In 1889, France was in the middle of its most peaceful period of the modern era—still stinging from its defeat in the Franco-German War of 1870–1871, when it relinquished European hegemony to the newly constituted German Empire. The terms of the Treaty of Frankfurt were harsh: an indemnity of five billion francs, plus the cost of maintaining a German occupation army in eastern France until the indemnity was paid. Most distressing, Alsace and half of Lorraine were annexed to the new German Empire. Then, a few days after the Treaty was signed, France tore itself apart when a civil war broke out during the rebellion of the Paris Commune.
Still, after its war with Prussia, France would not see another conflict or revolution until the early twentieth century. There would be no more “Bloody Weeks” for a long time. So after putting in his required years of service stationed in the armory of Bourges and Versailles, then the seat of the French government, Doriot left the army, all of twenty-six years old, in good health and spirits, with his homeland getting back on its feet.
Auguste had something else going for him: he had lined up a job for himself at the prestigious Peugeot Company. After his discharge from the Army, Doriot headed back home to Valentigney, a beautiful village in northeastern France near the borders of Switzerland and Germany, and the home of the Peugeot Company’s factory and cooperative store. While the majority of the villagers in Valentigney were farmers, many residents also worked in the factory. Indeed, most members of the Doriot family worked there at one time or another, including Auguste and his father Jacques Frederic Doriot.
Originally part of the Holy Roman Empire, Valentigney sits on the western bank of the attractive Doubs River. In the late seventeenth century, Louis XIV acquired the province in which Valentigney resides, Franche-Comte, following the Dutch War of 1672–1678. Louis XIV coveted the province because it provided the ancient regime with a buffer on its eastern border, helping to secure the safety of Paris. Turning eastward, Auguste could look over the crumbling Roman aqueducts and green forests and rolling hills of the Doubs district. And as he gazed over the horizon, he could marvel at the low, crenellated ridges of the Jura Mountains ranging across the Franco-Swiss border like some giant humpback whale.
Though it was a classically picturesque French village, Valentigney was unique in at least one respect. While nine-tenths of the French population was Roman Catholic, Valentigney was one of the few areas in the country that was completely Protestant. In fact, the district was so devoid of Catholics there was not even a single Catholic Church in the village. Later on, Georges, Auguste’s first and only son, fondly recalled his hometown and the industriousness of its people: “I remember it with a great deal of feeling. It was a wonderful world. People were not rich; they had to work for everything they had. They went to church very regularly and the Protestant minister was a kind and very respected man with a good education.”
The architecture of the village reflected the area’s working class roots. In the late nineteenth century, the typical house in Valentigney was a simple but sturdy structure built of stone and red roof tiles, and was encircled by a low stone wall, allowing passersby to peek over, luxuriate in the lush gardens and chirping birds, and smell the flowers.
This was the bucolic yet busy setting that Auguste returned to after five years in the Army. Auguste, the next-to-youngest child of a family of eight children, was born on October 24, 1863, in Sainte-Suzanne, a village in the Franche-Comte province about a dozen miles northwest of Valentigney. Auguste’s father Jacques, who had been a farmer in the early part of his life, worked his way all the way up to become the foreman of the Peugeot factory. In 1878, when Auguste was fifteen, Jacques arranged for him to become an apprentice fitter, or metal worker. Auguste worked in the factory for six years before he was called to join the Army. Now, back in Valentigney, Auguste could not have been more eager to return to the Peugeot Company.
If there was one thing that brought joy to Auguste, it was the pleasure of a hard day’s work. Photographs of him in his middle age show a man of medium height and solid build with a very serious look on his face. His most notable features were a strong Gallic nose, large ears, and a thick black moustache that was popular during the day. “My Father was a very wonderful person, extremely quiet, very thoughtful, very kind, but very strong,” recalled Georges. “He was a terribly hard worker. When he was young—I know this from my mother—he had worked as many as twelve to fourteen hours a day and he had still kept on doing that.”
By going back to work for Peugeot, Auguste showed wise judgment. The Peugeot clan had first settled in the east of France in the fifteenth century and, like most elite clans of that time, drew its wealth from vast tracts of land. In the eighteenth century, the Peugeots expanded into windmills and textile mills. In 1810, the brothers Jean-Pierre and Jean-Frédéric Peugeot converted one of those mills into a steel foundry for manufacturing saw blades, thereby creating the Peugeot Company.
By the late nineteenth century, the brothers had created one of the most well-known and successful companies in France. Building on their textile and steel plants, the family transformed their namesake into a diversified manufacturing concern with expertise in producing household tools such as kitchen utensils, coffee grinders, sewing machines, and various other items. But much of the Peugeots’ wealth came from a more unusual source: they cornered the market in women’s corsets, because they alone possessed the secret of manufacturing the special steel needed to stiffen these Victorian Age garments. Through hard work, a keen sense for spotting opportunity, and a flair for innovation, Peugeot forged a reputation for making quality products.
The Peugeot brothers were fortunate in that the family business was large and profitable enough to finance their expansion into new industries, for in the nineteenth century, financial markets were crude and entrepreneurs had a difficult, if not impossible, time raising money for new ventures. After all, the concept of the entrepreneur was relatively new, having been first introduced into economic theory by the underappreciated philosopher-economist Richard Cantillon in his remarkable treatise Essai sur la Nature du Commerce en Général, written between 1730 and 1734. In the nineteenth century, entrepreneurs virtually disappeared from classic economic and political thought thanks to the lack of financial support for their undertakings and awareness of their importance to the economy.
The idea of venture capital was even less developed. In fact, it was not until the early twentieth century that the term venture capital was first popularized. Sure, there were a multitude of individuals throughout the eighteenth and nineteenth centuries who were small saver-investors. They typically congregated around large European port cities and were prepared to take modest risks, such as sending a few goods on a departing ship. But by and large their meager savings were invested more readily into government bonds.
Banks, which had existed since antiquity, were also of little to no help to a struggling entrepreneur. It wasn’t until the Bank of England was founded in 1694 that banks began offering loans and advances of credit. Until that time, large public banks such as the Bank of Barcelona or the Bank of Genoa only handled deposits and transfers. Still, banks were not in the business of providing equity financing. It was too risky.
The most powerful bank of the nineteenth century, the House of Rothschild, is a case in point. In the first part of the century, the Rothschild family rose to power, transforming a small merchant bank in Frankfurt and a clothes exporter in England into a multinational financial conglomerate by lending money to war-torn, cash-strapped European governments. Later on, they created the biggest bank in the world by pioneering the creation of the modern bond market, enabling British investors to buy internationally tradable bonds of other European nations with a fixed interest rate. The Rothschilds made a colossal fortune by making these loans and by speculating on their rise and fall.
Occasionally, the Rothschilds invested their capital into a new business. But when they did it was to help finance major infrastructure or natural resource development projects. In the middle of the nineteenth century, the Rothschilds used their ample resources to become a dominant force in the finance and construction of European railways. Between 1835 and 1846, the Rothschilds contributed nearly 38 percent of the capital invested in thirtytwo French railway concessions.