The prudent tycoon

High Financier: The Lives and Time of Siegmund WarburgBy Niall Ferguson Allen Lane, 548pp. £30

A COMPLEX and mercurial character is how the subject of this book, the banker Siegmund Warburg, is described.

The book is based on the private papers of Siegmund Warburg made available to the author by Warburg’s son.

Warburg was a prodigious letter writer and more than 10,000 letters, memos and diary entries form the collection, from which the Warburg opinions and views can be gleaned. There is much material – he was a strong minded, dogmatic and Germanic man and was never reluctant to express his opinions. So many were his missives that, when on holidays, he would keep two secretaries at the nearby hotel to help him with his correspondence.

The book chronicles the success of the Warburg family, first in Hamburg, and later in the US and Berlin, from the late 19th century up to the second World War. Siegmund Warburg’s diaries of the days coming up to the outbreak of war are described as remarkable. Intriguingly, lines and paragraphs were carefully removed with a scalpel at some time afterwards – by Warburg himself? The author doesn’t speculate. The diaries record Warburg’s observations on speeches by Hitler, and provide an insight into the reactions of a Jewish family to the increasingly demagogic and sadistic ranting of this tyrant. He and his family left Germany in 1934. Possibly on the advice of his father-in-law, he chose to move to London rather than the US where many of his relatives were successfully in business.

His relationship with his mother was, he confessed, the greatest influence on his life. A loving and much-loved woman, she was nonetheless a hard taskmaster, of the view that fulfilment of duties was life’s objective. Play of any kind was viewed as a waste of time and self-improvement was the priority in life. She highly valued self-discipline, perfectionism, self-criticism and moral rectitude. She also despised social snobbery. Unusually for a banker of his success, Siegmund Warburg lived by these high moral standards and was noted for his integrity in business, something that cannot be said of many of his ilk.

Having moved to London, he established the firm of SG Warburg Co, which he successfully grew into one of the big players in that market. He applied the rigorous obsessive perfectionism learned from his mother to the world of high finance. He was a highly controlling man who despised laziness, inefficiency, sloppiness, mediocrity, materialism and personal vanity.

There are conflicting accounts of his personality. He was a strongly opinionated, independent-minded individual, motivated not solely by financial gain or economic self interest, but by more altruistic ideals. Following his experience of Nazism, he abhorred bullies. Yet he seems to have been a bit of a bully himself. He is described as having been ruthless with employees. But while he could at times be intolerant and irascible, he was also known for his consideration to staff. He swung from affection to anger, suffering from temper tantrums and eruptions of volcanic proportions. Once he launched a loud tirade at a secretary in the US office for her untidy desk, concluding “we are a banking house, not a butcher shop”. I admired the secretary who, pulling on her filter-tipped cigarette, looked him in the eye and said “Gee, Mr Warburg, you gotta be insecure”.

In London he seems to have integrated quite well into the establishment clique of high finance there (he eventually received a knighthood). However, his role in the hostile takeover of British Aluminium evoked some jingoistic reactions. Although he was apolitical, Warburg took a great interest in politics and international affairs. He was well connected politically, first advising Labour prime minister Harold Wilson and then the Conservative prime minister Edward Heath.

He was perpetually apprehensive that trouble was just around the corner, and was almost compulsively risk-averse (a trait we have now learned to appreciate in bankers). He was also acutely conscious that banking is a risky business and opined that the reputation of a bank is delicate, can easily be damaged and depends on integrity, generosity and thorough service. He was meticulous in preparation, precise in speech and writing and rarely late for an appointment. This led to him being considered old fashioned.

The firm was innovative and developed the Eurobond, which was very lucrative. The example provided to illustrate this was the purchase in 1971 of a sterling issue bond by the Irish Government that generated an enormous commission at that time of £200,000 – so large it caused one of Warburg’s partners some embarrassment. Let’s hope the National Treasury Management Agency is doing a better job for Ireland today.

Strangely, Warburg became fixated on graphology, the study of handwriting, and employed the services of a Swiss-based professional graphologist and psychologist. Samples of handwriting of prospective employees would be sent off for analysis and a negative verdict was hard to overturn. He even sent a sample of his son’s handwriting for analysis (his son being in his 30s at this stage).

For a man so critical of the human weaknesses of others, I was surprised to read that he had at least one affair (with a Russian ballerina in the 1930s) – and even more surprised that this merited no more than a passing reference in the book.

This book ends with two deaths. One sad; one not so sad. Not so sad was Warburg’s death in 1982 at the venerable age of 80 after a life lived to the full. Sad was the subsequent mismanagement of the firm, such that it was first taken over by the Swiss Bank Corporation, which merged with UBS, which eventually dropped the name Warburg in 2002. The demise of the firm was heralded by a particularly crass (and prophetic as events turned out) advertising campaign which would have had the firm’s founder turning in his grave – “ . . . visit Warburg. The one thing we’ll never merge is into the background”. The firm’s chief executive, Simon Cairns, was accused of destroying in one year what Siegmund Warburg had built up over 60 years. This kind of destruction of shareholder value is something we have sadly become used to in banking over the past three years.

Had SG Warburg Co and other financial institutions adopted Siegmund’s prudent, risk-averse attitude towards banking we would not be in a financial mess today.

The book is a meticulous work of scholarship, which does not get in the way of the compelling style of a good storyteller. This financial history provides an account of a man with high moral values, integrity and with a sense of sustainability and the requirements for long term success. Modern day bankers, please take note.

Niamh Brennan is Michael MacCormac Professor of Management at University College Dublin, and academic director of the Centre for Corporate Governance at UCD. She is chairwoman of the Dublin Docklands Development Authority