Review: Who wants to be a 'Millionaire'?

"Millionaire: The Philanderer, Gambler, and Duelist Who Invented Modern Finance"
By Janet Gleeson
Simon & Schuster
Nonfiction/History
304 pages

In this story: Financial dealings Relevant stories RELATED SITES

By Michael Barkin
Special to CNN.com

(CNN) -- Imagine a world in which Microsoft CEO Bill Gates also controls the Federal Reserve and the Treasury Department. Add in a tremendous rise in Microsoft stock price (based on phony reports of potential earnings), uncontrolled printing of new money (abetted by the acting president, a large Microsoft stockholder), and a wildly speculative market in which rich and poor invest like mad and giant paper fortunes are built overnight.

Finally, picture the widespread panic that ensues when this house of cards tumbles to the ground. You'll now have a good idea of what actually happened during the 17th century's so-called Mississippi Bubble, newly described by Janet Gleeson in her history, "Millionaire: The Philanderer, Gambler, and Duelist Who Invented Modern Finance."

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Excerpt: 'Millionaire: The Philanderer, Gambler, and Duelist Who Invented Modern Finance'

"Millionaire" centers on the larger-than-life Scotsman John Law, who played the central role in this financial tragedy. Born in 1671 to a family of clergymen, Law disdained the clerical life, turning instead to gambling and carousing -- showing great skill at both. In 1695, he killed a man in a duel. Sentenced to death, he jumped bail, going into exile and wandering the great cities of Europe for the next 20 years. Though he made a fortune gambling (thanks to a knowledge of probabilities), he had higher ambitions, centered on finding patrons -- including the governments of several countries -- for grandiose financial schemes based on the printing of money.

Because of countries' bad experiences with paper money in the past, that form of currency was extremely scarce in this era, making financial dealings difficult; complicated trading deals were managed through personal notes, bank loans, and sacks full of coins. Coins, in fact, were the only money generally available, and their value was more related to their actual silver or gold content, not to the values stamped on them. It was a time in which shaving metal off coins could, and did, result in the death penalty.

In 1715, Law found the opportunity to apply his ideas. France's powerful Louis XIV had died, and the regent -- Philippe, Duc d'Orleans, in charge until the 8-year-old Louis XV was of age -- found that the recently concluded War of Spanish Succession had bankrupted the government. Desperate for a solution, he turned to the well-connected Law and made him controller general of France.

Law put his plan into action immediately. First, he formed a bank to issue paper money, and used government pressure to require that its notes be used as legal tender. Second, he created the Mississippi Company to manage the French lands in America, selling shares ostensibly to finance company operations. Later, he merged both entities.

He claimed literal mountains of rubies in the New World, hid the deaths and hardships experienced by the workers, and saw the prices of Mississippi stock soar, fueled by generous issues of paper money by his own bank. Much of France partook in the scheme, and saw their investments increase exponentially.

Then, as in all such markets, the bubble burst. The few who had sold out before the crash ended up wealthy beyond their dreams; indeed, the word millionaire was invented in this era. The majority of investors, however, were ruined.

In disgrace, Law fled France for Venice, where he died in 1729.

Gleeson tells Law's story with enthusiasm and skill. She does an excellent job of documenting the lives of the people affected by the rocketing stock prices and making their stories relevant to today: It is impossible to read about the sudden wealth coming to Law's stockholders without thinking of today's Internet multimillionaires and the up-and-down stock market in which they've built their fortunes.

Gleeson sometimes concentrates too much, however, on the more sensational aspects of Law's life. Though his experiences make entertaining reading, occasionally what's really needed is a better explanation of financial markets in general and Law's schemes in particular. A little perspective would have helped, too: To what extent was the Mississippi Company fraudulent or just badly managed? The question is never quite answered.

At times, Gleeson also strains a bit for that contemporary relevance. "As with many successful businessmen today," she writes at one point, "he was consumed with political ambition." Yes, this is true, but it's also true for unsuccessful businessmen, and even non-businessmen.

There's also a minor error throughout the book regarding U.S. dollar equivalents to British pounds. Gleeson supplies a formula in the preface for historical accuracy, but then doesn't follow it in the book, leading to ludicrous results (for example, 10 British pounds in 1690 is described as equal to $16 in 1999, rather than $1168).

But those are quibbles. Overall, "Millionaire" is an enjoyable cautionary tale, worth taking to the beach -- or perusing while watching the stock market ticker go by, with the spirit of John Law never far away.

Simon & Schuster

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