The Richest Man Who Ever Lived: The Life and Times of Jacob Fugger

by Greg Steinmetz

  Fugger received greater honors over his long career, but the coat of arms pleased him most. Years later, he offered to renovate the members-only tavern where Augsburg’s leading merchants went to socialize, talk shop and drink. Called the Heerentrinkstube or Gentlemen’s Drinking Room, it sat across from City Hall. Fugger demanded that three lilies appear on the facade as a condition of the renovation. It was a reasonable request; the Medici put their crest on everything, even churches. But the members of the drinking club had more pride than the priests of Florence. They turned him down. A Fugger family chronicle commissioned by one of Fugger’s nephews in 1545 claimed the club came to regret the decision.

  Just as Fugger was finishing his Italian education, he received some bad news. His older brother Markus was dead. Markus, who was thirty when he died, had taken the path that Fugger had avoided. He had taken his priestly vows, received a university education and worked in Rome as an overseer of the pope’s affairs in Germany. A plague hit Rome in 1478 and took him just as he was becoming influential. The family sent Fugger, then nineteen, to Rome to settle his brother’s affairs. The visit was presumably formative. Sixtus IV, the pope who built the Sistine Chapel, was in his prime. If nothing else, Fugger saw the splendor of the papal court and the riches available to those who served it. From there, Fugger returned to Augsburg and began his work at the firm of Ulrich Fugger & Brothers. He traveled extensively, visiting trade fairs and inspecting the branch offices. Travel was punishing. Erasmus, another frequent traveler, complained about filthy inns, rude hosts and wretched food. But face-to-face communications was about the only way to get anything done. Ambitious people like Erasmus and Fugger had to hit the road.

  After Fugger finished in Rome, the family sent him to Austria, in the footsteps of his shifty grandfather, Franz, to get in on a mining boom. This was a big step for Fugger, but one has to wonder why the family didn’t send him to an established and important outpost like Nuremberg. Fugger was now twenty-six and the fact that his brothers sent him to explore a new industry in a place that didn’t matter to their current business suggests they had doubts about his ability. In any case, he went to Austria not as an apprentice or a junior associate but as a full-fledged businessman with authority to make decisions. He made the most of it. Austria was where Fugger first emerged as a business genius. His Austrian deals reveal a gift for handling customers, a willingness to take enormous risk and an extraordinary talent for negotiations.

  Until this point, the family had concentrated on buying and selling textiles. But mining was beckoning as a new business line because it offered better profits. The lure of fat paydays took Fugger to the village of Schwaz. Schwaz is twenty miles down the Inn River from Innsbruck. For most of its history, Schwaz was a community of poor farmers. Because of its elevation, the weather was cool and the growing season short. Worse, the river flooded every few years, destroying the crop. The luck of Schwaz changed in 1409, when a farm girl, out in the fields with her cow, stumbled on a patch of shiny metal that others soon identified as silver. The timing was fortunate. Owing to scarcity, the price of silver reached its peak in the fifteenth century when it traded as close to the price of gold as it ever came. Mints needed silver for coins. The rich wanted it for silver plate—dishes and other place settings—that they bought as a form of savings.

  Fortune hunters mobbed Schwaz and made it the Spindletop of its day. At its height, the population reached forty thousand, making it bigger than Augsburg and the second-biggest city in Austria after Vienna. Taverns and inns sprung up overnight. Miners from Bohemia came in such numbers that they built their own church. The mines provided for all. Schwaz was the largest silver mine on earth and occupied that spot until the New World discoveries of Potosi and Zacatecas a century later. In its prime, Schwaz produced four of every five tons of European silver.

  The local ruler, Archduke Sigmund, owned the mines. A jowly sovereign with bulging eyes and a hooked nose, he was another Habsburg. He and Emperor Frederick were cousins. If Fugger wanted to participate in Tyrolean mining, he had to go through Sigmund. Sigmund controlled a patchwork of territories that included the Tyrol, the Black Forest, Alsace and part of Bavaria. Schwaz should have freed Sigmund of money troubles. But moderation wasn’t his style. He loved luxury and spent beyond his means. He rejected his father’s palaces as too drafty and built new ones that were just as drafty but looked better. He built a series of grand hunting lodges—Sigmund’s Joy, Sigmund’s Peace, Sigmund’s Corner—where he could unwind after a day of chasing stags. With a vast staff of chefs, valets and butlers, he tried to copy the splendor of the Burgundian court and hosted parties where a dwarf jumped out of a pie to wrestle a giant. Sigmund got the trappings of Burgundian culture right but was too much of a slob to master the nuances. An ambassador from Burgundy once dined with Sigmund and expressed horror at the table manners in a memo to Charles the Bold. “It is noteworthy,” he wrote, “that as soon as the dishes were placed on the table everyone grabbed with their hands.” Although Sigmund married twice, his only children were the fifty from his girlfriends. He paid to support them lest the mothers embarrass him with claims.

  The only ones who received no support were his subjects. Other sovereigns shared their wealth by building roads, draining swamps and creating universities. Sigmund spent only on himself. When money ran out, he borrowed against the output of his mines by selling silver to a group of bankers at a discount. Fugger wanted to be one of the bankers and, remarkably, he got in on a deal in December 1485, not long after arriving in Austria. A day after hearing the Advent mass and smack in the middle of a witch-hunting affair that competed for Sigmund’s attention, Fugger advanced the duke 3,000 florins. The amount was small; it took only a fraction of the Fugger family’s capital and paled compared to what other bankers had loaned the duke. But it made Fugger a banker, the profession that over the next forty years he would take to new heights. In return for the money, Sigmund delivered a thousand pounds of silver in installments. Fugger paid eight florins a pound and sold it in Venice for as much as twelve florins.

  It was a great deal but it looked for a while like this was the only one Fugger would ever get. For four years he kept trying to land another one and for four years he failed. The duke continued to borrow from the same Italians he had known for years. Then came a border skirmish between Sigmund and Venice that changed everything.

  Venice’s hinterland reached the Tyrolean frontier. Sigmund and the doge had been bickering over some of the border towns. After a flare-up over trading privileges, Sigmund’s advisors encouraged the duke to send troops and take the villages in Venetian hands. Tyrol was a backwater, and Sigmund had to rely on mercenaries because he had no standing army. Compared to Venice he was a pipsqueak. Venice had military power to match its wealth. Behind the high brick walls of the Arsenal shipyard, where Venetian shipwrights pioneered the system of mass production, the Republic had built one of the largest naval fleets on earth to protect a string of trading posts that stretched down the Dalmatian coast, along the shores of Macedonia and to the most distant islands of Greece. Its ground forces were just as formidable. If sufficiently riled, Venice could march on Tyrol, lay waste to Innsbruck and put Sigmund in chains.

  But Venice had concerns besides little villages in the Alps. The Turks had taken Constantinople in 1453 and were now making trouble in Venetian waters off Greece. If Venice lost the Greek coast, the Turks could block its trade with the East and bring the republic to its knees. Sigmund gambled that Venice was sufficiently distracted to let the towns go without a fight. After the astrologer gave the all clear, Sigmund sent thousands of mercenaries to the Rovereto and captured it after weeks of firing flaming bombs of tar over the city walls. The victory elated Sigmund. He talked of marching his troops into St. Mark’s Square.

  He assumed his bankers would support him. But when he asked for more money, they offered only excuses. They knew that Venice considered Rovereto and its neighbors as a first line of defense. They refus
ed to get involved in a tangle with the region’s largest power. Broke and fearful of a Venetian counter attack, Sigmund sued for peace. Venice hit him with tough terms. It promised not to invade only if Sigmund surrendered Rovereto, abandoned his other claims and paid 100,000 florins in reparations. That was a lot of money and Sigmund tried his bankers one more time. But by now Sigmund’s years of unchecked spending and mounting debt had caught up with him. No matter what he promised, the bankers refused to help. Then a young German whose grandfather once ran the mint came forward with an offer. Fugger combined his family’s money with money raised from friends back in Augsburg and agreed to loan Sigmund the full amount. It was a whale of a deal for Fugger, coming in at more than ten times the size of his earlier loan with the duke.

  The other bankers laughed. They couldn’t believe Fugger was willing to give Sigmund anything, let alone a bigger loan than any they had ever made. If Sigmund repaid, Fugger would make a fortune because the contract entitled him to all the output from Schwaz, at a discount, until the loan was repaid.

  But if Sigmund welched—and, given his record, it seemed likely—Fugger would be finished.

  To prevent ruin, Fugger filled the loan agreement with safeguards. He barred Sigmund from touching the silver, he made the mine operators cosign the loan and he insisted on forwarding the money to the duke in installments rather than as a lump sum. That way, he could keep the loan balance reasonable. Before signing the agreement, Fugger made a final demand: He insisted on control over the state treasury. Fugger wanted stability and, by controlling the Tyrol’s purse strings, he could act as a one-man International Monetary Fund and keep the state afloat by paying its bills when due. Sigmund agreed to all of Fugger’s terms. He had no choice. But the agreement was only words on paper. Sigmund was the law of the land. Like all royals, he could renege without consequences. Debtor’s prison was for little people, not archdukes. The only things that kept him honest were his honor and his desire to borrow again in the future.

  The loan marked a pivotal moment in the ascent of Fugger. It was not only the biggest piece of business he ever conducted. It was also the biggest for his family. But there was nothing pioneering or innovative about the loan, and his competitors could have made it as easily as Fugger. All Fugger did was put up his money when no one else had the guts. Such out-of-favor investments became a hallmark of his investing career.

  When the other bankers saw wagons loaded with Sigmund’s silver roll up to Fugger’s warehouses, it became clear that Fugger had struck a winning deal. It drove them crazy. They complained of unfair treatment and accused Fugger of cheating the duke. They encouraged him to dissolve the agreement and renegotiate. But by this time Fugger had made friends with Sigmund. Knowing the duke was vulnerable to flattery, Fugger had won a spot in Sigmund’s heart by celebrating the greatest achievement in the duke’s otherwise disastrous reign. The achievement involved coins. At a time when other monarchs—or their minters—watered down coins to make them stretch further, the vast output of the Schwaz mine allowed Sigmund to mint a silver coin of unsurpassed purity. The coin featured an image of him holding a scepter and wearing a jaunty, oversized crown. The coins were a hit and earned him the name Sigmund Rich in Coins. When a merchant received one of Sigmund’s silver guldiners, he knew he could trust it. The popularity of the coin—weighing the same as six quarters—attracted imitators across Europe, including the German city of Joachimsthal. Joachimsthal introduced a coin of identical size and silver content, and called it the thaler. The Danes called their version the dollar. Three centuries later, Americans gave a nod to the Danes and ran with it. Sigmund loved his guldiners and Fugger gave him bags of the coins as gifts. Sigmund appreciated Fugger’s thoughtfulness. He stayed true to his banker. But his loyalty was one-sided. Soon enough, Fugger would return the duke’s loyalty by turning on him.

  Nothing boosted a city’s economy in Fugger’s time like a trade fair and no city in Germany got a bigger boost than Frankfurt. The population swelled by half during its fall fair. By renting out their floors for sleeping, homeowners made more money in a week than their regular jobs paid all year. An innkeeper made enough in three weeks to cover the costs of building the inn. The city had no bigger source of revenue. It collected money on everything from tolls to taxes to the fees for weighing goods on the public scales.

  Frankfurt was well situated. Located along the Main River, the biggest tributary of the Rhine, Frankfurt is in the middle of Germany. It is an easy boat trip from Cologne and Antwerp, and was only a few days from Augsburg even in that era of slow travel. Frankfurt began preparing for the fair months in advance. Soldiers swept the roads of highway robbers. Barges packed with beer and herring arrived from the Baltic. Apprentices unpacked boxes, sorted goods and stocked the shelves. Country girls came to town to compete with the full-time prostitutes. Authorities barricaded the brothels to corral the expected throngs. Acrobats, dancers and singers readied their acts. Jugglers polished their pins.

  Fugger considered Frankfurt the ideal spot to network. He was a regular visitor and when the fair came together for the 339th time in 1489, he was there as usual. This may have been the most important fair of his life because it was where historians believe Fugger first met Maximilian of Habsburg, Emperor Frederick’s son—the man who, with Fugger’s help, would take the Habsburgs to greatness. No one recorded their first impressions as the two of them, born sixteen days apart in 1459, considered each other for the first time. Maximilian knew other bankers and probably saw Fugger as just another one. Fugger must have wondered if Maximilian was a safe bet.

  They may have talked about the time, six years earlier, when Maximilian and his father had passed through Augsburg on the way to meet Charles the Bold in Trier. That visit ended disastrously. Frederick refused to trust Charles and, just days before the wedding, he and Maximilian snuck across the Mosel back to Germany. Maximilian eventually married the duchess, but only after Charles had died and Burgundy went back to France. Maximilian only got Flanders and some neighboring areas, and he had a weak hold on these places. After he tried to raise taxes in Ghent, angry taxpayers threw him in jail and beheaded some of his staff, including his court jester, before his eyes. They released Maximilian after limiting how he could spend Flemish tax revenue. This was just the latest setback for the Habsburgs. A few years earlier, the Hungarian king Matthew Corvinus had chased them from Vienna after a long siege. While the sultan of Turkey congratulated Corvinus with a gift of two dozen camels, Maximilian’s father, Frederick, who was still alive, fled to Salzburg and resigned himself to the loss. “Happiness is to forget what cannot be recovered,” he said.

  About the only things Maximilian had left were his titles. He was still a duke and, while he was in the Netherlands, the electors, not caring who became emperor as long as he left them alone, had made him king of the Germans with the promise of making him emperor after Frederick died. But what did “king of the Germans” even mean? And what did emperor even mean? It certainly didn’t make him a real sovereign like Henry VII of England and Charles VIII of France. They had armies, tax revenues and authority. Maximilian served at the pleasure of seven men uninterested in sharing power.

  What saved Maximilian from irrelevance was a winning collection of personal attributes. Charming and athletic, admirers called him the Last Knight. He was never happier than when in his armor, jousting in a tournament or fighting the enemy. He was a hard worker. After a day in the field, when his captains relaxed with beer around a campfire, Maximilian retired to his tent to address official correspondence. He had plenty of faults. He was moody, easily distracted and prone to get ahead of himself. But he had intelligence, determination, physical courage and a desire to do whatever it took to advance his family. Maximilian believed in AEIOU as much as Frederick and took it upon himself to make it happen.

  Fugger correctly grasped that Maximilian, who had the Tyrolean nobility in his corner, would outmaneuver the dull-witted Sigmund. Maximilian did it with a ploy th
at Fugger himself could have devised given its ingenuity. Maximilian loaned money to Sigmund backed by a mortgage on the duchy. If Sigmund failed to repay in three years, Maximilian would take over. Sure enough, Sigmund defaulted. He could have repaid if Fugger had loaned him the money. But Fugger, who preferred the ambitious Maximilian as a customer to Sigmund, did nothing. One could argue that Fugger behaved dishonorably. But he knew Sigmund had no chance against the young and talented Maximilian. To back Sigmund would have been a pointless act of loyalty.

  After a legislative session where the nobility accused Sigmund of treason for his earlier flirtations with the Bavarians, Sigmund, rattled and exhausted, signed his holdings over to Maximilian. Maximilian wasn’t vindictive. He made Sigmund’s final years happy by giving him a castle, a staff and unlimited hunting and fishing privileges. Fugger might have done his part, too. Legend has it that as Sigmund was dying, he asked for a bag of silver coins, the ones with his likeness. He wanted to again feel the cool metal against his skin. Fugger delivered a bag in person.

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  PARTNERS

  Dobratsch Mountain climbs 5,700 feet above sea level, a snowy lump imposed on the high meadows of southeast Austria and a soaring boundary at the intersection of Austria, Italy and Slovenia. The village of Arnoldstein sits at the base. Monks looking for solitude built a monastery there in the twelfth century. Apart from a bad year in 1348—the Black Death and an earthquake that buried the village—they got what they were looking for. Trouble came later. In 1478, Turkish adventurers attacked Arnoldstein and killed monks and anyone else they could find. In 1494, the Turks came back and captured ten thousand people in a neighboring province to use as slaves. The monks feared more killing. Then, just a year later, the stillness that once reigned over Dobratsch vanished amid a riot of saws, axes and falling timber. Fugger had come to Arnoldstein. He broke ground on the biggest factory Europe had ever seen.