Economic effect of Mark Twain
Not everyone has an economic impact named after them.
Mark Twain worked hard to ensure that this title stuck with him for centuries. He began investing simultaneously with his career as a journalist and writer. And if the pen brought him success in the literary field, then the investment game did not work out right away.
He started from humble beginnings five thousand dollars (about 168 thousand in today's money) to create a super-efficient steam engine, but ended up with a charlatan. The engine categorically refused to save fuel.
Failure provoked him – he bought several patents and hired people who tried to make them a reality… And then nothing came of it except a waste of a lot of money.
But this did not stop Twain the investor: he invested more than 32 thousand dollars (today this is just under a million) in the Hartford Company, which developed equipment for ferries, reasoning that since he himself had once worked as a pilot, everything in this area was clear to him inside and out. The company went bankrupt.
Then everything went in approximately the same vein. Thus was born the famous: “October is one of the especially dangerous months for stock speculation. The rest are July, January, September, April, November, May, March, June, December, August and February.”
In short, meet me here Mark Twain's economic effect in all its glory.
“To succeed in life you need two things – ignorance and confidence.”
Spoiler: neither one nor the other for Mark Twain at all
did not help.
He inherited his love of investing from his father. He invested in promising real estate: 30 thousand hectares in Tennessee, which could be sold at a profit, but someday later. Twain phrased it as “we were always going to be rich next year.” His father died when Mark was twelve, and left the family as an inheritance of this land and debts.
Outside there is industrialization and urbanization, inside there is a dream of wealth. Mark consistently worked towards this dream through work in a grocery store, a tannery, a blacksmith shop, a pharmacy, a bookstore, in the mines, and as a pilot on a river steamboat. He came when he got a job as a correspondent for the Territorial Enterprise newspaper. This is where his career as a journalist and writer began.
And an investor.
Trusting a friend, Twain bought a stake in the insurance company that he had founded and joined the board of directors.
The company collapsed after a year and a half.
Twain invested in the Fredonia watch company.
And there, out of joy, they even made a model, which was called “Mark Twain”
That, however, did not stop the company from starting to cheat with shares and dividends. We managed to get some of the invested money back, but about one and a half thousand dollars sank into oblivion.
His biggest investment in invention was perhaps the Paige Compositor, a machine that could lay out type and prepare the pages of newspapers and magazines for printing six times faster than a human. She charmed Mark Twain, who knew firsthand the labor-intensive tasks typesetters faced. Paige Compositor simply had to make a revolution! It seemed like the right thing to do, and he invested all his savings, his wife's inheritance and some more money that he borrowed. In total – about 300 thousand dollars (with our money, according to various estimates, from 4 to 9 million).
Everything would be fine, but James Page, who invented this miracle of technology, turned out to be a perfectionist, and this played a cruel joke on him. He did not release his printing press to the market until he had achieved the ideal, and he brought it to fruition for fourteen long years, from 1880 to 1894. And when I finally got it done, one very unpleasant thing became clear: no one needed Paige Compositor anymore, because Linotype had long ago released a cheaper and easier-to-use analogue.
A chance to make money could arise if Page agreed to release an unfinished version of the car on the market, and then refine it based on customer feedback.
As a result, a total of two such mechanisms were released. Page gave the first to Mark Twain, but the fate of the second is unknown
In addition to inventions, Mark Twain also invested in the stock market. For example, in the action of the Oregon Transcontinental Railroad. He bought them for $78 each. Then a stock bubble formed in the market and the price of the securities reached $98. It seemed like a stroke of luck, but the bubble burst and the stock collapsed. Twain eventually sold them for only $12.
Mark Twain also tried to promote his inventions and endeavors
His patents include:
- elastic belt with buttons, that is, an alternative to suspenders;
- a special crib clip to prevent babies from throwing off the blanket in their sleep;
- a special pin that allowed women to wear a hat even in windy weather without fear of it blowing off;
- a board game in which you had to combine dates and facts (although critics described it as “something between an income tax form and a table of logarithms”);
- an album with sheets of sticky paper in which it was easy to place photographs or newspaper clippings.
The scrapbook, I must say, brought in some money. But then the company that produced it also went bankrupt.
But all these were nothing compared to Mark Twain’s most unsuccessful startup
In 1884, he became offended by all his publishers and decided to become a publisher himself. He put his niece's husband, Charles Webster, at the head of the company. And at first, things went well: the first published books – “The Adventures of Huckleberry Finn” and the memoirs of Ulysses S. Grant – were a huge success. Especially the memoirs of Grant, who was very loved in the country. This man was the eighteenth President of the United States and commanded the Union Army during the War of 1861.
The fact that 350 thousand copies were purchased at the pre-sale stage speaks volumes. General's widow Julia Dent Grant publishing house in 1886 paid the largest fee at that time in the history of American publishing – $200 thousand. And then another 250 thousand. By comparison, the average food bill for a family of five at the time was about $80 a month.
It is noteworthy that Ulysses S. Grant himself also went bankrupt after a series of unsuccessful investments. And Mark Twain, who knew him personally, literally persuaded the hero dying of cancer to write his memoirs, which saved from poverty his family.
But after the first great success, Twain and Webster went somewhere in the wrong direction, they began to publish such “bestsellers” as “One Hundred Ways of Cooking Eggs,” “What and When to Drink,” etc.
The publishing house finally “buried” the multi-volume biography of Pope Leo XIII. It did not become a bestseller – it managed to sell no more than 200 copies, despite the fact that a lot of paper was needed to print the book. The publishing house did not have enough money, so at first Twain pulled out funds from his own capital. Then I borrowed it. Then I took out a loan. But in 1888, the publishing house went bankrupt, and Twain began to say that this entire campaign was “a protracted suicide.”
But Twain did not invest in every reckless endeavor along the way, as it might seem.
For example, in 1877, he flatly refused to buy a stake in another strange company that was going to promote another dubious invention. The evil irony is that this company was called Bell Telephone, and Alexander Bell himself persuaded the writer to invest money in it.
I would like to believe that their dialogue looked something like this:
- Dear Mark Twain, I am the founder of Bell Telephone, Alexander Bell. My colleagues and I have developed an interesting device that works in such and such a way and should solve the problem of communication at a distance. Imagine: a device for instant speech transmission. Now I am looking for investors and would like to offer to help you as much as possible with financing the project.
- Dear Alexander, your idea sounds implausible, you are probably an inventor and a charlatan, I will not give you a cent.
That is, purely hypothetically, Mark Twain could provide for his descendants foreverbut history does not know the subjunctive mood
By the age of 59, Mark Twain, despite his very high earnings, went completely bankrupt
In 1891, he had to move from his huge house in Hartford to a more modest and smaller home. By the way, he also sold the house for about one-sixth of the amount he invested in it twenty years ago.
By 1894, Twain had a huge duty 80 thousand dollars (well, or about 2.5 million, if we think so), which he had to pay to bookbinders, authors and the bank after the closure of the publishing house. He was saved by Henry Rogers, an ardent admirer of the writer, and part-time financier and one of the directors of the Standard Oil conglomerate.
Rogers came up with a good multi-step strategy that ultimately helped Twain improve his financial situation. On his advice, the writer first transferred the copyright to all his works to his wife. Then he declared himself bankrupt and entered into an agreement with creditors that he would repay part of the debt through the sale of assets, and part of it would be covered by future income. And then I went on a world tour with performances. It was something like a modern stand-up, and the hall was sold out every time. Mark Twain visited Australia, New Zealand, India, South Africa, gave one hundred and twenty-two concerts in more than seventy cities, and in four years managed to pay off all his debts. After which royalties for books began to flow into his account again. And it soon accumulated an impressive amount of money again.
But this man did not know how to learn from his mistakes…
Because in 1907 he invested more than 30 thousand dollars in nutritious protein powder
which is sixteen times more nutritious than steak and could end hunger in India.
He ate it himself, fed it to his family members, and even kept a special table filled with samples of the powder to serve to visitors.
Protein powder was produced in these packs and was used to cook everything under the sun. Athletes especially loved it (and still love its analogues, by the way).
But in 1907, the company that produced Plasmon in America went bankrupt, and Twain lost 30 thousand dollars. However, compared to previous losses, this is not so much.
So about the “Mark Twain effect”
Thanks to Twain’s aphorism that October is one of the most dangerous months for investment (as, indeed, are the other eleven), the concept of “
“or” the Mark Twain effect. This is the name given to the steady decline in stock returns in October.
And indeed the reputation of this month was thoroughly spoiled:
- Banking panic of 1907, as investors on Wall Street began panic selling stocks. This crisis lasted for a month and a half and ultimately led to the creation of the Federal Reserve System and the US Central Bank.
- Stock market crash of 1929which began the Great Depression, which ultimately affected the entire world economy.
- Black Monday 1987when first in one trading day the Dow Jones stock index fell sharply by 22%, and then all other indices.
- 2008 crisiswhich became the largest since the Great Depression.
True, in fairness, it is worth noting that market falls in other months of the year also happen quite regularly.
If we evaluate the “Mark Twain effect” using statistics Using the example of, say, the S&P 500 index, which is used to evaluate the global economy, we get a rather interesting picture.
Like this. It turns out that the worst month is not October at all, but January.
And if we consider the average monthly fluctuations of this index, then the worst situation will be in September
In statistics over the past 73 years, September has also been an outsider
That is, the “October effect” is rather a psychological phenomenon. It occurs because some investors, fearful of October, are eager to sell their shares and close their positions at the end of September, and this partly leads to poor performance in the stock market.
Well, September is so weak because it is in this month that large investors return from vacation. In addition, the financial year ends in October for many hedge funds and some institutions, and they are starting to close positions to take stock.
“There are two times in a man’s life when he should not speculate in stocks: when he cannot afford it and when he can.”
This is the conclusion that Mark Twain eventually made.
His talent as a writer brought him ever-increasing royalty income, similar in nature to bonds. When he switched to aggressive investments, the level of risk increased manifold. And the writer was prevented from winning this fight by two character traits that are deadly for an investor – ardent enthusiasm and a complete inability to analyze details.
No “October effect” will ever compare with them.
