Kuhn, Loeb was also in the vanguard of international finance. It tapped European capital to fund the railroads, made the initial dollar placements in the American market for leading European firms such as Royal Dutch Petroleum, and helped Japan defeat Russia in the Russo-Japanese War in 1904 and 1905 by loaning Japan $200 million. During World War I the firm aided the Allied cause by making a series of crucial loans to the cities of Paris, Bordeaux, Lyons, and Marseille, which used most of the proceeds to prop up the finances of the French Government.
Under Jacob Schiff, the senior partner who led the firm until the early twentieth century, Kuhn, Loeb came to rival J. P. Morgan & Company as the leading investment bank in America. Schiff was instrumental in pushing the bank to finance industrial enterprises. While the traditional investment banks of Morgan and Brown Brothers Harriman underwrote shares for blue chip companies such as U.S. Steel and General Electric, Kuhn, Loeb and other German-Jewish bankers such as Lehman Brothers and Goldman Sachs brokered securities for companies that were spurned by gentile firms as too lowly—retail stores and textile manufacturers. Among them were Sears, Roebuck, R. H. Macy, and Gimbel Brothers. Beginning in the 1890s, Kuhn, Loeb helped to secure loans for a number of pioneering enterprises such as Westinghouse Electric and Manufacturing Company, Western Union Telegraph Company, and the United States Rubber Company. “Let the Jews have that one,” was a familiar refrain on Wall Street.
Even though Kuhn, Loeb and other Jewish banks expanded the reach of financial markets, they were not in the business of betting their own capital on new enterprises. These banks were mostly middlemen, restricting their activities to selling government bonds or the securities and bonds of large, established companies to pools of investors that they rounded up—a safe though still lucrative business.
The House of Morgan, by contrast, remained even more conservative. It sometimes took small stakes in the companies for which it raised money as a commission. But it did not broker stocks, only underwriting railroad bonds, government bonds, or corporate bonds of the biggest firms such as U.S. Steel, General Electric, General Motors, and AT&T.
Young, unproven companies were still the stepchildren of capital markets, overlooked and neglected. That left entrepreneurs with the same old miniscule set of options: raising money from friends, family, or rich individuals. The only other financing option for new enterprises was to merge. By combining their financial resources, several small companies could increase the pool of capital that was necessary to help grow their businesses. Mergers could also raise the financial profile and health of a firm to a level where it could secure debt financing.
This was exactly the case with one of America’s oldest and most prestigious technology companies: IBM. In 1911, the Computing Tabulating Recording Corporation, the predecessor company of IBM, was formed through the merger of three separate firms: the Tabulating Machine Company, the Computing Scale Corporation, and the International Time Recording Company. The combined companies manufactured a wide range of products, including employee time-keeping systems, meat slicers, scales, and, most importantly, punch card machine technology—an innovation which ultimately led to the development of the computer. The three companies were brought together by financier Charles Flint, who helped the firm raise a $6.5 million bond offering.
According to existing records, Georges Doriot did not actually work for Kuhn, Loeb, but rather for a closely affiliated firm named New York & Foreign Development Corporation. In fact, Kuhn, Loeb and the New York & Foreign Development both shared the same address in lower Manhattan: 52 William Street. Although Doriot would only work for the company for four years and the period is barely mentioned in discussions of his life, his time here was significant in several ways.
In working for a Kuhn, Loeb affiliate, Doriot entered the rarified atmosphere of high finance, receiving his indoctrination into the world of power. He learned how to behave around power, how to be comfortable in a world of hidden influence. The connections he made at Kuhn, Loeb would serve him well the rest of his life. Doriot also received first-rate training in the craft of finance and investment banking, and gained an appreciation for the importance of technology. In fact, Doriot’s main job was to help evaluate new technologies for possible investment. His ability to judge men and their ideas, which were formed during these early years, would remain a signature talent throughout his life.
One of the more fascinating characters that Doriot befriended during this time was Sir William George Eden Wiseman, the president of New York & Foreign Development. A descendant of English royalty, Wiseman worked as a banker at Herndon’s in London before World War I. During the war, he served in the infantry, later coming to the United States as chief of the British Military Intelligence. After the war ended, he acted as a liaison between the British government and President Woodrow Wilson, and then became an advisor at the Paris Peace Conference. Following the peace accords, Wiseman, along with several other fledgling diplomats, joined Kuhn, Loeb.
More significant was Doriot’s relationship with Lewis L. Strauss—another statesmen-cum-banker who joined Kuhn, Loeb after the war. Over the next thirty years, Doriot and Strauss would become the best of friends. Doriot, eager to form new ties as an unmoored immigrant, became so attached to Strauss and his wife Alice that he considered them part of his family just a few years after striking up a friendship. For a newcomer trying to make his way in a foreign land, Strauss’s Horatio Alger tale must have struck a chord with Doriot.
The son of a Jewish shoe salesmen from Virginia, Strauss rose above his meager beginnings to become a rich investment banker and chairman of the U. S. Atomic Energy Commission. Valedictorian of his high school class, Strauss was offered a scholarship to the University of Virginia but turned it down to sell shoes for his father’s struggling business. Strauss later saved up $20,000 to pay for college, but guided by his mother’s desire for her son to serve the nation during war, Strauss instead miraculously landed a job as private secretary to the industrialist-turned-statesman Herbert Hoover.
President Woodrow Wilson picked Hoover to take charge of the Food Administration, which provided a steady supply of food to the American and Allied Armies. While in Europe, Strauss distinguished himself by helping Hoover direct America’s post-war relief effort, and by coming to the aid of the Jewish Joint Distribution Committee, which alleviated the suffering of thousands of oppressed European Jews. Strauss parlayed his relief work into a job offer from the partners of Kuhn, Loeb, many of whom were Jewish and impressed by the way he helped move emergency supplies to Jews living in Vienna, Warsaw, Prague, and the surrounding war-torn areas.
Doriot came to know Strauss because he was a director at New York & Foreign Development. In Doriot, Strauss saw a younger version of himself: a young, smart man full of energy, brio, and a desire to make his mark on the world. The two worked together on a deal in the fall of 1923. On September 24, 1923, members of Kuhn, Loeb organized an entity called the International Gear Company, Incorporated to investigate an innovative new method of commercial gear production known as the Anderson Rolled Gear process. The process of forging gears under heavy heated pressure in a rolling action was “unquestionably the outstanding achievement in modern methods, for not only is a much lower cost of production realized, but the gears produced are stronger, tougher, and more accurately formed than the best types of gears produced by the machining processes of this generation,” according to the leading machine experts of the day. Even though he had turned only twenty-four on the very day the company was incorporated, Doriot was elected as one of seven directors of International Gear. It would be the first of many directorships for Doriot, who learned much about the world of business through his participation on the boards of dozens of companies.
In the spring of 1924, Strauss asked Doriot to compile a list of French industrial firms, along with their financial backers. On March 18, Doriot wrote a letter to Strauss describing his findings. The letter illustrates Doriot’s emerging iconoclasm and his penchant for holding strong opinions that