LEADERSHIP / JUL. 05, 2014
version 4, draft 4

Management Lessons from the House of Rothschild

The Rothschild banking family of Europe is regarded as one of the richest families in the history of the world and over centuries they have accumulated wealth that is now the stuff of legends. However, it is actually staggering to think of the fact that the Rothschilds had humble beginnings and the first well known patriarch of the family, Mayer Amshel Rothschild was actually a court Jew (someone who lends money to royal families). He used to lend money to the royal family based in Frankfurt in Germany; however he was not a man who was ready to remain a court Jew for life and it was Mayer Amshel Rothschild along with the later generations of Rothschilds who laid the foundation of one of the wealthiest and most powerful families in the modern world. The management innovations that were introduced by the Rothschilds are relevant to this day and should be revisited by managers or entrepreneurs as often as possible.

1 A Close Knit Group of Managers

A company cannot go far as far as its goals are concerned if it does not have a group of managers who share the same vision irrespective of the sort of departments they handle and this is something that was put to effective use by the Rothschild family back in the 18 century. Mayer Amshel Rothschild installed his 4 brothers Salomon, Nathan, Calmann and Jakob as the 4 heads of their banking businesses in Vienna, London, Naples and Paris respectively, while he stayed back in Frankfurt. The move proved to be a masterstroke and the family business grew by leaps and bounds over the years. Now, it is not possible for an entrepreneur or a CEO to employ blood relatives as managers of the different key departments but the individual managers can be trained in such a way that the ethos of the company are drilled into them and they always work as a team.

2 Spreading the Risks

The Rothschild banking business was one of the earliest exponents of the idea of multinational corporations when Mayer Amshel Rothschild sent his 4 sons to different parts of Europe in order to establish banking operations. However, the real reason behind this move was not merely a motivation of creating more wealth, but actually that of safeguarding what they had already earned. In the 18 century Europe was an extremely volatile place in which wars used to break out quite frequently and banks used to be looted by the plunderers, as a result it was indeed an excellent move by Mayer Amshel Rothschild to spread the operations of the banks across different countries. At one stroke he succeeded in negating the danger posed by upheavals at certain parts of Europe. In this day and age, an entrepreneur, CEO or a senior manager has to come up with similar ideas in order to make sure that the company minimises the effects of the risks that they might be exposed to in the long run.

3 Proximity with Those in Power

Now, there are wild conspiracy theories about the Rothschild Family on how they engineered the Second World War. But the truth of the matter is that they assisted the British government with their war effort by lending huge sums of money and in return they were awarded government securities that increased their wealth vastly over the years. It was Nathan Mayer Rothschild who was instrumental in growing the family’s influence in the United Kingdom by lending vast amounts of money to the government. In the same way, it is important for corporations to be close to powerful individuals, corporations and government officials in order to further their business. It is true that many corporations resort to lobbying which is a perfect legal tactic but it is important to keep in mind that the best way of creating an empire is by abiding by the laws of the land and keeping the company as clean as possible so that powerful allies are picked up along the way.

The 3 points mentioned here clearly shows how the Rothschilds built an empire from scratch over centuries. And it can be said without much of a doubt that anyone who is in a decision making position in a company or has a business of his own should try to emulate them if they want to build an empire of their own. The Rothschilds indeed stand as a living testimony of how a business can grow if the leadership is wise enough.

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