“Eureka! Here’s The Goose That Lays The Golden Egg.”

Right now, I’m reading a biography titled, “The Richest Woman in America.” It’s the fascinating story of Hetty Green who compounded the inheritance of her father’s estate into $100 million in 1912. In today’s dollars, this amounts to $2 billion.

Here is an interesting quote from the book:

“While Edward (Hetty’s husband) engaged in business for the bank, Hetty had her own business to attend to, concentrating on investing the interest from her father’s trust fund. Like Andrew Carnegie, who cried, “Eureka! Here’s the goose that lays the golden egg.” when he discovered the power of dividends, Hetty had already learned the magic of compound interest. As a child she used her allowance to earn interest in the savings bank and saw it grow. Now she used her money to earn a high yield, paid in gold, on Civil War bonds. Even better, she could reinvest those dividends to earn more. And all the time she was compounding her return.”

At an early age, Hetty learned to avoid debt and invest money cautiously for income. She followed this formula throughout her life and ultimately joined the ranks of Rockefeller, Vanderbilt, and Carnegie. Her investments included mortgages, real estate, railroads, government bonds, and gold/copper/iron mines. “She was considered the single biggest individual financier in the world.”

It all started with the golden egg laying goose left to her by her father. Hetty took the eggs and compounded them into a community of golden egg geese. She shunned high society and avoided luxury. Instead, she used her increasing investment income to acquire additional income producing assets.

Hetty once told a reporter, “I believe in getting in at the bottom and out at the top. I like to buy railroad stock or mortgage bonds. When I see a good thing cheap because nobody wants it, I buy a lot of it and tuck it away.” Once she tucked her investment away she waited for the income to roll in and simply reinvested it.

In Andrew Carnegie’s biography I found the following:

“Andy’s reaction to getting his first dividend check was euphoric, as it should have been: he was getting a guaranteed 24% interest on his investment. “I shall remember that check as long as I live… It gave me the first penny of revenue from capital – something that I had not worked for with the sweat of my brow.” He was amazed by the magical properties of investment capital. “How money could make money, how, without any attention from me, this mysterious golden visitor should come!”

Carnegie’s family was not accustomed to dividends as they lived a challenging life without much money. His family was amazed by this “dividend” Andy collected. They wondered if dividends were like the rents landlords collected – without working – because they owned the land on which other’s toiled?

Dividends are amazing.

The trick is getting the first goose. It is impossible to collect golden eggs without a goose.