Founder’s Note: We have a special two-part Digest for you this week. It’s a wild story we bet you’ve never heard. It involves a powerful hero and a sinister enemy.
Even better, it pulls in the CIA… the Mafia… and even a splash of rum.
Pay attention to this tale, and not only will you be thrilled and entertained… but you may just learn how to make a buck or two. Enjoy.
Few folks understand just how important rum was to the exploration of this planet. It wasn’t just bragging rights that men like Columbus set sail looking for. No, they didn’t plot their way to every corner of the Earth looking merely to find new lands.
They wanted a ripe source of sugar – the sweet nectar they could transform into the oh-so-intoxicating drink that sailors loved so much.
It’s no stretch of the truth to say the sugar trade built the British Empire. As thirsty mariners dropped their anchors in the deep blue waters of the Caribbean, they became the conduit for the world’s first truly global industry.
And as happens with all trades, money went where money was treated best.
Soon, nations from all over the planet were trading this and that as they worked to build their wealth. Power ebbed and flowed from the sugar-rich Caribbean as one partner amassed more resources than the next.
That’s when the hero of this tale enters the story.
Capitalism is the world’s greatest motivator. It ensures the smart, the resourceful and the hardworking get what’s theirs.
But it goes further than that. It’s not all about greed. Our mighty hero also ensures prices stay fair, products get better and innovation is an industrial constant.
It’s why a man by the name of Don Facundo Bacardí Massó figured he could make rum better, breaking with a centuries-old process.
The Spanish-born man made his living selling wine… at least to start. But he quickly realized that he could improve the world’s rum markets. Until Bacardí got involved, rum wasn’t all that good.
It was a sailor’s drink – harsh and strong.
But after he moved to Cuba, Bacardí got his hands on a unique strain of yeast. And then he discovered he could filter the brew through charcoal to smooth out its taste. After adding the mellowing effect of virgin oak barrels to the process, the man created the first clear rum.
As we’d expect… our hero – Capitalism – rewarded Bacardí handsomely.
Sales were good. A second generation soon joined the namesake business. Together they opened a new distillery. Then a third generation joined, and production got even bigger.
But while Capitalism was doing what it does best… its archenemy was doing work of its own.
It’s no secret that Cuba has had its fair share of Liberty haters step their feet on the island over the centuries.
As Cuba fought to gain freedom from Spain, business (and life) was tough.
Bacardí’s son was tossed in jail for joining rebel forces. Many women of the family were forced to find cover in Jamaica. And sales dipped.
Capitalism took a back seat. But it was far from defeated.
We saw proof firsthand. When we were invited to the company’s modern-day distillery in Puerto Rico, our host was eager to show us a bar tucked into the back corner of the plant. It recreates the scene where American soldiers toasted Cuba’s independence.
They grabbed a glass of Bacardi rum, tossed in some American Coca-Cola and pushed it high overhead as one of them supposedly proclaimed, “¡Cuba libre!”
With that, an iconic drink was born, and Capitalism got back to work. Bacardi went global.
This is where things get interesting. It’s where our hero shows his sinister – yet powerful – side.
Again, Capitalism treated Bacardí and his family well. They were expanding to Mexico and Puerto Rico and were quickly building a big brand and an even bigger empire.
But then – as it does – the powerful hand of the government reached down and grabbed our hero by the throat.
America’s 18th Amendment was thought to be a death blow to the company.
But Capitalism is big and strong. It always finds a way.
In this case, America’s Prohibition did anything but slow the company’s business. Oh sure, the rum maker had to officially “shut down” American operations, but anybody who knows Capitalism knows where there’s a will… there’s booze.
Americans flocked to Cuba. They made the short 90-mile boat ride not for the scenery but for the liquor. Bacardi was selling like crazy. Men like Ernest Hemingway made the destination famous around the world.
“My mojito in La Bodeguita,” he reportedly said. “My daiquiri in El Floridita.”
Of course, not all Americans could get to Cuba… and, besides that, those who could got thirsty once they got back home.
That’s why it’s important to tell you our hero is a bit of a lawbreaker. If the 18th Amendment taught Washington anything, it’s that Capitalism follows just one law… the law of supply and demand.
While the ships’ manifests may have shown their rum-laden cargoes were bound for ports all around the world, the truth was that many of the ships leaving Cuba were headed north to America’s territorial waters.
That’s where rumrunners would quietly offload their cargo and divert it to American buyers. Business was good. But if it wasn’t one thing holding Bacardi back, it was another.
Not too long after America was “wet” again in 1933, Fidel Castro started to gain power in Cuba. The man turned out to be one of Capitalism’s sharpest enemies.
In 1960, he dealt a devastating blow to our little rum company – the bugger stole it from the Bacardí family.
Castro banned the notion of private property on his island and nationalized all assets – everything from businesses to bank accounts.
Capitalism got knocked on its butt.
Knowing where he’s not wanted, our hero fled Cuba… pulled along by the entrepreneurial spirit that seems to be bred into the DNA of the Bacardí family.
Instead of helping Fidel expand his regime, members of the boozy family scratched their heads and remembered that money goes where money is treated best.
They packed their bags (probably full of money) and set sail to the Bahamas – where they trademarked their brand – and then to Puerto Rico – where they already had plants. Despite a fierce enemy, Capitalism found a way. It always finds a way…
We’ll continue our tale tomorrow. We’ll learn just how far a grudge can go and how rum finally overcame all adversity. There’s an important lesson within for all investors. You can stake your money on it.