Chapter 404: Getting Rich Overnight
September 3, 1872.
United States, 11 Wall Street.
On the New York Stock Exchange—just last year relocated to its new address on Wall Street—stood what was then the world's newest, largest, and most lavish trading hall.
Since the end of the Civil War, the United States had embraced an unprecedented boom, fueled by the railway economy, western expansion, and major industrial growth in the East.
Foreign capital poured madly into this fertile ground. Foreign investors alone held half of all U.S. railway investments. From 1865 to 1871, over six thousand miles of track had been built—more than a hundred times the amount in East Africa during the same period. In 1872, each railway company planned to build nine times the length of track built in 1865. The fervor for railway investment was higher than ever, and vast sums of money flowed into railway projects through the New York Stock Exchange.
Railway construction then drove demand for steel, coal, and oil. A multitude of factories sprang up, sometimes blindly and frantically. The market's demand acted like a bottomless black hole, endlessly and greedily absorbing everything.
"Boss, someone is selling twelve percent of the Aurora Railroad Company's shares. The stock's been rising steadily these past few months. Should we move in and buy?" Jack asked his boss, Smith.
"Of course, Jack. Buy all of it," said Smith.
"Boss, if we buy it all, I'm afraid we'll be using up all our funds!" Jack said hesitantly.
"Jack, railway shares are so scarce right now. Once we buy, we can just wait, do nothing, and watch the dollars flow into our pockets," Smith said. "So don't be afraid. Cowards never make big money. Go all in—don't let anyone else snatch them. Time is money!"
"Yes, sir," Jack answered.
Though Smith pushed hard, they were a step late and only snapped up about twenty percent. This left Smith somewhat annoyed.
Red-eyed, he roared, "Jack, listen up! From now on, watch every fluctuation in the market. The moment anyone sells railway stock, buy it. No need to ask me. Keep going until we've spent all our funds. If you succeed, you'll get a huge bonus this month. If you fail, I'll dock your pay!"
"Yes, sir!"
Soon enough, Smith got his wish. Some other "idiot" sold a block of railway stock, and Jack seized the opportunity to buy it all up.
Over the next few days, shares in various railway companies were put up for sale, though none in large amounts, so it went unnoticed. The bustling sounds of bidding filled the trading floor. In fact, the Hechingen consortium had unloaded all of its own railway shares.
"We invested in North America just a year ago, and the value of our assets has nearly increased tenfold," employees at Hechingen Bank's North America branch commented. "But it seems that's nowhere near the limit here. These assets are still rising in price. It's such a pity!"
To get a piece of the hot profits, Ernst had invested a huge sum of forty million pounds sterling in North America—about eighty percent of the Hechingen consortium's earnings from the Franco-Prussian War. After a spin in the U.S. stock market, that had turned into three hundred eighty million pounds, or 114 billion East African Rhine Thalers. Because silver prices hadn't depreciated yet, this sum was worth about 1.1 billion taels of silver—eight times the indemnity of the Treaty of Shimonoseki (considering how silver's value had dropped by that treaty's time). Clearly, at that point, the U.S.—the world's second largest economy, after Britain—was indeed wealthy.
Besides gains in North America, Ernst also sold off many assets in Europe, altogether netting around eighty million pounds, nowhere near North America's scale.
This discrepancy related to the Hechingen consortium's main presence in Europe. The consortium's European enterprises were nearly all genuinely valuable operations, unlike North America's "premium businesses," which were actually created by speculative hype. Take, for instance, the U.S. Aurora Railroad Company, founded just last year with only about thirty employees. Then it got massive capital injections from the Hechingen consortium, hired staff, and took on the Philadelphia-to-New York rail project, making its stock price skyrocket a hundredfold. Step by step, Hechingen Bank sold shares in the stock market at high prices. By the time Hechingen sold all its holdings, the railroad had completed only a single station.
Although Ernst made a large sum from financial markets, that was far from his entire fortune. The Hechingen consortium—an enormous conglomerate—was the real heavyweight. Among its several major enterprises, many would rank in the top Fortune 500 if we compare with later eras, and Hechingen Bank itself would be among the top few.
At present, the House of Hechingen is one of the world's strongest contenders for the title of richest. Of course, no one truly knows how much wealth those ancient families have, such as the famed Rothschilds or various European royals and nobles. The "publicly recognized" richest man might be America's Rockefeller, whose net worth exceeds a billion dollars, yet Rockefeller can't be compared with Ernst at the same level.
Besides, Ernst commands the East African Kingdom, a political entity whose value defies estimation. In 1871, the East African government's revenue was just over seven hundred thousand East African Rhine Thalers—about eighty thousand taels of silver.
That isn't much, but it doesn't mean much either. For example, nearly all factories in East Africa pay no taxes, aside from Mombasa and Dar es Salaam, the two main sources of government tax revenue, mostly because of external trade.
Nonetheless, collecting eighty thousand taels of silver in taxes is about sixteen percent of Japan's government income during that same period. Not bad, considering East Africa's population is around seven million, whereas Japan's is over thirty-eight million—East Africa's at about eighteen percent of Japan's population.
Japan's government invests heavily in many industries and has centuries of accumulated wealth, so its per capita public income surpassing East Africa is normal.
Of course, the East African Kingdom also has more than 23 million natives (including those in South Africa), but the majority still live under minimal oversight in the kingdom's western areas and in southern Africa. Only about nine million are used as labor by East Africa.
The wealth they create can't simply be measured in money. For example, they substitute for animals like cattle and horses to plow fields, they work together to build roads and water projects, etc. All that is purely manual labor. The benefits they provide get distributed among East Africa's citizens. For instance, farmland is allocated based on the total citizenry. East Africa's yields per acre might be higher because it invests more manpower than other countries. Especially for plantation crops and rice fields, both labor-intensive. East Africa uses a large workforce to produce what in other agrarian nations might be produced by fewer people, yet East Africa still calculates output as if each farmland worker is just one person in the stats.
Overall, East Africa's productivity remains rather backward—or even quite low. But the kingdom faces tougher hurdles than other states. Take land, for example—turning East African land from unclaimed wilderness into farmland requires massive effort, and short-term returns are limited. Elsewhere in the world, farmland was cleared a long time ago, worked for many years, producing steady yields.
The supply of livestock in East Africa is also much smaller than in other agrarian nations of the era. They can't jump straight from "manpower empire" to "mule-and-horse empire." They need a few years, perhaps decades, to build up enough to meet the kingdom's demand. That's a major problem across Africa: there's no local domesticated species for East Africa to employ, so they must import and breed them in large numbers.
They're also lacking in agricultural tools. Large quantities of basic implements—hoes, shovels, iron plows—must be imported in bulk from Germany. It's not that East Africa can't produce them, but its own production capacity is limited and quality is unreliable.
Plenty of problems exist within East Africa, but including its colonial period, it's only been about seven years. One can't be too demanding.
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