The following is Methods of Prosperity newsletter number 4. It was originally deployed July 13, 2023. As of March 21, 2024, original subscribers have received up to issue number 40.
Last week on Methods of Prosperity: Jakob Fugger knew how to do deals with influential people. His strategic partnership with the House of Habsburg, and Emperor Maximilian I in particular, secured his own influence across generational lines. Maximilian’s grandson, Charles V became Holy Roman Emperor in 1519. This is his story.
First, an addendum to the roadmap. As mentioned at the start of this course, studying people who earned their wealth is more useful than studying royalty or unfair players in this game of extraordinary wealth creation. If you’ll forgive the inconsistency, there is a loophole here. Royalty at this time was financially backed by entrepreneurs like the Fugger family enterprise. This is a point in history before such fairness was an option. Emerging ideas like upward mobility or a level playing field wasn’t a reality until The Renaissance.
Part 4. The reign of Charles V.
“Generational wealth doesn’t just manifest overnight. Every inheritance starts with an individual who makes a decision.”
– Sean Allen Fenn
Though he had a strong claim to the title of Holy Roman Emperor through his inheritance of the Spanish and Austrian thrones, entitlement still requires payment. The Holy Roman Empire was not a centralized state, but rather a loose confederation of territories with a shared ruler. Upon the death of Maximilian I, a small number of electors would gather to choose his successor. In theory, the electors were free to vote for whomever they liked, but in practice, the scene could get ugly. Imagine being an elector who votes for a candidate which the Pope doesn’t like. You might be excommunicated. Meanwhile, the Habsburgs offered military and financial backing to those who supported their preferred candidate.
The Habsburgs were one of the most powerful and influential families in Europe at the time of the Imperial election of 1519. They controlled vast territories across Spain, Austria, and the Netherlands, and had significant military and financial resources at their disposal. As a result, they were able to exert a great deal of influence over the election process, both through direct intervention and by leveraging their network of alliances and political connections.
Facing threats by France and the Ottoman Empire, The Habsburgs had everything to lose. This opportunity to be the head of one of the most prestigious and influential political institutions of the time was a zero-sum game. Among his competition for the title of Holy Roman Emperor were Francis I of France and Henry VIII of England. Francis I, in particular, was a formidable opponent. He was young, charismatic, and had significant support among the electors. He also had the backing of the influential Medici family, who were able to offer him significant military and financial support. Henry VIII, meanwhile, was seen as a wildcard, but still commanded respect and admiration from many quarters.
The balance of power was about to shift, not only in Europe, but perhaps the exploration of the New World would take a different course. In a parallel universe, Ferdinand Magellan may not have sailed around the world. The Aztec and Inca civilizations would not have been conquered. Wealth accrued from conquering the Americas would not end up being transferred to the Habsburg dynasty if they didn’t win this election.
They weren’t the only ones at risk of losing control. If the electors chose Francis I of France or Henry VIII of England instead of Maximilian’s grandson, the ripple effect of such a shift in the balance of power would impact the fortune of Jakob Fugger. Fugger's power was such that he wanted Charles V to understand that he, not the electors, would decide who became emperor. He made considerable contributions to secure the election of Charles V as Holy Roman Emperor. The election was an opportunity for The Habsburgs and, by extension, Fugger to consolidate their power and maintain their position as one of the leading players in European politics.
Fortunately for them, Charles V became Holy Roman Emperor in 1519. He inherited the title after the death of his paternal grandfather, Maximilian, and was elected to succeed him. In 1523, Fugger wrote to Charles V reminding him of his services to his grandfather, Maximilian, and emphasized his loyalty to the House of Austria. Fugger also provided loans that enabled Charles V to finance his wars. This was a risky investment, as there was no guarantee that Charles V would be able to repay the loans. However, Fugger likely calculated that the potential benefits – including increased political influence and the opportunity to finance lucrative military campaigns – outweighed the risks.
The consolidation of Habsburg power through the election of Charles V had significant implications for the future of Europe. Habsburg dominance would continue to be felt across the continent for centuries to come, with the family playing a central role in events such as the Thirty Years’ War and the Napoleonic Wars. The Habsburgs would also continue to exert significant influence over the Holy Roman Empire, shaping its politics and policies and maintaining their position as one of the most powerful families in Europe.
Charles V borrowed money from German and Italian bankers and relied on the flow of precious metals, especially silver, from the New World to Spain, which caused widespread inflation. For a deeper explanation of the Spanish price revolution, my knowledge is limited. A basic explanation is that the influx of silver and gold from exploits of the New World contributed to the increased money supply. Kings debased coins, removing precious metals and adding more base metals.
While buying power goes down, prices go up.
Severely in debt, and with more liabilities than assets, Charles V abdicated in 1556. Sovereign default was declared in 1557. He retired to a monastery in 1558.
In conclusion, Charles V was one of the wealthiest monarchs of his time. In studying accumulation of wealth, it would be an error not to factor in luck (for lack of a better word). Besides being born into the Habsburg dynasty, he was already Archduke of Austria and the King of Spain before his reign as Holy Roman Emperor. He inherited a vast amount of wealth from his father, Philip the Handsome, and his paternal grandfather, Maximilian I. Which is exactly the point of this series; the whole point of generational wealth is to leave an inheritance to your grandchildren.
Generational wealth doesn’t just manifest overnight. Every inheritance starts with an individual who makes a decision. How long it lasts depends on the consequences of further decisions. External factors including war and natural disasters are also a form of bad luck. Luck is a form of randomness. We have to account for that randomness to some degree, don’t we?
Stay tuned next week, when we examine the first big corporation: The British East India Companies.
–Sean Allen Fenn
