The following is Methods of Prosperity newsletter number 3. It was originally deployed July 6, 2023. As of March 14, 2024, original subscribers have received up to issue number 39.
Last week on Methods of Prosperity, we studied the Medici family. Known for their banking prowess and patronage of the arts during the Italian Renaissance, their decline was a gradual process that occurred over several centuries, marked by political upheavals, economic troubles, and the loss of their banking empire.
Part 3. The story of Jakob Fugger “The Rich”
Between the years 1487 to 1488, a loan was given by Jakob Fugger, to Sigismund, Archduke and Count of Tyrol. Sigismund was the younger son of Archduke Leopold V and Claudia de Medici, and a member of the House of Habsburg. For collateral on the loan, the archduke’s Schwaz silver mines would serve as equity for Jakob Fugger’s rising empire in precious metals.
The first lesson of entrepreneurship is to find a business model that works and double down.
With the equity from this deal, Fugger would repeat the process. Financing the Habsburgs was worth the risk. This was the Austro-Hungarian family whose lands extended across Europe and who supplied a succession of Holy Roman Emperors for four centuries. Maximilian was co-regent of the Holy Roman Empire from 1486. King Maximilian would later assume the debts of Sigismund, payable to Fugger, when the Archduke resigned under pressure in 1490.
Jakob Fugger invested in land from the House of Habsburg, sold to him by now Emperor Maximilian in 1508 for fifty thousand guilders. This wasn’t a single family house or parking lot. This is the Habsburg Dynasty we’re talking about, which overlapped with the Holy Roman Empire. We’re talking about a whole city and county, plus a few Austrian lordships. Maximilian later sold Fugger another lordship and manor in 1514, and granted him the title of Imperial Count. That’s impressive, but with a portfolio of precious metals and real estate like that, a fancy title is icing on the cake.
Fugger diversified his business beyond lending to aristocrats and dealing in precious metals. He cornered the market in manufacturing copper cannons and church bells. This was at a point in history when there was a high demand for firearms and religion. Fugger would also expand into the religion business.
The Roman Curia – the central administrative body of the Catholic Church – demanded high fees from those achieving high office. Prestigious pay-to-play, the entry fee for that gig was high. When Albrecht of Brandenburg was appointed Elector of Mainz in 1514, he had to raise 21,000 ducats to pay the Curia. If paying for status in the church is not strange enough, remember that usury was against the rules. Fugger charged Albrecht interest to borrow the money anyway. They called it: a fee for “trouble, danger and, expense”.
In Catholic tradition, they believe in Purgatory. At the time, they charged fees to spend less time in Purgatory. That makes sense, right? Pay now and save time in the after life’s waiting room. They called these fees, “indulgences”. There was a person in position to collect indulgences, known as the Pardoner. Albrecht’s appointed Pardoner was accompanied at all times by an agent of the Fugger. The agent held the key to the Indulgence chest and when it was full, it was the agent that took the contents. Half went to the Fugger agent in Rome to pay off the Curia, and half went to Augsburg to pay off Albrecht’s loans.
And that’s how Fugger and his family accumulated extraordinary wealth. Oh yeah, there was one more thing that gave him an edge. Jakob Fugger started the first newsletter. This was valuable information about market trends, political developments, and other topics of interest. You have to understand that deploying that newsletter provided a moat around his business, and kept the Fugger business relevant to his subscribers. The Fugger Newsletter, also known as the Fuggerzeitungen, was a collection of handwritten newsletters that contained news and rumors about politics, economics, and society in Renaissance Europe. The newsletters were compiled by his brothers Octavian Secundus and Philipp Eduard Fugger in the late 16th century.
In the end, the amount of wealth accumulated by Jakob Fugger approximated two percent of Europe’s GDP. Compared to today’s measures, he would be worth the equivalent of four hundred billion dollars!
Stay tuned for next week, when we explore the adventures of Emperor Charles V, head of the rising House of Habsburg during the first half of the 16th century.
–Sean Allen Fenn
