Remember when I reviewed Teacher Man’s great book on ETF investing I said one of the things that got me reading it as that it is unlikely Ken Follett will write a book on how to build an investment portfolio? Well, I was wrong!

I have been working really hard lately and have become rather reckless with my reading; mental tiredness means that out go all ‘serious’ books and in come the novels that draw you in and don’t let go till you know what’s happened. This explains me going back to an old friend, Ken Follett (OK, don’t judge; I could have gone to Jilly Cooper, you know, her books were my frequent companions when I was finishing my thesis). So last week, I read A Dangerous Fortune and was struck by four money related lessons it contained.

Otherwise the book is about ‘what it says in the title’. It is about a family of bankers, the Pilasters, in mid-nineteenth century London. The family is divided – there is the main branch and it is rich and totally messed up (let’s just say that there are scheming women, clandestine relationships, love, sex and murder), and there is a tiny branch spawning from a brother who didn’t want to work in the bank, started another business and went bust. Interestingly, his business went bust because of one of the numerous bank crashes of the time. His son Hugh Pilaster, one of the main characters in the book, is the one who provides most food for thought and money lessons.

Here are the four lessons I learned from Hugh Pilaster.

  1. If you are not enough without money, you are not going to be enough with it. Hugh was very poor to begin with; his dad went bankrupt and committed suicide. So little Hugh had to be taken out of his posh and expensive school and sent to a cheaper school where they taught him mathematics instead of Latin. Later, he loved with his rich uncle but was earning so little in the bank that he was not able to buy shirts; but he changed his cravats. He didn’t change when he became rich and he stayed the same when the family bank collapsed. He was enough without money, you see, so he was enough with it.
  2. Anything is possible when you see opportunities where everyone else sees nothing but problems. This was very clear under current in the book. But the best example was when Hugh met a very rich and unhappy customer of the bank and instead of losing him he managed to sell him what was left of an issue of bonds. This was the Occam’s razor: he cheered up the customer, and he cheered his uncles who headed the bank by shifting the bonds increasing their value.
  3. Do your homework before investing and look broadly. After scoring big in the bank several times, Hugh Pilaster was sent in exile to America (never mind my American friends, I am sure that at the time young, unruly Americans were banished to Europe). There he started investing in the railways (remember we are talking mid-nineteenth century) and made a fortune. But he always made sure that he knows a lot about the business, the political situation and other conditions that may affect the enterprise. He never lost!
  4. Honour is more important than money. Eventually Hugh became the senior partner in the Pilasters bank. Too late! By this time dodgy Latin American bonds have been purchased (not for reasons of finance but friendship and obsession) and when civil war broke the bank collapsed. The Pilasters had no option but to go bankrupt, but remembering his father’s suicide Hugh made sure that they paid all they owe. Most bankers at the time lived a life of shame after bankruptcy; Hugh came out even more respected than he was as senior partner. At the end of the book, he was already planning to start another bank and he had the support of the most conservative and careful bankers in the City. Because he had his honour!

Who would have thought, that I will learn so much about finance from Ken Follett; I just wanted to rest and have some escapist fun. Thinking about it, it shouldn’t have been a surprise – most good books are about money or sex; or both.