BUSINESSWEEK ONLINE : JULY 31, 2000 ISSUE
BOOKS Sex, Duels, Jailbreaks--and High Finance MILLIONAIRE The Philanderer, Gambler, and Duelist Who Invented Modern Finance By Janet Gleeson Simon & Schuster -- 303pp -- $24 The current crop of globe-straddling moguls is pretty colorless. Gates, Ellison, Buffett, Murdoch, et al. may be richer than Croesus. But these masters of the universe are sorely lacking in derring-do and razzle-dazzle. Compared with the rich cream of their 18th century predecessors, they're skim milk. Gates might be pugnacious in civil deposition, but how many men has he killed in a duel? One can't help but feel this way after finishing the elegantly written Millionaire: The Philanderer, Gambler, and Duelist Who Invented Modern Finance, by British writer Janet Gleeson. This biography of the pioneering 18th century Scottish banker and financier John Law, described by the author as the ''financial wizard of his age'' and the virtual inventor of paper money, reads like John Kenneth Galbraith crossed with Danielle Steel: slashing rapiers, daring prison escapes, palace intrigues, financial cupidity, and illicit sex, though the last, alas, is handled discreetly. In the bargain, one learns about the dawn of high finance. This might be the one financier's biography published this year with a shot at becoming a TV movie. Law was born in 1671 in Edinburgh, above his father's goldsmith shop. The family, if not gentry, was more than financially comfortable. From an early age, Law displayed three traits that would forge his life: a hunger for comely women, an attraction to games of chance, and mathematical brilliance. Before he turned 20, he set off for London, where he efficiently burned through his inheritance and faced debtor's prison. His mother bailed him out financially. After such a brush, other men might have foresworn gambling; Law devoted himself to studying risk. ''No man understood calculation and numbers better than he,'' observed a contemporary. Life as a London fop was not in the cards, however. In 1694, at 23, Law killed another young dandy in a duel, probably over an insult regarding Law's mistress. The victim's family was well-connected, and they demanded Law's neck. Law was sentenced to death, but he, too, had well-placed allies, including friends of the King, who approved a plan to bust Law out of the slammer. He fled to the Continent. Law spent his early exile wandering from one gaming table to the next in Amsterdam, Venice, Genoa, and Turin, amassing a fortune in short order, thanks to his calculating skills. In Paris, he picked up Katherine Seigneur, a married woman of noble birth who left her husband to live with Law. Their affair scandalized polite society, but such was their collective personality and charm that no doors were shut to them. Law's pockets were bulging, but many of Europe's royal treasuries were nearly broke. Decades of incessant warfare had left governments scrambling for cash. High taxes meant there was little currency in circulation, and most gold and silver coins were so debased (''shaving'' coins, though a capital offense, was commonplace) that merchants constantly haggled over the real value of payments, constraining trade. As early as 1705, Law believed he had the answer. He argued in a pamphlet for the establishment of banks that would issue paper money backed by land or other collateral. He realized that money was ''a functional medium--with no intrinsic value but backed by something of stable value, the gambler's chips that can be cashed in at the end of the evening.'' This was not an entirely original idea--the Bank of England had been established and begun issuing banknotes in 1694, and in Amsterdam, similar banks had been operating for nearly a century before that--but Law had the ears of some of Europe's most powerful men, and he pushed the concept of paper money to new extremes. He found his most receptive audience in France. After the death of Louis XIV, Law managed to persuade the Regent, the Duc d'Orleans, to establish the Banque Generale to issue paper money backed by deposits and to install him as its head. Despite fierce opposition inside and outside of government, the bank was a success: The banknotes it issued soon commanded a premium. The economy revived, and Law's became the nation's premier bank. Law was not content. He wanted to be an empire builder and saw his chance in France's vast North American territories. In 1717, he founded the Mississippi Company. ''It was given the right to all trade between France and its Louisiana colony for 25 years, and to maintain its own army and navy, to mine and to farm,'' Gleeson writes. ''Law held sway, ruling half of America in all but name.'' To underwrite the venture, Law began issuing public shares at 500 livres apiece. ''Over the summer of 1719, France savored her first taste of a bull market. By the time the second installment was due on the new issue, the share price had doubled to 1,000 livres.'' What's more, Law had become in effect France's central banker, and his printers were working round the clock to print new paper currency with which speculators could buy shares. It was as if the Federal Reserve and Drexel Burnham Lambert Inc. had merged. The soaring share prices floated upon a flood of paper money. By the end of the year, the price of Mississippi shares touched 10,000 livres. Hundreds of thousands of foreigners crowded Paris to play the market. So many shareholders found themselves richer than they had ever imagined that a new word--''millionaire''--was minted to describe them. Meanwhile, the cost of bread jumped fivefold in a matter of months. Law knew the frenzy was insupportable in the long run. But he had also discovered something Fed Chairman Alan Greenspan was to learn centuries later: Orchestrating a soft landing is extremely difficult. When share prices showed signs of softening, Law, who had recently been promoted to controller general of France, issued a stream of edicts designed to keep investors from stampeding out of Mississippi shares and dumping their paper currency. He outlawed the export of coinage and the ownership or purchase of gold, silver, or precious gems. Even silver crucifixes were banned. Finally, he announced that all gold and silver coins would be removed from circulation. Law hoped to restore public confidence in paper currency by diktat--a foolish idea. The final straw came on May 21, 1720, when Law announced that the value of Mississippi shares would be cut nearly in half, to 5,000 livres. Simultaneously, the face value of banknotes was also cut 50%. Paris mobs rioted for three days. Mississippi shares crashed, and Law was soon under house arrest. Although he was released briefly from custody to clean up the mess, his rehabilitation did not last long. By year's end, Law had fled France forever. He stayed just long enough to see the government declare its experiment with paper money dead; it would be 80 years before France would introduce banknotes again. Law died in 1729 in Venice. Thoroughly researched, Millionaire is a marvelous read that animates its flawed hero while intelligently illuminating his time. Yet while Gleeson make no bones about Law's opportunism, she seems too willing, at times, to give him the benefit of the doubt. Law lured thousands of settlers to America with tales of gold and other riches; on arrival, they found only hostile natives, rampant disease, and death. ''The glossy reports,'' Gleeson insists, ''had been masterminded by Law more as a marketing ploy than a deliberate deception.'' At such points, the author seems guilty of shaving historical currency. But these complaints are small change. The intriguing John Law deserves to be remembered--thanks to him, you didn't have to grab a moneybag as you left the house. And Millionaire is worth reading as a reminder that public confidence is vastly easier to damage than it is to fix. That's a lesson some of today's moguls--however watered down they seem--might heed. By MARK FRANKEL Frankel is executive editor of dads magazine. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS Sex, Duels, Jailbreaks--and High Finance PHOTO: Cover, ``Millionaire'' INTERACT E-Mail to Business Week Online

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