means not chasing
0:03:32 attention. Mellon lived his life in a way not to surface. In fact, he built a fortune in silence.
0:03:38 Even at his home in Pittsburgh, Mellon was a ghost. Dinner guests would watch him sit silently
0:03:41 at the head of the table, lost in thought, barely touching his food,
0:03:47 rarely speaking, almost never laughing. He turned that silence, however, into a superpower,
0:03:52 his natural introversion into a weapon of wealth creation. Those who knew him as a
0:03:59 young man painted a strange pitcher. Solitary, but not Mellon-colly. Seclusive, but not moody.
0:04:05 Achieving, but never boasting. Timid, but not fearful. Silent, but never stupid.
0:04:11 But to understand how this ghost of Pittsburgh built one of America’s great fortunes while
0:04:17 barely raising his voice above a whisper, we need to start with his father, Thomas Mellon,
0:04:23 and the distinctive world of 19th century Pittsburgh. Part one, The Judge’s Son.
0:04:32 Most great American fortunes of the 1800s were built by bold risk takers, charismatic empire
0:04:37 builders, but the Mellons were different. They moved with the patience of farmers watching crops
0:04:43 grow, which makes sense because that’s exactly where they started. In 1823, a nine-year-old
0:04:49 farm boy set out at dawn to walk 21 miles to Pittsburgh. His family’s farm was on poverty
0:04:55 point, a name that said everything about their circumstances. That boy was Thomas Mellon,
0:05:01 and what he saw that day would transform not just his life, but American financial history.
0:05:07 The local farmer walking beside young Thomas Mellon made a prediction. The boy would see more
0:05:13 in that single day in Pittsburgh than in a lifetime back on the farm, and he was right,
0:05:18 but not in the way he imagined. What caught Thomas’s eye wasn’t the roaring factories
0:05:25 or bustling streets. Instead, he found himself transfixed by a vast estate overlooking the city,
0:05:33 1500 acres with a mansion that seemed to command Pittsburgh itself. The whole scene he would later
0:05:40 write impressed me with an idea of wealth and magnificence. I had before no conception of it.
0:05:47 Suddenly, everything was possible. Silently, he asked himself whether I might not one day attain
0:05:52 such wealth, and the answer to that question would launch a multi-generational journey from
0:05:58 farming on poverty point to one of the richest and most powerful families in America.
0:06:04 While most great American fortunes of the era were built by bold gamblers and charismatic
0:06:10 empire builders, the Mellons took a different approach. Thomas, and later his son Andrew,
0:06:16 would build their dynasty the way they learned to grow crops by planting carefully, watching
0:06:20 patiently, and waiting for the harvest. They understood something that modern investors like
0:06:26 Warren Buffett and Charlie Munger would later teach so simply. The big money isn’t in the buying
0:06:32 or the selling, it’s in the waiting. The Mellons had discovered this truth decades earlier,
0:06:36 quietly building their empire while others chased quick riches.
0:06:42 The farm boy who dreamed of mansions found his roadmap in an unlikely place,
0:06:47 Benjamin Franklin’s autobiography. While other teenagers worked the field, 17-year-old Thomas
0:06:53 Mellon was studying Franklin’s story as if it were a manual for success. This wasn’t just
0:06:58 inspiration, it was instruction. And it’s worth pointing out that Thomas Mellon isn’t the only
0:07:04 one who found this book and loved it. Charlie Munger also had a similar experience with Ben
0:07:09 Franklin’s autobiography. Franklin’s influence on Thomas Mellon would prove so profound that
0:07:15 decades later, when establishing his bank in Pittsburgh, he placed Franklin’s statue above
0:07:21 the entrance. It wasn’t decoration, it was a bronze reminder of the principles that guided him.
0:07:26 The autobiography became his secular gospel, one that he would later preach
0:07:33 relentlessly to his sons, none more so than Andrew. Thanks in large part to Ben Franklin’s book,
0:07:39 Thomas saw education as a way out of farming and poverty point. Not everyone agreed. Against
0:07:45 his father’s wishes but supported by his mother and uncle, Thomas set out to pursue what he saw
0:07:52 as the essential trinity of success, knowledge, wealth, and distinction. When choosing a college,
0:07:57 he rejected the popular Jefferson College because its students lacked what he called
0:08:03 earnestness of purpose. At Western University of Pennsylvania, he captured his emerging philosophy
0:08:09 writing, “Money is to society what the element of fire is to matter, diffusing warmth and vigor
0:08:15 through all of its parts.” This wasn’t just clever wordplay. Thomas was developing a theory
0:08:21 of wealth in real time that would guide the Mellon Empire for generations. While other ambitious
0:08:27 young men rushed into business, Thomas took a longer view. He chose law as his path into the
0:08:34 business world, seeing it as Franklin had, not as an end in itself, but as a systematic way to
0:08:40 understand how money moved through society. Though when he would later claim in the professions and
0:08:46 business management certificates of either ability or learning are valueless, at the early stages,
0:08:52 Thomas saw education as a tactical step, indeed the first such step toward his greater ambitions.
0:08:59 While Pittsburgh’s other lawyers chased headlines and high-profile cases, Thomas Mellon took a
0:09:04 different approach. He kept his fees reasonable, built fierce client loyalty, and stayed in the
0:09:11 background. Dispising, display, and notoriety, Mellon preferred to make money quietly. Law became a
0:09:16 means to spot opportunities in real estate, foreclosures, and property development. Every
0:09:22 foreclosure case, every property dispute, every business deal that crossed his desk wasn’t just
0:09:27 legal work. He was intelligent about where money was flowing in Pittsburgh’s booming economy.
0:09:32 His law practice became an observation post, letting him spot opportunities others missed.
0:09:37 While other lawyers collected fees, Thomas collected assets, real estate, stocks, stakes,
0:09:43 and growing businesses. By age 29, this quiet approach had already made him relatively wealthy.
0:09:49 But Thomas saw his law practice the way a chess player sees the opening moves of a game. It wasn’t
0:09:54 just about winning quickly, it was about positioning for the real opportunities ahead. This pattern,
0:10:00 using a profession to spot investment opportunities, would become a classic wealth-building strategy.
0:10:04 A century later, Charlie Munger would follow the same path, practice law by day,
0:10:08 but use that knowledge to build lasting wealth through investments. Both men understood that
0:10:13 true wealth rarely comes from a salary, it comes from owning things that grow in value while you
0:10:20 sleep. This systematic mindset extended every aspect of Thomas’ life, even marriage. Just as he’d
0:10:25 approach education and career as systems to be mastered, he viewed matrimony through the same
0:10:31 cold analytical lens. It wasn’t looking for passion and romance as much as a partner,
0:10:37 evaluating potential wives with what he called an impartial assessment of their favorable and
0:10:43 unfavorable qualities. He found his helpmate in Sarah Jane Negley. Her high status and connections
0:10:49 expanded his network of opportunities even further. Over the next 16 years, the Mellons would have
0:10:56 eight children, with Andrew arriving in 1855 as the sixth child and fourth son. From the beginning,
0:11:00 Andrew stood apart. From his earliest days, he seemed to be his father’s son incarnate,
0:11:06 showing an innate understanding of money and business that delighted Thomas. While other
0:11:10 children played in Pittsburgh’s dirty streets, young Andrew Mellon was learning to count money.
0:11:15 At an age when most kids were trading marbles, he was selling bundles of grass to passing farmers
0:11:20 at five cents each. When that business proved successful, he recruited his brothers to sell
0:11:25 produce from the family garden. That enterprise was so profitable and so successful that his
0:11:30 mother sometimes had to buy back her own vegetables just to have something for dinner.
0:11:35 This wasn’t normal childhood behavior, but the Mellon household was anything but normal.
0:11:39 Thomas raised his children, according to philosopher Herbert Spencer’s maxim, that life
0:11:45 was a struggle, which only the fittest survive. Outside their windows, Pittsburgh was transforming
0:11:53 into hell with the lid taken off, 500 factories belching smoke into the sky, forging two-fifths
0:11:59 of America’s iron. Thomas saw this industrial battlefield and determined his sons would be
0:12:05 prepared. He built on their own schoolhouse, where poetry and fiction were banned as useless
0:12:10 distraction. Only what’s necessary and useful in business was Thomas’s motto.
0:12:16 The curriculum was ruthlessly practical, reading, writing, and arithmetic, nothing else.
0:12:21 The studies Thomas later explained were such as would be most necessary and useful in the
0:12:27 subsequent business of life. Years later, Thomas would express surprise that all of his sons
0:12:33 spontaneously chose business careers as if he hadn’t engineered precisely that outcome.
0:12:38 But Andrew’s path took an unexpected turn. When Andrew’s brother Selwyn died,
0:12:43 something softened in Thomas’s iron philosophy. The judge closed his schoolhouse and enrolled
0:12:48 Andrew in public school and began commuting with him on the way to school every day, which was by
0:12:53 his office. Their daily commutes became kind of an apprenticeship. As one relative observed,
0:12:58 Thomas spoke to Andrew not as a little boy, but as one with a mature intellect.
0:13:03 These conversations, repeatedly daily walking through Pittsburgh’s smoky streets, transformed
0:13:09 a father’s systematic approach to wealth into a son’s natural instinct. They weren’t just talks,
0:13:16 they were downloading knowledge. If you know this sound, I have some good news for you.
0:13:23 The 2026 lineup is here. And if you don’t know this sound, it’s all right. You have a good day.
0:13:29 Discover the new Skidoo models now. Want to own part of the company that makes your favorite burger?
0:13:35 Now you can. With partial shares from TD Direct Investing, you can own less than one full share,
0:13:40 so expensive stocks are within reach. Learn more at td.com/partialshares.
0:13:48 TD, ready for you. Part two, building the system. When Judge Thomas Mellon’s eyesight began to fail,
0:13:53 he turned even this setback into a teaching opportunity. He would pay his children 50
0:13:59 cents for two to three hours of reading. Of course, not fairy tales or novels, but rather
0:14:05 business reports, financial news, and economic theory. It was through this seemingly tedious task
0:14:11 that Andrew gained unique access to his father’s intellectual life. The judge was, as biographer
0:14:18 David Canada notes, “far from a passive audience.” This exact pattern, children reading business
0:14:23 material to parents and learning to think critically through discussion, appears repeatedly in the
0:14:28 stories of 19th century financial success. Hedy Green, who would go on to become America’s richest
0:14:35 woman, developed her legendary financial acumen by reading market reports to her father and grandfather.
0:14:41 In both cases, these weren’t just reading sessions, they were apprenticeships in analytical thinking.
0:14:45 It’s a fascinating approach to learning. You’re not just absorbing information,
0:14:50 you’re learning how to think about it, how to argue about it, how to engage with ideas critically,
0:14:53 and with a person that you probably inherently trust and respect.
0:15:00 As Thomas Millen’s influence on his children grew, he began laying the foundations for what would
0:15:06 become the Mellon family’s financial empire through two key institutions. The first was
0:15:12 East Liberty Savings and Deposit Bank. On the surface, a simple investment, but a machine for
0:15:18 creating wealth. The East Liberty Savings and Deposit Bank looks simple from the outside,
0:15:23 but it was actually the hub of an intricate system. The Mellons would vertically integrate
0:15:29 everything. Here’s how author David Kashkoff described it. The Mellon boys subdivided acreage
0:15:34 into homesites sold that are profit, sold their buyers lumber with which to construct their humble
0:15:40 dwellings at a profit, financed the transactions through the bank profitably, and then sold the coal
0:15:46 to heat the houses, again, at a profit. This interlocking system of businesses,
0:15:51 all reinforcing one another, would become known later as the Mellon system once Andrew perfected
0:15:57 it. The integration would give them unprecedented influence and advantage over competition.
0:16:03 When Thomas opened his second bank, T. Mellon & Sons, he placed Ben Franklin’s statue above
0:16:09 the door. The same mentor who had guided him from Farm Boy to Finance Year would now watch over his
0:16:16 sons. Thomas approached banking with characteristic confidence. He said, “There is nothing in banking
0:16:22 but what you ought to be able to learn in a week or two.” As to bank books, keeping them is the
0:16:29 simplest of all kinds. He wasn’t alone in this optimism. Over 20 new banks opened in booming
0:16:35 Pittsburgh during this period, which may explain why there were so many financial panics. Andrew
0:16:40 proved to be a reliable study. Judge Mellon’s trust in young Andrew was so complete that at just
0:16:47 19, Andrew became the only person beside his father with the bank’s safe combination. The 1860s
0:16:52 proved remarkably fertile ground for the Mellon’s ambitions. Pittsburgh was transforming into the
0:16:58 industrial capital of America. The nation’s railway network doubled, and Pittsburgh stood at
0:17:06 the center of American industrial revolution. The city, near 300,000 residents producing half
0:17:13 the nation’s glass and iron, while new industries sprouted like wildflowers, Heinz food processing,
0:17:19 Westinghouse’s air brakes, and soon Carnegie’s revolutionary Bessemer steel process,
0:17:27 which would help him create his own empire. Thomas called it an easy to grow rich decade,
0:17:33 watching with satisfaction as his system worked exactly as designed. For the judge, though, the
0:17:38 greatest satisfaction came not from the profits themselves, but from seeing his son succeed in
0:17:46 the system that he had created. Yet this golden age wouldn’t last. In 1873, a financial hurricane
0:17:52 in what came to be known at the time as the Great Depression swept from Europe to America,
0:17:58 destroying nearly half of Pittsburgh’s banks and its path. Even the mighty Mellon banks
0:18:03 barely survived. Thomas had to turn away desperate customers. Shaken and humbled,
0:18:09 he closed the East Liberty Savings and Deposit Bank, and debated going out of the banking
0:18:15 business entirely. The judge and Andrew learned something profound from the Panic of 1873,
0:18:21 something that would shape not just their fortune, but a pattern repeated by history’s greatest
0:18:27 wealth builders. They realized that financial storms don’t just destroy, they create opportunity.
0:18:32 This goes back to one of the key lessons Thomas Mellon tried to instill in his children.
0:18:39 Life is competition, and only the fittest survive. While most tried to simply survive
0:18:43 panics, great fortunes were built by those who understood a crucial truth.
0:18:49 Down turns are inevitable, and when they happen, only those positioned to take advantage of them
0:18:57 can thrive. The Panic of 1873, like the Panics of 1857, 1884, and 1907 that would follow,
0:19:03 wasn’t just a crisis. It was a chance to acquire valuable assets at fire sale prices. In an era
0:19:09 where banks went out of business quickly, the Mellons always kept a surplus and never needed
0:19:14 the kindness of strangers to survive. It got pretty close one time, but they survived,
0:19:20 and it was never ever that close again. That’s more a testament to just how bad the downturn
0:19:26 was than from them not having enough capital. Being well positioned to take advantage of
0:19:31 opportunities continues to build great fortunes. When others retreated, when weak competition
0:19:37 failed, when solid businesses were selling for pennies on the dollar, that’s when the prepared
0:19:43 few expanded their empires. As John D. Rockefeller would later observe, the strong feed during
0:19:51 depressions. You can think of the 2008 financial crisis and how Buffett was able to deploy billions
0:19:57 of dollars with really high rates of returns in a matter of weeks. While everyone else was
0:20:04 paralyzed, he provided liquidity, of course, at a price. You can’t predict when the next crisis
0:20:10 will hit, you know there will be one. When it does, those who borrowed too much or expanded
0:20:16 too fast fight for survival, will those who stayed strong and liquid pounce on opportunities.
0:20:21 The Mellons understood this truth early. The goal isn’t just to be strong enough to survive
0:20:27 the storm, it’s to be strong enough to capitalize on it. While others pray for endless summer,
0:20:31 the wise prepare for winter, knowing that fortunes are built when the assets are cheap
0:20:37 and competition is weak. This is really the idea behind positioning, and it, combined with patients,
0:20:45 would really build and fuel the Mellon fortune. The panic of 1873 was Andrew Mellon’s first,
0:20:51 but far from his last, and marked his true entry into banking. At 19, Andrew didn’t look like a
0:20:58 banking titan in the making. He was thin-voiced, shy, and uncommunicative, but something remarkable
0:21:03 was happening at T. Mellon and Sons. This quiet teenager was becoming the family’s center of
0:21:10 gravity. He didn’t demand authority, he simply exercised it naturally. Soon, everyone from his
0:21:16 father down was asking the same question. What would Andy think? While other Pittsburgh titans
0:21:22 roared and dominated, like Carnegie and Steele or Frick and Cole, Andrew moved like a shadow
0:21:28 through the financial world. His quietness wasn’t just personality, it was strategy. He moved in
0:21:35 silence so as not to attract attention. He was building something different. Not a visible empire
0:21:42 of smokestacks and railroads, but an invisible web of financial power. He began methodically
0:21:49 acquiring local banks. Each piece carefully chosen to expand his reach. But his master’s
0:21:56 stroke came in 1886 when he established just the second trust company in Pittsburgh. While regular
0:22:01 banks faced tight restrictions, trust companies, on the other hand, could do almost anything.
0:22:07 They could lend against real estate, deal in stocks and bonds, even act as venture capital firms of
0:22:12 their day. Andrew ventured far beyond his father’s bread and butter of mortgages and real estate.
0:22:18 By his early 30s, Andrew had built his family’s fortune to the modern equivalent of 50 million.
0:22:25 But he was just getting started. His true genius would emerge late one day in 1889,
0:22:30 when three men walked into tea melons and sands seeking a modest $4,000 loan,
0:22:35 a moment that would transform not just the melons, but American industry itself.
0:22:42 The three men who walked in that day were Captain Elford Hunt and MIT-trained metallurgist George
0:22:49 Klopp, a young chemist, and Arthur Davis, fresh from Amherst College. Their company, named the
0:22:55 Pittsburgh Reduction Company, had developed something revolutionary, a practical method of
0:23:01 producing aluminum through electrolysis. It was a classic startup, a breakthrough technology,
0:23:07 promising early results, but a desperate need for capital to expand. On paper, it looked incredibly
0:23:14 risky. They were producing just 475 pounds of aluminum daily and selling it for about two
0:23:20 dollars a pound. And they were struggling to convince anyone to abandon trusted metals like
0:23:27 iron and copper for this expensive new material. But where others saw shabby accounts and a lot
0:23:33 of problems, Andrew Mellon saw opportunity. Instead of just the $4,000 they requested,
0:23:42 he offered them $25,000, more than six times what they asked for. Not just enough to clear the debts,
0:23:47 it was enough to grow. It wasn’t just a loan, it was the beginning of a system.
0:23:52 The Mellon approach was methodical. First, help the company move to New Kensington,
0:23:58 where the Mellon-owned real estate provided room to grow. Then, engineer a crucial expansion to
0:24:04 Niagara Falls, where cheap hydroelectric power could drive costs down. Lower costs meant lower
0:24:11 prices and lower prices meant explosive growth. Within five years, the price of aluminum had
0:24:20 dropped by 75% and sales had skyrocketed from a few hundred pounds to 600,000 pounds annually
0:24:28 in 1895. This small company, the Pittsburgh Reduction Company, would later become Alcoa,
0:24:33 still a $10 billion giant today. But more importantly, it revealed what would become
0:24:37 known as the Mellon touch. The ability to spot not just promising technologies,
0:24:44 but the right people to build them into empires. The Mellon system that emerged wasn’t just a
0:24:49 collection of investments. It was a wealth-building machine that got smarter with every deal.
0:24:55 While its foundations were simple, identified promising technologies, back exceptional operators,
0:25:02 provide capital at crucial moments, its real power lay in flexibility. The Mellons didn’t have one
0:25:07 playbook. They had many. With aluminum in the Pittsburgh Reduction Company, they were content
0:25:14 being minority investors, taking about 12% while letting the founders run the show. But in oil,
0:25:20 they seized majority control and installed family leadership. This flexibility made them one of
0:25:26 the few who could ever successfully compete against John D. Rockefeller. When Standard Oil tried to
0:25:31 squeeze them out by manipulating railroad rates and trying to block them at every turn,
0:25:38 they didn’t fight directly. They simply built their own 271-mile pipeline to the coast.
0:25:46 By 1894, they controlled 10% of America’s oil exports, prompting Andrew to confidently tell
0:25:52 one associate, “We have every facility possessed by the Standard Oil Company and receive and deliver
0:25:58 oil under as favorable conditions in every way.” Rockefeller would eventually buy them out. But
0:26:02 not because the Mellons were weak, but because they were strong. They had built something he
0:26:08 couldn’t crush into submission. This wasn’t just their father’s system anymore. Like Thomas Mellon,
0:26:14 they believed in vertical integration and backing capable operators. But where the judge had stuck
0:26:20 to familiar territory, coal, iron, and real estate, Andrew and Dick ventured into cutting-edge
0:26:27 industries like hydroelectric power and aluminum manufacturing. As one historian noted, Andrew may
0:26:32 habitually have asked, “What would father do?” But his answers wouldn’t always have convinced
0:26:39 the judge. The system wasn’t perfect. In 1890, they missed a golden opportunity with George Westinghouse,
0:26:45 who was demanding too much equity for a $500,000 loan. Westinghouse turned to New York Financers
0:26:51 instead, a decision Andrew would later regret as he watched a major Pittsburgh industry slip away.
0:26:58 But even failures fed the learning machine. By 1912, their banks controlled half of Pittsburgh’s
0:27:03 banking resources. But more importantly, they built something that looked more like a modern
0:27:09 venture capital firm than a traditional bank. Each new venture made their network stronger and
0:27:14 their intelligence deeper. Every venture they backed, every operator they partnered with,
0:27:19 didn’t just bring one opportunity, they brought access to entire networks of knowledge,
0:27:24 relationships, and new opportunities. It was a system that learned from itself.
0:27:30 Success breeds relationships. Relationships breed intelligence. Intelligence breeds opportunity
0:27:36 and opportunity bred more success. The Mellons had created something rare in business history,
0:27:43 a wealth-building machine that grew smarter and stronger with every deal decade after decade.
0:27:49 At the core of the Mellon system was Andrew’s genius for invisibility. While living modestly in
0:27:54 his parents’ house, he quietly built a network that included not just industrialists like Carnegie
0:28:01 and Frick, but senators, judges, and future presidents. His power grew precisely because he
0:28:06 seemed to want none of its trappings. In fact, he came off as a modest Pittsburgh businessman who
0:28:12 still lived in his parents’ house. Reality was anything but that. The invisible influence let
0:28:18 him solve one of the industrial age’s greatest challenges, how to scale human expertise.
0:28:25 Mellon built a cadre of operators, tough, competent men who became his eyes and ears across
0:28:31 industries. He would deploy them whenever and wherever opportunity arose, and they’d report
0:28:37 back intelligence that led to even more opportunities. In an era before computers, it was a human
0:28:42 algorithm for spotting and seizing opportunity with better information. But Mellon understood
0:28:48 something profound. The system would only work if his operators got rich too. He wanted a real
0:28:54 win-win. Real success he observed comes from making others successful. It wasn’t just philosophy,
0:29:00 it was pragmatism. When Alfred Hall, who Mellon had backed in Pittsburgh Reduction Company, died
0:29:07 worth $30 million, it wasn’t an accident. It was the system working as designed.
0:29:12 This was Mellon’s real innovation. He didn’t need to master aluminum manufacturing or oil
0:29:18 refining or pipeline construction. What he built instead was a machine that could identify talent,
0:29:24 deploy capital, be a good partner, and maintain control without much direct investment,
0:29:29 all while learning without drawing too much attention to himself. Like its creator,
0:29:32 the system worked best when few could see how powerful it had become.
0:29:39 The numbers tell the story of Mellon’s success. His companies regularly paid dividends of 20,
0:29:46 30, even 100% annually. Golf Oil once declared a staggering 500% dividend,
0:29:50 so large that it attracted the attention of the regulators.
0:29:55 But the real genius wasn’t just in generating these returns, it was how Mellon recycled them.
0:30:01 Each successful venture became fuel for the next, creating an ever-expanding web of opportunity.
0:30:06 In this way, Andrew Mellon built something far more durable than just a company. He created a
0:30:11 perpetual capital deployment machine, a system that could transform promising businesses into
0:30:18 empires, quietly, methodically, and with remarkable consistency. While others were building individual
0:30:25 enterprises, Mellon built a machine that fed companies. The blueprint Mellon created would
0:30:29 later be refined by Warren Buffett and Charlie Munger with Berkshire Hathaway. There’s a lot
0:30:35 of parallels here. Both could spot opportunities others missed, deploy capital decisively when
0:30:43 others needed it most, recognize, attract, and retain talent, and wait patiently for returns.
0:30:48 Most importantly, both created companies that were really learning machines. Each acquisition
0:30:53 gave them more and more information that made them smarter and smarter about the next opportunity.
0:30:58 Even their philosophy of management was similar. Mellon’s observation that
0:31:03 real success comes from making others successful could have come straight from Buffett’s annual
0:31:10 letters. It’s reciprocation in action. Go positive, go first, and the world will do most of the work
0:31:16 for you. Both Buffett and Mellon understood that a fundamental truth is that if you find exceptional
0:31:22 operators, you pay them well, you give them autonomy, and you let the system just work its magic with
0:31:28 patience. Andrew Mellon wielded influence from the shadows. Pennsylvania’s legislature was known as
0:31:34 the best that money could buy, and Mellon saw this as simply efficient business, ensuring, for
0:31:39 instance, that import duties protected his aluminum interests. He wanted policies that
0:31:44 made businesses prosper, and he quietly funded politicians who shared that vision. His personal
0:31:50 style reflected invisible power. In Pittsburgh, they said if you wanted $5,000, you saw Dick,
0:31:57 but if you needed $25,000, you saw Andrew. Those who did would find a slight man in an expensive,
0:32:04 yet understated suit. His blue eyes could be described either as dreamy or as sharp blue daggers,
0:32:09 and they were always fixed on a balance sheet. His weapon of choice in these conversations was
0:32:16 silence. While his brother Dick chatted easily, Andrew would sit, sphinx-like, breaking his
0:32:22 silence only for a laser precise question. What makes you think so? Can this thing be owned?
0:32:28 Whom have you done work for? Most people left his office disappointed. Some got a brief “Here’s
0:32:32 the trouble with the whole scheme.” Others received detailed explanations of why their
0:32:38 ventures would fail, but a select few heard the magic words “I may be able to help.” By 1907,
0:32:45 the system Mellon had built was staggering in its reach. From his position at Union Trust Company,
0:32:51 he held 41 corporate directureships, more than anyone else in Pittsburgh. His brother Dick held
0:32:58 31, but these numbers only hinted at their true influence. Consider Gulf Oil. Its tankers were
0:33:04 built by Mellon New York Shipbuilding Company, using steel from Mellon-controlled mills,
0:33:09 all financed through Mellon banks, and insured by Mellon companies. At Alcoa, workers lived in
0:33:17 houses financed by Mellon’s Union Trust, built on Mellon lots, heated by Mellon coal, lit by Mellon
0:33:23 utilities. They rode to work on Mellon streetcars and deposited their paychecks in Mellon banks.
0:33:30 What’s remarkable is how quickly this empire emerged from the shadows. In less than a decade
0:33:36 after 1898, Mellon had transformed himself from a successful banker into something entirely new,
0:33:42 an architect of industrial ecosystems. Having made crucial moves during the Depression of
0:33:51 1893, took advantage of it. He rode this subsequent boom years with extraordinary precision. By 1907,
0:33:57 the framework was complete. What remained was simply to let the system grow, each part strengthening
0:34:08 and reinforcing the others. Part three, The Private Kingdom. The system that had built Mellon’s business
0:34:15 empire met its match and matters of the heart. In 1900, at age 45, Andrew approached marriage the
0:34:22 only way he knew how, coldly, as another strategic partnership to be carefully structured and managed.
0:34:28 On paper, his marriage to 21-year-old Norma McMullen had all the hallmarks of a classic Mellon
0:34:34 venture. It was carefully constructed, strategically sound, and had clear benefits for both parties.
0:34:41 He, on one hand, brought wealth and stability. She, on the other, brought youth and vitality.
0:34:46 To Andrew’s methodical mind, it was another example of identifying complementary strengths.
0:34:52 Exactly the kind of thinking that had built his fortune. But Norma McMullen was not a business
0:34:58 proposition to be optimized, and love is not cold and rational. She was raised in London
0:35:04 Society, the daughter of a British brewing family. She found Pittsburgh suffocating.
0:35:09 Her first glimpse of her new home prompted a horrified question. “We don’t get off here,
0:35:15 do we?” “You don’t live here.” To her, Pittsburgh must have felt like exile. A grey
0:35:21 industrial city dominated by what one observer called a dour, Philistine, insular male culture,
0:35:28 where men like her husband made fortunes. The very qualities that made Mellon a financial genius,
0:35:34 his reserve, his patience, his ability to wait silently while others revealed themselves,
0:35:40 his cold, rational, emotionless approach to decisions, proved disastrous in marriage.
0:35:46 While he orchestrated the quiet accumulation of power, Nora felt the walls closing in.
0:35:52 She had married into what was becoming the most powerful financial ecosystem in western Pennsylvania,
0:35:58 only to find herself starved of the one commodity Andrew Mellon couldn’t control. Joy.
0:36:04 What followed was a collision between two forces. Mellon’s need for order and control,
0:36:11 and Nora’s desperate grasp at vitality. The divorce was public and nasty. The details,
0:36:18 her affairs, his retreats into work, the public scandals, matter less than what they reveal
0:36:24 about the limits of pure rationality. He was a man who could orchestrate entire industries
0:36:30 and bend the world to his will, but he couldn’t bridge the gap across his own dinner table.
0:36:36 The divorce in 1913, like everything else in Mellon’s life, was handled with meticulous attention
0:36:42 to detail. The settlement was one of the largest at his time. The timing was ironic, just as his
0:36:48 business system was really reaching its apex of efficiency. His personal life demonstrated
0:36:52 that not everything could be managed like a balance sheet or an income statement. You couldn’t
0:36:58 integrate a marriage the same way that you could integrate an industry or a company. In the aftermath,
0:37:04 Mellon retreated farther into his work, where the rules made sense, where the silence was an asset,
0:37:10 not a liability. A conversation with Robert Kennedy Duncan, the scientist who would go on
0:37:17 to help establish the Mellon Institute, captures the poignant reality of Mellon’s life. Duncan,
0:37:23 Andrew asked one day, “Are you happy at home?” When Duncan confirmed that he was most happy,
0:37:27 Mellon’s response was revealing, “Then you’re a far richer man than I am.”
0:37:33 The divorce marked a turning point. While personal happiness eluded him,
0:37:39 Mellon found a new challenge worthy of his methodical mind. Pittsburgh itself was reaching its
0:37:46 limits. At age 60, while many of his wealthy peers had moved to New York, Mellon saw what others missed.
0:37:51 The region’s traditional industries were plateauing, and its future growth would depend on
0:37:58 something that had always fascinated him, the marriage of science and industry. He had witnessed
0:38:06 firsthand how his most successful ventures like alcoa or carburandum and golf oil increasingly
0:38:12 relied on what we would now call research and development. But true to his nature, Mellon
0:38:18 didn’t rush in to solve this problem. He watched and he waited. The solution arrived in 1911 through
0:38:24 an unlikely partnership with a Canadian professor named Robert Kennedy Duncan. Duncan approached
0:38:30 Mellon with a radical idea—industrial fellowships that would bridge the gap between academic research
0:38:36 and commercial application. He had tested this concept at the University of Kansas with projects
0:38:42 ranging from extending the life of laundered fabric to finding new uses for waste buttermilk.
0:38:48 In Duncan’s systematic approach to innovation, Mellon recognized something familiar—his own
0:38:54 methodical style applied to scientific discovery. Following the same patient pattern that he’d
0:39:00 used to build his business empire, Mellon started small—a wooden building and a two-year trial
0:39:05 period. When early projects showed promise, including the conversion of petroleum to gasoline and
0:39:11 tackling Pittsburgh’s chronic smoke pollution, Mellon and his brother Dick committed fully.
0:39:20 By 1913, they had funded a permanent structure in brick and granite, pledging $325,000 for construction
0:39:27 and $40,000 annually for maintenance. The Mellon Institute of Industrial Research
0:39:33 wasn’t charity in any conventional sense. It was strategic investment in Pittsburgh’s future.
0:39:40 Once again, Mellon’s patients had paid off. The institute would later merge with the Carnegie
0:39:46 Institute of Technology to form Carnegie Mellon University, now one of the world’s premier
0:39:52 research institutes. In characteristic silence, Mellon had orchestrated another masterpiece
0:39:58 of systematic thinking. He had solved multiple problems at once, advancing American industrial
0:40:04 research, securing Pittsburgh’s economic future, and creating a lasting memorial to his family’s
0:40:11 interest in applied science. This same instinct for strategic opportunity would serve him exceptionally
0:40:17 well as Europe descended into war in 1914. Months before the conflict, Mellon had quietly
0:40:24 orchestrated what seemed like just another industrial investment, but it would prove to be a masterstroke.
0:40:30 The story centered on coke, the high carbon fuel essential to steelmaking. For decades,
0:40:36 Pittsburgh’s landscape had been dominated by dome-shaped beehive ovens. More than 50,000 of
0:40:43 them belching toxic gases into the air as they converted coal into coke. It was cheap, dirty,
0:40:50 and outdated. One of the many reasons Pittsburgh had earned its nickname hell with the lid taken off.
0:40:54 Europe, particularly Germany, had moved on to something far more sophisticated,
0:41:00 the byproduct method. The key player here was Heinrich Koppers, a German industrialist who had
0:41:06 perfected his new approach and was working with the United States Steel to install 300 of these
0:41:12 new ovens. Instead of wasting valuable gases, his ovens captured these byproducts, converting
0:41:18 them into essential chemicals. The building blocks of modern industry and, as it would turn out,
0:41:25 modern warfare. In 1913, while others saw just another industrial investment, Mellon saw the
0:41:31 future. With his characteristic thoroughness, he consulted his network in the coal and steel
0:41:38 industries, including Thomas Lynch of the Frick Coal Company and Henry Clay Frick himself, before
0:41:46 committing $1 million for a 37.5% stake in Koppers American Company. Then he orchestrated
0:41:52 his familiar pattern of integration. Within months, the H. Koppers Company relocated to Pittsburgh,
0:41:57 established a fellowship at the New Mellon Institute, and began interweaving itself with
0:42:02 the other Mellon companies. What looked like routine business development was actually preparation
0:42:08 for a war that wouldn’t start for another year. Once again, Mellon’s patience and systematic
0:42:14 thinking had positioned him well ahead of events. When World War I erupted in Europe, Mellon’s
0:42:19 decades of patient positioning suddenly paid off with explosive force. What looked like a
0:42:26 collection of separate businesses revealed itself as an interconnected empire perfectly positioned
0:42:33 for wartime production. The conflict proved to be as much a battle of chemicals as men and steel,
0:42:38 and Pittsburgh, thanks to Mellon’s foresight, was at the center of it all. The numbers tell the
0:42:45 story. Elkoa’s pre-tax earnings nearly tripled from $8.9 million in 1915 to $25 million in 1916.
0:42:54 Golf oil’s assets ballooned from $142 million to $254 million between 1917 and 1920.
0:43:00 Even the cyclical coal business thrived, with the Pittsburgh Coal Company’s profits surging from
0:43:08 $104 million to $160 million. At the heart of this empire, Mellon’s banks grew even faster.
0:43:15 Union Trust became so profitable, it raised its quarterly dividend from 25% to 35% in 1916,
0:43:22 on top of its traditional 6% Christmas bonus. By 1918, its assets matched those of all other
0:43:28 Pittsburgh Trust companies combined. This was the most dominant institution in Pittsburgh.
0:43:35 Mellon’s personal fortune exploded from $55 million in 1913 to $80 million by 1921,
0:43:40 but these were merely book values. They really understated how much he was worth. His golf oil
0:43:46 holdings alone were valued at $17.4 million on paper, but they were worth close to $100
0:43:52 million at market prices. The true extent of his wealth was almost impossible to calculate,
0:43:57 and that’s how he liked it. Contemporary estimates put his fortune at about $135 million
0:44:03 or a billion or so in today’s money. The quiet banker from Pittsburgh had become one of America’s
0:44:10 wealthiest men while barely raising his voice above a whisper. By late 1920 at age 65,
0:44:15 Andrew Mellon had reached what should have been a natural stopping point. He had built a financial
0:44:21 and industrial empire, amassed one of America’s great fortunes, and established a research
0:44:26 institute that would transform American industry well beyond his own lifetime.
0:44:31 Most men would have been content to retire to a life of quiet luxury,
0:44:33 but Andrew Mellon wasn’t most men.
0:44:44 In 1921, a nation exhausted by war and progressive reform sought normalcy.
0:44:50 The Republicans led by Warren G. Harding swept back into power, promising exactly that,
0:44:55 but their choice for Treasury Secretary would prove anything but normal.
0:44:59 Mellon, who had emerged from his characteristic reserve to throw himself into the campaign,
0:45:07 raised $400,000 from Pittsburgh alone and personally donated $56,000. He now faced an
0:45:12 unexpected challenge. The very qualities that had made him successful in private, his silence,
0:45:19 his patience, his ability to operate in the shadows, his cold, logical approach to things,
0:45:25 suddenly made him irresistible as a public servant. Pennsylvania’s powerful senators,
0:45:29 Penrose and Knox, saw in Mellon exactly what the administration needed.
0:45:33 A financial genius who had built his fortune not through wall street manipulation,
0:45:37 but through decades of patient observation and systematic thinking.
0:45:43 Knox’s endorsement letter called him “the greatest constructive economist of his generation.”
0:45:46 But Mellon, true to form, recoiled from the spotlight.
0:45:49 “I could not contemplate taking the job,” he told associates.
0:45:54 His diary from the period reads like a methodical list of reasons to decline.
0:45:58 “I’m too old. There’s too many business conflicts. I’m too private. I don’t want the light.”
0:46:01 Perhaps the most revealing was his worry about his daughter,
0:46:04 Elza, becoming prey to Washington’s fortune hunters.
0:46:09 Yet the forces pulling him toward Washington proved irresistible.
0:46:14 Elza was eager for the move. Andrew’s life in Pittsburgh with his children scattered and his
0:46:19 friends moving away or dying had grown lonely. When Knox called on late February 1st to say
0:46:25 the Treasury position was his, Mellon’s diary recorded his characteristically understated response.
0:46:29 “Tell him I am not sure that news is pleasing to me.”
0:46:35 The United States Treasury that Andrew Mellon inherited looked remarkably like a troubled
0:46:40 company in need of restructuring. The government’s debt had ballooned 20-fold
0:46:46 during the war years, from $1.2 billion in 1916 to $25.5 billion by war’s end.
0:46:51 The top marginal tax rate had soared from 15% to 77%.
0:46:58 Most pressing was the $7.5 billion in short-term debt accumulated at rates up to 6%
0:47:03 with some coming due in just a few years. Mellon approached the nation’s finances
0:47:07 as he approached his business empire with systematic precision.
0:47:12 His solution was pure banking elegance. Refinance the loans at lower rates,
0:47:17 saving the Treasury $200 million annually while extending and staggering repayment terms from
0:47:23 $23 to $28. It was the same methodical thinking that had built his fortune now applied to the
0:47:29 nation’s balance sheet. The contrast with his cabinet peers was striking. His personal fortune
0:47:34 exceeded that of all the entire cabinet combined. Herbert Hoover, the self-made secretary of
0:47:40 commerce, was worth a mere $4 million compared to Mellon’s understated $100 million plus.
0:47:45 But what truly set him apart wasn’t his wealth. It was his obsession with detail
0:47:51 and an industrialist’s focus on relentless execution. The Treasury Department, he insisted,
0:47:57 must be conducted on business principles and kept free at all times from detrimental influences.
0:48:02 On his first day, Mellon demonstrated that his habits wouldn’t change with his title.
0:48:07 Just as he had for decades in Pittsburgh, he arrived before everyone else. He knew the details
0:48:12 better than anyone else. The ghost of Pittsburgh was about to reshape America’s financial
0:48:18 architecture, and he would do it in only the way that he knew how, quietly, methodically,
0:48:24 and with a relentless attention to detail. Here was a puzzle worthy of Andrew Mellon’s
0:48:29 systematic mind. When tax rates rose too high, wealthy people didn’t simply pay more. They
0:48:36 found creative ways to pay less. Most rich Americans were avoiding the 77% federal rate
0:48:43 entirely by investing in tax-exempt state and municipal bonds. His solution revealed the same
0:48:48 counterintuitive thinking that had built his fortune, lower the top rate to 25%.
0:48:54 The logic was pure Mellon. If federal taxes dropped significantly, the wealthy would rationally move
0:49:00 their money from low-yield tax-exempt securities into higher-returning industrial stocks.
0:49:06 Just as he had learned in business, sometimes you have to lower prices to increase total revenue.
0:49:10 This wasn’t about helping his fellow millionaires. It was about creating a system
0:49:15 where they would choose to pay taxes rather than avoid them entirely. His approach carried
0:49:21 all the hallmarks of his business career. It was methodical, pragmatic, and indifferent to
0:49:27 public opinion. He insisted on taxing more lately incomes from wages and salaries than incomes
0:49:33 from investments. Why? Because undincome was uncertain and limited in duration, sickness,
0:49:40 or death destroys it, and old age diminishes it while investment income descends to errors.
0:49:47 By 1927, his reforms meant most Americans paid no federal income tax at all.
0:49:52 The tax reforms were not the only reforms. Mellon favored high tariffs as a way to
0:49:58 stock the government coffers and shield domestic manufacturers from foreign competition.
0:50:04 He also favored reduced government spending. The results validated his systematic approach.
0:50:11 Though roaring 20s saw tax revenues remain stable or increase even as tax rates dropped,
0:50:17 while federal debt shrank considerably. Critics argued that his policies favored the wealthy
0:50:22 who received the largest rate reductions, but Mellon pointed to the data which said the rich
0:50:26 actually paid a larger share of total income taxes because the lower rates encouraged
0:50:33 honest reporting rather than tax avoidance. What fascinates me about this chapter in Mellon’s life
0:50:37 is how perfectly it demonstrates his core strengths. Here was the wealthiest member of
0:50:42 the cabinet proposing policies that would obviously bring him intense criticism from
0:50:48 all sides. Yet, just as he had done in Pittsburgh, he treated public opinion as a relevant noise.
0:50:53 In his mind, optics didn’t matter, only results did. The Treasury was just another
0:50:58 enterprise to run efficiently, regardless of how it might look to have a millionaire advocating for
0:51:04 tax cuts. For a man who had built his fortune through silence, Andrew Mellon now faced his
0:51:10 greatest challenge. He had to talk. Imagine 40 impatient reporters crammed into a Treasury
0:51:16 conference room while Mellon, avoiding eye contact, responds with “I don’t know. No man
0:51:21 can answer that. This is a great deal I have to learn.” But listen to what he did after this.
0:51:26 He handled this like he approached every other business problem. The press conferences
0:51:31 had become an education to me he later observed. The newspaper men, they come in here and they
0:51:35 ask me a lot of questions about things I know nothing about. And when they leave, I send for
0:51:40 somebody who knows and find out all about them. And the next time they come, I know. Think about
0:51:45 that approach compounded over a long life. That’s insane. He’s just a constant learning machine.
0:51:50 It reminds me of Charlie Munger’s observation about people who go to bed every night a little
0:51:56 wiser than when they grow up. We see this pattern in great minds like Munger and Buffett and
0:52:02 guests that we’ve had on the show. This relentless drive to learn regardless of age or achievement.
0:52:09 Always learning. Constantly. A little bit extra every day applied over a long life. Perhaps it’s
0:52:15 not surprising that of all the presidents Mellon served under, Kelvin Coolridge provided his most
0:52:21 natural ally. Both men were of few words. They often conversed entirely in pauses. They shared
0:52:27 not just an aversion to ostentation, but a deep belief that systematic thinking could solve problems.
0:52:32 Coolridge’s famous declaration that the business of America is business could have been written
0:52:36 by Mellon himself. Part five, the fall.
0:52:45 While Mellon was quietly restructuring the nation’s finances, a perfect storm of forces was
0:52:50 transforming American society. The changes were so profound that they would reshape not just the
0:52:56 economy, but the very fabric of American life. The foundations were laid by war and demographics.
0:53:01 Soldiers returning from World War One started families, creating enormous pent-up demand for
0:53:06 consumer goods. Meanwhile, Europe, devastated by conflict, turned to America for both
0:53:11 manufacturer goods and capital. The result was an unprecedented economic opportunity,
0:53:18 one that would be amplified by three massive waves of change. First came the technological
0:53:23 revolution. Henry Ford’s assembly line completely transformed manufacturing, dramatically increasing
0:53:29 productivity. The telephone and radio compressed time and space spreading information and speculation
0:53:36 faster than ever. Second was the financial transformation. Banks and retailers began offering
0:53:40 installment plans, making major purchases accessible to average Americans for the first
0:53:46 time. Meanwhile, growing confidence led many Americans to invest in stocks, using easily
0:53:52 available margin, creating both opportunity and risk. Finally, there was a profound social shift.
0:53:58 Advertising and mass media exploded, encouraging a culture of consumerism. The continuing migration
0:54:04 from rural areas to cities accelerated social change. The quiet, methodical world of Andrew
0:54:09 Mellon’s Pittsburgh was giving way to something louder, faster, more dynamic, and potentially
0:54:14 more dangerous. The government’s role in all of this, Mellon’s domain, was to reduce friction,
0:54:20 lower taxes, increase tariffs, and generally stay out of the way. But as the roaring 20s gained
0:54:26 momentum, a question lurked beneath the surface. Could a system built on such dramatic change
0:54:32 maintain its stability forever? When Herbert Hoover won the presidency in 1928, the architect
0:54:39 of America’s prosperity faced a fateful choice. Mellon, now 73, could have retired at his peak,
0:54:45 acclaimed as the genius behind the roaring 20s. Instead, he chose to stay, a decision that would
0:54:50 test whether his systematic approach could handle a system spinning out of control.
0:54:56 By 1929, the banker’s careful eye saw what others missed. Growth was no longer driven.
0:55:01 By the productive investment, he understood, but by the kind of speculation he always avoided.
0:55:07 As a Federal Reserve Board member, he repeatedly voted to raise interest rates in order to curb
0:55:13 the frenzy, but was consistently outvoted. His diary from this period reveals mounting
0:55:19 frustration. “Meeting Federal Reserve Board,” he wrote in March, “I vote with Board,
0:55:23 but state, I think, increase in the discount rate to be inevitable.” By May, he was openly
0:55:29 criticizing the Board to President Hoover for their refusal to act and raise rates.
0:55:34 True to his nature, Mellon tried to warn the public in his characteristically understated way.
0:55:41 “For prudent investors,” he told reporters now, “is the time to buy good bonds,” he added carefully,
0:55:47 “that while many stocks remain sound investments, some are too high of a price to be good buys.”
0:55:53 It was classic Mellon, measured, precise, and systematic. But in a market gripped by speculative
0:56:01 fever, his quiet voice went unheard. The crash when it came was unprecedented in its severity.
0:56:07 October 23rd saw what papers called a hurricane of liquidation. More than 6 million shares changed
0:56:14 hands, wiping out over 4 billion in paper value. The next day, dubbed Black Thursday, nearly 13
0:56:21 million shares traded. By October 29th, 16 million shares changed hands, a record that would stand
0:56:27 for 39 years. What made the crash particularly devastating wasn’t just the falling prices,
0:56:34 it’s that so many people had borrowed heavily to invest, turning paper losses into real bankruptcy.
0:56:39 While others panicked, Mellon displayed the same quiet observation that had built his fortune.
0:56:43 His diary entry for that fateful Tuesday simply noted, “Stock Market Panic,”
0:56:47 “RBM Telephones from Pittsburgh Asking Conditions as to Money,”
0:56:52 “Devene Comes to Lunch.” While Wall Street was in meltdown, he calmly discussed
0:56:56 art acquisitions over lunch with Devene, a famous art dealer. This calm wasn’t just
0:57:01 personality, it was positioning. One of the things that seems underappreciated about many
0:57:07 outliers is that they’re never forced by circumstances into bad decisions. Mellon’s
0:57:12 decades of systematic thinking had created a fortress of wealth that no market panic could
0:57:17 breach. He simply did not have to sell. In fact, he could take advantage of the dislocation.
0:57:26 His composure was cold Mellon rationality. Only 2.5% of Americans owned stocks in 1929,
0:57:31 and his own wealth remained largely insulated, tied up in mostly private enterprises like Gulf
0:57:36 Oil and Alcoa, rather than publicly traded securities. In fact, while the market crashed
0:57:44 around him, his personal income actually increased from 5.2 million in 1928 to 7.8 million in 1929.
0:57:50 However, the coming crisis would demand more than just cool analysis. It would require a kind
0:57:56 of public leadership that had never been his strength. The qualities that had made Andrew
0:58:02 Mellon a financial genius, patience, detachment, systematic thinking were about to become his
0:58:10 fatal flaws. By January 1932, more than 10 million Americans were underemployed. In industrial cities
0:58:16 like Pittsburgh, his Pittsburgh unemployment approached 50%. The crisis came to a head in
0:58:22 September 1931, when Britain abandoned the gold standard, triggering another cascade of bank failures
0:58:29 across America. Among the victims was the Bank of Pittsburgh, the city’s oldest financial institution.
0:58:35 It was the only major bank in Pittsburgh outside of the Mellon reach. It was particularly hard
0:58:39 hit when Britain abandoned the gold standard. In contrast, the Mellon banks were exceptionally
0:58:44 well-capitalized throughout the Depression. The Bank of Pittsburgh needed $1 million to remain
0:58:49 insolvent, a trivial sum for a man of Mellon’s wealth. A late-night meeting at his Fifth Avenue
0:58:55 Managing could have saved it. Instead, Mellon imposed a condition he knew would be rejected.
0:59:00 He wanted control. The directors refused, effectively ensuring the bank’s collapse.
0:59:06 Mellon knew exactly what he was doing. For by imposing such conditions, he would either obtain
0:59:12 the Bank of Pittsburgh for nothing or terminate it for nothing. Mathematically, it was pure win-win.
0:59:16 Remember, to Andrew Mellon, who was brought to believe that only the strongest survived,
0:59:20 recessions were nothing more than an opportunity for the strong to get stronger and acquire the weak.
0:59:25 And these opportunities don’t come around very often, so you have to take advantage of them.
0:59:30 Reputationally, Mellon’s approach was a disaster. It was the act of a man who coldly pressed his
0:59:35 advantage too far. This reminds me of something Warren Buffett said. “It takes 20 years to
0:59:40 build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”
0:59:46 The mistake Mellon made was reputation, not his balance sheet, was actually his biggest asset.
0:59:51 His prescription for the Depression remained equally cold and rational. Liquidate labor,
0:59:56 liquidate stocks, liquidate the farmers, liquidate real estate, he advised President Hoover.
1:00:00 The Depression in Mellon’s view was just another problem to be solved. A necessary
1:00:08 win that cleared away economic excesses just as the panics of 1873 and 1907 had done before.
1:00:12 As Mellon’s reputation started to sour, a Pittsburgh newspaper captured the public’s
1:00:19 verdict. The Mellon family is in disresput. The worship has ended. The glamour has utterly
1:00:24 disappeared. The ghost of Pittsburgh, who had built an empire through patient observation,
1:00:28 now found himself unable to adapt to a world that had fundamentally changed.
1:00:33 The ghost of Pittsburgh was about to meet his opposite. A man who believed that silence and
1:00:39 patience was part of the problem, not the solution. When Franklin Delano Roosevelt emerged as the
1:00:45 voice of new American capitalism, it set up more than a political dispute. It was a clash between
1:00:52 two fundamentally different ideologies. Roosevelt articulated this divide in a September 1932
1:00:57 speech to the San Francisco Commonwealth Club, where he directly challenged everything
1:01:02 Mellon represented. The last half-century Roosevelt declared had been, in large measure,
1:01:08 a history of a group of financial titans. Society had given these men free play and
1:01:12 unlimited reward based on the belief that the business of government was not to interfere
1:01:18 but to assist in the development of industry. But now, Roosevelt insisted, there was need
1:01:24 for a reappraisal of values. He wanted a new deal. Under the harsh light of the Depression,
1:01:29 FDR argued the very qualities that Mellon embodied, the patient accumulator of wealth,
1:01:35 a mere builder of more industrial plants, a creator of more railroad system, and organizer
1:01:41 of more corporations was as likely to be a dagger as a help. The era of the great promoter
1:01:47 and financial titan to whom America had granted everything if only he would build and develop
1:01:53 and employ was over. The philosophical divide cut to the heart of how each person viewed human
1:01:59 suffering. For Roosevelt, the Depression wasn’t just an economic event, it was a human catastrophe
1:02:04 requiring immediate government intervention. But for Mellon, the downturn, however severe,
1:02:10 remained part of the natural economic order. Like a fever breaking, the suffering must be endured
1:02:15 until the system purged itself of excess. It was the same lessons his father had taught him growing
1:02:21 up. Survival of the fittest, always be prepared. Never put yourself in a position where circumstances
1:02:26 can force you into poor decisions. Never reach too far. Be prudent and ride it out. No one is
1:02:32 coming to save you, you must save yourself. The contrast in FDR and Mellon’s approaches could
1:02:38 not have been starker. While Mellon advocated patience and calm, Roosevelt mobilized every tool
1:02:46 of government power. Where Mellon saw the crashes of 1873 and 1907 as precedent, Roosevelt saw an
1:02:54 unprecedented crisis requiring unprecedented solutions. Yet here was the ultimate irony both
1:02:59 men were trying to save American capitalism. They just differed profoundly on how to go about it.
1:03:04 Roosevelt believed that capitalism needed strong regulatory framework and a social safety net
1:03:10 to survive. Mellon and his peers believed in the same principles that had built their fortunes,
1:03:15 individual liberty, self-help, and minimal government intervention. But the world had
1:03:20 changed and the principles that had once built their empires now threatened to destroy them.
1:03:25 For a man who had spent his life avoiding attention, Andrew Mellon now found himself
1:03:31 at the center of a national storm. By early 1932, letters poured in from across the country,
1:03:37 denouncing him as everything from a robber to America’s Mussolini. When his picture appeared
1:03:43 on a movie theater screen in Pittsburgh, his Pittsburgh, the crowd reportedly shouted, “Robber!”
1:03:48 The architect of the roaring twenties had become the villain of the Great Depression.
1:03:54 The people needed an enemy and naturally the unrelatable Mellon would make a great one.
1:04:01 On January 6, 1932, a freshman Democratic congressman from Texas, Wright Patman,
1:04:07 stood before a packed house of representatives and declared, “On my own responsibility as a member
1:04:14 of the house, I am Peach Andrew William Mellon, Secretary of the Treasury of the United States
1:04:20 for high crimes and misdemeanors.” The charges ranged from illegal ownership of bank stock to
1:04:25 profiting from companies doing business with the Soviet Union. But the legal accusations were
1:04:32 merely a vehicle for something deeper, a nation’s fury at what they saw as Mellon’s cold indifference
1:04:37 to their suffering. The systematic thinking that had built his fortune now seemed like a callous
1:04:44 detachment in the face of human misery. President Hoover himself politically wounded saw an elegant
1:04:49 solution to this. He offered Mellon the position of ambassador to Great Britain, a golden parachute
1:04:54 that would remove him from the Treasury while preserving his dignity. Mellon accepted,
1:05:00 though without enthusiasm. It was he told reporters like a divorce. And given his personal
1:05:05 experience with the divorce, this didn’t suggest a pleasant thing. Mellon’s departure marked more
1:05:11 than just another political casualty. It signaled the end of an era in American economic thinking.
1:05:16 The banker’s faith and eventual market self-correction in patience and systematic thinking
1:05:22 gave way to Roosevelt’s vision of active government management. The debate between these
1:05:27 two competing philosophies, the government saving people or the people being fully responsible,
1:05:32 continues to shape American economic policy today and policy all around the globe.
1:05:38 In the summer of 1933, Andrew Mellon made what would prove to be a fateful visit to the White
1:05:43 House. The meeting with Roosevelt seemed cordial. They discussed banking reform and Mellon left
1:05:49 remarking, “What a charming man Mr. Roosevelt is.” The very next day, Roosevelt signed into law the
1:05:55 very bill they discussed, completely contrary to their conversation. What Mellon didn’t know,
1:06:00 what he couldn’t know, was that he’d already been marked for destruction, him and every other
1:06:06 industrialist and banker. Within a week of Roosevelt’s inauguration before Mellon had even returned
1:06:12 from his ambassadorship in London, the government had begun investigating his tax returns. This wasn’t
1:06:19 routine tax enforcement. It was lawfare, the use of the legal system as a weapon of political warfare.
1:06:25 The man who had built his empire through patient observation now found himself under hostile
1:06:32 observation. The focus was pecure, a single art purchase, the Raphael Madonna, which Mellon had
1:06:37 donated to his charitable trust. This specific charge Mellon had sold stocks at a loss to reduce
1:06:43 his taxes, then repurchased them through companies he controlled after the legally required waiting
1:06:48 period. Everything he did was perfectly legal, but that didn’t matter. True to his systematic
1:06:52 nature, Mellon responded with cool and cold precision. He opened his books completely,
1:06:58 putting his entire staff at the investigator’s disposal. After three weeks of examination,
1:07:02 with people like going over everything this guy had done trying to find something,
1:07:08 the Justice Department agents found that nothing was irregular. The Bureau of Internal Revenue
1:07:14 actually recommended he receive a small refund, but lawfare never lets facts get in the way.
1:07:20 As the incoming Treasury Secretary, Henry Warntho Jr. spelled out, I consider that Mr.
1:07:25 Mellon is not on trial, but democracy and the privileged rich, and I want to see who will win.
1:07:31 In a final twist of irony, when the grand jury, composed of laborers, mechanics, farmers, and
1:07:38 craftsmen, voted on Mellon’s indictment, they decided 11 to 10 against. As one newspaper observed,
1:07:44 the larger standing fact is that a grand jury of such men as have little reason to love the rich
1:07:49 tossed the government’s complaint into the discard. Mellon was completely cleared, but
1:07:55 his reputation was damaged forever. The trial’s real significance went beyond mere tax. As Fortune
1:08:01 Magazine would later observe, the plain fact of the matter was that Mr. Mellon had made out his
1:08:07 tax return in one economic era and was being prosecuted for it in another. The systematic
1:08:13 thinker who had mastered one era found himself a stranger in the next. Let’s pause here just to
1:08:20 appreciate the full irony of Mellon’s story here. Here was one of history’s most successful bankers
1:08:26 and investors, a man who could have spent the 1920s quietly compounding his wealth,
1:08:34 choosing instead to dedicate a decade to public service. The cost to him was enormous,
1:08:39 hundreds of millions of dollars and foregone opportunities to focus on serving and saving
1:08:46 his country. His reward, he left the nation’s finances in the best shape they had ever been in,
1:08:51 but that wasn’t enough. He saw the speculative bubble building and tried to stop it,
1:08:56 voting repeatedly to raise interest rates he was ignored. Then, hold on, before this,
1:09:01 then he goes to the public and he says to reporters that you should basically sell stocks,
1:09:06 but he does it in a very understated way. And then, finally, his warnings proved correct,
1:09:12 and he became the target of the very excesses he tried to prevent. The final twist of the knife,
1:09:17 after a politically motivated investigation tore through his life, the verdict was clear,
1:09:22 he had done nothing wrong. The ghost of Pittsburgh, it seemed, was guilty of only being out of step
1:09:27 with his times. There’s a larger lesson here about power, public service, and reputation.
1:09:32 Mellon’s cold rational mind had built one of history’s greatest fortunes, but rationality,
1:09:38 it turns out, can’t protect you from politics. The tax trial was never really about taxes.
1:09:43 What Roosevelt’s administration put on trial was the entire way of thinking about American
1:09:49 capitalism, and Andrew Mellon was its perfect poster child. As Ogden Mills, Mellon’s successor
1:09:55 at Treasury observed, the administration was entirely lacking in elementary sense of decency.
1:10:01 The goal wasn’t to win in court, it was to destroy everything that Mellon represented.
1:10:03 In this, Roosevelt succeeded.
1:10:10 The man once hailed as the greatest secretary of Treasury since Alexander Hamilton
1:10:14 found himself transformed from financial genius to public villain.
1:10:19 The ghost of Pittsburgh, who had built his fortune through patience and systematic thinking,
1:10:24 became a symbol of everything wrong with American capitalism. The transformation revealed something
1:10:29 profound about American society. Mellon’s core belief, the government should stay out of business
1:10:35 affairs, had once seemed like common sense. Now, thanks to FDR, that approach appeared not just
1:10:41 wrong, but morally repugnant. His fall from grace wasn’t merely personal, it forever changed how
1:10:48 Americans viewed the relationship between business and government. Epilogue, the final gift.
1:10:57 In December 1936, as Roosevelt celebrated his landslide re-election and the new deal reached
1:11:02 its zenith, Andrew Mellon demonstrated one final time the power of systematic thinking.
1:11:09 Despite years of political persecution, despite a tax trial that had sought to destroy his reputation,
1:11:14 he would give the American people a gift unprecedented in the nation’s history.
1:11:19 But what truly revealed Mellon’s genius wasn’t just the magnitude of the gift,
1:11:23 it was how he structured it. In creating the National Gallery of Art in Washington,
1:11:29 he applied the same precise and strategic thinking that had built his business empire.
1:11:34 The key insight came from careful observation. Mellon watched as other great art collections,
1:11:39 the Huntington Gallery, the Carnegie Institute, the Frick Collection, struggle to grow after
1:11:45 their founders’ deaths. Other collectors he noticed were reluctant to donate their treasures to the
1:11:50 buildings that bore another person’s name. His solution was characteristic Mellon, maximize
1:11:55 the outcome by minimizing ego. He explicitly refused to put his name on the building,
1:12:00 instead insisting on calling it the National Gallery of Art. His collection would serve
1:12:05 not as a monument to himself, but as a nucleus around which something far greater could grow.
1:12:11 It was the Mellon system in its final, perhaps most perfect form. Provide the initial capital,
1:12:15 establish the right conditions for growth, and then let the enterprise build its own momentum.
1:12:21 Even in his final act, Andrew Mellon thought like a system builder. The governance structure
1:12:26 for his National Gallery revealed the same careful planning he applied to every venture.
1:12:31 He created a board of nine trustees with five private citizens forming a controlling majority.
1:12:36 Each trustee was selected with characteristic precision, his son-in-law David Bruce,
1:12:40 his lawyer Donald Shepard, and others he knew would protect the institution’s
1:12:45 independence and standards. The design was pure Mellon, a private institution operating
1:12:50 in the public interest, subject to no review by any federal officer or agency other than a court
1:12:55 of law. Works could only be added if they met the high standards set by his initial collection.
1:13:00 It was exactly the model he had always believed in, private initiative creating public good.
1:13:05 Some cynics suggest the gallery was merely an attempt to win favor during his tax trial,
1:13:10 but Mellon’s systematic mind had been quietly working on the gallery for years before his
1:13:14 troubles began. In fact, you’re not even going to believe this, this is a boy run. You can’t
1:13:19 make this up. The education and charitable trust he created to fund the gallery became
1:13:25 one of the very things prosecutors tried to use against him. In the final months of his life,
1:13:30 a different Andrew Mellon emerged. The banker, who had spent decades accumulating wealth,
1:13:35 now worked with unprecedented urgency to create something lasting for the American people.
1:13:40 When asked why he persisted, despite continued opposition from the administration, he replied,
1:13:44 “Eventually the people now in power in Washington will be dead, and I will be dead,
1:13:49 but the National Gallery, I hope, will be there, and that is something the country needs.”
1:13:54 Time has vindicated his vision. Today, the National Gallery stands as one of the world’s
1:14:01 great museums. Its collection far larger than what Mellon initially provided. Other collectors,
1:14:06 just as he had predicted, have added their own treasures to this truly national institution.
1:14:11 The ghosts of Pittsburgh had created something that would outlive not just his reputation,
1:14:17 but the very era that had tried to destroy it. Perhaps that’s the final lesson of Andrew Mellon’s
1:14:23 remarkable life. True legacy isn’t about putting your name on buildings, it’s about creating something
1:14:28 that outlasts you. Conditions that allow something greater than yourself to grow and flourish
1:14:33 long after you’re gone. In giving his art to the nation, Mellon didn’t just build a museum,
1:14:39 he created an institution that continues to enrich American cultural life nearly a century later.
1:14:51 Thanks for listening and learning with us. The Furnum Street blog is where you can learn more
1:14:56 about my new book, “Clear Thinking,” turning ordinary moments into extraordinary results.
1:15:02 It’s a transformative guide that hands you the tools to master your fate, sharpen your decision
1:15:17 making, and set yourself up for unparalleled success. Learn more at fs.blog/clear. Until next time.