Show pageOld revisionsBacklinksBack to top This page is read only. You can view the source, but not change it. Ask your administrator if you think this is wrong. ======Andrew W. Mellon====== Andrew W. Mellon (1855-1937) was a towering figure in American finance, an industrialist, a banker, and one of the earliest practitioners of what we would now call [[venture capitalist]] investing. He served as the [[U.S. Secretary of the Treasury]] for an astonishing 11 years (1921-1932) under three different presidents. While not a "value investor" in the modern, codified sense, his philosophy and actions, particularly during market crises, offer profound and controversial lessons. Mellon believed that economic downturns were a necessary, if painful, cleansing process for the economy. His infamous advice at the start of the [[Great Depression]] was to let the system purge itself of weak businesses and bad [[debt]]. This "liquidationist" viewpoint, while widely criticized for its social harshness, embodies a ruthless form of [[contrarian investing]]: buying high-quality [[assets]] when they are discarded by a panicked market at bargain-basement prices. His career is a masterclass in turning financial chaos into generational wealth. ===== Mellon's Investment Philosophy ===== Mellon's approach wasn't found in textbooks; it was demonstrated through his actions. He was a builder of enterprises and a shrewd investor who understood that true value is often most visible during times of maximum pessimism. ==== Liquidate, Liquidate, Liquidate ==== This phrase is Mellon's most famous and controversial legacy. As the Great Depression began, he reportedly advised President Herbert Hoover to "liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate." To the modern ear, this sounds unbelievably callous. However, from a purely financial perspective, Mellon’s logic was starkly clear. He believed the boom of the 1920s had created an unstable system built on speculation and excessive debt. In his view, a deep and painful recession was the only way to purge this excess. The process of [[liquidation]] would: * Force inefficient companies into bankruptcy, freeing up capital and labor. * Drive down the price of stocks, land, and commodities to their "real" value. * Crush the speculative mindset that had caused the bubble. For Mellon, a crash wasn't just a disaster; it was a powerful, self-correcting mechanism. Only after the system was cleansed of its "rottenness" could a healthy and sustainable recovery begin. ==== A Contrarian at Heart ==== Mellon's "liquidationist" theory went hand-in-hand with his actions as an investor. While he advocated for letting the market collapse, he also recognized the once-in-a-generation buying opportunity this created. A market in freefall doesn't distinguish well between good companies and bad ones; it sells everything. Mellon, with his vast fortune and strong [[balance sheet]], was perfectly positioned to be the buyer of last resort. He understood that the time to acquire durable, productive assets was not during the euphoric peak of a bull market, but in the despair of a [[bear market]]. This is the very essence of contrarian investing: zigging when the entire [[stock market]] is zagging. ===== Mellon's Legacy for Value Investors ===== For today's investor, Mellon is a complex figure. His methods provide a powerful, if uncomfortable, case study in [[value investing]] principles. ==== The Good: Seeing Opportunity in Crisis ==== Andrew Mellon was the embodiment of [[Warren Buffett]]'s famous maxim: "Be fearful when others are greedy, and greedy when others are fearful." His career demonstrates the immense wealth that can be created by maintaining a long-term perspective and having the courage and capital to act decisively during a panic. Value investors study downturns and market crashes, looking for solid businesses that have been unfairly punished by widespread fear. Mellon simply did this on a national and industrial scale. He reminds us that a market crash is a terrible thing to waste. ==== The Bad: The Human Cost ==== The primary criticism of Mellon's philosophy is its complete disregard for the human suffering that accompanies economic liquidation. For the average person, "liquidating labor" means losing a job. "Liquidating real estate" means foreclosure. While his approach may seem logical on a macroeconomic spreadsheet, it entails devastating consequences for millions of families. Modern governments and central banks, for this very reason, typically intervene to prevent the kind of total systemic collapse Mellon advocated. His philosophy serves as a stark reminder that purely financial logic can sometimes be socially and ethically untenable. ===== In a Nutshell ===== Andrew Mellon was a financial titan whose Depression-era advice, "liquidate, liquidate, liquidate," makes him a controversial figure. For value investors, he is a powerful, if ruthless, example of contrarian thinking: seeing immense opportunity in the wreckage of a market crash and having the conviction to buy valuable assets when no one else will.