AI transcript
I suppose I’m what they call a rich man. They tell me so.
I’m not particularly conscious of it. I don’t use money for myself.
I don’t spend much on myself. I have always just worked. Done what needed to be done in business.
I didn’t try to make money especially. I’m not interested in money.
Welcome to The Knowledge Project. I’m your host, Shane Parrish.
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This episode is part of our new series, Lessons from Outliers, where we study extraordinary
people to extract timeless principles about business, leadership, and life.
Today’s episode is on Andrew Mellon, the wealthiest member of America’s cabinet
built his fortune by staying invisible. While Carnegie and Rockefeller dominated headlines
and built empires of steel and oil, Andrew Mellon created something far more powerful,
a system for spotting opportunities that others missed and overlooked, and turning
promising ventures into industrial giants. His secret? Staying in the shadows.
The Mellon system transformed American industry. Identified promising ventures provide capital
at precisely the right moment and integrate them into a growing ecosystem of mutually
reinforcing businesses. This deceptively simple approach created industrial giants like Alcoa,
Gulf Oil, and Coppers, companies that still shape American industry today. More importantly,
his systematic approach to spotting and seizing opportunities
offers a blueprint we can apply to our own ventures. It’s time to listen and learn.
This podcast is for entertainment and informational purposes only,
and you should do all of your own research.
Don hadn’t yet broken over Washington, D.C. when Andrew Mellon first walked into
the Treasury building on March 5, 1921. At age 65, when most men were settling into retirement,
America’s most successful and visible billionaire, at least in today’s terms,
stepped into one of the most public roles possible, Secretary of the United States Treasury.
On the surface, it seemed like a bizarre choice. How could someone who’d spent decades amassing
a fortune while avoiding attention succeed in one of the most public roles in government?
But Mellon’s story suggests something counterintuitive. There’s immense power in silence and standing
apart and observing while others shout. One of my good friends, Peter Kaufman,
has a saying that I think about often. He says, “The whale that surfaces gets harpooned.”
There’s a lot of wisdom in this statement. It means staying out of the headlines. It means
moving in silence. It means not bragging. It means not trying to be seen. It means not chasing
attention. Mellon lived his life in a way not to surface. In fact, he built a fortune in silence.
Even at his home in Pittsburgh, Mellon was a ghost. Dinner guests would watch him sit silently
at the head of the table, lost in thought, barely touching his food,
rarely speaking, almost never laughing. He turned that silence, however, into a superpower,
his natural introversion into a weapon of wealth creation. Those who knew him as a
young man painted a strange pitcher. Solitary, but not Mellon-colly. Seclusive, but not moody.
Achieving, but never boasting. Timid, but not fearful. Silent, but never stupid.
But to understand how this ghost of Pittsburgh built one of America’s great fortunes while
barely raising his voice above a whisper, we need to start with his father, Thomas Mellon,
and the distinctive world of 19th century Pittsburgh. Part one, The Judge’s Son.
Most great American fortunes of the 1800s were built by bold risk takers, charismatic empire
builders, but the Mellons were different. They moved with the patience of farmers watching crops
grow, which makes sense because that’s exactly where they started. In 1823, a nine-year-old
farm boy set out at dawn to walk 21 miles to Pittsburgh. His family’s farm was on poverty
point, a name that said everything about their circumstances. That boy was Thomas Mellon,
and what he saw that day would transform not just his life, but American financial history.
The local farmer walking beside young Thomas Mellon made a prediction. The boy would see more
in that single day in Pittsburgh than in a lifetime back on the farm, and he was right,
but not in the way he imagined. What caught Thomas’s eye wasn’t the roaring factories
or bustling streets. Instead, he found himself transfixed by a vast estate overlooking the city,
1500 acres with a mansion that seemed to command Pittsburgh itself. The whole scene he would later
write impressed me with an idea of wealth and magnificence. I had before no conception of it.
Suddenly, everything was possible. Silently, he asked himself whether I might not one day attain
such wealth, and the answer to that question would launch a multi-generational journey from
farming on poverty point to one of the richest and most powerful families in America.
While most great American fortunes of the era were built by bold gamblers and charismatic
empire builders, the Mellons took a different approach. Thomas, and later his son Andrew,
would build their dynasty the way they learned to grow crops by planting carefully, watching
patiently, and waiting for the harvest. They understood something that modern investors like
Warren Buffett and Charlie Munger would later teach so simply. The big money isn’t in the buying
or the selling, it’s in the waiting. The Mellons had discovered this truth decades earlier,
quietly building their empire while others chased quick riches.
The farm boy who dreamed of mansions found his roadmap in an unlikely place,
Benjamin Franklin’s autobiography. While other teenagers worked the field, 17-year-old Thomas
Mellon was studying Franklin’s story as if it were a manual for success. This wasn’t just
inspiration, it was instruction. And it’s worth pointing out that Thomas Mellon isn’t the only
one who found this book and loved it. Charlie Munger also had a similar experience with Ben
Franklin’s autobiography. Franklin’s influence on Thomas Mellon would prove so profound that
decades later, when establishing his bank in Pittsburgh, he placed Franklin’s statue above
the entrance. It wasn’t decoration, it was a bronze reminder of the principles that guided him.
The autobiography became his secular gospel, one that he would later preach
relentlessly to his sons, none more so than Andrew. Thanks in large part to Ben Franklin’s book,
Thomas saw education as a way out of farming and poverty point. Not everyone agreed. Against
his father’s wishes but supported by his mother and uncle, Thomas set out to pursue what he saw
as the essential trinity of success, knowledge, wealth, and distinction. When choosing a college,
he rejected the popular Jefferson College because its students lacked what he called
earnestness of purpose. At Western University of Pennsylvania, he captured his emerging philosophy
writing, “Money is to society what the element of fire is to matter, diffusing warmth and vigor
through all of its parts.” This wasn’t just clever wordplay. Thomas was developing a theory
of wealth in real time that would guide the Mellon Empire for generations. While other ambitious
young men rushed into business, Thomas took a longer view. He chose law as his path into the
business world, seeing it as Franklin had, not as an end in itself, but as a systematic way to
understand how money moved through society. Though when he would later claim in the professions and
business management certificates of either ability or learning are valueless, at the early stages,
Thomas saw education as a tactical step, indeed the first such step toward his greater ambitions.
While Pittsburgh’s other lawyers chased headlines and high-profile cases, Thomas Mellon took a
different approach. He kept his fees reasonable, built fierce client loyalty, and stayed in the
background. Dispising, display, and notoriety, Mellon preferred to make money quietly. Law became a
means to spot opportunities in real estate, foreclosures, and property development. Every
foreclosure case, every property dispute, every business deal that crossed his desk wasn’t just
legal work. He was intelligent about where money was flowing in Pittsburgh’s booming economy.
His law practice became an observation post, letting him spot opportunities others missed.
While other lawyers collected fees, Thomas collected assets, real estate, stocks, stakes,
and growing businesses. By age 29, this quiet approach had already made him relatively wealthy.
But Thomas saw his law practice the way a chess player sees the opening moves of a game. It wasn’t
just about winning quickly, it was about positioning for the real opportunities ahead. This pattern,
using a profession to spot investment opportunities, would become a classic wealth-building strategy.
A century later, Charlie Munger would follow the same path, practice law by day,
but use that knowledge to build lasting wealth through investments. Both men understood that
true wealth rarely comes from a salary, it comes from owning things that grow in value while you
sleep. This systematic mindset extended every aspect of Thomas’ life, even marriage. Just as he’d
approach education and career as systems to be mastered, he viewed matrimony through the same
cold analytical lens. It wasn’t looking for passion and romance as much as a partner,
evaluating potential wives with what he called an impartial assessment of their favorable and
unfavorable qualities. He found his helpmate in Sarah Jane Negley. Her high status and connections
expanded his network of opportunities even further. Over the next 16 years, the Mellons would have
eight children, with Andrew arriving in 1855 as the sixth child and fourth son. From the beginning,
Andrew stood apart. From his earliest days, he seemed to be his father’s son incarnate,
showing an innate understanding of money and business that delighted Thomas. While other
children played in Pittsburgh’s dirty streets, young Andrew Mellon was learning to count money.
At an age when most kids were trading marbles, he was selling bundles of grass to passing farmers
at five cents each. When that business proved successful, he recruited his brothers to sell
produce from the family garden. That enterprise was so profitable and so successful that his
mother sometimes had to buy back her own vegetables just to have something for dinner.
This wasn’t normal childhood behavior, but the Mellon household was anything but normal.
Thomas raised his children, according to philosopher Herbert Spencer’s maxim, that life
was a struggle, which only the fittest survive. Outside their windows, Pittsburgh was transforming
into hell with the lid taken off, 500 factories belching smoke into the sky, forging two-fifths
of America’s iron. Thomas saw this industrial battlefield and determined his sons would be
prepared. He built on their own schoolhouse, where poetry and fiction were banned as useless
distraction. Only what’s necessary and useful in business was Thomas’s motto.
The curriculum was ruthlessly practical, reading, writing, and arithmetic, nothing else.
The studies Thomas later explained were such as would be most necessary and useful in the
subsequent business of life. Years later, Thomas would express surprise that all of his sons
spontaneously chose business careers as if he hadn’t engineered precisely that outcome.
But Andrew’s path took an unexpected turn. When Andrew’s brother Selwyn died,
something softened in Thomas’s iron philosophy. The judge closed his schoolhouse and enrolled
Andrew in public school and began commuting with him on the way to school every day, which was by
his office. Their daily commutes became kind of an apprenticeship. As one relative observed,
Thomas spoke to Andrew not as a little boy, but as one with a mature intellect.
These conversations, repeatedly daily walking through Pittsburgh’s smoky streets, transformed
a father’s systematic approach to wealth into a son’s natural instinct. They weren’t just talks,
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TD, ready for you. Part two, building the system. When Judge Thomas Mellon’s eyesight began to fail,
he turned even this setback into a teaching opportunity. He would pay his children 50
cents for two to three hours of reading. Of course, not fairy tales or novels, but rather
business reports, financial news, and economic theory. It was through this seemingly tedious task
that Andrew gained unique access to his father’s intellectual life. The judge was, as biographer
David Canada notes, “far from a passive audience.” This exact pattern, children reading business
material to parents and learning to think critically through discussion, appears repeatedly in the
stories of 19th century financial success. Hedy Green, who would go on to become America’s richest
woman, developed her legendary financial acumen by reading market reports to her father and grandfather.
In both cases, these weren’t just reading sessions, they were apprenticeships in analytical thinking.
It’s a fascinating approach to learning. You’re not just absorbing information,
you’re learning how to think about it, how to argue about it, how to engage with ideas critically,
and with a person that you probably inherently trust and respect.
As Thomas Millen’s influence on his children grew, he began laying the foundations for what would
become the Mellon family’s financial empire through two key institutions. The first was
East Liberty Savings and Deposit Bank. On the surface, a simple investment, but a machine for
creating wealth. The East Liberty Savings and Deposit Bank looks simple from the outside,
but it was actually the hub of an intricate system. The Mellons would vertically integrate
everything. Here’s how author David Kashkoff described it. The Mellon boys subdivided acreage
into homesites sold that are profit, sold their buyers lumber with which to construct their humble
dwellings at a profit, financed the transactions through the bank profitably, and then sold the coal
to heat the houses, again, at a profit. This interlocking system of businesses,
all reinforcing one another, would become known later as the Mellon system once Andrew perfected
it. The integration would give them unprecedented influence and advantage over competition.
When Thomas opened his second bank, T. Mellon & Sons, he placed Ben Franklin’s statue above
the door. The same mentor who had guided him from Farm Boy to Finance Year would now watch over his
sons. Thomas approached banking with characteristic confidence. He said, “There is nothing in banking
but what you ought to be able to learn in a week or two.” As to bank books, keeping them is the
simplest of all kinds. He wasn’t alone in this optimism. Over 20 new banks opened in booming
Pittsburgh during this period, which may explain why there were so many financial panics. Andrew
proved to be a reliable study. Judge Mellon’s trust in young Andrew was so complete that at just
19, Andrew became the only person beside his father with the bank’s safe combination. The 1860s
proved remarkably fertile ground for the Mellon’s ambitions. Pittsburgh was transforming into the
industrial capital of America. The nation’s railway network doubled, and Pittsburgh stood at
the center of American industrial revolution. The city, near 300,000 residents producing half
the nation’s glass and iron, while new industries sprouted like wildflowers, Heinz food processing,
Westinghouse’s air brakes, and soon Carnegie’s revolutionary Bessemer steel process,
which would help him create his own empire. Thomas called it an easy to grow rich decade,
watching with satisfaction as his system worked exactly as designed. For the judge, though, the
greatest satisfaction came not from the profits themselves, but from seeing his son succeed in
the system that he had created. Yet this golden age wouldn’t last. In 1873, a financial hurricane
in what came to be known at the time as the Great Depression swept from Europe to America,
destroying nearly half of Pittsburgh’s banks and its path. Even the mighty Mellon banks
barely survived. Thomas had to turn away desperate customers. Shaken and humbled,
he closed the East Liberty Savings and Deposit Bank, and debated going out of the banking
business entirely. The judge and Andrew learned something profound from the Panic of 1873,
something that would shape not just their fortune, but a pattern repeated by history’s greatest
wealth builders. They realized that financial storms don’t just destroy, they create opportunity.
This goes back to one of the key lessons Thomas Mellon tried to instill in his children.
Life is competition, and only the fittest survive. While most tried to simply survive
panics, great fortunes were built by those who understood a crucial truth.
Down turns are inevitable, and when they happen, only those positioned to take advantage of them
can thrive. The Panic of 1873, like the Panics of 1857, 1884, and 1907 that would follow,
wasn’t just a crisis. It was a chance to acquire valuable assets at fire sale prices. In an era
where banks went out of business quickly, the Mellons always kept a surplus and never needed
the kindness of strangers to survive. It got pretty close one time, but they survived,
and it was never ever that close again. That’s more a testament to just how bad the downturn
was than from them not having enough capital. Being well positioned to take advantage of
opportunities continues to build great fortunes. When others retreated, when weak competition
failed, when solid businesses were selling for pennies on the dollar, that’s when the prepared
few expanded their empires. As John D. Rockefeller would later observe, the strong feed during
depressions. You can think of the 2008 financial crisis and how Buffett was able to deploy billions
of dollars with really high rates of returns in a matter of weeks. While everyone else was
paralyzed, he provided liquidity, of course, at a price. You can’t predict when the next crisis
will hit, you know there will be one. When it does, those who borrowed too much or expanded
too fast fight for survival, will those who stayed strong and liquid pounce on opportunities.
The Mellons understood this truth early. The goal isn’t just to be strong enough to survive
the storm, it’s to be strong enough to capitalize on it. While others pray for endless summer,
the wise prepare for winter, knowing that fortunes are built when the assets are cheap
and competition is weak. This is really the idea behind positioning, and it, combined with patients,
would really build and fuel the Mellon fortune. The panic of 1873 was Andrew Mellon’s first,
but far from his last, and marked his true entry into banking. At 19, Andrew didn’t look like a
banking titan in the making. He was thin-voiced, shy, and uncommunicative, but something remarkable
was happening at T. Mellon and Sons. This quiet teenager was becoming the family’s center of
gravity. He didn’t demand authority, he simply exercised it naturally. Soon, everyone from his
father down was asking the same question. What would Andy think? While other Pittsburgh titans
roared and dominated, like Carnegie and Steele or Frick and Cole, Andrew moved like a shadow
through the financial world. His quietness wasn’t just personality, it was strategy. He moved in
silence so as not to attract attention. He was building something different. Not a visible empire
of smokestacks and railroads, but an invisible web of financial power. He began methodically
acquiring local banks. Each piece carefully chosen to expand his reach. But his master’s
stroke came in 1886 when he established just the second trust company in Pittsburgh. While regular
banks faced tight restrictions, trust companies, on the other hand, could do almost anything.
They could lend against real estate, deal in stocks and bonds, even act as venture capital firms of
their day. Andrew ventured far beyond his father’s bread and butter of mortgages and real estate.
By his early 30s, Andrew had built his family’s fortune to the modern equivalent of 50 million.
But he was just getting started. His true genius would emerge late one day in 1889,
when three men walked into tea melons and sands seeking a modest $4,000 loan,
a moment that would transform not just the melons, but American industry itself.
The three men who walked in that day were Captain Elford Hunt and MIT-trained metallurgist George
Klopp, a young chemist, and Arthur Davis, fresh from Amherst College. Their company, named the
Pittsburgh Reduction Company, had developed something revolutionary, a practical method of
producing aluminum through electrolysis. It was a classic startup, a breakthrough technology,
promising early results, but a desperate need for capital to expand. On paper, it looked incredibly
risky. They were producing just 475 pounds of aluminum daily and selling it for about two
dollars a pound. And they were struggling to convince anyone to abandon trusted metals like
iron and copper for this expensive new material. But where others saw shabby accounts and a lot
of problems, Andrew Mellon saw opportunity. Instead of just the $4,000 they requested,
he offered them $25,000, more than six times what they asked for. Not just enough to clear the debts,
it was enough to grow. It wasn’t just a loan, it was the beginning of a system.
The Mellon approach was methodical. First, help the company move to New Kensington,
where the Mellon-owned real estate provided room to grow. Then, engineer a crucial expansion to
Niagara Falls, where cheap hydroelectric power could drive costs down. Lower costs meant lower
prices and lower prices meant explosive growth. Within five years, the price of aluminum had
dropped by 75% and sales had skyrocketed from a few hundred pounds to 600,000 pounds annually
in 1895. This small company, the Pittsburgh Reduction Company, would later become Alcoa,
still a $10 billion giant today. But more importantly, it revealed what would become
known as the Mellon touch. The ability to spot not just promising technologies,
but the right people to build them into empires. The Mellon system that emerged wasn’t just a
collection of investments. It was a wealth-building machine that got smarter with every deal.
While its foundations were simple, identified promising technologies, back exceptional operators,
provide capital at crucial moments, its real power lay in flexibility. The Mellons didn’t have one
playbook. They had many. With aluminum in the Pittsburgh Reduction Company, they were content
being minority investors, taking about 12% while letting the founders run the show. But in oil,
they seized majority control and installed family leadership. This flexibility made them one of
the few who could ever successfully compete against John D. Rockefeller. When Standard Oil tried to
squeeze them out by manipulating railroad rates and trying to block them at every turn,
they didn’t fight directly. They simply built their own 271-mile pipeline to the coast.
By 1894, they controlled 10% of America’s oil exports, prompting Andrew to confidently tell
one associate, “We have every facility possessed by the Standard Oil Company and receive and deliver
oil under as favorable conditions in every way.” Rockefeller would eventually buy them out. But
not because the Mellons were weak, but because they were strong. They had built something he
couldn’t crush into submission. This wasn’t just their father’s system anymore. Like Thomas Mellon,
they believed in vertical integration and backing capable operators. But where the judge had stuck
to familiar territory, coal, iron, and real estate, Andrew and Dick ventured into cutting-edge
industries like hydroelectric power and aluminum manufacturing. As one historian noted, Andrew may
habitually have asked, “What would father do?” But his answers wouldn’t always have convinced
the judge. The system wasn’t perfect. In 1890, they missed a golden opportunity with George Westinghouse,
who was demanding too much equity for a $500,000 loan. Westinghouse turned to New York Financers
instead, a decision Andrew would later regret as he watched a major Pittsburgh industry slip away.
But even failures fed the learning machine. By 1912, their banks controlled half of Pittsburgh’s
banking resources. But more importantly, they built something that looked more like a modern
venture capital firm than a traditional bank. Each new venture made their network stronger and
their intelligence deeper. Every venture they backed, every operator they partnered with,
didn’t just bring one opportunity, they brought access to entire networks of knowledge,
relationships, and new opportunities. It was a system that learned from itself.
Success breeds relationships. Relationships breed intelligence. Intelligence breeds opportunity
and opportunity bred more success. The Mellons had created something rare in business history,
a wealth-building machine that grew smarter and stronger with every deal decade after decade.
At the core of the Mellon system was Andrew’s genius for invisibility. While living modestly in
his parents’ house, he quietly built a network that included not just industrialists like Carnegie
and Frick, but senators, judges, and future presidents. His power grew precisely because he
seemed to want none of its trappings. In fact, he came off as a modest Pittsburgh businessman who
still lived in his parents’ house. Reality was anything but that. The invisible influence let
him solve one of the industrial age’s greatest challenges, how to scale human expertise.
Mellon built a cadre of operators, tough, competent men who became his eyes and ears across
industries. He would deploy them whenever and wherever opportunity arose, and they’d report
back intelligence that led to even more opportunities. In an era before computers, it was a human
algorithm for spotting and seizing opportunity with better information. But Mellon understood
something profound. The system would only work if his operators got rich too. He wanted a real
win-win. Real success he observed comes from making others successful. It wasn’t just philosophy,
it was pragmatism. When Alfred Hall, who Mellon had backed in Pittsburgh Reduction Company, died
worth $30 million, it wasn’t an accident. It was the system working as designed.
This was Mellon’s real innovation. He didn’t need to master aluminum manufacturing or oil
refining or pipeline construction. What he built instead was a machine that could identify talent,
deploy capital, be a good partner, and maintain control without much direct investment,
all while learning without drawing too much attention to himself. Like its creator,
the system worked best when few could see how powerful it had become.
The numbers tell the story of Mellon’s success. His companies regularly paid dividends of 20,
30, even 100% annually. Golf Oil once declared a staggering 500% dividend,
so large that it attracted the attention of the regulators.
But the real genius wasn’t just in generating these returns, it was how Mellon recycled them.
Each successful venture became fuel for the next, creating an ever-expanding web of opportunity.
In this way, Andrew Mellon built something far more durable than just a company. He created a
perpetual capital deployment machine, a system that could transform promising businesses into
empires, quietly, methodically, and with remarkable consistency. While others were building individual
enterprises, Mellon built a machine that fed companies. The blueprint Mellon created would
later be refined by Warren Buffett and Charlie Munger with Berkshire Hathaway. There’s a lot
of parallels here. Both could spot opportunities others missed, deploy capital decisively when
others needed it most, recognize, attract, and retain talent, and wait patiently for returns.
Most importantly, both created companies that were really learning machines. Each acquisition
gave them more and more information that made them smarter and smarter about the next opportunity.
Even their philosophy of management was similar. Mellon’s observation that
real success comes from making others successful could have come straight from Buffett’s annual
letters. It’s reciprocation in action. Go positive, go first, and the world will do most of the work
for you. Both Buffett and Mellon understood that a fundamental truth is that if you find exceptional
operators, you pay them well, you give them autonomy, and you let the system just work its magic with
patience. Andrew Mellon wielded influence from the shadows. Pennsylvania’s legislature was known as
the best that money could buy, and Mellon saw this as simply efficient business, ensuring, for
instance, that import duties protected his aluminum interests. He wanted policies that
made businesses prosper, and he quietly funded politicians who shared that vision. His personal
style reflected invisible power. In Pittsburgh, they said if you wanted $5,000, you saw Dick,
but if you needed $25,000, you saw Andrew. Those who did would find a slight man in an expensive,
yet understated suit. His blue eyes could be described either as dreamy or as sharp blue daggers,
and they were always fixed on a balance sheet. His weapon of choice in these conversations was
silence. While his brother Dick chatted easily, Andrew would sit, sphinx-like, breaking his
silence only for a laser precise question. What makes you think so? Can this thing be owned?
Whom have you done work for? Most people left his office disappointed. Some got a brief “Here’s
the trouble with the whole scheme.” Others received detailed explanations of why their
ventures would fail, but a select few heard the magic words “I may be able to help.” By 1907,
the system Mellon had built was staggering in its reach. From his position at Union Trust Company,
he held 41 corporate directureships, more than anyone else in Pittsburgh. His brother Dick held
31, but these numbers only hinted at their true influence. Consider Gulf Oil. Its tankers were
built by Mellon New York Shipbuilding Company, using steel from Mellon-controlled mills,
all financed through Mellon banks, and insured by Mellon companies. At Alcoa, workers lived in
houses financed by Mellon’s Union Trust, built on Mellon lots, heated by Mellon coal, lit by Mellon
utilities. They rode to work on Mellon streetcars and deposited their paychecks in Mellon banks.
What’s remarkable is how quickly this empire emerged from the shadows. In less than a decade
after 1898, Mellon had transformed himself from a successful banker into something entirely new,
an architect of industrial ecosystems. Having made crucial moves during the Depression of
1893, took advantage of it. He rode this subsequent boom years with extraordinary precision. By 1907,
the framework was complete. What remained was simply to let the system grow, each part strengthening
and reinforcing the others. Part three, The Private Kingdom. The system that had built Mellon’s business
empire met its match and matters of the heart. In 1900, at age 45, Andrew approached marriage the
only way he knew how, coldly, as another strategic partnership to be carefully structured and managed.
On paper, his marriage to 21-year-old Norma McMullen had all the hallmarks of a classic Mellon
venture. It was carefully constructed, strategically sound, and had clear benefits for both parties.
He, on one hand, brought wealth and stability. She, on the other, brought youth and vitality.
To Andrew’s methodical mind, it was another example of identifying complementary strengths.
Exactly the kind of thinking that had built his fortune. But Norma McMullen was not a business
proposition to be optimized, and love is not cold and rational. She was raised in London
Society, the daughter of a British brewing family. She found Pittsburgh suffocating.
Her first glimpse of her new home prompted a horrified question. “We don’t get off here,
do we?” “You don’t live here.” To her, Pittsburgh must have felt like exile. A grey
industrial city dominated by what one observer called a dour, Philistine, insular male culture,
where men like her husband made fortunes. The very qualities that made Mellon a financial genius,
his reserve, his patience, his ability to wait silently while others revealed themselves,
his cold, rational, emotionless approach to decisions, proved disastrous in marriage.
While he orchestrated the quiet accumulation of power, Nora felt the walls closing in.
She had married into what was becoming the most powerful financial ecosystem in western Pennsylvania,
only to find herself starved of the one commodity Andrew Mellon couldn’t control. Joy.
What followed was a collision between two forces. Mellon’s need for order and control,
and Nora’s desperate grasp at vitality. The divorce was public and nasty. The details,
her affairs, his retreats into work, the public scandals, matter less than what they reveal
about the limits of pure rationality. He was a man who could orchestrate entire industries
and bend the world to his will, but he couldn’t bridge the gap across his own dinner table.
The divorce in 1913, like everything else in Mellon’s life, was handled with meticulous attention
to detail. The settlement was one of the largest at his time. The timing was ironic, just as his
business system was really reaching its apex of efficiency. His personal life demonstrated
that not everything could be managed like a balance sheet or an income statement. You couldn’t
integrate a marriage the same way that you could integrate an industry or a company. In the aftermath,
Mellon retreated farther into his work, where the rules made sense, where the silence was an asset,
not a liability. A conversation with Robert Kennedy Duncan, the scientist who would go on
to help establish the Mellon Institute, captures the poignant reality of Mellon’s life. Duncan,
Andrew asked one day, “Are you happy at home?” When Duncan confirmed that he was most happy,
Mellon’s response was revealing, “Then you’re a far richer man than I am.”
The divorce marked a turning point. While personal happiness eluded him,
Mellon found a new challenge worthy of his methodical mind. Pittsburgh itself was reaching its
limits. At age 60, while many of his wealthy peers had moved to New York, Mellon saw what others missed.
The region’s traditional industries were plateauing, and its future growth would depend on
something that had always fascinated him, the marriage of science and industry. He had witnessed
firsthand how his most successful ventures like alcoa or carburandum and golf oil increasingly
relied on what we would now call research and development. But true to his nature, Mellon
didn’t rush in to solve this problem. He watched and he waited. The solution arrived in 1911 through
an unlikely partnership with a Canadian professor named Robert Kennedy Duncan. Duncan approached
Mellon with a radical idea—industrial fellowships that would bridge the gap between academic research
and commercial application. He had tested this concept at the University of Kansas with projects
ranging from extending the life of laundered fabric to finding new uses for waste buttermilk.
In Duncan’s systematic approach to innovation, Mellon recognized something familiar—his own
methodical style applied to scientific discovery. Following the same patient pattern that he’d
used to build his business empire, Mellon started small—a wooden building and a two-year trial
period. When early projects showed promise, including the conversion of petroleum to gasoline and
tackling Pittsburgh’s chronic smoke pollution, Mellon and his brother Dick committed fully.
By 1913, they had funded a permanent structure in brick and granite, pledging $325,000 for construction
and $40,000 annually for maintenance. The Mellon Institute of Industrial Research
wasn’t charity in any conventional sense. It was strategic investment in Pittsburgh’s future.
Once again, Mellon’s patients had paid off. The institute would later merge with the Carnegie
Institute of Technology to form Carnegie Mellon University, now one of the world’s premier
research institutes. In characteristic silence, Mellon had orchestrated another masterpiece
of systematic thinking. He had solved multiple problems at once, advancing American industrial
research, securing Pittsburgh’s economic future, and creating a lasting memorial to his family’s
interest in applied science. This same instinct for strategic opportunity would serve him exceptionally
well as Europe descended into war in 1914. Months before the conflict, Mellon had quietly
orchestrated what seemed like just another industrial investment, but it would prove to be a masterstroke.
The story centered on coke, the high carbon fuel essential to steelmaking. For decades,
Pittsburgh’s landscape had been dominated by dome-shaped beehive ovens. More than 50,000 of
them belching toxic gases into the air as they converted coal into coke. It was cheap, dirty,
and outdated. One of the many reasons Pittsburgh had earned its nickname hell with the lid taken off.
Europe, particularly Germany, had moved on to something far more sophisticated,
the byproduct method. The key player here was Heinrich Koppers, a German industrialist who had
perfected his new approach and was working with the United States Steel to install 300 of these
new ovens. Instead of wasting valuable gases, his ovens captured these byproducts, converting
them into essential chemicals. The building blocks of modern industry and, as it would turn out,
modern warfare. In 1913, while others saw just another industrial investment, Mellon saw the
future. With his characteristic thoroughness, he consulted his network in the coal and steel
industries, including Thomas Lynch of the Frick Coal Company and Henry Clay Frick himself, before
committing $1 million for a 37.5% stake in Koppers American Company. Then he orchestrated
his familiar pattern of integration. Within months, the H. Koppers Company relocated to Pittsburgh,
established a fellowship at the New Mellon Institute, and began interweaving itself with
the other Mellon companies. What looked like routine business development was actually preparation
for a war that wouldn’t start for another year. Once again, Mellon’s patience and systematic
thinking had positioned him well ahead of events. When World War I erupted in Europe, Mellon’s
decades of patient positioning suddenly paid off with explosive force. What looked like a
collection of separate businesses revealed itself as an interconnected empire perfectly positioned
for wartime production. The conflict proved to be as much a battle of chemicals as men and steel,
and Pittsburgh, thanks to Mellon’s foresight, was at the center of it all. The numbers tell the
story. Elkoa’s pre-tax earnings nearly tripled from $8.9 million in 1915 to $25 million in 1916.
Golf oil’s assets ballooned from $142 million to $254 million between 1917 and 1920.
Even the cyclical coal business thrived, with the Pittsburgh Coal Company’s profits surging from
$104 million to $160 million. At the heart of this empire, Mellon’s banks grew even faster.
Union Trust became so profitable, it raised its quarterly dividend from 25% to 35% in 1916,
on top of its traditional 6% Christmas bonus. By 1918, its assets matched those of all other
Pittsburgh Trust companies combined. This was the most dominant institution in Pittsburgh.
Mellon’s personal fortune exploded from $55 million in 1913 to $80 million by 1921,
but these were merely book values. They really understated how much he was worth. His golf oil
holdings alone were valued at $17.4 million on paper, but they were worth close to $100
million at market prices. The true extent of his wealth was almost impossible to calculate,
and that’s how he liked it. Contemporary estimates put his fortune at about $135 million
or a billion or so in today’s money. The quiet banker from Pittsburgh had become one of America’s
wealthiest men while barely raising his voice above a whisper. By late 1920 at age 65,
Andrew Mellon had reached what should have been a natural stopping point. He had built a financial
and industrial empire, amassed one of America’s great fortunes, and established a research
institute that would transform American industry well beyond his own lifetime.
Most men would have been content to retire to a life of quiet luxury,
but Andrew Mellon wasn’t most men.
In 1921, a nation exhausted by war and progressive reform sought normalcy.
The Republicans led by Warren G. Harding swept back into power, promising exactly that,
but their choice for Treasury Secretary would prove anything but normal.
Mellon, who had emerged from his characteristic reserve to throw himself into the campaign,
raised $400,000 from Pittsburgh alone and personally donated $56,000. He now faced an
unexpected challenge. The very qualities that had made him successful in private, his silence,
his patience, his ability to operate in the shadows, his cold, logical approach to things,
suddenly made him irresistible as a public servant. Pennsylvania’s powerful senators,
Penrose and Knox, saw in Mellon exactly what the administration needed.
A financial genius who had built his fortune not through wall street manipulation,
but through decades of patient observation and systematic thinking.
Knox’s endorsement letter called him “the greatest constructive economist of his generation.”
But Mellon, true to form, recoiled from the spotlight.
“I could not contemplate taking the job,” he told associates.
His diary from the period reads like a methodical list of reasons to decline.
“I’m too old. There’s too many business conflicts. I’m too private. I don’t want the light.”
Perhaps the most revealing was his worry about his daughter,
Elza, becoming prey to Washington’s fortune hunters.
Yet the forces pulling him toward Washington proved irresistible.
Elza was eager for the move. Andrew’s life in Pittsburgh with his children scattered and his
friends moving away or dying had grown lonely. When Knox called on late February 1st to say
the Treasury position was his, Mellon’s diary recorded his characteristically understated response.
“Tell him I am not sure that news is pleasing to me.”
The United States Treasury that Andrew Mellon inherited looked remarkably like a troubled
company in need of restructuring. The government’s debt had ballooned 20-fold
during the war years, from $1.2 billion in 1916 to $25.5 billion by war’s end.
The top marginal tax rate had soared from 15% to 77%.
Most pressing was the $7.5 billion in short-term debt accumulated at rates up to 6%
with some coming due in just a few years. Mellon approached the nation’s finances
as he approached his business empire with systematic precision.
His solution was pure banking elegance. Refinance the loans at lower rates,
saving the Treasury $200 million annually while extending and staggering repayment terms from
$23 to $28. It was the same methodical thinking that had built his fortune now applied to the
nation’s balance sheet. The contrast with his cabinet peers was striking. His personal fortune
exceeded that of all the entire cabinet combined. Herbert Hoover, the self-made secretary of
commerce, was worth a mere $4 million compared to Mellon’s understated $100 million plus.
But what truly set him apart wasn’t his wealth. It was his obsession with detail
and an industrialist’s focus on relentless execution. The Treasury Department, he insisted,
must be conducted on business principles and kept free at all times from detrimental influences.
On his first day, Mellon demonstrated that his habits wouldn’t change with his title.
Just as he had for decades in Pittsburgh, he arrived before everyone else. He knew the details
better than anyone else. The ghost of Pittsburgh was about to reshape America’s financial
architecture, and he would do it in only the way that he knew how, quietly, methodically,
and with a relentless attention to detail. Here was a puzzle worthy of Andrew Mellon’s
systematic mind. When tax rates rose too high, wealthy people didn’t simply pay more. They
found creative ways to pay less. Most rich Americans were avoiding the 77% federal rate
entirely by investing in tax-exempt state and municipal bonds. His solution revealed the same
counterintuitive thinking that had built his fortune, lower the top rate to 25%.
The logic was pure Mellon. If federal taxes dropped significantly, the wealthy would rationally move
their money from low-yield tax-exempt securities into higher-returning industrial stocks.
Just as he had learned in business, sometimes you have to lower prices to increase total revenue.
This wasn’t about helping his fellow millionaires. It was about creating a system
where they would choose to pay taxes rather than avoid them entirely. His approach carried
all the hallmarks of his business career. It was methodical, pragmatic, and indifferent to
public opinion. He insisted on taxing more lately incomes from wages and salaries than incomes
from investments. Why? Because undincome was uncertain and limited in duration, sickness,
or death destroys it, and old age diminishes it while investment income descends to errors.
By 1927, his reforms meant most Americans paid no federal income tax at all.
The tax reforms were not the only reforms. Mellon favored high tariffs as a way to
stock the government coffers and shield domestic manufacturers from foreign competition.
He also favored reduced government spending. The results validated his systematic approach.
Though roaring 20s saw tax revenues remain stable or increase even as tax rates dropped,
while federal debt shrank considerably. Critics argued that his policies favored the wealthy
who received the largest rate reductions, but Mellon pointed to the data which said the rich
actually paid a larger share of total income taxes because the lower rates encouraged
honest reporting rather than tax avoidance. What fascinates me about this chapter in Mellon’s life
is how perfectly it demonstrates his core strengths. Here was the wealthiest member of
the cabinet proposing policies that would obviously bring him intense criticism from
all sides. Yet, just as he had done in Pittsburgh, he treated public opinion as a relevant noise.
In his mind, optics didn’t matter, only results did. The Treasury was just another
enterprise to run efficiently, regardless of how it might look to have a millionaire advocating for
tax cuts. For a man who had built his fortune through silence, Andrew Mellon now faced his
greatest challenge. He had to talk. Imagine 40 impatient reporters crammed into a Treasury
conference room while Mellon, avoiding eye contact, responds with “I don’t know. No man
can answer that. This is a great deal I have to learn.” But listen to what he did after this.
He handled this like he approached every other business problem. The press conferences
had become an education to me he later observed. The newspaper men, they come in here and they
ask me a lot of questions about things I know nothing about. And when they leave, I send for
somebody who knows and find out all about them. And the next time they come, I know. Think about
that approach compounded over a long life. That’s insane. He’s just a constant learning machine.
It reminds me of Charlie Munger’s observation about people who go to bed every night a little
wiser than when they grow up. We see this pattern in great minds like Munger and Buffett and
guests that we’ve had on the show. This relentless drive to learn regardless of age or achievement.
Always learning. Constantly. A little bit extra every day applied over a long life. Perhaps it’s
not surprising that of all the presidents Mellon served under, Kelvin Coolridge provided his most
natural ally. Both men were of few words. They often conversed entirely in pauses. They shared
not just an aversion to ostentation, but a deep belief that systematic thinking could solve problems.
Coolridge’s famous declaration that the business of America is business could have been written
by Mellon himself. Part five, the fall.
While Mellon was quietly restructuring the nation’s finances, a perfect storm of forces was
transforming American society. The changes were so profound that they would reshape not just the
economy, but the very fabric of American life. The foundations were laid by war and demographics.
Soldiers returning from World War One started families, creating enormous pent-up demand for
consumer goods. Meanwhile, Europe, devastated by conflict, turned to America for both
manufacturer goods and capital. The result was an unprecedented economic opportunity,
one that would be amplified by three massive waves of change. First came the technological
revolution. Henry Ford’s assembly line completely transformed manufacturing, dramatically increasing
productivity. The telephone and radio compressed time and space spreading information and speculation
faster than ever. Second was the financial transformation. Banks and retailers began offering
installment plans, making major purchases accessible to average Americans for the first
time. Meanwhile, growing confidence led many Americans to invest in stocks, using easily
available margin, creating both opportunity and risk. Finally, there was a profound social shift.
Advertising and mass media exploded, encouraging a culture of consumerism. The continuing migration
from rural areas to cities accelerated social change. The quiet, methodical world of Andrew
Mellon’s Pittsburgh was giving way to something louder, faster, more dynamic, and potentially
more dangerous. The government’s role in all of this, Mellon’s domain, was to reduce friction,
lower taxes, increase tariffs, and generally stay out of the way. But as the roaring 20s gained
momentum, a question lurked beneath the surface. Could a system built on such dramatic change
maintain its stability forever? When Herbert Hoover won the presidency in 1928, the architect
of America’s prosperity faced a fateful choice. Mellon, now 73, could have retired at his peak,
acclaimed as the genius behind the roaring 20s. Instead, he chose to stay, a decision that would
test whether his systematic approach could handle a system spinning out of control.
By 1929, the banker’s careful eye saw what others missed. Growth was no longer driven.
By the productive investment, he understood, but by the kind of speculation he always avoided.
As a Federal Reserve Board member, he repeatedly voted to raise interest rates in order to curb
the frenzy, but was consistently outvoted. His diary from this period reveals mounting
frustration. “Meeting Federal Reserve Board,” he wrote in March, “I vote with Board,
but state, I think, increase in the discount rate to be inevitable.” By May, he was openly
criticizing the Board to President Hoover for their refusal to act and raise rates.
True to his nature, Mellon tried to warn the public in his characteristically understated way.
“For prudent investors,” he told reporters now, “is the time to buy good bonds,” he added carefully,
“that while many stocks remain sound investments, some are too high of a price to be good buys.”
It was classic Mellon, measured, precise, and systematic. But in a market gripped by speculative
fever, his quiet voice went unheard. The crash when it came was unprecedented in its severity.
October 23rd saw what papers called a hurricane of liquidation. More than 6 million shares changed
hands, wiping out over 4 billion in paper value. The next day, dubbed Black Thursday, nearly 13
million shares traded. By October 29th, 16 million shares changed hands, a record that would stand
for 39 years. What made the crash particularly devastating wasn’t just the falling prices,
it’s that so many people had borrowed heavily to invest, turning paper losses into real bankruptcy.
While others panicked, Mellon displayed the same quiet observation that had built his fortune.
His diary entry for that fateful Tuesday simply noted, “Stock Market Panic,”
“RBM Telephones from Pittsburgh Asking Conditions as to Money,”
“Devene Comes to Lunch.” While Wall Street was in meltdown, he calmly discussed
art acquisitions over lunch with Devene, a famous art dealer. This calm wasn’t just
personality, it was positioning. One of the things that seems underappreciated about many
outliers is that they’re never forced by circumstances into bad decisions. Mellon’s
decades of systematic thinking had created a fortress of wealth that no market panic could
breach. He simply did not have to sell. In fact, he could take advantage of the dislocation.
His composure was cold Mellon rationality. Only 2.5% of Americans owned stocks in 1929,
and his own wealth remained largely insulated, tied up in mostly private enterprises like Gulf
Oil and Alcoa, rather than publicly traded securities. In fact, while the market crashed
around him, his personal income actually increased from 5.2 million in 1928 to 7.8 million in 1929.
However, the coming crisis would demand more than just cool analysis. It would require a kind
of public leadership that had never been his strength. The qualities that had made Andrew
Mellon a financial genius, patience, detachment, systematic thinking were about to become his
fatal flaws. By January 1932, more than 10 million Americans were underemployed. In industrial cities
like Pittsburgh, his Pittsburgh unemployment approached 50%. The crisis came to a head in
September 1931, when Britain abandoned the gold standard, triggering another cascade of bank failures
across America. Among the victims was the Bank of Pittsburgh, the city’s oldest financial institution.
It was the only major bank in Pittsburgh outside of the Mellon reach. It was particularly hard
hit when Britain abandoned the gold standard. In contrast, the Mellon banks were exceptionally
well-capitalized throughout the Depression. The Bank of Pittsburgh needed $1 million to remain
insolvent, a trivial sum for a man of Mellon’s wealth. A late-night meeting at his Fifth Avenue
Managing could have saved it. Instead, Mellon imposed a condition he knew would be rejected.
He wanted control. The directors refused, effectively ensuring the bank’s collapse.
Mellon knew exactly what he was doing. For by imposing such conditions, he would either obtain
the Bank of Pittsburgh for nothing or terminate it for nothing. Mathematically, it was pure win-win.
Remember, to Andrew Mellon, who was brought to believe that only the strongest survived,
recessions were nothing more than an opportunity for the strong to get stronger and acquire the weak.
And these opportunities don’t come around very often, so you have to take advantage of them.
Reputationally, Mellon’s approach was a disaster. It was the act of a man who coldly pressed his
advantage too far. This reminds me of something Warren Buffett said. “It takes 20 years to
build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”
The mistake Mellon made was reputation, not his balance sheet, was actually his biggest asset.
His prescription for the Depression remained equally cold and rational. Liquidate labor,
liquidate stocks, liquidate the farmers, liquidate real estate, he advised President Hoover.
The Depression in Mellon’s view was just another problem to be solved. A necessary
win that cleared away economic excesses just as the panics of 1873 and 1907 had done before.
As Mellon’s reputation started to sour, a Pittsburgh newspaper captured the public’s
verdict. The Mellon family is in disresput. The worship has ended. The glamour has utterly
disappeared. The ghost of Pittsburgh, who had built an empire through patient observation,
now found himself unable to adapt to a world that had fundamentally changed.
The ghost of Pittsburgh was about to meet his opposite. A man who believed that silence and
patience was part of the problem, not the solution. When Franklin Delano Roosevelt emerged as the
voice of new American capitalism, it set up more than a political dispute. It was a clash between
two fundamentally different ideologies. Roosevelt articulated this divide in a September 1932
speech to the San Francisco Commonwealth Club, where he directly challenged everything
Mellon represented. The last half-century Roosevelt declared had been, in large measure,
a history of a group of financial titans. Society had given these men free play and
unlimited reward based on the belief that the business of government was not to interfere
but to assist in the development of industry. But now, Roosevelt insisted, there was need
for a reappraisal of values. He wanted a new deal. Under the harsh light of the Depression,
FDR argued the very qualities that Mellon embodied, the patient accumulator of wealth,
a mere builder of more industrial plants, a creator of more railroad system, and organizer
of more corporations was as likely to be a dagger as a help. The era of the great promoter
and financial titan to whom America had granted everything if only he would build and develop
and employ was over. The philosophical divide cut to the heart of how each person viewed human
suffering. For Roosevelt, the Depression wasn’t just an economic event, it was a human catastrophe
requiring immediate government intervention. But for Mellon, the downturn, however severe,
remained part of the natural economic order. Like a fever breaking, the suffering must be endured
until the system purged itself of excess. It was the same lessons his father had taught him growing
up. Survival of the fittest, always be prepared. Never put yourself in a position where circumstances
can force you into poor decisions. Never reach too far. Be prudent and ride it out. No one is
coming to save you, you must save yourself. The contrast in FDR and Mellon’s approaches could
not have been starker. While Mellon advocated patience and calm, Roosevelt mobilized every tool
of government power. Where Mellon saw the crashes of 1873 and 1907 as precedent, Roosevelt saw an
unprecedented crisis requiring unprecedented solutions. Yet here was the ultimate irony both
men were trying to save American capitalism. They just differed profoundly on how to go about it.
Roosevelt believed that capitalism needed strong regulatory framework and a social safety net
to survive. Mellon and his peers believed in the same principles that had built their fortunes,
individual liberty, self-help, and minimal government intervention. But the world had
changed and the principles that had once built their empires now threatened to destroy them.
For a man who had spent his life avoiding attention, Andrew Mellon now found himself
at the center of a national storm. By early 1932, letters poured in from across the country,
denouncing him as everything from a robber to America’s Mussolini. When his picture appeared
on a movie theater screen in Pittsburgh, his Pittsburgh, the crowd reportedly shouted, “Robber!”
The architect of the roaring twenties had become the villain of the Great Depression.
The people needed an enemy and naturally the unrelatable Mellon would make a great one.
On January 6, 1932, a freshman Democratic congressman from Texas, Wright Patman,
stood before a packed house of representatives and declared, “On my own responsibility as a member
of the house, I am Peach Andrew William Mellon, Secretary of the Treasury of the United States
for high crimes and misdemeanors.” The charges ranged from illegal ownership of bank stock to
profiting from companies doing business with the Soviet Union. But the legal accusations were
merely a vehicle for something deeper, a nation’s fury at what they saw as Mellon’s cold indifference
to their suffering. The systematic thinking that had built his fortune now seemed like a callous
detachment in the face of human misery. President Hoover himself politically wounded saw an elegant
solution to this. He offered Mellon the position of ambassador to Great Britain, a golden parachute
that would remove him from the Treasury while preserving his dignity. Mellon accepted,
though without enthusiasm. It was he told reporters like a divorce. And given his personal
experience with the divorce, this didn’t suggest a pleasant thing. Mellon’s departure marked more
than just another political casualty. It signaled the end of an era in American economic thinking.
The banker’s faith and eventual market self-correction in patience and systematic thinking
gave way to Roosevelt’s vision of active government management. The debate between these
two competing philosophies, the government saving people or the people being fully responsible,
continues to shape American economic policy today and policy all around the globe.
In the summer of 1933, Andrew Mellon made what would prove to be a fateful visit to the White
House. The meeting with Roosevelt seemed cordial. They discussed banking reform and Mellon left
remarking, “What a charming man Mr. Roosevelt is.” The very next day, Roosevelt signed into law the
very bill they discussed, completely contrary to their conversation. What Mellon didn’t know,
what he couldn’t know, was that he’d already been marked for destruction, him and every other
industrialist and banker. Within a week of Roosevelt’s inauguration before Mellon had even returned
from his ambassadorship in London, the government had begun investigating his tax returns. This wasn’t
routine tax enforcement. It was lawfare, the use of the legal system as a weapon of political warfare.
The man who had built his empire through patient observation now found himself under hostile
observation. The focus was pecure, a single art purchase, the Raphael Madonna, which Mellon had
donated to his charitable trust. This specific charge Mellon had sold stocks at a loss to reduce
his taxes, then repurchased them through companies he controlled after the legally required waiting
period. Everything he did was perfectly legal, but that didn’t matter. True to his systematic
nature, Mellon responded with cool and cold precision. He opened his books completely,
putting his entire staff at the investigator’s disposal. After three weeks of examination,
with people like going over everything this guy had done trying to find something,
the Justice Department agents found that nothing was irregular. The Bureau of Internal Revenue
actually recommended he receive a small refund, but lawfare never lets facts get in the way.
As the incoming Treasury Secretary, Henry Warntho Jr. spelled out, I consider that Mr.
Mellon is not on trial, but democracy and the privileged rich, and I want to see who will win.
In a final twist of irony, when the grand jury, composed of laborers, mechanics, farmers, and
craftsmen, voted on Mellon’s indictment, they decided 11 to 10 against. As one newspaper observed,
the larger standing fact is that a grand jury of such men as have little reason to love the rich
tossed the government’s complaint into the discard. Mellon was completely cleared, but
his reputation was damaged forever. The trial’s real significance went beyond mere tax. As Fortune
Magazine would later observe, the plain fact of the matter was that Mr. Mellon had made out his
tax return in one economic era and was being prosecuted for it in another. The systematic
thinker who had mastered one era found himself a stranger in the next. Let’s pause here just to
appreciate the full irony of Mellon’s story here. Here was one of history’s most successful bankers
and investors, a man who could have spent the 1920s quietly compounding his wealth,
choosing instead to dedicate a decade to public service. The cost to him was enormous,
hundreds of millions of dollars and foregone opportunities to focus on serving and saving
his country. His reward, he left the nation’s finances in the best shape they had ever been in,
but that wasn’t enough. He saw the speculative bubble building and tried to stop it,
voting repeatedly to raise interest rates he was ignored. Then, hold on, before this,
then he goes to the public and he says to reporters that you should basically sell stocks,
but he does it in a very understated way. And then, finally, his warnings proved correct,
and he became the target of the very excesses he tried to prevent. The final twist of the knife,
after a politically motivated investigation tore through his life, the verdict was clear,
he had done nothing wrong. The ghost of Pittsburgh, it seemed, was guilty of only being out of step
with his times. There’s a larger lesson here about power, public service, and reputation.
Mellon’s cold rational mind had built one of history’s greatest fortunes, but rationality,
it turns out, can’t protect you from politics. The tax trial was never really about taxes.
What Roosevelt’s administration put on trial was the entire way of thinking about American
capitalism, and Andrew Mellon was its perfect poster child. As Ogden Mills, Mellon’s successor
at Treasury observed, the administration was entirely lacking in elementary sense of decency.
The goal wasn’t to win in court, it was to destroy everything that Mellon represented.
In this, Roosevelt succeeded.
The man once hailed as the greatest secretary of Treasury since Alexander Hamilton
found himself transformed from financial genius to public villain.
The ghost of Pittsburgh, who had built his fortune through patience and systematic thinking,
became a symbol of everything wrong with American capitalism. The transformation revealed something
profound about American society. Mellon’s core belief, the government should stay out of business
affairs, had once seemed like common sense. Now, thanks to FDR, that approach appeared not just
wrong, but morally repugnant. His fall from grace wasn’t merely personal, it forever changed how
Americans viewed the relationship between business and government. Epilogue, the final gift.
In December 1936, as Roosevelt celebrated his landslide re-election and the new deal reached
its zenith, Andrew Mellon demonstrated one final time the power of systematic thinking.
Despite years of political persecution, despite a tax trial that had sought to destroy his reputation,
he would give the American people a gift unprecedented in the nation’s history.
But what truly revealed Mellon’s genius wasn’t just the magnitude of the gift,
it was how he structured it. In creating the National Gallery of Art in Washington,
he applied the same precise and strategic thinking that had built his business empire.
The key insight came from careful observation. Mellon watched as other great art collections,
the Huntington Gallery, the Carnegie Institute, the Frick Collection, struggle to grow after
their founders’ deaths. Other collectors he noticed were reluctant to donate their treasures to the
buildings that bore another person’s name. His solution was characteristic Mellon, maximize
the outcome by minimizing ego. He explicitly refused to put his name on the building,
instead insisting on calling it the National Gallery of Art. His collection would serve
not as a monument to himself, but as a nucleus around which something far greater could grow.
It was the Mellon system in its final, perhaps most perfect form. Provide the initial capital,
establish the right conditions for growth, and then let the enterprise build its own momentum.
Even in his final act, Andrew Mellon thought like a system builder. The governance structure
for his National Gallery revealed the same careful planning he applied to every venture.
He created a board of nine trustees with five private citizens forming a controlling majority.
Each trustee was selected with characteristic precision, his son-in-law David Bruce,
his lawyer Donald Shepard, and others he knew would protect the institution’s
independence and standards. The design was pure Mellon, a private institution operating
in the public interest, subject to no review by any federal officer or agency other than a court
of law. Works could only be added if they met the high standards set by his initial collection.
It was exactly the model he had always believed in, private initiative creating public good.
Some cynics suggest the gallery was merely an attempt to win favor during his tax trial,
but Mellon’s systematic mind had been quietly working on the gallery for years before his
troubles began. In fact, you’re not even going to believe this, this is a boy run. You can’t
make this up. The education and charitable trust he created to fund the gallery became
one of the very things prosecutors tried to use against him. In the final months of his life,
a different Andrew Mellon emerged. The banker, who had spent decades accumulating wealth,
now worked with unprecedented urgency to create something lasting for the American people.
When asked why he persisted, despite continued opposition from the administration, he replied,
“Eventually the people now in power in Washington will be dead, and I will be dead,
but the National Gallery, I hope, will be there, and that is something the country needs.”
Time has vindicated his vision. Today, the National Gallery stands as one of the world’s
great museums. Its collection far larger than what Mellon initially provided. Other collectors,
just as he had predicted, have added their own treasures to this truly national institution.
The ghosts of Pittsburgh had created something that would outlive not just his reputation,
but the very era that had tried to destroy it. Perhaps that’s the final lesson of Andrew Mellon’s
remarkable life. True legacy isn’t about putting your name on buildings, it’s about creating something
that outlasts you. Conditions that allow something greater than yourself to grow and flourish
long after you’re gone. In giving his art to the nation, Mellon didn’t just build a museum,
he created an institution that continues to enrich American cultural life nearly a century later.
Thanks for listening and learning with us. The Furnum Street blog is where you can learn more
about my new book, “Clear Thinking,” turning ordinary moments into extraordinary results.
It’s a transformative guide that hands you the tools to master your fate, sharpen your decision
making, and set yourself up for unparalleled success. Learn more at fs.blog/clear. Until next time.
I’m not particularly conscious of it. I don’t use money for myself.
I don’t spend much on myself. I have always just worked. Done what needed to be done in business.
I didn’t try to make money especially. I’m not interested in money.
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This episode is part of our new series, Lessons from Outliers, where we study extraordinary
people to extract timeless principles about business, leadership, and life.
Today’s episode is on Andrew Mellon, the wealthiest member of America’s cabinet
built his fortune by staying invisible. While Carnegie and Rockefeller dominated headlines
and built empires of steel and oil, Andrew Mellon created something far more powerful,
a system for spotting opportunities that others missed and overlooked, and turning
promising ventures into industrial giants. His secret? Staying in the shadows.
The Mellon system transformed American industry. Identified promising ventures provide capital
at precisely the right moment and integrate them into a growing ecosystem of mutually
reinforcing businesses. This deceptively simple approach created industrial giants like Alcoa,
Gulf Oil, and Coppers, companies that still shape American industry today. More importantly,
his systematic approach to spotting and seizing opportunities
offers a blueprint we can apply to our own ventures. It’s time to listen and learn.
This podcast is for entertainment and informational purposes only,
and you should do all of your own research.
Don hadn’t yet broken over Washington, D.C. when Andrew Mellon first walked into
the Treasury building on March 5, 1921. At age 65, when most men were settling into retirement,
America’s most successful and visible billionaire, at least in today’s terms,
stepped into one of the most public roles possible, Secretary of the United States Treasury.
On the surface, it seemed like a bizarre choice. How could someone who’d spent decades amassing
a fortune while avoiding attention succeed in one of the most public roles in government?
But Mellon’s story suggests something counterintuitive. There’s immense power in silence and standing
apart and observing while others shout. One of my good friends, Peter Kaufman,
has a saying that I think about often. He says, “The whale that surfaces gets harpooned.”
There’s a lot of wisdom in this statement. It means staying out of the headlines. It means
moving in silence. It means not bragging. It means not trying to be seen. It means not chasing
attention. Mellon lived his life in a way not to surface. In fact, he built a fortune in silence.
Even at his home in Pittsburgh, Mellon was a ghost. Dinner guests would watch him sit silently
at the head of the table, lost in thought, barely touching his food,
rarely speaking, almost never laughing. He turned that silence, however, into a superpower,
his natural introversion into a weapon of wealth creation. Those who knew him as a
young man painted a strange pitcher. Solitary, but not Mellon-colly. Seclusive, but not moody.
Achieving, but never boasting. Timid, but not fearful. Silent, but never stupid.
But to understand how this ghost of Pittsburgh built one of America’s great fortunes while
barely raising his voice above a whisper, we need to start with his father, Thomas Mellon,
and the distinctive world of 19th century Pittsburgh. Part one, The Judge’s Son.
Most great American fortunes of the 1800s were built by bold risk takers, charismatic empire
builders, but the Mellons were different. They moved with the patience of farmers watching crops
grow, which makes sense because that’s exactly where they started. In 1823, a nine-year-old
farm boy set out at dawn to walk 21 miles to Pittsburgh. His family’s farm was on poverty
point, a name that said everything about their circumstances. That boy was Thomas Mellon,
and what he saw that day would transform not just his life, but American financial history.
The local farmer walking beside young Thomas Mellon made a prediction. The boy would see more
in that single day in Pittsburgh than in a lifetime back on the farm, and he was right,
but not in the way he imagined. What caught Thomas’s eye wasn’t the roaring factories
or bustling streets. Instead, he found himself transfixed by a vast estate overlooking the city,
1500 acres with a mansion that seemed to command Pittsburgh itself. The whole scene he would later
write impressed me with an idea of wealth and magnificence. I had before no conception of it.
Suddenly, everything was possible. Silently, he asked himself whether I might not one day attain
such wealth, and the answer to that question would launch a multi-generational journey from
farming on poverty point to one of the richest and most powerful families in America.
While most great American fortunes of the era were built by bold gamblers and charismatic
empire builders, the Mellons took a different approach. Thomas, and later his son Andrew,
would build their dynasty the way they learned to grow crops by planting carefully, watching
patiently, and waiting for the harvest. They understood something that modern investors like
Warren Buffett and Charlie Munger would later teach so simply. The big money isn’t in the buying
or the selling, it’s in the waiting. The Mellons had discovered this truth decades earlier,
quietly building their empire while others chased quick riches.
The farm boy who dreamed of mansions found his roadmap in an unlikely place,
Benjamin Franklin’s autobiography. While other teenagers worked the field, 17-year-old Thomas
Mellon was studying Franklin’s story as if it were a manual for success. This wasn’t just
inspiration, it was instruction. And it’s worth pointing out that Thomas Mellon isn’t the only
one who found this book and loved it. Charlie Munger also had a similar experience with Ben
Franklin’s autobiography. Franklin’s influence on Thomas Mellon would prove so profound that
decades later, when establishing his bank in Pittsburgh, he placed Franklin’s statue above
the entrance. It wasn’t decoration, it was a bronze reminder of the principles that guided him.
The autobiography became his secular gospel, one that he would later preach
relentlessly to his sons, none more so than Andrew. Thanks in large part to Ben Franklin’s book,
Thomas saw education as a way out of farming and poverty point. Not everyone agreed. Against
his father’s wishes but supported by his mother and uncle, Thomas set out to pursue what he saw
as the essential trinity of success, knowledge, wealth, and distinction. When choosing a college,
he rejected the popular Jefferson College because its students lacked what he called
earnestness of purpose. At Western University of Pennsylvania, he captured his emerging philosophy
writing, “Money is to society what the element of fire is to matter, diffusing warmth and vigor
through all of its parts.” This wasn’t just clever wordplay. Thomas was developing a theory
of wealth in real time that would guide the Mellon Empire for generations. While other ambitious
young men rushed into business, Thomas took a longer view. He chose law as his path into the
business world, seeing it as Franklin had, not as an end in itself, but as a systematic way to
understand how money moved through society. Though when he would later claim in the professions and
business management certificates of either ability or learning are valueless, at the early stages,
Thomas saw education as a tactical step, indeed the first such step toward his greater ambitions.
While Pittsburgh’s other lawyers chased headlines and high-profile cases, Thomas Mellon took a
different approach. He kept his fees reasonable, built fierce client loyalty, and stayed in the
background. Dispising, display, and notoriety, Mellon preferred to make money quietly. Law became a
means to spot opportunities in real estate, foreclosures, and property development. Every
foreclosure case, every property dispute, every business deal that crossed his desk wasn’t just
legal work. He was intelligent about where money was flowing in Pittsburgh’s booming economy.
His law practice became an observation post, letting him spot opportunities others missed.
While other lawyers collected fees, Thomas collected assets, real estate, stocks, stakes,
and growing businesses. By age 29, this quiet approach had already made him relatively wealthy.
But Thomas saw his law practice the way a chess player sees the opening moves of a game. It wasn’t
just about winning quickly, it was about positioning for the real opportunities ahead. This pattern,
using a profession to spot investment opportunities, would become a classic wealth-building strategy.
A century later, Charlie Munger would follow the same path, practice law by day,
but use that knowledge to build lasting wealth through investments. Both men understood that
true wealth rarely comes from a salary, it comes from owning things that grow in value while you
sleep. This systematic mindset extended every aspect of Thomas’ life, even marriage. Just as he’d
approach education and career as systems to be mastered, he viewed matrimony through the same
cold analytical lens. It wasn’t looking for passion and romance as much as a partner,
evaluating potential wives with what he called an impartial assessment of their favorable and
unfavorable qualities. He found his helpmate in Sarah Jane Negley. Her high status and connections
expanded his network of opportunities even further. Over the next 16 years, the Mellons would have
eight children, with Andrew arriving in 1855 as the sixth child and fourth son. From the beginning,
Andrew stood apart. From his earliest days, he seemed to be his father’s son incarnate,
showing an innate understanding of money and business that delighted Thomas. While other
children played in Pittsburgh’s dirty streets, young Andrew Mellon was learning to count money.
At an age when most kids were trading marbles, he was selling bundles of grass to passing farmers
at five cents each. When that business proved successful, he recruited his brothers to sell
produce from the family garden. That enterprise was so profitable and so successful that his
mother sometimes had to buy back her own vegetables just to have something for dinner.
This wasn’t normal childhood behavior, but the Mellon household was anything but normal.
Thomas raised his children, according to philosopher Herbert Spencer’s maxim, that life
was a struggle, which only the fittest survive. Outside their windows, Pittsburgh was transforming
into hell with the lid taken off, 500 factories belching smoke into the sky, forging two-fifths
of America’s iron. Thomas saw this industrial battlefield and determined his sons would be
prepared. He built on their own schoolhouse, where poetry and fiction were banned as useless
distraction. Only what’s necessary and useful in business was Thomas’s motto.
The curriculum was ruthlessly practical, reading, writing, and arithmetic, nothing else.
The studies Thomas later explained were such as would be most necessary and useful in the
subsequent business of life. Years later, Thomas would express surprise that all of his sons
spontaneously chose business careers as if he hadn’t engineered precisely that outcome.
But Andrew’s path took an unexpected turn. When Andrew’s brother Selwyn died,
something softened in Thomas’s iron philosophy. The judge closed his schoolhouse and enrolled
Andrew in public school and began commuting with him on the way to school every day, which was by
his office. Their daily commutes became kind of an apprenticeship. As one relative observed,
Thomas spoke to Andrew not as a little boy, but as one with a mature intellect.
These conversations, repeatedly daily walking through Pittsburgh’s smoky streets, transformed
a father’s systematic approach to wealth into a son’s natural instinct. They weren’t just talks,
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TD, ready for you. Part two, building the system. When Judge Thomas Mellon’s eyesight began to fail,
he turned even this setback into a teaching opportunity. He would pay his children 50
cents for two to three hours of reading. Of course, not fairy tales or novels, but rather
business reports, financial news, and economic theory. It was through this seemingly tedious task
that Andrew gained unique access to his father’s intellectual life. The judge was, as biographer
David Canada notes, “far from a passive audience.” This exact pattern, children reading business
material to parents and learning to think critically through discussion, appears repeatedly in the
stories of 19th century financial success. Hedy Green, who would go on to become America’s richest
woman, developed her legendary financial acumen by reading market reports to her father and grandfather.
In both cases, these weren’t just reading sessions, they were apprenticeships in analytical thinking.
It’s a fascinating approach to learning. You’re not just absorbing information,
you’re learning how to think about it, how to argue about it, how to engage with ideas critically,
and with a person that you probably inherently trust and respect.
As Thomas Millen’s influence on his children grew, he began laying the foundations for what would
become the Mellon family’s financial empire through two key institutions. The first was
East Liberty Savings and Deposit Bank. On the surface, a simple investment, but a machine for
creating wealth. The East Liberty Savings and Deposit Bank looks simple from the outside,
but it was actually the hub of an intricate system. The Mellons would vertically integrate
everything. Here’s how author David Kashkoff described it. The Mellon boys subdivided acreage
into homesites sold that are profit, sold their buyers lumber with which to construct their humble
dwellings at a profit, financed the transactions through the bank profitably, and then sold the coal
to heat the houses, again, at a profit. This interlocking system of businesses,
all reinforcing one another, would become known later as the Mellon system once Andrew perfected
it. The integration would give them unprecedented influence and advantage over competition.
When Thomas opened his second bank, T. Mellon & Sons, he placed Ben Franklin’s statue above
the door. The same mentor who had guided him from Farm Boy to Finance Year would now watch over his
sons. Thomas approached banking with characteristic confidence. He said, “There is nothing in banking
but what you ought to be able to learn in a week or two.” As to bank books, keeping them is the
simplest of all kinds. He wasn’t alone in this optimism. Over 20 new banks opened in booming
Pittsburgh during this period, which may explain why there were so many financial panics. Andrew
proved to be a reliable study. Judge Mellon’s trust in young Andrew was so complete that at just
19, Andrew became the only person beside his father with the bank’s safe combination. The 1860s
proved remarkably fertile ground for the Mellon’s ambitions. Pittsburgh was transforming into the
industrial capital of America. The nation’s railway network doubled, and Pittsburgh stood at
the center of American industrial revolution. The city, near 300,000 residents producing half
the nation’s glass and iron, while new industries sprouted like wildflowers, Heinz food processing,
Westinghouse’s air brakes, and soon Carnegie’s revolutionary Bessemer steel process,
which would help him create his own empire. Thomas called it an easy to grow rich decade,
watching with satisfaction as his system worked exactly as designed. For the judge, though, the
greatest satisfaction came not from the profits themselves, but from seeing his son succeed in
the system that he had created. Yet this golden age wouldn’t last. In 1873, a financial hurricane
in what came to be known at the time as the Great Depression swept from Europe to America,
destroying nearly half of Pittsburgh’s banks and its path. Even the mighty Mellon banks
barely survived. Thomas had to turn away desperate customers. Shaken and humbled,
he closed the East Liberty Savings and Deposit Bank, and debated going out of the banking
business entirely. The judge and Andrew learned something profound from the Panic of 1873,
something that would shape not just their fortune, but a pattern repeated by history’s greatest
wealth builders. They realized that financial storms don’t just destroy, they create opportunity.
This goes back to one of the key lessons Thomas Mellon tried to instill in his children.
Life is competition, and only the fittest survive. While most tried to simply survive
panics, great fortunes were built by those who understood a crucial truth.
Down turns are inevitable, and when they happen, only those positioned to take advantage of them
can thrive. The Panic of 1873, like the Panics of 1857, 1884, and 1907 that would follow,
wasn’t just a crisis. It was a chance to acquire valuable assets at fire sale prices. In an era
where banks went out of business quickly, the Mellons always kept a surplus and never needed
the kindness of strangers to survive. It got pretty close one time, but they survived,
and it was never ever that close again. That’s more a testament to just how bad the downturn
was than from them not having enough capital. Being well positioned to take advantage of
opportunities continues to build great fortunes. When others retreated, when weak competition
failed, when solid businesses were selling for pennies on the dollar, that’s when the prepared
few expanded their empires. As John D. Rockefeller would later observe, the strong feed during
depressions. You can think of the 2008 financial crisis and how Buffett was able to deploy billions
of dollars with really high rates of returns in a matter of weeks. While everyone else was
paralyzed, he provided liquidity, of course, at a price. You can’t predict when the next crisis
will hit, you know there will be one. When it does, those who borrowed too much or expanded
too fast fight for survival, will those who stayed strong and liquid pounce on opportunities.
The Mellons understood this truth early. The goal isn’t just to be strong enough to survive
the storm, it’s to be strong enough to capitalize on it. While others pray for endless summer,
the wise prepare for winter, knowing that fortunes are built when the assets are cheap
and competition is weak. This is really the idea behind positioning, and it, combined with patients,
would really build and fuel the Mellon fortune. The panic of 1873 was Andrew Mellon’s first,
but far from his last, and marked his true entry into banking. At 19, Andrew didn’t look like a
banking titan in the making. He was thin-voiced, shy, and uncommunicative, but something remarkable
was happening at T. Mellon and Sons. This quiet teenager was becoming the family’s center of
gravity. He didn’t demand authority, he simply exercised it naturally. Soon, everyone from his
father down was asking the same question. What would Andy think? While other Pittsburgh titans
roared and dominated, like Carnegie and Steele or Frick and Cole, Andrew moved like a shadow
through the financial world. His quietness wasn’t just personality, it was strategy. He moved in
silence so as not to attract attention. He was building something different. Not a visible empire
of smokestacks and railroads, but an invisible web of financial power. He began methodically
acquiring local banks. Each piece carefully chosen to expand his reach. But his master’s
stroke came in 1886 when he established just the second trust company in Pittsburgh. While regular
banks faced tight restrictions, trust companies, on the other hand, could do almost anything.
They could lend against real estate, deal in stocks and bonds, even act as venture capital firms of
their day. Andrew ventured far beyond his father’s bread and butter of mortgages and real estate.
By his early 30s, Andrew had built his family’s fortune to the modern equivalent of 50 million.
But he was just getting started. His true genius would emerge late one day in 1889,
when three men walked into tea melons and sands seeking a modest $4,000 loan,
a moment that would transform not just the melons, but American industry itself.
The three men who walked in that day were Captain Elford Hunt and MIT-trained metallurgist George
Klopp, a young chemist, and Arthur Davis, fresh from Amherst College. Their company, named the
Pittsburgh Reduction Company, had developed something revolutionary, a practical method of
producing aluminum through electrolysis. It was a classic startup, a breakthrough technology,
promising early results, but a desperate need for capital to expand. On paper, it looked incredibly
risky. They were producing just 475 pounds of aluminum daily and selling it for about two
dollars a pound. And they were struggling to convince anyone to abandon trusted metals like
iron and copper for this expensive new material. But where others saw shabby accounts and a lot
of problems, Andrew Mellon saw opportunity. Instead of just the $4,000 they requested,
he offered them $25,000, more than six times what they asked for. Not just enough to clear the debts,
it was enough to grow. It wasn’t just a loan, it was the beginning of a system.
The Mellon approach was methodical. First, help the company move to New Kensington,
where the Mellon-owned real estate provided room to grow. Then, engineer a crucial expansion to
Niagara Falls, where cheap hydroelectric power could drive costs down. Lower costs meant lower
prices and lower prices meant explosive growth. Within five years, the price of aluminum had
dropped by 75% and sales had skyrocketed from a few hundred pounds to 600,000 pounds annually
in 1895. This small company, the Pittsburgh Reduction Company, would later become Alcoa,
still a $10 billion giant today. But more importantly, it revealed what would become
known as the Mellon touch. The ability to spot not just promising technologies,
but the right people to build them into empires. The Mellon system that emerged wasn’t just a
collection of investments. It was a wealth-building machine that got smarter with every deal.
While its foundations were simple, identified promising technologies, back exceptional operators,
provide capital at crucial moments, its real power lay in flexibility. The Mellons didn’t have one
playbook. They had many. With aluminum in the Pittsburgh Reduction Company, they were content
being minority investors, taking about 12% while letting the founders run the show. But in oil,
they seized majority control and installed family leadership. This flexibility made them one of
the few who could ever successfully compete against John D. Rockefeller. When Standard Oil tried to
squeeze them out by manipulating railroad rates and trying to block them at every turn,
they didn’t fight directly. They simply built their own 271-mile pipeline to the coast.
By 1894, they controlled 10% of America’s oil exports, prompting Andrew to confidently tell
one associate, “We have every facility possessed by the Standard Oil Company and receive and deliver
oil under as favorable conditions in every way.” Rockefeller would eventually buy them out. But
not because the Mellons were weak, but because they were strong. They had built something he
couldn’t crush into submission. This wasn’t just their father’s system anymore. Like Thomas Mellon,
they believed in vertical integration and backing capable operators. But where the judge had stuck
to familiar territory, coal, iron, and real estate, Andrew and Dick ventured into cutting-edge
industries like hydroelectric power and aluminum manufacturing. As one historian noted, Andrew may
habitually have asked, “What would father do?” But his answers wouldn’t always have convinced
the judge. The system wasn’t perfect. In 1890, they missed a golden opportunity with George Westinghouse,
who was demanding too much equity for a $500,000 loan. Westinghouse turned to New York Financers
instead, a decision Andrew would later regret as he watched a major Pittsburgh industry slip away.
But even failures fed the learning machine. By 1912, their banks controlled half of Pittsburgh’s
banking resources. But more importantly, they built something that looked more like a modern
venture capital firm than a traditional bank. Each new venture made their network stronger and
their intelligence deeper. Every venture they backed, every operator they partnered with,
didn’t just bring one opportunity, they brought access to entire networks of knowledge,
relationships, and new opportunities. It was a system that learned from itself.
Success breeds relationships. Relationships breed intelligence. Intelligence breeds opportunity
and opportunity bred more success. The Mellons had created something rare in business history,
a wealth-building machine that grew smarter and stronger with every deal decade after decade.
At the core of the Mellon system was Andrew’s genius for invisibility. While living modestly in
his parents’ house, he quietly built a network that included not just industrialists like Carnegie
and Frick, but senators, judges, and future presidents. His power grew precisely because he
seemed to want none of its trappings. In fact, he came off as a modest Pittsburgh businessman who
still lived in his parents’ house. Reality was anything but that. The invisible influence let
him solve one of the industrial age’s greatest challenges, how to scale human expertise.
Mellon built a cadre of operators, tough, competent men who became his eyes and ears across
industries. He would deploy them whenever and wherever opportunity arose, and they’d report
back intelligence that led to even more opportunities. In an era before computers, it was a human
algorithm for spotting and seizing opportunity with better information. But Mellon understood
something profound. The system would only work if his operators got rich too. He wanted a real
win-win. Real success he observed comes from making others successful. It wasn’t just philosophy,
it was pragmatism. When Alfred Hall, who Mellon had backed in Pittsburgh Reduction Company, died
worth $30 million, it wasn’t an accident. It was the system working as designed.
This was Mellon’s real innovation. He didn’t need to master aluminum manufacturing or oil
refining or pipeline construction. What he built instead was a machine that could identify talent,
deploy capital, be a good partner, and maintain control without much direct investment,
all while learning without drawing too much attention to himself. Like its creator,
the system worked best when few could see how powerful it had become.
The numbers tell the story of Mellon’s success. His companies regularly paid dividends of 20,
30, even 100% annually. Golf Oil once declared a staggering 500% dividend,
so large that it attracted the attention of the regulators.
But the real genius wasn’t just in generating these returns, it was how Mellon recycled them.
Each successful venture became fuel for the next, creating an ever-expanding web of opportunity.
In this way, Andrew Mellon built something far more durable than just a company. He created a
perpetual capital deployment machine, a system that could transform promising businesses into
empires, quietly, methodically, and with remarkable consistency. While others were building individual
enterprises, Mellon built a machine that fed companies. The blueprint Mellon created would
later be refined by Warren Buffett and Charlie Munger with Berkshire Hathaway. There’s a lot
of parallels here. Both could spot opportunities others missed, deploy capital decisively when
others needed it most, recognize, attract, and retain talent, and wait patiently for returns.
Most importantly, both created companies that were really learning machines. Each acquisition
gave them more and more information that made them smarter and smarter about the next opportunity.
Even their philosophy of management was similar. Mellon’s observation that
real success comes from making others successful could have come straight from Buffett’s annual
letters. It’s reciprocation in action. Go positive, go first, and the world will do most of the work
for you. Both Buffett and Mellon understood that a fundamental truth is that if you find exceptional
operators, you pay them well, you give them autonomy, and you let the system just work its magic with
patience. Andrew Mellon wielded influence from the shadows. Pennsylvania’s legislature was known as
the best that money could buy, and Mellon saw this as simply efficient business, ensuring, for
instance, that import duties protected his aluminum interests. He wanted policies that
made businesses prosper, and he quietly funded politicians who shared that vision. His personal
style reflected invisible power. In Pittsburgh, they said if you wanted $5,000, you saw Dick,
but if you needed $25,000, you saw Andrew. Those who did would find a slight man in an expensive,
yet understated suit. His blue eyes could be described either as dreamy or as sharp blue daggers,
and they were always fixed on a balance sheet. His weapon of choice in these conversations was
silence. While his brother Dick chatted easily, Andrew would sit, sphinx-like, breaking his
silence only for a laser precise question. What makes you think so? Can this thing be owned?
Whom have you done work for? Most people left his office disappointed. Some got a brief “Here’s
the trouble with the whole scheme.” Others received detailed explanations of why their
ventures would fail, but a select few heard the magic words “I may be able to help.” By 1907,
the system Mellon had built was staggering in its reach. From his position at Union Trust Company,
he held 41 corporate directureships, more than anyone else in Pittsburgh. His brother Dick held
31, but these numbers only hinted at their true influence. Consider Gulf Oil. Its tankers were
built by Mellon New York Shipbuilding Company, using steel from Mellon-controlled mills,
all financed through Mellon banks, and insured by Mellon companies. At Alcoa, workers lived in
houses financed by Mellon’s Union Trust, built on Mellon lots, heated by Mellon coal, lit by Mellon
utilities. They rode to work on Mellon streetcars and deposited their paychecks in Mellon banks.
What’s remarkable is how quickly this empire emerged from the shadows. In less than a decade
after 1898, Mellon had transformed himself from a successful banker into something entirely new,
an architect of industrial ecosystems. Having made crucial moves during the Depression of
1893, took advantage of it. He rode this subsequent boom years with extraordinary precision. By 1907,
the framework was complete. What remained was simply to let the system grow, each part strengthening
and reinforcing the others. Part three, The Private Kingdom. The system that had built Mellon’s business
empire met its match and matters of the heart. In 1900, at age 45, Andrew approached marriage the
only way he knew how, coldly, as another strategic partnership to be carefully structured and managed.
On paper, his marriage to 21-year-old Norma McMullen had all the hallmarks of a classic Mellon
venture. It was carefully constructed, strategically sound, and had clear benefits for both parties.
He, on one hand, brought wealth and stability. She, on the other, brought youth and vitality.
To Andrew’s methodical mind, it was another example of identifying complementary strengths.
Exactly the kind of thinking that had built his fortune. But Norma McMullen was not a business
proposition to be optimized, and love is not cold and rational. She was raised in London
Society, the daughter of a British brewing family. She found Pittsburgh suffocating.
Her first glimpse of her new home prompted a horrified question. “We don’t get off here,
do we?” “You don’t live here.” To her, Pittsburgh must have felt like exile. A grey
industrial city dominated by what one observer called a dour, Philistine, insular male culture,
where men like her husband made fortunes. The very qualities that made Mellon a financial genius,
his reserve, his patience, his ability to wait silently while others revealed themselves,
his cold, rational, emotionless approach to decisions, proved disastrous in marriage.
While he orchestrated the quiet accumulation of power, Nora felt the walls closing in.
She had married into what was becoming the most powerful financial ecosystem in western Pennsylvania,
only to find herself starved of the one commodity Andrew Mellon couldn’t control. Joy.
What followed was a collision between two forces. Mellon’s need for order and control,
and Nora’s desperate grasp at vitality. The divorce was public and nasty. The details,
her affairs, his retreats into work, the public scandals, matter less than what they reveal
about the limits of pure rationality. He was a man who could orchestrate entire industries
and bend the world to his will, but he couldn’t bridge the gap across his own dinner table.
The divorce in 1913, like everything else in Mellon’s life, was handled with meticulous attention
to detail. The settlement was one of the largest at his time. The timing was ironic, just as his
business system was really reaching its apex of efficiency. His personal life demonstrated
that not everything could be managed like a balance sheet or an income statement. You couldn’t
integrate a marriage the same way that you could integrate an industry or a company. In the aftermath,
Mellon retreated farther into his work, where the rules made sense, where the silence was an asset,
not a liability. A conversation with Robert Kennedy Duncan, the scientist who would go on
to help establish the Mellon Institute, captures the poignant reality of Mellon’s life. Duncan,
Andrew asked one day, “Are you happy at home?” When Duncan confirmed that he was most happy,
Mellon’s response was revealing, “Then you’re a far richer man than I am.”
The divorce marked a turning point. While personal happiness eluded him,
Mellon found a new challenge worthy of his methodical mind. Pittsburgh itself was reaching its
limits. At age 60, while many of his wealthy peers had moved to New York, Mellon saw what others missed.
The region’s traditional industries were plateauing, and its future growth would depend on
something that had always fascinated him, the marriage of science and industry. He had witnessed
firsthand how his most successful ventures like alcoa or carburandum and golf oil increasingly
relied on what we would now call research and development. But true to his nature, Mellon
didn’t rush in to solve this problem. He watched and he waited. The solution arrived in 1911 through
an unlikely partnership with a Canadian professor named Robert Kennedy Duncan. Duncan approached
Mellon with a radical idea—industrial fellowships that would bridge the gap between academic research
and commercial application. He had tested this concept at the University of Kansas with projects
ranging from extending the life of laundered fabric to finding new uses for waste buttermilk.
In Duncan’s systematic approach to innovation, Mellon recognized something familiar—his own
methodical style applied to scientific discovery. Following the same patient pattern that he’d
used to build his business empire, Mellon started small—a wooden building and a two-year trial
period. When early projects showed promise, including the conversion of petroleum to gasoline and
tackling Pittsburgh’s chronic smoke pollution, Mellon and his brother Dick committed fully.
By 1913, they had funded a permanent structure in brick and granite, pledging $325,000 for construction
and $40,000 annually for maintenance. The Mellon Institute of Industrial Research
wasn’t charity in any conventional sense. It was strategic investment in Pittsburgh’s future.
Once again, Mellon’s patients had paid off. The institute would later merge with the Carnegie
Institute of Technology to form Carnegie Mellon University, now one of the world’s premier
research institutes. In characteristic silence, Mellon had orchestrated another masterpiece
of systematic thinking. He had solved multiple problems at once, advancing American industrial
research, securing Pittsburgh’s economic future, and creating a lasting memorial to his family’s
interest in applied science. This same instinct for strategic opportunity would serve him exceptionally
well as Europe descended into war in 1914. Months before the conflict, Mellon had quietly
orchestrated what seemed like just another industrial investment, but it would prove to be a masterstroke.
The story centered on coke, the high carbon fuel essential to steelmaking. For decades,
Pittsburgh’s landscape had been dominated by dome-shaped beehive ovens. More than 50,000 of
them belching toxic gases into the air as they converted coal into coke. It was cheap, dirty,
and outdated. One of the many reasons Pittsburgh had earned its nickname hell with the lid taken off.
Europe, particularly Germany, had moved on to something far more sophisticated,
the byproduct method. The key player here was Heinrich Koppers, a German industrialist who had
perfected his new approach and was working with the United States Steel to install 300 of these
new ovens. Instead of wasting valuable gases, his ovens captured these byproducts, converting
them into essential chemicals. The building blocks of modern industry and, as it would turn out,
modern warfare. In 1913, while others saw just another industrial investment, Mellon saw the
future. With his characteristic thoroughness, he consulted his network in the coal and steel
industries, including Thomas Lynch of the Frick Coal Company and Henry Clay Frick himself, before
committing $1 million for a 37.5% stake in Koppers American Company. Then he orchestrated
his familiar pattern of integration. Within months, the H. Koppers Company relocated to Pittsburgh,
established a fellowship at the New Mellon Institute, and began interweaving itself with
the other Mellon companies. What looked like routine business development was actually preparation
for a war that wouldn’t start for another year. Once again, Mellon’s patience and systematic
thinking had positioned him well ahead of events. When World War I erupted in Europe, Mellon’s
decades of patient positioning suddenly paid off with explosive force. What looked like a
collection of separate businesses revealed itself as an interconnected empire perfectly positioned
for wartime production. The conflict proved to be as much a battle of chemicals as men and steel,
and Pittsburgh, thanks to Mellon’s foresight, was at the center of it all. The numbers tell the
story. Elkoa’s pre-tax earnings nearly tripled from $8.9 million in 1915 to $25 million in 1916.
Golf oil’s assets ballooned from $142 million to $254 million between 1917 and 1920.
Even the cyclical coal business thrived, with the Pittsburgh Coal Company’s profits surging from
$104 million to $160 million. At the heart of this empire, Mellon’s banks grew even faster.
Union Trust became so profitable, it raised its quarterly dividend from 25% to 35% in 1916,
on top of its traditional 6% Christmas bonus. By 1918, its assets matched those of all other
Pittsburgh Trust companies combined. This was the most dominant institution in Pittsburgh.
Mellon’s personal fortune exploded from $55 million in 1913 to $80 million by 1921,
but these were merely book values. They really understated how much he was worth. His golf oil
holdings alone were valued at $17.4 million on paper, but they were worth close to $100
million at market prices. The true extent of his wealth was almost impossible to calculate,
and that’s how he liked it. Contemporary estimates put his fortune at about $135 million
or a billion or so in today’s money. The quiet banker from Pittsburgh had become one of America’s
wealthiest men while barely raising his voice above a whisper. By late 1920 at age 65,
Andrew Mellon had reached what should have been a natural stopping point. He had built a financial
and industrial empire, amassed one of America’s great fortunes, and established a research
institute that would transform American industry well beyond his own lifetime.
Most men would have been content to retire to a life of quiet luxury,
but Andrew Mellon wasn’t most men.
In 1921, a nation exhausted by war and progressive reform sought normalcy.
The Republicans led by Warren G. Harding swept back into power, promising exactly that,
but their choice for Treasury Secretary would prove anything but normal.
Mellon, who had emerged from his characteristic reserve to throw himself into the campaign,
raised $400,000 from Pittsburgh alone and personally donated $56,000. He now faced an
unexpected challenge. The very qualities that had made him successful in private, his silence,
his patience, his ability to operate in the shadows, his cold, logical approach to things,
suddenly made him irresistible as a public servant. Pennsylvania’s powerful senators,
Penrose and Knox, saw in Mellon exactly what the administration needed.
A financial genius who had built his fortune not through wall street manipulation,
but through decades of patient observation and systematic thinking.
Knox’s endorsement letter called him “the greatest constructive economist of his generation.”
But Mellon, true to form, recoiled from the spotlight.
“I could not contemplate taking the job,” he told associates.
His diary from the period reads like a methodical list of reasons to decline.
“I’m too old. There’s too many business conflicts. I’m too private. I don’t want the light.”
Perhaps the most revealing was his worry about his daughter,
Elza, becoming prey to Washington’s fortune hunters.
Yet the forces pulling him toward Washington proved irresistible.
Elza was eager for the move. Andrew’s life in Pittsburgh with his children scattered and his
friends moving away or dying had grown lonely. When Knox called on late February 1st to say
the Treasury position was his, Mellon’s diary recorded his characteristically understated response.
“Tell him I am not sure that news is pleasing to me.”
The United States Treasury that Andrew Mellon inherited looked remarkably like a troubled
company in need of restructuring. The government’s debt had ballooned 20-fold
during the war years, from $1.2 billion in 1916 to $25.5 billion by war’s end.
The top marginal tax rate had soared from 15% to 77%.
Most pressing was the $7.5 billion in short-term debt accumulated at rates up to 6%
with some coming due in just a few years. Mellon approached the nation’s finances
as he approached his business empire with systematic precision.
His solution was pure banking elegance. Refinance the loans at lower rates,
saving the Treasury $200 million annually while extending and staggering repayment terms from
$23 to $28. It was the same methodical thinking that had built his fortune now applied to the
nation’s balance sheet. The contrast with his cabinet peers was striking. His personal fortune
exceeded that of all the entire cabinet combined. Herbert Hoover, the self-made secretary of
commerce, was worth a mere $4 million compared to Mellon’s understated $100 million plus.
But what truly set him apart wasn’t his wealth. It was his obsession with detail
and an industrialist’s focus on relentless execution. The Treasury Department, he insisted,
must be conducted on business principles and kept free at all times from detrimental influences.
On his first day, Mellon demonstrated that his habits wouldn’t change with his title.
Just as he had for decades in Pittsburgh, he arrived before everyone else. He knew the details
better than anyone else. The ghost of Pittsburgh was about to reshape America’s financial
architecture, and he would do it in only the way that he knew how, quietly, methodically,
and with a relentless attention to detail. Here was a puzzle worthy of Andrew Mellon’s
systematic mind. When tax rates rose too high, wealthy people didn’t simply pay more. They
found creative ways to pay less. Most rich Americans were avoiding the 77% federal rate
entirely by investing in tax-exempt state and municipal bonds. His solution revealed the same
counterintuitive thinking that had built his fortune, lower the top rate to 25%.
The logic was pure Mellon. If federal taxes dropped significantly, the wealthy would rationally move
their money from low-yield tax-exempt securities into higher-returning industrial stocks.
Just as he had learned in business, sometimes you have to lower prices to increase total revenue.
This wasn’t about helping his fellow millionaires. It was about creating a system
where they would choose to pay taxes rather than avoid them entirely. His approach carried
all the hallmarks of his business career. It was methodical, pragmatic, and indifferent to
public opinion. He insisted on taxing more lately incomes from wages and salaries than incomes
from investments. Why? Because undincome was uncertain and limited in duration, sickness,
or death destroys it, and old age diminishes it while investment income descends to errors.
By 1927, his reforms meant most Americans paid no federal income tax at all.
The tax reforms were not the only reforms. Mellon favored high tariffs as a way to
stock the government coffers and shield domestic manufacturers from foreign competition.
He also favored reduced government spending. The results validated his systematic approach.
Though roaring 20s saw tax revenues remain stable or increase even as tax rates dropped,
while federal debt shrank considerably. Critics argued that his policies favored the wealthy
who received the largest rate reductions, but Mellon pointed to the data which said the rich
actually paid a larger share of total income taxes because the lower rates encouraged
honest reporting rather than tax avoidance. What fascinates me about this chapter in Mellon’s life
is how perfectly it demonstrates his core strengths. Here was the wealthiest member of
the cabinet proposing policies that would obviously bring him intense criticism from
all sides. Yet, just as he had done in Pittsburgh, he treated public opinion as a relevant noise.
In his mind, optics didn’t matter, only results did. The Treasury was just another
enterprise to run efficiently, regardless of how it might look to have a millionaire advocating for
tax cuts. For a man who had built his fortune through silence, Andrew Mellon now faced his
greatest challenge. He had to talk. Imagine 40 impatient reporters crammed into a Treasury
conference room while Mellon, avoiding eye contact, responds with “I don’t know. No man
can answer that. This is a great deal I have to learn.” But listen to what he did after this.
He handled this like he approached every other business problem. The press conferences
had become an education to me he later observed. The newspaper men, they come in here and they
ask me a lot of questions about things I know nothing about. And when they leave, I send for
somebody who knows and find out all about them. And the next time they come, I know. Think about
that approach compounded over a long life. That’s insane. He’s just a constant learning machine.
It reminds me of Charlie Munger’s observation about people who go to bed every night a little
wiser than when they grow up. We see this pattern in great minds like Munger and Buffett and
guests that we’ve had on the show. This relentless drive to learn regardless of age or achievement.
Always learning. Constantly. A little bit extra every day applied over a long life. Perhaps it’s
not surprising that of all the presidents Mellon served under, Kelvin Coolridge provided his most
natural ally. Both men were of few words. They often conversed entirely in pauses. They shared
not just an aversion to ostentation, but a deep belief that systematic thinking could solve problems.
Coolridge’s famous declaration that the business of America is business could have been written
by Mellon himself. Part five, the fall.
While Mellon was quietly restructuring the nation’s finances, a perfect storm of forces was
transforming American society. The changes were so profound that they would reshape not just the
economy, but the very fabric of American life. The foundations were laid by war and demographics.
Soldiers returning from World War One started families, creating enormous pent-up demand for
consumer goods. Meanwhile, Europe, devastated by conflict, turned to America for both
manufacturer goods and capital. The result was an unprecedented economic opportunity,
one that would be amplified by three massive waves of change. First came the technological
revolution. Henry Ford’s assembly line completely transformed manufacturing, dramatically increasing
productivity. The telephone and radio compressed time and space spreading information and speculation
faster than ever. Second was the financial transformation. Banks and retailers began offering
installment plans, making major purchases accessible to average Americans for the first
time. Meanwhile, growing confidence led many Americans to invest in stocks, using easily
available margin, creating both opportunity and risk. Finally, there was a profound social shift.
Advertising and mass media exploded, encouraging a culture of consumerism. The continuing migration
from rural areas to cities accelerated social change. The quiet, methodical world of Andrew
Mellon’s Pittsburgh was giving way to something louder, faster, more dynamic, and potentially
more dangerous. The government’s role in all of this, Mellon’s domain, was to reduce friction,
lower taxes, increase tariffs, and generally stay out of the way. But as the roaring 20s gained
momentum, a question lurked beneath the surface. Could a system built on such dramatic change
maintain its stability forever? When Herbert Hoover won the presidency in 1928, the architect
of America’s prosperity faced a fateful choice. Mellon, now 73, could have retired at his peak,
acclaimed as the genius behind the roaring 20s. Instead, he chose to stay, a decision that would
test whether his systematic approach could handle a system spinning out of control.
By 1929, the banker’s careful eye saw what others missed. Growth was no longer driven.
By the productive investment, he understood, but by the kind of speculation he always avoided.
As a Federal Reserve Board member, he repeatedly voted to raise interest rates in order to curb
the frenzy, but was consistently outvoted. His diary from this period reveals mounting
frustration. “Meeting Federal Reserve Board,” he wrote in March, “I vote with Board,
but state, I think, increase in the discount rate to be inevitable.” By May, he was openly
criticizing the Board to President Hoover for their refusal to act and raise rates.
True to his nature, Mellon tried to warn the public in his characteristically understated way.
“For prudent investors,” he told reporters now, “is the time to buy good bonds,” he added carefully,
“that while many stocks remain sound investments, some are too high of a price to be good buys.”
It was classic Mellon, measured, precise, and systematic. But in a market gripped by speculative
fever, his quiet voice went unheard. The crash when it came was unprecedented in its severity.
October 23rd saw what papers called a hurricane of liquidation. More than 6 million shares changed
hands, wiping out over 4 billion in paper value. The next day, dubbed Black Thursday, nearly 13
million shares traded. By October 29th, 16 million shares changed hands, a record that would stand
for 39 years. What made the crash particularly devastating wasn’t just the falling prices,
it’s that so many people had borrowed heavily to invest, turning paper losses into real bankruptcy.
While others panicked, Mellon displayed the same quiet observation that had built his fortune.
His diary entry for that fateful Tuesday simply noted, “Stock Market Panic,”
“RBM Telephones from Pittsburgh Asking Conditions as to Money,”
“Devene Comes to Lunch.” While Wall Street was in meltdown, he calmly discussed
art acquisitions over lunch with Devene, a famous art dealer. This calm wasn’t just
personality, it was positioning. One of the things that seems underappreciated about many
outliers is that they’re never forced by circumstances into bad decisions. Mellon’s
decades of systematic thinking had created a fortress of wealth that no market panic could
breach. He simply did not have to sell. In fact, he could take advantage of the dislocation.
His composure was cold Mellon rationality. Only 2.5% of Americans owned stocks in 1929,
and his own wealth remained largely insulated, tied up in mostly private enterprises like Gulf
Oil and Alcoa, rather than publicly traded securities. In fact, while the market crashed
around him, his personal income actually increased from 5.2 million in 1928 to 7.8 million in 1929.
However, the coming crisis would demand more than just cool analysis. It would require a kind
of public leadership that had never been his strength. The qualities that had made Andrew
Mellon a financial genius, patience, detachment, systematic thinking were about to become his
fatal flaws. By January 1932, more than 10 million Americans were underemployed. In industrial cities
like Pittsburgh, his Pittsburgh unemployment approached 50%. The crisis came to a head in
September 1931, when Britain abandoned the gold standard, triggering another cascade of bank failures
across America. Among the victims was the Bank of Pittsburgh, the city’s oldest financial institution.
It was the only major bank in Pittsburgh outside of the Mellon reach. It was particularly hard
hit when Britain abandoned the gold standard. In contrast, the Mellon banks were exceptionally
well-capitalized throughout the Depression. The Bank of Pittsburgh needed $1 million to remain
insolvent, a trivial sum for a man of Mellon’s wealth. A late-night meeting at his Fifth Avenue
Managing could have saved it. Instead, Mellon imposed a condition he knew would be rejected.
He wanted control. The directors refused, effectively ensuring the bank’s collapse.
Mellon knew exactly what he was doing. For by imposing such conditions, he would either obtain
the Bank of Pittsburgh for nothing or terminate it for nothing. Mathematically, it was pure win-win.
Remember, to Andrew Mellon, who was brought to believe that only the strongest survived,
recessions were nothing more than an opportunity for the strong to get stronger and acquire the weak.
And these opportunities don’t come around very often, so you have to take advantage of them.
Reputationally, Mellon’s approach was a disaster. It was the act of a man who coldly pressed his
advantage too far. This reminds me of something Warren Buffett said. “It takes 20 years to
build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”
The mistake Mellon made was reputation, not his balance sheet, was actually his biggest asset.
His prescription for the Depression remained equally cold and rational. Liquidate labor,
liquidate stocks, liquidate the farmers, liquidate real estate, he advised President Hoover.
The Depression in Mellon’s view was just another problem to be solved. A necessary
win that cleared away economic excesses just as the panics of 1873 and 1907 had done before.
As Mellon’s reputation started to sour, a Pittsburgh newspaper captured the public’s
verdict. The Mellon family is in disresput. The worship has ended. The glamour has utterly
disappeared. The ghost of Pittsburgh, who had built an empire through patient observation,
now found himself unable to adapt to a world that had fundamentally changed.
The ghost of Pittsburgh was about to meet his opposite. A man who believed that silence and
patience was part of the problem, not the solution. When Franklin Delano Roosevelt emerged as the
voice of new American capitalism, it set up more than a political dispute. It was a clash between
two fundamentally different ideologies. Roosevelt articulated this divide in a September 1932
speech to the San Francisco Commonwealth Club, where he directly challenged everything
Mellon represented. The last half-century Roosevelt declared had been, in large measure,
a history of a group of financial titans. Society had given these men free play and
unlimited reward based on the belief that the business of government was not to interfere
but to assist in the development of industry. But now, Roosevelt insisted, there was need
for a reappraisal of values. He wanted a new deal. Under the harsh light of the Depression,
FDR argued the very qualities that Mellon embodied, the patient accumulator of wealth,
a mere builder of more industrial plants, a creator of more railroad system, and organizer
of more corporations was as likely to be a dagger as a help. The era of the great promoter
and financial titan to whom America had granted everything if only he would build and develop
and employ was over. The philosophical divide cut to the heart of how each person viewed human
suffering. For Roosevelt, the Depression wasn’t just an economic event, it was a human catastrophe
requiring immediate government intervention. But for Mellon, the downturn, however severe,
remained part of the natural economic order. Like a fever breaking, the suffering must be endured
until the system purged itself of excess. It was the same lessons his father had taught him growing
up. Survival of the fittest, always be prepared. Never put yourself in a position where circumstances
can force you into poor decisions. Never reach too far. Be prudent and ride it out. No one is
coming to save you, you must save yourself. The contrast in FDR and Mellon’s approaches could
not have been starker. While Mellon advocated patience and calm, Roosevelt mobilized every tool
of government power. Where Mellon saw the crashes of 1873 and 1907 as precedent, Roosevelt saw an
unprecedented crisis requiring unprecedented solutions. Yet here was the ultimate irony both
men were trying to save American capitalism. They just differed profoundly on how to go about it.
Roosevelt believed that capitalism needed strong regulatory framework and a social safety net
to survive. Mellon and his peers believed in the same principles that had built their fortunes,
individual liberty, self-help, and minimal government intervention. But the world had
changed and the principles that had once built their empires now threatened to destroy them.
For a man who had spent his life avoiding attention, Andrew Mellon now found himself
at the center of a national storm. By early 1932, letters poured in from across the country,
denouncing him as everything from a robber to America’s Mussolini. When his picture appeared
on a movie theater screen in Pittsburgh, his Pittsburgh, the crowd reportedly shouted, “Robber!”
The architect of the roaring twenties had become the villain of the Great Depression.
The people needed an enemy and naturally the unrelatable Mellon would make a great one.
On January 6, 1932, a freshman Democratic congressman from Texas, Wright Patman,
stood before a packed house of representatives and declared, “On my own responsibility as a member
of the house, I am Peach Andrew William Mellon, Secretary of the Treasury of the United States
for high crimes and misdemeanors.” The charges ranged from illegal ownership of bank stock to
profiting from companies doing business with the Soviet Union. But the legal accusations were
merely a vehicle for something deeper, a nation’s fury at what they saw as Mellon’s cold indifference
to their suffering. The systematic thinking that had built his fortune now seemed like a callous
detachment in the face of human misery. President Hoover himself politically wounded saw an elegant
solution to this. He offered Mellon the position of ambassador to Great Britain, a golden parachute
that would remove him from the Treasury while preserving his dignity. Mellon accepted,
though without enthusiasm. It was he told reporters like a divorce. And given his personal
experience with the divorce, this didn’t suggest a pleasant thing. Mellon’s departure marked more
than just another political casualty. It signaled the end of an era in American economic thinking.
The banker’s faith and eventual market self-correction in patience and systematic thinking
gave way to Roosevelt’s vision of active government management. The debate between these
two competing philosophies, the government saving people or the people being fully responsible,
continues to shape American economic policy today and policy all around the globe.
In the summer of 1933, Andrew Mellon made what would prove to be a fateful visit to the White
House. The meeting with Roosevelt seemed cordial. They discussed banking reform and Mellon left
remarking, “What a charming man Mr. Roosevelt is.” The very next day, Roosevelt signed into law the
very bill they discussed, completely contrary to their conversation. What Mellon didn’t know,
what he couldn’t know, was that he’d already been marked for destruction, him and every other
industrialist and banker. Within a week of Roosevelt’s inauguration before Mellon had even returned
from his ambassadorship in London, the government had begun investigating his tax returns. This wasn’t
routine tax enforcement. It was lawfare, the use of the legal system as a weapon of political warfare.
The man who had built his empire through patient observation now found himself under hostile
observation. The focus was pecure, a single art purchase, the Raphael Madonna, which Mellon had
donated to his charitable trust. This specific charge Mellon had sold stocks at a loss to reduce
his taxes, then repurchased them through companies he controlled after the legally required waiting
period. Everything he did was perfectly legal, but that didn’t matter. True to his systematic
nature, Mellon responded with cool and cold precision. He opened his books completely,
putting his entire staff at the investigator’s disposal. After three weeks of examination,
with people like going over everything this guy had done trying to find something,
the Justice Department agents found that nothing was irregular. The Bureau of Internal Revenue
actually recommended he receive a small refund, but lawfare never lets facts get in the way.
As the incoming Treasury Secretary, Henry Warntho Jr. spelled out, I consider that Mr.
Mellon is not on trial, but democracy and the privileged rich, and I want to see who will win.
In a final twist of irony, when the grand jury, composed of laborers, mechanics, farmers, and
craftsmen, voted on Mellon’s indictment, they decided 11 to 10 against. As one newspaper observed,
the larger standing fact is that a grand jury of such men as have little reason to love the rich
tossed the government’s complaint into the discard. Mellon was completely cleared, but
his reputation was damaged forever. The trial’s real significance went beyond mere tax. As Fortune
Magazine would later observe, the plain fact of the matter was that Mr. Mellon had made out his
tax return in one economic era and was being prosecuted for it in another. The systematic
thinker who had mastered one era found himself a stranger in the next. Let’s pause here just to
appreciate the full irony of Mellon’s story here. Here was one of history’s most successful bankers
and investors, a man who could have spent the 1920s quietly compounding his wealth,
choosing instead to dedicate a decade to public service. The cost to him was enormous,
hundreds of millions of dollars and foregone opportunities to focus on serving and saving
his country. His reward, he left the nation’s finances in the best shape they had ever been in,
but that wasn’t enough. He saw the speculative bubble building and tried to stop it,
voting repeatedly to raise interest rates he was ignored. Then, hold on, before this,
then he goes to the public and he says to reporters that you should basically sell stocks,
but he does it in a very understated way. And then, finally, his warnings proved correct,
and he became the target of the very excesses he tried to prevent. The final twist of the knife,
after a politically motivated investigation tore through his life, the verdict was clear,
he had done nothing wrong. The ghost of Pittsburgh, it seemed, was guilty of only being out of step
with his times. There’s a larger lesson here about power, public service, and reputation.
Mellon’s cold rational mind had built one of history’s greatest fortunes, but rationality,
it turns out, can’t protect you from politics. The tax trial was never really about taxes.
What Roosevelt’s administration put on trial was the entire way of thinking about American
capitalism, and Andrew Mellon was its perfect poster child. As Ogden Mills, Mellon’s successor
at Treasury observed, the administration was entirely lacking in elementary sense of decency.
The goal wasn’t to win in court, it was to destroy everything that Mellon represented.
In this, Roosevelt succeeded.
The man once hailed as the greatest secretary of Treasury since Alexander Hamilton
found himself transformed from financial genius to public villain.
The ghost of Pittsburgh, who had built his fortune through patience and systematic thinking,
became a symbol of everything wrong with American capitalism. The transformation revealed something
profound about American society. Mellon’s core belief, the government should stay out of business
affairs, had once seemed like common sense. Now, thanks to FDR, that approach appeared not just
wrong, but morally repugnant. His fall from grace wasn’t merely personal, it forever changed how
Americans viewed the relationship between business and government. Epilogue, the final gift.
In December 1936, as Roosevelt celebrated his landslide re-election and the new deal reached
its zenith, Andrew Mellon demonstrated one final time the power of systematic thinking.
Despite years of political persecution, despite a tax trial that had sought to destroy his reputation,
he would give the American people a gift unprecedented in the nation’s history.
But what truly revealed Mellon’s genius wasn’t just the magnitude of the gift,
it was how he structured it. In creating the National Gallery of Art in Washington,
he applied the same precise and strategic thinking that had built his business empire.
The key insight came from careful observation. Mellon watched as other great art collections,
the Huntington Gallery, the Carnegie Institute, the Frick Collection, struggle to grow after
their founders’ deaths. Other collectors he noticed were reluctant to donate their treasures to the
buildings that bore another person’s name. His solution was characteristic Mellon, maximize
the outcome by minimizing ego. He explicitly refused to put his name on the building,
instead insisting on calling it the National Gallery of Art. His collection would serve
not as a monument to himself, but as a nucleus around which something far greater could grow.
It was the Mellon system in its final, perhaps most perfect form. Provide the initial capital,
establish the right conditions for growth, and then let the enterprise build its own momentum.
Even in his final act, Andrew Mellon thought like a system builder. The governance structure
for his National Gallery revealed the same careful planning he applied to every venture.
He created a board of nine trustees with five private citizens forming a controlling majority.
Each trustee was selected with characteristic precision, his son-in-law David Bruce,
his lawyer Donald Shepard, and others he knew would protect the institution’s
independence and standards. The design was pure Mellon, a private institution operating
in the public interest, subject to no review by any federal officer or agency other than a court
of law. Works could only be added if they met the high standards set by his initial collection.
It was exactly the model he had always believed in, private initiative creating public good.
Some cynics suggest the gallery was merely an attempt to win favor during his tax trial,
but Mellon’s systematic mind had been quietly working on the gallery for years before his
troubles began. In fact, you’re not even going to believe this, this is a boy run. You can’t
make this up. The education and charitable trust he created to fund the gallery became
one of the very things prosecutors tried to use against him. In the final months of his life,
a different Andrew Mellon emerged. The banker, who had spent decades accumulating wealth,
now worked with unprecedented urgency to create something lasting for the American people.
When asked why he persisted, despite continued opposition from the administration, he replied,
“Eventually the people now in power in Washington will be dead, and I will be dead,
but the National Gallery, I hope, will be there, and that is something the country needs.”
Time has vindicated his vision. Today, the National Gallery stands as one of the world’s
great museums. Its collection far larger than what Mellon initially provided. Other collectors,
just as he had predicted, have added their own treasures to this truly national institution.
The ghosts of Pittsburgh had created something that would outlive not just his reputation,
but the very era that had tried to destroy it. Perhaps that’s the final lesson of Andrew Mellon’s
remarkable life. True legacy isn’t about putting your name on buildings, it’s about creating something
that outlasts you. Conditions that allow something greater than yourself to grow and flourish
long after you’re gone. In giving his art to the nation, Mellon didn’t just build a museum,
he created an institution that continues to enrich American cultural life nearly a century later.
Thanks for listening and learning with us. The Furnum Street blog is where you can learn more
about my new book, “Clear Thinking,” turning ordinary moments into extraordinary results.
It’s a transformative guide that hands you the tools to master your fate, sharpen your decision
making, and set yourself up for unparalleled success. Learn more at fs.blog/clear. Until next time.
He was the strangest titan America ever produced: a whisper-quiet banker who turned systematic thinking into a superpower, building an industrial empire while barely raising his voice above a murmur. Andrew Mellon’s story isn’t just about money—it’s about how patience, observation, and positioning can create more wealth than charisma ever could. But when the Great Depression hit, the very qualities that made him rich made him the perfect villain for a nation demanding change.
Whether you’re building a business, investing in the future, or seeking insights on strategic decision-making, Mellon’s story reveals the power of patience, positioning, and playing the long game.
(2:25) Prologue: The Quiet Titan
(4:20) Part 1 – The Judge’s Son
(6:36) Benjamin Franklin’s Blueprint
(8:53) The Pittsburgh Promise
(10:45) Andrew’s Early Years
(13:11) Part 2 – Building the System
(14:23) The Banking Foundation
(17:09) Panic Creates Opportunity
(20:09) Andy at the Wheel
(22:05) Opportunity in Aluminum
(24:10) The Mellon System
(27:12) Connections Create Power
(29:02) Reinvesting Success
(30:51) Staying in the Shadows
(33:28) Part 3 – The Private Kingdom
(34:52) A Broken Heart
(36:56) Science Meets Industry
(39:35) Preparations for War
(41:39) The Silent Empire Strikes
(44:04) Part 4 – Washington’s Banker
(45:58) The Banker Takes Command
(47:49) The Banker’s Paradox
(50:27) The Silent Man Learns to Speak
(52:03) Part 5 – The Fall
(53:56) 1928
(55:25) Black Thursday
(57:23) When Strength Becomes Weakness
(59:58) Roosevelt’s Vendetta
(1:02:48) The Silent Man Shouted Down
(1:05:01) The Final Battle: Mellon’s Tax Trial
(1:09:04) The End of an Era
(1:10:14) Epilogue – The Final Gift
(1:11:44) Thinking Long Term
This podcast is for information purposes only and draws primarily from two foundational books: David Cannadine’s ‘Mellon: An American Life’, the first comprehensive published biography of Andrew W. Mellon, which masterfully chronicles his journey from shy Pittsburgh boy to industrial titan, Treasury Secretary, and philanthropist. The second source, ‘Thomas Mellon and His Times’, written by Andrew’s father Thomas Mellon himself provides invaluable firsthand insights into the immigrant experience and the formation of the Mellon family’s business philosophy in America. If this story captured your interest, we highly recommend both works – Cannadine’s for its thorough examination of Andrew’s profound impact on American business, politics, and philanthropy, and Thomas Mellon’s autobiography for its intimate portrait of the family’s rise from immigrant farmers to financial powerhouses in both nineteenth- and twentieth-century Pittsburgh.
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