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    Founders

    #348 The Financial Genius Behind A Century of Wall Street Scandals: Ivar Kreuger

    Tue May 07 2024
    Founder's ConferenceBuilding RelationshipsEvar KrogerManipulation TacticsFinancial DownfallIncentives

    Description

    The episode covers the Founder's Conference, building relationships, and the rise and fall of Evar Kroger's financial empire. It explores Kroger's manipulation tactics, fraudulent activities, and eventual downfall. The importance of incentives and the role they play in shaping behavior are highlighted. The episode also discusses the benefits of Founder's Notes and offers exclusive deals for listeners.

    Insights

    Evar Kroger's Financial Empire

    Evar Kroger's financial empire was not a Ponzi scheme but involved legitimate and profitable businesses across various industries.

    Evar Kroger's Manipulation Tactics

    Evar manipulated human psychology and financial history knowledge to deceive investors and create the illusion of success.

    Evar Kroger's Downfall

    Evar's risky financial dealings coincided with the largest stock market decline in US history, leading to a dramatic downfall.

    The Power of Incentives

    The power of incentives is highlighted through examples from Charlie Munger's Almanac, emphasizing the importance of aligning incentives for desired behavior.

    Chapters

    1. Founder's Conference and Building Relationships
    2. Exclusive Events and Evar Kroger's Financial Empire
    3. Key Insights on Evar Kroger's Business Strategies
    4. Evar Kroger's Manipulation and Downfall
    5. Evar Kroger's Adaptation and Risk-Taking
    6. Evar Kroger's Innovations in Finance and Construction
    7. Evar Kroger's Vertical Integration and Financial Manipulation
    8. Evar Kroger's Deception and Lack of Regulations
    9. International Match and Evar Kroger's Exploits
    10. Evar Kroger's Manipulation of American Investors
    11. Evar Kroger's Fraudulent Activities and Downfall
    12. Evar Kroger's Mental Deterioration and Suicide
    13. Founder's Notes and Exclusive Deals for Listeners
    14. Exclusive Deals for Listeners
    Summary
    Transcript

    Founder's Conference and Building Relationships

    00:00 - 06:00

    • The episode starts with a recap of the Founder's Conference and announces two upcoming events.
    • The host had a dinner with Daniel Eck, the founder of Spotify, who provided great advice and book recommendations.
    • Two new Founder's Conferences are scheduled in California and Texas to help build relationships among founders and investors.
    • Building relationships is emphasized as crucial for success by influential figures like Charlie Munger.
    • Attendees of previous events have benefited greatly from networking, forming valuable connections, and expanding their ambitions.

    Exclusive Events and Evar Kroger's Financial Empire

    05:39 - 12:21

    • Events organized by the speaker are exclusive and all-inclusive, catering to successful individuals.
    • The speaker emphasizes the value of learning from podcasts and connecting with like-minded people at smaller events.
    • A historical account of Evar Kroger, a financial genius who faced downfall due to fraudulent practices, is discussed in a book.
    • Evar Kroger's financial empire was complex and not entirely comparable to a Ponzi scheme.

    Key Insights on Evar Kroger's Business Strategies

    11:55 - 18:23

    • Evar Kroger's financial empire was not a Ponzi scheme but involved legitimate and profitable businesses across various industries.
    • Evar possessed world-class charisma and selling skills, which he honed through methodical practice.
    • Evar demonstrated excellent communication skills in pitching his European match monopoly to American investors by focusing on a simple, essential product that everyone used - matches.
    • Evar studied successful business magnates like John D. Rockefeller and Andrew Carnegie to apply their principles in building his Swedish match monopoly through vertical integration and securing a global match sales monopoly.

    Evar Kroger's Manipulation and Downfall

    18:01 - 24:06

    • Evar Kruger aimed to secure a monopoly on match sales worldwide to increase profits by limiting competition.
    • He controlled multiple businesses through a public holding company and raised significant funds from American investors for his ventures.
    • Kruger's main theme was that too much finance ruined legitimate business, leading him to seek greater wealth and operate on a larger scale.
    • Kruger manipulated human psychology and financial history knowledge to deceive investors and create the illusion of success.
    • By targeting Lee Higginson bank, Kruger orchestrated a scheme that ultimately led the once prestigious bank to bankruptcy and partners to poverty.
    • Kruger strategically created rumors about the success of his companies before meeting with investment bankers, showcasing his ability to manipulate perceptions.

    Evar Kroger's Adaptation and Risk-Taking

    23:48 - 30:01

    • Enzo Farri understood the importance of creating desire for Ferrari by not making it readily available.
    • Eivar used a strategy of playing hard to get with America's elite to attract attention and secure deals.
    • Eivar's plan involved lending money to European governments in exchange for monopolies on match production and sales.
    • Eivar adapted historical concepts, like the South Sea Company's monopoly, to create his own profitable scheme with matches.
    • Warren Buffett's emphasis on using debt sparingly and prioritizing survival contrasts with Eivar's downfall due to overextending and falsifying financial statements.

    Evar Kroger's Innovations in Finance and Construction

    29:43 - 36:40

    • Evar Kroger risked a successful business to speculate and made innovations in both finance and building
    • He realigned incentives in the construction industry by taking on risks associated with delays, ensuring projects were completed on time
    • Kroger and Toll became the first firm in Europe to commit to finishing projects by a fixed date, offering completion bonuses for early delivery
    • Evar used his successful construction firm as collateral to enter and consolidate the match industry, following Rockefeller's domination tactics

    Evar Kroger's Vertical Integration and Financial Manipulation

    36:19 - 42:58

    • Ivar's decision to vertically integrate his match business by taking over suppliers and choking off competitors was inspired by Rockefeller's tactics.
    • Swedish Match remained profitable during World War I due to Ivar's strategies.
    • In 1922, Ivar controlled Swedish Match monopoly and other companies, attracting American investors with high dividends and a new idea of loans for match monopolies.
    • Ivar set up International Match Corporation with distracted directors like Percy Rockefeller to oversee the business.
    • To sustain his growing businesses, Ivar had to constantly raise funds, leading to a Ponzi-esque scheme where dividends paid to old investors came from proceeds raised from new ones.
    • Despite real profits, Ivar's reliance on raising cash to pay debts eventually led to bankruptcy in 1929.
    • Regulators in Sweden found Swedish Match finances complex but were influenced by banks who were also shareholders in calming down concerns about the company's risky ventures.

    Evar Kroger's Deception and Lack of Regulations

    42:37 - 49:02

    • Bankers help regulators turn a blind eye to questionable practices in exchange for financial benefits
    • Historical examples like Rockefeller's tactics show how incentives and partnerships influence business decisions
    • Evar manipulates auditors and regulators by providing misleading financial information
    • Lack of federal security regulations in the past allowed for deceptive corporate disclosures and practices
    • Monopolies have existed throughout history as a way to generate revenue for governments

    International Match and Evar Kroger's Exploits

    48:40 - 54:38

    • Poland entered a deal with International Match involving a loan secured by match sales royalties and nationalization of match factories.
    • The finance ministry of Poland replicated Dr. Glakwaki's signature for future use through rubber stamps.
    • International Match introduced B-shares with limited voting rights to retain control while raising funds from investors.
    • Despite concerns about sloppy financial statements, investors eagerly bought securities from International Match, leading to quarterly interest payments as promised.
    • Evar set up secret companies and hired questionable individuals to maintain complete control over his operations.

    Evar Kroger's Manipulation of American Investors

    54:12 - 1:00:59

    • Evar manipulated American investors by exaggerating milestones and raising funds multiple times through deceptive practices.
    • Evar successfully tripled his funds raised from American investors in the 1920s, becoming very wealthy and influential.
    • Evar used incentives to manipulate his auditor, Burning, into overlooking suspicious activities and hiding crucial information about a Dutch hidden company called Garanta.
    • Burning was incentivized to trust Evar due to the benefits he received, including consulting fees, trips, and potential partnership opportunities.
    • The power of incentives is highlighted through examples from Charlie Munger's Almanac, emphasizing the importance of aligning incentives for desired behavior.

    Evar Kroger's Fraudulent Activities and Downfall

    1:00:35 - 1:07:08

    • Incentives play a crucial role in shaping behavior, as seen in examples from business history.
    • Manipulation and deception were key tactics used by Evar to maintain his fraudulent activities.
    • Evar's elaborate schemes involved fake phone calls, hired actors posing as ambassadors, and auditors becoming accomplices.
    • Despite his fraudulent actions, Evar managed to gain respectability and social status through his wealth and connections.
    • Evar's risky financial dealings coincided with the largest stock market decline in US history, leading to a dramatic downfall.

    Evar Kroger's Mental Deterioration and Suicide

    1:06:40 - 1:13:07

    • Evar faces financial crisis and is cut off by banks and institutions.
    • Evar's mental state deteriorates, leading to erratic behavior and breakdown.
    • Evar commits suicide the night before a crucial meeting, shocking his bankers and investors.

    Founder's Notes and Exclusive Deals for Listeners

    1:12:38 - 1:18:29

    • Reading consistently and following one idea can lead to significant success in business, as seen with examples like Charlie making millions from reading a magazine for 50 years.
    • Having a deep knowledge base can be valuable for creativity and work, as seen with Tarantino's historical database of film industry knowledge.
    • Founder's Notes provides a searchable database of collective knowledge that can be used to enhance understanding and decision-making based on incentives mentioned in podcasts or books.
    • The ability to search through Founder's Notes allows users to quickly find specific information mentioned in past episodes or books, enhancing learning and retention.
    • Investing in the lifetime version of Founder's Notes grants access to all past and future content, making it a valuable tool for ongoing learning and development.

    Exclusive Deals for Listeners

    1:18:02 - 1:23:32

    • The host is developing a directory of businesses related to the podcast and offering exclusive deals to listeners.
    • One of the businesses mentioned is Scribe Media, which helps professionals organize and publish their knowledge, offering discounts for podcast listeners.
    • Another business highlighted is Vesto, providing solutions for managing multiple company financial accounts, with a discount available for podcast listeners.
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