Book Reviews

High Financier

Niall Ferguson's biography of Siegmund Warburg is often good literature, but a lesser achievement in biography and financial history.

Something of a cult of personality surrounds Niall Ferguson these days. His work has always been less historian-like and closer to punditry. History, of course, cannot exist without biases and viewpoints, but Ferguson takes special creative and editorial license in his work. 

This isn't necessarily a bad thing. The more a historian editorializes, though, the more his/her intellectual views take center stage. That is, the work becomes more an argument than a recounting of past events. This is no new thing—noted historians are ubiquitously more subjective than they first appear. 

Ferguson ranks among the era's most popular historians. He's made himself into a financial guru—starting (at least in popular form) with his Ascent of Money (a ripping good read but archetypal example of his subjective style of history). Ferguson's lately been on a tear of financial commentary. His editorials on the financial crisis have appeared widely in the biggest newspapers and most circulated journals. 

True, Ferguson is a charismatic persona and excellent writer (he professes to judge himself to the likes of Thomas Mann), and demonstrates an often precise rote knowledge of capital market mechanisms. His is a very sharp mind. But, as with so many pundits of the day, he's a fellow with much to say but scant direct investment experience. Thus, his proclamations often hinge on the breathless and dire. He is in the business of being compelling, not necessarily right.  

So it's interesting that Siegmund Warburg became the focus of Ferguson's newest book: High Financier. Warburg was undoubtedly an important player in the development of European capital markets in the 20th century, but has gone somewhat unsung in recent decades, giving Ferguson's spotlight upon him a certain cachet—here is a titan of today's history literature, plumbing the depths for important financial figures we've sorrowfully forgotten. 

The book seems intended to be a pure biography of Warburg's life and times, but often takes a broader geopolitical scope of history than may be warranted. Throughout the book, Ferguson grapples with the reality that Warburg's namesake firm was never truly a behemoth of finance (many folks in the US probably never even heard the name, and surely the Rothschilds were more notable). Yet, Warburg was instrumental in developing important parts of 20th century finance: He represented the primordial image of a merchant banker and played a hefty role in developing the Eurobond market (hugely useful in the reemergence of global corporate capital finance post-Depression and WWII, and paved the way for later experiments like the European Union and euro). Ferguson credits Warburg often for "rejuvenating" London as a post-war global financial epicenter. While not wholly untrue, it's too much—financial firms throughout the world reestablished beachheads in London during his time. 

Reviews about history books (particularly biographies) have a penchant for recounting the book in almost "Cliff's Notes" fashion. We won't do that here, but instead highlight a few salient points. High Financier more or less functions in three parts (that sometimes meld into one another): Warburg the family and political man; Warburg the financial innovator; and Warburg the head of a major merchant banking operation. Ultimately, this is an entertaining book, but not a major contribution to financial history literature or of great value to seekers of investment wisdom. If in a hurry, one could read the bookending chapters only and gain a near complete picture of the work. 

Ferguson is at his best in this first category—Warburg as family and political being. Just the few pages devoted to the context of Warburg's life are compelling: A German Jew whose father was an important financial figure in the Austrian Habsburg Republic, Siegmund understood before many that Hitler's fascism was hugely dangerous and emigrated to London without much initial family support. He studied and took great solace in Nietzsche, Mann, Goethe (still then the intellectual hero of Germany), and Freud. Warburg seemed a cold father, and sometimes regretful he didn't end up a politician. In fact, Warburg's political views (he kept copious and highly articulate journals and notes) occupy the lion's share of the book. This is sometimes interesting (he was prescient about many leaders and major geopolitical tides), but often tedious. Warburg surely had a strong political voice in London (particularly in his latter years), but we don't need so much detail about his views since he never directly affected many political outcomes. 

The second part, on Warburg's financial innovation, gets the short shrift. This is too bad for MarketMinder readers because it's the part most interesting to investors. Warburg's role in the British "Aluminium War" between (principally) Alcoa and British Aluminium, deserved more attention. Warburg was often described as an "artist" of deal-making and finance generally, but we seldom get to see that in action. Warburg had the psyche of a great investor: Never shaken by current fads or overwrought pessimism, yet was always prudent and disciplined about his own dealings. He was often clear-eyed and shrewd: calling gold bugs "gold somnambulists" and believed in the US as the strongest economy in the world, but was also a great believer in globalization. 

The last part, on Warburg's life as chief executive, is full of aphorisms (the idea of publishing his many maxims in a single volume was once entertained) and at times feels banal. Many usual myths about charismatic leaders are recounted: He was a curmudgeon who could carry a grudge for a long time, but loved a good joke; he was a kind man who didn't care about making money, only making money for the firm; he wore his hair in a strict part that was never seen out of place; he worked long hours and even during his vacations; he would disagree with clients and even refuse to act on their behalf if he vehemently believed they were hurting themselves, and so on.  

Importantly, Warburg acknowledged his own ignorance whenever possible, and stuck to the firm's core competencies, never believing they were capable of more. He held that banking was a relationship business, thus making integrity and firm reputation the key. As his career waned, Warburg was increasingly appalled by the technocratic, cold nature of Wall Street—he would probably balk at today's assembly-line style of financial product creation. A cynic of the press, he nevertheless wrote many newspaper editorials. Economists were generally hucksters to him, and Warburg preferred those who attained wisdom via experience. Yet, he never shrugged off his intellectual core, and his philosophical ethos sprang up again and again in his work and writing. Goethe's unique brand of romanticism never left him. 

The autumn of Warburg's life strikes a melancholy tone. He became cranky and hugely pessimistic. Ferguson even introduces the possibility of senility (which seems possible but unlikely given the apparent continued lucidity of Warburg's writing to the end). It's fascinating to read of Warburg's inability to let go of his firm, to ultimately worry about legacy, and to emotionally abandon his children because they didn't live up to his standards as professionals. When he finally departed from the firm (he "retired" many times and was sort of the Brett Favre of finance) he began to see his firm as a "soft" place that maybe wouldn't survive in the long run. So he sought out "partnerships" with the likes of BNP Paribas and others—to cement the viability of his firm and also to become more global. (Ultimately, though, the final fate of SG Warburg was to be fully acquired by the Swiss Bank Corporation in 1995.) 

Ferguson often paints Warburg in a sage-like way and implies that, had he been around today, he wouldn't have made the same mistakes other financial titans did. Maybe, but history often enough repeats itself, and persons of Warburg's experience and background cannot be replicated. It's representative of the great mystery and difficulty of much of life, and is no different in finance: Textbooks and theories can only offer so much; the real learning comes from the tribulations of the journey.

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.