September 8, 2025 • 21 mins
They called him the Rothschild of the East. But while the Rothschilds moved paper, David Sassoon built infrastructure.
In 1829, he fled Baghdad with nothing but two saddlebags of gold. By 1860, his family controlled the largest trading house in Asia. By 1940, they owned half of Shanghai.
This isn't just another rags-to-riches story. It's a masterclass in turning displacement into dynasty.
In this episode, we explore:
- How a stateless refugee became the unofficial bank of Bombay
- Why owning warehouses beats owning goods (the original REIT model)
- The concept of "cultural arbitrage" and why immigrants have a superpower
- How the Sassoons timed every market perfectly across 130 years
- Why infrastructure always wins, regardless of who's in power
From the opium trade to Shanghai jazz clubs, from Bombay swampland to prime real estate - the Sassoons proved that disruption creates opportunity, displacement creates advantage, and infrastructure creates dynasties.
Whether you're a real estate investor, a student of history, or someone interested in how fortunes are really built, this episode reveals timeless principles that work in any era.
Think Well. Act Wisely. Build Something Timeless.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
SPEAKER_00 (00:00):
They called him the Rothschild of the East, but
that's not quite right.
David Sassoon didn't just movemoney.
He moved opium, cotton, andeventually entire cities.
While the Rothschilds werefinancing European wars, Sassoon
was building the infrastructureof Asian trade, warehouses in
(00:21):
Bombay, ports in Shanghai, millsin Manchester.
The Sassoons didn't build theirempire on innovation or
technology.
We'll be right back.
(01:00):
We often dive into manydifferent stories.
You know, we have a seriesrunning now called The Cons or
The Villains, if you will.
We have a series on greatcrashes throughout history.
Last week, we covered the Kipperand Whipper crisis, which was
very well received by theaudience.
So thank you, everybody.
(01:20):
We also cover the builders,people who have built incredible
empires throughout history andwhat can we learn from them.
Cover economic history, thehistory of of Finance, and we
interview real-life peopletoday, the real OGs, if you
will, people who have beenthrough multiple cycles and have
something to teach us.
And today, we are diving intohow a Baghdad merchant family
(01:42):
became Asia's real estatedynasty, and what their playbook
teaches us about how the bestopportunities often come from
the worst circumstances.
Let me paint you a picture ofBaghdad in 1792.
This is not the Baghdad you knowfrom headlines.
(02:03):
Saddam Hussein's home, the sceneof, you know, bombs and fighting
and killing.
This, at the time, was the jewelof the Ottoman Empire.
And the Ottoman Empire, forthose of you who don't know, was
one of the major world empiresat the time that spanned the
entire Middle East.
Coming out of Turkey, modern-dayTurkey, out of Istanbul,
(02:24):
historic Constantinople, TheOttoman Empire controlled all of
the Middle East.
This was a city where Jewishmerchants have thrived for 2,500
years since the Babylonianexile.
Think about that long history.
They ran the trade routesbetween Europe and Asia.
They financed the caravans.
They were the trustedintermediaries in a world that
ran on trust.
(02:45):
And if there's one thing we cansay that is a common thread
throughout any of the TimelessInvestor episodes, shows,
articles, it is that economiestrade Everything runs at the
speed of trust.
David Sassoon was born intothis.
His father was the chieftreasurer to the Baghdad
governor.
The Sassoons were not justwealthy.
(03:07):
They were connected.
They understood power.
They understood how to be usefulto whoever held it.
But here's the problem with abase of power connections and
everything that is built onconnections and power.
Power changes hands.
So in 1829, a new governorarrived.
arrives.
His name is Dawood Pasha, andDawood Pasha does not like
(03:30):
successful Jewish merchants.
He really doesn't like Jewishmerchants who know where all the
money is hidden.
So David Sassoon sees thewriting on the wall.
One night, he packs twosaddlebags with gold coins,
takes his family, and he flees.
First to Persia, then to thePersian Gulf, and finally to
Bombay.
He is 37 years old.
(03:51):
He has lost everything exceptwhat he can carry.
And he's about to build one ofthe greatest commercial empires
in Asian history.
Think about that for a moment.
37.
I mean, we view that as likeentering midlife.
I'm at 38, about to turn 39.
So, you know, I like to saythat's still young age.
But, you know, I think many ofus suffer angst in our 20s.
(04:13):
Like, oh, we haven't doneanything.
We haven't done anything.
And I'm going to repeat thegreat story.
Julius Caesar, in his mid-20s,weeping at the feet of the
statue of Alexander the Great.
Because by the time he's donethat, By 25 or whatever, 25, 26,
Alexander the Great hadconquered the entire known
world.
And so Caesar thought tohimself, what am I ever going to
(04:34):
be?
Here I am, I'm a 27-year-oldloser who hasn't achieved what
Alexander the Great achieved.
Interestingly enough, I thinkit's arguable who's more famous
now, Alexander the Great orJulius Caesar.
By the way, David Sassoon, notfamous.
Nobody in the West probably evenknows who this gentleman is.
And that is why we love thesestories.
They're incredible.
But keep in mind, he's 37 he haslost everything except,
(04:58):
crucially, two saddlebags withgold coins, which is pretty
nice.
I mean, it's better thannothing, right?
But I mean, he came from a lotand had nothing.
So let me paint you anotherpicture now.
Bombay in 1832 was not theMumbai of today.
It was a malaria-infestedbackwater.
The British had just takencontrol.
They needed everything.
(05:19):
Infrastructure, trade networks,local knowledge.
And here comes David Sassoon.
He speaks Arabic Hebrew,Persian, and Turkish.
He understands Asian tradebetter than any European could
possibly understand it.
And crucially, he's stateless.
He needs British protection asmuch as they need his expertise.
So this is the first lesson.
(05:39):
Some of the best partnershipshappen when both sides
desperately need each other.
But I want to get into like theactual start of how he did this.
So Sassoon doesn't open a grandtrading house.
He rents a single room in the be10,000 rupees in gold.
Like I said, he didn't come withnothing, right?
(06:00):
Decent money, but not empirebuilding money.
So what is his first move?
He doesn't try to compete withestablished traders.
Instead, he identifies a gap.
The British East India Companyneeds someone to handle the
quote unquote country trade, thesmall scale, high touch commerce
between Indian ports thatBritish merchants considered
(06:20):
beneath them and something theydon't want to deal with.
So pearls from the Persian Gulf,dates from Basra, horses from
Arabia, small shipments, highmargins, and most importantly,
it required trust relationshipsthat took decades to build.
Sassoon had those relationshipsand the British didn't.
So within six months, he is thego-to intermediary for Gulf
(06:42):
India trade.
But here's what I think is areally clever move on his part.
He doesn't just broker thedeals, he starts extending
credit.
A Gujarati cotton farmer whoneeds funds before harvest,
Sassoon lends it 12% monthly.
Monthly?
Wild.
A British date merchant needs tobuy cargo space.
Sassoon finances it.
(07:02):
A British officer wants to sendmoney home.
Sassoon handles the exchange.
He is becoming the informal bankof Bombay's trading community.
But his breakthrough reallycomes in 1839.
The first opium war starts.
The British need to move massiveamounts of opium from India to
China to finance their teaimports.
(07:23):
But they have a problem.
China The Chinese merchants donot trust British traders.
Too many broken contracts, toomuch colonial arrogance.
Sassoon sees the opportunity.
He is not British.
He's a Baghdadi Jew.
He's not colonial.
He's a fellow Asian merchant.
The Chinese dealers in Cantontrust him in a way that they
just won't trust a British face.
(07:44):
So he makes the British anoffer.
Let me handle your China trade.
I'll guarantee delivery.
I'll manage the risk.
In exchange, I want exclusiveprivileges at Bombay Port and
Protection.
from my ships.
The British take the deal.
Within one year, Sassoon goesfrom small-time Gulf trader to
running one of the largest Chinatrading operations in Asia.
(08:05):
But, Critical point.
He does not blow his profits onluxury.
Every rupee goes back into thebusiness.
He brings over his sons fromBaghdad, Abdullah, Elias,
Solomon, Rubin.
Each one gets trained in adifferent aspect.
Abdullah learns British law.
Elias studies cotton markets.
Solomon goes to Hong Kong tounderstand Chinese commerce.
(08:27):
By 1850, he's got eight sons,and they're running eight
offices across Asia.
It's not a business anymore.
It's a network, and networks areexponentially more valuable in
businesses.
Sassoon insists that everyfamily member spend two years
working in the Bombay warehouse,not in the offices, in the
warehouse, loading cotton bales,checking opium quality,
(08:49):
understanding the physicalreality of trade.
Why does he do this?
Because he learned something inBaghdad.
When you're too far from theactual business, you make fatal
mistakes.
His sons might become BritishKnights and Chinese Taipans, but
they always know what a cottonbale should way.
Now think about that.
I want to say a little addedpoint here.
(09:11):
Many of the wealthiest familiesthat I have encountered that run
large family businesses take avery similar approach.
Their children do not get tojust ride in on a beautiful
white stallion and take over thebusiness.
They got to learn the businessfrom the ground up.
I had a good friend at Goldmanwho came from a major banking
(09:32):
family that had a businessthey'd owned for like 700 years.
He didn't get to ride in likethe prince and just run the
whole thing.
He had to go prove himselfelsewhere.
Fisher Investments, where Ispent a good portion of my early
working career, Ken Fisher hadfamily members working in the
business.
They started at the bottom, Ican tell you.
Now, did they get some help?
(09:52):
I don't know, probably, but theydidn't get to just write into a
senior executive role.
They had to learn the businessfrom the ground up.
This is a tried and truestrategy.
I also know guys who runbusinesses where their sons have
gotten to write in immediatelyand become the head honcho, and
it doesn't always work very wellbecause they have a lot of
arrogance.
They're like, oh, I'm thekingpin, I'm the prince.
(10:14):
This is important.
So the numbers tell the storyhere really well.
In 1832, Sassoon had one roomand 10,000 rupees.
By 1840, his warehouse at BombayPort had 100,000 rupees in
annual revenue.
In 1845, there were five shipsunder the Sassoon flag, one
(10:36):
million rupees in revenue.
By 1850, offices in eightcities, 10 million rupees in
revenue.
And by 1860, he was the largesttrading house in Asia with 50
million rupees in revenue.
Not a bad start from 1832 with10,000 rupees.
10,000, and in 28 years, 28years, 50 million rupees in
(11:00):
revenue.
That is awesome.
But here's what the numbersdon't show.
By 1850, the Sassoons are notnot just moving goods.
They are setting prices.
So when David Sassoon sets thecotton price in Bombay, that's
the price in Manchester.
When he says opium quality isdeclining, London listens.
He is not just in the market.
He is the market.
(11:21):
The British want Indian cottonto feed Manchester mills.
Sassoon knows every cottonfarmer in Gujarat.
The British want to sell opiumto China.
Sassoon has cousins in Canton.
The British need someone totrust in a world where contracts
mean very little to nothing.
Sassoon's word is his bond.
So by 1850, David Session andCompany has offices in Bombay,
Calcutta, Shanghai, Hong Kong,and eventually London.
(11:44):
But, and this is critical, it'sall family.
Every office is run by a son ornephew.
Every transaction stays withinthe network.
Now, I'm a real estate investor.
Many of my listeners are realestate investors.
We have a focus on real estate,the history of real estate, the
glorious patterns and traditionsof the past in real estate.
So this is where things start toget really interesting if you
(12:05):
are a real estate investor.
The Sassoons, at this point, arewealthy.
They could have just stayed puretraders.
Buy low, sell high, clip thespread.
That's what most merchantfamilies of this era did.
But then, I would beg to argue,we would not remember their
name.
David understood somethingdifferent.
Whoever controls theinfrastructure controls the
(12:25):
trade.
Just like the Hanseatic Leaguethat we covered prior to this.
Just like them.
So they started buying.
Not the goods, but the buildingswhere goods were stored.
Not the cottons The mills werecaught and was processed, not
the ships, the docks where shipshad to unload.
By 1860, the Sassoons owned thelargest warehouse complex in
(12:46):
Bombay, three of five majormills in the city, prime
waterfront real estate inShanghai, and the first
synagogues in Bombay and HongKong, which I will add doubled
as community centers andinformal trading floors.
They basically built the REITmodel in this market, owned the
infrastructure, lease it back tooperators, collect rent forever.
(13:09):
But here's the thing that I, youknow, these stories are always
fascinating.
And here's the thing that'simportant.
They bought all of this whennobody else wanted it.
The Bombay waterfront in 1840was swampland.
The Shanghai InternationalSettlement in 1850, a
speculative disaster waiting tohappen.
But the Sassoon saw what othersdidn't.
Population growth is reallyimportant.
Trade routes are permanent andinfrastructure always win.
(13:32):
And there's an additionalconcept I want to introduce here
that's critical culturalarbitrage.
The British couldn't do businessin China.
They didn't speak the language,understand the culture, or have
the relationships.
The Chinese couldn't accessBritish markets.
Same problem in reverse.
The Sassoons were the bridge.
(13:53):
They were Iraqi Jews who spokeEnglish, lived like British
gentlemen, but maintained Asiannetworks.
They could walk into aManchester bank or a Canton
trading house with equalcredibility.
This is the immigrantsuperpower.
You're not trapped in oneculture's way of thinking.
David's son, Albert Sassoon,later Sir Albert, was knighted
(14:15):
by Queen Victoria and marriedinto the Rothschild family.
His brother Elias stayed inBombay and became more Indian
than the Indians.
Another brother, Solomon, wentto Shanghai and became a Chinese
real estate magnate.
Same family, three continents,total cultural fluency.
What are the modern parallels?
Look at Indian tech families inSilicon Valley or Chinese
(14:36):
property developers inVancouver, Nigerian
entrepreneurs in London.
Same playbook, differentcentury, bridging the gap
between cultures, culturalarbitrage.
I don't know if it's going tostick, guys, but I like it.
Now, we need to talk about themajor elephant in this room.
The Sassoons made enormousprofits from opium.
From 1830 to 1900, they were oneof the largest opium traders
(14:59):
between India and China.
At one point, they controlled70% of the trade.
This is not a small footnote.
It was central to their wealth.
Now, I'm not here to judge 19thcentury business by 21st century
ethics, but I think there's animportant lesson here about
concentration risk andreputation.
When China finally banned opiumimports in 1907, the Sassoons
(15:22):
had already diversified.
Real estate, textiles, banking,they saw the end coming and they
positioned accordingly.
But the reputation damage waspermanent.
In China today, the Sassoon nameis still associated with the
century of humiliation.
So the lesson here is yourbiggest profit center can become
your biggest liability.
What makes you rich today mightmake you toxic tomorrow.
(15:45):
Always be diversifying.
Always be building alternativeincome streams.
The Sassoons did so.
They successfully took theirwealth generated from what I
would argue is a fairly immoraltrade in hindsight, right?
Probably at the time as well,frankly, but in hindsight,
definitely immoral.
And they used it to diversifyand build something else.
(16:05):
So by the In the 1920s, theSassoons had largely exited
trading and become pure realestate players.
Victor Sassoon, David'sgreat-grandson, embodied this
transformation.
He sold the family's Indiantextile mills in 1931, right
before the global depressiondestroyed commodity prices.
He took that capital and hepoured it into Shanghai real
(16:25):
estate.
The Cafe Hotel, Hamilton House,the Metropolitan Hotel, the
Embankment Building.
By 1940, Victor Sassoon ownedhalf the international
settlement.
But here is what I love.
He didn't just own thebuildings.
He owned experiences.
The Cafe Hotel wasn't justlodging.
It was the place where jazzhappened in Asia, where Noel
(16:48):
Coward wrote plays, whereCharlie Chaplin stayed.
Victor understood something thatwe talk about all the time on
this show.
Real estate isn't just aboutbeautiful buildings, big,
beautiful buildings.
It's more than that.
It's about human behavior.
Control where people gather.
control where they store theirgoods, and you control the
commerce.
(17:09):
When the communists tookShanghai in 1949, Victor had
already moved his capital to theBahamas.
When they seized his buildings,he'd already extracted decades
of cash flow.
Never fall in love with yourassets.
Fall in love with your cashflow.
By the way, something thatstands out to me in this story,
it's absolutely wild.
These guys managed to time themarket well every single time.
(17:32):
They got in early in Bombay.
They got in early in Shanghai.
They They escaped before thecommunists took over.
Something's going on.
So the Sassoon Empire lastedfrom 1832 to roughly 1960, 130
years.
That's five generations ofwealth.
How many American fortunes havelasted that long?
Here's what they did right.
First, they treated real estateas the ultimate store of value.
(17:55):
Not stocks, not bonds, not evengold.
Buildings and growing cities.
Second, they understoodportfolio theory before
portfolio theory even existed asa concept.
They never had more than 30% inany one city, never more than
50% in any one asset class.
They always had geographicdiversification, which allowed
them to survive the communistrevolution.
(18:16):
Third, they maintained familycontrol while bringing in
professional management.
Their buildings were run byexperts.
The capital decisions stayedwithin the family.
Fourth, they knew when to leave.
They had a good sense of markettiming.
They got out of Baghdad beforepersecution, out of India before
independence, out of Chinabefore communism.
They didn't try to time itperfectly to just make sure they
(18:37):
were early, not late.
So what does this story mean forus today?
Look at the Li Ka-shing family,refugees from mainland China who
built Hong Kong's largestproperty empire using almost the
exact same playbook.
Look at the Canadian pensionfunds buying American
infrastructure, culturalarbitrage at institutional
scale.
Look at yourself if you're aninvestor trying to find
(18:59):
opportunity in chaos.
The Sassoon model still works.
Find displacement.
There's always displacementsomewhere.
Bridge cultures.
Every market has aninsider-outsider divide.
Buy infrastructure, notproducts, not services,
infrastructure.
Hold forever, but be ready torun and take it with you if you
(19:19):
have to.
Here is my controversialopinion.
The Sassoons were better capitalallocators than the Rothschilds.
The Rothschilds were financiers.
They moved paper.
When governments defaulted orcurrencies collapsed, they lost
fortunes.
The Sassoons owned physicalassets.
When governments changed, thebuildings remained.
When currencies collapsed, thewarehouses still collected rent.
(19:41):
The Rothschilds are more famousbecause they financed wars.
The Sassoons lasted longerbecause they owned ports.
Fame is narrative.
Wealth is cash flow.
Now, David Sassoon died in 1864in Pune, India.
I think I pronounced that right.
He never saw England.
He never returned to Baghdad.
He never set foot in America.
(20:02):
But he understood somethingtimeless.
Disruption creates opportunity.
Displacement creates advantage.
And infrastructure can createdynasties.
He started with two saddlebagsof gold coins and his
great-great-grandchildren arestill collecting rent today.
This is not a story about luckor timing or even intelligence.
(20:25):
It's a story about seeingclearly when everyone else is
blinded by the chaos and terrorof the present moment.
The British saw colonies to I'mAri Van Gemeren.
Remember, think in centuries,not quarters.
(20:59):
I hope you guys enjoyed thisshow.
And remember, build forgenerations not for exits, and
always, always aim to own theinfrastructure.
This has been the TimelessInvestor Show.
Think well, act wisely, buildsomething timeless.
Thank you.
I look forward to seeing youguys again next week.
They called him the Rothschild of the East, but
that's not quite right.
David Sassoon didn't just movemoney.
He moved opium, cotton, andeventually entire cities.
While the Rothschilds werefinancing European wars, Sassoon
was building the infrastructureof Asian trade, warehouses in
(00:21):
Bombay, ports in Shanghai, millsin Manchester.
The Sassoons didn't build theirempire on innovation or
technology.
We'll be right back.
(01:00):
We often dive into manydifferent stories.
You know, we have a seriesrunning now called The Cons or
The Villains, if you will.
We have a series on greatcrashes throughout history.
Last week, we covered the Kipperand Whipper crisis, which was
very well received by theaudience.
So thank you, everybody.
(01:20):
We also cover the builders,people who have built incredible
empires throughout history andwhat can we learn from them.
Cover economic history, thehistory of of Finance, and we
interview real-life peopletoday, the real OGs, if you
will, people who have beenthrough multiple cycles and have
something to teach us.
And today, we are diving intohow a Baghdad merchant family
(01:42):
became Asia's real estatedynasty, and what their playbook
teaches us about how the bestopportunities often come from
the worst circumstances.
Let me paint you a picture ofBaghdad in 1792.
This is not the Baghdad you knowfrom headlines.
(02:03):
Saddam Hussein's home, the sceneof, you know, bombs and fighting
and killing.
This, at the time, was the jewelof the Ottoman Empire.
And the Ottoman Empire, forthose of you who don't know, was
one of the major world empiresat the time that spanned the
entire Middle East.
Coming out of Turkey, modern-dayTurkey, out of Istanbul,
(02:24):
historic Constantinople, TheOttoman Empire controlled all of
the Middle East.
This was a city where Jewishmerchants have thrived for 2,500
years since the Babylonianexile.
Think about that long history.
They ran the trade routesbetween Europe and Asia.
They financed the caravans.
They were the trustedintermediaries in a world that
ran on trust.
(02:45):
And if there's one thing we cansay that is a common thread
throughout any of the TimelessInvestor episodes, shows,
articles, it is that economiestrade Everything runs at the
speed of trust.
David Sassoon was born intothis.
His father was the chieftreasurer to the Baghdad
governor.
The Sassoons were not justwealthy.
(03:07):
They were connected.
They understood power.
They understood how to be usefulto whoever held it.
But here's the problem with abase of power connections and
everything that is built onconnections and power.
Power changes hands.
So in 1829, a new governorarrived.
arrives.
His name is Dawood Pasha, andDawood Pasha does not like
(03:30):
successful Jewish merchants.
He really doesn't like Jewishmerchants who know where all the
money is hidden.
So David Sassoon sees thewriting on the wall.
One night, he packs twosaddlebags with gold coins,
takes his family, and he flees.
First to Persia, then to thePersian Gulf, and finally to
Bombay.
He is 37 years old.
(03:51):
He has lost everything exceptwhat he can carry.
And he's about to build one ofthe greatest commercial empires
in Asian history.
Think about that for a moment.
37.
I mean, we view that as likeentering midlife.
I'm at 38, about to turn 39.
So, you know, I like to saythat's still young age.
But, you know, I think many ofus suffer angst in our 20s.
(04:13):
Like, oh, we haven't doneanything.
We haven't done anything.
And I'm going to repeat thegreat story.
Julius Caesar, in his mid-20s,weeping at the feet of the
statue of Alexander the Great.
Because by the time he's donethat, By 25 or whatever, 25, 26,
Alexander the Great hadconquered the entire known
world.
And so Caesar thought tohimself, what am I ever going to
(04:34):
be?
Here I am, I'm a 27-year-oldloser who hasn't achieved what
Alexander the Great achieved.
Interestingly enough, I thinkit's arguable who's more famous
now, Alexander the Great orJulius Caesar.
By the way, David Sassoon, notfamous.
Nobody in the West probably evenknows who this gentleman is.
And that is why we love thesestories.
They're incredible.
But keep in mind, he's 37 he haslost everything except,
(04:58):
crucially, two saddlebags withgold coins, which is pretty
nice.
I mean, it's better thannothing, right?
But I mean, he came from a lotand had nothing.
So let me paint you anotherpicture now.
Bombay in 1832 was not theMumbai of today.
It was a malaria-infestedbackwater.
The British had just takencontrol.
They needed everything.
(05:19):
Infrastructure, trade networks,local knowledge.
And here comes David Sassoon.
He speaks Arabic Hebrew,Persian, and Turkish.
He understands Asian tradebetter than any European could
possibly understand it.
And crucially, he's stateless.
He needs British protection asmuch as they need his expertise.
So this is the first lesson.
(05:39):
Some of the best partnershipshappen when both sides
desperately need each other.
But I want to get into like theactual start of how he did this.
So Sassoon doesn't open a grandtrading house.
He rents a single room in the be10,000 rupees in gold.
Like I said, he didn't come withnothing, right?
(06:00):
Decent money, but not empirebuilding money.
So what is his first move?
He doesn't try to compete withestablished traders.
Instead, he identifies a gap.
The British East India Companyneeds someone to handle the
quote unquote country trade, thesmall scale, high touch commerce
between Indian ports thatBritish merchants considered
(06:20):
beneath them and something theydon't want to deal with.
So pearls from the Persian Gulf,dates from Basra, horses from
Arabia, small shipments, highmargins, and most importantly,
it required trust relationshipsthat took decades to build.
Sassoon had those relationshipsand the British didn't.
So within six months, he is thego-to intermediary for Gulf
(06:42):
India trade.
But here's what I think is areally clever move on his part.
He doesn't just broker thedeals, he starts extending
credit.
A Gujarati cotton farmer whoneeds funds before harvest,
Sassoon lends it 12% monthly.
Monthly?
Wild.
A British date merchant needs tobuy cargo space.
Sassoon finances it.
(07:02):
A British officer wants to sendmoney home.
Sassoon handles the exchange.
He is becoming the informal bankof Bombay's trading community.
But his breakthrough reallycomes in 1839.
The first opium war starts.
The British need to move massiveamounts of opium from India to
China to finance their teaimports.
(07:23):
But they have a problem.
China The Chinese merchants donot trust British traders.
Too many broken contracts, toomuch colonial arrogance.
Sassoon sees the opportunity.
He is not British.
He's a Baghdadi Jew.
He's not colonial.
He's a fellow Asian merchant.
The Chinese dealers in Cantontrust him in a way that they
just won't trust a British face.
(07:44):
So he makes the British anoffer.
Let me handle your China trade.
I'll guarantee delivery.
I'll manage the risk.
In exchange, I want exclusiveprivileges at Bombay Port and
Protection.
from my ships.
The British take the deal.
Within one year, Sassoon goesfrom small-time Gulf trader to
running one of the largest Chinatrading operations in Asia.
(08:05):
But, Critical point.
He does not blow his profits onluxury.
Every rupee goes back into thebusiness.
He brings over his sons fromBaghdad, Abdullah, Elias,
Solomon, Rubin.
Each one gets trained in adifferent aspect.
Abdullah learns British law.
Elias studies cotton markets.
Solomon goes to Hong Kong tounderstand Chinese commerce.
(08:27):
By 1850, he's got eight sons,and they're running eight
offices across Asia.
It's not a business anymore.
It's a network, and networks areexponentially more valuable in
businesses.
Sassoon insists that everyfamily member spend two years
working in the Bombay warehouse,not in the offices, in the
warehouse, loading cotton bales,checking opium quality,
(08:49):
understanding the physicalreality of trade.
Why does he do this?
Because he learned something inBaghdad.
When you're too far from theactual business, you make fatal
mistakes.
His sons might become BritishKnights and Chinese Taipans, but
they always know what a cottonbale should way.
Now think about that.
I want to say a little addedpoint here.
(09:11):
Many of the wealthiest familiesthat I have encountered that run
large family businesses take avery similar approach.
Their children do not get tojust ride in on a beautiful
white stallion and take over thebusiness.
They got to learn the businessfrom the ground up.
I had a good friend at Goldmanwho came from a major banking
(09:32):
family that had a businessthey'd owned for like 700 years.
He didn't get to ride in likethe prince and just run the
whole thing.
He had to go prove himselfelsewhere.
Fisher Investments, where Ispent a good portion of my early
working career, Ken Fisher hadfamily members working in the
business.
They started at the bottom, Ican tell you.
Now, did they get some help?
(09:52):
I don't know, probably, but theydidn't get to just write into a
senior executive role.
They had to learn the businessfrom the ground up.
This is a tried and truestrategy.
I also know guys who runbusinesses where their sons have
gotten to write in immediatelyand become the head honcho, and
it doesn't always work very wellbecause they have a lot of
arrogance.
They're like, oh, I'm thekingpin, I'm the prince.
(10:14):
This is important.
So the numbers tell the storyhere really well.
In 1832, Sassoon had one roomand 10,000 rupees.
By 1840, his warehouse at BombayPort had 100,000 rupees in
annual revenue.
In 1845, there were five shipsunder the Sassoon flag, one
(10:36):
million rupees in revenue.
By 1850, offices in eightcities, 10 million rupees in
revenue.
And by 1860, he was the largesttrading house in Asia with 50
million rupees in revenue.
Not a bad start from 1832 with10,000 rupees.
10,000, and in 28 years, 28years, 50 million rupees in
(11:00):
revenue.
That is awesome.
But here's what the numbersdon't show.
By 1850, the Sassoons are notnot just moving goods.
They are setting prices.
So when David Sassoon sets thecotton price in Bombay, that's
the price in Manchester.
When he says opium quality isdeclining, London listens.
He is not just in the market.
He is the market.
(11:21):
The British want Indian cottonto feed Manchester mills.
Sassoon knows every cottonfarmer in Gujarat.
The British want to sell opiumto China.
Sassoon has cousins in Canton.
The British need someone totrust in a world where contracts
mean very little to nothing.
Sassoon's word is his bond.
So by 1850, David Session andCompany has offices in Bombay,
Calcutta, Shanghai, Hong Kong,and eventually London.
(11:44):
But, and this is critical, it'sall family.
Every office is run by a son ornephew.
Every transaction stays withinthe network.
Now, I'm a real estate investor.
Many of my listeners are realestate investors.
We have a focus on real estate,the history of real estate, the
glorious patterns and traditionsof the past in real estate.
So this is where things start toget really interesting if you
(12:05):
are a real estate investor.
The Sassoons, at this point, arewealthy.
They could have just stayed puretraders.
Buy low, sell high, clip thespread.
That's what most merchantfamilies of this era did.
But then, I would beg to argue,we would not remember their
name.
David understood somethingdifferent.
Whoever controls theinfrastructure controls the
(12:25):
trade.
Just like the Hanseatic Leaguethat we covered prior to this.
Just like them.
So they started buying.
Not the goods, but the buildingswhere goods were stored.
Not the cottons The mills werecaught and was processed, not
the ships, the docks where shipshad to unload.
By 1860, the Sassoons owned thelargest warehouse complex in
(12:46):
Bombay, three of five majormills in the city, prime
waterfront real estate inShanghai, and the first
synagogues in Bombay and HongKong, which I will add doubled
as community centers andinformal trading floors.
They basically built the REITmodel in this market, owned the
infrastructure, lease it back tooperators, collect rent forever.
(13:09):
But here's the thing that I, youknow, these stories are always
fascinating.
And here's the thing that'simportant.
They bought all of this whennobody else wanted it.
The Bombay waterfront in 1840was swampland.
The Shanghai InternationalSettlement in 1850, a
speculative disaster waiting tohappen.
But the Sassoon saw what othersdidn't.
Population growth is reallyimportant.
Trade routes are permanent andinfrastructure always win.
(13:32):
And there's an additionalconcept I want to introduce here
that's critical culturalarbitrage.
The British couldn't do businessin China.
They didn't speak the language,understand the culture, or have
the relationships.
The Chinese couldn't accessBritish markets.
Same problem in reverse.
The Sassoons were the bridge.
(13:53):
They were Iraqi Jews who spokeEnglish, lived like British
gentlemen, but maintained Asiannetworks.
They could walk into aManchester bank or a Canton
trading house with equalcredibility.
This is the immigrantsuperpower.
You're not trapped in oneculture's way of thinking.
David's son, Albert Sassoon,later Sir Albert, was knighted
(14:15):
by Queen Victoria and marriedinto the Rothschild family.
His brother Elias stayed inBombay and became more Indian
than the Indians.
Another brother, Solomon, wentto Shanghai and became a Chinese
real estate magnate.
Same family, three continents,total cultural fluency.
What are the modern parallels?
Look at Indian tech families inSilicon Valley or Chinese
(14:36):
property developers inVancouver, Nigerian
entrepreneurs in London.
Same playbook, differentcentury, bridging the gap
between cultures, culturalarbitrage.
I don't know if it's going tostick, guys, but I like it.
Now, we need to talk about themajor elephant in this room.
The Sassoons made enormousprofits from opium.
From 1830 to 1900, they were oneof the largest opium traders
(14:59):
between India and China.
At one point, they controlled70% of the trade.
This is not a small footnote.
It was central to their wealth.
Now, I'm not here to judge 19thcentury business by 21st century
ethics, but I think there's animportant lesson here about
concentration risk andreputation.
When China finally banned opiumimports in 1907, the Sassoons
(15:22):
had already diversified.
Real estate, textiles, banking,they saw the end coming and they
positioned accordingly.
But the reputation damage waspermanent.
In China today, the Sassoon nameis still associated with the
century of humiliation.
So the lesson here is yourbiggest profit center can become
your biggest liability.
What makes you rich today mightmake you toxic tomorrow.
(15:45):
Always be diversifying.
Always be building alternativeincome streams.
The Sassoons did so.
They successfully took theirwealth generated from what I
would argue is a fairly immoraltrade in hindsight, right?
Probably at the time as well,frankly, but in hindsight,
definitely immoral.
And they used it to diversifyand build something else.
(16:05):
So by the In the 1920s, theSassoons had largely exited
trading and become pure realestate players.
Victor Sassoon, David'sgreat-grandson, embodied this
transformation.
He sold the family's Indiantextile mills in 1931, right
before the global depressiondestroyed commodity prices.
He took that capital and hepoured it into Shanghai real
(16:25):
estate.
The Cafe Hotel, Hamilton House,the Metropolitan Hotel, the
Embankment Building.
By 1940, Victor Sassoon ownedhalf the international
settlement.
But here is what I love.
He didn't just own thebuildings.
He owned experiences.
The Cafe Hotel wasn't justlodging.
It was the place where jazzhappened in Asia, where Noel
(16:48):
Coward wrote plays, whereCharlie Chaplin stayed.
Victor understood something thatwe talk about all the time on
this show.
Real estate isn't just aboutbeautiful buildings, big,
beautiful buildings.
It's more than that.
It's about human behavior.
Control where people gather.
control where they store theirgoods, and you control the
commerce.
(17:09):
When the communists tookShanghai in 1949, Victor had
already moved his capital to theBahamas.
When they seized his buildings,he'd already extracted decades
of cash flow.
Never fall in love with yourassets.
Fall in love with your cashflow.
By the way, something thatstands out to me in this story,
it's absolutely wild.
These guys managed to time themarket well every single time.
(17:32):
They got in early in Bombay.
They got in early in Shanghai.
They They escaped before thecommunists took over.
Something's going on.
So the Sassoon Empire lastedfrom 1832 to roughly 1960, 130
years.
That's five generations ofwealth.
How many American fortunes havelasted that long?
Here's what they did right.
First, they treated real estateas the ultimate store of value.
(17:55):
Not stocks, not bonds, not evengold.
Buildings and growing cities.
Second, they understoodportfolio theory before
portfolio theory even existed asa concept.
They never had more than 30% inany one city, never more than
50% in any one asset class.
They always had geographicdiversification, which allowed
them to survive the communistrevolution.
(18:16):
Third, they maintained familycontrol while bringing in
professional management.
Their buildings were run byexperts.
The capital decisions stayedwithin the family.
Fourth, they knew when to leave.
They had a good sense of markettiming.
They got out of Baghdad beforepersecution, out of India before
independence, out of Chinabefore communism.
They didn't try to time itperfectly to just make sure they
(18:37):
were early, not late.
So what does this story mean forus today?
Look at the Li Ka-shing family,refugees from mainland China who
built Hong Kong's largestproperty empire using almost the
exact same playbook.
Look at the Canadian pensionfunds buying American
infrastructure, culturalarbitrage at institutional
scale.
Look at yourself if you're aninvestor trying to find
(18:59):
opportunity in chaos.
The Sassoon model still works.
Find displacement.
There's always displacementsomewhere.
Bridge cultures.
Every market has aninsider-outsider divide.
Buy infrastructure, notproducts, not services,
infrastructure.
Hold forever, but be ready torun and take it with you if you
(19:19):
have to.
Here is my controversialopinion.
The Sassoons were better capitalallocators than the Rothschilds.
The Rothschilds were financiers.
They moved paper.
When governments defaulted orcurrencies collapsed, they lost
fortunes.
The Sassoons owned physicalassets.
When governments changed, thebuildings remained.
When currencies collapsed, thewarehouses still collected rent.
(19:41):
The Rothschilds are more famousbecause they financed wars.
The Sassoons lasted longerbecause they owned ports.
Fame is narrative.
Wealth is cash flow.
Now, David Sassoon died in 1864in Pune, India.
I think I pronounced that right.
He never saw England.
He never returned to Baghdad.
He never set foot in America.
(20:02):
But he understood somethingtimeless.
Disruption creates opportunity.
Displacement creates advantage.
And infrastructure can createdynasties.
He started with two saddlebagsof gold coins and his
great-great-grandchildren arestill collecting rent today.
This is not a story about luckor timing or even intelligence.
(20:25):
It's a story about seeingclearly when everyone else is
blinded by the chaos and terrorof the present moment.
The British saw colonies to I'mAri Van Gemeren.
Remember, think in centuries,not quarters.
(20:59):
I hope you guys enjoyed thisshow.
And remember, build forgenerations not for exits, and
always, always aim to own theinfrastructure.
This has been the TimelessInvestor Show.
Think well, act wisely, buildsomething timeless.
Thank you.
I look forward to seeing youguys again next week.
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