The Match King

“Ivar took the long view. He believed matches were an important staple, like steel or sugar, and that match factories inevitably would be consolidated. He also foresaw that Britain’s abandoning of the gold standard would open up international finance to newcomers, and that the war would not clog shipping lanes as much as people supposed. He thought that if he could manage the match business as well as he had managed construction, he would be able to acquire a monopoly on production. Then, he could raise prices and earn enormous profits. Just as Rockefeller controlled oil and Morgan controlled banking, Kreuger envisioned controlling matches, and thereby joining an élite group of global monopolists.”

“When Swedish lawmakers decided to permit banks to invest in industrial companies for the first time, Ivar struck a deal with Oscar Rydbeck, a rising star at Skandinaviska Kredit A.B., known as “The Swedish Credit Bank.”11 When Rydbeck said he would be willing to take Ivar’s Kreuger & Toll shares as collateral for an investment in a new business, Ivar’s thoughts turned to his family - and to matches. Ivar’s father, Ernst August, had methodically saved enough money to buy stakes in two small match factories from their extended family’s consortium, Mönsterås Matchworks. Ivar’s brother Torsten now managed one of those factories in Kalmar, Ivar’s home town. The match business was highly competitive and not very profitable, but Ivar and the newly liberated Swedish banks agreed there was potential. Ivar saw that the match industry was in the same economic position oil, sugar, and steel had been in a few decades earlier. There were too many owners of too many factories. Competition was driving prices down so far that hardly any profit remained. Ivar knew his family, and the numerous other small factory owners, would never make much money this way. However, if these factories could be consolidated, the owner of a Swedish match monopoly could raise prices and make a fortune. Some factories in Sweden recently had combined, to form the Jönköping-Vulcan trust, but the men running the trust were conservative and slow. Ivar was sure he could dominate them. He began using loans from the Swedish Credit Bank to buy match factories throughout Sweden. During the next eight years, Ivar parlayed a few family match factories into a conglomerate. He modernized factories and expanded overseas sales. Production increased from 90,000 cases in 1914 to double that in 1916; his profits more than tripled.12 He reduced costs by purchasing the companies that made his machines, as well as companies that supplied chlorate acid potash for the tips. The hardball tactics Ivar used to take over competitors must have reminded Lee Higg’s partners of John D. Rockefeller, who used a similar approach to acquire competitors of his company Standard Oil. To get the money for these expansions, Ivar turned to Oscar Rydbeck. The Swedish markets were going through their version of a speculative frenzy during 1914-15, and Ivar was able to raise 5 million kronor from Swedish banks. During the war, when exports to Britain closed, Ivar turned to Russia, where he not only exported matches, but purchased aspen wood (the best wood for matches) and paper mills. After the war, he bought up virtually all of his competitors in Sweden, using more cash borrowed with Rydbeck’s help. He never gave up control. When he consolidated his match companies, he kept a majority of the voting shares.”

“Ivar tapped into the new funds available there to finance construction projects throughout Europe. He developed superior technology and methods of engineering design, as well as novel contractual features. In particular, he was willing to change the standard terms of construction contracts to reallocate risks to him. His appetite for risk was unique among men in the construction industry. For example, from his experience at Fuller Construction in New York, Ivar knew how frustrated builders became when there were lengthy delays. Construction firms had not been willing to take on the risk associated with delays; instead, they put that risk on their clients. But Ivar understood a fundamental proposition about the allocation of risk: both parties to a deal can gain when the party in the best position to bear a risk takes on that risk. Construction firms, not clients, were in the best position to reduce delays. Therefore, as Ivar realized, the best way to minimize construction delays was to shift the risk of loss that arose from such delays to him and Paul Toll. Then, Kreuger & Toll would have the incentive - and, crucially, the ability - to speed up a project. And here was the punchline: clients would pay more if they knew the job would be done on time. Kreuger & Toll became the first firm in Europe to commit to finish projects by a fixed date.9 After completing some small projects, building some beams and a viaduct, Ivar secured a deal to build a six-story “skyscraper.” He promised that if construction wasn’t finished by a particular date, he would give the client a partial refund of 1,200 dollars for each late day.”

“felt he could trust even more. By 1922, Ivar secretly had hired a handful of men with no previous connection to him or his”

“Ivar was about to use the two important oratorical lessons he had absorbed from giving hundreds of speeches to investors in Europe: speak from memory, and use lengthy pauses. First, he rubbed his hands together - a long-standing habit - to show he did not plan to use any notes. Second, he paused. And then he paused some more. And then some more. Ivar had learned the power of silence. He liked to make eye contact with everyone in the audience, one by one, and he did so slowly, before he uttered a word.”

“Ivar devised a more elegant solution to this problem. It was an ingenious piece of financial engineering that would survive the test of time. Ivar decided to introduce a new type of security, which he called a “B Share.” Ivar began with Swedish Match. He divided its common shares into two classes. Each class would have the same claim to dividends and profits, but the B Share would carry only 1/1000 of a vote, compared to one vote for each A Share. It was a simple, but profound, insight. B Shares could be sold to investors without affecting control.20 Ivar could double the size of his capital, while diluting his control by just a fraction of a percent.”

“Modern business leaders follow his footsteps and missteps. The chief executive officer today is an essentially political position, which requires men and women to assume public postures that often conflict with their true personalities. Many corporate executives who confront this tension become infected with hubris, as this man did. Like him, they come to believe they can overcome any skepticism and dig out of any financial hole, no matter how deep. Given the complexity of accounting, they, and their employees, manage reported earnings in a way that diverges from reality. Securities analysts and journalists entice them to repeat optimism so frequently that they come to believe it, just as he did. Some corporate officers become mentally unstable as the pressure mounts, especially at times of calamity. Many have unhappy endings.”

“To the extent Ivar or any of his henchmen needed money for bribes or other clandestine activities, they could avoid the scrutiny of American auditors”

“23 W. H. Stevens, “Stockholders’ Voting Rights and the Centralization of Voting Control,” Quarterly Journal of Economics,”

“Greta Garbo’s views of ocean travel: “The sea is wonderful. Nowhere does one feel so free! At the same time one is caught - there is no escape. Then, in port, one is free to go, and the sense of freedom is gone.””

“Books and book chapters Adams, Jr, Russell B., The Boston Money Tree (Thomas Y. Crowell Company, 1977). Allen, Frederick Lewis, Only Yesterday: An Informal History of the 1920s (Harper & Row, 1931). Allen, Frederick Lewis, The Great Pierpont Morgan (Harper & Brothers, 1949). Allen, Trevor, Ivar Kreuger, Match King, Croesus and Crook (John Long, Ltd, 1932). Anderson, Ingvar, A History of Sweden (Weidenfeld & Nicholson, 1955). Ångström, Lars-Jonas, Därför Mördades Ivar Kreuger (Sellin & Blomquist, 1990). Ångström, Lars-Jonas, Översättning (unpublished manuscript). Berle, Adolf A., Jr & Gardiner C. Means, The Modern Corporation and Private Property (Macmillan, 1932). Bernstein, Peter L., Capital Ideas: The Improbable Origins of Modern Wall Street (John Wiley, 1992). Bjerre, Poul Carl, Kreuger (Natur och Kultur, 1932). Brooks, John, Once in Golconda: A True Drama of Wall Street 1920-1938, at 82 (John Wiley, 1969). Burk, Kathleen, “The House of Morgan in Financial Diplomacy - 1920-1930,” in B. J. McKercher, ed., The Struggle for Supremacy: Anglo-American Relations in the 1920s (Macmillan, 1987). Chernow, Ron, The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance (Simon & Schuster, 1990). Churchill, Allen, The Incredible Ivar Kreuger (Rinehart & Company, Inc., 1957). Deeson, A. F. L., Great Swindlers: A Fascinating Collection of Some of the World’s Most Incredible Frauds, at 120 (Drake Publishers, 1972). Drachenfels, Kurt, The Real Ivar Kreuger (United Press, 1933). Edwards, George W., The Evolution of Finance Capitalism (Longmans, Green and Co., 1938). Eichengreen, Barry, Golden Fetters: The Gold Standard and the Great Depression 1919-1939 (Oxford University Press, 1992). Galbraith, John Kenneth, The Great Crash 1929 (Houghton Mifflin, 1954). Geisst, Charles R., Wall Street: A History (Oxford University Press, 1997). Georg, Manfred, The Case of Ivar Kreuger (Jonathan Cape, 1933). Glete, Jan, Kreugerkoncerne och Boliden (LiberFörlag, 1975). Glete, Jan, Kreugerkoncernen och Krisen På Svensk Aktiemarknad (Almqvist & Wiksell, 1981). Graham, Benjamin and David L. Dodd, Security Analysis (Whittlesey House, 1934). Hassbring, Lars, The International Development of the Swedish Match Company, 1917-1924 (LiberFörlag, 1979). Keynes, John Maynard, The Economic Consequences of the Peace (Harcourt, Brace & Howe, 1920). Kindleberger, Charles P., Manias, Panics and Crashes (John Wiley, 1978). Kreuger, Torsten, The Truth About Ivar Kreuger (Seewald, 1968). Lefèvre, Edwin, Reminiscences of a Stock Operator (George H. Doran and Company, 1923). Lindgren, Håkan, Corporate Growth: The Swedish Match Industry in Its Global Setting (LiberFörlag, 1979). Loewe, Walter, Arne Jansson, and Carl Magnus Rosell, From Swedish Matches to Swedish Match: Sweden’s Match Industry 1836-1996 (Wahlström & Widstrand, 1997). Mackay, Charles, Extraordinary Delusions and the Madness of Crowds (Harriman House, 2003). Marcosson, Isaac Frederick, Turbulent Years (Books for Libraries Press, 1938). Markham, Jerry W., A Financial History of the United States (M. E. Sharpe, 2002). Mitchell, Lawrence E., The Speculation Economy: How Finance Triumphed Over Industry (Berrett-Koehler Publishers, Inc., 2007). Moberg, Vilhelm, A History of the Swedish People: From Renaissance to Revolution (Dorset Press, 1971). Modig, Hans, Swedish Match Interests in British India During the Interwar Years (LiberFörlag, 1979). Partnoy, Frank, Infectious Greed: How Deceit and Risk Corrupted the Financial Markets (Profile, 2003). Rand, Ayn, Night of January 16th (Plume, 1971). Ripley, William Z., Main Street and Wall Street (Little Brown & Co., 1927). Scott, Franklin D., Sweden: The Nation’s History (Southern Illinois University Press, 1988). Seligman, Joel, The Transformation of Wall Street: A History of the Securities and Exchange Commission and Modern Corporate Finance (Houghton Mifflin, 1982). Shaplen, Robert, Kreuger: Genius and Swindler (Alfred A. Knopf, 1960). Soloveychik, George, The Financier: The Life of Ivar Kreuger (Peter Davies, 1933). Sparling, Earl, Kreuger’s Billion Dollar Bubble (Greenberg, 1932). Stolpe, Sven, Ivar Kreuger Mördad? (Médans, 1955). Stoneman, William H., The Life and Death of Ivar Kreuger (The Bobbs-Merrill Company, 1932). Strouse, Jean, Morgan: American Financier (Random House, 1999). Thunholm, Lars-Erik, trans. George Thiel, Ivar Kreuger: The Match King (T. Fischer & Co., 1995). Train, John, Famous Financial Fiascos (Clarkson N. Potter, Inc., 1985). Wasik, John F., The Merchant of Power: Sam Insull, Thomas Edison, and the Creation of the Modern Metropolis (Palgrave Macmillan, 2006). Wikander, Ulla, Kreuger’s Match Monopolies, 1925-1930: Case Studies in Market Control Through Public Monopolies (LiberFörlag, 1979). Wilkins, Mira, The History of Foreign Investment in the United States, 1914-1945 (Harvard University Press, 2004). Zuckoff, Mitchell, Ponzi’s Scheme: The True Story of a Financial Legend (Random House, 2005).”

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