By Mark Higgins, CFA, CFP®, an institutional investment consultant with more than ten years of experience serving large institutional investors, such as endowments, foundations, public pension plans, and corporate operating reserves.
Today we're celebrating International Women’s Day – a global day celebrating the social, economic, cultural, and political achievements of women!
Overview
Value investing is a philosophy known for its discipline of purchasing assets only when prices fall comfortably below fair market value and then selling them when prices exceed fair market value. Ben Graham, author of the bestselling books, Securities Analysis and The Intelligent Investor, is almost universally regarded as the founder of value investing; and famed investors, such as Warren Buffett, Charlie Munger, and Seth Klarman, credit much of their success to Graham’s insights.
However, contrary to conventional wisdom, Graham was not the first American to apply the principles of value investing. Before Graham was even born, a woman by the name of Hetty Green used these principles to tame the wild markets of the Gilded Age and establish herself as the richest woman in America. Further, Green developed these principles instinctively at an early age, enabling her to thrive during several market panics that ruined many of her male contemporaries. In contrast, Graham embraced value investing only after narrowly avoiding financial ruin after levering his portfolio prior to the Great Crash of 1929.[3]
In fairness, this paper does not seek to diminish Graham’s contributions to the investment profession. He deserves credit for documenting multiple value investing techniques that have guided the decisions of many of America’s most successful investors. However, it does seek to properly position Graham’s achievements within a more comprehensive timeline. The truth is that few, if any, of Graham’s principles were unfamiliar to Hetty Green – and, perhaps more importantly, she achieved a level of proficiency that Graham himself would never claim. At the peak of her career, Hetty Green was considered the most creditworthy lender to many of America’s most respected stock operators, corporations, and even the government of New York City. This enabled her to play a crucial role in rescuing the nation during the Panic of 1907, which was a crisis that she predicted well before her peers — even the legendary J. Pierpont Morgan.
Hetty Green’s accomplishments are extraordinary by any standard, but what makes them even more impressive is that she succeeded despite having none of the advantages afforded to men at the time. Hetty Green could not purchase a seat on the New York Stock Exchange, serve as a director on a corporate board, or even exercise the right to vote. In a February 1900 interview with Woman’s Home Companion, Hetty recalled these obstacles, stating, “A woman hasn’t as many chances for making money as men have…She isn’t around or among men, as a rule, and she doesn’t hear of the opportunities for investment which are talked of day by day, in Wall Street and other financial centers.”[4]
My hope is that by sharing this story, Hetty Green will finally receive the recognition she deserves as the true originator of the value investing philosophy and one of the greatest financial minds in all of U.S. history. By revealing the success of this extraordinary woman, perhaps the investment profession will more confidently embrace a future that promises more of the same.
A Virtual Orphan in the Town of New Bedford
Henrietta “Hetty” Howland Robinson was born on November 21, 1834 to a Quaker family in the town of New Bedford, Massachusetts. The Robinsons were a wealthy family, as Isaac Howland, Jr. (Hetty’s maternal great grandfather), had amassed a fortune as an early investor in the whaling industry. Isaac had no direct male heirs, however, and Edward Robinson (Hetty’s father) took over the family business upon his death. Despite their wealth, the Robinsons were notoriously frugal. New Bedford residents often joked that he “squeezed a penny till the eagle squawked.”[5] One theory regarding their thrift was that it was a byproduct of their Quaker values. Hetty later added credence to this theory, stating, “I am a Quaker; my early training disciplined me towards pomp and show…My family has been wealthy for five generations. We need make no display to insure recognition of our position.”[6]
The wealth of the Robinson and Howland families ensured that Hetty was never deprived of basic material needs, but her emotional needs were another matter. Hetty’s father longed for a male heir and was disappointed when his wife, Abby, gave birth to a girl. His frustration intensified when their second child, Isaac, died in infancy. Edward’s disappointment with Hetty’s gender placed additional pressure on a marriage that was already strained, and Hetty’s parents responded by sending her to live with her aunt, Sylvia Howland, and grandfather, Gideon Howland, for most of her childhood.[7] While living with her grandfather, Hetty showed a keen interest in mathematics and finance. This interest blossomed when Gideon’s failing vision prevented him from reading financial documents and newspaper reports relating to the family business. Each day, Hetty happily read them aloud to Gideon. Later in life, Hetty credited much of her business education to these daily sessions, stating, “My grandfather’s eyesight was failing and my father’s, too. And as soon as I learned to read, it became my daily duty to read aloud to them the financial news of the world. In this way I came to know what stocks and bonds were, how the markets fluctuated, and the meaning of ‘bulls’ and ‘bears.’”[8] Hetty also instinctively adopted her father’s thriftiness. By the time she was eight years-old, she had saved enough of her monthly allowance to open her first bank account.[9]
Gideon Howland passed away when Hetty was thirteen, depriving her of her daily financial training. However, soon after his death, Hetty’s perfect eyesight and burgeoning financial acumen attracted desperately needed attention from her father. Hetty soon became her father’s eyes, while also learning the practical elements of business management by shadowing him on his daily visits to the docks of New Bedford. By the time Hetty turned fifteen, her financial abilities rivaled those of her father, providing a durable foundation upon which to build her future financial empire.[10]
A Fish Out of Water
In her late teens, Hetty attended multiple boarding schools and finishing schools, while simultaneously assisting her father with the management of the family business. The unifying theme throughout this period of her life was her unapologetic rejection of societal norms established for Gilded Age woman — especially wealthy heiresses. Hetty cared little for her personal appearance, preferring to dress in old clothes, and she disregarded the daily primping practiced by young women at the time. Hetty’s behavior frustrated her mother and Aunt Sylvia, and they feared what the future would hold for a wealthy heiress who felt more at home on the docks of New Bedford than mingling with members of her class.
When Hetty turned 20-years old, Sylvia began pressuring her to find a spouse. Reluctantly, Hetty journeyed to New York City to mingle with the upper crust of New York Society. Over the course of her stay, she attended many lavish balls, but expressed little interest in finding a husband. Instead, she spent much of her time eavesdropping on men as they discussed the latest Wall Street dramas. Her relatives were exasperated when Hetty returned several months early to New Bedford with no wedding prospects. Her father was the only person unable to contain his delight when he learned that Hetty had spent only $200 out of her $1,200 budget, investing the remainder in high-quality bonds.[11]
Within a few years of returning to New Bedford, Hetty’s father exited the whaling business and relocated to New York City. His exit was perfectly timed, as the use of petroleum virtually eliminated demand for whale oil within a few years. Hetty spent the next six years shuttling between New York City and New Bedford. Her priority in New York City was assisting her father with their new business and investment activities, while her priority in New Bedford was browbeating her Aunt Sylvia to ensure that she remained the sole beneficiary on her will. The constant fights over Aunt Sylvia’s will eventually led to a drawn-out court battle, which haunted Hetty for the rest of her life.
While residing in New York City, Hetty also met her future husband, Edward Henry Green, who had amassed a $1 million fortune of his own as a merchant in the Philippines. Hetty’s father encouraged the marriage, as he was concerned with his declining health and worried about Hetty’s ability to independently manage the family business in his absence. In May 1865, Hetty and Edward announced their engagement with the understanding that Edward would have no claim to Hetty’s assets and inheritance. The couple was married two years later, and Hetty took the name Mrs. Edward Green.[12]
The Princess of Whales[13]
During her six-year stay in London, Hetty honed her investment skills. One of her most successful investments was in U.S. war bonds. In the years immediately after the Civil War, the bonds were selling at a steep discount due to fears that the federal government would redeem them with depreciated greenbacks rather than gold.[14] Hetty correctly calculated that the political environment strongly favored redemption in gold. By the time President Grant confirmed her hypothesis by signing the Public Credit Act in 1869, Hetty had realized a $1.25 million profit from the capital appreciation alone.[15] Soon after announcing her engagement, Hetty’s father and Aunt Sylvia passed away. Although Hetty was the primary beneficiary on both estates, most of the assets were placed into trust, entitling Hetty only to the income. This enraged Hetty, who believed that she could invest the assets more effectively and at much lower cost – a claim she later proved beyond any shadow of a doubt. Hetty was especially angered by Sylvia’s will, and she initiated a drawn-out court case disputing its legitimacy. Although never proven, evidence strongly suggests that Hetty forged the signature on a mysterious addendum to Sylvia’s will, which claimed that Hetty was the direct beneficiary of almost the entire estate. The court rejected Hetty’s claim, and she was forced to settle for a smaller percentage of the estate, which was placed in trust. Exhausted from lawsuits and possibly fearful of prosecution for forgery, Hetty and Edward Green departed the U.S. for London soon after their wedding in July 1867.
Hetty also profited from investments in railroad bonds. It was in this area that her meticulous due diligence proved especially valuable. During the decade following the Civil War, British investors were enamored with American railroad securities, but few could differentiate sound investments from worthless paper. Unlike her British counterparts, Hetty was not easily fooled by slick salesman, nor was she tempted by abnormally high yields.
As if her investment activities were not enough to keep her busy, Hetty also gave birth to her two children, Ned and Sylvia, during their stay in London. Although the press often portrayed her negatively, Hetty cared deeply for her children. She also trained them from an early age in the art of frugality and the importance of a strong work ethic. Ned, in particular, gravitated to his mother’s side and would develop into a successful business executive in his own right.
Mrs. and Mr. Hetty Green
In the early 1880s, Edward Green had a solid reputation on Wall Street, but like many men, he had grown overconfident. In 1884, Green was heavily invested in the stock of the Louisville and Nashville Railroad (L&N). The investment had absorbed nearly all his personal savings, as well as a substantial amount of margin debt. He also invested in small competitors, which the L&N gobbled up to create a much larger conglomerate. Unfortunately, like many railroad men of the time, Edward Green’s ambitions exceeded demand for the railroad’s services. After spending six years in London, the Greens returned to the United States to ensure closer oversight over their investments during the long depression that followed the Panic of 1873. By the start of the 1880s, the depression had lifted, and Americans regained confidence. Construction of U.S. railroads rebounded and, before long, a flood of foreign capital drove massive overbuilding once again.
In the spring of 1884, the U.S. experienced yet another panic. The trigger was the failure of Marine National Bank and the brokerage firm of Grant and Ward. Simultaneously, the President of the L&N admitted to a massive fraud. The resulting downward spiral in L&N stock pushed Edward Green into insolvency. Initially, Hetty may have viewed her husband’s failure as disappointing but perhaps forgivable; but it became unforgivable after the sequence of events that soon followed. At the time, both Hetty and Edward held their securities in custody at the private bank of John J. Cisco and Son. Hetty also held $557,000 in a cash account. The problem was that the Cisco Bank also had financial problems during the Panic of 1884. Sensing trouble, Hetty requested a full withdrawal of her cash deposit and approximately $25 million of securities held in custody. Although her assets were segregated from Edward’s, the bank rejected her withdrawal, demanding that she first cover her husband’s debt of more than $700,000.[16]
Hetty rightly protested the unethical (and possibly illegal) action by the Cisco Bank, but terrified by the prospect of losing her entire fortune, she reluctantly covered Edward’s outstanding debts and then transferred her assets to the Chemical Bank. After paying his debts, Hetty banished her husband to live a lonely life at the Union Club of New York and reportedly put him on a modest monthly allowance. From that moment forward, the press ceased referring to Hetty as Mrs. Edward Green. Instead, she was known as Mrs. Hetty Green – and occasionally journalists referred to her husband as Mr. Hetty Green.[17]
The Queen of Wall Street
The Panic of 1907 began in earnest after a newcomer to Wall Street, Otto Heinze, borrowed heavily in a foolish attempt to corner the stock of United Copper. The failed corner bankrupted several brokerages, which, in turn, triggered runs on trust companies and banks. Because the U.S. lacked a central bank to serve as a lender of last resort, the financial system was left to its own devices to stem the Panic. If not for the leadership of J. Pierpont Morgan, who orchestrated a series of massive, last-minute rescues of the banking system, the U.S. would have descended into a catastrophic depression. Instead, Morgan convinced leaders of national banks, trust companies, and the New York Clearing House to raise more than $200 million in a matter of weeks.[18] On April 18, 1906, residents of San Francisco, California were jolted awake by a violent earthquake measuring an estimated 8.3 on the Richter Scale. Within a matter of days, most of San Francisco was reduced to rubble from the quake itself or to ashes from the fires that swept through the city in the days that followed. The earthquake also triggered a slow but steady financial chain reaction that would shake the entire nation. The source of the problem was a steady outflow of money from New York City banks and trust companies to fund reconstruction in San Francisco, as well as the typical autumn funding requirements associated with the agricultural financing cycle. The problem was magnified by the thin layers of capital maintained by trust companies, which were the first large-scale shadow banks in America.
Tragically, Hetty Green’s contributions during the Panic of 1907 are barely acknowledged by historians. Not only did she lend $1.1 million to the New York City government at the height of the crisis, she had offered generous support to the City multiple times over the preceding year. For example, she provided a loan for $4.5 million several months before the Panic arrived in October 1907.[19] Ned Green also revealed after Hetty’s death that she had lent $6 million to individuals and businesses throughout Texas to carry them through the Panic.[20]
Hetty Green was well-positioned to provide emergency loans because she foresaw the arrival of the Panic of 1907 well in advance. She could do this because she understood the dynamics of monetary flows in a way that few, if any, investors appreciated at the time. This knowledge derived from several decades of experience serving as the lender of last resort to investors, businesses, and governments. Hetty Green’s ability to navigate the expansion and contraction of the money supply sets her apart from almost all investors. Even today, few investors possess such abilities.
Discreet Generosity
Outside of her business dealings, Hetty Green was also a caretaker. In addition to serving as a beloved mother to her two children, there are countless stories of her caring for neighbors in the boarding houses in which she resided. She also played the role of Good Samaritan when complete strangers required assistance. For example, while residing in London, she bandaged a delivery man who had fallen from his carriage, while onlookers seemed perfectly content to watch him bleed out. In a more gruesome incident, she assisted surgeons with the amputation of a fellow passenger’s leg after their train derailed.[22] In both situations, she sought neither credit nor reward for her heroism. When asked why she was viewed as a cruel miser, she responded, “I am not a hard woman, but because I do not have a secretary to announce every kind act I perform, I am called close and mean and stingy…I am a Quaker, and I am trying to live up to the tenets of the faith. That is why I dress plainly and live quietly. No other kind of life would please me.”[23]
Hetty Green’s Wealth Melts into the Sea
Hetty Green passed away on July 3, 1916. Almost her entire estate, which was valued at more than $100 million, was split evenly between her two children, Ned Green and Sylvia Ann Wilks. Neither Ned nor Sylvia had children of their own. When Ned passed away on June 8, 1936, he bequeathed virtually all of his $44 million estate to his sister. On February 5, 1951, the widowed Sylvia Ann Wilks passed away, leaving all but $50,000 of her estate to 63 different charitable organizations. The Green family left no personal foundations, monuments, or buildings to memorialize their contributions to the growth of the U.S. economy during its most formative years. Instead, Hetty Green’s wealth was quietly absorbed by a sea of American educational institutions and charities, many of which soon lost track of its source. The full list of beneficiaries on Silvia Ann Wilks’s will was never published, but the figure below provides a partial list assembled from articles (often brief) in various newspapers.[24]
A Belated Tribute
Hetty Green was arguably the most talented investor ever to brave the unforgiving securities markets of Wall Street, yet she received little credit both during and after her life. She was the true pioneer of the value investing philosophy, which Ben Graham only rediscovered and documented nearly 20 years after Hetty’s passing. Her nerves were tested in the Panics of 1873, 1884, 1893, and 1907. Not only did she pass each test with hardly a flinch, but she profited from each crisis, while many men forfeited their fortunes (and occasionally their lives). She refused to cheat investors by using market manipulation and insider trading tactics, which were the preferred weapons of men such as Jay Gould, Daniel Drew, and Collis Huntington. She never yielded to the temptation to boost her returns by using margin debt, thereby avoiding the catastrophes experienced by most speculators – including her own husband. She never allowed the confidence obtained from past conquests to distort her perceptions regarding the strength of future investment prospects. Finally, her modesty preserved her respect for the dignity of all human beings regardless of the size of their bank accounts. This virtue, in particular, made her a cherished mentor to her children, caretaker to her neighbors, Good Samaritan to strangers, and generous lender of last resort to her country.
It is uncommon for investors to possess any of these talents (much less combine them with admirable character), but it is a true marvel when a single individual possesses all of them. There is no such thing as a perfect investor, but Hetty Green is a strong candidate for the one who came closest. At minimum, this qualifies her as the best female investor in U.S. history – but in this author’s opinion, Hetty Green’s accomplishments transcend gender, making her the best investor of all time.
References:
[1] “Seventy Years Rest Lightly on Mrs. Hetty Green.” The New York Times. (November 5, 1905).
[2] Graham, Benjamin (1949). The Intelligent Investor. New York: Harper Business.
[3] Robinson, David. “Even Legendary Benjamin Graham Made Errors.” Buffalo News. (October 5, 1994).
[4] Wallach, Janet (2012). The Richest Woman in America. New York: Anchor Books.
[5] Ibid.
[6] Slack, Charles (2005). Hetty: The Genius and Madness of America’s First Female Tycoon. New York: HarperCollins Publishers.
[7] There is limited documentation on the relationship between Edward and Abby Robinson, but it was clearly unhealthy. The relationship became so unbearable for Abby that she eventually left her home and lived the remaining years of her life with her sister, Sylvia Howland.
[8] Ibid.
[9] Sparkes, Boyden and Moore, Samuel Taylor (1930). The Witch of Wall Street: Hetty Green. New York: Doubleday, Doran, and Company.
[10] Slack, Charles (2005). Hetty: The Genius and Madness of America’s First Female Tycoon. New York: HarperCollins Publishers.
[11] Sparkes, Boyden and Moore, Samuel Taylor (1930). The Witch of Wall Street: Hetty Green. New York: Doubleday, Doran, and Company.
[12] Ibid.
[13] Hetty Green was introduced to the Prince of Wales during his visit to the United States in 1860 and made him laugh when she introduced herself as the “Princess of Whales.” She retold this story often, taking pride in her witty response.
[14] During the Civil War, the U.S. Treasury issued notes (known as “greenbacks”) to help fund the war effort. Greenbacks were not exchangeable for a fixed amount of gold. For several years, investors feared that the U.S. might not honor its pledge to redeem war bonds for gold upon maturity. Many politicians (especially Southern Democrats) argued that the government should redeem the notes in depreciated greenbacks. Hetty Green astutely observed that the cost of such a maneuver in terms of damage to U.S. creditworthiness was much too high, making it unlikely that such a bill would pass. She proceeded to purchase the bonds for a heavy discount and made a fortune when the bonds returned to par value.
[15] Ibid.
[16] Slack, Charles (2005). Hetty: The Genius and Madness of America’s First Female Tycoon. New York: HarperCollins Publishers.
[17] Noll, Francis. “Repudiation! The Crisis of United States Civil War Debt, 1865-1870.” Graduate Institute of International and Development Studies, Geneva Pierre du Bois Foundation. (2012).
[18] “Seventy Years Rest Lightly on Mrs. Hetty Green.” The New York Times. (November 5, 1905).
[19] Gordon, John Steele. “The Ordeal of Mrs. Hetty Green.” ABA Banking Journal. (November 1, 2019).
[20] Wallach, Janet (2012). The Richest Woman in America. New York: Anchor Books.
[21] Sparkes, Boyden and Moore, Samuel Taylor (1930). The Witch of Wall Street: Hetty Green. New York: Doubleday, Doran, and Company.
[22] Dalio, Ray (2018). Principles for Navigating Big Debt Crises. Connecticut: Bridgewater Associates, LLP.
[23] Sparkes, Boyden and Moore, Samuel Taylor (1930). The Witch of Wall Street: Hetty Green. New York: Doubleday, Doran, and Company.
[24] Chernow, Ron. The House of Morgan (1990). New York: Grove Press.
[25] Sparkes, Boyden and Moore, Samuel Taylor (1930). The Witch of Wall Street: Hetty Green. New York: Doubleday, Doran, and Company.
[26] Bruner, Robert F. and Carr, Sean D. (2007). The Panic of 1907: Lessons Learned from the Market’s Perfect Storm.
New Jersey: John Wiley & Sons.
[27] “City is Hard Up, Budget to Be Cut.” The New York Times. (October 24, 1907).
[28] “Hetty Green Dies, Worth $100,000,000.” The New York Times. (July 4, 1916).
[29] Sparkes, Boyden and Moore, Samuel Taylor (1930). The Witch of Wall Street: Hetty Green. New York: Doubleday, Doran, and Company.
[30] Ibid.
[31] Ibid.
[32] Ibid.
[33] Wallach, Janet (2012). The Richest Woman in America. New York: Anchor Books.
[34] Sparkes, Boyden and Moore, Samuel Taylor (1930). The Witch of Wall Street: Hetty Green. New York: Doubleday, Doran, and Company.
[35] Wallach, Janet (2012). The Richest Woman in America. New York: Anchor Books.
[36] “Topics of the Times: A Prodigy Because a Woman.” New York Times. (July 5, 1916).
Disclaimer: The views and opinions expressed are solely his own and do not express the views or opinions of his employer.
About the Author:
Mark Higgins, CFA, CFP® is an institutional investment consultant with more than ten years of experience serving large institutional investors, such as endowments, foundations, public pension plans, and corporate operating reserves. Mark received a Master of Business Administration from the Darden School of Business and graduated Phi Beta Kappa from Georgetown University with a Bachelor of Arts in English and Psychology. In his spare time, he enjoys learning about key events that shaped U.S. financial history and sharing long-forgotten insights and stories to advance the thinking among members of the academic community.
