corporate raider

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pages: 477 words: 144,329

How Money Became Dangerous by Christopher Varelas

activist fund / activist shareholder / activist investor, Airbnb, airport security, barriers to entry, basic income, bitcoin, blockchain, Bonfire of the Vanities, California gold rush, cashless society, corporate raider, crack epidemic, cryptocurrency, discounted cash flows, disintermediation, diversification, diversified portfolio, Donald Trump, dumpster diving, fiat currency, fixed income, friendly fire, full employment, Gordon Gekko, greed is good, interest rate derivative, John Meriwether, Kickstarter, Long Term Capital Management, mandatory minimum, mobile money, mortgage debt, pensions crisis, pets.com, pre–internet, profit motive, risk tolerance, Saturday Night Live, shareholder value, side project, Silicon Valley, Steve Jobs, technology bubble, The Predators' Ball, too big to fail, universal basic income, zero day

Those in control nearly always resist making the required changes to adapt to the evolving definition of happiness. Or they don’t know how to adjust to it. So an outside agent is often required to force that change. For Walt Disney Productions, that agent was the corporate raider. The resulting disruption from such change is seldom pleasant. To the incumbent managers—and to the other employees whose futures are now uncertain—the disruptors are the bad guys. But the changes that they bring about can be necessary for the survival of the company. Before the corporate raiders of the ’80s, the mission statements of most companies were focused on creating the best product or providing the best service. Then corporate raiders forced management teams to prioritize share price above all else. Maximizing shareholder value became the new mantra. In making management decisions, those in charge had only to ask if the decision would increase the company’s share price, with the most direct means being an increase in profits; if it did, then the decision was easy to justify.

Then on June 8, 1984, during my fourth summer at the park, the nation’s most famous Main Street collided with Wall Street in a way that would both rattle Disney and change the arc of modern business. I didn’t know it at the time, but it would also be an important catalyst for moving me toward a career in the financial services industry. That morning, some portentous and confusing news appeared in the papers. A corporate raider named Saul Steinberg was targeting Walt Disney Productions in a hostile takeover. None of us knew what it meant, as we had never heard the terms “corporate raider” and “hostile takeover” before—the same was true for most Americans—yet I was fascinated by the news and gleaned what I could from the papers and TV reports. I learned that, while Disney hadn’t been for sale, there was a process by which a well-funded investor could buy up enough stock in a publicly traded company that he would gain some measure of influence over the firm’s board of directors.

“So Gere’s character,” Bruce said, pulling his old BMW into traffic, “he’s a corporate raider. Is that what you’re gonna be, Chris?” “No,” I said. “I would either be on the financing side, representing a guy like Gere’s character, helping him raise the money for the takeover; or I’d be running defense for the guy who owns the shipping company.” Ty rolled down his window. He always got to ride shotgun since he was six foot six. “Like the movie Wall Street? That’s the sort of thing you’ll be doing?” “Not really,” I said. “I’m much more Working Girl.” That got a good round of laughs. “Working Girl is about M&A, mergers and acquisitions, which is what I’m gonna do, while Wall Street is about sales and trading and corporate raiders.” As is often the case, Hollywood movies probably did more than anything else to formulate public perception and disseminate a limited understanding of the financial services industry—even for smart people like my friends in the car.


pages: 414 words: 108,413

King Icahn: The Biography of a Renegade Capitalist by Mark Stevens

corporate governance, corporate raider, Donald Trump, Gordon Gekko, Irwin Jacobs, laissez-faire capitalism, old-boy network, Ponzi scheme, profit motive, shareholder value, yellow journalism

TEXACO: ANOTHER YEAR, ANOTHER $500 MILLION COLD STEEL: USX AND THE END OF AN ERA ALL THE KING’S HORSES AND ALL THE KING’S MEN FORWARD: THE BATTLE TO WRITE THIS BOOK It was the spring of 1992 when Carl Celian Icahn first appeared on my radar screen. I knew of his Wall Street exploits from various news reports but it all became strangely personal when I watched the tall gangly figure I’d seen on television walk across the village green of my hometown of Bedford, New York. My mind raced. “Is that the feared corporate raider dressed in faded tennis shorts and a wrinkled top walking into the village wine shop? Is it just a look alike? If it’s Icahn, what’s he doing here in sleepy Bedford?” I wanted to approach the man but held back, thinking it was likely just another resident of the town who had no interest in or relationship to Icahn. Still, the face seemed to strike a chord, so when I returned home, I called a neighbor who was familiar with all things Bedford.

To know Icahn is to know full well that he would not have invested a dime in Tappan before Kingsley the numbers-crunching analyst put the company under a microscope. What’s more, the idea of Icahn the born skeptic putting a penny’s worth of faith in management’s assertions is laughable. At this point his prey had yet to figure out that it was under siege. As Blasius noted in a memo to Chairman W. R. Tappan, Icahn “seemed pleased that we took the time to talk to them about the company.” Icahn had yet to become a feared corporate raider, and the Blasius memo speaks volumes about corporate management’s naiveté concerning his intentions. Carl Icahn “pleased” that executives of a company in which he held a major investment would take the time to talk to him? Nonsense. As a shareholder, Icahn believed that Tappan and Blasius worked for him, that they continued in their capacity at the pleasure of the shareholders and that they were obligated to be responsive to him.

“For his entire life, he had been in the textile business and he’d worked his way up to achieve the pinnacle for a man like that—to become the chief executive officer of a company. Now to have someone come along and buy that company, well what was Johnston going to do at this stage of his life, look for a job? Johnston reacted the way other CEOs react when they find themselves in that situation.” On every front, Icahn vs. Dan River was a clash of cultures, of geography, of insiders and outsiders, of company men and a corporate raider. But most of all, it was a clash between two individuals: one who wanted to keep control over a public corporation and one who wanted to earn a fast profit on the value of its assets. Both were determined to have their way. To block Icahn, management put in place a series of measures that might well thwart the raider but that brought into question their alleged concern for the shareholders.


Deep Value by Tobias E. Carlisle

activist fund / activist shareholder / activist investor, Andrei Shleifer, availability heuristic, backtesting, business cycle, buy and hold, corporate governance, corporate raider, creative destruction, Daniel Kahneman / Amos Tversky, discounted cash flows, fixed income, intangible asset, joint-stock company, margin call, passive investing, principal–agent problem, Richard Thaler, riskless arbitrage, Robert Shiller, Robert Shiller, Rory Sutherland, shareholder value, Sharpe ratio, South Sea Bubble, statistical model, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, Tim Cook: Apple

Others resisted civilization and institutionalization, maintaining the freebooting ways and anti-glamour machismo of their corporate raider forebears. Perhaps it is a necessary response to the goings on in the stocks found in the netherworld of the market. Far from the glare of analysts and the media, blatant fraud, outright theft, and flagrant oppression of minority investors flourishes. The sheriffs on this frontier are the activists and short sellers, and who can blame them if the horror, the horror drives them to write Hunter S. Thompson Gonzo-style poison-pen letters, drafted as if Mistah Kurtz had to file his “Exterminate all the brutes!” pamphlet with the SEC. Icahn’s evolution from liquidator to corporate raider reflected the underlying philosophical shift in the broader world of value investment and shareholder activism.

As a lawyer specializing in mergers and acquisitions he has advised on transactions across a variety of industries in the United States, the United Kingdom, China, Australia, Singapore, Bermuda, Papua New Guinea, New Zealand, and Guam. He is a graduate of the University of Queensland in Australia with degrees in Law (2001) and Business (Management) (1999). xvii CHAPTER 1 The Icahn Manifesto Corporate Raider to Activist Investor “Had we but world enough, and time, This coyness, Lady, were no crime. . . —Andrew Marvell, To His Coy Mistress (c. 1650) bouleversement \bool-vair-suh-MAWN\, noun: Complete overthrow; a reversal; an overturning; convulsion; turmoil. —Comes from French, from Old French bouleverser, “to overturn,” from boule, “ball” (from Latin bulla) + verser, “to overturn” (from Latin versare, from vertere, “to turn”).

Kingsley later recalled:4 We asked ourselves, “If we can be activists in an undervalued closed-end mutual fund, why can’t we be activists in a corporation with undervalued assets?” As they had with the closed-end mutual funds, Icahn and Kingsley would seek to control the destiny of public companies. Their impact on America’s corporations would be profound. ICAHN’S WALL STREET REFORMATION Icahn’s progression from arbitrageur and liquidator of closed-end funds to full-blown corporate raider started in 1976 with a distillation of the strategy into an investment memorandum distributed to prospective investors:5 It is our opinion that the elements in today’s economic environment have combined in a unique way to create large profit-making 4 DEEP VALUE opportunities with relatively little risk. [T]he real or liquidating value of many American companies has increased markedly in the last few years; however, interestingly, this has not at all been reflected in the market value of their common stocks.


pages: 263 words: 80,594

Stolen: How to Save the World From Financialisation by Grace Blakeley

"Robert Solow", activist fund / activist shareholder / activist investor, asset-backed security, balance sheet recession, bank run, banking crisis, banks create money, Basel III, basic income, battle of ideas, Berlin Wall, Big bang: deregulation of the City of London, bitcoin, Bretton Woods, business cycle, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collective bargaining, corporate governance, corporate raider, credit crunch, Credit Default Swap, cryptocurrency, currency peg, David Graeber, debt deflation, decarbonisation, Donald Trump, eurozone crisis, Fall of the Berlin Wall, falling living standards, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, fixed income, full employment, G4S, gender pay gap, gig economy, Gini coefficient, global reserve currency, global supply chain, housing crisis, Hyman Minsky, income inequality, inflation targeting, Intergovernmental Panel on Climate Change (IPCC), Kenneth Rogoff, Kickstarter, land value tax, light touch regulation, low skilled workers, market clearing, means of production, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, negative equity, neoliberal agenda, new economy, Northern Rock, offshore financial centre, paradox of thrift, payday loans, pensions crisis, Ponzi scheme, price mechanism, principal–agent problem, profit motive, quantitative easing, race to the bottom, regulatory arbitrage, reserve currency, Right to Buy, rising living standards, risk-adjusted returns, road to serfdom, savings glut, secular stagnation, shareholder value, Social Responsibility of Business Is to Increase Its Profits, sovereign wealth fund, the built environment, The Great Moderation, too big to fail, transfer pricing, universal basic income, Winter of Discontent, working-age population, yield curve, zero-sum game

In other words, the City Code institutionalised the power of corporate raiders, activist investors, and other short-term shareholders who would come to act as the enforcers of shareholder value ideology. From Thatcher’s perspective, and from that of her friends in the Mont Pelerin Society, corporate raiders like Hanson were heroes, charging into corporate fortresses and taking on the vested interests of the managers who were hoarding the company’s capital for themselves rather than investing it in the interests of shareholders. Thatcher’s Big Bang and the development of the City Code sought to make it as easy as possible for corporate raiders to “shake-up” big, incumbent firms like Imperial Tobacco. Once the shake-up was through, corporate raiders like Hanson were no longer needed. The Economist wrote in Hanson’s obituary that his company’s focus on the maximisation of shareholder value had become “standard business practice”.

Together, the increasing power of investors and the emergence of an ideology to support this power has led to the financialisation of the non-financial corporation: businesses are increasingly being used as piggy banks for rich shareholders. This, according to the CEO of General Electric, makes shareholder value “the dumbest idea in the world”34. But like many dumb ideas that enrich the powerful, shareholder value took off in the 1980s — and nowhere more so than in the City of London. Corporate Raiders, Hostile Takeovers, and Activist Investors Lord Hanson — aka “Lord Moneybags” — is famous for many things.35 He was engaged to Audrey Hepburn, had a fling with Joan Collins, and also happens to be one of the UK’s most notorious corporate raiders. Although he made his money in the new economy, Hanson didn’t exactly come from humble beginnings. Born into a family that made its money during the industrial revolution, he built multiple successful business ventures on the back of his family’s wealth before teaming up with Lord Gordon White to start Hanson Trust in 1964.

CONTENTS Introduction The Interregnum What is the Alternative? Building the Future Chapter One The Golden Age of Capitalism How Does Change Happen? The Rise of Global Finance The Political Consequences of Social Democracy Never Let a Serious Crisis Go to Waste Chapter Two Vulture Capitalism: The Financialisation of the Corporation The Big Bang Corporate Raiders, Hostile Takeovers and Activist Investors From Downsize and Distribute to Merge and Monopolise Chapter Three Let Them Eat Houses: The Financialisation of the Household The Enemy Within Privatised Keynesianism Blowing Bubbles Financialisation and Politics Chapter Four Thatcher’s Greatest Achievement: The Financialisation of the State Thatcher’s Greatest Achievement PFI: Profits for Investors The Bond Vigilantes Illiberal Technocracy Chapter Five The Crash Bubble Economics Financial Globalisation Securitisation, Shadow Banking and Inter-Bank Lending Bailout Britain Transatlantic Banking Crisis or Structural Crisis of Financial Capitalism?


pages: 120 words: 33,892

The Acquirer's Multiple: How the Billionaire Contrarians of Deep Value Beat the Market by Tobias E. Carlisle

activist fund / activist shareholder / activist investor, business cycle, cognitive dissonance, corporate governance, corporate raider, Jeff Bezos, Paul Graham, Peter Thiel, Richard Thaler, shareholder value, Tim Cook: Apple

THE ACQUIRER’S MULTIPLE “In the old legend the wise men finally boiled down the history of mortal affairs into the single phrase, ‘This too shall pass.’” —Benjamin Graham, Security Analysis (1934) The Acquirer’s Multiple is an industrial-strength PE multiple. It’s a throwback to the corporate raiders and buyouts of the 1980s. In dusty, old finance journals, it is described it as the Acquirer’s Multiple because corporate raiders and buyout firms—the acquirers—used it to find whole companies cheap enough to take over. Where most investors only look at profits, the corporate raiders looked to see what a company owned. They used it to find treasure hidden in plain sight on corporate balance sheets. The Acquirer’s Multiple compares the total cost of a business to the operating income flowing into the company. It assumes the acquirer can sell assets, pay out the company’s cash, or redirect the business’s cash flows.

They buy stocks with falling prices. …with falling profits. …that lose money. …that are failing. …that have failed. But they only do it when the stock is deeply undervalued. Billionaire value-investor Warren Buffett famously says he tries to be “fearful when others are greedy, and greedy when others are fearful.” Said in other words, Buffett zigs when the crowd zags. Like Buffett, billionaire corporate-raider Carl Icahn is also a value investor. He has been called the “the contrarian to end all contrarians.”2 Ken Moelis, former chief of investment banking at UBS, said of Icahn, “He’ll buy at the worst possible moment, when there’s no reason to see a sunny side and no one agrees with him.”3 Icahn explains why:4 The consensus thinking is generally wrong. If you go with a trend, the momentum always falls apart on you.

At the peak of his power in the 1980s, Icahn controlled billions in capital. He attacked the giants of the public markets, which included Texaco, the “Big Red Star of the American Highway,” for which he bid $12.4 billion. He also attacked U.S. Steel, the world’s first billion-dollar corporation, then with a market cap of $6 billion. Other investors took notice. A cottage industry of so-called corporate raiders sprang up. They disappeared with the 1987 stock market crash. But a new breed of activist investors emerged in the wake of the dot-com bust in the early 2000s. We’ll learn about two in the next chapter. 10. NEW GENTLEMEN OF FORTUNE “It seemed a very great world in which these men lived; a world where high rules reigned and every trifle in public conduct counted: a duelling-ground where although the business might be ruthless, and the weapons loaded with ball, there was ceremonious personal courtesy and mutual respect


pages: 154 words: 47,880

The System: Who Rigged It, How We Fix It by Robert B. Reich

affirmative action, Affordable Care Act / Obamacare, Bernie Madoff, Bernie Sanders, business cycle, clean water, collective bargaining, corporate governance, corporate raider, corporate social responsibility, Credit Default Swap, crony capitalism, cryptocurrency, Donald Trump, ending welfare as we know it, financial deregulation, Gordon Gekko, immigration reform, income inequality, Jeff Bezos, job automation, London Whale, Long Term Capital Management, market fundamentalism, mass incarceration, mortgage debt, Occupy movement, Ponzi scheme, race to the bottom, Robert Bork, Ronald Reagan, shareholder value, too big to fail, trickle-down economics, union organizing, women in the workforce, working poor, zero-sum game

Because most attendants were women, he insisted they were not “breadwinners” and should not expect the same pay as male employees. Former TWA chair C. E. Meyer Jr. calls Icahn “one of the greediest men on earth.” Greedy or not, Icahn ushered in a systemic change in the American corporation that continues to this day. As Icahn and other corporate raiders made fortunes, CEOs began to devote themselves entirely and obsessively to maximizing the short-term values of their shares of stock in order to prevent a takeover. Before Icahn and the corporate raiders, it was assumed that large corporations had responsibilities to all their stakeholders, not just their shareholders. “The job of management,” proclaimed Frank Abrams, chair of Standard Oil of New Jersey, in a 1951 address that was typical of the time, “is to maintain an equitable and working balance among the claims of the various directly affected interest groups…stockholders, employees, customers, and the public at large.”

They should “balance the interests of the stockholder, the community, the customer, and the employee.” Over the past forty years, corporate raiders have morphed into more respectable-sounding “shareholder activists” and “private equity managers” who take over “underperforming” companies. Outright hostile takeovers have become rare, but that’s only because corporate norms have changed. CEOs now run corporations only to maximize shareholder returns. * * * — This systemic change could not have occurred without changes in laws and regulations that encouraged it. Some appeared small at the time, which is often the case with systemic change: It’s not the size or visibility of specific legal or regulatory changes that count but their consequences for how the system functions. Ronald Reagan’s administration looked favorably on the corporate raiders. Although the raiders’ tactics might easily have been seen to violate the Securities Acts of 1933 and 1934 because of their reliance on risky loans, Reagan’s Securities and Exchange Commission made no attempt to stop them.

In King Icahn, a 1993 biography, author Mark Stevens describes Icahn as a “germophobic, detached, relatively loveless man,” and quotes one contemporary saying, “Carl’s dream in life is to have the only fire truck in town. Then when your house is in flames, he can hold you up for every penny you have.” Isaac Perlmutter, the CEO of Marvel Comics and a veteran of the Israeli Army, likened dealing with Icahn to negotiating with terrorists. Also like Trump, Icahn came to prominence in the roaring 1980s. As America’s preeminent corporate raider, he was part of the inspiration for the character Gordon Gekko in the 1987 film Wall Street. When Oliver Stone was researching the film, he visited Icahn and borrowed one of Icahn’s observations for the Gekko character: “If you need a friend, get a dog.” (Icahn borrowed the phrase from Harry Truman’s description of life in Washington. It’s unclear whether Icahn also supplied the most memorable line in the film: “Greed, for lack of a better word, is good.


pages: 421 words: 128,094

King of Capital: The Remarkable Rise, Fall, and Rise Again of Steve Schwarzman and Blackstone by David Carey

activist fund / activist shareholder / activist investor, asset allocation, banking crisis, Bonfire of the Vanities, business cycle, carried interest, collateralized debt obligation, corporate governance, corporate raider, credit crunch, diversification, diversified portfolio, fixed income, Gordon Gekko, margin call, Menlo Park, mortgage debt, new economy, Northern Rock, risk tolerance, Rod Stewart played at Stephen Schwarzman birthday party, Sand Hill Road, sealed-bid auction, Silicon Valley, sovereign wealth fund, The Predators' Ball, éminence grise

For all the power and wealth private equity firms had amassed, leveraged buyouts (LBOs or buyouts for short) had always been controversial, a lightning rod for anger over the effects of capitalism. As Blackstone and its peers gobbled up ever-bigger companies in 2006 and 2007, all the fears and criticisms that had dogged the buyout business since the 1980s resurfaced. In part it was guilt by association. The industry had come of age in the heyday of corporate raiders, saber-rattling financiers who launched hostile takeover bids and worked to overthrow managements. Buyout firms rarely made hostile bids, preferring to strike deals with management before buying a company. But in many cases they swooped in to buy companies that were under siege and, once in control, they often laid off workers and broke companies into pieces just like the raiders. Thus they, too, came to be seen as “asset strippers” who attacked companies and feasted on their carcasses, selling off good assets for a quick profit, and leaving just the bones weighed down by piles of debt.

But it was the advent of a new kind of financing that would have the most profound effect on the buyout business. Junk bonds, and Drexel Burnham Lambert, the upstart investment bank that single-handedly invented them and then pitched them as a means to finance takeovers, would soon provide undreamed-of amounts of new debt for buyout firms. Drexel’s ability to sell junk bonds also sustained the corporate raiders, a rowdy new cast of takeover artists whose bullying tactics shook loose subsidiaries and frequently drove whole companies into the arms of buyout firms. Over the course of five years, Drexel’s innovations revolutionized the LBO business and reshaped the American corporate establishment. A decade earlier buyouts had been a cottage industry with just a handful of new and more established LBO boutiques.

At bottom, Kravis’s power and celebrity, like the deals KKR did, were magnified by the billions put up by Drexel. * * * Buyout specialists weren’t the only financial players benefiting from and dependent on Milken. At the same time that LBO firms were proliferating, Drexel was also staking a new, rude, and belligerent horde that emerged on the corporate scene. The corporate establishment and a skeptical press coined a string of equally unflattering names for the new intruders: corporate raiders, buccaneers, bust-up artists, and, most famously, barbarians. Like wolves, the raiders stalked stumbling or poorly run public companies that had fallen behind the herd, and they bought them in LBOs. Like the buyout firms, the raiders were forever on the lookout for companies whose stocks traded for less than they thought the companies were worth—because they had valuable assets that weren’t reflected in the stock price or because the companies were inefficiently managed.


pages: 302 words: 80,287

When the Wolves Bite: Two Billionaires, One Company, and an Epic Wall Street Battle by Scott Wapner

activist fund / activist shareholder / activist investor, asset allocation, Bernie Madoff, corporate governance, corporate raider, Credit Default Swap, Mark Zuckerberg, Ponzi scheme, price discrimination, Ronald Reagan, short selling, Silicon Valley, Tim Cook: Apple, unbiased observer

Robert Slater, The Titans of Takeover (Philadelphia: Beard Books, 1999). 9. James Sterngold, “The Pawns Differ: Icahn Still Winning,” New York Times, February 6, 1985. 10. Tobias Carlisle, “How Carl Icahn Became a Corporate Raider,” Investment News, December 7, 2014. 11. Tobias Carlisle, “The Insight That Enabled Carl Icahn to Become a Corporate Raider,” Crain’s Wealth, December 8, 2014. 12. Carlisle, “How Carl Icahn Became a Corporate Raider.” 13. Paul Richter, “Carl Icahn Relishes His Raider Role,” Los Angeles Times, June 9, 1985. 14. Slater, The Titans of Takeover. 15. Ibid. 16. Ibid. 17. Ibid. 18. Ibid. 19. Carlisle, “How Carl Icahn Became a Corporate Raider.” 20. Robert Cole, “Icahn Makes Dual Offer for Dan River,” New York Times, October 26, 1982. 21. Slater, The Titans of Takeover. 22. Richter, “Carl Icahn Relishes His Raider Role.” 23.

Loeb, Nelson Peltz, and others, is defined by an interest not just in owning a piece of a company, but also in using their influence and money to change the way it operates. And no company, large or small, is beyond their reach. Apple, PepsiCo, Yahoo, DuPont, JC Penney, and Macy’s are among the businesses that have been targeted in recent years. While the 1970s and 1980s marked the rise, dominance, and ultimate fall of the corporate raiders, arbitrageurs, and junk bond kings of the day, during the current Era of the Activist, barely a week goes by without one of the aforementioned financiers revealing a stake in a company’s stock and an ambitious plan to propel it higher. Activism isn’t just proliferating—it’s exploding. In 2012 there were seventy-one activist campaigns with a total of $12 billion invested, according to the new regulatory filings with the Securities and Exchange Commission.

While Saxon initially talked tough, the company settled after only six months and agreed to buy back Icahn’s stock for $10.50 a share, more than three dollars above Icahn’s average purchase price.20 Icahn made $2.2 million on the deal, and the scores kept coming.21 Icahn pocketed $10 million in a deal with Hammermill Paper the same year, $7 million from Simplicity Pattern in 1981, and $17 million on an investment in the storied department store chain Marshall Fields the following year.22 By the mid-1980s, Icahn had become a player on Wall Street’s emerging takeover scene alongside the day’s other dealmakers, such as Ivan F. Boesky, T. Boone Pickens, and Michael Milken, the Drexel Burnham Lambert banker whose infamous “junk bonds” helped finance the buying frenzy of the times. Milken’s high-yielding securities had earned him the nickname “The Junk Bond King” since he had all but invented the market for the securities. The men—coined corporate raiders by the media—were shrewd, often ruthless negotiators, stopping at nothing to shake up companies whose CEOs were deemed either too “imperial” or too “country-club,” more interested in their golf scores than their shareholders. It was the era of the leveraged buyout (LBO), a time when deep-pocketed dealmakers like Icahn and others ran roughshod through the nation’s boardrooms and there was little anyone could do to stop them.


pages: 706 words: 206,202

Den of Thieves by James B. Stewart

corporate raider, creative destruction, discounted cash flows, diversified portfolio, fixed income, fudge factor, George Gilder, index arbitrage, Internet Archive, Irwin Jacobs, margin call, money market fund, Ponzi scheme, rolodex, Ronald Reagan, shareholder value, South Sea Bubble, The Predators' Ball, walking around money, zero-coupon bond

page 103 Ronald Perelman was head of MacAndrews & Forbes and launched a hostile takeover of Revlon. Nelson Peltz, head of Triangle Industries, acquired National Can and then bought American Can from Primerica. He sold American National Can to Pechiney, the French packaging company. Gerald Tsai was chairman of Primerica, which he reshaped into a financial services concern which owns Smith Barney, the brokerage firm. Irwin Jacobs is a corporate raider based in Minneapolis. The Hafts became corporate raiders, launching an unsuccessful bid for Safeway Stores. The Pritzker family owns Hyatt Hotels Corporation and invests in numerous other ventures. page 104 Carr has denied being part of any scheme to free Posner from the standstill agreement. page 104 While based on independent reporting, the text's account of the Fischbach transaction closely parallels that set forth in Government's Milken memo, pp. 30-37 (redacted).

., New York Robert Freeman, head of arbitrage Robert Rubin, future co-chief executive Frank Brosens, arbitrageur David Brown, investment banker At Lazard Freres, New York Robert Wilkis, investment banker Randall Gecola, analyst Felix Rohatyn, investment banker At Shearson Lehman Brothers, New York Ira Sokolow, investment banker J. Tomilson Hill III, co-head of M&A Steve Waters, co-head of M&A Peter Solomon, investment banker At Bank Leu, Nassau, the Bahamas Bernhard Meier, banker Bruno Pletscher, banker Cast of Characters U At Merrill Lynch & Co., New York Stephen Hammerman, general counsel Richard Drew, vice president, compliance Major investors Carl Icahn, corporate raider and future chairman of TWA John Mulheren, head of Jamie Securities Henry Kravis, principal, Kohlberg Kravis Roberts Inc. At Wachtell, Lipton, Rosen & Katz, New York (counsel for Goldman, Sachs) Martin Lipton, partner Ilan Reich, partner Lawrence Pedowitz, partner At Paul, Weiss, Rifkind, Wharton & Garrison, New York (counsel for Michael Milken and Dennis Levine) Arthur Liman, partner Martin Flumenbaum, partner At Williams & Connolly, Washington, D.C.

Levine told Reich about his own family background, his wife, his frustrations at Smith Barney. Levine's confessions resonated with Reich, who had just gotten married himself. He understood Levine's family milieu, and he often felt frustrated and underappreciated at Wachtell. Levine told Reich that he had big ambitions: he planned to earn from $10 million to $20 million fast, then set up his own operation, maybe as a corporate raider. Then he, Levine, would have the lawyers and investment bankers like himself and Reich working for him. "How are you going to make that kind of money?" Reich asked. Levine leaned forward. "There's a lot of money to be made in information," he said. "Look at the arbitrageurs. They're trading in it. Look at investment bankers. Everyone's doing it." He paused. "Wach-tell is really a clearinghouse" for some of the most valuable information, he said.


pages: 645 words: 190,680

The Taking of Getty Oil: Pennzoil, Texaco, and the Takeover Battle That Made History by Steve Coll

business cycle, corporate governance, corporate raider, financial innovation, interchangeable parts, Jarndyce and Jarndyce, jitney, North Sea oil, Ralph Nader, Ronald Reagan

Why, after all, was Getty Oil’s stock price so low—not just a little bit depressed, but two or three or even four times less than the company’s actual value? Who was responsible? Boone Pickens and his allies on Wall Street said unequivocally that it was Sid Petersen’s fault. Pickens might be an opportunist, but he was also a brilliant, articulate oilman, and the critique he proffered of large, publicly held oil companies such as Getty was persuasive. The domestic oil industry, Pickens said, was already in a state of liquidation; corporate raiders such as himself were only accelerating an inexorable trend. For more than ten years, the largest American oil companies had been unable to replace their domestic reserves as fast as they produced and sold them. That meant the companies were living on borrowed time—eventually, their reserves would run out and there would be no oil in the United States to replace them. American soil had been thoroughly picked over for oil; no major field had been discovered since Prudhoe Bay, in Alaska, back in the 1960s, and there was no reason to believe that any major discoveries were left to be made.

To him, the case sponsored by Boone Pickens and his aggressive, takeover-minded allies made the most sense because it explained the poor recent performance of Getty Oil stock, as evidenced by the failure of management to properly invest the late 1970s windfall, and laid the blame at the feet of Sid Petersen, whom Gordon doubted for his own reasons. Actually, Petersen was not as hostile to the Pickens movement as some other executives of large oil companies. He, too, was distressed by Getty Oil’s value gap and the company’s foundering stock price. He was distressed above all because the value gap meant that Getty Oil was a prime takeover target for Pickens or some other like-minded corporate raider. What Petersen appreciated better than Gordon Getty did, however, was that the debate on Wall Street and in corporate boardrooms over the oil industry’s past errors and future policies had two distinct aspects. On the one hand, there was sometimes a scholarly, academic atmosphere about it all, a sense among industry analysts of reasonable men disagreeing over complex business issues. In that context, Petersen was willing to examine the Pickens “theory” of the oil business, and even, after thorough study, to implement its principles at Getty Oil if it would benefit stockholders.

Petersen had no way to know for certain, but he suspected that Gordon was sharing information in the studies. If so, Gordon was likely violating the law; at the very least, he was moving into a precarious legal gray area. Gordon was a director of Getty Oil. In that position, he had certain legal obligations to protect the company’s shareholders. Turning over secret company documents to a competitive, aggressive corporate raider was hardly consistent with those obligations. What Gordon Getty did not realize when he wrote his hopeful, friendly letter to Sid Petersen on December 24 was that only a few days before, concerned about Gordon’s behavior, Petersen had met with his lawyers at Getty Oil headquarters to discuss how they might launch a legal challenge to Gordon’s control of the Sarah Getty Trust. At that meeting, Petersen was not yet convinced that an all-out war between Getty Oil and the company’s largest stockholder was necessary or desirable.


pages: 515 words: 132,295

Makers and Takers: The Rise of Finance and the Fall of American Business by Rana Foroohar

accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, additive manufacturing, Airbnb, algorithmic trading, Alvin Roth, Asian financial crisis, asset allocation, bank run, Basel III, bonus culture, Bretton Woods, British Empire, business cycle, buy and hold, call centre, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, carried interest, centralized clearinghouse, clean water, collateralized debt obligation, commoditize, computerized trading, corporate governance, corporate raider, corporate social responsibility, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, crowdsourcing, David Graeber, deskilling, Detroit bankruptcy, diversification, Double Irish / Dutch Sandwich, Emanuel Derman, Eugene Fama: efficient market hypothesis, financial deregulation, financial intermediation, Frederick Winslow Taylor, George Akerlof, gig economy, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, High speed trading, Home mortgage interest deduction, housing crisis, Howard Rheingold, Hyman Minsky, income inequality, index fund, information asymmetry, interest rate derivative, interest rate swap, Internet of things, invisible hand, John Markoff, joint-stock company, joint-stock limited liability company, Kenneth Rogoff, Kickstarter, knowledge economy, labor-force participation, London Whale, Long Term Capital Management, manufacturing employment, market design, Martin Wolf, money market fund, moral hazard, mortgage debt, mortgage tax deduction, new economy, non-tariff barriers, offshore financial centre, oil shock, passive investing, Paul Samuelson, pensions crisis, Ponzi scheme, principal–agent problem, quantitative easing, quantitative trading / quantitative finance, race to the bottom, Ralph Nader, Rana Plaza, RAND corporation, random walk, rent control, Robert Shiller, Robert Shiller, Ronald Reagan, Satyajit Das, Second Machine Age, shareholder value, sharing economy, Silicon Valley, Silicon Valley startup, Snapchat, Social Responsibility of Business Is to Increase Its Profits, sovereign wealth fund, Steve Jobs, technology bubble, The Chicago School, the new new thing, The Spirit Level, The Wealth of Nations by Adam Smith, Tim Cook: Apple, Tobin tax, too big to fail, trickle-down economics, Tyler Cowen: Great Stagnation, Vanguard fund, zero-sum game

Six out of the top ten fastest-growing job categories pay $15 an hour and workforce participation is as low as it’s been since the late 1970s.4 It used to be that as the fortunes of American companies improved, the fortunes of the average American rose, too. But now something has broken that relationship. That something is Wall Street. Just consider that only weeks after Apple announced it would pay off investors with the $17 billion, more sharks began circling. Corporate raider Carl Icahn, one of the original barbarians at the gate who attacked companies from TWA to RJR Nabisco in the 1980s and 1990s, promptly began buying up Apple stock, all the while tweeting demands that Cook spend billions and billions more on buybacks. With each tweet, Apple’s share price jumped. By May 2015, Icahn’s stake in Apple had soared 330 percent, to more than $6.5 billion, and Apple had pledged to spend a total of $200 billion on dividends and buybacks through March 2017.

The ruling enshrined in law the idea that companies had a legal obligation to maximize profits for investors, and that their interests trumped those of anyone else. Indeed, “shareholder value” has become the rallying cry of many a financially oriented manager making decisions that boost a company’s share price at the expense of longer-term growth. And it has also become the justification for “activist” investors who, in a clever semantic trick, have today been rebranded from their previous incarnation as “corporate raiders”—people like Carl Icahn, Bill Ackman, and Daniel Loeb, who have pushed American companies to pay back their record $2 trillion cash hoard in the form of dividends and share buybacks, rather than pay higher wages or make investments in factories, infrastructure, or worker training.17 And they’ve been quite successful at forcing companies to do just that. In 2015 alone, American firms have paid a record $1 trillion back to investors in the form of buybacks and dividends, more than ever before in history, even as wages have remained stagnant and business investment in capital goods, factories, worker training, and other growth-enhancing things has flagged.

Boards would watch over the managers, making sure they did whatever was designed to boost share price. Never mind that these theories were cooked up in college classrooms and on computers rather than in real businesses. Agency theory took hold quickly. Jensen and Meckling’s ideas were lauded in the Wall Street Journal and the Harvard Business Review and used as fuel in the legislative fight to increase limits on executive stock options, as well as justification for corporate raiders and greenmailers, such as T. Boone Pickens. Like many takeover titans, Pickens thought CEOs were mostly lazy, self-interested, and insulated. “US executives…look at takeovers as a threat to their salaries and their perks,” said Pickens at the time. “And the reason they perceive it this way is that they generally own very little stock in their own companies. They don’t relate to the shareholders’ interests, because they aren’t substantial shareholders themselves.”38 Indeed, academics like Jensen believed that people like Pickens were “inventors” who brought needed discipline to America’s large and sloppily run corporations.


pages: 713 words: 203,688

Barbarians at the Gate: The Fall of RJR Nabisco by Bryan Burrough, John Helyar

buy and hold, buy low sell high, corporate raider, Donald Trump, Gordon Gekko, margin call, Ronald Reagan, Rubik’s Cube, shareholder value, South Sea Bubble

He was a blunt, Bronx-born high-school dropout, who had risen in the movie business from Sam Goldwyn’s office boy to head of Gulf + Western’s Paramount unit. He had developed a fearsome reputation for firing and intimidating people, earning him a spot on Fortune’s list of “America’s toughest bosses.” As chief executive of Gulf + Western, he had faced down corporate raiders such as Carl Icahn. He had also overhauled the company from a sprawling conglomerate to a media and financial power. He knew how to value businesses, and he thought $75 a share to be insulting or bungling or both. Bill Anderson of NCR simply didn’t like junk bonds, corporate raiders, or any of the modern folderol that kept business from doing business. At NCR he preached a homespun philosophy of looking after “stakeholders”: employees, suppliers, and communities whose lives were intertwined with and dependent on a large company.

Critics of this procedure called it stealing the company from its owners and fretted that the growing mountain of corporate debt was hindering America’s ability to compete abroad. Everyone knew LBOs meant deep cuts in research and every other imaginable budget, all sacrificed to pay off debt. Proponents insisted that companies forced to meet steep debt payments grew lean and mean. On one thing they all agreed: The executives who launched LBOs got filthy rich. “The wolf is not at the door,” Johnson said. No corporate raider was forcing him to do this. “This is simply the option that I think is best for our shareholders. I believe it is a doable transaction, and it can be done at prices much higher than the present stock price. We’re not far enough along this road to make firm conclusions or make a proposal at this point, though.” Johnson stopped a moment and looked at each of the directors: mostly current and retired chief executives, their median age was sixty-five.

Goldstone asked Atkins. “Would you read it?” Atkins did, and agreed to Goldstone’s request that he and Johnson be allowed to take it upstairs to review it. The press release was a worrisome development, although one Goldstone had anticipated on learning Atkins had been brought along by Hugel. Lifting the veil of secrecy was ordinarily enough to kill a developing buyout in its cradle: Once disclosed, corporate raiders or other unwanted suitors were free to make a run at the company before management had a chance to prepare its own bid. Still, Johnson and his partners hadn’t panicked when the prospect of an announcement was raised. RJR Nabisco was so big that no one in the world seemed likely to top their bid—and certainly not without a friendly management team to lead the way. Upstairs, Goldstone and Johnson searched for the team from Shearson Lehman.


pages: 324 words: 92,805

The Impulse Society: America in the Age of Instant Gratification by Paul Roberts

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, 3D printing, accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, American Society of Civil Engineers: Report Card, asset allocation, business cycle, business process, Cass Sunstein, centre right, choice architecture, collateralized debt obligation, collective bargaining, computerized trading, corporate governance, corporate raider, corporate social responsibility, creative destruction, crony capitalism, David Brooks, delayed gratification, disruptive innovation, double helix, factory automation, financial deregulation, financial innovation, fixed income, full employment, game design, greed is good, If something cannot go on forever, it will stop - Herbert Stein's Law, impulse control, income inequality, inflation targeting, invisible hand, job automation, John Markoff, Joseph Schumpeter, knowledge worker, late fees, Long Term Capital Management, loss aversion, low skilled workers, mass immigration, new economy, Nicholas Carr, obamacare, Occupy movement, oil shale / tar sands, performance metric, postindustrial economy, profit maximization, Report Card for America’s Infrastructure, reshoring, Richard Thaler, rising living standards, Robert Shiller, Robert Shiller, Rodney Brooks, Ronald Reagan, shareholder value, Silicon Valley, speech recognition, Steve Jobs, technoutopianism, the built environment, The Predators' Ball, the scientific method, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, total factor productivity, Tyler Cowen: Great Stagnation, Walter Mischel, winner-take-all economy

As this second efficiency revolution hit its stride, we saw not only the declining fortunes for tens of millions of Americans, but also a disturbing shift in the relationship between the self and the marketplace. It’s at this turning point that the story of the Impulse Society resumes. If this unsettled new era of free markets and bold new theories could be distilled to a single character type, it would be that of the corporate raider. Where the dominant figure of the postwar business world was the empire builder (the CEO methodically assembling vast armies of workers and arsenals of products), the new figure on the scene was more like a demolitions expert or a hit man. The raiders’ m.o. was simple: they looked for struggling companies whose sagging share price made them a bargain, quietly bought up a controlling stake (usually with high-interest loans, known as “junk bonds”), and then began what was euphemistically referred to as “restructuring.”

There was Icahn, who, after raiding TWA, directed the struggling airline to borrow half a billion dollars (most of which he paid to himself), then sold off the airline’s most profitable routes (a practice known as asset stripping) to service the debt. There was even a raiders’ gala—a posh annual conference hosted by the deal-making firm Drexel Burnham Lambert for all the big names in restructuring, known as the “Predators’ Ball.” For many critics, and a great many more traumatized former employees, the corporate raider perfectly captured the “greed is good” zeitgeist that overran American corporate culture in the 1980s. But to an emerging school of conservative economists, the raider was nothing less than an economic savior. Raiders had appeared because share prices were falling, and share prices had fallen in part because the companies were being mismanaged. After thirty years of postwar prosperity, many American firms had become complacent and inefficient.

Share prices had plunged—the New York Stock Exchange fell by 50 percent in the early 1970s—and shareholders had watched, powerless, as their investments were nearly halved. For, in those days, shareholders had almost no say in the running of a company: decisions were made largely by corporate executives who treated shareholders (and share price) as a secondary concern, well behind factors such as labor or suppliers. As far as Wall Street was concerned, corporate raiders were the market’s way of correcting years of bad management. That correction was surprisingly swift. As one company after another was taken over and taken apart, corporate America panicked. Even unraided firms scrambled to fend off raiders by keeping their share prices high. Companies cut costs ruthlessly. As important, they began compensating their executives in company stock, thus transforming executives’ priorities and strategies.


pages: 741 words: 179,454

Extreme Money: Masters of the Universe and the Cult of Risk by Satyajit Das

affirmative action, Albert Einstein, algorithmic trading, Andy Kessler, Asian financial crisis, asset allocation, asset-backed security, bank run, banking crisis, banks create money, Basel III, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, Bonfire of the Vanities, bonus culture, Bretton Woods, BRICs, British Empire, business cycle, capital asset pricing model, Carmen Reinhart, carried interest, Celtic Tiger, clean water, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, corporate raider, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, debt deflation, Deng Xiaoping, deskilling, discrete time, diversification, diversified portfolio, Doomsday Clock, Edward Thorp, Emanuel Derman, en.wikipedia.org, Eugene Fama: efficient market hypothesis, eurozone crisis, Everybody Ought to Be Rich, Fall of the Berlin Wall, financial independence, financial innovation, financial thriller, fixed income, full employment, global reserve currency, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, happiness index / gross national happiness, haute cuisine, high net worth, Hyman Minsky, index fund, information asymmetry, interest rate swap, invention of the wheel, invisible hand, Isaac Newton, job automation, Johann Wolfgang von Goethe, John Meriwether, joint-stock company, Jones Act, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, Kevin Kelly, laissez-faire capitalism, load shedding, locking in a profit, Long Term Capital Management, Louis Bachelier, margin call, market bubble, market fundamentalism, Marshall McLuhan, Martin Wolf, mega-rich, merger arbitrage, Mikhail Gorbachev, Milgram experiment, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, mortgage tax deduction, mutually assured destruction, Myron Scholes, Naomi Klein, negative equity, NetJets, Network effects, new economy, Nick Leeson, Nixon shock, Northern Rock, nuclear winter, oil shock, Own Your Own Home, Paul Samuelson, pets.com, Philip Mirowski, plutocrats, Plutocrats, Ponzi scheme, price anchoring, price stability, profit maximization, quantitative easing, quantitative trading / quantitative finance, Ralph Nader, RAND corporation, random walk, Ray Kurzweil, regulatory arbitrage, rent control, rent-seeking, reserve currency, Richard Feynman, Richard Thaler, Right to Buy, risk-adjusted returns, risk/return, road to serfdom, Robert Shiller, Robert Shiller, Rod Stewart played at Stephen Schwarzman birthday party, rolodex, Ronald Reagan, Ronald Reagan: Tear down this wall, Satyajit Das, savings glut, shareholder value, Sharpe ratio, short selling, Silicon Valley, six sigma, Slavoj Žižek, South Sea Bubble, special economic zone, statistical model, Stephen Hawking, Steve Jobs, survivorship bias, The Chicago School, The Great Moderation, the market place, the medium is the message, The Myth of the Rational Market, The Nature of the Firm, the new new thing, The Predators' Ball, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, trickle-down economics, Turing test, Upton Sinclair, value at risk, Yogi Berra, zero-coupon bond, zero-sum game

It would be paid when assets were sold or from money raised by selling shares. The lenders were attracted by the higher interest rates, ignoring whether they would receive anything at all. LBOs now relied on paying down debt from selling assets, cost cutting, reducing business investment, and other corporate auto-cannibalism: “We’re always cutting, cutting, cutting.... There’s the risk that you may cut out something that you really need.”9 In the 1980s, corporate raiders—T. Boone Pickens, Carl Icahn, Victor Posner, Robert M. Bass, Kirk Kerkorian, Sir James Goldsmith, Saul Steinberg—dominated LBOs. Boone Pickens made a series of raids on major oil companies, realizing that they were literally liquidating themselves by depleting their reserves without investing in exploration and development to replenish them. Pickens was unsuccessful but earned significant profits by building up strategic stakes in companies like Cities Services, Gulf Oil, and Unocal, effectively putting them into play.

When Goldman Sachs and Lehman Brothers issued the first junk bonds in 1977, Milken and Drexel seized the opportunity, starting with a $30 million issue for Texas International. Over time, they found new issuers of junk bonds—Milken’s mobsters. Drexel forged relationships with the new robber barons—buyout firms, entrepreneurial outsiders like Turner Broadcasting, MCI, and McCaw Cellular, and aggressive corporate raiders like Carl Icahn and Boone Pickens. Drexel’s Christian Anderson summarized the situation: “There are only two kinds of companies—the comers and the goers. We finance the comers.”28 Observers later noted: “Pumped into buyouts, Milken’s junk bonds became a high-octane fuel that transformed the LBO industry from a Volkswagen Beetle into a monstrous drag race belching smoke and fire.”29 Harvard-trained Fred Joseph, Drexel president and CEO, wanted to build the firm to rival Goldman Sachs, then, as now, the benchmark for excellence.

Milken evolved the highly confident letter, which stated that Drexel was “highly confident” that it could obtain the necessary financing. Originally nicknamed the Air Fund, the highly confident letter lacked legal status, relying on Milken and Drexel’s ability to underwrite and place bonds to raise the money. Drexel’s reputation meant that the letter was as good as cash. Modestly resourced corporate raiders, backed by a highly confident letter, were suddenly credible. Jay Higgins, head of mergers and acquisitions at rival Salomon Brothers, observed: “Big companies used to worry only about threats from other big companies. But with Drexel doing the financing, anybody long on ideas and short on capital is a threat.”31 Drexel moved from providing advice to bankrolling transactions as a principal.


pages: 611 words: 130,419

Narrative Economics: How Stories Go Viral and Drive Major Economic Events by Robert J. Shiller

agricultural Revolution, Albert Einstein, algorithmic trading, Andrei Shleifer, autonomous vehicles, bank run, banking crisis, basic income, bitcoin, blockchain, business cycle, butterfly effect, buy and hold, Capital in the Twenty-First Century by Thomas Piketty, Cass Sunstein, central bank independence, collective bargaining, computerized trading, corporate raider, correlation does not imply causation, cryptocurrency, Daniel Kahneman / Amos Tversky, debt deflation, disintermediation, Donald Trump, Edmond Halley, Elon Musk, en.wikipedia.org, Ethereum, ethereum blockchain, full employment, George Akerlof, germ theory of disease, German hyperinflation, Gunnar Myrdal, Gödel, Escher, Bach, Hacker Ethic, implied volatility, income inequality, inflation targeting, invention of radio, invention of the telegraph, Jean Tirole, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, litecoin, market bubble, money market fund, moral hazard, Northern Rock, nudge unit, Own Your Own Home, Paul Samuelson, Philip Mirowski, plutocrats, Plutocrats, Ponzi scheme, publish or perish, random walk, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Reagan, Rubik’s Cube, Satoshi Nakamoto, secular stagnation, shareholder value, Silicon Valley, speech recognition, Steve Jobs, Steven Pinker, stochastic process, stocks for the long run, superstar cities, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, theory of mind, Thorstein Veblen, traveling salesman, trickle-down economics, tulip mania, universal basic income, Watson beat the top human players on Jeopardy!, We are the 99%, yellow journalism, yield curve, Yom Kippur War

Both show similar hump-shaped paths through time. Other narratives in the same constellation with the Laffer curve sprang up around the same time. The terms leveraged buyouts and corporate raiders also went viral in the 1980s, often in admiring stories about companies that responded well to true incentives and that produced high profits as a result. One marker for such stories is the phrase maximize shareholder value, which, according to ProQuest News & Newspapers and Google Ngrams, was not used until the 1970s and whose usage grew steadily until the twenty-first century. The phrase maximize shareholder value puts a nice spin on questionable corporate raider practices, such as saddling the company with extreme levels of debt and ignoring implicit contracts with employees and stakeholders. Maximize suggests intelligence, science, calculus.

His suggestion for people who mislay their keys: As you drop your keys into the flowerpot, form a mental image of the two vital entities—the keys and the place where you’re putting them. Make it a silly or impossible image. Example: “See” a gigantic key growing in a flowerpot.17 As neuroscience has shown us, long-term memory formation involves many regions of the brain, including visual-image processing regions.18 Rubik’s Cube, Corporate Raiders, and Other Parallel Epidemics Another fad appeared around the same time as the Laffer curve. Rubik’s Cube, invented in 1974 by Ernő Rubik, is a puzzle in the form of a cube-shaped stack of multicolored smaller cubes. As the narrative went, Rubik was a creative Hungarian sculptor and architect whose puzzle captivated the scientific and mathematics community worldwide because it fostered a narrative that it represented some interesting mathematical principles.

Maximize suggests intelligence, science, calculus. Shareholder reminds the listener that there are people whose money started the whole enterprise, and who may sometimes be forgotten. Value sounds better, more idealistic, than wealth or profit. Use of the three words together as a phrase is an invention of the 1980s, used to tell stories of corporate raiders and their success. The term maximize shareholder value is a contagious justification for aggressiveness and the pursuit of wealth, and the narratives that exploited the term are most certainly economically significant. The Laffer Curve, Supply-Side Economics, and Narrative Constellations After the Laffer curve epidemic, the Reagan administration (1981–89) reduced the top US federal income tax bracket from 70% to 28%. It also cut the top-bracket US corporate profits tax rate from 46% to 34%, and it reduced the top US capital gains tax rate from 28% to 20% in 1981 (though it returned to 28% again in 1987 during the Reagan presidency).


pages: 230 words: 71,320

Outliers: The Story of Success by Malcolm Gladwell

affirmative action, Bill Gates: Altair 8800, computer age, corporate raider, crew resource management, medical residency, old-boy network, Pearl River Delta, popular electronics, Silicon Valley, Steve Ballmer, Steve Jobs, union organizing, upwardly mobile, why are manhole covers round?

What the old-line firms also did not do was involve themselves in hostile corporate takeovers. It's hard to imagine today, when corporate raiders and private-equity firms are constantly swallowing up one company after another, but until the 1970s, it was considered scandalous for one company to buy another company without the target agreeing to be bought. Places like Mudge Rose and the other establishment firms on Wall Street would not touch those kinds of deals. “The problem with hostile takeovers is that they were hostile/' says Steven Brill, who founded the trade magazine American Lawyer. ”It wasn't gentlemanly. If your best buddy from Princeton is the CEO of Company X, and he's been coasting for a long time, and some corporate raider shows up and says this company sucks, it makes you uncomfortable. You think, If he goes, then maybe I go too.

Flom was fat (a hundred pounds overweight then, one lawyer said...), physically unattractive (to a partner, he resembled a frog), and indifferent to social niceties (he would fart in public or jab a cigar close to the face of someone he was talking to, without apology). But in the judgment of colleagues and of some adversaries, his will to win was unsurpassed and he was often masterful. The white-shoe law firms would call in Flom as well whenever some corporate raider made a run at one of their establishment clients. They wouldn't touch the case. But they were happy to outsource it to Skadden, Arps. “Flom's early specialty was proxy fights, and that was not what we did, just like we don't do matrimonial work,” said Robert Rif kind, a longtime partner at Cravath, Swaine and Moore. “And therefore we purported not to know about it. I remember once we had an issue involving a proxy fight, and one of my senior corporate partners said, Well, let's get Joe in.


file:///C:/Documents%20and%... by vpavan

accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, asset allocation, Berlin Wall, business cycle, buttonwood tree, buy and hold, corporate governance, corporate raider, disintermediation, diversification, diversified portfolio, Donald Trump, estate planning, fixed income, index fund, intangible asset, interest rate swap, margin call, money market fund, Myron Scholes, new economy, price discovery process, profit motive, risk tolerance, shareholder value, short selling, Silicon Valley, Small Order Execution System, Steve Jobs, stocks for the long run, stocks for the long term, technology bubble, transaction costs, Vanguard fund, women in the workforce, zero-coupon bond, éminence grise

In the 1970s and '80s, activist religious and political groups began using company annual meetings to push shareholder proposals that denounced investment in apartheid South Africa as well as companies dealing in weapons and tobacco. Shareholder groups also began invoking federal securities laws in place since the 1930s to support their corporate governance struggles. Corporate Raiders and Poison Pills The biggest boost for corporate governance, however, came in the 1980s, when corporate raiders and leveraged buyout firms vied for control of struggling corporations. Many companies resisted being taken over, and enacted protections such as special share-voting devices and poison pills. The share-voting devices block hostile takeovers by, for example, providing for super-voting rights to be cast in favor of management when an unwanted suitor appears on the scene.

They entrench the current management, even when it's doing a poor job. They water down shareholders' votes and deprive them of a meaningful voice in corporate affairs. And they deprive investors of a contest for their shares— and the possibility that they will receive a premium price from a new owner. Numerous courtroom battles were waged over poison pills and other antitakeover measures. The corporate raider era shook up many complacent management teams and corporate boards, which often were smack in the middle of these legal dramas. The mergers-and-acquisitions divisions of Wall Street firms became more profitable than their brokerage departments. But overall, the 1980s "was a mixed bag" for governance, says Harvey Goldschmid, a securities law professor at Columbia University. "There was increased pressure on management to look after the interests of shareholders, because a raider could come along if the stock was too low," says Goldschmid, who would later become the SEC's general counsel.

"On the other hand, there was a lot of funny money going around, and a lot of questionable people and motives involved." The raiders— people such as Carl Icahn, T. Boone Pickens, and Saul Steinberg— caused much bitterness, and not just among unhappy managers turned out of their corner offices. Dozens of acquired companies were broken up and sold in pieces, thousands of people were laid off, suppliers and customers were disrupted, and local communities were torn apart. The corporate raider movement caused governance experts to look for better ways to improve corporate performance, but with far less turmoil. Goldschmid and others focused on forcing directors to switch their allegiance from management to shareholders. And that gave rise to a new and powerful special interest group: activist shareholders. Institutional pension funds began to use their considerable leverage to pressure companies to get rid of poison pills and take other steps to improve performance.


pages: 976 words: 235,576

The Meritocracy Trap: How America's Foundational Myth Feeds Inequality, Dismantles the Middle Class, and Devours the Elite by Daniel Markovits

"Robert Solow", 8-hour work day, activist fund / activist shareholder / activist investor, affirmative action, Anton Chekhov, asset-backed security, assortative mating, basic income, Bernie Sanders, big-box store, business cycle, capital asset pricing model, Capital in the Twenty-First Century by Thomas Piketty, carried interest, collateralized debt obligation, collective bargaining, computer age, corporate governance, corporate raider, crony capitalism, David Brooks, deskilling, Detroit bankruptcy, disruptive innovation, Donald Trump, Edward Glaeser, Emanuel Derman, equity premium, European colonialism, everywhere but in the productivity statistics, fear of failure, financial innovation, financial intermediation, fixed income, Ford paid five dollars a day, Frederick Winslow Taylor, full employment, future of work, gender pay gap, George Akerlof, Gini coefficient, glass ceiling, helicopter parent, high net worth, hiring and firing, income inequality, industrial robot, interchangeable parts, invention of agriculture, Jaron Lanier, Jeff Bezos, job automation, job satisfaction, John Maynard Keynes: Economic Possibilities for our Grandchildren, knowledge economy, knowledge worker, Kodak vs Instagram, labor-force participation, longitudinal study, low skilled workers, manufacturing employment, Mark Zuckerberg, Martin Wolf, mass incarceration, medical residency, minimum wage unemployment, Myron Scholes, Nate Silver, New Economic Geography, new economy, offshore financial centre, Paul Samuelson, payday loans, plutocrats, Plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, precariat, purchasing power parity, rent-seeking, Richard Florida, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, school choice, shareholder value, Silicon Valley, Simon Kuznets, six sigma, Skype, stakhanovite, stem cell, Steve Jobs, supply-chain management, telemarketer, The Bell Curve by Richard Herrnstein and Charles Murray, Thomas Davenport, Thorstein Veblen, too big to fail, total factor productivity, transaction costs, traveling salesman, universal basic income, unpaid internship, Vanguard fund, War on Poverty, Winter of Discontent, women in the workforce, working poor, young professional, zero-sum game

In the 1950s, for example, hard-charging takeover artists targeted firms led by the idle rich—as one of them put it, the “third-generation Yale man who spends his afternoons drinking martinis at the club.” But these corporate raiders who threatened the leisure class were “treated as uncouth ruffians,” censured by government investigators, and threatened with legislative sanction. Even in the breach, norms reaffirmed and enforced the facts of life among the leisured elite. Midcentury Wall Street, moreover, was not unique or even distinctive in its taste for leisure. The corporate raiders just mentioned took aim at firms run by comfortably lazy managers who, as one contemporary observer noted, behaved as if they were gentlemen of independent means. The captains of midcentury industry came to work “dressed in a suit cut for the club rather than the factory; occupied an office which looked like a drawing room, with no sign to be seen of anything so vulgar as a digital computer.”

As the middle-management function becomes superfluous, firm hierarchies lose their middle rungs. Beginning in the 1980s, an unprecedented wave of corporate restructurings streamlined American firms. It is almost impossible to find any case of corporate downsizing before the mid-1980s, and some large companies even adopted express “no layoff” policies. But now the reorganizations expressly sought to eliminate what the corporate raider Carl Icahn once called “incompetent” and “inbred” middle managers, “layers of bureaucrats reporting to bureaucrats.” The cull was dramatic: AT&T, for example, restructured one of its units with the express aim of reducing the ratio of managers to nonmanagers from 1:5 to 1:30. Across restructurings in the 1980s and 1990s, middle managers were downsized at nearly twice the rate of nonmanagerial workers.

Beginning in the 1980s, leveraged buyouts acutely increased the pressure that potential takeovers placed on incumbent managers. Law firms such as Wachtell, Lipton, Rosen & Katz and Skadden, Arps, Slate, Meagher & Flom developed the legal frameworks to implement activist investing on a massive scale. And investment banks such as Drexel Burnham Lambert and private equity firms such as Kohlberg Kravis Roberts & Company embraced and expanded the tactics of earlier corporate raiders, bringing corporate takeovers from the eccentric fringes of finance to Wall Street’s charismatic center. The dollar volume of mergers and acquisitions in the United States—a good if rough overall measure of the shareholder activism—grew by over 200 percent between 1982 and 1987 (similar years in the business cycle) and then by nearly 500 percent again between 1988 and 1999. By 1990, one-third of the firms in the Fortune 500 had been targeted by a hostile takeover bid, and two-thirds had feared such a bid sufficiently to implement anti-takeover defenses.


pages: 296 words: 78,112

Devil's Bargain: Steve Bannon, Donald Trump, and the Storming of the Presidency by Joshua Green

4chan, Affordable Care Act / Obamacare, Ayatollah Khomeini, Bernie Sanders, business climate, centre right, Charles Lindbergh, coherent worldview, collateralized debt obligation, conceptual framework, corporate raider, crony capitalism, currency manipulation / currency intervention, Donald Trump, Fractional reserve banking, Goldman Sachs: Vampire Squid, Gordon Gekko, guest worker program, illegal immigration, immigration reform, liberation theology, low skilled workers, Nate Silver, Nelson Mandela, nuclear winter, obamacare, Peace of Westphalia, Peter Thiel, quantitative hedge fund, Renaissance Technologies, Robert Mercer, Ronald Reagan, Silicon Valley, social intelligence, speech recognition, urban planning

So Milken and his firm, Drexel Burnham Lambert, devised an ingenious new use for them: they used junk bonds to finance raids on undervalued blue-chip corporations. Milken and Drexel would fund these hostile takeovers by pledging the assets of the target corporation as collateral, in the same way that a home buyer obtains a mortgage by pledging the collateral of the home against the loan. This practice gave rise to an army of corporate raiders, men such as Ron Perelman, Carl Icahn, T. Boone Pickens, and Nelson Peltz, who became rich selling junk bonds through Drexel Burnham to finance predatory raids on such Fortune 100 companies as TWA, Disney, Revlon, and Phillips Petroleum. So fearsome did Milken’s reputation become that sometimes the mere rumor that a company might come under siege was enough to send it scrambling toward a defensive merger.

“Everything in the Midwest was being raided by Milken,” said Bannon. “It was like a firestorm.” The attacks by Milken had a corollary effect on the companies he targeted: they needed help staving off the barbarians at the gates. This, too, created profitable new business opportunities. Goldman Sachs, not yet evolved into the money-grubbing “vampire squid” it would later become, was a white-shoe firm that wouldn’t deign to represent corporate raiders in hostile takeover bids. Instead, Goldman developed a specialty in raid defense for blue-chip companies targeted by the likes of Drexel Burnham and First Boston. Bannon landed in the firm’s mergers-and-acquisitions department, the SWAT team that companies called in to advise and protect them when the raiders came calling. Ensconced on the twenty-third floor of Goldman’s old headquarters at 85 Broad Street, Bannon spent his first few years at Goldman working one-hundred-hour weeks and clocking in every day except Christmas.

But it was also because the federal government under Reagan had relaxed antitrust restrictions, which meant that the media and entertainment industries—like the oil-and-gas, retail-clothing, and pharmaceutical industries—were taking a page from Wall Street and embarking on an orgy of mergers and acquisitions. Some of these media mergers, such as Time Inc.’s $14 billion merger with Warner Communications in 1989 to create the world’s largest entertainment conglomerate, were defensive in nature, intended to make companies large enough that they wouldn’t fall prey to corporate raiders. Others were strategic acquisitions, like General Electric’s 1985 takeover of RCA and its NBC division for $6.3 billion, a deal Bannon worked on for Goldman in its capacity as an adviser to GE. “A lot of people were coming from outside buying media companies,” he said. “There was just huge consolidation going on.” The frenzy to acquire TV and film companies posed a particular challenge for investment banks like Goldman Sachs that profited by facilitating these deals.


pages: 207 words: 86,639

The New Economics: A Bigger Picture by David Boyle, Andrew Simms

Asian financial crisis, back-to-the-land, banking crisis, Bernie Madoff, Big bang: deregulation of the City of London, Bonfire of the Vanities, Bretton Woods, capital controls, carbon footprint, clean water, collateralized debt obligation, colonial rule, Community Supported Agriculture, congestion charging, corporate raider, corporate social responsibility, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, delayed gratification, deskilling, en.wikipedia.org, energy transition, financial deregulation, financial exclusion, financial innovation, full employment, garden city movement, happiness index / gross national happiness, if you build it, they will come, income inequality, informal economy, Intergovernmental Panel on Climate Change (IPCC), Jane Jacobs, Kickstarter, land reform, light touch regulation, loss aversion, mega-rich, microcredit, Mikhail Gorbachev, mortgage debt, neoliberal agenda, new economy, North Sea oil, Northern Rock, offshore financial centre, oil shock, peak oil, pensions crisis, profit motive, purchasing power parity, quantitative easing, Ronald Reagan, seigniorage, Simon Kuznets, sovereign wealth fund, special drawing rights, The Wealth of Nations by Adam Smith, Thomas L Friedman, too big to fail, trickle-down economics, Vilfredo Pareto, Washington Consensus, wealth creators, working-age population

The debt is also underpinning nearly every institution, public and private, that we deal with every day. At least a third of the price of the goods we pay for, or the rooms we rent, goes on interest payments to cover the money borrowed. An average of 28 per cent of the income of UK businesses goes to service their debt.16 The rise of indebtedness is not just among individuals but among companies that are forced to take on debt to avoid their clean balance sheets being used against them by corporate raiders (see Chapter 10), who will load prudent companies up with debt in order to pay for their own takeover. More debt means that money increasingly has to be directed at the most profitable aspects of the economy, often financial services or the pillaging of natural resources, so that it can be paid off; just as we have to accept the best paid jobs, rather than the jobs which suit us, in order to pay our mortgages.

For a moment the old assumptions of economics seemed not quite as much like the rational, mathematical science it claims to be – more like a rather colourless and grubby version of Alice in Wonderland. A nonsense world ruled over by capricious, self-absorbed financial royalty who were careless about the consequences of their actions on the rest of the world. The vast rewards for those in charge of the system have often been belied by their miserably indebted companies. This is partly a side effect of the junk bond revolution in the 1980s, which fuelled the activities of corporate raiders like T. Boone Pickens and Sir James Goldsmith. The main complaint by critics was that these takeover ventures, tailored to reap short-term profits for high rollers, left many companies deeply in debt or dismembered. If a company had been prudent and paid off too much debt, then a raider could potentially use that as their own asset for grabbing control of the company, loading it with debt to pay for the takeover, stripping it of saleable assets and then selling the remains on.

(Gilbert Keith) 18, 20, 21, 81 Chicago (Illinois) 87, 127, 131 chief executives 19, 141, 142 children 4, 46–7, 82, 86, 87 Chile 51 China 28, 50, 60, 82, 100, 116, 154 CHP (combined heat and power) plants 102, 103 cities 3, 61, 75, 80, 105–6, 110, 116 and energy 102, 103 traffic speeds 65–6 citizen’s incomes 45, 58, 73, 91–2, 148 Clarke, Otto 21 classical economics 28–9, 34–5, 44, 67, 89, 123 assumptions 71, 72, 85 Cleveland (Ohio) 6 climate change 3–4, 40, 96, 112, 115 tackling 45, 90, 155, 157 Clinton, Bill 27, 52, 145 co-generation of energy 102, 103 co-production 88–9, 127–31, 132, 158, 159 Cobb, Clifford 39, 40–1 Cobb, John 22, 40–1 collateralized debt obligations (CDOs) 5–6 Colombia 33, 51 Columbus, Christopher 139 combined heat and power see CHP commodities 11, 57, 139 currencies based on 60, 90, 120 commons 79, 82, 113, 148 communications technologies 58, 59, 78, 158 communities 2, 27, 42, 43, 89, 92 assets 57–8, 106 investing in 118 money in 103–5, 107, 124, 151–2 Wal-mart and 124–5 community 32, 33, 54, 89, 158 community banks 26, 145 community land trusts 46, 73, 151 Community Way model 58 community-supported agriculture 26, 119 companies 74–5, 84, 137–8, 142–3 see also corporations comparative advantage 26, 75, 109, 116 competition 90 regulation 85, 113, 125, 126, 133 complementary currencies 26, 57–8, 59, 62, 154 consumerism 20, 44, 132 consumers 44, 67–8 consumption 11, 34, 39–40, 100, 158 ‘defensive’ 37 contributing, need for 128–9 conventional economics 10–12, 82, 97, 127 cooperatives 20, 26, 153 ‘core economy’ 54–5, 88, 89, 127, 158 corporate debt 84, 142–3 corporate power 20, 28, 85 corporate raiders 84, 142 corporate responsibility 26, 153–4 corporations 4, 8, 13, 82, 90, 116, 142, 158 tax gap 52, 137, 157 Costa Rica 99 Country Party 18 crashes 1, 51, 91 2008–9 crash 2, 3, 5, 6–7, 8, 15, 84, 85, 154–5 creativity 38, 46, 75, 79, 91 credit 91, 145–6 see also debt credit cards 84 credit crunch 3, 91, 144, 157 credit unions 26, 144, 145, 146 crime 10, 35, 37, 38, 87, 127, 128 crises, fundamental 3–5 Cuba 95–7, 101, 105 culture 43, 44, 111, 115, 127, 158 INDEX 183 currencies 26, 55, 56–8, 81 barter currencies 58, 59 based on commodities 60, 90, 120 based on emissions rights 90, 148 big 53, 54, 55–6, 58, 59 complementary 26, 57–8, 59, 62, 154 global 56, 61, 120, 147–8 local 26, 27, 56, 57, 58, 60, 151–2, 153 multiple 58, 59–60, 60, 90 regional 58, 59, 60 domestic tradeable quotas (DTQs) 117–18 Douthwaite, Richard 56–7, 148 Downs-Thomson Paradox 66 downshifting 2, 4–5, 11, 35, 69, 73 Drexel Burnham Lambert 142 drugs, generic 113, 116, 117 DTQs (domestic tradeable quotas) 117–18 Dublin (Ireland) 52, 106 DuPont 85 dynamic equilibrium 43, 44 Daly, Herman 22, 23, 40–1, 43, 97 Dawnay, Emma 71 debt 4, 7, 11–12, 81, 83–4 cancellation 137, 148 corporate 84, 142–3 and development 138–43 GM crops and 91, 119, 140 Malawi 135–6 medieval freedom from 79, 80–1 money creation 7, 8, 11, 56, 60, 84, 90, 138 national 49–50, 83, 84, 139, 141 personal 7, 36, 83–4, 91, 140, 141 repayments 90, 137 small-scale 143–4 see also sub-prime loans decentralized energy generation 102–3, 106, 114, 155 decision making 67–8, 71, 158 ‘defensive consumption’ 37 democracy 31, 55, 91, 141, 158 demurrage 57 depression 4, 10, 11, 35, 38, 68, 75, 83 deregulation 8, 12, 22, 28 developing countries 11, 81, 136–8, 143 development 24, 27, 116, 138–43 development projects 82 Dickens, Charles 36 Diggers 18 Disney 141 Distributism 19–21, 29 District of Columbia School of Law 131 diversity 82, 90, 152 Earth, Apollo pictures of 101–2 EBCU (emissions-backed currency unit) 148 ecological debt 113–14 ecological footprints 31, 33, 34, 112 ecological issues 3–4, 12, 25 economic activity 25, 148 economic development 24, 27, 116, 138–43 economic growth see growth economic indicators, alternative 26 economic institutions 29, 82, 153, 154 economic processes 97–8, 99 economic system 2, 11, 21–2, 23, 29, 112, 138 and poverty 13–14, 18, 29, 81–2, 154 economics 10–12, 18, 19, 29, 72–3, 98 assumptions 10, 25, 28, 29, 69, 71, 72, 82, 85, 97, 99, 115 medieval 78–80, 80–1 post-autistic 9–10, 71–2 and psychology 67–8, 71, 72–3 as a science 15, 34–5, 98, 152 and sustainability 24 see also classical economics; conventional economics; new economics economy 12, 26, 84–5, 158 creating poverty 13–14, 18, 29, 81, 154 ecosystems 99, 112, 114 Edison, Thomas 58, 90, 147 education 13, 33, 35, 46, 113 efficiency 4, 13, 99, 100, 123, 126, 131–2 E.F.


pages: 561 words: 157,589

WTF?: What's the Future and Why It's Up to Us by Tim O'Reilly

4chan, Affordable Care Act / Obamacare, Airbnb, Alvin Roth, Amazon Mechanical Turk, Amazon Web Services, artificial general intelligence, augmented reality, autonomous vehicles, barriers to entry, basic income, Bernie Madoff, Bernie Sanders, Bill Joy: nanobots, bitcoin, blockchain, Bretton Woods, Brewster Kahle, British Empire, business process, call centre, Capital in the Twenty-First Century by Thomas Piketty, Captain Sullenberger Hudson, Chuck Templeton: OpenTable:, Clayton Christensen, clean water, cloud computing, cognitive dissonance, collateralized debt obligation, commoditize, computer vision, corporate governance, corporate raider, creative destruction, crowdsourcing, Danny Hillis, data acquisition, deskilling, DevOps, Donald Davies, Donald Trump, Elon Musk, en.wikipedia.org, Erik Brynjolfsson, Filter Bubble, Firefox, Flash crash, full employment, future of work, George Akerlof, gig economy, glass ceiling, Google Glasses, Gordon Gekko, gravity well, greed is good, Guido van Rossum, High speed trading, hiring and firing, Home mortgage interest deduction, Hyperloop, income inequality, index fund, informal economy, information asymmetry, Internet Archive, Internet of things, invention of movable type, invisible hand, iterative process, Jaron Lanier, Jeff Bezos, jitney, job automation, job satisfaction, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Kevin Kelly, Khan Academy, Kickstarter, knowledge worker, Kodak vs Instagram, Lao Tzu, Larry Wall, Lean Startup, Leonard Kleinrock, Lyft, Marc Andreessen, Mark Zuckerberg, market fundamentalism, Marshall McLuhan, McMansion, microbiome, microservices, minimum viable product, mortgage tax deduction, move fast and break things, move fast and break things, Network effects, new economy, Nicholas Carr, obamacare, Oculus Rift, packet switching, PageRank, pattern recognition, Paul Buchheit, peer-to-peer, peer-to-peer model, Ponzi scheme, race to the bottom, Ralph Nader, randomized controlled trial, RFC: Request For Comment, Richard Feynman, Richard Stallman, ride hailing / ride sharing, Robert Gordon, Robert Metcalfe, Ronald Coase, Sam Altman, school choice, Second Machine Age, secular stagnation, self-driving car, SETI@home, shareholder value, Silicon Valley, Silicon Valley startup, skunkworks, Skype, smart contracts, Snapchat, Social Responsibility of Business Is to Increase Its Profits, social web, software as a service, software patent, spectrum auction, speech recognition, Stephen Hawking, Steve Ballmer, Steve Jobs, Steven Levy, Stewart Brand, strong AI, TaskRabbit, telepresence, the built environment, The Future of Employment, the map is not the territory, The Nature of the Firm, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Thomas Davenport, transaction costs, transcontinental railway, transportation-network company, Travis Kalanick, trickle-down economics, Uber and Lyft, Uber for X, uber lyft, ubercab, universal basic income, US Airways Flight 1549, VA Linux, Watson beat the top human players on Jeopardy!, We are the 99%, web application, Whole Earth Catalog, winner-take-all economy, women in the workforce, Y Combinator, yellow journalism, zero-sum game, Zipcar

Yes, the speed of trading has increased, so that a human trader not paired with that machine has become prey, not predator. Yes, the market is increasingly made of complex financial derivatives that no human can truly understand. But the key lesson is one we have seen again and again. The design of a system determines its outcomes. The robots did not force a human-hostile future upon us; we chose it ourselves. The 1980s were the years of “corporate raiders” celebrated by Michael Douglas’s character, Gordon Gekko, in the 1987 movie Wall Street, who so memorably said, “Greed is good.” The theory was that by discovering and rooting out bad managers and finding efficiencies in underperforming businesses, these raiders were actually improving the operation of the capitalist system. It is certainly true that in some cases they played that role. But by elevating the single fitness function of increasing share price above all else, they hollowed out our overall economy.

“The normal economics of maximizing economic value is replaced by the topsy-turvy economics of maximizing current extractable value, which tends to drive the firm’s economic net worth deeply negative. . . . A dollar in increased dividends today is worth a dollar to owners, but a dollar in increased future earnings of the firm is worth nothing because future payments accrue to the creditors who will be left holding the bag.” This was the game plan of many corporate raiders, who laid off workers and stripped firms of their assets, even taking them through bankruptcy to eliminate their pension plans. It was also at the heart of a series of booms and busts in real estate and finance that decimated the economy while enormously enriching a tiny group of economic looters and lucky bystanders. It is the Bizarro World inverse of my maxim that companies must create more value than they capture.

Author Douglas Rushkoff told me the story of one Fortune 100 CEO who broke down in tears as she told him how her attempts to inject social value into decision making at her company had resulted in quick punishment by “the market,” forcing her to reverse course. Who is the market? It is algorithmic traders who pop in and out of companies at millisecond speed, turning what was once a vehicle for capital investment in the real economy into a casino where the rules always favor the house. It is corporate raiders like Carl Icahn (now rebranded as a “shareholder activist”) who buy large blocks of shares and demand that companies that wish to remain independent instead put themselves up for sale, or that a company like Apple disgorge its cash into their pockets rather than using it to lower prices for customers or raise wages for workers. It is also pension funds, desperate for higher returns to fund the promises that they have made, who outsource their money to professional managers who must then do their best to match the market or lose the funds they manage.


pages: 1,009 words: 329,520

The Last Tycoons: The Secret History of Lazard Frères & Co. by William D. Cohan

activist fund / activist shareholder / activist investor, bank run, carried interest, cognitive dissonance, commoditize, computer age, corporate governance, corporate raider, creative destruction, credit crunch, diversification, Donald Trump, East Village, fear of failure, fixed income, G4S, hiring and firing, interest rate swap, intermodal, Joseph Schumpeter, late fees, Long Term Capital Management, Marc Andreessen, market bubble, offshore financial centre, Ponzi scheme, Ralph Nader, Ralph Waldo Emerson, rolodex, Ronald Reagan, shareholder value, The Nature of the Firm, the new new thing, Yogi Berra

For his part, in 1981, Felix was back focused nearly exclusively on deals, although he remained chairman of MAC. The new partners were making meaningful contributions. Damon Mezzacappa had begun to build a small but profitable capital markets business. Overheads remained low. Lazard was poised for what proved to be a remarkable run of increasing profitability, just as the M&A market exploded in a rare confluence of large strategic mergers and the emergence of well-financed corporate raiders and buyout shops. Nineteen eighty-one was also the year that Felix and Lazard were able to--finally and quietly--put the ITT scandal behind them. ITT reached its $17.8 million tax settlement with the federal government in May, effectively ending a seven-year legal battle. (In 1981, Felix also turned over his ITT board seat to Michel.) Ironically, just as the ITT matter was quietly wrapping up, Felix was perfecting his status as a national figure.

One of the more notorious deals at the time was Ron Perelman's 1985 bold and successful hostile bid to take over Revlon, the cosmetics company. Felix represented Revlon, thanks to his enduring friendship with its CEO, Michel Bergerac, a Frenchman whom Felix had met when Bergerac was one of Geneen's top lieutenants at ITT. While far from the biggest deal, at a mere $1.83 billion, the Perelman-Revlon fight seemed to have it all: an upstart corporate raider, using money borrowed with the help of Michael Milken, trying to buy one of the world's best-known consumer brands, versus a proud corporate pillar, run by a sophisticated Frenchman, desperately hoping to avoid his clutches. The process dragged on for months, with Bergerac and Felix bringing in Forstmann Little, the buyout firm, to put together a competing bid. At each turn, Perelman and Milken raised their price until finally the Delaware Supreme Court ruled that Revlon had put itself up for sale and had to sell itself to the highest bidder--the precedent forever more known as being in Revlon Mode--which turned out to be Perelman.

"It's not bad to be isolated," he said. "I think a lot is taken out of you by the urge to conform, and I never had that. I had no urge to conform. I was not with other kids. I was not part of a group." This sense of being apart informed the way Michel and Felix directed the firm professionally, too. Felix, of course, was a leading critic of the Wall Street fads of junk bonds, bridge loans, and advising corporate raiders, a source of huge but unsustainable profits at places like First Boston and Drexel Burnham in the 1980s. Michel defended Felix and the firm's decision to keep away from most of the faddish behavior, a variation of the ability to just say no. "We pride ourselves that we don't have to do anything," Michel said often. "It's an illusion that you have to rush into anything." When Michel did emerge from his cocoon, it was usually in the company of women.


pages: 801 words: 209,348

Americana: A 400-Year History of American Capitalism by Bhu Srinivasan

activist fund / activist shareholder / activist investor, American ideology, Apple II, Apple's 1984 Super Bowl advert, bank run, barriers to entry, Berlin Wall, blue-collar work, Bob Noyce, Bonfire of the Vanities, British Empire, business cycle, buy and hold, California gold rush, Charles Lindbergh, collective bargaining, commoditize, corporate raider, cuban missile crisis, Deng Xiaoping, diversification, diversified portfolio, Douglas Engelbart, financial innovation, fixed income, Ford paid five dollars a day, global supply chain, Gordon Gekko, Haight Ashbury, hypertext link, income inequality, invisible hand, James Watt: steam engine, Jane Jacobs, Jeff Bezos, John Markoff, joint-stock company, joint-stock limited liability company, Kickstarter, laissez-faire capitalism, Louis Pasteur, Marc Andreessen, Menlo Park, mortgage debt, mutually assured destruction, Norman Mailer, oil rush, peer-to-peer, pets.com, popular electronics, profit motive, race to the bottom, refrigerator car, risk/return, Ronald Reagan, Sand Hill Road, self-driving car, shareholder value, side project, Silicon Valley, Silicon Valley startup, Steve Ballmer, Steve Jobs, Steve Wozniak, strikebreaker, Ted Nelson, The Death and Life of Great American Cities, the new new thing, The Predators' Ball, The Wealth of Nations by Adam Smith, trade route, transcontinental railway, traveling salesman, Upton Sinclair, Vannevar Bush, Works Progress Administration, zero-sum game

To represent the interest of shareholders, incongruously, emerged the predatory, gleeful financial entrepreneur of the eighties. It required swashbuckling, swaggering change agents to take on powerful CEOs. Buttoned-up mutual fund managers and diligent Wall Street analysts were no match for the alpha males who had climbed to the top of their respective corporate ladders, but these new men, often denigrated as greenmailers and corporate raiders, seemed to be fully up to the task. With their rise, American culture had new villains, icons, movie characters, and caricatures that remain one part of the enduring imagery of the eighties. The best juxtaposition of the opposing viewpoints of the essential purpose of the corporation came from American cinema. In Other People’s Money, Gregory Peck starred as the gentle, patrician chief of New England Wire and Cable, headquartered in a fictional town similar to New Bedford in character.

There was some truth to this. Yet the logic of the argument was alone not enough. Just as Silicon Valley entrepreneurs needed venture capital, their equivalents on Wall Street needed their own specialized financing. The best and the brightest among them looked west to Beverly Hills, where Michael Milken could raise billions of dollars when the need arose, junk bonds becoming the pirate ship on which the corporate raiders sailed. • • • IF THERE WAS A COMPETITION to find a real-life equivalent to Larry the Liquidator, who relished the persona of financial agitator in the 1980s, the award would have gone to Carl Icahn. Raised in a middle-class home in Queens, Icahn went to Princeton and then enrolled at NYU School of Medicine for two years. He dropped out and joined the army, where his main contribution seems to have been playing poker.

To win the support of the unions for his bid, Icahn made a series of concessions that he would live up to if he gained control. The unions, shockingly, threw their full support behind Icahn’s bid. In the court of public opinion, this effectively neutralized any notion of the airline’s management as victims. As far as the unions were concerned, in one of the most visible hostile takeovers, their white knight was the corporate raider. By the fall, Icahn ended up in control of TWA, functioning as the actual CEO, a feat he would be loath to repeat in the future. But the actions of men like Icahn also set the template for a new type of acquirer, men who were decidedly less rough around the edges or, at the very least, smart enough to appear so. This new category, the leveraged buyout, also required borrowing money to buy a company’s stock, but it was not hostile and often required the complicity of the company’s management.


One Up on Wall Street by Peter Lynch

air freight, Apple's 1984 Super Bowl advert, buy and hold, corporate raider, cuban missile crisis, Donald Trump, fixed income, index fund, Irwin Jacobs, Isaac Newton, large denomination, money market fund, prediction markets, random walk, shareholder value, Silicon Valley, Y2K, Yom Kippur War, zero-sum game

Merck, having washed its hands of Calgon and a few other minor distractions, is once again concentrating on its ethical drugs. It has four new drugs in clinical trials and two that have passed FDA approval, and the earnings are picking up. THE ASSET PLAYS An asset play is any company that’s sitting on something valuable that you know about, but that the Wall Street crowd has overlooked. With so many analysts and corporate raiders snooping around, it doesn’t seem possible that there are any assets that Wall Street hasn’t noticed, but believe me, there are. The asset play is where the local edge can be used to greatest advantage. The asset may be as simple as a pile of cash. Sometimes it’s real estate. I’ve already mentioned Pebble Beach as a great asset play. Here’s why: At the end of 1976 the stock was selling for 14½ per share, which, with 1.7 million shares outstanding, meant that the whole company was valued at only $25 million.

The boom and then bust in tax shelters: farm land, oil wells, oil rigs, barges, low-rent housing syndicates, graveyards, movie productions, shopping centers, sports teams, computer leasing, and almost anything else that can be bought, financed, or rented. The emergence of merger and acquisition groups, and other buyout groups, that are willing and able to finance $20-billion purchases. Between the domestic buyout groups (Kohlberg, Kravis, and Roberts; Kelso; Coniston Partners; Odyssey Partners; and Wesray), the European firms and buyout groups (Hanson Trust, Imperial Chemical, Electrolux, Unilever, Nestlé, etc.), and the individual corporate raiders with sizable bankrolls (David Murdock, Donald Trump, Sam Hyman, Paul Bilzerian, the Bass brothers, the Reichmanns, the Hafts, Rupert Murdoch, Boone Pickens, Carl Icahn, Asher Edelman, et al.) any company, large or small, is up for grabs. The popularity of the leveraged buyout, or LBO, through which entire companies or divisions are “taken private”—purchased by outsiders or by current management with money that’s borrowed from banks or raised via junk bonds.

By the time I thought of it, people had forgotten about the trade deficit and had started to worry about the next trade surplus. Why does the emperor of Wall Street always have to have no clothes? We’re so anxious to catch that act that every time he parades around in full regalia we think we’re seeing a nude. I’ve been hearing that investors ought to be delighted when companies in which they’ve invested are bought out by corporate raiders, or taken private by management, sometimes doubling the stock price overnight. When a raider comes in to buy out a solid and prosperous enterprise, it’s the shareholders who get robbed. Maybe it looks like a good deal to the shareholders today, but they’re giving away their stake in the future growth. Investors were only too happy to tender their shares in Taco Bell when Pepsi-Cola bought in the shares for $40 apiece.


pages: 1,336 words: 415,037

The Snowball: Warren Buffett and the Business of Life by Alice Schroeder

affirmative action, Albert Einstein, anti-communist, Ayatollah Khomeini, barriers to entry, Bob Noyce, Bonfire of the Vanities, Brownian motion, capital asset pricing model, card file, centralized clearinghouse, Charles Lindbergh, collateralized debt obligation, computerized trading, corporate governance, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, desegregation, Donald Trump, Eugene Fama: efficient market hypothesis, Everybody Ought to Be Rich, global village, Golden Gate Park, Haight Ashbury, haute cuisine, Honoré de Balzac, If something cannot go on forever, it will stop - Herbert Stein's Law, In Cold Blood by Truman Capote, index fund, indoor plumbing, intangible asset, interest rate swap, invisible hand, Isaac Newton, Jeff Bezos, John Meriwether, joint-stock company, joint-stock limited liability company, Long Term Capital Management, Louis Bachelier, margin call, market bubble, Marshall McLuhan, medical malpractice, merger arbitrage, Mikhail Gorbachev, money market fund, moral hazard, NetJets, new economy, New Journalism, North Sea oil, paper trading, passive investing, Paul Samuelson, pets.com, plutocrats, Plutocrats, Ponzi scheme, Ralph Nader, random walk, Ronald Reagan, Scientific racism, shareholder value, short selling, side project, Silicon Valley, Steve Ballmer, Steve Jobs, supply-chain management, telemarketer, The Predators' Ball, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, transcontinental railway, Upton Sinclair, War on Poverty, Works Progress Administration, Y2K, yellow journalism, zero-coupon bond

“You’ve got to come and tell me how I’m going to pay for it,” Murphy said.8 ABC was caught in the crosshairs of the corporate raiders. The company had hung a lure out to see whether Murphy would save it by doing a friendly deal—and Murphy bit.9 “Think about how it will change your life,” Buffett said. Murphy was a devout Catholic who never wasted money on anything—and this was Hollywood. Buffett may well have been thinking about the incongruity between the modest, retiring Murphy and the glamorous world of television, as Murphy believed10—but Buffett’s next move signaled that he wouldn’t mind such a change himself. Or so it seemed, since he recommended to Murphy that Cap Cities/ABC recruit a “gorilla” investor who could protect it if its turn came to be gobbled up by the corporate raiders. To no one’s surprise, Murphy suggested that this investor should be Buffett himself.

People like Tom Murphy had to worry about whether they would be targeted by corporate raiders wielding junk bonds, but Berkshire Hathaway was impregnable because Buffett and friends of Buffett owned so much of its stock; his reputation made Berkshire a fortress where others could shelter. Berkshire had made $120 million on Cap Cities/ABC in the first twelve months it owned the stock; now the very mention that Buffett had bought a stock could, all by itself, move its price and revalue a company by hundreds of millions of dollars. Ralph Schey, the head of Scott Fetzer, an Ohio conglomerate, got his company into a jam by trying to take it private in a leveraged buyout. With its stable of profitable businesses, from Kirby vacuums to the World Book encyclopedia, Scott Fetzer made appealing prey, and corporate raider Ivan Boesky quickly intervened to make a bid of his own.

Soon, money managers no longer looked as though they were playing roulette with investors’ money by putting high-paying junk bonds in their portfolios. Indeed, it quickly became more respectable to issue new junk bonds—quite a different thing. Another short hop and takeovers of strong, well-financed companies could be financed with junk, turning formerly sound balance sheets into debt-riddled Swiss cheese. Corporate raiders armed with junk bonds, intent on “hostile takeovers” whose goal was to pluck a company clean, suddenly stalked companies that had been waddling along complacently. Their targets lunged toward any buyer who might conceivably be more friendly; in the end the target company was usually sold to someone or another and financially gutted. The bankers’ fees became so staggering that, instead of waiting for deals to present themselves, the bankers went a-huntin’ on their own, flipping through the ranks of the S&P 1000 the way Buffett had once used his Moody’s Manuals to find cigar-butt stocks.


pages: 1,073 words: 302,361

Money and Power: How Goldman Sachs Came to Rule the World by William D. Cohan

asset-backed security, Bernie Madoff, business cycle, buttonwood tree, buy and hold, collateralized debt obligation, corporate governance, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, diversified portfolio, fear of failure, financial innovation, fixed income, Ford paid five dollars a day, Goldman Sachs: Vampire Squid, Gordon Gekko, high net worth, hiring and firing, hive mind, Hyman Minsky, interest rate swap, John Meriwether, Kenneth Arrow, London Interbank Offered Rate, Long Term Capital Management, margin call, market bubble, mega-rich, merger arbitrage, moral hazard, mortgage debt, Myron Scholes, paper trading, passive investing, Paul Samuelson, Ponzi scheme, price stability, profit maximization, risk tolerance, Ronald Reagan, Saturday Night Live, South Sea Bubble, time value of money, too big to fail, traveling salesman, value at risk, yield curve, Yogi Berra, zero-sum game

Seventeen years after that somewhat quaint description of M&A bankers, it seemed the supposedly press-shy Goldman partners were willing to make an exception for writer Tim Metz’s 1982 page-one story, which portrayed the firm—virtually alone on Wall Street—as unwilling to represent a corporate raider in an unfriendly, hostile deal for a company. Whether intentional or not, in one fell swoop, Goldman had whitewashed a meaningful chunk of Levy’s role in the 1950s and 1960s on behalf of raiders—such as the Murchison brothers and Norton Simon—in mounting hostile takeover attempts. The Journal’s story would not only prove invaluable in marketing Goldman’s M&A business but would also ratify what Levy had told Institutional Investor, in December 1973, that the firm would not work for corporate raiders on hostile deals. Indeed, the story’s headline said it all: “The Pacifist: Goldman Sachs Avoids Bitter Takeover Fights but Leads in Mergers.”

Goldman had even devised a rare advertising campaign based on just that notion of hiring their firm in the event of a hostile corporate takeover. “Who do you want in your corner?” the ad asked. Companies signed up “in droves,” Whitehead said, paying a $50,000 annual retainer to have Goldman in its corner in case of a hostile attack. Friedman told the Journal that Goldman’s refusal to represent “corporate raiders” actually enhanced the firm’s “credibility” and “effectiveness,” since Goldman would not even show a potential acquisition to a buyer unless the buyer agreed, in advance, that a hostile approach would not later be made. “That lets us approach just about anyone at any time and talk openly with them,” he said. “You would be surprised at how frank they are with us, too, knowing that we won’t be back later uninvited.”

Specifically, in his complaint, Doonan claimed Freeman and his “co-conspirators” at Kidder had twice used inside information to make illegal profits: In April 1985, Doonan claimed Freeman disclosed to Kidder, Peabody “non-public inside information material to the efforts of Unocal Corporation to resist a hostile takeover,” information Freeman had supposedly gleaned from his fellow M&A bankers at Goldman who were helping Unocal craft its (ultimately successful) defense to keep from being taken over by corporate raider T. Boone Pickens. According to Doonan, at the time Pickens announced his hostile takeover of Unocal, Kidder’s arbitrage department “had purchased a substantial amount of Unocal’s stock for its own account” to bet on whether or not the deal would happen. Soon thereafter, Doonan alleged, Freeman called Siegel at Kidder and disclosed “confidential, non-public details” about the defense strategy that Goldman had developed for its client whereby Unocal would buy back some but not all of its common stock and specifically would exclude the stock Pickens had accumulated in Unocal from the buyback.


pages: 196 words: 57,974

Company: A Short History of a Revolutionary Idea by John Micklethwait, Adrian Wooldridge

affirmative action, barriers to entry, Bonfire of the Vanities, borderless world, business process, Charles Lindbergh, Corn Laws, corporate governance, corporate raider, corporate social responsibility, creative destruction, credit crunch, crony capitalism, double entry bookkeeping, Etonian, hiring and firing, industrial cluster, invisible hand, James Watt: steam engine, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, knowledge economy, knowledge worker, laissez-faire capitalism, manufacturing employment, market bubble, mittelstand, new economy, North Sea oil, race to the bottom, railway mania, Ronald Coase, Silicon Valley, six sigma, South Sea Bubble, Steve Jobs, Steve Wozniak, strikebreaker, The Nature of the Firm, The Wealth of Nations by Adam Smith, Thorstein Veblen, trade route, transaction costs, tulip mania, wage slave, William Shockley: the traitorous eight

If the archetypical figure of the Gilded Age was the robber baron, his successor was the professional manager—a more tedious character, perhaps, but one who turned out to be surprisingly controversial. In the 1940s, left-wing writers like the lapsed-Trotskyite James Burnham argued that a new managerial ruling class had stealthily obliterated the difference between capitalism and socialism; in the 1980s, corporate raiders said much the same thing. SLOAN’S REVOLUTION In the first two decades of the twentieth century, a silent takeover began: the gradual separation of ownership from control. The robber barons may have kept the big strategic decisions in their own hands, but they couldn’t personally oversee every detail of their gigantic business empires. And they couldn’t find the management skills that they needed among their immediate families, who anyway found more amusing things to do: Digby Baltzell writes acidly about “the divorcing John Jacob Astor III (three wives), Cornelius Vanderbilt, Jr.

By the early 1980s, the Western world had an integrated foreign exchange market and, for big firms at least, a global bond market. Soon mathematicians were dreaming up ever more ingenious forms of swaps, options, and other derivatives. The first hedge funds appeared, while other phrases such as “off balance sheet liabilities” acquired new meanings. Yet, the Wall Street figures who struck most fear into managers were the corporate raiders—particularly now that they focused on using debt to dismantle companies. One of the pioneers was Hanson Trust, a British conglomerate that did half its deals in America. Set up in 1964 by two buccaneering Yorkshiremen, James Hanson and Gordon White, it rose to prominence in the 1970s by taking over a series of unglamorous but cash-rich businesses, such as brick firms and tobacco firms. Once a takeover had been completed, Hanson rapidly repaid some of the debt by selling assets (typically a now-unnecessary head office) and then set about pruning management.


pages: 520 words: 164,834

Bill Marriott: Success Is Never Final--His Life and the Decisions That Built a Hotel Empire by Dale van Atta

Berlin Wall, Charles Lindbergh, clean water, collective bargaining, corporate raider, Deng Xiaoping, Donald Trump, dumpster diving, financial innovation, hiring and firing, index card, indoor plumbing, Kickstarter, Maui Hawaii, medical residency, Menlo Park, Mikhail Gorbachev, mortgage debt, profit motive, Robert Bork, Ronald Reagan, shareholder value, short selling, urban renewal

In 1984 and again in 1989, the board had rewritten the corporate charter to include so-called “poison pill” provisions to prevent a takeover. One of the reasons for the board’s regular multimillion-share buyback of Marriott stock was to prevent anyone else from accumulating enough to seize control of the company. The fact that the Marriott family owned a quarter of the stock also was a healthy deterrent to corporate raiders. But by November 1990, the company was vulnerable to moves by any determined corporate raider with a pile of cash. Richard Rainwater, the financial genius who had made the Bass family billions, called Bill and said he was considering “taking a position” in Marriott with the stock at such a low price. Bill politely told Rainwater to back off, and he did; he was not interested in a hostile takeover. Another call came from Charles Brady, the brains behind the spectacular growth of the Atlanta-based Invesco investment firm, which was then managing $21 billion in stocks and bonds for more than 200 clients.

The project would require a $2.5-billion loan to bankroll the acquisition, and Disney wasn’t for sale. Bill didn’t want to be involved in a hostile takeover; it wasn’t his style. But he gave Wilson one last hope in late 1983—if a buyer could be found for a spun-off Disney film division, Bill would take a run at buying Disney. No buyer could be found for that portion, and after three years Bill put an end to the plan. In February 1984, corporate raider Saul Steinberg took advantage of the golden opportunity Wilson had discerned. After secretly buying more than 6 percent of Disney stock, he announced his plan to buy up to 25 percent of the shares, which put Disney “in play.” Ironically, at that point, the main thing that saved Disney from a hostile takeover was the Marriott connection. Because Checchi had been part of Wilson’s team looking at the Disney acquisition, he knew all the details and persuaded his new employers, Bass Brothers Enterprises, to put together a complicated subsidiary-related plan that made it too expensive for Steinberg to continue his bid.

In September 1997, the Marriott board approved the sale—a four-year process of joint ownership with an option for Sodexho to buy out Marriott in 2001, which it did, for about $3 billion. Less gratifying, however, was a related shareholder vote, which became the only one Bill lost in his storied career. During the merger-mania decade of the 1980s, many companies adopted a dual-class stock position, which involved giving existing stockholders more votes with “super voting stock” so future corporate raiders buying one-vote stock shares could not prevail as easily in a hostile takeover attempt. Long-term investors in a company, such as owners and employees, appreciated the extra power it gave them. But institutional investors sometimes opposed the idea because it was better for them to get the windfall of cash that came with takeovers. In the Sodexho deal, Bill saw an opportunity to try the dual-class concept and further protect Marriott from a hostile takeover.


pages: 422 words: 113,830

Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism by Kevin Phillips

algorithmic trading, asset-backed security, bank run, banking crisis, Bernie Madoff, Black Swan, Bretton Woods, BRICs, British Empire, business cycle, buy and hold, collateralized debt obligation, computer age, corporate raider, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, currency peg, diversification, Doha Development Round, energy security, financial deregulation, financial innovation, fixed income, Francis Fukuyama: the end of history, George Gilder, housing crisis, Hyman Minsky, imperial preference, income inequality, index arbitrage, index fund, interest rate derivative, interest rate swap, Joseph Schumpeter, Kenneth Rogoff, large denomination, Long Term Capital Management, market bubble, Martin Wolf, Menlo Park, mobile money, money market fund, Monroe Doctrine, moral hazard, mortgage debt, Myron Scholes, new economy, oil shale / tar sands, oil shock, old-boy network, peak oil, plutocrats, Plutocrats, Ponzi scheme, profit maximization, Renaissance Technologies, reserve currency, risk tolerance, risk/return, Robert Shiller, Robert Shiller, Ronald Reagan, Satyajit Das, shareholder value, short selling, sovereign wealth fund, The Chicago School, Thomas Malthus, too big to fail, trade route

The United States would have had less bull, less bubble, and certainly a less complete breakthrough of the U.S. financial sector into its twenty-first-century digitalized nirvana. But so promoted, and in less than half a century, finance has ascended from its image as a mistrusted casino (a memory from 1929) to secular altar, from emotional cockpit to Efficient Market, from a battlefield of scamps to a playing field of such Efficient Market exemplars as speculators, arbitrageurs, credit-derivative designers, and corporate raiders. Hedge funds were useful participants, erudite citadels of Ph.D.’s and professors. Derivatives, even though mere fifteen- to twenty-year-old conceptual adolescents, were, well . . . as safe as houses. “Democratization of capital” had allowed “We the People” to end-run around yesteryear’s elite market riggers. Bubbles did not really exist, being merely extensions of rational enthusiasm, and business cycles no longer had primitive time limitations.

The place to start, though, is with Bullnomics, the pied-piping of America toward a misleading financial ideology (the efficiency and reliability of markets), buttressed by a spectrum of dubious thinkers, doctrines, and enablers: monetarist economists with their dismissal of government; economic-deregulation enthusiasts; and gurus of the Efficient Market Hypothesis, with its validation of speculators, corporate raiders, assets shuffling, debt, and derivative instruments. That is not the entire tool kit, but it is a fair summary. MARKET WORSHIP: ITS DEITIES, DISCIPLES, AND DOCTRINES Many Americans of the late 1940s, the 1950s, and the early 1960s still adhered to the nation’s powerful Depression-era disillusionment with speculation, finance, and big business. Feisty Democratic president Harry S. Truman flogged speculators and war profiteers, and even called Republicans “bloodsuckers with offices in Wall Street” during the 1948 presidential campaign.

However, the larger phenomenon of economic deregulation likewise reflected the spreading conservative viewpoint that markets delivered better results than government-controlled economies. The 1980s, 1990s, and 2000s were also decades in which the stock market averages were propelled by high levels of mergers, reorganizations, and leveraged buyouts. Under the new Internal Revenue provisions of the 1980s, debt seemed rational from a tax standpoint, rather than immoral or indulgent. That same decade saw corporate raiders posture as outsiders tackling a bloated “corpocracy,” as promoters of the ability of the small to challenge the big, and as standard-bearers of “a democratization of capital” that unlocked “shareholder value.” Business school realpolitik was more appealing to the public when rephrased to emphasize commitment to shareholders. That being said, in each of the three decades, the most important effect of mergers, acquisitions, and reorganizations was to goose the stock indexes and increase fees and profits.


pages: 1,335 words: 336,772

The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance by Ron Chernow

always be closing, bank run, banking crisis, Big bang: deregulation of the City of London, Bolshevik threat, Boycotts of Israel, Bretton Woods, British Empire, buy and hold, California gold rush, capital controls, Charles Lindbergh, collective bargaining, corporate raider, Etonian, financial deregulation, fixed income, German hyperinflation, index arbitrage, interest rate swap, margin call, money market fund, Monroe Doctrine, North Sea oil, oil shale / tar sands, old-boy network, paper trading, plutocrats, Plutocrats, Robert Gordon, Ronald Reagan, short selling, strikebreaker, the market place, the payments system, too big to fail, transcontinental railway, undersea cable, Yom Kippur War, young professional

The new junk bond department coincided with Morgan Stanley’s sudden interest in small start-up companies. As Bob Greenhill explained, “Morgan was building a high-technology effort at that time, and I said, ‘How can we not be in a business that is so necessary for so many of our growing clients?’ ”31 Junk bonds revolutionized Wall Street by magnifying the money available to corporate raiders. Where conglomerate takeovers in the 1960s used share exchanges, and cash was the method of choice in the 1970s, the junk bond market let corporate raiders flout the Wall Street establishment and finance their incursions by selling bonds to investors. The merger frenzy was also fueled by abundant money from commercial banks, whose dwindling prospects in wholesale lending attracted them to the financing of takeovers. Thus both sides of Wall Street—commercial and investment banking—found takeover work a salvation from the fundamental crises in their core lending and underwriting business.

In 1974, it carried out the first hostile raid of the modern era, then dominated that rambunctious world. (In early 1989, it was still America’s top merger adviser, claiming $60 billion in deals during the year’s first half.) In the 1980s, it gentrified junk bonds and amassed a huge two-billion-dollar war chest for leveraged buyouts, the decade’s riskiest innovation. After shocking Wall Street by siding with corporate raiders, it became a raider itself, acquiring stakes in forty companies. For more than a decade, an incredulous business press has exclaimed, “This is Morgan Stanley?” All the while, with its 30-percent return on equity, it has consistently rated as the most profitable of publicly traded securities firms. It has had unerring strategic judgment. To complete the family album, we note Morgan Grenfell, one of London’s most prestigious merchant banks.

“He assumed that fighting one meant fighting both, plus Guaranty Trust and other banks,” said Clifford H. Ramsdell, then an Allegh-any vice-president.19 Young revived ancient myths that a single Morgan director on a board could bully the rest, claiming the “real issue” was whether the railroad would “continue to submit to a Morgan non-ownership board with countless conflicting interests.”20 The Brandeisian rhetoric is less notable than its application by a millionaire corporate raider in the middle of a takeover battle. The New Deal had only wanted to curb Morgan power; Robert Young wished to appropriate it. There was an element of bear baiting in Young’s attacks on the Morgan interests. He must have known these proper gentlemen wouldn’t emerge from their clubs, roll up their sleeves, and resort to fisticuffs, they had no tactical repertoire for street fights, which they considered ill-bred and highly offensive.


pages: 613 words: 181,605

Circle of Greed: The Spectacular Rise and Fall of the Lawyer Who Brought Corporate America to Its Knees by Patrick Dillon, Carl M. Cannon

accounting loophole / creative accounting, affirmative action, Bernie Madoff, buy and hold, collective bargaining, Columbine, computer age, corporate governance, corporate raider, desegregation, energy security, estate planning, Exxon Valdez, fear of failure, fixed income, Gordon Gekko, greed is good, illegal immigration, index fund, John Markoff, mandatory minimum, margin call, Maui Hawaii, money market fund, new economy, oil shale / tar sands, Ponzi scheme, Ralph Nader, rolodex, Ronald Reagan, Sand Hill Road, Silicon Valley, Silicon Valley startup, Steve Jobs, the High Line, the market place, white picket fence, Works Progress Administration, zero-sum game

Ebbers and a host of market manipulators were beginning to see the possibilities open to them if government regulators turned a blind eye. In 1980, at the time of the Pacific Homes trial, CEO pay was forty-two times the pay of the average worker in the United States. Twenty years later CEOs would make 531 times the amount of their workers. In 1980, at least in San Diego, the business of American business wasn’t yet epitomized by high-profile takeover artists, corporate raiders, and privatizing buccaneers dedicated to amassing more wealth than they could ever have spent in three lifetimes, at the cost of breaking companies apart, laying off workers, and moving jobs offshore. Nor was the profession of the law yet exemplified by rapacious trial attorneys whose monumental judgments and staggering legal fees amounted to a redistribution of wealth in its own right. Judge Butler, speaking as the traditionalist he was, gave voice to the ethos of a sun that was setting.

His client base included comedian Lenny Bruce, jazz trumpeter Miles Davis, Broadway producer David Merrick, and Johnny Rivers, who told The Wall Street Journal that Lazar helped him negotiate his first recording contract shortly before he generated a string of hits, including “Secret Agent Man.” Lazar’s array of friends encompassed beat poet Allen Ginsberg, criminal defense lawyer Melvin Belli, LSD guru Timothy Leary, and corporate raider Meshulam Riklis. Still another was a young Hollywood cabaret singer from the 1950s. “I was very shapely and nice to look at, but Seymour saw more than that,” recalled Maya Angelou, the singer-turned-poet-laureate. “He knew I was always writing and encouraged me to be more than a cocktail singer.” The two dated and remained longtime friends. Lazar, driving a Rolls-Royce and living in Beverly Hills, was ever the boulevardier (he said Pierre Cardin made him a leather suit) when he grew bored with being a lawyer.

Before he could file for an injunction to stop the railroad transaction, Lerach received a phone call from a conciliatory Bob Warren, representing the defense. Warren proposed a settlement in return for dropping the case. Lerach agreed. Within weeks of the settlement Lerach heard the news he had been expecting: the Disney company was indeed the target of a hostile takeover attempt. The man trying to get it was Saul P. Steinberg, a notorious corporate raider, whose Disney foray popularized the term greenmail—the act of taking money midway through a takeover bid just to go away. Helping Steinberg finance the assault on Disney was Drexel Burnham Lambert, along with a rogues’ gallery of other operators, some with their own agendas: Ivan F. Boesky, Sid Richardson Bass, Irwin “Irv the Liquidator” Jacobs—and Lerach’s previous foil, Kirk Kerkorian. “We sued them again,” Lerach said, referring to a second suit against both Disney and Steinberg for their greenmail deal.


pages: 306 words: 78,893

After the New Economy: The Binge . . . And the Hangover That Won't Go Away by Doug Henwood

"Robert Solow", accounting loophole / creative accounting, affirmative action, Asian financial crisis, barriers to entry, borderless world, Branko Milanovic, Bretton Woods, business cycle, capital controls, corporate governance, corporate raider, correlation coefficient, credit crunch, deindustrialization, dematerialisation, deskilling, ending welfare as we know it, feminist movement, full employment, gender pay gap, George Gilder, glass ceiling, Gordon Gekko, greed is good, half of the world's population has never made a phone call, income inequality, indoor plumbing, intangible asset, Internet Archive, job satisfaction, joint-stock company, Kevin Kelly, labor-force participation, liquidationism / Banker’s doctrine / the Treasury view, manufacturing employment, means of production, minimum wage unemployment, Naomi Klein, new economy, occupational segregation, pets.com, post-work, profit maximization, purchasing power parity, race to the bottom, Ralph Nader, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, Silicon Valley, Simon Kuznets, statistical model, structural adjustment programs, Telecommunications Act of 1996, telemarketer, The Bell Curve by Richard Herrnstein and Charles Murray, The Wealth of Nations by Adam Smith, total factor productivity, union organizing, War on Poverty, women in the workforce, working poor, zero-sum game

Subduing the Third World was left to Ronald Reagan and the contras, but Wall Street declared war on the workers' insolence—and in this case, corporate managers were a special kind of worker that also needed to be subdued. To accompHsh that subduing, WaU Street has tried several strategies over the last two decades. First was the wave of hostile takeovers and leveraged buyouts that dominated the financial landscape of the 1980s. Underperforming companies—those generating insufficient profits to satisfy shareholders—^were taken over, either by allegedly more competent rivals or by corporate raiders (or, as Alan Greenspan dubbed them at the time, "unaffiliated corporate restructurers"), or they were taken private by a management team in partnership with outside investors using lots of borrowed money. Regardless of the financial maneuver, the operational strategy was similar: shut or sell weak divisions, lay off workers, cut wages, break unions (where they existed), speed up the Hne, get the profit rate up.

., 169 Ellwood, Wayne, 171 employment intensity of growth, 71 empowerment, 76,163 energy industry, 200—201; 5ee also Enron Enion, 33-36,200-201 Esping-Andersen, Gosta, 139 Esprit, 161,162 eToys, 201 Euro-envy, 7 Europe, slow growth rates, 69 European economic integration, 177 executive pay, 217 family vs. household, 237 fear, value of, 206-207,215-216 federal funds rate, 208 Federal Reserve and class war, 207-211 Survey of Consumer Finances, 118—119 fetishism, 46, 67 fmance economics on, 192—193 global, Americanization of, 217-225 and power, 202—207 stock- vs. bank-centered systems, 218 financialization of everything, 191 financial assets, growth in, 191 financial lifespans, household, 124—125 Financial Markets Center, 127 Fisher, George, 107 Food Stamps, 237 Forfce5 400,119-121 foreign competition, 153 foreign direct investment, 221—222; see also multinational corporations (MNCs) Foreign Policy, 153 Foreman, Dave, 161 Forrester, Viviane, 69 Foucault, Michel, 185 Foundation for Deep Ecology, 161—163 Frank, Tom, 8-9 Friedman, Thomas, 177 fiill employment, 206-207,220 Galbraith,John Kenneth, 213-214 Gates, Bill, 1,177-178 GDP growth, 4—5 distribution of, 88 employment intensity of, 71 and happiness, 168 and human welfare, 61 potential, 47 Gekko, Gordon, 214 General Agreement on Tariffs and Trade, 219 Index General Electric, 164 Gilder, George, 232 as cheerleader, 196 faith in downfallen, 36 intellectual history, 9—14 Gini index, 84, 88-89 global, 131 Glass-Steagall Act, 200 globahzation, 37,145-186 bibliometrics, 145-146 common claims about, 148—154 definitions, 145-148 and inequality, 152—155 localist critiques of, 159-165 MNCs and, 155-159 novelty of, 148-150 place and, 147-148 vs. regionalization, 159 and retreat of state, 150-152 global assembly line, 158 Global Crossing, 197 global ruling class, 174—178 Golden Age myths, 164 Gordon, Robert, 53, 62—63 Gottschalk, Peter, 115 Gramm, Phil, 200-201 Gramm, Wendy, 200-201 Greenhouse, Steven, 38 Greenspan, Alan, 1,45,228 as bubble apologist, 193 on corporate raiders, 214 history of reign, 209 New Economy promoter, 7 on tininess, 14—16 on unemployment, 206,216 gross domestic product. See GDP Grubman,Jack, 197-198 happiness, 168 Hardt, Michael, 180-186 Harris, Jerry, 175—176 Hayek, Friedrich, 174 hedonic pricing, 44 Henderson, David, 179 Hilferding, Rudolf, 181 HITEK2, 52-54 household structures and poverty, 112 household vs. family, 237 Huws, Ursula, 28 idealab, 201 imperialism Lenin on, 181 privatized, 169 import-substitution industrialization, 170, 220 income household, median, 87-88 and productivity, 45, 56 income distribution discrimination and, 94-101 educational attainment and, 99—100 global, 127-133 health consequences, 81—82 historical perspective, 82-90 long view, 82—84 recent view, 84—90 increasing returns to skill, 86—87 international comparisons, 133—141 in New Economy hotbeds, 103 productivity and, 46 race and, 90-91, 93,98-99 race and sex together, 93—94 sex and, 91-93,95-97 voting and, 81 see also poverty income mobility, 80,114-118 international comparisons of, 136-138 inequality globahzation and, 152—155 increase in, ubiquity of, 116—117 as poUtical issue, 79-81 265 see also income distribution; wealth distribution inflation, 42 pobticaJ analysis, 204—206 initial pubUc offerings (IPOs), 187-188 fees, 201 innovation, 17 historical perspective, 54—55 intangibles, 204 accounting for, 17—22,232 intellectual property, 229, 231 interest, source of, 203 International Fonim on Globalization, 160-162 Internet bubble, natural history, 188-189 and New Economy, 24—26 public subsidy, 6 IQ, corporate America's, 21-22 irrational exuberance, 7 Jameson, Fredric, 27-28 Jencks, Christopher, 75 Jensen, Michael, 203 Jessop, Bob, 147 jobs of the future, 71—74 job skills, 73-77 Jorgenson, Dale, 51, 57 Kahn, Lawrence, 97 Kaldor paradox, 158 Kalecki, Michal, 206 KeUy Kevin, 24, 79 Kemp, Jack, 230 Kennedy Ted, 208 Kennickell, Arthur, 119 Kenworthy, Lane, 135—136 Keynes, John Maynard, 148-149,188,219 Klein, Naomi, 18 Knight, Phil, 159 Korten, David, 162-169,173 Kovel,Joel, 174 Krueger,Anne O., 149 Kuznets, Simon, 83 labor class war, 208-209,227 fear among workers, 206-207, 215—216 inputs, 45, 57 quality, 58 war on, 208-209 labor force participation rate, 40 Labor Notes, 25 Lawrence, Robert Z., 145 Lay, Kenneth, 33 Lenin, V.


pages: 280 words: 73,420

Crapshoot Investing: How Tech-Savvy Traders and Clueless Regulators Turned the Stock Market Into a Casino by Jim McTague

algorithmic trading, automated trading system, Bernie Madoff, Bernie Sanders, Bretton Woods, buttonwood tree, buy and hold, computerized trading, corporate raider, creative destruction, credit crunch, Credit Default Swap, financial innovation, fixed income, Flash crash, High speed trading, housing crisis, index arbitrage, locking in a profit, Long Term Capital Management, margin call, market bubble, market fragmentation, market fundamentalism, Myron Scholes, naked short selling, pattern recognition, Ponzi scheme, quantitative trading / quantitative finance, Renaissance Technologies, Ronald Reagan, Sergey Aleynikov, short selling, Small Order Execution System, statistical arbitrage, technology bubble, transaction costs, Vanguard fund, Y2K

Robert Prechter, who the Wall Street Journal described as the reigning market guru, predicted in the first Barron’s cover story of 1987 that the DJIA would hit 3,600. Prechter, editor of the Elliot Wave Theorist newsletter, seemed prescient. The DJIA rose to what was to be its high that year of 2,722.42 in August—a level that contrarians felt was overvalued.2 But this had been a year of buying frenzy fueled by takeovers funded by junk bonds. The deals enriched corporate raiders, investment bankers, and investors, and the fever had not abated even when one of the era’s most successful buccaneers, Ivan Boesky, had been taken down on fraud charges by a young U.S. attorney named Rudolph Giuliani. Analysts cited the takeover boom plus a surge in cash from foreign and American investors as the basis for their bullish predictions.3 The public was so eager to swallow their malarkey that the market had continued its climb even when interest rates suddenly turned upward in April.

After working there a short time, he decided that his future lay on Wall Street, not in a dentist’s office scraping teeth. He switched his major to business, and after earning his undergraduate degree, he continued on toward an MBA. Beginning in 1973, Houtkin worked for a succession of firms. This was a brutal period on Wall Street because of the bear market that had its roots in the 1969 crash. He looked on the period as an extension of his education. About the middle of the decade, he worked for corporate raiders Carl Ichan and Asher Edelman and was inspired to start his own company, which he did in 1979. Houtkin possessed enough experience and ample smarts to know that the market makers for OTC stocks in the NASDAQ system were cheats. They’d often display quotes at a favorable price and then, when a trader placed an order with them over the telephone—which was the preferred way they did business in those days—they’d announce that the price had changed.


pages: 461 words: 128,421

The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street by Justin Fox

activist fund / activist shareholder / activist investor, Albert Einstein, Andrei Shleifer, asset allocation, asset-backed security, bank run, beat the dealer, Benoit Mandelbrot, Black-Scholes formula, Bretton Woods, Brownian motion, business cycle, buy and hold, capital asset pricing model, card file, Cass Sunstein, collateralized debt obligation, complexity theory, corporate governance, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, discovery of the americas, diversification, diversified portfolio, Edward Glaeser, Edward Thorp, endowment effect, Eugene Fama: efficient market hypothesis, experimental economics, financial innovation, Financial Instability Hypothesis, fixed income, floating exchange rates, George Akerlof, Henri Poincaré, Hyman Minsky, implied volatility, impulse control, index arbitrage, index card, index fund, information asymmetry, invisible hand, Isaac Newton, John Meriwether, John Nash: game theory, John von Neumann, joint-stock company, Joseph Schumpeter, Kenneth Arrow, libertarian paternalism, linear programming, Long Term Capital Management, Louis Bachelier, mandelbrot fractal, market bubble, market design, Myron Scholes, New Journalism, Nikolai Kondratiev, Paul Lévy, Paul Samuelson, pension reform, performance metric, Ponzi scheme, prediction markets, pushing on a string, quantitative trading / quantitative finance, Ralph Nader, RAND corporation, random walk, Richard Thaler, risk/return, road to serfdom, Robert Bork, Robert Shiller, Robert Shiller, rolodex, Ronald Reagan, shareholder value, Sharpe ratio, short selling, side project, Silicon Valley, Social Responsibility of Business Is to Increase Its Profits, South Sea Bubble, statistical model, stocks for the long run, The Chicago School, The Myth of the Rational Market, The Predators' Ball, the scientific method, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, Thomas L Friedman, Thorstein Veblen, Tobin tax, transaction costs, tulip mania, value at risk, Vanguard fund, Vilfredo Pareto, volatility smile, Yogi Berra

It assesses long-term investments better than many CEOs and at times appears to be peering further into the future than most. Says Alfred Rappaport, professor of accounting and finance at Northwestern University’s Kellogg School and a leading student of stock values: “You can’t justify today’s stock prices without looking at profits into the 21st century.”15 It took a while for CEOs other than Welch and Goizueta to catch on to this idea. Many still had to be pushed. Corporate raiders did the pushing in the 1980s, but if they had remained the most visible agitators for shareholder value it never would have taken root in the popular imagination the way it did. With the possible exception of colorful Texan T. Boone Pickens, the LBO artists weren’t made out to be folk heroes. Fortuitously, a new sort of investor activist was on the rise, more palatable to the media, individual investors, and lawmakers than the takeover guys ever were.

Less than two decades after Milton Friedman scandalized liberal readers of the New York Times with his argument that the job of corporations was to make money, union pension funds and liberal state politicians were joining hands to pressure CEOs to…make more money. Years later, as pension funds heeded their consultants’ calls to diversify into new asset classes, many even began investing in the funds of 1980s corporate raiders that had rebranded themselves as “private equity” firms. Unruh died in 1987, but Dale Hanson—hired away from Wisconsin’s state pension fund that year to run Calpers—proved a more than capable successor as a shareholder activist. Hanson saw that his potential allies weren’t just the other pension funds that belonged to the Council of Institutional Investors, but mutual fund companies such as Fidelity and Vanguard.

Joel Stern, “Let’s Abandon Earnings Per Share,” Wall Street Journal, Dec. 18, 1972. Reprinted in Joel M. Stern with Irwin Ross, Against the Grain: How to Succeed in Business by Peddling Heresy (Hoboken: John Wiley & Sons, 2003), 171–77. 27. Alfred Rappaport, “Selecting strategies that create shareholder value,” Harvard Business Review (May–June 1981): 139–49. 28. Diana Henriques, The White Sharks of Wall Street: Thomas Mellon Evans and the Original Corporate Raiders (New York: A Lisa Drew Book/Scribner, 2000), 150–58. 29. Cited in Daniel R. Fischel, “Efficient Capital Market Theory, the Market for Corporate Control, and the Regulation of Cash Tender Offers,” Texas Law Review 57, no. 1 (Dec. 1978): 17. 30. Henry G. Manne, “Mergers and the Market for Corporate Control,” Journal of Political Economy (April 1965): 113. 31. Manne, “Mergers and the Market,” 112. 32.


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Londongrad: From Russia With Cash; The Inside Story of the Oligarchs by Mark Hollingsworth, Stewart Lansley

Berlin Wall, Big bang: deregulation of the City of London, Bob Geldof, business intelligence, corporate governance, corporate raider, credit crunch, crony capitalism, Donald Trump, energy security, Etonian, F. W. de Klerk, income inequality, kremlinology, mass immigration, mega-rich, Mikhail Gorbachev, offshore financial centre, paper trading, plutocrats, Plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, rent-seeking, Ronald Reagan, Skype, Sloane Ranger

He was a 23-year-old student when the Soviet Union collapsed in 1991, but by 1994 had made big money from trading in metal. Unlike the other oligarchs, Deripaska did not acquire his fortune through the privatization auctions or via political connections. His control of the aluminium industry was largely due to the way in which he outmuscled and outwitted his competitors and his prowess with the hostile takeover. Deripaska was a post-Soviet corporate raider, borrowing from techniques pioneered by American and British tycoons, notably Sir James Goldsmith. In person, Deripaska, tall with cropped blond hair and deep blue eyes, is deceptive, a man of few words. Negotiations were more like poker or chess than orthodox business deals. He shared many of the characteristics of his friend Roman Abramovich - externally reserved and even more boyish-looking.

Abramovich and his representatives refused to comment. 4Kevin Dowling, Sunday Times, 7 October 2007. 5‘Berezovsky v Abramovich’, [2008] EWHC 1138 (Comm) (22 May 2008) paras 4(e) and 2; ‘Particulars of Claim’, Berezovsky v Abramovich, High Court, 8 January, 2008, p. 17. 6Dominic Midgley and Chris Hutchins, Abramovich: The Billionaire from Nowhere, HarperCollins, 2004, p. 239. 7Eric Reguly, Toronto Globe & Mail, 12 November 2007. 8Luke Harding, Guardian, 24 July 2007. 9Belton, op. cit. 10Ibid. 11Andrew Kramer, New York Times, 20 August 2006. 12Ruling by Justice Clarke, ‘Cherney v Deripaska’ - 2008 EWHC 1530 (Comm), Queen’s Bench Division, High Court, 3 July 2008, para. 58. 13Belton, op. cit. 14Quoted in ruling by Justice Clarke, para. 9. 15Ibid., para. 9. 16Ibid., para. 166. 17Sabrina Tavernise, ‘Handful of Corporate Raiders Transform Russia’s Economy’, New York Times, 13 August 2002. 18Rusal always claimed that the dispute between Cherney and Deripaska was a matter for them and not the company, making the company’s main owner the sole defendant. 19Ruling by Justice Langley, ‘Cherney v Deripaska’ - 2007 EWHC 965 (Comm) - Case No. 2006 Folio 1218, Queen’s Bench High Court, 3 May 2007, para. 39. 20Ibid., para. 45. 21Ruling by Justice Clarke, op. cit., para. 264. 22Ibid., para. 47. 23Ibid., para. 10. 24Benjamin Wegg-Prosser, Guardian Blog, Guardian, 23 October 2008. 25Jon Ungoed-Thomas and Nicola Smith, ‘The Secret World of Lord Freebie’, Sunday Times, 10 October 2008. 26Washington Post, 25 January 2008. 27John Helmer, ‘Deripaska Settles Big London Claim to Speed Aluminium IPO’, www.johnhelmer.net, May 2007. 28Quoted in Toronto Star, 13 November 2007. 29‘Jim Pettit: Immigration from Russia to the US Seems to Have Peaked and Is Now Falling’, Interfax, 2007. 30Martin Sixsmith, The Litvinenko File, Macmillan, 2007, p. 135. 31Belton, op. cit., 13 July 2007. 32Nicolas van Praet, ‘Magna’s Man in Moscow Remains a Mystery’, Financial Post, 25 August 2007. 33Financial Times, 19 July 2005. 34Mail on Sunday, 30 April 2006. 35St Petersburg Times, 2 May 2006. 36Terry Macalister.

.: Failed Crusade 63 Coleman, John 147-8, 149 Collins, James 32 Collins, Tim 109 Collongues-Popova, Elena 219-20 Colony Club, Hertford Street, Mayfair 119 Commercial Court, London 317 Committee to Protect Journalists 271-2 communism collapse of (1991) 13, 32, 46, 273 Russian attitude to 49 Communist Party, backs Khodorkovsky 46 Confederation of Independent States 54 Connery, Sean 138 Conservative Party 58, 334 Constellation (ship) 229-30 Cook, Robin 160 Cooperative Insurance Society 341 Corbin, Arnaud 368 Corfe Holdings Ltd 236 Corker Binning 213 Cossacks 56, 171 Côte d’Azur 198, 203, 264 Courchevel ski resort, France 158, 181, 198, 204-7 Cowdray, Lord 236 Crown Prosecution Service 261 Crown Protection Services 351 CSKA Moscow 160 CSS 202 Curtis, Louise 11 Curtis, Sarah 10, 11, 12, 13 Curtis, Stephen Langford 89, 266 covert cooperation with NCIS 6, 7 covert custodian of Russian personal fortunes 3-4 death threats 6-7, 10 decision to co-operate with British police 5 early career 94 fatal helicopter crash follows threats 1-10 finds working for Russians exciting and challenging 93-4 and Fomichev 104, 105 funeral 10-13 guardian of Russian clients’ secrets 4 health 10 and ISC Global 237 and Khodorkovsky 4, 5, 6, 46, 93, 215, 234 meets Berezovsky 94 and Menatep 5, 6, 94, 216, 217, 237, 240 personal fortune 4-5, 236 personality 4, 10, 94, 95, 234 and security 237, 239, 240-41 sets up New World Value Fund Ltd 235 and Sibneft 98, 99 works for Berezovsky 4, 6, 95-6, 107, 110, 261, 262 and the Yukos curse 246 Curtis & Co. 94, 95, 235, 238, 240-41 Cyprus 213, 215, 216, 247, 321, 322 Daily Mail 346 Daiwa Bank 218 Daresbury, Lord 161 Darling, Alistair 301, 356 Dart, Kenneth 240 Dartmouth, Earl of 147 Davidson, Rod 11-12 Davis, Alan 9 Davis, Rick 336 Davos, Switzerland 49, 214 World Economic Forum 49, 275, 330 ‘Davos Pact’ 49-50 de Klerk, F.W. 257, 276 de Kooning, Willem: Woman III 186 de Sancha, Antonia 257 de Saumarez family 350 de Waal, Thomas 288 Del Ponte, Carla 79 Deloitte Touche 137 Deng, Wendi 280 Dent-Brocklehurst, Molly 202 Derby, Earl of 161 Deripaska, Oleg 151, 157, 162, 165, 167, 256, 315, 342, 353 aluminium magnate 15, 55 appearance 55, 319 and Bob Dole 335-6 buys racehorses 356-7 and Cherney 318-19, 322-8, 339, 342, 343 Conservative Party donation issue 334 as a dollar billionaire 363 early life 56 enemies 326 entry problems to United States 16, 328-9, 335, 336, 337 and the ‘family’ 56 friendship with Abramovich 55, 319 global business empire 16 Jewish background and Cossack heritage 56 losses 364 and Magna 328, 339, 364 marriage 56 and Nat Rothschild 329-30 personality 55, 319 a post-Soviet corporate raider 55 property purchaser 145, 320-21 and Putin 15, 66, 343 ruthless young pretender 15, 55 Deripaska, Polina 165, 181, 320 Devonshire, Duke of 114 Diana, Princess of Wales 133, 171 Dickens, Charles 196 Dinamo Tbilisi Football Club 277 Disdale, Terence 153, 154, 351-2 Doig, Peter: White Canoe 185-6, 193 Dolce & Gabbana 315 Dole, Bob 335-6 Dom-2 (reality TV programme) 189 Donde, Daniel Ermes 201 Dorchester Hotel, London 26, 223, 322, 323 Doronin, Vladimir 169-70 Downside Manor, Leatherhead, Surrey 277-8, 279 Draycott House, off Sloane Square 339 Dresner-Wickers 50 Dubai 99, 142, 198 Dubov, Yuli 267-8, 279 Bolshaya Paika (The Lion’s Share) 30, 267 The Lesser Evil 267-8 Ducasse, Alain 203 Dulwich College 166 Dyachenko, Boris 165 Dyachenko, Tatyana (Tanya) 50, 52, 145, 162, 165, 204 Dzerzhinsky, Felix 173 East End, London 21, 190 Eastern Bloc, collapse of (late 1980s) 22 Eastern Oil Company 210 Easton, Isle of Portland 11, 12 Easton Neston, neat Towcester 146 Eaton Square, London 136, 137, 140-41 Ecclestone, Bernie 162 Eclipse (yacht) 155-6 Economic and Trade Ministry 61 Economist, The 221 Ecstasea (yacht) 154 Ekho Moskvy radio station 25, 75, 271, 280 Elizabeth II, Queen 142 Elliott Hotel, Gibraltar 235 Ellison, Larry 153 Enron scandal 337 Esher, Surrey 143 Eurocement 157 Eurocement Holding AG 157 European Bank for Reconstruction and Development (EBRD) 126, 127, 128 European Champions League 154 European Union 330, 331, 332 Evans, Chris 111, 112 Evans, Jonathan 270 Evening Standard 132, 346, 365 Evraz 157, 363 Exclusive London 174-5 ExxonMobil 230, 245 Fabergé 192 Falileyev, Judge Igor 357 ‘family, the’ 51-2, 56 Farnborough Airport 152 Farouk, King of Egypt 129 Fatherland All-Russia Party 73 Fayed, Camilla 181 FBI 359 Federal Law N 153-F3 310-11 Feldman, Andrew 334 Felshtinsky, Yuri 292 Fennell, Theo (jewellers) 26 Fezan Ltd 236 Fiat 38 financial crash (1998) 218, 221 Financial Dynamics 256 Financial Times 63, 131, 236, 275, 323, 339 Finans business magazine 55, 363 Finsbury 256 Firebird Fund 80 first Gulf War 130, 131 Fitasc Sporting British clay pigeon shooting Grand Prix 148 Fitzgerald, Edward, QC 213 Fleming, Roddie 161 Florida International University 61 Fomichev, Katya 104-5, 181 Fomichev, Ruslan 104-5, 181 Forbes magazine 24, 77, 363 Forbes Russia 246, 272, 273 Ford, Tom 179 Foreign Office 7, 241, 261, 270, 282, 303, 307 Foreign Policy Centre (FPC) 225 Fortnum & Mason 24 Forus 40, 78, 79, 80 Forward Media Group 320 Fox, James 125 Fox and Gibbons 94 Foxwell, Gavin 8 France, affluent Russians move to 22 Francis I, King of France 149 Fraud Squad 261 Fredriksen, John 128, 132 Freeland, Chrystia 63 French Foreign Legion 108 French Special Forces 108 Freud, Lucian: Benefits Supervisor Sleeping 201 Fridman, Mikhail 49 Friedman, Thomas 61-2 Frieze Fair 188, 192 Frontline (American news programme) 63, 76 Frontline Club, London 36 FSB (Federal Security Service) 53, 62, 71, 74, 86, 103, 106, 115, 230, 231, 262, 267, 275, 281, 285, 286, 287, 289-90, 292, 293, 296, 305-9, 312, 313, 338 Fulham Football Club 163 Fyning Hill, Rogate, West Sussex 124, 130, 152, 161, 163, 200, 201, 353 G8 summits 259-60, 309, 360 Gagosian, Larry 202 Gallitzin, Prince Gregory 167 Garda Worldwide 130 GAZ 157 Gazprom 76, 157, 173, 233, 270-71, 317, 341, 362 Geffen, David 194 Geldof, Bob 172 General Motors 39, 244, 325 George V, King 114 Giacometti, Alberto 201 Gibraltar 19, 100, 104, 215, 216, 235, 236, 241 Gibraltar Criminal Intelligence Agency 241 Gillford, Lord (‘Paddy’) 226-7 Glencore 340 global economic crisis (2008) 17 Global Leadership Foundation (GLF) 275-6 Global Options Group Inc 335, 336 Glushkov, Nikolai 92, 96, 102-3, 279 Goldfarb, Alex 65, 80, 82-3, 275, 281, 291, 297, 298, 337 Goldfarb, Alex with Litivinenko, Marina: Death of a Dissident 307 Goldsmith, Sir James 55 Goldsmith, Lord (Peter) 279 Golubev, Yuri 245 Goodwin, James 334 Gorbachev, Mikhail 32, 35, 40, 171, 173, 199, 312 Gorbunova, Yelena 72, 110, 111, 113, 114 GPW Ltd 351 Grand Bleu, Le (yacht) 153, 154, 155, 203 Grand-Hôtel du Cap-Ferrat 203-4 Grayson, Patrick 351 Gref, German 330 Greig, Geordie 171, 172, 345-6, 365 Grey Advertising 222 Grigoriev, Boris Dmitrievich: Faces of Russia 194 Group Menatep Ltd (GML) 215-16, 227, 235, 236 Group of Seven 49 GRU 270, 287 GSS Global 248 Gstaad, Switzerland 19 Guardian 195, 268, 280, 281, 369 Gubkin Institute of Oil and Gas, Moscow 43 Gucci 179 Guernsey 236 Guinness, Lady Honor 320-21 Gulf States 99 Gusinsky, Vladimir 49, 75-6, 82, 83, 86, 132, 196, 280 Gutseriyev, Mikhail 165, 360-62 Gyunel 169 Hague, Ian 80 Hakkasan restaurant, London 176 Hamnett, Professor Chris 353 Hampton Court Palace 171 Hamstone House, St George’s Hill, Weybridge 145 Hannant, Paul 8 Hanson, Lord 226 Hanson Plc 226 Harding, James 17 Harewood estate, near Windsor 142, 203 Harrods department store, London 26, 123, 125, 137, 163, 174 Harrods Estates 135 Harrogate Ladies’ College 166 Harrow School 165 Harry’s Bar restaurant, South Audley Street, London 101, 109 Hartlands 145-6 Harvard University-Dow Jones US-Russian Investment Symposium 328 Harvey, David 17-18 Harvey Nichols department store, London 174, 180 Fifth Floor Restaurant 26 Hascombe Court, near Godalming, Surrey 111-12 Haslam, Nicholas 105, 136 Hawksmoor, Nicholas 146 Hazlitt, William 191 Health Protection Agency 298, 300 Heath Lodge, Iver, Buckinghamshire 110 Heath, Sir Edward 304 Hello!


The America That Reagan Built by J. David Woodard

affirmative action, anti-communist, Ayatollah Khomeini, Berlin Wall, Bonfire of the Vanities, business cycle, colonial rule, Columbine, corporate raider, cuban missile crisis, Deng Xiaoping, friendly fire, glass ceiling, global village, Gordon Gekko, gun show loophole, income inequality, invisible hand, Jeff Bezos, laissez-faire capitalism, late capitalism, Live Aid, Marc Andreessen, Mikhail Gorbachev, mutually assured destruction, Neil Kinnock, Nelson Mandela, new economy, postindustrial economy, Ralph Nader, Robert Bork, Ronald Reagan, Ronald Reagan: Tear down this wall, Rubik’s Cube, Silicon Valley, South China Sea, stem cell, Ted Kaczynski, The Predators' Ball, trickle-down economics, women in the workforce, Y2K, young professional

Spending and mergers were fueling the boom, and any tendency to go slow was seen as alarming. Leveraged buyouts were risky, but legal, transactions. As in any business, a few successful corporate raiders operated outside the law. On May 12, 1986, Dennis Levine, who had made $12.6 million on insider-trading deals, implicated two well-known Wall Street traders: Michael Milken and Ivan Boesky. Both men 68 THE AMERICA THAT REAGAN BUILT were charged with violations of federal securities law. Boesky agreed to pay $100 million in forfeitures and penalties, and Michael Milken admitted to six felonies and agreed to pay $600 million in fines. The amount of the fines was staggering, but more revealing was the corporate raider lifestyle the investigations uncovered. In the early 1980s Milken was reportedly making $550 million a year.12 Overall, the freeing of the market for corporate control had important benefits for women in the workforce.

Junk bonds were high-risk investments by securities rating agencies, such as Standard and Poor’s and Moody’s, marked as such because they had a potential for higher yield and failure. If the people who bought the bonds were successful in the takeover, then they were handsomely rewarded; but if they failed, then there was the possibility that the bonds would not be repaid. Companies with low debt loads were attractive targets for leveraged buyouts, which meant that successful businessmen found themselves the object of ‘‘corporate raiders.’’ Benjamin Franklin’s age-old virtues of thrift and frugality resulted in business success, so much so that the entrepreneurial founders lost control of their companies. Sometimes, to prevent these unwanted effects, recently acquired companies bought back their stock at higher than market prices—in effect, paying raiders to go away. The practice was known as ‘‘greenmail,’’ for its resemblance to blackmail.


pages: 613 words: 200,826

Unreal Estate: Money, Ambition, and the Lust for Land in Los Angeles by Michael Gross

Albert Einstein, Ayatollah Khomeini, bank run, Bernie Madoff, California gold rush, clean water, corporate raider, Donald Trump, estate planning, family office, financial independence, Irwin Jacobs, Joan Didion, Maui Hawaii, McMansion, mortgage debt, Norman Mailer, offshore financial centre, oil rush, passive investing, pension reform, Ponzi scheme, Right to Buy, Robert Bork, Ronald Reagan, Silicon Valley, stem cell, Steve Jobs, Steve Wozniak, The Predators' Ball, transcontinental railway, yellow journalism

A brother of Saudi Arabia’s King Abdullah owns three lots near Mulholland Drive (literally around the bend from Jack Nicholson) totaling 55,000 square feet; Bambang Trihatmodjo, the late Indonesian dictator Suharto’s second son, is said to have bought two or three (after Suharto family business associates reportedly invested in Adler and Ezralow’s purchase of the tract); former Disney boss Michael Eisner bought and sold three properties; mobile home park operator Lee Kort sold his 27,000-square-foot mansion for $36.7 million to public-works builder Ronald Tutor in 2008. Other owners in the north have included Indonesian billionaire Peter Sondakh; the comedian Paul Reiser; California Pizza Kitchen founder Larry Fink; Michael Jackson lawyer John Branca; the St. Petersburg, Russia–based corporate raider Alexander Sabadash; the leveraged buyout specialist Alec Gores; former Marvel Entertainment chairman Avi Arad; tech tycoon and Tesla Motors CEO Ze’ev Drori; baseball’s Barry Bonds; Tampa Bay Buccaneers owner Ed Glazer; the former head of Noble Group, a Hong Kong–based commodities trading giant, Michel Harouche; financier and fashion executive Fabian Oberfeld; former studio heads Richard Frank and Mike Medavoy; casino executive Paul Alanis; Beverly Hills plastic surgeon and nose-job specialist Paul Nassif and his wife Adrienne Maloof, whose family owns the Sacramento Kings (and who is a “real housewife” of Beverly Hills); hand tool and hardware mogul Eric Smidt; and Perfect 10 magazine publisher and Hugh Hefner–wannabe Norman Zadeh.

Shortly after moving into Bellagio House, Murdock made his most public move yet, earning a front-page story in the Wall Street Journal—he put together a deal to have Occidental Petroleum buy Iowa Beef, and came away with a 2.8 percent share of Occidental, which made him the company’s top shareholder, barely edging out its chairman, Dr. Armand Hammer. The Journal painted him as a greenmailer, one of those eighties corporate raiders who bought stakes in companies in the hope management would pay a premium to be rid of them. But he was really chasing deals, and the excitement of reinforcing his self-image. “Anything man’s mind can imagine, he can do,” he told the Journal. In 1982, Murdock bought Cannon Mills for $414 million. Had they known how he’d dealt with Conrad Hilton’s furnishings, the employees of Cannon, long a family-run, paternal business, might have had a warning of what was to come.

With that, I said, ‘What I want to do is find a cure for cancer.’ ” Gabriele’s death spurred an interest in brain, nutrition, and biotechnology research, which became his philanthropic focus. Another heartache followed the same year, when their eldest son from Gabriele’s first marriage drowned in an accident at twenty-three. Though devastated, Murdock didn’t falter in business. Within a year, he’d beaten another corporate raider, Irwin Jacobs, and taken over a troubled 104-year-old real estate company called Castle & Cook, which owned almost the entire 90,000-acre Hawaiian island of Lanai, and Dole Food, the pineapple and banana company that had been born there. Dole also owned 60,000 acres on other Hawaiian islands, 6,600 acres in California, and plantations in Thailand and the Philippines, where most of its fruit was grown.


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The Cost of Inequality: Why Economic Equality Is Essential for Recovery by Stewart Lansley

"Robert Solow", banking crisis, Basel III, Big bang: deregulation of the City of London, Bonfire of the Vanities, borderless world, Branko Milanovic, Bretton Woods, British Empire, business cycle, business process, call centre, capital controls, collective bargaining, corporate governance, corporate raider, correlation does not imply causation, creative destruction, credit crunch, Credit Default Swap, crony capitalism, David Ricardo: comparative advantage, deindustrialization, Edward Glaeser, Everybody Ought to Be Rich, falling living standards, financial deregulation, financial innovation, Financial Instability Hypothesis, floating exchange rates, full employment, Goldman Sachs: Vampire Squid, high net worth, hiring and firing, Hyman Minsky, income inequality, James Dyson, Jeff Bezos, job automation, John Meriwether, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, laissez-faire capitalism, light touch regulation, Long Term Capital Management, low skilled workers, manufacturing employment, market bubble, Martin Wolf, mittelstand, mobile money, Mont Pelerin Society, Myron Scholes, new economy, Nick Leeson, North Sea oil, Northern Rock, offshore financial centre, oil shock, plutocrats, Plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, Right to Buy, rising living standards, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, shareholder value, The Great Moderation, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, Tyler Cowen: Great Stagnation, Washington Consensus, Winter of Discontent, working-age population

These new power-brokers were mostly barely connected with the companies they were restructuring, had any knowledge of their workings and rarely went onto get their own hands dirty running the companies they refinanced. Typically interventions were driven less by improving the health of the companies they targeted or their employees, but how much money could be made. They had taken a lesson from Lord White—one of the pioneering British corporate raiders of the 1970s and 1980s. White used to boast that he had never stepped foot on the shop floor of any of the companies that he had bought. As his business partner, James Hanson, later acknowledged, the name of the game was to get hold of ‘tomorrow’s money today’. 190 It was a philosophy embraced in full by this new breed of corporate raider. In the UK and the US, the great majority of mergers have occurred as a result of pressure from investment banks which both advise the boardrooms and raise the finance to fund the deals. Investment banks would warn companies that if they made no acquisitions they risked being downgraded by analysts for ‘having no strategy’.


pages: 538 words: 147,612

All the Money in the World by Peter W. Bernstein

Albert Einstein, anti-communist, Berlin Wall, Bill Gates: Altair 8800, call centre, Charles Lindbergh, corporate governance, corporate raider, creative destruction, currency peg, David Brooks, Donald Trump, estate planning, family office, financial innovation, George Gilder, high net worth, invisible hand, Irwin Jacobs: Qualcomm, Jeff Bezos, job automation, job-hopping, John Markoff, Long Term Capital Management, Marc Andreessen, Martin Wolf, Maui Hawaii, means of production, mega-rich, Menlo Park, Mikhail Gorbachev, new economy, Norman Mailer, PageRank, Peter Singer: altruism, pez dispenser, popular electronics, Renaissance Technologies, Rod Stewart played at Stephen Schwarzman birthday party, Ronald Reagan, Sand Hill Road, school vouchers, Search for Extraterrestrial Intelligence, shareholder value, Silicon Valley, Silicon Valley startup, stem cell, Stephen Hawking, Steve Ballmer, Steve Jobs, Steve Wozniak, the new new thing, Thorstein Veblen, too big to fail, traveling salesman, urban planning, wealth creators, William Shockley: the traitorous eight, women in the workforce

Two vast fields opened up for fortune makers of the time, one based upon financial acumen—in particular, the borrowing of money to buy undervalued assets—the other upon investment in rapidly evolving digital and computer technologies. These two sectors, more than any others, represented “Oklahoma” in the money rush of the last twenty-five years. More traditional fields for making big money, such as oil and manufacturing, grew at a much slower rate. In the 1980s, as the chapter on finance, Beyond Wall Street, chronicles, corporate raiders dominated the news, with Michael Milken (the so-called junk bond king) becoming the financial poster boy of his generation. Milken and other leveraged buyout (LBO) players would, in the popular phrase, “unlock” the value of the American corporation; typically, they would buy a company with borrowed money and then sell off some of its pieces and ruthlessly streamline others until they repaid their debt and made back their investment many times over.

And billionaire industrialist Dennis Washington5 spent the first ten years of his career using his house as security on loans so that he could bid on highway contracts. Even when they make it to the top, many of the 400 do not stop gambling. Shipping magnate Daniel Ludwig6 poured as much as $850 million into building a wood pulp factory in the middle of the Amazon. Donald Trump borrowed7 hundreds of millions of dollars to build on his father’s substantial real-estate empire. And oilman and corporate raider T. Boone Pickens8 bet his entire company, Mesa Petroleum, which he had spent most of his life building, on his instinct that the falling price of natural gas would eventually go up. (Although the price later went up, it didn’t at the time, and Pickens was bought out.) Big-time entrepreneurs don’t just capture the imagination: They embody something of the American Dream. Where else in the world could so many people born of humble origins or who emigrated from foreign shores rise in a short period of time to become among the richest in the country?

And odd couple Bill Gates and Warren Buffett: Daniel Roth, “The $91 Billion Conversation,” Fortune, Oct. 31, 2005. 5. And billionaire industrialist Dennis Washington: Contavespi, “Tips from Winners in the Game of Wealth.” 6. Shipping magnate Daniel Ludwig: “Daniel Ludwig, Billionaire Businessman Dies at 95,” obituary, New York Times, Aug. 29, 1992. 7. Donald Trump borrowed: Mark Singer, “Trump Solo,” The New Yorker, May 19, 1997. 8. And oilman and corporate raider T. Boone Pickens: Joseph Nocera, “Return of the Raider,” Fortune, May 27, 2002. 9. Among the men: Christopher Palmeri and Marla Matzer, “The Plaza Hotel, That’s Not My Style,” Forbes, Feb. 26, 1996. 10. “I figured my worst risk”: Richard L. Stern, “Denny’s Always the Low-Cost Producer,” Forbes, May 15, 1989. 11. Hunt stayed afloat: Harry Hurt, Texas Rich (New York: W. W. Norton, 1982), pp. 41–43. 12.


pages: 585 words: 151,239

Capitalism in America: A History by Adrian Wooldridge, Alan Greenspan

"Robert Solow", 2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, Affordable Care Act / Obamacare, agricultural Revolution, air freight, Airbnb, airline deregulation, American Society of Civil Engineers: Report Card, Asian financial crisis, bank run, barriers to entry, Berlin Wall, Bonfire of the Vanities, Bretton Woods, British Empire, business climate, business cycle, business process, California gold rush, Charles Lindbergh, cloud computing, collateralized debt obligation, collective bargaining, Corn Laws, corporate governance, corporate raider, creative destruction, credit crunch, debt deflation, Deng Xiaoping, disruptive innovation, Donald Trump, edge city, Elon Musk, equal pay for equal work, Everybody Ought to Be Rich, Fall of the Berlin Wall, fiat currency, financial deregulation, financial innovation, fixed income, full employment, George Gilder, germ theory of disease, global supply chain, hiring and firing, income per capita, indoor plumbing, informal economy, interchangeable parts, invention of the telegraph, invention of the telephone, Isaac Newton, Jeff Bezos, jimmy wales, John Maynard Keynes: technological unemployment, Joseph Schumpeter, Kenneth Rogoff, Kitchen Debate, knowledge economy, knowledge worker, labor-force participation, Louis Pasteur, low skilled workers, manufacturing employment, market bubble, Mason jar, mass immigration, means of production, Menlo Park, Mexican peso crisis / tequila crisis, minimum wage unemployment, mortgage debt, Myron Scholes, Network effects, new economy, New Urbanism, Northern Rock, oil rush, oil shale / tar sands, oil shock, Peter Thiel, plutocrats, Plutocrats, popular capitalism, post-industrial society, postindustrial economy, price stability, Productivity paradox, purchasing power parity, Ralph Nader, Ralph Waldo Emerson, RAND corporation, refrigerator car, reserve currency, rising living standards, road to serfdom, Robert Gordon, Ronald Reagan, Sand Hill Road, savings glut, secular stagnation, Silicon Valley, Silicon Valley startup, Simon Kuznets, Social Responsibility of Business Is to Increase Its Profits, South Sea Bubble, sovereign wealth fund, stem cell, Steve Jobs, Steve Wozniak, strikebreaker, supply-chain management, The Great Moderation, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, too big to fail, total factor productivity, trade route, transcontinental railway, tulip mania, Tyler Cowen: Great Stagnation, union organizing, Unsafe at Any Speed, Upton Sinclair, urban sprawl, Vannevar Bush, War on Poverty, washing machines reduced drudgery, Washington Consensus, white flight, wikimedia commons, William Shockley: the traitorous eight, women in the workforce, Works Progress Administration, Yom Kippur War, young professional

Performance-related pay and a vigorous market in corporate control would soon restore corporate America to rude health. The government largely stood back while all this restructuring took place on the grounds that corporate turmoil promoted wealth creation. Antitrust legislators stood pat for WorldCom’s $37 billion merger with MCI, and Citicorp’s $70 billion merger with Travelers. There were a few exceptions. Rudy Giuliani stepped in to discipline two of the greatest corporate raiders, Michael Milken and Ivan Boesky, and the antitrust authorities fought an intense battle with Bill Gates. Much discussed though they were at the time, however, these exceptions did little to change the character of the era. THE FINANCIAL REVOLUTION Ronald Reagan inaugurated the most exuberant era on Wall Street since the 1920s. Financiers became national celebrities. Investment banks sucked in the country’s jeunesse dorée with a promise of instant riches and a glamorous life.

These “junk bonds,” as they were dubbed, helped to finance America’s entrepreneurial revolution: Milken’s clients included Ted Turner, the founder of Turner Broadcasting; Rupert Murdoch, the owner of News International; Leonard Riggio, the founder of Barnes & Noble; and William McGowan, the founder of MCI Communications, the first serious challenger to AT&T’s monopoly on long-distance telephone calls. They also became some of the most valuable tools in the restructuring wars: corporate raiders used them to buy shares in the companies that they wanted to take over, with a view to using the acquired companies’ assets to pay off their debts; and many targets of takeover attempts bought back their own shares from raiders at a premium. Junk bonds expanded from a mere 3.5 percent of the bond market in 1977 to a quarter of the market a decade later. Michael Milken became the symbol of the era, with his $550 million salary in a single year and his annual Predators’ Ball.

Junk bonds lived up to their name: around a fifth of the bonds issued from 1978 to 1983 had defaulted by 1988. Many of the thrifts that bought junk bonds went bankrupt, as did Drexel Burnham itself in February 1990. Michael Milken was indicted on almost a hundred counts of racketeering, ending up in jail, and his company, Drexel Burnham, was forced into bankruptcy. Financial innovation continued regardless. In the 1990s, venture capital funds took over from corporate raiders as the pacesetters of capitalism, focusing on start-ups rather than mature firms, and making less use of leverage. America had far more venture capital available than the rest of the world combined: in the mid-1990s, Massachusetts had more venture capital than Britain, and California had more than the whole of Europe. All this venture capital fueled the surge of the high-tech industry. Venture capitalists were willing to take bets because they relied on the law of averages: most investments failed but a successful IPO could yield vast returns.


pages: 347 words: 91,318

Netflixed: The Epic Battle for America's Eyeballs by Gina Keating

activist fund / activist shareholder / activist investor, barriers to entry, business intelligence, collaborative consumption, corporate raider, inventory management, Jeff Bezos, late fees, Mark Zuckerberg, McMansion, Menlo Park, Netflix Prize, new economy, out of africa, performance metric, Ponzi scheme, pre–internet, price stability, recommendation engine, Saturday Night Live, shareholder value, Silicon Valley, Silicon Valley startup, Steve Jobs, subscription business, Superbowl ad, telemarketer, X Prize

Wattles, however, would not turn over the information to Antioco unless his rival agreed not to tender an offer directly to Hollywood Video’s shareholders. Wattles said publicly that he welcomed the offer, but he privately expressed doubts to the Blockbuster executives that U.S. antitrust regulators would approve the deal. The proposal had drawn the attention of billionaire investor Carl Icahn, a former corporate raider and self-styled shareholder activist, who then planned to profit on both ends of the Blockbuster–Hollywood Video merger. Icahn sank $150 million into Blockbuster shares and about $60 million into Hollywood Video. In a securities filing Icahn said he might seek to participate in, and influence the outcome of, any proxy solicitation and the bidding process involving the owner of the Hollywood Video stores.

He called for Blockbuster’s board to find a private equity buyer for the company; a move that Viacom had tried and failed at before splitting it off. Then Icahn demanded another special dividend for Blockbuster shareholders that would have totaled more than $300 million—again rejected by Antioco and the board. The tension between the two men rose, egged on by Stead, who vowed not to submit to the former corporate raider’s tactics. • • • AS THE CRISIS with Hollywood Video unfolded, attorneys general in several states started looking into the End of Late Fees promotion with great interest—especially the policies under which Blockbuster charged a $1.25 restocking fee if consumers returned a movie or game outside the seven-day rental window, or the full sale price of the item minus the rental fee if they kept DVDs beyond a seven-day grace period.


Hiding in Plain Sight: The Invention of Donald Trump and the Erosion of America by Sarah Kendzior

"side hustle", 4chan, Berlin Wall, Bernie Sanders, borderless world, Chelsea Manning, Columbine, corporate raider, desegregation, don't be evil, Donald Trump, drone strike, Edward Snowden, Ferguson, Missouri, Francis Fukuyama: the end of history, hiring and firing, illegal immigration, income inequality, Jaron Lanier, Jeff Bezos, Jeffrey Epstein, Julian Assange, Mohammed Bouazizi, Naomi Klein, Nelson Mandela, new economy, payday loans, plutocrats, Plutocrats, QAnon, Robert Hanssen: Double agent, Ronald Reagan, Silicon Valley, Skype, Thomas L Friedman, trickle-down economics, unpaid internship, white flight, WikiLeaks, Y2K, zero-sum game

Louis and New York made roughly the same salaries and had a similar cost of living7—which meant life in both cities was cheap and low-down. When John Carpenter filmed his 1981 postapocalyptic thriller Escape from New York—a commentary on Manhattan’s shattered state—he chose to do it in St. Louis because he did not need to build a set. St. Louis’s natural end-times look filled in just fine. New York and St. Louis were brothers in blight—until they weren’t. The rapacious greed of the Reagan 1980s marked the rise of New York corporate raiders like Carl Icahn, who bought out St. Louis companies like Trans World Airlines (TWA), draining St. Louis of its money and resources and pride. TWA was “a broken-winged bird helpless before the pounce of the ultimate corporate predator,” wrote St. Louis magazine, describing the shock of Missourians that an out-of-state tycoon had bought something as essential as an airline purely to destroy it and pocket the profits.8 By the late 1980s, New York and St.

We are living in Roy Cohn’s America, directed by his apt pupil, with the aid of a crime syndicate that does not recognize law, freedom, or the sanctity of human life. In the late 1970s, as Ford told New York to drop dead, Cohn and Trump picked at the city’s corpse like vultures. Manhattan was ready to be torn down and bludgeoned and remade with blood money in concrete: Trump Tower, the Plaza, the many, many casinos. Corporate raiders who would later aid the Trump administration—Carl Icahn, Wilbur Ross, Rupert Murdoch—commenced a national shakedown disguised as economic revival. Scams stretched from Atlantic City to Gary, Indiana, to St. Louis and beyond, to international waters where moguls parked their stolen assets.29 Critical regulations were tossed—the fairness doctrine that had protected media; the labor laws that had protected unions.


pages: 314 words: 101,452

Liar's Poker by Michael Lewis

barriers to entry, Bonfire of the Vanities, business cycle, cognitive dissonance, corporate governance, corporate raider, financial independence, financial innovation, fixed income, Home mortgage interest deduction, interest rate swap, Irwin Jacobs, John Meriwether, London Interbank Offered Rate, margin call, mortgage tax deduction, nuclear winter, Ponzi scheme, The Predators' Ball, yield curve

A take-over of a large corporation could generate billions of dollars' worth of junk bonds, for not only would new junk be issued, but the increased leverage transformed the outstanding bonds of a former blue-chip corporation to junk. To raid corporations, however, Milken needed a few hit men. The new and exciting job of invading corporate boardrooms appealed mainly to men of modest experience in business and a great deal of interest in becoming rich. Milken funded the dreams of every corporate raider of note: Ronald Perelman, Boone Pickens, Carl Icahn, Mar-vin Davis, Irwin Jacobs, Sir James Goldsmith, Nelson Peltz, Samuel Heyman, Saul Steinberg, and Asher Edelman. "If you don't inherit it, you have to borrow it," says one. Most sold junk bonds through Drexel to raise money to storm such hitherto unassailable fortresses as Revlon, Phillips Petroleum, Unocal, TWA, Disney, AFC, Crown Zellerbach, National Can, and Union Carbide.

That was the first question that crossed my mind and the minds of many of our managing directors. For the good of Salomon Brothers, explained Gutfreund. "I was shocked," Gutfreund said of Perelman's bid. "Perelman was just a name to me, but I felt that the structure of Salomon Brothers, in terms of our relationships with clients, their trust and confidence, would not do well with someone deemed to be a corporate raider." Except for the first sentence, this statement rings false from the beginning to end. Let's take the last part first. Our relationship with clients hadn't suffered from having a South African as a shareholder; why should it suffer from an association with a hostile raider? I don't care to dwell on the morality of either apartheid or hostile take-overs. But at the very minimum, it must be agreed, the former is at least as dangerous to be associated with as the latter.


pages: 296 words: 98,018

Winners Take All: The Elite Charade of Changing the World by Anand Giridharadas

"side hustle", activist lawyer, affirmative action, Airbnb, Bernie Sanders, bitcoin, Burning Man, Capital in the Twenty-First Century by Thomas Piketty, carried interest, cognitive dissonance, collective bargaining, corporate raider, corporate social responsibility, crowdsourcing, David Brooks, David Heinemeier Hansson, deindustrialization, disintermediation, Donald Trump, Edward Snowden, Elon Musk, friendly fire, global pandemic, high net worth, hiring and firing, housing crisis, Hyperloop, income inequality, invisible hand, Jeff Bezos, Kibera, Kickstarter, land reform, Lyft, Marc Andreessen, Mark Zuckerberg, new economy, Occupy movement, offshore financial centre, Panopticon Jeremy Bentham, Parag Khanna, Paul Graham, Peter Thiel, plutocrats, Plutocrats, profit maximization, risk tolerance, rolodex, Ronald Reagan, shareholder value, sharing economy, side project, Silicon Valley, Silicon Valley startup, Skype, Social Responsibility of Business Is to Increase Its Profits, Steven Pinker, technoutopianism, The Chicago School, The Fortune at the Bottom of the Pyramid, the High Line, The Wealth of Nations by Adam Smith, Thomas L Friedman, too big to fail, Travis Kalanick, trickle-down economics, Uber and Lyft, uber lyft, Upton Sinclair, Vilfredo Pareto, working poor, zero-sum game

The organization raising money helps troubled, vulnerable, and poor New Yorkers find work, housing, skills, companionship, and safety. The whole night is divided into two types of performances from the stage. The young and the helped, mostly black and brown, repeatedly dance for their donors. Then, between performances, older white men are brought up to praise them and to talk about, and be applauded for, their generosity to the program. Most of the men work in finance. They include the corporate raiders who, seeking to raise profits by cutting costs, have helped to do away with stable employment. They are the gentrifiers who have pushed real estate prices through the roof and made it harder for families like those of the young dancers to maintain a livelihood in the city. They are the beneficiaries of tax laws that give carried interest a major break and help to keep the public coffers low and the schools attended by the city’s poor underfunded, thus driving them into the streets and occasionally, when they are lucky, into the charity’s arms.

Was he going to tell them they were responsible for the rise of nationalism globally, that the world he wanted would lower them a few pegs? Was he going to say that their business practices were part of the problem, or that they needed to pay higher taxes? Would he “meet them where they were”? Was it possible to do all these things? On that day, at least, no. Walker, in his opening remarks, referred a few times to Henry Kravis, one of KKR’s founders, as “a philanthropist.” He was no longer a corporate raider, a pioneer of the kind of value extraction Walker deplored in the limo. Walker spoke highly of his own experience in the financial services industry. It had given him “skills”—some of which, presumably, were the protocols that he could now tell himself he had redeployed in service of the weak. It taught him how to multitask, manage a complex portfolio of projects, assimilate data and turn it into insight, have discipline.


pages: 350 words: 103,988

Reinventing the Bazaar: A Natural History of Markets by John McMillan

"Robert Solow", accounting loophole / creative accounting, Albert Einstein, Alvin Roth, Andrei Shleifer, Anton Chekhov, Asian financial crisis, congestion charging, corporate governance, corporate raider, crony capitalism, Dava Sobel, Deng Xiaoping, experimental economics, experimental subject, fear of failure, first-price auction, frictionless, frictionless market, George Akerlof, George Gilder, global village, Hernando de Soto, I think there is a world market for maybe five computers, income inequality, income per capita, informal economy, information asymmetry, invisible hand, Isaac Newton, job-hopping, John Harrison: Longitude, John von Neumann, Kenneth Arrow, land reform, lone genius, manufacturing employment, market clearing, market design, market friction, market microstructure, means of production, Network effects, new economy, offshore financial centre, ought to be enough for anybody, pez dispenser, pre–internet, price mechanism, profit maximization, profit motive, proxy bid, purchasing power parity, Ronald Coase, Ronald Reagan, sealed-bid auction, second-price auction, Silicon Valley, spectrum auction, Stewart Brand, The Market for Lemons, The Nature of the Firm, The Wealth of Nations by Adam Smith, trade liberalization, transaction costs, War on Poverty, Xiaogang Anhui farmers, yield management

Discipline comes from both the product markets in which firms sell and the financial markets from which they get capital. Well-functioning financial markets—accessible banks and a stock market—enable firms to invest and grow and then push them to perform well. A liquid stock market means owners can punish underperforming managers by selling their shares, driving down the firm’s stock market valuation. Corporate raiders add to this discipline. A firm performing badly enough to have a low stock market valuation may be bought out by a corporate raider, whose first action after taking over the firm often is to fire the managers. The threat of takeover serves to induce managers to run the firm efficiently. Product markets also provide discipline. Firms that face competition to sell their output must produce at high enough quality and low enough prices that consumers buy their products ahead of their competitors’.


pages: 367 words: 108,689

Broke: How to Survive the Middle Class Crisis by David Boyle

anti-communist, banking crisis, Berlin Wall, Big bang: deregulation of the City of London, Bonfire of the Vanities, bonus culture, call centre, collateralized debt obligation, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, deindustrialization, delayed gratification, Desert Island Discs, Eugene Fama: efficient market hypothesis, eurozone crisis, Fall of the Berlin Wall, financial deregulation, financial independence, financial innovation, financial intermediation, Francis Fukuyama: the end of history, Frederick Winslow Taylor, housing crisis, income inequality, Jane Jacobs, job satisfaction, Kickstarter, knowledge economy, knowledge worker, market fundamentalism, Martin Wolf, mega-rich, mortgage debt, Neil Kinnock, Nelson Mandela, new economy, Nick Leeson, North Sea oil, Northern Rock, Occupy movement, off grid, offshore financial centre, pension reform, pensions crisis, Plutonomy: Buying Luxury, Explaining Global Imbalances, Ponzi scheme, positional goods, precariat, quantitative easing, school choice, Slavoj Žižek, social intelligence, too big to fail, trickle-down economics, Vanguard fund, Walter Mischel, wealth creators, Winter of Discontent, working poor

It was a real no-brainer.’ Two weeks later, Northern Rock said that it would merge with the Heart of England Building Society. Something was going on, and the Cheltenham & Gloucester announcement changed everything. Even the giant Halifax decided it would have to rethink its decision not to convert. What if there was a hostile bid? Could they ever withstand it? Were their own reserves too much of a temptation to corporate raiders? Could building societies survive at all? A year of agonizing and rethinking followed, and the Observer was reporting: ‘The great and good of the building-society industry will sit down together on Thursday to consider whether the organisations they lead are bound for extinction.’[12] In the months that followed the C&G announcement, as Coles took over the reins at the Building Societies Association, it began to look as though he would have no members left.

But their time horizon is three months or six months, when in pension terms you need a horizon of thirty or forty years. Other countries are bad, but less bad than we are. We are incandescently awful.’ The short-termism of politicians lies behind the third element of Ellison’s perfect storm. It is the problem of pension surpluses. This hardly sounds like a problem, but it was. For one thing, having big pension reserves made companies afraid that they might be the target of corporate raiders, who wanted to get hold of their huge pension pots. For another thing, it was a temptation too far for hungry politicians. ‘For twenty years, pensions had surpluses,’ says Ellison now. ‘The word was a kind of incentive to governments to raid pension schemes. They shouldn’t have used the word “surplus”; they should have used a word like “actuarial reserves”. “Surplus” made them think there was too much money — which there wasn’t, because with hindsight they needed money for the bad years.


pages: 398 words: 105,917

Bean Counters: The Triumph of the Accountants and How They Broke Capitalism by Richard Brooks

accounting loophole / creative accounting, asset-backed security, banking crisis, Big bang: deregulation of the City of London, blockchain, BRICs, British Empire, business process, cloud computing, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, David Strachan, Deng Xiaoping, Donald Trump, double entry bookkeeping, Double Irish / Dutch Sandwich, energy security, Etonian, eurozone crisis, financial deregulation, forensic accounting, Frederick Winslow Taylor, G4S, intangible asset, Internet of things, James Watt: steam engine, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, light touch regulation, Long Term Capital Management, low cost airline, new economy, Northern Rock, offshore financial centre, oil shale / tar sands, On the Economy of Machinery and Manufactures, Ponzi scheme, post-oil, principal–agent problem, profit motive, race to the bottom, railway mania, regulatory arbitrage, risk/return, Ronald Reagan, savings glut, short selling, Silicon Valley, South Sea Bubble, statistical model, supply-chain management, The Chicago School, too big to fail, transaction costs, transfer pricing, Upton Sinclair, WikiLeaks

One Price Waterhouse partner later recalled that the profession had become ‘so spoiled that we didn’t really have the muscles that we needed to cope with the 1970s’.15 GENTLEMEN ACCOUNTANTS Three and a half thousand miles away, Britain experienced its own 1960s mergers-and-acquisition boom, kicked off by a young chartered accountant named Jim Slater. His skills in reading companies’ books told him how much hidden value there was in stagnant companies often run but no longer owned by the old industrial families. They just needed to be broken up, stripped down and sold off. Where Slater led, a gang of infamous corporate raiders including the likes of James Goldsmith and Roland ‘Tiny’ Rowland followed, egged on by a Labour government that saw takeovers as the way to shake up moribund industries. It was a cut-throat business, and one in which – just as in the US – company balance sheets, profit statements and earnings forecasts moved centre stage. It said something about the British accountancy profession that it emerged from the period with its reputation far less tarnished than its American counterpart’s.

‘Lincoln’s strategies have thus far proved successful’, he wrote to a group of senators, ‘and have turned an association headed for failure into a strong and viable financial entity.’ A year later, after signing off the 1987 audit, Atchison took a top job with a Keating-owned construction firm on a salary of $930,000 – far higher than any bean counter could dream of at the time.1 Atchison’s successor, a woman named Janice Vincent, did speak out. The following year she disputed Lincoln’s treatment of a deal with British corporate raider James Goldsmith, refusing to admit that a swap of financial assets had immediately generated a $55m gain. ‘Lady, you’ve just lost a job,’ Keating told her. Arthur Young did now resign from the audit, but Vincent’s stand made a couple of important points. It showed that, however skewed the major accountancy firms’ priorities had become, there were still people of integrity and courage within them.


pages: 379 words: 109,223

Frenemies: The Epic Disruption of the Ad Business by Ken Auletta

Airbnb, barriers to entry, Bernie Sanders, Boris Johnson, Build a better mousetrap, Burning Man, call centre, carbon footprint, cloud computing, commoditize, connected car, corporate raider, crossover SUV, disintermediation, Donald Trump, Elon Musk, forensic accounting, Google Glasses, Internet of things, Jeff Bezos, Khan Academy, Lyft, Mark Zuckerberg, market design, Menlo Park, move fast and break things, move fast and break things, Naomi Klein, NetJets, Network effects, pattern recognition, pets.com, race to the bottom, Richard Feynman, ride hailing / ride sharing, Saturday Night Live, self-driving car, sharing economy, Shoshana Zuboff, Silicon Valley, Snapchat, Steve Ballmer, Steve Jobs, Tim Cook: Apple, transaction costs, Uber and Lyft, uber lyft, Upton Sinclair, éminence grise

The CEOs of the brands badger their team about company profit margins, as if marketing costs were an extravagance. The agencies complain they are being choked by low fees, but the CEO knows that agency holding company profit margins are still a relatively robust 15 or so percent. So the company CEO demands to know the return on investment of what is spent on marketing, and the honest answer is at best a guess. Corporate raiders are circling, pressing companies to manufacture short-term gains. The average CMO holds office for only about two years before being replaced by a new CMO. The new CMO is probably inclined to bring in a new agency and to insist that the agency reduce its costs. What does the CMO do about the digital fraud issue? A 2015 study by Distil Networks concluded that one of every three digital ad dollars is wasted by ad fraud, meaning ads are clicked and paid for but are not viewed by desired consumers.

Looking ahead, Kassan and Bourkoff scanned the field of possible suitors, assessing their pluses and minuses. With his friend Maurice Levy soon to step down as CEO of Publicis, and with the uncertainty as to who would succeed Sorrell, John Wren, and Michael Roth, all north of the customary retirement age, their stocks might be impacted. Viselike cost pressures on the holding companies were tightening, driven by C-suite demands to slash spending, by fears of corporate raiders mounting hostile takeovers, and by spiraling mistrust between clients and agencies. Procter & Gamble would announce that over the next five years it would slash its $10.5 billion marketing budget by $2 billion. Keith Weed’s Unilever, which fended off a Kraft Heinz takeover assault in February 2017, would cut its agency fees by nearly 20 percent and the number of ads it produces by 30 percent, especially impacting its foremost supplier, WPP.


pages: 113 words: 37,885

Why Wall Street Matters by William D. Cohan

Apple II, asset-backed security, bank run, Bernie Sanders, Blythe Masters, bonus culture, break the buck, buttonwood tree, corporate governance, corporate raider, creative destruction, Credit Default Swap, Donald Trump, Exxon Valdez, financial innovation, financial repression, Fractional reserve banking, Gordon Gekko, greed is good, income inequality, Joseph Schumpeter, London Interbank Offered Rate, margin call, money market fund, moral hazard, Potemkin village, quantitative easing, secular stagnation, Snapchat, South Sea Bubble, Steve Jobs, Steve Wozniak, too big to fail, WikiLeaks

Morgan once controlled, set out to create a new supply of these so-called junk bonds by persuading companies that never before had access to the capital markets—where companies go to get capital from public investors as opposed to trying to get it from banks—to issue bonds underwritten by Drexel Burnham. Not only did Drexel underwrite these bonds for corporations that could not get financing from more traditional sources—banks, insurance companies, and the public-equity markets—but it also pioneered the selling of junk bonds to help corporate raiders, like Carl Icahn and T. Boone Pickens, get the capital they needed to take over companies such as TWA and Gulf Oil, which they would otherwise have been unable to do, and to help private-equity firms, such as Kohlberg Kravis Roberts and the Texas Pacific Group, get the money they needed to buy companies with their investors’ money. Before long, the previously unknown firm of Drexel Burnham Lambert was both advising and financing these raiders and private-equity firms in their acquisition sprees.


pages: 128 words: 38,847

The Curse of Bigness: Antitrust in the New Gilded Age by Tim Wu

AltaVista, barriers to entry, collective bargaining, corporate personhood, corporate raider, creative destruction, Donald Trump, income inequality, Johann Wolfgang von Goethe, Joseph Schumpeter, Kickstarter, move fast and break things, move fast and break things, new economy, open economy, Peter Thiel, price discrimination, road to serfdom, Robert Bork, Silicon Valley, Snapchat, The Chicago School

The more power a firm or industry enjoys, the easier it is to prevent employees from getting too much of the returns. To be sure, there are some private checks on bigness, or of the building of empire for empire’s sake. The firm’s owners or board of directors may order management to stop expanding for no good reason but their own welfare. Smaller, more efficient competitors do sometimes manage to kill a bloated dinosaur, or the firm may be taken over by a corporate raider who sees value in breaking the firm into smaller pieces. But unfortunately, these market-based checks on bigness can and do fail, and their mythology can outmatch their real effectiveness. For they are, at all times, counterbalanced by the advantages and attractions of power, and the allure of monopoly profit. For that reason, oversized, inefficient firms can persist for decades, effectively immunized from the need to improve products or lower prices.


pages: 423 words: 118,002

The Boom: How Fracking Ignited the American Energy Revolution and Changed the World by Russell Gold

accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, activist lawyer, addicted to oil, American energy revolution, Bakken shale, Bernie Sanders, Buckminster Fuller, clean water, corporate governance, corporate raider, energy security, energy transition, hydraulic fracturing, Intergovernmental Panel on Climate Change (IPCC), margin call, market fundamentalism, Mason jar, North Sea oil, oil shale / tar sands, oil shock, peak oil, Project Plowshare, risk tolerance, Ronald Reagan, shareholder value, Silicon Valley, Upton Sinclair

Nichols sent Hall back to Houston again, despite some grumbling about spinning wheels. By this time, the earliest Barnett Shale wells had a couple years of production data and looked better than he expected. Moreover, the refracks of old wells looked quite promising. Mitchell wasn’t trying to put lipstick on a pig, Hall began to realize, he was selling a prizewinning hog. Hall, a geologist who had worked for wildcatter-turned-corporate raider T. Boone Pickens before ending up at Devon, got increasingly excited the longer he crunched numbers in the data room. He returned to Oklahoma and started working out some rough estimates. If these wells could be replicated across all of Mitchell’s acreage, what would that mean? “This was just a big gas factory,” he concluded. Before he presented his new thinking to Nichols, Hall decided to learn all he could about these shale rocks.

Before Chesapeake Energy began investing billions of dollars to snap up every drillable acre it could find and kicked the shale boom into overdrive, the company needed to see this newfangled gas production firsthand. Its introduction was accidental. A week after Devon’s 2002 presentation to Wall Street analysts, Chesapeake acquired Canaan Energy. Chesapeake CEO Aubrey McClendon had been pursuing Canaan for more than a year. When Canaan rebuffed McClendon’s initial offers, he used bare-knuckled tactics pioneered by corporate raiders in the 1980s. “We believe it is clear that management’s plan is not working,” McClendon wrote in an open letter to Wall Street after buying up 7.7 percent of the company’s stock. “If given the opportunity, most Canaan shareholders would prefer to sell their stock at a premium to us rather than waiting on management’s plan to work.” Canaan capitulated. McClendon wanted Canaan because of its wells in western Oklahoma.


pages: 425 words: 122,223

Capital Ideas: The Improbable Origins of Modern Wall Street by Peter L. Bernstein

"Robert Solow", Albert Einstein, asset allocation, backtesting, Benoit Mandelbrot, Black-Scholes formula, Bonfire of the Vanities, Brownian motion, business cycle, buy and hold, buy low sell high, capital asset pricing model, corporate raider, debt deflation, diversified portfolio, Eugene Fama: efficient market hypothesis, financial innovation, financial intermediation, fixed income, full employment, implied volatility, index arbitrage, index fund, interest rate swap, invisible hand, John von Neumann, Joseph Schumpeter, Kenneth Arrow, law of one price, linear programming, Louis Bachelier, mandelbrot fractal, martingale, means of production, money market fund, Myron Scholes, new economy, New Journalism, Paul Samuelson, profit maximization, Ralph Nader, RAND corporation, random walk, Richard Thaler, risk/return, Robert Shiller, Robert Shiller, Ronald Reagan, stochastic process, Thales and the olive presses, the market place, The Predators' Ball, the scientific method, The Wealth of Nations by Adam Smith, Thorstein Veblen, transaction costs, transfer pricing, zero-coupon bond, zero-sum game

Amateur investors and many professionals are wary of space-age trading strategies and kinky financial instruments that seem beyond their understanding. Individual investors grumble that they are the last to receive information about the stocks they own and the last to find buyers when security prices are dropping. Giant financial institutions complain that security prices are dangerously volatile. There is a widely held perception that overpaid MBAs, corporate raiders, and investment managers who talk like astrophysicists are living in a world of their own, detached from the realities of people who really work for a living. But that is only part of the story. The untold part, which is what this book is about, reveals that much of this fear and resentment is misplaced. Baffling as it may be to some, Wall Street is vital and productive, a model for the rest of the world, including former socialist countries seeking the path to prosperity and freedom.

Some people argue that valuing corporations is unnecessary when most big companies no longer need to raise new capital from the stock market and when so many of them have been buying their shares back in from the market. That is a simplistic view. We learned during the 1980s that the price of a company’s stock exerts a powerful influence on the behavior of its managers. Managers who are asleep at the switch or who prefer their own perks to the stockholders’ interest soon find their companies on the bargain counter and a corporate raider shoving them out the door. The stock market is a huge voting booth in which the ballots are counted every minute of the business day. No officeholder in a publicly held corporation can afford to ignore it. But there is a more subtle force at work. Takeovers make big headlines, but most investors, even the biggest, are in the stock market to buy fragments of companies, not whole companies.


pages: 520 words: 129,887

Power Hungry: The Myths of "Green" Energy and the Real Fuels of the Future by Robert Bryce

addicted to oil, Bernie Madoff, carbon footprint, Cesare Marchetti: Marchetti’s constant, cleantech, collateralized debt obligation, corporate raider, correlation does not imply causation, Credit Default Swap, credit default swaps / collateralized debt obligations, decarbonisation, Deng Xiaoping, en.wikipedia.org, energy security, energy transition, flex fuel, greed is good, Hernando de Soto, hydraulic fracturing, hydrogen economy, Indoor air pollution, Intergovernmental Panel on Climate Change (IPCC), Isaac Newton, James Watt: steam engine, Menlo Park, new economy, offshore financial centre, oil shale / tar sands, oil shock, peak oil, Ponzi scheme, purchasing power parity, RAND corporation, Ronald Reagan, Silicon Valley, smart grid, Stewart Brand, Thomas L Friedman, uranium enrichment, Whole Earth Catalog, WikiLeaks

Hollandsworth reported that when he caught up with Pickens in New York City on July 8, just four days after the launch of the Pickens Plan, “Boone had spent more than an hour that morning chatting about the plan on CNBC, and he had also appeared on ABC’s Good Morning America and NPR’s Morning Edition. Later that day, he was scheduled to meet with CNN, Fox, and the BBC, followed by visits to the offices of the Associated Press, the Wall Street Journal,” and other news outlets. About that same time, Slate named Pickens as number three in its ranking of the eighty most powerful octogenarians in America, behind only U.S. Supreme Court Justice John Paul Stevens and billionaire corporate raider Kirk Kerkorian.2 Pickens testified on Capitol Hill, had private meetings with Al Gore and Barack Obama (then a senator), and was a near-constant presence on television—appearing on The Jay Leno Show, and CBS Evening News with Katie Couric, to name just a few.3 Reporters swarmed the Dallas-based billionaire. They gushed over his money, his private jet—the leather seats are monogrammed!—and his ambitious plan to build the world’s largest wind farm, a 4,000-megawatt project in the Texas Panhandle.4 Pickens’ media team spent lavishly to court the public and the media.

He’s the energy industry’s only rock star. Not even during Enron’s heyday (and downfall) was Ken Lay as visible as Pickens has been over the past few years. Pickens loves the attention. He’s friendly and cordial with reporters. And make no mistake, he’s a savvy operator. Pickens is among a rare breed of entrepreneurs who just knows how to make money. And over the past few decades, he has applied that ability, as an oil man, corporate raider, dealmaker, and money manager, to amass a fortune that Forbes has estimated at $3.1 billion.8 And those billions further burnish his rock-star credentials. Unfortunately for Pickens, though, rock stars don’t have a very long shelf life. Just a few months after Pickens rolled out his grand plan, the Wall Street Journal reported that two investment funds managed by Pickens had lost about $1 billion of his investors’ money.9 And exactly one year after Pickens launched his much-ballyhooed plan, he was forced to admit that his vision for the wind business was in tatters.


pages: 430 words: 140,405

A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers by Lawrence G. Mcdonald, Patrick Robinson

asset-backed security, bank run, business cycle, collateralized debt obligation, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, cuban missile crisis, diversification, fixed income, high net worth, hiring and firing, if you build it, they will come, London Interbank Offered Rate, Long Term Capital Management, margin call, money market fund, moral hazard, mortgage debt, naked short selling, negative equity, new economy, Ronald Reagan, short selling, sovereign wealth fund, value at risk

Unlike me, who had nothing and was officially associated with one of the least attractive bucket shop gangs on the East Coast. Whether or not that Series 7 was a top priority or just a distant mountain to be climbed made no difference. One by one my new Wharton buddies came and asked to see the study book, especially my pal and roommate Rick Schnall, a nephew of Carl Icahn, the most famous corporate raider on Wall Street, the Muhammad Ali of his trade. It was a big help being among guys like that, because when everyone is involved in the same subject, with similar insights and perceptions, the sheer velocity of the available information is ratcheted up a few notches. They were generous to me with their time and advice, and in turn I let them take a few peeps at the practice exams in the back of my book.

There was perhaps a poetic edge to Lehman’s participation in this particular deal, since Bobbie Lehman had been such a close friend of his fellow racehorse owner John Hertz, who was also a partner in Lehman. But the two great financiers doubtless would have been astounded at the sheer sophistication of the deal as the Wall Street guys rustled up the cash for the world’s biggest car-rental corporation to essentially buy itself for the corporate raiders from New York: Clayton Dubilier & Rice, the Carlyle Group, and Merrill Lynch. This one set the standard, as they put the debt from buying the corporation onto the balance sheet of the Hertz Corporation, repaying it with the company’s own cash flow. John D. Hertz was once described by that bard of the casting couch, Louis B. Mayer, as “the toughest man who ever wore shoes.” But even Hertz might have flinched from an act of such astonishing opportunism against the business that still bears his name.


pages: 162 words: 50,108

The Little Book of Hedge Funds by Anthony Scaramucci

Andrei Shleifer, asset allocation, Bernie Madoff, business process, carried interest, corporate raider, Credit Default Swap, diversification, diversified portfolio, Donald Trump, Eugene Fama: efficient market hypothesis, fear of failure, fixed income, follow your passion, Gordon Gekko, high net worth, index fund, John Meriwether, Long Term Capital Management, mail merge, margin call, mass immigration, merger arbitrage, money market fund, Myron Scholes, NetJets, Ponzi scheme, profit motive, quantitative trading / quantitative finance, random walk, Renaissance Technologies, risk-adjusted returns, risk/return, Ronald Reagan, Saturday Night Live, Sharpe ratio, short selling, Silicon Valley, Thales and the olive presses, Thales of Miletus, the new new thing, too big to fail, transaction costs, Vanguard fund, Y2K, Yogi Berra, zero-sum game

At the time, I had no idea what a hedge fund was and if someone asked me I probably would have said it had to do with landscaping (as in hedges) and nothing to do with money management. When I graduated college and law school in the 1980s, the dream job was to work in investment banking. At the time, newspapers, magazines, and journalists glorified the lavish lifestyles of investment bankers and corporate raiders. As hedge fund managers weren’t yet on the media’s radar screen, it wasn’t in the consciousness of the undergraduate wannabe financier. So, the yuppie puppies at Harvard, including me, all signed up for the biggest, lowest-risk firms that we thought could offer the highest reward and paycheck. Goldman Sachs was the most effective of all the firms at recruiting the best and the brightest, so naturally I set my eyes on the prize.


pages: 162 words: 51,473

The Accidental Theorist: And Other Dispatches From the Dismal Science by Paul Krugman

"Robert Solow", Bonfire of the Vanities, Bretton Woods, business cycle, clean water, collective bargaining, computerized trading, corporate raider, declining real wages, floating exchange rates, full employment, George Akerlof, George Gilder, Home mortgage interest deduction, income inequality, indoor plumbing, informal economy, invisible hand, Kenneth Arrow, knowledge economy, life extension, new economy, Nick Leeson, paradox of thrift, Paul Samuelson, plutocrats, Plutocrats, price stability, rent control, Ronald Reagan, Silicon Valley, trade route, very high income, working poor, zero-sum game

And that leaves the field open for special interests—which means people with a large stake in small issues—to buy policies that suit them. For example, not many voters know or care whether the United States uses a substantial amount of its diplomatic capital to open European markets to Central American bananas. Why should they? (I only keep track of the dispute because I have to update my textbook, which includes the sentence: “Efforts to resolve Europe’s banana split have proved fruitless.”) But Carl Lindner, the corporate raider who now owns Chiquita Brands, has strong feelings about the issue; and thanks to his $500,000 in contributions, so does President Clinton. It’s not that Clinton believed that money alone could buy him the election. But money does help, and any practical politician comes to realize that betraying the public interest on small issues involves little political cost, because voters lack the individual incentive to notice.


pages: 237 words: 50,758

Obliquity: Why Our Goals Are Best Achieved Indirectly by John Kay

Andrew Wiles, Asian financial crisis, Berlin Wall, bonus culture, British Empire, business process, Cass Sunstein, computer age, corporate raider, credit crunch, Daniel Kahneman / Amos Tversky, discounted cash flows, discovery of penicillin, diversification, Donald Trump, Fall of the Berlin Wall, financial innovation, Gordon Gekko, greed is good, invention of the telephone, invisible hand, Jane Jacobs, lateral thinking, Long Term Capital Management, Louis Pasteur, market fundamentalism, Myron Scholes, Nash equilibrium, pattern recognition, Paul Samuelson, purchasing power parity, RAND corporation, regulatory arbitrage, shareholder value, Simon Singh, Steve Jobs, Thales of Miletus, The Death and Life of Great American Cities, The Predators' Ball, The Wealth of Nations by Adam Smith, ultimatum game, urban planning, value at risk

Dunlap was spared possible civil and criminal suits only after he agreed to pay penalties and restitution of fifteen million dollars.10 The history of the last two decades is littered with fallen idols who, like Dunlap, stridently asserted the primacy of wealth. Gordon Gekko, the antihero of Oliver Stone’s 1987 film Wall Street, famously proclaimed: “Greed is good.” Gekko was partly based on Ivan Boesky, a notorious corporate raider of the 1980s, who was reported as telling a class at Columbia: “I want you to know that I think greed is healthy. You can be greedy and still feel good about yourself.”11 Soon after, Boesky went to prison, convicted of insider trading. The businesses that epitomized the explosion of greed on Wall Street in the 1980s were Salomon Brothers (the firm mercilessly caricatured in Michael Lewis’s Liar’s Poker)12 and Drexel Burnham Lambert (more gently pilloried in Connie Bruck’s The Predators’ Ball).13 Salomon turned bond trading from a backwater into the activity of choice for the financially ambitious, while Drexel Burnham Lambert pioneered the issue of junk bonds.


pages: 208 words: 51,277

Chicken: The Dangerous Transformation of America's Favorite Food by Steve Striffler

clean water, collective bargaining, corporate raider, illegal immigration, immigration reform, longitudinal study, market design, place-making, Ronald Reagan, Upton Sinclair, upwardly mobile

The effect of Tyson’s takeover on administrative and managerial jobs may have been swift and not entirely unexpected, but its broader impact on workers and farmers has been more subtle and difficult to judge. Most agree that “it got worse” after Tyson took over, but people also admit that the situation was headed in the same direction under Holly. Indeed, Tyson inherited something of a mess in Wilkesboro. Holly’s attempt to cut costs may have made the company leaner and more attractive to corporate raiders, but it also had made life more difficult for workers and growers, who struggled even during the best of times. Further, during its battle with Tyson and ConAgra, Holly management had been engaged in two bitter disputes with workers and farmers. The first was a relatively straightforward union battle between the company and A New Bird 74 a group of truck drivers, a conflict that would become increasingly intense once Tyson took over and got into the mix.


pages: 518 words: 147,036

The Fissured Workplace by David Weil

accounting loophole / creative accounting, affirmative action, Affordable Care Act / Obamacare, banking crisis, barriers to entry, business cycle, business process, buy and hold, call centre, Carmen Reinhart, Cass Sunstein, Clayton Christensen, clean water, collective bargaining, commoditize, corporate governance, corporate raider, Corrections Corporation of America, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, declining real wages, employer provided health coverage, Frank Levy and Richard Murnane: The New Division of Labor, George Akerlof, global supply chain, global value chain, hiring and firing, income inequality, information asymmetry, intermodal, inventory management, Jane Jacobs, Kenneth Rogoff, law of one price, loss aversion, low skilled workers, minimum wage unemployment, moral hazard, Network effects, new economy, occupational segregation, Paul Samuelson, performance metric, pre–internet, price discrimination, principal–agent problem, Rana Plaza, Richard Florida, Richard Thaler, Ronald Coase, shareholder value, Silicon Valley, statistical model, Steve Jobs, supply-chain management, The Death and Life of Great American Cities, The Nature of the Firm, transaction costs, ultimatum game, union organizing, women in the workforce, yield management

The Federal Trade Commission deemed conglomerate accounting that masked the profitability of individual product lines “a tool of deception.”29 The actual performance of many conglomerates undercut arguments about the economies of scale arising from centralized management of diverse business units (“good management is the same for any business”) or superior access to capital that being part of the conglomerate conferred. Instead, unhappy shareholders of public companies and private equity investors began to question the results of broad acquisition strategies.30 Weakening macroeconomic conditions and declining stock prices created further pressure on conglomerate companies by the late 1960s to demonstrate to investors the value of the highly diversified enterprises. Corporate raiders attacked them as unwieldy and underperforming behemoths. By acquiring the companies through corporate takeover and selling off the loosely related (or unrelated) units, investors could extract value through the improved performance of units closer to the core business, and also benefit by selling the other units to external investors who could gain greater value from them. The dismantling of the conglomerate in this view would reveal that its pieces were worth more than the firm as a whole.31 The rise and demise of Beatrice Foods is instructive.32 The company was founded as the Beatrice Creamery Company in Beatrice, Nebraska, in 1894, beginning as a grading operation for other dairy producers but quickly becoming a butter producer and creamery with its own label and product line.

It purchased Beatrice for $8.7 billion in 1986 and began over the next four years to sell off the welter of brands and companies under its umbrella. The final units still operating under the Beatrice name were sold to ConAgra in 1990. By the late 1980s, the flagship conglomerate companies of the 1960s had been dismantled through the actions of private equity companies like Kohlberg Kravis Roberts, corporate raiders like T. Boone Pickens, and leveraged buyout machers like Michael Milliken. But breaking apart conglomerated behemoths like Beatrice represented only the start of efforts to focus on core competencies. Along with and following divestment of peripheral business units, the insistent effort to shed turned inward. Cutting the Corporate Periphery Headquarters offices of companies and divisions blossomed in size and scope during much of the twentieth century.


pages: 207 words: 52,716

Capitalism 3.0: A Guide to Reclaiming the Commons by Peter Barnes

Albert Einstein, car-free, clean water, collective bargaining, corporate governance, corporate personhood, corporate raider, corporate social responsibility, dark matter, diversified portfolio, en.wikipedia.org, hypertext link, Isaac Newton, James Watt: steam engine, jitney, money market fund, new economy, patent troll, profit maximization, Ronald Coase, telemarketer, The Wealth of Nations by Adam Smith, transaction costs, War on Poverty, Yogi Berra

It was also generous to its workers, renting them housing at below-market rates and refraining from layoffs during downturns. Sadly, however, Pacific Lumber’s responsible behavior made it easy prey for a takeover. Its concern for nature and its employees diminished its profits and hence its share price. Because of its cutting practices, it held tremendous stands of virgin redwoods that could be liquidated quickly. In addition, its pension plan was overfunded. Spotting all this, corporate raider Charles Hurwitz offered to buy the company in 1985 through a holding company called Maxxam. At first the directors refused, but when Hurwitz threatened to sue them for violating their fiduciary duty to shareholders, the directors succumbed. Hurwitz financed his purchase with junk bonds, the interest on which was more than the historical profits of the company. To service this debt, he terminated the workers’ pension plan and began harvesting trees at twice the previous rate.


pages: 223 words: 58,732

The Retreat of Western Liberalism by Edward Luce

"Robert Solow", 3D printing, affirmative action, Airbnb, basic income, Berlin Wall, Bernie Sanders, Boris Johnson, Branko Milanovic, Bretton Woods, business cycle, call centre, carried interest, centre right, Charles Lindbergh, cognitive dissonance, colonial exploitation, colonial rule, computer age, corporate raider, cuban missile crisis, currency manipulation / currency intervention, Dissolution of the Soviet Union, Doha Development Round, Donald Trump, double entry bookkeeping, Erik Brynjolfsson, European colonialism, everywhere but in the productivity statistics, Fall of the Berlin Wall, Francis Fukuyama: the end of history, future of work, George Santayana, gig economy, Gini coefficient, global pandemic, global supply chain, illegal immigration, imperial preference, income inequality, informal economy, Internet of things, Jaron Lanier, knowledge economy, lateral thinking, liberal capitalism, Marc Andreessen, Mark Zuckerberg, Martin Wolf, mass immigration, means of production, Monroe Doctrine, moral panic, more computing power than Apollo, mutually assured destruction, new economy, New Urbanism, Norman Mailer, offshore financial centre, one-China policy, Peace of Westphalia, Peter Thiel, plutocrats, Plutocrats, precariat, purchasing power parity, reserve currency, reshoring, Richard Florida, Robert Gordon, Ronald Reagan, Second Machine Age, self-driving car, sharing economy, Silicon Valley, Skype, Snapchat, software is eating the world, South China Sea, Steve Jobs, superstar cities, telepresence, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Thomas L Friedman, Tyler Cowen: Great Stagnation, universal basic income, unpaid internship, Washington Consensus, We are the 99%, We wanted flying cars, instead we got 140 characters, white flight, World Values Survey, Yogi Berra

At Trump’s encouragement, America’s network of alliances is now starting to unravel. In Britain, which was post-war America’s closest ally, there was a saying that the aim was to keep the Germans down, the Americans in, and the Russians out. All three are now failing. Putin’s Russia has gained a toehold in many central European democracies, and increasingly in Western Europe. Some have likened him to a corporate raider, who buys a minority share of a company’s stock and uses his voting power to disrupt the company. His goal is European disunity. It is an aim he shares with Trump. America’s forty-fifth president has called for other members of the European Union to follow Britain’s lead. After taking office, Trump publicly enquired which European country would be the next to make an exit. Trump has also continued to cast doubt on the future of Nato.


Global Financial Crisis by Noah Berlatsky

accounting loophole / creative accounting, asset-backed security, banking crisis, Bretton Woods, capital controls, Celtic Tiger, centre right, circulation of elites, collapse of Lehman Brothers, collateralized debt obligation, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, deindustrialization, Doha Development Round, energy security, eurozone crisis, financial innovation, Food sovereignty, George Akerlof, God and Mammon, Gordon Gekko, housing crisis, illegal immigration, income inequality, market bubble, market fundamentalism, mass immigration, moral hazard, new economy, Northern Rock, purchasing power parity, quantitative easing, race to the bottom, regulatory arbitrage, reserve currency, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, South China Sea, structural adjustment programs, too big to fail, trade liberalization, transfer pricing, working poor

The dramatic change in Iceland, from the poor relation of Europe to one of its wealthiest . . . and now back again, dates from the mid-1990s with the privatisation of the banks and the founding of the country’s Stock Exchange. They had learnt at school all about the last Cod War with Britain, in 1976, when Iceland unilaterally extended its territorial waters, desperate to increase the financial yield from its trawler fleet. So, in keeping with the traditions of their Viking ancestors, the new army of corporate raiders went overseas to seek their fortune. Kaupthing, one of the three banks at centre of the debt crisis, is not even in the top 100 of the world’s biggest banks. But its influence on the British economy is out of all proportion to its 124th ranking. In five years it has underwritten more than £3 billion in debt to help finance British deals. 104 Effects of the Global Financial Crisis on Wealthier Nations Instability and Violence in Iceland The tiny, North Atlantic island of Iceland, whose economy already lies in tatters, was plunged into further crisis on Monday [January 26, 2009] as the coalition government collapsed amid violent protests on the streets. . . .


pages: 202 words: 62,901

The People's Republic of Walmart: How the World's Biggest Corporations Are Laying the Foundation for Socialism by Leigh Phillips, Michal Rozworski

Berlin Wall, Bernie Sanders, call centre, carbon footprint, central bank independence, Colonization of Mars, combinatorial explosion, complexity theory, computer age, corporate raider, decarbonisation, discovery of penicillin, Elon Musk, G4S, Georg Cantor, germ theory of disease, Gordon Gekko, greed is good, hiring and firing, index fund, Intergovernmental Panel on Climate Change (IPCC), Internet of things, inventory management, invisible hand, Jeff Bezos, Joseph Schumpeter, linear programming, liquidity trap, mass immigration, Mont Pelerin Society, new economy, Norbert Wiener, oil shock, passive investing, Paul Samuelson, post scarcity, profit maximization, profit motive, purchasing power parity, recommendation engine, Ronald Coase, Ronald Reagan, sharing economy, Silicon Valley, Skype, sovereign wealth fund, strikebreaker, supply-chain management, technoutopianism, The Nature of the Firm, The Wealth of Nations by Adam Smith, theory of mind, transaction costs, Turing machine, union organizing

In 2003, the fund he managed, ESL Investments, took over the bankrupt discount retail chain Kmart (launched the same year as Walmart). A year later, he parlayed this into a $12 billion buyout of a stagnating (but by no means troubled) Sears. At first, the familiar strategy of merciless, life-destroying post-acquisition cost cutting and layoffs did manage to turn around the fortunes of the merged Kmart-Sears, now operating as Sears Holdings. But Lampert’s big wheeze went well beyond the usual corporate raider tales of asset stripping, consolidation and chopping-block use of operations as a vehicle to generate cash for investments elsewhere. Lampert intended to use Sears as a grand free market experiment to show that the invisible hand would outperform the central planning typical of any firm. He radically restructured operations, splitting the company into thirty, and later forty, different units that were to compete against each other.


pages: 218 words: 62,889

Sabotage: The Financial System's Nasty Business by Anastasia Nesvetailova, Ronen Palan

algorithmic trading, bank run, banking crisis, barriers to entry, Basel III, Bernie Sanders, big-box store, bitcoin, Black-Scholes formula, blockchain, Blythe Masters, bonus culture, Bretton Woods, business process, collateralized debt obligation, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, cryptocurrency, distributed ledger, diversification, Double Irish / Dutch Sandwich, en.wikipedia.org, Eugene Fama: efficient market hypothesis, financial innovation, financial intermediation, financial repression, fixed income, gig economy, Gordon Gekko, high net worth, Hyman Minsky, information asymmetry, interest rate derivative, interest rate swap, Joseph Schumpeter, Kenneth Arrow, litecoin, London Interbank Offered Rate, London Whale, Long Term Capital Management, margin call, market fundamentalism, mortgage debt, new economy, Northern Rock, offshore financial centre, Paul Samuelson, peer-to-peer lending, plutocrats, Plutocrats, Ponzi scheme, price mechanism, regulatory arbitrage, rent-seeking, reserve currency, Ross Ulbricht, shareholder value, short selling, smart contracts, sovereign wealth fund, Thorstein Veblen, too big to fail

Reportedly the firm gloried in undercutting rivals and in stealing business from under the noses of a Wall Street elite which it viewed as snooty and indolent. The business thrived. But Milken was not content to restrict himself to fallen angels. Soon he expanded and began to use junk bonds to finance leveraged buyouts of companies. ‘Leveraged buyouts’ (LBOs) is a polite term for corporate raiding. Junk bonds were used to finance the hugely ambitious corporate raiders and private equity firms.5 Through junk bond leverage buyouts, companies with poor ratings could acquire better-performing companies. In the deal the acquiring company would use the target companies’ funds to repay the debt it incurred to fund the takeover in the first place – ideally to Milken’s bank. Junk bonds became the weapon of choice of hostile raiders churning up and destroying companies in the process.


pages: 553 words: 168,111

The Asylum: The Renegades Who Hijacked the World's Oil Market by Leah McGrath Goodman

anti-communist, Asian financial crisis, automated trading system, banking crisis, barriers to entry, Bernie Madoff, computerized trading, corporate governance, corporate raider, credit crunch, Credit Default Swap, East Village, energy security, Etonian, family office, Flash crash, global reserve currency, greed is good, High speed trading, light touch regulation, market fundamentalism, peak oil, Peter Thiel, pre–internet, price mechanism, profit motive, regulatory arbitrage, reserve currency, rolodex, Ronald Reagan, side project, Silicon Valley, upwardly mobile, zero-sum game

As the witch hunt became more disruptive, Guttman put his foot down. “Whoever these spies are, they’re getting in the way of trading in the oil ring. Nobody wants to stand near them. The whole floor is moving away, so you have these two guys standing there basically trying to do trades by themselves.” He asked around and found out both men worked for Texas oil man and corporate raider Oscar Wyatt Jr. Until being incarcerated in 2007 for sluicing kickbacks to Saddam Hussein’s regime, Wyatt led a charmed life, running Coastal Corp., an oil company he sold to Texas competitor El Paso Corp. in 2001 for $24 billion, after repeatedly inflaming the U.S. Justice Department by inking foreign oil deals with countries like Libya. (About paying the Iraqi government for access to its lucrative oil deals after being sentenced to over a year in prison, Wyatt offered an extremely rare apology, blaming his actions on his personal politics.

Make that $150,000!” The riches of the natural-gas and power markets and the ease with which they could be won and lost would inspire Kenneth Lay to partner up with Jeff Skilling at Enron, which proceeded to make a fortune before bankrupting itself in 2001, bringing the fragile U.S. energy market to the brink. It also made the second career of T. Boone Pickens, the Dallas corporate raider–turned–hedge fund manager, and his second round of billions. And it allowed Enron’s star gas trader, John Arnold, to become a self-made billionaire by the age of thirty-three, after founding a Houston hedge fund, Centaurus Energy Advisers, at just twenty-eight. Five years after starting his fund in 2002, Arnold became the youngest person on the Forbes Richest 400 Americans list, with an estimated net worth of $1.5 billion.


pages: 596 words: 163,682

The Third Pillar: How Markets and the State Leave the Community Behind by Raghuram Rajan

activist fund / activist shareholder / activist investor, affirmative action, Affordable Care Act / Obamacare, airline deregulation, Albert Einstein, Andrei Shleifer, banking crisis, barriers to entry, basic income, battle of ideas, Bernie Sanders, blockchain, borderless world, Bretton Woods, British Empire, Build a better mousetrap, business cycle, business process, capital controls, Capital in the Twenty-First Century by Thomas Piketty, central bank independence, computer vision, conceptual framework, corporate governance, corporate raider, corporate social responsibility, creative destruction, crony capitalism, crowdsourcing, cryptocurrency, currency manipulation / currency intervention, data acquisition, David Brooks, Deng Xiaoping, desegregation, deskilling, disruptive innovation, Donald Trump, Edward Glaeser, facts on the ground, financial innovation, financial repression, full employment, future of work, global supply chain, high net worth, housing crisis, illegal immigration, income inequality, industrial cluster, intangible asset, invention of the steam engine, invisible hand, Jaron Lanier, job automation, John Maynard Keynes: technological unemployment, joint-stock company, Joseph Schumpeter, labor-force participation, low skilled workers, manufacturing employment, market fundamentalism, Martin Wolf, means of production, moral hazard, Network effects, new economy, Nicholas Carr, obamacare, Productivity paradox, profit maximization, race to the bottom, Richard Thaler, Robert Bork, Robert Gordon, Ronald Reagan, Sam Peltzman, shareholder value, Silicon Valley, Social Responsibility of Business Is to Increase Its Profits, South China Sea, South Sea Bubble, Stanford marshmallow experiment, Steve Jobs, superstar cities, The Future of Employment, The Wealth of Nations by Adam Smith, trade liberalization, trade route, transaction costs, transfer pricing, Travis Kalanick, Tyler Cowen: Great Stagnation, universal basic income, Upton Sinclair, Walter Mischel, War on Poverty, women in the workforce, working-age population, World Values Survey, Yom Kippur War, zero-sum game

There is usually an understanding that the company will compensate the employee for these investments, even if there is no written contract to the effect, and thus no legal power for the employee to enforce compliance. When a corporate raider takes over a company where most employees have already made such investments, repudiates these implicit contracts, eliminates jobs and cuts wages, the raider benefits, as do shareholders. Workers take a large hit, though, and they, as well as future employees in the industry, may forever lose trust in management. Harvard economists Andrei Shleifer and Larry Summers emphasized this point in the context of airline takeovers in the 1980s, after the industry was deregulated. When corporate raider Carl Icahn took over Trans World Airlines (TWA) in 1985, they argue that much of the value he squeezed out for shareholders came from abrogating wage agreements and renegotiating worker wages down.42 To the extent that workers were overpaid because of lax prior management and strong union bargaining, this was beneficial for shareholders, but unless lower costs led to lower ticket prices and more travel, this was a wash for society since no additional value was created.


pages: 274 words: 70,481

The Psychopath Test: A Journey Through the Madness Industry by Jon Ronson

Albert Einstein, corporate raider, cuban missile crisis, Donald Trump, Douglas Hofstadter, Gödel, Escher, Bach, impulse control, Norman Mailer, Ronald Reagan, Skype

It’s trench warfare out there.” I wondered if the screenwriters had taken the line from Al Dunlap, but later I discovered that he hadn’t been the only bigwig to say it. “You want a friend in Washington? Get a dog,” Harry Truman had apparently said during his presidency, according to the 1975 biographical play Give ’em Hell, Harry! “You learn in this business, if you want a friend, get a dog,” said the corporate raider and pharmaceutical chief Carl Icahn at some point during the mid-1980s. “If you want to be liked, get a dog,” said the host of CBS’s Inside Edition, Deborah Norville, in the early 1990s. “The people you work with are not your friends.” We gathered in the kitchen—Al, Judy, and Sean the bodyguard. I cleared my throat. “You know how I said in my e-mail that your amygdala might not shoot the requisite signals of fear to your central nervous system and that’s perhaps why you’ve been so successful and so interested in the predatory spirit?”


pages: 252 words: 70,424

The Self-Made Billionaire Effect: How Extreme Producers Create Massive Value by John Sviokla, Mitch Cohen

business cycle, Cass Sunstein, Colonization of Mars, corporate raider, Daniel Kahneman / Amos Tversky, Elon Musk, Frederick Winslow Taylor, game design, global supply chain, James Dyson, Jeff Bezos, John Harrison: Longitude, Jony Ive, loss aversion, Mark Zuckerberg, market design, old-boy network, paper trading, RAND corporation, randomized controlled trial, Richard Thaler, risk tolerance, self-driving car, Silicon Valley, smart meter, Steve Ballmer, Steve Jobs, Steve Wozniak, Tony Hsieh, Toyota Production System, young professional

Furthermore, the CEO and head executive Boone Pickens had courted were not open to acquisition. But Boone Pickens found another way—he persuaded the board to let him offer Hugoton stockholders 1.8 shares of Mesa Petroleum stock for every one Hugoton Production Company share they were willing to sell. In this way, Mesa acquired 30 percent of Hugoton, and Boone Pickens began to earn a reputation as a corporate raider.32 The Hugoton acquisition paved the way for Mesa to become the oil-and-gas giant it remains today, but it was not without personal loss for T. Boone Pickens. The billionaire owned 23 percent of Mesa when he went after Hugoton. “If I’d been as smart as I am today I would’ve said to that board member, ‘If I’m able to pull it off, I take no dilution.’ But I didn’t say that. We acquired them.


pages: 239 words: 69,496

The Wisdom of Finance: Discovering Humanity in the World of Risk and Return by Mihir Desai

activist fund / activist shareholder / activist investor, Albert Einstein, Andrei Shleifer, assortative mating, Benoit Mandelbrot, Brownian motion, capital asset pricing model, carried interest, Charles Lindbergh, collective bargaining, corporate governance, corporate raider, discounted cash flows, diversified portfolio, Eugene Fama: efficient market hypothesis, financial innovation, follow your passion, George Akerlof, Gordon Gekko, greed is good, housing crisis, income inequality, information asymmetry, Isaac Newton, Jony Ive, Kenneth Rogoff, longitudinal study, Louis Bachelier, moral hazard, Myron Scholes, new economy, out of africa, Paul Samuelson, Pierre-Simon Laplace, principal–agent problem, Ralph Waldo Emerson, random walk, risk/return, Robert Shiller, Robert Shiller, Ronald Coase, Silicon Valley, Steve Jobs, Thales and the olive presses, Thales of Miletus, The Market for Lemons, The Nature of the Firm, The Wealth of Nations by Adam Smith, Tim Cook: Apple, transaction costs, zero-sum game

But, for our purposes, it’s worth revisiting the Tootsie Roll story to grasp how all this relates to our lives. It turns out that the story is richer and more complex than I’ve made out so far. The CEO who died, Melvin Gordon, had married into the Rubin family, that had historically controlled Tootsie Roll. He had been CEO for more than fifty years (he died at age ninety-five) and had repeatedly refused the overtures of Carl Icahn, a notorious corporate raider, who had wanted to sell the company to a larger candy company, like Mars or Hershey’s. The Gordon/Rubin family owned a fair chunk of Tootsie Roll, but the key is that they controlled the company with a separate class of shares that had extra voting rights, effectively meaning they would always call the shots. So the first version of the story—irresponsible CEO ignoring the will of shareholders (an agent not fulfilling the goals of his principal)—is somewhat simplistic.


pages: 232 words: 71,024

The Decline and Fall of IBM: End of an American Icon? by Robert X. Cringely

AltaVista, Bernie Madoff, business cycle, business process, cloud computing, commoditize, compound rate of return, corporate raider, full employment, if you build it, they will come, immigration reform, interchangeable parts, invention of the telephone, Khan Academy, knowledge worker, low skilled workers, Paul Graham, platform as a service, race to the bottom, remote working, Robert Metcalfe, Robert X Cringely, shareholder value, Silicon Valley, six sigma, software as a service, Steve Jobs, Toyota Production System, Watson beat the top human players on Jeopardy!, web application

With a dividend, you see, IBM would first pay corporate income tax on the money, possibly reducing the total sum available to be distributed to shareholders. And when the dividends were distributed to shareholders they’d pay income taxes on it again—double taxation. Shareholder buybacks, then, ought to allow shareholders to receive more money and pay less tax on that money because it is taxed only once at the lower capital gains rate, and shareholders who don’t want to sell shares back aren’t required to. This is the sort of gambit reformed corporate raider Carl Icahn loved to push on the companies in which he invested. IBM, unlike some of the Icahn target companies like Apple and eBay, isn’t at all resistant to buying back its own shares. In the last decade, in fact, IBM has spent $101 billion buying back shares, thereby reducing the number outstanding by about a third. But there’s something odd about the way IBM buys back its own shares: The company does it with borrowed money.


pages: 257 words: 71,686

Swimming With Sharks: My Journey into the World of the Bankers by Joris Luyendijk

activist fund / activist shareholder / activist investor, bank run, barriers to entry, Bonfire of the Vanities, bonus culture, collapse of Lehman Brothers, collective bargaining, corporate raider, credit crunch, Credit Default Swap, Emanuel Derman, financial deregulation, financial independence, Flash crash, glass ceiling, Gordon Gekko, high net worth, hiring and firing, information asymmetry, inventory management, job-hopping, light touch regulation, London Whale, Nick Leeson, offshore financial centre, regulatory arbitrage, Satyajit Das, selection bias, shareholder value, sovereign wealth fund, the payments system, too big to fail

The general ignorance about the current threat posed by the financial system came across very clearly every time anyone asked me at parties, over dinner or at the school gates what had surprised me most about ‘those bankers’. The question often came with a cynical laugh as if nothing genuinely serious was at stake; they seemed to anticipate my answer would be ‘greed’, ‘cocaine’ or ‘arrogance’. Many referred to the Gordon Gekko character from the iconic 1987 film Wall Street and his famous quote: ‘Greed, for want of a better word, is good.’ I would resist pointing out that Gordon Gekko was not a banker but a ‘corporate raider’ or ‘activist shareholder’ taking over companies against their will, and instead I’d tell them how some of the things I’d learnt about bankers had ‘lightning-bolted me off my horse’, as the Flemish expression goes. I had had no idea just how much damage the financial sector can do to society let alone how terrifyingly close to the brink we were in 2008. However, what had struck me even more is how such organisations continue to be governed by a system of incentives that seem almost designed to encourage short-termism.


pages: 234 words: 63,844

Filthy Rich: A Powerful Billionaire, the Sex Scandal That Undid Him, and All the Justice That Money Can Buy: The Shocking True Story of Jeffrey Epstein by James Patterson, John Connolly, Tim Malloy

Bernie Madoff, corporate raider, Donald Trump, East Village, Elon Musk, Isaac Newton, Jeffrey Epstein, Julian Assange, Murray Gell-Mann, Ponzi scheme, Stephen Hawking, WikiLeaks

If Greenberg knew about their affair, he did not seem to care. Then again, Greenberg had other things on his mind. The Reagan era, when deregulation kicked into high gear, was still on the horizon. But there was already a decreasing amount of government oversight on Wall Street, and a new breed of bare-knuckle traders had begun to push every available limit. It was the start of the age of corporate raiders, and with Ace Greenberg looking out for him, Epstein had no reservations when it came to throwing his weight around. The golden boy’s gift for working the numbers earned him a place in the special-products division, where he worked on extremely complex tax-related problems for a select group of Bear Stearns’s wealthiest clients—an elite within the elite—including Seagram CEO Edgar Bronfman.


pages: 584 words: 187,436

More Money Than God: Hedge Funds and the Making of a New Elite by Sebastian Mallaby

Andrei Shleifer, Asian financial crisis, asset-backed security, automated trading system, bank run, barriers to entry, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Bonfire of the Vanities, Bretton Woods, business cycle, buy and hold, capital controls, Carmen Reinhart, collapse of Lehman Brothers, collateralized debt obligation, computerized trading, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, currency manipulation / currency intervention, currency peg, Elliott wave, Eugene Fama: efficient market hypothesis, failed state, Fall of the Berlin Wall, financial deregulation, financial innovation, financial intermediation, fixed income, full employment, German hyperinflation, High speed trading, index fund, John Meriwether, Kenneth Rogoff, Kickstarter, Long Term Capital Management, margin call, market bubble, market clearing, market fundamentalism, merger arbitrage, money market fund, moral hazard, Myron Scholes, natural language processing, Network effects, new economy, Nikolai Kondratiev, pattern recognition, Paul Samuelson, pre–internet, quantitative hedge fund, quantitative trading / quantitative finance, random walk, Renaissance Technologies, Richard Thaler, risk-adjusted returns, risk/return, Robert Mercer, rolodex, Sharpe ratio, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, statistical arbitrage, statistical model, survivorship bias, technology bubble, The Great Moderation, The Myth of the Rational Market, the new new thing, too big to fail, transaction costs

Soros was not alone in being bullish. The following week Salomon Brothers issued a research note promising that the bull market would continue into 1988, and the week after that, Byron Wien, a well-known Morgan Stanley strategist and Soros friend, predicted “a new high before this cycle is over.” It was the era of the leveraged buyout, and debt-fueled takeovers were driving stock prices steadily higher; the lives of corporate raiders were the stuff of drooling magazine features. The mood of the moment was captured by a hitherto unknown financier named P. David Herrlinger, who announced a $6.8 billion offer for Dayton Hudson Corporation. Herrlinger appeared on his front lawn to tell reporters that his offer might or might not be a hoax—“It’s no more of a hoax than anything else,” he said—and the news of the apparent takeover sent Dayton Hudson stock into the stratosphere.

Curran, “Are Stocks Too High?” Fortune, September 28, 1987, p. 28. 38. James B. Stewart and Daniel Hertzberg, “Before the Fall,” Wall Street Journal, December 11, 1987, p. 1. 39. Druckenmiller interview. 40. The Ways and Means Committee of the U.S. House of Representatives was considering legislation to eliminate the tax deductions for some interest expenses and to tax “greenmail”—payments made by companies to corporate raiders to buy back their stock at above-market prices to prevent the raider from taking over the company. See Mark Carlson, “A Brief History of the 1987 Stock Market Crash with a Discussion of the Federal Reserve Response” (Federal Reserve discussion paper, November 2006). 41. Soros, Soros on Soros, p. 60. In conversation with the author, Soros reaffirmed, “I came out and the market had fallen, and I said to myself that I should have been following the market.


pages: 282 words: 26,931

The Five-Year Party: How Colleges Have Given Up on Educating Your Child and What You Can Do About It by Craig Brandon

Bernie Madoff, call centre, corporate raider, Donald Trump, en.wikipedia.org, Gordon Gekko, helicopter parent, impulse control, new economy, Ponzi scheme, Ralph Nader

But what does accreditation really mean? Not much, it turns out. The regional accreditation organizations that are supposed to evaluate the quality of education at our colleges and universities seem to have been soundly sleeping as the colleges dumbed down their programs, inflated grades, and turned themselves into entertainment centers. They are like Securities and Exchange Commission watchdogs, fiddling with forms while corporate raiders fleeced millions of Americans and Bernie Madoff set up his Ponzi schemes. There are six regional accreditation groups in the United States, but they all work pretty much the same way. Colleges apply for membership and then become a part of the organization. The college and individual departments submit regular self-study reports about changes they have made and problems they are experiencing.


pages: 231 words: 71,248

Shipping Greatness by Chris Vander Mey

corporate raider, don't be evil, en.wikipedia.org, fudge factor, Google Chrome, Google Hangouts, Gordon Gekko, Jeff Bezos, Kickstarter, Lean Startup, minimum viable product, performance metric, recommendation engine, Skype, slashdot, sorting algorithm, source of truth, Steve Jobs, Superbowl ad, web application

The other side won’t even bother to put a value on this marketing ploy, and the reality is that you shouldn’t expect them to do so; you’re just hoping that if you “sweeten the deal” enough, they’ll take the last number you offered in stage 3. In many ways, this “deal sweetening” phase is time that each party spends trying to get comfortable with The Reality Of The Situation, which is that neither of you is going to make out like a bandit. It’s too bad, but we always feel disappointed at this point, even though bandits are the bad guys—except in movies, where “corporate raider” sounds glamorous (see stage 1). Stage 5: Walking Away and Thinking It’s possible that after throwing in a few pot sweeteners and a few months of negotiation, everyone is so tired that you’re ready to do a deal. So you just do it. If this is you, proceed to stage 6 and light a candle at the chapel on the way home. Also, some money to the Salvation Army Santa might be in order. Most of us are not so lucky because fatigue makes everything worse (or so my new-mother friends tell me).


pages: 183 words: 17,571

Broken Markets: A User's Guide to the Post-Finance Economy by Kevin Mellyn

banking crisis, banks create money, Basel III, Bernie Madoff, Big bang: deregulation of the City of London, Bonfire of the Vanities, bonus culture, Bretton Woods, BRICs, British Empire, business cycle, buy and hold, call centre, Carmen Reinhart, central bank independence, centre right, cloud computing, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, corporate raider, creative destruction, credit crunch, crony capitalism, currency manipulation / currency intervention, disintermediation, eurozone crisis, fiat currency, financial innovation, financial repression, floating exchange rates, Fractional reserve banking, global reserve currency, global supply chain, Home mortgage interest deduction, index fund, information asymmetry, joint-stock company, Joseph Schumpeter, labor-force participation, light touch regulation, liquidity trap, London Interbank Offered Rate, market bubble, market clearing, Martin Wolf, means of production, mobile money, money market fund, moral hazard, mortgage debt, mortgage tax deduction, negative equity, Ponzi scheme, profit motive, quantitative easing, Real Time Gross Settlement, regulatory arbitrage, reserve currency, rising living standards, Ronald Coase, seigniorage, shareholder value, Silicon Valley, statistical model, Steve Jobs, The Great Moderation, the payments system, Tobin tax, too big to fail, transaction costs, underbanked, Works Progress Administration, yield curve, Yogi Berra, zero-sum game

Joining one of these battalions, or one of a handful of the established players, such as Goldman Sachs, that learned to play across almost all new products and markets, almost guaranteed vast rewards. Only at the turn of the 1990s did mainstream banks of the world begin to put serious resources into the new markets and instruments that had transformed finance from the outside in response to investors seeking higher returns, innovators seeking capital, and a new breed of corporate raiders seeking a killing. A seminal moment came in 1999 when the last vestiges of Glass-Steagall were swept away, largely after they had fallen into disuse. By then the game was already changed beyond recognition, and 1930s-style regulation had become a dead letter. What had once been private partnerships became public companies so they could raise the capital to invest in trading and, as important, the technology to support trading in competition with big global banks determined to build or buy their way into the new Golconda.


pages: 233 words: 73,772

The Secret World of Oil by Ken Silverstein

business intelligence, clean water, corporate governance, corporate raider, Donald Trump, energy security, Exxon Valdez, failed state, Google Earth, offshore financial centre, oil shock, paper trading, rolodex, Ronald Reagan, WikiLeaks, Yom Kippur War

It’s the same with oil, which gives you the liberty to run your ships and planes and tanks, and your economy. If you don’t have it, you can’t run your country.” Key brokers who emerged in the post-1973 OPEC world included: Marc Rich, who founded the giant commodities firm Glencore (see Chapter 3); Hany Salaam, a Lebanese middleman who made numerous deals for Occidental Petroleum Corporation during the days of Armand Hammer, its former chairman; and Oscar Wyatt, a Houston oilman and corporate raider who was sentenced to a year in prison in 2007 in connection with the UN oil-for-food scandal. One of the more colorful of that era’s fixers was John Deuss, who once owned his own tanker fleet, and who during the 1980s smuggled vast quantities of oil to South Africa’s apartheid regime, then under an international trade embargo imposed by the United Nations. In 1979, after the overthrow of the shah, Iran stopped exporting oil to South Africa’s apartheid regime, due to the embargo.


pages: 244 words: 79,044

Money Mavericks: Confessions of a Hedge Fund Manager by Lars Kroijer

activist fund / activist shareholder / activist investor, Bernie Madoff, capital asset pricing model, corporate raider, diversification, diversified portfolio, family office, fixed income, forensic accounting, Gordon Gekko, hiring and firing, implied volatility, index fund, intangible asset, Jeff Bezos, Just-in-time delivery, Long Term Capital Management, merger arbitrage, NetJets, new economy, Ponzi scheme, post-work, risk-adjusted returns, risk/return, shareholder value, Silicon Valley, six sigma, statistical arbitrage, Vanguard fund, zero-coupon bond

A rights issue can take many forms, but often it involves a publicly listed company seeking to raise money from its shareholders by giving them the ‘right’ to invest more money in the company at a discount on the prevailing share price. So a company that trades at $10 may give a right to buy one more share at $7 for every five shares you own in the company. It is a tactic sometimes used by companies in trouble (and thus unable to get a loan) and Bure was certainly in trouble. Bure and the corporate raider Bure was still hung-over from the happy internet days of half a decade ago. The company had a large number of stakes in smaller technology-related businesses as well as more substantial stakes in a couple of quoted businesses, a healthcare company, a private equity fund, and a large Nordic infrastructure engineering business. It had some debt but nothing that seem likely to cause bankruptcy in the short term, although there had been a very close call a couple of weeks earlier.


pages: 268 words: 74,724

Who Needs the Fed?: What Taylor Swift, Uber, and Robots Tell Us About Money, Credit, and Why We Should Abolish America's Central Bank by John Tamny

Airbnb, bank run, Bernie Madoff, bitcoin, Bretton Woods, buy and hold, Carmen Reinhart, corporate raider, correlation does not imply causation, creative destruction, Credit Default Swap, crony capitalism, crowdsourcing, Donald Trump, Downton Abbey, fiat currency, financial innovation, Fractional reserve banking, full employment, George Gilder, Home mortgage interest deduction, Jeff Bezos, job automation, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, liquidity trap, Mark Zuckerberg, market bubble, money market fund, moral hazard, mortgage tax deduction, NetJets, offshore financial centre, oil shock, peak oil, Peter Thiel, price stability, profit motive, quantitative easing, race to the bottom, Ronald Reagan, self-driving car, sharing economy, Silicon Valley, Silicon Valley startup, Steve Jobs, The Wealth of Nations by Adam Smith, too big to fail, Travis Kalanick, Uber for X, War on Poverty, yield curve

Boone Pickens, Reginald Lewis—the first black CEO of Fortune 500 company Beatrice Foods) eager to restructure corporations that were operating at a fraction of their potential. This included “breaking up” large-for-large’s-sake corporations by selling pieces to investors with a stated objective of running the business lines purchased more effectively. These “hostile” takeovers performed by Icahn, Pickens, and other outsiders were similarly shunned by establishment banks, mainly because the blue-chip firms these “corporate raiders” eyed for necessary restructuring were often the banks’ clients. Milken had created yet another market, and he was a magnet for credit. Milken was so successful at discovering companies worthy of both finance and take over that investors lined up to participate in his deals. Fischel writes: Drexel became known as a firm that could, if necessary, finance a takeover bid by raising billions of dollars within a matter of hours.


pages: 258 words: 71,880

Street Fighters: The Last 72 Hours of Bear Stearns, the Toughest Firm on Wall Street by Kate Kelly

bank run, buy and hold, collateralized debt obligation, corporate governance, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Donald Trump, fixed income, housing crisis, index arbitrage, Long Term Capital Management, margin call, moral hazard, quantitative hedge fund, Renaissance Technologies, risk-adjusted returns, shareholder value, technology bubble, too big to fail, traveling salesman

Ever since his troubled investment in Salomon Brothers, the trading unit that had eventually been absorbed by Citigroup, the Omaha investor had largely steered clear of trading shops and investment banks, sticking to other businesses, like newspapers, candy, and insurance, to fill out Berkshire Hathaway’s enormously successful portfolio of companies. 13 Buffett had taken a controlling stake in Salomon Brothers in 1987, at a time when it was fending off a hostile offer from the corporate raider Ronald Perelman. The company had proved, however, to be a huge headache—even for one of American’s savviest investors. A top player in the trading of mortgage-backed securities and other fixed-income products, Salomon was dominated by an unruly collection of well-compensated traders who engaged in high-stakes poker games, among other shenanigans, on the trading floor. The team was almost unaffordable in good times, but when a group of Salomon’s best players left to open Long-Term Capital Management in the early 1990s, the gap had been exceedingly hard to fill.


pages: 232 words: 71,965

Dead Companies Walking by Scott Fearon

bank run, Bernie Madoff, business cycle, corporate raider, creative destruction, crony capitalism, Donald Trump, Eugene Fama: efficient market hypothesis, fear of failure, Golden Gate Park, hiring and firing, housing crisis, index fund, Jeff Bezos, Joseph Schumpeter, late fees, McMansion, moral hazard, new economy, pets.com, Ponzi scheme, Ronald Reagan, short selling, Silicon Valley, Snapchat, South of Market, San Francisco, Steve Jobs, survivorship bias, Upton Sinclair, Vanguard fund, young professional

Even though he’d just come back from what I later found out was a daily ten-mile jog in the sweltering midday heat, there wasn’t a drop of sweat on his brow. His dark hair was parted neatly to one side and a bespoke Italian suit hung loosely on his wiry frame. There’s no other way to put it: the man was imposing. Leaning back in his leather chair with the skyline of Houston spread out behind him, he looked like the perfect embodiment of the 1980s corporate raider—which, in many ways, he was. A few years after our meeting, he waged a storied takeover battle for Eastern Airlines with none other than Carl Icahn. Several scale models of DC-10s were displayed around his office. One of these was painted in Continental’s colors, another had the now-defunct Texas International Air brand on the side of it, and a third had been decorated with the name and logo of Jet Capital, the holding company Lorenzo and a fellow Harvard MBA had started in the late 1960s.


pages: 601 words: 193,225

740 Park: The Story of the World's Richest Apartment Building by Michael Gross

Albert Einstein, anti-communist, Bonfire of the Vanities, California gold rush, corporate raider, cuban missile crisis, Donald Trump, Irwin Jacobs, Jarndyce and Jarndyce, McMansion, mortgage debt, Norman Mailer, offshore financial centre, oil shale / tar sands, plutocrats, Plutocrats, Ronald Reagan, sensible shoes, short selling, strikebreaker, The Predators' Ball, traveling salesman, Upton Sinclair, urban planning

With a nest egg of $18,000, he started a hedge fund, Zebra Associates, in the early 1970s and made a fortune. A childhood friend who gave him $10,000 when he started got back $1.6 million in 1980. Charles commuted to work on the subway wearing a backpack. In the 1980s, Stevenson teamed up briefly with Asher Edelman, an arbitrageur often described as a “feared corporate raider” in reports of his battles to wrest control of companies he’d invested in from entrenched management. But Edelman retired to run an art museum in Switzerland; newspapers speculated that one reason for his retreat was increasing government scrutiny of corporate raiders in the late 1980s. Stevenson lowered his profile, too, but continued working as a private investor and head of two hedge funds, Navigator Partners Fund and Navigator Diversified Strategies Fund. One friend describes him as “a WASP who thinks more like a Jew than any Jew you ever met.”


pages: 305 words: 79,356

Drowning in Oil: BP & the Reckless Pursuit of Profit by Loren C. Steffy

Berlin Wall, clean water, corporate governance, corporate raider, Exxon Valdez, Fall of the Berlin Wall, North Sea oil, oil rush, oil shock, peak oil, Piper Alpha, Ronald Reagan, South China Sea, sovereign wealth fund

It had squandered $6 billion in profits from its Alaska assets on a disastrous copper-mining venture, and it was drilling one dry hole after another. As group 39 40 D R O W N I N G I N O I L treasurer in the early 1980s, Browne developed a plan for BP to buy Sohio outright, using its controlling stake to replace the Sohio board with directors who would support the acquisition by BP. It was the heyday of hostile takeovers, when corporate raiders like T. Boone Pickens were prowling the oil patch looking for undervalued and poorly managed companies, but BP’s chairman, reflecting the company’s timid heritage, decided that Browne’s plan was too heavy-handed.7 Instead, BP pressured Sohio to remove its three top officers and replace them with BP executives, including Browne. Ultimately, BP wound up buying out the remaining piece of Sohio anyway, paying almost $8 billion for it, and Browne and the other executives implemented a turnaround plan that included huge job cuts in an effort to generate more than a halfbillion dollars in profit in two years.8 By the time his Sohio project was complete, Browne had become convinced that the only way BP could compete globally was to shake off its stodgy culture and embrace American-style management.


pages: 273 words: 87,159

The Vanishing Middle Class: Prejudice and Power in a Dual Economy by Peter Temin

"Robert Solow", 2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, affirmative action, Affordable Care Act / Obamacare, American Legislative Exchange Council, American Society of Civil Engineers: Report Card, anti-communist, Bernie Sanders, Branko Milanovic, Bretton Woods, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, carried interest, clean water, corporate raider, Corrections Corporation of America, crack epidemic, deindustrialization, desegregation, Donald Trump, Edward Glaeser, Ferguson, Missouri, financial innovation, financial intermediation, floating exchange rates, full employment, income inequality, intangible asset, invisible hand, longitudinal study, low skilled workers, low-wage service sector, mandatory minimum, manufacturing employment, Mark Zuckerberg, mass immigration, mass incarceration, means of production, mortgage debt, Network effects, New Urbanism, Nixon shock, obamacare, offshore financial centre, oil shock, plutocrats, Plutocrats, Powell Memorandum, price stability, race to the bottom, road to serfdom, Ronald Reagan, secular stagnation, Silicon Valley, Simon Kuznets, the scientific method, War on Poverty, Washington Consensus, white flight, working poor

Its success shows that there are other ways to affect public policy than to elect favorable representatives and provides evidence in support of the Investment Theory of Politics. For example, private enterprise has entered parts of the judicial system we do not ordinarily think are open to the private public oxymoron. When you dial 911, you typically get an outsourced answering service. Private equity firms, the “corporate raiders” of an earlier era, increasingly have taken over a wide array of civic and financial services that are central to American life since the 2008 financial crisis. Like private prisons, their interests do not align with the public programs for safety. Their aims are to cut costs, increase prices, lobby, and litigate to expand their reach. As might be expected, response times have grown, ambulance equipment often does not work, and people in need get short-changed.


pages: 290 words: 83,248

The Greed Merchants: How the Investment Banks Exploited the System by Philip Augar

Andy Kessler, barriers to entry, Berlin Wall, Big bang: deregulation of the City of London, Bonfire of the Vanities, business cycle, buttonwood tree, buy and hold, capital asset pricing model, commoditize, corporate governance, corporate raider, crony capitalism, cross-subsidies, financial deregulation, financial innovation, fixed income, Gordon Gekko, high net worth, information retrieval, interest rate derivative, invisible hand, John Meriwether, Long Term Capital Management, Martin Wolf, new economy, Nick Leeson, offshore financial centre, pensions crisis, regulatory arbitrage, Sand Hill Road, shareholder value, short selling, Silicon Valley, South Sea Bubble, statistical model, Telecommunications Act of 1996, The Chicago School, The Predators' Ball, The Wealth of Nations by Adam Smith, transaction costs, tulip mania, value at risk, yield curve

Even after the merger wave of the sixties, top advisers such as Morgan Stanley had only about four merger and acquisition specialist investment bankers.25 The senior partner of Goldman Sachs ‘would say that he was the original merger department, in the sense that the bottom left-hand drawer held the buyers and the bottom right-hand drawer the sellers’.26 There were only three hundred bulge bracket investment bankers in America in total in 1965 and only 1,500 in 1978.27 It was the leverage-based corporate raiders of the eighties such as Carl Icahn and Ronald Perelman and the mega-mergers of the nineties such as Travelers-Citicorp and Vodafone-Mannesmann that signified the arrival of mergers and acquisitions as a mainstream activity for the investment banks. In 1980 there were only 106 M&A deals announced in America and 97 in the rest of the world; in 1998, the peak year, there were nearly 12,000 in America and over 30,000 elsewhere.


pages: 330 words: 83,319

The New Rules of War: Victory in the Age of Durable Disorder by Sean McFate

active measures, anti-communist, barriers to entry, Berlin Wall, blood diamonds, cognitive dissonance, commoditize, computer vision, corporate governance, corporate raider, cuban missile crisis, Donald Trump, double helix, drone strike, European colonialism, failed state, hive mind, index fund, invisible hand, John Markoff, joint-stock company, moral hazard, mutually assured destruction, Nash equilibrium, offshore financial centre, pattern recognition, Peace of Westphalia, plutocrats, Plutocrats, private military company, profit motive, RAND corporation, ransomware, Ronald Reagan, Silicon Valley, South China Sea, Stuxnet, technoutopianism, Washington Consensus, Westphalian system, yellow journalism, Yom Kippur War, zero day, zero-sum game

When the super-rich become superpowers, what will it look like? The British East India Company may prove instructive. For all the power wielded today by the world’s largest corporations—whether ExxonMobil, Walmart, or Google—they are tame beasts compared with the British East India Company. Founded in 1600 as a joint stock company, it became the greatest corporation in history and the original corporate raider. One of the very first Indian words to enter the English language was the Hindustani slang for plunder: “loot.” In its 275-year run, the company conquered India for the British crown, although at times it was hard to distinguish who served whom. What made the British East India Company powerful was its private military. With its own armed forces, it conducted the military conquest, subjugation, plunder, and rule of a subcontinent, while fending off its European rivals.


pages: 287 words: 80,050

The Wisdom of Frugality: Why Less Is More - More or Less by Emrys Westacott

Airbnb, back-to-the-land, Bertrand Russell: In Praise of Idleness, Bonfire of the Vanities, carbon footprint, clean water, Community Supported Agriculture, corporate raider, Daniel Kahneman / Amos Tversky, dark matter, Diane Coyle, discovery of DNA, Downton Abbey, dumpster diving, financial independence, full employment, greed is good, happiness index / gross national happiness, haute cuisine, hedonic treadmill, income inequality, invisible hand, Isaac Newton, loss aversion, McMansion, means of production, move fast and break things, move fast and break things, negative equity, New Urbanism, paradox of thrift, Ralph Waldo Emerson, Thales and the olive presses, Thales of Miletus, the market place, The Spirit Level, Thorstein Veblen, Upton Sinclair, Veblen good, Zipcar

Travie McCoy’s 2010 hit “Billionaire” begins with a frank admission: “I wanna be a billionaire / So freaking bad / Buy all the things I never had.” Even though Paul McCartney’s conventional platitude carried a whiff of irony, especially given his experience of sudden fame and fortune, while McCoy’s song goes on to imagine ways in which he will use his wealth to benefit others, the contrast here does seem to suggest a shift in cultural attitudes. Even so, when in the 1987 film Wall Street the real estate speculator and corporate raider Gordon Gecko declares that “greed is good,” we the audience understand by convention that the man who says this is bad; and we are duly satisfied when, at the end of the film, we see the bad man who says that greed is good carted off to prison. It seems that our culture is still torn between accepting acquisitiveness as a necessary condition of economic growth and denouncing it as an undesirable character trait that bespeaks false values and encourages unethical conduct.


pages: 251 words: 80,243

Nothing Is True and Everything Is Possible: The Surreal Heart of the New Russia by Peter Pomerantsev

Bretton Woods, corporate governance, corporate raider, Julian Assange, mega-rich, new economy, Occupy movement, Silicon Valley, WikiLeaks

And the result is an array of voices, working away at global audiences from different angles, producing a cumulative echo chamber of Kremlin support, all broadcast on RT. “We’re minority shareholders in globalization,” I hear from Russian corporate spooks and politicians. Which, remembering how the system tried to break Yana, might mean that the best way to imagine the Kremlin’s vision of itself in the world is as a “corporate reider”: the ultraviolent cousin of Western corporate raiders. For “reiding” is how most of the Russian elite made their first money, buying into a company and then using any means possible (arrests, guns, seizures, explosions, bribery, blackmail) to extract its advantages. The Kremlin is the great corporate reider inside globalization, convinced that it can see through all the old ways of the slow West to play at something more subversive. The twenty-first century’s geopolitical avant-garde.


pages: 403 words: 87,035

The New Geography of Jobs by Enrico Moretti

assortative mating, Bill Gates: Altair 8800, business climate, call centre, cleantech, cloud computing, corporate raider, creative destruction, desegregation, Edward Glaeser, financial innovation, global village, hiring and firing, income inequality, industrial cluster, Jane Jacobs, Jeff Bezos, Joseph Schumpeter, knowledge economy, labor-force participation, low skilled workers, manufacturing employment, Mark Zuckerberg, mass immigration, medical residency, Menlo Park, new economy, peer-to-peer lending, Peter Thiel, Productivity paradox, Richard Florida, Sand Hill Road, Silicon Valley, Skype, special economic zone, Startup school, Steve Jobs, Steve Wozniak, thinkpad, Tyler Cowen: Great Stagnation, Wall-E, Y Combinator, zero-sum game

In Oliver Stone’s acclaimed movie Wall Street, the economic transformation of the 1980s is portrayed as a fight between the honesty and purity of Main Street, embodied by a solid, contented blue-collar union representative played by Martin Sheen, and the corruption and moral recklessness of Wall Street, embodied by Martin Sheen’s son Charlie. Charlie Sheen plays a young stockbroker willing to do anything to get ahead in the ruthless world of corporate raiders and ends up almost destroying the company where his father works. Thirty years later, Hollywood’s view of America’s economic woes is unchanged. In the 2010 movie The Company Men, Ben Affleck portrays a white-collar employee who loses his job when a greedy CEO orders savage layoffs in an effort to appease Wall Street and boost the company’s stock price. The similarities are striking. In both movies the good guys make real, physical things—in the early movie they work for an airline, in the later one they work for a shipbuilding company—while the bad guys scheme with stocks and options, spend their time aggressively shouting buy or sell orders, and end up destroying jobs.


pages: 274 words: 81,008

The New Tycoons: Inside the Trillion Dollar Private Equity Industry That Owns Everything by Jason Kelly

activist fund / activist shareholder / activist investor, barriers to entry, Berlin Wall, call centre, carried interest, collective bargaining, corporate governance, corporate raider, Credit Default Swap, diversification, Fall of the Berlin Wall, family office, fixed income, Goldman Sachs: Vampire Squid, Gordon Gekko, housing crisis, income inequality, late capitalism, margin call, Menlo Park, Occupy movement, place-making, Rod Stewart played at Stephen Schwarzman birthday party, rolodex, Ronald Reagan, Rubik’s Cube, Sand Hill Road, shareholder value, side project, Silicon Valley, sovereign wealth fund

That translated to deals, as well. Blackstone’s initial approach was to team with a well-known corporation, tapping that Rolodex cultivated when Peterson was the chief executive of Bell & Howell, the U.S. Secretary of Commerce and the head of Lehman Brothers. Going in with a company had a couple of benefits: Would-be sellers took the offer more seriously, and it also helped assuage worries that Blackstone was a corporate raider looking to dismantle what it bought for a quick buck. “By aligning yourself with blue-chip firms, you were instantly the white knight,” JPMorgan’s Jimmy Lee said. Blackstone also offered the chance at times to hang on to a slice of the unit being divested, helping the selling CEO avoid potential embarrassment of selling too cheap and watching Blackstone reap huge profits down the line. It’s undeniable that the biggest private-equity firms today stand as financial behemoths given what they own and their expansion into areas beyond buying companies with borrowed money.


pages: 346 words: 89,180

Capitalism Without Capital: The Rise of the Intangible Economy by Jonathan Haskel, Stian Westlake

"Robert Solow", 23andMe, activist fund / activist shareholder / activist investor, Airbnb, Albert Einstein, Andrei Shleifer, bank run, banking crisis, Bernie Sanders, business climate, business process, buy and hold, Capital in the Twenty-First Century by Thomas Piketty, cloud computing, cognitive bias, computer age, corporate governance, corporate raider, correlation does not imply causation, creative destruction, dark matter, Diane Coyle, Donald Trump, Douglas Engelbart, Douglas Engelbart, Edward Glaeser, Elon Musk, endogenous growth, Erik Brynjolfsson, everywhere but in the productivity statistics, Fellow of the Royal Society, financial innovation, full employment, fundamental attribution error, future of work, Gini coefficient, Hernando de Soto, hiring and firing, income inequality, index card, indoor plumbing, intangible asset, Internet of things, Jane Jacobs, Jaron Lanier, job automation, Kenneth Arrow, Kickstarter, knowledge economy, knowledge worker, laissez-faire capitalism, liquidity trap, low skilled workers, Marc Andreessen, Mother of all demos, Network effects, new economy, open economy, patent troll, paypal mafia, Peter Thiel, pets.com, place-making, post-industrial society, Productivity paradox, quantitative hedge fund, rent-seeking, revision control, Richard Florida, ride hailing / ride sharing, Robert Gordon, Ronald Coase, Sand Hill Road, Second Machine Age, secular stagnation, self-driving car, shareholder value, sharing economy, Silicon Valley, six sigma, Skype, software patent, sovereign wealth fund, spinning jenny, Steve Jobs, survivorship bias, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Tim Cook: Apple, total factor productivity, Tyler Cowen: Great Stagnation, urban planning, Vanguard fund, walkable city, X Prize, zero-sum game

Ikenberry, Lakonishok, and Vermaelen (1995), it should be noted, argue that share buybacks create value in the short term and create even more value in the long term. 10. This is related to a famous argument made by the economists Sanford Grossman and Oliver Hart (1980), who pointed out that small shareholders will not devote resources to getting rid of poorly performing managers, but rather they will just implicitly rely on the work of others (in particular, corporate raiders) via the share price. 11. See his profile in Forbes Magazine, http://archive.fortune.com/magazines/fortune/fortune_archive/1998/10/26/250008/index.htm. Chapter 9: Competing, Managing, and Investing in the Intangible Economy 1. Sarah O’Connor, “Amazon Unpacked,” February 8, 2013, https://www.ft.com/content/ed6a985c-70bd-11e2-85d0-00144feab49a. 2. Sustained advantage should not be confused with sustainability, often referred to not as a measure of longevity but of environmental concern.


Concentrated Investing by Allen C. Benello

activist fund / activist shareholder / activist investor, asset allocation, barriers to entry, beat the dealer, Benoit Mandelbrot, Bob Noyce, business cycle, buy and hold, carried interest, Claude Shannon: information theory, corporate governance, corporate raider, delta neutral, discounted cash flows, diversification, diversified portfolio, Edward Thorp, family office, fixed income, high net worth, index fund, John von Neumann, Louis Bachelier, margin call, merger arbitrage, Paul Samuelson, performance metric, random walk, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, Robert Shiller, shareholder value, Sharpe ratio, short selling, survivorship bias, technology bubble, transaction costs, zero-sum game

His uncle read the paper, and “thanked” Greenberg “by calling me every name he could think of.”18 That ended any notion of him going to work in the family business. Soon after, investor Laurence “Larry” Tisch—the self-made billionaire known for buying into failing companies when their share prices were at a low ebb and then turning them into profitable enterprises with much higher stock valuations—emerged with a large holding in the company.19 Tisch, who would later play the role of white knight for broadcaster CBS, Inc., sought the role of corporate raider and liquidator of the department store chain. He wanted to take over the company and liquidate it for its undervalued New York real estate. Greenberg says that Tisch’s approach put his family “in a dither.”20 They hired investment bankers to advise them on strategic options, and an improbable white knight was located in the form of Brown & Williamson Tobacco. Brown & Williamson bought the company in 1973, paying $23 per share, and buying out the family in the process.


pages: 366 words: 94,209

Throwing Rocks at the Google Bus: How Growth Became the Enemy of Prosperity by Douglas Rushkoff

activist fund / activist shareholder / activist investor, Airbnb, algorithmic trading, Amazon Mechanical Turk, Andrew Keen, bank run, banking crisis, barriers to entry, bitcoin, blockchain, Burning Man, business process, buy and hold, buy low sell high, California gold rush, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, centralized clearinghouse, citizen journalism, clean water, cloud computing, collaborative economy, collective bargaining, colonial exploitation, Community Supported Agriculture, corporate personhood, corporate raider, creative destruction, crowdsourcing, cryptocurrency, disintermediation, diversified portfolio, Elon Musk, Erik Brynjolfsson, Ethereum, ethereum blockchain, fiat currency, Firefox, Flash crash, full employment, future of work, gig economy, Gini coefficient, global supply chain, global village, Google bus, Howard Rheingold, IBM and the Holocaust, impulse control, income inequality, index fund, iterative process, Jaron Lanier, Jeff Bezos, jimmy wales, job automation, Joseph Schumpeter, Kickstarter, loss aversion, Lyft, Marc Andreessen, Mark Zuckerberg, market bubble, market fundamentalism, Marshall McLuhan, means of production, medical bankruptcy, minimum viable product, Mitch Kapor, Naomi Klein, Network effects, new economy, Norbert Wiener, Oculus Rift, passive investing, payday loans, peer-to-peer lending, Peter Thiel, post-industrial society, profit motive, quantitative easing, race to the bottom, recommendation engine, reserve currency, RFID, Richard Stallman, ride hailing / ride sharing, Ronald Reagan, Satoshi Nakamoto, Second Machine Age, shareholder value, sharing economy, Silicon Valley, Snapchat, social graph, software patent, Steve Jobs, TaskRabbit, The Future of Employment, trade route, transportation-network company, Turing test, Uber and Lyft, Uber for X, uber lyft, unpaid internship, Y Combinator, young professional, zero-sum game, Zipcar

It’s still corporate capitalism, but corporate capitalism that ensures that the primary stockholders are also real-world stakeholders in multiple facets of the enterprise. So far, most companies that have sold themselves to employees have done so under duress. For instance, in 1985, Amsted Industries, a heavy industrial parts manufacturer with some thirty-five plants across the U.S. and Canada, learned that corporate raider Charles Hurwitz had targeted the company for hostile takeover. That same year, Hurwitz would become famous for purchasing the Pacific Lumber Company and attempting to clear-cut the old-growth redwoods of California for a fast, onetime profit. So rather than accept its business being dismantled and sold off for its assets, Amsted opted to distribute ownership to its employees through a stock ownership plan, for a price of $529 million.66 Thirty years later, the company is still here and still employee owned.


pages: 279 words: 87,875

Underwater: How Our American Dream of Homeownership Became a Nightmare by Ryan Dezember

activist fund / activist shareholder / activist investor, Airbnb, business cycle, call centre, Cesare Marchetti: Marchetti’s constant, cloud computing, collateralized debt obligation, coronavirus, corporate raider, COVID-19, Credit Default Swap, credit default swaps / collateralized debt obligations, Donald Trump, Home mortgage interest deduction, housing crisis, interest rate swap, margin call, McMansion, mortgage debt, mortgage tax deduction, negative equity, rent control, rolodex, sharing economy, sovereign wealth fund, transaction costs

They went looking for an investor to pair with, someone with deeper pockets than the doctors and dentists who had so far been funding their splurge. Treehouse had bought a few houses in Atlanta and California but needed many more properties in each market to make managing them cost-effective. Treehouse enlisted a young investment banker named Rich Ford to find a match on Wall Street. Ford approached Carl Icahn, the corporate raider and activist investor, and pitched the Carlyle Group, a $200 billion Washington, D.C., firm that had gained prominence privatizing government businesses and carving out unloved divisions from big corporations. Blackstone took a meeting. Jonathan Gray, the New York firm’s real estate chief, was mulling a move into single-family real estate, and his team was vetting rental operators for potential partnerships.


pages: 825 words: 228,141

MONEY Master the Game: 7 Simple Steps to Financial Freedom by Tony Robbins

3D printing, active measures, activist fund / activist shareholder / activist investor, addicted to oil, affirmative action, Affordable Care Act / Obamacare, Albert Einstein, asset allocation, backtesting, bitcoin, buy and hold, clean water, cloud computing, corporate governance, corporate raider, correlation does not imply causation, Credit Default Swap, Dean Kamen, declining real wages, diversification, diversified portfolio, Donald Trump, estate planning, fear of failure, fiat currency, financial independence, fixed income, forensic accounting, high net worth, index fund, Internet of things, invention of the wheel, Jeff Bezos, Kenneth Rogoff, lake wobegon effect, Lao Tzu, London Interbank Offered Rate, market bubble, money market fund, mortgage debt, new economy, obamacare, offshore financial centre, oil shock, optical character recognition, Own Your Own Home, passive investing, profit motive, Ralph Waldo Emerson, random walk, Ray Kurzweil, Richard Thaler, risk tolerance, riskless arbitrage, Robert Shiller, Robert Shiller, self-driving car, shareholder value, Silicon Valley, Skype, Snapchat, sovereign wealth fund, stem cell, Steve Jobs, survivorship bias, telerobotics, the rule of 72, thinkpad, transaction costs, Upton Sinclair, Vanguard fund, World Values Survey, X Prize, Yogi Berra, young professional, zero-sum game

Icahn’s business skills have made him one of the richest men in the world—at last check of the Forbes list, he was 27th, with a net worth of more than $23 billion—and he’s made billions more for ordinary shareholders who invest in his diversified holding company, Icahn Enterprises LP (NASDAQ: IEP), or own stock in the companies he targets. The secret to his success? Even his critics will tell you Carl Icahn doesn’t just look for opportunities in business—he makes them. But most outsiders still think of him as a Wall Street caricature, a ruthless vulture capitalist who pillages companies for personal gain. When you Google the term corporate raider, Icahn’s name autofills in the search bar. But Carl Icahn is challenging that creaky old stereotype. Icahn thinks of himself as a “shareholder activist.” What does that mean? “We go in and shine a light on public companies that are not giving shareholders the value they deserve,” he told me. His obsession, he says, is to stop the abuse of stockholders by improving corporate governance and accountability—which makes American companies stronger and therefore the American economy stronger.

And they’re sitting behind your desk, preparing for the future. ME: Exactly. My work life and family life are all one thing, and I’m always determined to get the most out of both of them. CHAPTER 6.8 T. BOONE PICKENS: MADE TO BE RICH, MADE TO GIVE * * * Chairman and CEO of BP Capital Management T. Boone Pickens, dubbed the “Oil Oracle” by CNBC, has always been ahead of his time. In the early 1980s, he was the original corporate raider—although “shareholder activist” has always been the term he’s preferred. His early focus on maximizing shareholder value, virtually unheard of at the time, has long since become a standard of American corporate culture. As Fortune magazine declared, “Boone’s once revolutionary ideas [are] so completely taken for granted that they have become linchpins of the economy.” By the early 2000s, Pickens had become a hedge fund manager, making his first billion after turning seventy—with a second career investing in energy assets.


pages: 111 words: 1

Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets by Nassim Nicholas Taleb

Antoine Gombaud: Chevalier de Méré, availability heuristic, backtesting, Benoit Mandelbrot, Black Swan, commoditize, complexity theory, corporate governance, corporate raider, currency peg, Daniel Kahneman / Amos Tversky, discounted cash flows, diversified portfolio, endowment effect, equity premium, fixed income, global village, hedonic treadmill, hindsight bias, Kenneth Arrow, Long Term Capital Management, loss aversion, mandelbrot fractal, mental accounting, meta analysis, meta-analysis, Myron Scholes, Paul Samuelson, quantitative trading / quantitative finance, QWERTY keyboard, random walk, Richard Feynman, road to serfdom, Robert Shiller, Robert Shiller, selection bias, shareholder value, Sharpe ratio, Steven Pinker, stochastic process, survivorship bias, too big to fail, Turing test, Yogi Berra

Janet’s immediate acquaintance is composed of the other parents of the Manhattan private school attended by their children, and their neighbors at the co-operative apartment building where they live. From a materialistic standpoint, they come at the low end of such a set, perhaps even at the exact bottom. They would be the poorest of these circles, as their co-op is inhabited by extremely successful corporate executives, Wall Street traders, and high-flying entrepreneurs. Their children’s private school harbors the second set of children of corporate raiders, from their trophy wives—perhaps even the third set, if one takes into account the age discrepancy and the model-like features of the other mothers. By comparison, Marc’s wife, Janet, like him, presents a homely country-home-with-a-rose-garden type of appearance. You’re a Failure Marc’s strategy of staying in Manhattan may be rational, as his demanding work hours would make it impossible for him to commute.


How to Form Your Own California Corporation by Anthony Mancuso

business cycle, corporate governance, corporate raider, distributed generation, estate planning, information retrieval, intangible asset, passive income, passive investing, Silicon Valley

by Anthony Mancuso (Nolo). 24 | how to form your own california corporation Does It Make Sense to Incorporate Out of State? You have no doubt heard about the possi­bility of incorporating in another state, most likely Delaware, where initial and ongoing fees are lower and regulations may be less restric­tive than in California. Does this make sense? For large, publicly held corporations looking for the most lenient statutes and courts to help them fend off corporate raiders, perhaps yes. But for a small, privately held corporation pursuing an active California business, our answer is generally no—it is usually a very poor idea to incorporate out of state. The big reason is that you probably will have to qualify to do business in California even if you don’t incorporate here, and this process takes about as much time and costs as much money as filing incorporation papers in California in the first place.


pages: 336 words: 95,773

The Theft of a Decade: How the Baby Boomers Stole the Millennials' Economic Future by Joseph C. Sternberg

Affordable Care Act / Obamacare, Airbnb, American Legislative Exchange Council, Asian financial crisis, banking crisis, Basel III, Bernie Sanders, blue-collar work, centre right, corporate raider, Detroit bankruptcy, Donald Trump, Edward Glaeser, employer provided health coverage, Erik Brynjolfsson, eurozone crisis, future of work, gig economy, Gordon Gekko, hiring and firing, Home mortgage interest deduction, housing crisis, job satisfaction, job-hopping, labor-force participation, low skilled workers, Lyft, Marc Andreessen, Mark Zuckerberg, minimum wage unemployment, mortgage debt, mortgage tax deduction, Nate Silver, new economy, obamacare, oil shock, payday loans, pension reform, quantitative easing, Richard Florida, Ronald Reagan, Saturday Night Live, Second Machine Age, sharing economy, Silicon Valley, sovereign wealth fund, TaskRabbit, total factor productivity, Tyler Cowen: Great Stagnation, uber lyft, unpaid internship, women in the workforce

An oddity of so many arguments about Baby Boomers versus Millennials today is that people forget that the Boomers didn’t have things so great, either. Maybe people don’t notice how tough life was for Boomer adults because life for Boomer children was so great. The American notion of what a Baby Boomer is often looks like something out of Leave It to Beaver or The Brady Bunch—prosperous and secure and generally happy even if sometimes unconventional. But grownup Boomers are the generation of the movie Wall Street, with its greedy corporate raiders slashing jobs left and right—Baby Boomers’ jobs. The Boomers are the generation that started their careers in the middle of the oil crises and stagflation of the 1970s, and who lived through the deep recession of the early 1980s. The Boomers are the ones who had to pick up the pieces of their careers when the local steel mills or factories closed. The reality is that America hasn’t gotten the economy right for decades.


pages: 417 words: 97,577

The Myth of Capitalism: Monopolies and the Death of Competition by Jonathan Tepper

Affordable Care Act / Obamacare, air freight, Airbnb, airline deregulation, bank run, barriers to entry, Berlin Wall, Bernie Sanders, big-box store, Bob Noyce, business cycle, Capital in the Twenty-First Century by Thomas Piketty, citizen journalism, Clayton Christensen, collapse of Lehman Brothers, collective bargaining, computer age, corporate raider, creative destruction, Credit Default Swap, crony capitalism, diversification, don't be evil, Donald Trump, Double Irish / Dutch Sandwich, Edward Snowden, Elon Musk, en.wikipedia.org, eurozone crisis, Fall of the Berlin Wall, family office, financial innovation, full employment, German hyperinflation, gig economy, Gini coefficient, Goldman Sachs: Vampire Squid, Google bus, Google Chrome, Gordon Gekko, income inequality, index fund, Innovator's Dilemma, intangible asset, invisible hand, Jeff Bezos, John Nash: game theory, John von Neumann, Joseph Schumpeter, Kenneth Rogoff, late capitalism, London Interbank Offered Rate, low skilled workers, Mark Zuckerberg, Martin Wolf, means of production, merger arbitrage, Metcalfe's law, multi-sided market, mutually assured destruction, Nash equilibrium, Network effects, new economy, Northern Rock, offshore financial centre, passive investing, patent troll, Peter Thiel, plutocrats, Plutocrats, prediction markets, prisoner's dilemma, race to the bottom, rent-seeking, road to serfdom, Robert Bork, Ronald Reagan, Sam Peltzman, secular stagnation, shareholder value, Silicon Valley, Skype, Snapchat, Social Responsibility of Business Is to Increase Its Profits, Steve Jobs, The Chicago School, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, too big to fail, undersea cable, Vanguard fund, very high income, wikimedia commons, William Shockley: the traitorous eight, zero-sum game

Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms – greed for life, for money, for love, knowledge – has marked the upward surge of mankind. And greed – you mark my words – will not only save Teldar Paper, but that other malfunctioning corporation called the USA. The bond market boomed, and Wall Street provided financing to corporate raiders who bought companies. Speculating on deals promised vast riches, and merger arbitrage became one of the most profitable trading strategies on Wall Street. It spawned a cottage industry of insider trading on merger tips. Men like Ivan Boesky were kings of Wall Street, until the SEC arrested him and others in insider trading rings. Regulators no longer cared about mergers, and the only thing that brought the merger wave to an end was the recession of 1990–1991 and the stock market decline.


pages: 306 words: 97,211

Value Investing: From Graham to Buffett and Beyond by Bruce C. N. Greenwald, Judd Kahn, Paul D. Sonkin, Michael van Biema

Andrei Shleifer, barriers to entry, Berlin Wall, business cycle, capital asset pricing model, corporate raider, creative destruction, Daniel Kahneman / Amos Tversky, discounted cash flows, diversified portfolio, Eugene Fama: efficient market hypothesis, fixed income, index fund, intangible asset, Long Term Capital Management, naked short selling, new economy, place-making, price mechanism, quantitative trading / quantitative finance, Richard Thaler, shareholder value, short selling, Silicon Valley, stocks for the long run, Telecommunications Act of 1996, time value of money, tulip mania, Y2K, zero-sum game

Gabelli assumed that the right buyer, probably a firm already in the same businesses, could drastically shrink corporate overhead. If so, then the PMV of the firm was considerably more than its market price. Here are the calculations, back-of-the-envelope style: This is an extraordinary cap rate, especially for a company selling nothing more exotic than kitchen tools. The story had a swift denouement. A catalyst for the sale of the entire company was already present in the form of a corporate raider who had gained a seat on the board of directors. All that was necessary was the industrial buyer, tempted by the low enterprise value and the high rate of return. In Spring 1999 a third party offered $11 per share to buy the entire company. General Housewares then hired an investment bank to find a better deal. By the end of July, they had secured three offers, including one from a buyout firm that had already acquired the home products division of Corning and which eventually bought General Housewares for $28.75 a share.


pages: 411 words: 98,128

Bezonomics: How Amazon Is Changing Our Lives and What the World's Best Companies Are Learning From It by Brian Dumaine

activist fund / activist shareholder / activist investor, AI winter, Airbnb, Amazon Web Services, Atul Gawande, autonomous vehicles, basic income, Bernie Sanders, Black Swan, call centre, Chris Urmson, cloud computing, corporate raider, creative destruction, Danny Hillis, Donald Trump, Elon Musk, Erik Brynjolfsson, future of work, gig economy, Google Glasses, Google X / Alphabet X, income inequality, industrial robot, Internet of things, Jeff Bezos, job automation, Joseph Schumpeter, Kevin Kelly, Lyft, Marc Andreessen, Mark Zuckerberg, money market fund, natural language processing, pets.com, plutocrats, Plutocrats, race to the bottom, ride hailing / ride sharing, Sand Hill Road, self-driving car, shareholder value, Silicon Valley, Silicon Valley startup, Snapchat, speech recognition, Steve Jobs, Stewart Brand, supply-chain management, Tim Cook: Apple, too big to fail, Travis Kalanick, Uber and Lyft, uber lyft, universal basic income, wealth creators, web application, Whole Earth Catalog

On top of that, the small number of companies that master the AI flywheel will dominate globally, and their founders and shareholders will continue to rake in more than a fair share of global wealth. In the 1960s and 1970s, corporations tended toward a more balanced approach by taking into consideration the needs not only of their shareholders but also their employees and communities. The 1980s saw the advent of corporate raiders such as Carl Icahn, Victor Posner, and T. Boone Pickens, who put pressure on boards and management to run their corporations solely for shareholders. Since then, running a business to maximize returns for shareholders has become the modus operandi. Commonly, CEOs today will do whatever it takes—cutting R&D, firing employees, slicing benefits—to make the latest quarterly earnings, because if they don’t deliver, activist investors will find someone who will.


pages: 827 words: 239,762

The Golden Passport: Harvard Business School, the Limits of Capitalism, and the Moral Failure of the MBA Elite by Duff McDonald

activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, Albert Einstein, barriers to entry, Bayesian statistics, Bernie Madoff, Bob Noyce, Bonfire of the Vanities, business cycle, business process, butterfly effect, capital asset pricing model, Capital in the Twenty-First Century by Thomas Piketty, Clayton Christensen, cloud computing, collateralized debt obligation, collective bargaining, commoditize, corporate governance, corporate raider, corporate social responsibility, creative destruction, deskilling, discounted cash flows, disintermediation, disruptive innovation, Donald Trump, family office, financial innovation, Frederick Winslow Taylor, full employment, George Gilder, glass ceiling, global pandemic, Gordon Gekko, hiring and firing, income inequality, invisible hand, Jeff Bezos, job-hopping, John von Neumann, Joseph Schumpeter, Kenneth Arrow, Kickstarter, London Whale, Long Term Capital Management, market fundamentalism, Menlo Park, new economy, obamacare, oil shock, pattern recognition, performance metric, Peter Thiel, plutocrats, Plutocrats, profit maximization, profit motive, pushing on a string, Ralph Nader, Ralph Waldo Emerson, RAND corporation, random walk, rent-seeking, Ronald Coase, Ronald Reagan, Sam Altman, Sand Hill Road, Saturday Night Live, shareholder value, Silicon Valley, Skype, Social Responsibility of Business Is to Increase Its Profits, Steve Jobs, survivorship bias, The Nature of the Firm, the scientific method, Thorstein Veblen, union organizing, urban renewal, Vilfredo Pareto, War on Poverty, William Shockley: the traitorous eight, women in the workforce, Y Combinator

What Friedman was saying was that it wasn’t American managers’ loss of focus, excessive hubris, or self-congratulation that had brought the country to the brink, but the fact that corporate executives had been trying to do too much for too many people. They’d let their good nature get in the way of getting the job done. And it was time to throw off such naive notions for the good of the country—nay, for capitalism itself. “Friedman’s maxim arrived just in time for the era of the hostile takeover and the leveraged buyout, when corporate raiders sold themselves as saviors liberating shareholders from misguided managers who paid too little attention to the stock price,” writes the New York Times’ Eduardo Porter. “Though legally dubious, the argument that it is an executive’s fiduciary duty to maximize the company’s share price became a mantra from the business school to the boardroom. And it was nailed down with money.”2 It was a remarkable intellectual sleight of hand.

The Dow Jones Industrial Average was basically flat from the mid-1960s through the early 1980s. That excess capacity played a large part in what Jensen called the “capital market restructuring revolution of the 1980s.”2 Companies sitting on large piles of cash—and there were many, as before the 1980s, executives were loath to return money to shareholders—suddenly became the target of hostile acquirers. The age of investor capitalism had begun, and its heroes were not CEOs but corporate raiders like Carl Icahn and T. Boone Pickens. A wave of deregulation then created the active market for corporate control that critics of managerialism were calling for, with the new logic of shareholder primacy absolving managers of responsibility to any “stakeholder”—employees, communities, society itself—except shareholders. The bottom line was what mattered. In a remarkable irony, observes Khurana, this revolution in the definition of corporate and managerial purpose was wholeheartedly embraced by the very business schools that had been preaching something very different since their founding days.3 Agency theory wasn’t new.


pages: 430 words: 109,064

13 Bankers: The Wall Street Takeover and the Next Financial Meltdown by Simon Johnson, James Kwak

American ideology, Andrei Shleifer, Asian financial crisis, asset-backed security, bank run, banking crisis, Bernie Madoff, Bonfire of the Vanities, bonus culture, break the buck, business cycle, buy and hold, capital controls, Carmen Reinhart, central bank independence, Charles Lindbergh, collapse of Lehman Brothers, collateralized debt obligation, commoditize, corporate governance, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, Edward Glaeser, Eugene Fama: efficient market hypothesis, financial deregulation, financial innovation, financial intermediation, financial repression, fixed income, George Akerlof, Gordon Gekko, greed is good, Home mortgage interest deduction, Hyman Minsky, income per capita, information asymmetry, interest rate derivative, interest rate swap, Kenneth Rogoff, laissez-faire capitalism, late fees, light touch regulation, Long Term Capital Management, market bubble, market fundamentalism, Martin Wolf, money market fund, moral hazard, mortgage tax deduction, Myron Scholes, Paul Samuelson, Ponzi scheme, price stability, profit maximization, race to the bottom, regulatory arbitrage, rent-seeking, Robert Bork, Robert Shiller, Robert Shiller, Ronald Reagan, Saturday Night Live, Satyajit Das, sovereign wealth fund, The Myth of the Rational Market, too big to fail, transaction costs, value at risk, yield curve

In 1987, Tom Wolfe’s novel The Bonfire of the Vanities introduced the term “Master of the Universe” to American culture, in the form of multimillionaire investment banker Sherman McCoy, who lived in “the sort of apartment the mere thought of which ignites flames of greed and covetousness under people all over New York and, for that matter, all over the world.”72 Although the term was used sarcastically, and McCoy turns out badly in both the human and financial senses, the image of the swashbuckling, super-rich banker engaged in transactions too complex to be understood by ordinary mortals was born. Also in 1987, Oliver Stone’s movie Wall Street was released, with its memorable antihero, corporate raider Gordon Gekko (played by Michael Douglas). Although the movie’s story shows the corruption and ultimate downfall of Gekko, it is remembered for his “Greed is good” speech, which justified the pursuit of money above all else. As screenwriter Stanley Weiser wrote recently, many people would later tell him the movie made them want to work on Wall Street: “A typical example would be a business executive or a younger studio development person spouting something that goes like this: ‘The movie changed my life.


The Future of Money by Bernard Lietaer

agricultural Revolution, banks create money, barriers to entry, Bretton Woods, business cycle, clean water, complexity theory, corporate raider, dematerialisation, discounted cash flows, diversification, fiat currency, financial deregulation, financial innovation, floating exchange rates, full employment, George Gilder, German hyperinflation, global reserve currency, Golden Gate Park, Howard Rheingold, informal economy, invention of the telephone, invention of writing, Lao Tzu, Mahatma Gandhi, means of production, microcredit, money: store of value / unit of account / medium of exchange, Norbert Wiener, North Sea oil, offshore financial centre, pattern recognition, post-industrial society, price stability, reserve currency, Ronald Reagan, seigniorage, Silicon Valley, South Sea Bubble, The Future of Employment, the market place, the payments system, Thomas Davenport, trade route, transaction costs, trickle-down economics, working poor

Here is the root cause of the proverbial 'short-sightedness' of the financial markets, which force corporations into making decisions which they know may hurt society and even business itself in the long run. If a CEO of a corporation were tempted to think in longer-term social or ecological ways, he would soon be removed either by his board, or - if needed - by a new board after raiders have taken over. 'A special breed of investors, the corporate raiders, specialises in preying on established corporations. The basic process is simple, though the details are complex and the power struggles often nasty. The raider identifies a company traded on a public stock exchange that has a "break-up" value in excess of the current market price of the shares. Sometimes they are troubled companies. More often, they are well-managed, fiscally sound companies that are being good citizens and looking to the future.


pages: 274 words: 93,758

Phishing for Phools: The Economics of Manipulation and Deception by George A. Akerlof, Robert J. Shiller, Stanley B Resor Professor Of Economics Robert J Shiller

"Robert Solow", Andrei Shleifer, asset-backed security, Bernie Madoff, business cycle, Capital in the Twenty-First Century by Thomas Piketty, collapse of Lehman Brothers, corporate raider, Credit Default Swap, Daniel Kahneman / Amos Tversky, dark matter, David Brooks, desegregation, en.wikipedia.org, endowment effect, equity premium, financial intermediation, financial thriller, fixed income, full employment, George Akerlof, greed is good, income per capita, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, Kenneth Arrow, Kenneth Rogoff, late fees, loss aversion, market bubble, Menlo Park, mental accounting, Milgram experiment, money market fund, moral hazard, new economy, Pareto efficiency, Paul Samuelson, payday loans, Ponzi scheme, profit motive, publication bias, Ralph Nader, randomized controlled trial, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Reagan, short selling, Silicon Valley, the new new thing, The Predators' Ball, the scientific method, The Wealth of Nations by Adam Smith, theory of mind, Thorstein Veblen, too big to fail, transaction costs, Unsafe at Any Speed, Upton Sinclair, Vanguard fund, Vilfredo Pareto, wage slave

Soon-to-be-bankrupt S&Ls played a significant role in the expansion of the market for junk bonds, which underlay hostile takeovers of even the largest firms—previously deemed impossible. TEN Michael Milken Phishes with Junk Bonds as Bait The work of one man, Michael Milken, in the 1970s and 1980s changed the face of US finance forever. No longer could corporate executives of large US corporations be confident that their companies were too big to be challenged by corporate raiders threatening hostile takeovers because now the raiders could acquire even very large companies without putting up much capital. What enabled them to do this was the leveraged buyout, in which a raider’s company could amass cash by taking on enormous debt (through high-yield, or “junk,” bonds developed by Milken) to acquire, often, a much larger company. The leveraged buyouts massively increased everything related to corporate mergers and acquisitions, notably risks and potential payoffs.


pages: 352 words: 104,411

Rush Hour: How 500 Million Commuters Survive the Daily Journey to Work by Iain Gately

Albert Einstein, autonomous vehicles, Beeching cuts, blue-collar work, Boris Johnson, British Empire, business intelligence, business process, business process outsourcing, call centre, car-free, Cesare Marchetti: Marchetti’s constant, Clapham omnibus, cognitive dissonance, congestion charging, connected car, corporate raider, DARPA: Urban Challenge, Dean Kamen, decarbonisation, Deng Xiaoping, Detroit bankruptcy, don't be evil, Elon Musk, extreme commuting, global pandemic, Google bus, Henri Poincaré, Hyperloop, Jeff Bezos, lateral thinking, low skilled workers, Marchetti’s constant, postnationalism / post nation state, Ralph Waldo Emerson, remote working, self-driving car, Silicon Valley, stakhanovite, Steve Jobs, telepresence, Tesla Model S, urban planning, éminence grise

The industry is noted for its extravagant office complexes that resemble crosses between university campuses, cartoon sets and sweet shops, where employees can eat, sleep and play pool, golf and ping-pong as well as write code. Indeed, the excess apparent in some dotcom corporate headquarters is now on a par with that of auto manufacturers in the 1960s, when GM felt it ruled America. It’s an interesting parallel and, perhaps, a parable. Sir James Hanson, the notorious British corporate raider of the 1980s, used to consider over-palatial head offices to be a sign that a company was ripe for takeover and asset stripping. However, his favourite symbol of corporate decadence – a duck lake – seems limited and quaint beside, say, Google’s current headquarters, the Googleplex in Santa Clara County, California. This behemoth has the skeleton of a T.rex; a replica of SpaceShip-One; two swimming pools; twenty-five cafés; a green building that uses recycled blue jeans for soundproofing; and random giant rubber balls, all crammed into its 56-acre lot.


pages: 452 words: 110,488

The Cheating Culture: Why More Americans Are Doing Wrong to Get Ahead by David Callahan

1960s counterculture, affirmative action, business cycle, corporate governance, corporate raider, creative destruction, David Brooks, deindustrialization, East Village, fixed income, forensic accounting, full employment, game design, greed is good, high batting average, housing crisis, illegal immigration, income inequality, job satisfaction, mandatory minimum, market fundamentalism, McMansion, microcredit, moral hazard, new economy, New Urbanism, offshore financial centre, oil shock, old-boy network, plutocrats, Plutocrats, postindustrial economy, profit maximization, profit motive, RAND corporation, Ray Oldenburg, Robert Bork, rolodex, Ronald Reagan, shareholder value, Shoshana Zuboff, Silicon Valley, Steve Jobs, The Bell Curve by Richard Herrnstein and Charles Murray, The Chicago School, Thorstein Veblen, War on Poverty, winner-take-all economy, World Values Survey, young professional, zero-sum game

This lament wasn't true, of course, but it seemed to be true at the height of the boom. Those who didn't have money felt worse about themselves during this era, while those who were wealthy felt more pressures to sustain and improve their position. Such pressures can be lethal to people's integrity. The fall of Jeffrey Silverman is a case in point. Silverman was the prototypical child of privilege. His father was a multimillionaire corporate raider, and Silverman grew up in Forest Hills in the 1950s and '60s amid lavish surroundings. He was driven to private school every day in a limousine and groomed for success in business. Starting his career on home plate, he became at the age of twenty-one the youngest person with a seat on the New York Stock Exchange. He joined a company that made home-building products in 1981 and made $100 million when the company was sold in the late 1990s.


pages: 385 words: 111,807

A Pelican Introduction Economics: A User's Guide by Ha-Joon Chang

Affordable Care Act / Obamacare, Albert Einstein, Asian financial crisis, asset-backed security, bank run, banking crisis, banks create money, Berlin Wall, bilateral investment treaty, borderless world, Bretton Woods, British Empire, call centre, capital controls, central bank independence, collateralized debt obligation, colonial rule, Corn Laws, corporate governance, corporate raider, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, deindustrialization, discovery of the americas, Eugene Fama: efficient market hypothesis, eurozone crisis, experimental economics, Fall of the Berlin Wall, falling living standards, financial deregulation, financial innovation, Francis Fukuyama: the end of history, Frederick Winslow Taylor, full employment, George Akerlof, Gini coefficient, global value chain, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, Gunnar Myrdal, Haber-Bosch Process, happiness index / gross national happiness, high net worth, income inequality, income per capita, information asymmetry, intangible asset, interchangeable parts, interest rate swap, inventory management, invisible hand, Isaac Newton, James Watt: steam engine, Johann Wolfgang von Goethe, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, knowledge economy, laissez-faire capitalism, land reform, liberation theology, manufacturing employment, Mark Zuckerberg, market clearing, market fundamentalism, Martin Wolf, means of production, Mexican peso crisis / tequila crisis, Nelson Mandela, Northern Rock, obamacare, offshore financial centre, oil shock, open borders, Pareto efficiency, Paul Samuelson, post-industrial society, precariat, principal–agent problem, profit maximization, profit motive, purchasing power parity, quantitative easing, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, savings glut, Scramble for Africa, shareholder value, Silicon Valley, Simon Kuznets, sovereign wealth fund, spinning jenny, structural adjustment programs, The Great Moderation, The Market for Lemons, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, trade liberalization, transaction costs, transfer pricing, trickle-down economics, Vilfredo Pareto, Washington Consensus, working-age population, World Values Survey

A significant portion of the US manufacturing industry, which had already been losing ground to Japanese and other foreign competition, could not withstand such an increase in financial costs. The traditional industrial heartland in the Midwest was turned into ‘the Rust Belt’. Financial deregulation in the US at this time laid the foundation for the financial system we have today. The rapid increase in hostile takeovers, in which a company is taken over against the will of the existing management, changed the whole corporate culture in the US. Many of those taking over were ‘corporate raiders’ only interested in asset stripping (namely, the sales of valuable assets, regardless of the impact on the long-term viability of the company), immortalized by Gordon ‘Greed-is-good’ Gekko in the 1987 movie Wall Street. To avoid such a fate, firms had to deliver profits faster than before. Otherwise impatient shareholders would sell up, reducing the share prices and thus exposing the firm to greater danger of hostile takeover.


pages: 408 words: 108,985

Rewriting the Rules of the European Economy: An Agenda for Growth and Shared Prosperity by Joseph E. Stiglitz

Airbnb, balance sheet recession, bank run, banking crisis, barriers to entry, Basel III, basic income, Berlin Wall, bilateral investment treaty, business cycle, business process, Capital in the Twenty-First Century by Thomas Piketty, central bank independence, collapse of Lehman Brothers, collective bargaining, corporate governance, corporate raider, corporate social responsibility, creative destruction, credit crunch, deindustrialization, discovery of DNA, diversified portfolio, Donald Trump, eurozone crisis, Fall of the Berlin Wall, financial intermediation, Francis Fukuyama: the end of history, full employment, gender pay gap, George Akerlof, gig economy, Gini coefficient, hiring and firing, housing crisis, Hyman Minsky, income inequality, inflation targeting, informal economy, information asymmetry, intangible asset, investor state dispute settlement, invisible hand, Isaac Newton, labor-force participation, liberal capitalism, low skilled workers, market fundamentalism, mini-job, moral hazard, non-tariff barriers, offshore financial centre, open economy, patent troll, pension reform, price mechanism, price stability, purchasing power parity, quantitative easing, race to the bottom, regulatory arbitrage, rent-seeking, Robert Shiller, Robert Shiller, Ronald Reagan, selection bias, shareholder value, Silicon Valley, sovereign wealth fund, TaskRabbit, too big to fail, trade liberalization, transaction costs, transfer pricing, trickle-down economics, tulip mania, universal basic income, unorthodox policies, zero-sum game

Systems where workers have some direct financial stake in the company (as in employee stock ownership plans) may also help to ensure the alignment of all interests and may encourage more cooperative behavior. Also, the voices of shareholders who have a greater interest in the long-run performance of the company deserve a better hearing. Loyalty share voting,6 which is rewarding those who have held on to their shares longer by giving them greater say in the affairs of the company, is one solution. It will, at the same time, weaken the voice of corporate raiders (sometimes from private equity firms) who often buy up companies only to strip away their assets or to load them up with debt that leads to an eventual bankruptcy and loss of jobs. Executive compensation schemes, too, have to be reformed in a way that provides incentives that promote long-term value, rather than a focus on short-term spikes in share prices. There have been several proposals for curbing excesses in executive compensation and to better align executive incentives with the long-run interests of firms.


Pour Your Heart Into It by Howard Schultz

Albert Einstein, barriers to entry, clean water, corporate raider, Exxon Valdez, fear of failure, job satisfaction, market design, Ray Oldenburg, shareholder value, The Great Good Place, urban renewal, working poor, zero-sum game

One of the requests employees had made to the original owners had been health benefits for part-time workers. They were turned down. The symbolism wasn’t lost on me. I decided to recommend to the board of directors that we expand our health-care coverage to include part-timers who worked as little as twenty hours a week. In the late 1980s, employer generosity was hopelessly out of fashion. Corporate raiders and soaring health-care costs had forced many American executives to reduce benefits. Under the prevailing mantra of “maximizing shareholder value,” CEOs were applauded by Wall Street if they cut costs and laid off thousands. Companies that did value their employees above shareholders were mocked as paternalistic and uncompetitive. They were encouraged to become more hard-nosed, to cut bloated payrolls, and to become lean and mean.


pages: 370 words: 111,129

Inglorious Empire: What the British Did to India by Shashi Tharoor

affirmative action, barriers to entry, Boris Johnson, British Empire, colonial exploitation, colonial rule, corporate raider, deindustrialization, European colonialism, global village, informal economy, joint-stock company, land tenure, liberal capitalism, Mahatma Gandhi, Nelson Mandela, night-watchman state, Parkinson's law, trade route

Sunderland, India in Bondage: Her Right to Freedom and a Place Among the Great Nations, New York: Lewis Copeland, 1929, p. 367. At the beginning of the eighteenth century, as the British economic historian Angus Maddison: Angus Maddison, The World Economy, Development Centre of the Organisation for Economic Co-operation and Development, 2006. ‘What honour is left to us?’: William Dalrymple, ‘The East India Company: The Original Corporate Raiders’, The Guardian, 4 March 2015. Bengal’s textiles were still being exported: Most of these details are from K. N. Chaudhuri, The Trading World of Asia and the English East India Company: 1660–1760, Cambridge: Cambridge University Press, 2006 and Sushil Chaudhury, The Prelude to Empire: Plassey Revolution of 1757, New Delhi: Manohar Publishers, 2000. The soldiers of the East India Company obliged, systematically smashing the looms: William Bolts, Considerations on Indian Affairs: Particularly Respecting the Present State of Bengal and its Dependencies, London: J.


pages: 459 words: 118,959

Confidence Game: How a Hedge Fund Manager Called Wall Street's Bluff by Christine S. Richard

activist fund / activist shareholder / activist investor, Asian financial crisis, asset-backed security, banking crisis, Bernie Madoff, Blythe Masters, buy and hold, cognitive dissonance, collateralized debt obligation, corporate governance, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, Donald Trump, family office, financial innovation, fixed income, forensic accounting, glass ceiling, Long Term Capital Management, market bubble, money market fund, moral hazard, old-boy network, Ponzi scheme, profit motive, short selling, statistical model, white flight, zero-sum game

“Financial schemes are like magic tricks,” Kheirallah says. “They are about making people see what they’re not really seeing.” IN EARLY 2003, in addition to preparing for upcoming testimony at the attorney general’s office and at the Securities and Exchange Commission, Ackman was working to liquidate Gotham’s holdings. He negotiated the sale of Gotham’s stake in Hallwood Realty Partners to renowned shareholder activist and corporate raider Carl Icahn for $80 a share. As part of the agreement, Ackman and Icahn worked out a “schmuck insurance” arrangement under which Ackman would get half of the profits if Icahn sold his Hallwood stake within 18 months. When Icahn asked Ackman if he had any other interesting investment ideas, Ackman launched into his argument for shorting MBIA and gave Icahn a copy of the Gotham report Is MBIA Triple-A?


pages: 379 words: 114,807

The Land Grabbers: The New Fight Over Who Owns the Earth by Fred Pearce

activist lawyer, Asian financial crisis, banking crisis, big-box store, blood diamonds, British Empire, Buy land – they’re not making it any more, Cape to Cairo, carbon footprint, clean water, corporate raider, credit crunch, Deng Xiaoping, Elliott wave, en.wikipedia.org, energy security, farmers can use mobile phones to check market prices, index fund, Jeff Bezos, Kickstarter, land reform, land tenure, Mahatma Gandhi, market fundamentalism, megacity, Mohammed Bouazizi, Nelson Mandela, Nikolai Kondratiev, offshore financial centre, out of africa, quantitative easing, race to the bottom, Ronald Reagan, smart cities, structural adjustment programs, too big to fail, undersea cable, urban planning, urban sprawl, WikiLeaks

A wild west, where men on horses staged gun battles on empty grassland they could buy for the price of a packet of cigarettes. Times change. I was joined for lunch at Campo Aberto by a dapper British financier in a blazer and Panama hat. He used to be something big in Rolls Royce, and he had just flown in with his wife to consider investing in the farm—part of Agrifirma, a 100,000-acre agricultural empire assembled by Lord Rothschild, the head of the world-famous banking family, and the once-notorious 1970s corporate raider Jim Slater. The incorrigible pair, both past their seventy-fifth birthdays, were betting their profits from a successful speculation in gold and uranium on Brazilian agriculture. We were in the heart of the cerrado, the most biologically rich savannah grassland in the world, in what was once the outback of Brazil. But the lawless days are disappearing, and with them biodiversity. For this land is turning into one of the most unremittingly commercialized monocultures on Earth.


pages: 479 words: 113,510

Fed Up: An Insider's Take on Why the Federal Reserve Is Bad for America by Danielle Dimartino Booth

Affordable Care Act / Obamacare, asset-backed security, bank run, barriers to entry, Basel III, Bernie Sanders, break the buck, Bretton Woods, business cycle, central bank independence, collateralized debt obligation, corporate raider, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, Donald Trump, financial deregulation, financial innovation, fixed income, Flash crash, forward guidance, full employment, George Akerlof, greed is good, high net worth, housing crisis, income inequality, index fund, inflation targeting, interest rate swap, invisible hand, John Meriwether, Joseph Schumpeter, liquidity trap, London Whale, Long Term Capital Management, margin call, market bubble, Mexican peso crisis / tequila crisis, money market fund, moral hazard, Myron Scholes, natural language processing, negative equity, new economy, Northern Rock, obamacare, price stability, pushing on a string, quantitative easing, regulatory arbitrage, Robert Shiller, Robert Shiller, Ronald Reagan, selection bias, short selling, side project, Silicon Valley, The Great Moderation, The Wealth of Nations by Adam Smith, too big to fail, trickle-down economics, yield curve

Greenspan could have increased margin requirements and stopped many traders in their tracks. He didn’t, believing that an unfettered free market is the best allocator of resources. A true optimist. I had less of his faith in mankind. In a few short months, I’d learned plenty about how the investment banking world really worked. While in training at DLJ, my class of newly minted MBAs had watched the 1987 movie Wall Street. The corporate raider Gordon Gecko, played by a sleek Michael Douglas, was our role model. We adopted his mantra: “Greed is good.” We believed it, having arrived on Wall Street at the height of the dot-com mania. Yahoo went public, making instant millionaires of those who held its stock. Clients begged to buy into the next big thing. After a few years I was working with hedge funds, mutual funds, and wealthy individuals.


pages: 396 words: 116,332

Political Ponerology (A Science on the Nature of Evil Adjusted for Political Purposes) by Andrew M. Lobaczewski

anti-communist, corporate raider, en.wikipedia.org, John Nash: game theory, means of production, phenotype, Project for a New American Century

We now need to fear the super-sophisticated modern crook who does know what he is doing - and does it so well that no one else knows. Yes, psychopaths love the business world. “Uninvolved with others, he coolly saw into their fears and desires, and maneuvered them as he wished. Such a man might not, after all, be doomed to a life of scrapes and escapades ending ignominiously in the jailhouse. Instead of murdering others, he might become a corporate raider and murder companies, firing people instead of killing them, and chopping up their functions rather than their bodies.” (Harrington) … … [T]he consequences to the average citizen from business crimes are staggering. As criminologist Georgette Bennett says, “They account for nearly 30% of case filings in U.S. District Courts - more than any other category of crime. The combined burglary, mugging and other property losses induced by the country’s street punks come to about $4 billion a year.


pages: 413 words: 117,782

What Happened to Goldman Sachs: An Insider's Story of Organizational Drift and Its Unintended Consequences by Steven G. Mandis

activist fund / activist shareholder / activist investor, algorithmic trading, Berlin Wall, bonus culture, BRICs, business process, buy and hold, collapse of Lehman Brothers, collateralized debt obligation, commoditize, complexity theory, corporate governance, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, disintermediation, diversification, Emanuel Derman, financial innovation, fixed income, friendly fire, Goldman Sachs: Vampire Squid, high net worth, housing crisis, London Whale, Long Term Capital Management, merger arbitrage, Myron Scholes, new economy, passive investing, performance metric, risk tolerance, Ronald Reagan, Saturday Night Live, Satyajit Das, shareholder value, short selling, sovereign wealth fund, The Nature of the Firm, too big to fail, value at risk

A “hostile” bidder makes its offer “public,” taking it directly to shareholders—implying that the board of directors and management are not acting in the best interests of the shareholders and are trying to hold on to their jobs. To the target’s board and management teams, the bankers who work against the takeover to protect them and shareholders are viewed very positively. A 1982 Wall Street Journal headline captured this positive image: “The Pacifist: Goldman Sachs Avoids Bitter Takeover Fights but Leads in Mergers.” The accompanying article praised Goldman’s policy of not representing corporate raiders in hostile deals, although it included the few obligatory criticisms from competitors.13 Goldman had made a strategic decision not to represent companies initiating hostile bids, the only large investment banking firm to do so.14 When questioned about the wisdom of this policy, Whitehead responded, “We have to dissuade them from going forward with this and explain to them why our experience showed that it would be unlikely that this unfriendly tender offer would turn out to be successful for them a few years later.”15 As a result, CEOs were more comfortable revealing confidential information to Goldman than to other firms, because they trusted Goldman not to use the information in representing hostile raiders against them.


pages: 454 words: 122,612

In-N-Out Burger by Stacy Perman

anti-communist, British Empire, commoditize, corporate raider, El Camino Real, estate planning, forensic accounting, Haight Ashbury, Maui Hawaii, McJob, McMansion, new economy, Ronald Reagan, Silicon Valley, Upton Sinclair

The little regional chain that was built on the philosophy of quality, made-to-order hamburgers, and “the customer is always king” had over the years drawn fans from every imaginable quarter. In an industry that has come to be seen as a scourge on modern society, responsible for everything from obesity to urban blight to cultural imperialism, this modest, low-slung eatery with the big yellow arrow is unique among fast-food breeds: a chain revered by hamburger aficionados and epicureans, anti-globalization fanatics and corporate raiders, meat-eaters and even vegetarians. Make mention of the three monosyllabic words and a kind of reverie takes hold. People’s eyes close and their lips begin to quiver with the pleasures of sense memory. “For years, In-N-Out was the other woman in my life,” my mother once told me. “I’d be cooking dinner and your father would go to an In-N-Out on his way home from the office. He’d eat a Double-Double, fries, and a chocolate shake.


pages: 394 words: 124,743

Overhaul: An Insider's Account of the Obama Administration's Emergency Rescue of the Auto Industry by Steven Rattner

activist fund / activist shareholder / activist investor, affirmative action, bank run, banking crisis, business cycle, centre right, collapse of Lehman Brothers, collective bargaining, corporate governance, corporate raider, creative destruction, credit crunch, David Brooks, David Ricardo: comparative advantage, declining real wages, friendly fire, hiring and firing, income inequality, Joseph Schumpeter, low skilled workers, McMansion, Mikhail Gorbachev, moral hazard, Ronald Reagan, Saturday Night Live, shareholder value, supply-chain management, too big to fail

The new company would own all the assets GM did want to keep. Free of crippling costs and debts, this new business would go forth as a streamlined, revitalized competitor on the world automotive scene. We meant it to be not only viable but also highly profitable. The meeting ended at 6 P.M., having stretched nine hours. Even though it was Friday night, Harry didn't stop; he had booked a session with Carl Icahn, the legendary corporate raider and multibillionaire, who had lately expressed interest in acquiring a stake in Delphi. Icahn's offices were a couple of elevator rides away, on the forty-seventh floor. Matt dutifully accompanied Harry on the short journey, but was soon called back to Connecticut over a family matter. He was not sorry. Harry, who liked to have an aide-de-camp by his side, summoned Sadiq Malik to Icahn's office as soon as Matt left.


pages: 399 words: 122,688

Shoe Dog by Phil Knight

banking crisis, corporate raider, fear of failure, fixed income, index card, intangible asset, Menlo Park, Silicon Valley

He reminded me that until this fight was behind us, we couldn’t think about going public, and if we didn’t go public we continued to risk losing everything. I became petulant. I moaned about fairness. I talked about holding out. I said maybe I didn’t want to go public—ever. Yet again I expressed my fear that going public would change Nike, ruin it, by turning over control to others. What would happen to the culture of Oregon Track, for instance, if it was subject to shareholder votes or corporate raider demands? We’d gotten a little taste of that scenario with the small group of debenture holders. Scaling up and letting in thousands of shareholders—it would be a thousand times worse. Above all, I couldn’t bear the thought of one titan buying up shares, becoming a behemoth on the board. “I don’t want to lose control,” I said to Chuck. “That’s my greatest fear.” “Well . . . there might be a way to go public without losing any control,” he said.


pages: 349 words: 134,041

Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives by Satyajit Das

accounting loophole / creative accounting, Albert Einstein, Asian financial crisis, asset-backed security, beat the dealer, Black Swan, Black-Scholes formula, Bretton Woods, BRICs, Brownian motion, business process, buy and hold, buy low sell high, call centre, capital asset pricing model, collateralized debt obligation, commoditize, complexity theory, computerized trading, corporate governance, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, cuban missile crisis, currency peg, disintermediation, diversification, diversified portfolio, Edward Thorp, Eugene Fama: efficient market hypothesis, Everything should be made as simple as possible, financial innovation, fixed income, Haight Ashbury, high net worth, implied volatility, index arbitrage, index card, index fund, interest rate derivative, interest rate swap, Isaac Newton, job satisfaction, John Meriwether, locking in a profit, Long Term Capital Management, mandelbrot fractal, margin call, market bubble, Marshall McLuhan, mass affluent, mega-rich, merger arbitrage, Mexican peso crisis / tequila crisis, money market fund, moral hazard, mutually assured destruction, Myron Scholes, new economy, New Journalism, Nick Leeson, offshore financial centre, oil shock, Parkinson's law, placebo effect, Ponzi scheme, purchasing power parity, quantitative trading / quantitative finance, random walk, regulatory arbitrage, Right to Buy, risk-adjusted returns, risk/return, Satyajit Das, shareholder value, short selling, South Sea Bubble, statistical model, technology bubble, the medium is the message, the new new thing, time value of money, too big to fail, transaction costs, value at risk, Vanguard fund, volatility smile, yield curve, Yogi Berra, zero-coupon bond

Corporate expenses almost doubled. In theory, in 1984 Disney had made around $98 million, compared to $93 million (1983) and $100 million (1982). Disney’s biggest profit centre was the accounting section. In 1984, they contributed $76 million – ‘cumulative effect of change in accounting for investment tax credits’. Actions of distressed fish generally attract predators. The predator in this case was a famed corporate raider – Sol Steinberg and Reliance Insurance Company. Reliance launched a hostile takeover bid for Disney and its management reacted in time-honoured fashion – they thought about the shareholders. Then, they thought about themselves. Disney bought back the Reliance shareholding, handing the raider a nice greenmail profit. The repurchase of 4.2 million shares cost $328 million, adding to the build-up of short-term debt.


pages: 418 words: 128,965

The Master Switch: The Rise and Fall of Information Empires by Tim Wu

accounting loophole / creative accounting, Alfred Russel Wallace, Apple II, barriers to entry, British Empire, Burning Man, business cycle, Cass Sunstein, Clayton Christensen, commoditize, corporate raider, creative destruction, disruptive innovation, don't be evil, Douglas Engelbart, Douglas Engelbart, Howard Rheingold, Hush-A-Phone, informal economy, intermodal, Internet Archive, invention of movable type, invention of the telephone, invisible hand, Jane Jacobs, John Markoff, Joseph Schumpeter, Menlo Park, open economy, packet switching, PageRank, profit motive, road to serfdom, Robert Bork, Robert Metcalfe, Ronald Coase, sexual politics, shareholder value, Silicon Valley, Skype, Steve Jobs, Steve Wozniak, Telecommunications Act of 1996, The Chicago School, The Death and Life of Great American Cities, the market place, The Wisdom of Crowds, too big to fail, Upton Sinclair, urban planning, zero-sum game

With Ross we might say, generalizing broadly, that that effect was the result of being in the content business for all the wrong reasons, while with Eisner the problem was more nearly one of seeing content less and less as an end in itself. The Disney Company that Eisner inherited had pioneered the branding of content by way of various forms of merchandising, from theme parks to sweatshirts. But by the time Eisner would take the helm in 1984, the company, whose bread and butter was still the theatrical film release, was faltering and had barely survived takeover by corporate raiders. Eisner would turn the company around, making it for a while the largest media conglomerate in the world, but in ways that would seem to some, the founder’s nephew among them, a betrayal of the company’s founding devotion to content values above all. It was a common complaint against the media conglomerates rising in those years, and it stemmed from the other strategies typical of that corporate structure.


pages: 448 words: 142,946

Sacred Economics: Money, Gift, and Society in the Age of Transition by Charles Eisenstein

Albert Einstein, back-to-the-land, bank run, Bernie Madoff, big-box store, Bretton Woods, capital controls, clean water, collateralized debt obligation, commoditize, corporate raider, credit crunch, David Ricardo: comparative advantage, debt deflation, deindustrialization, delayed gratification, disintermediation, diversification, fiat currency, financial independence, financial intermediation, fixed income, floating exchange rates, Fractional reserve banking, full employment, global supply chain, God and Mammon, happiness index / gross national happiness, hydraulic fracturing, informal economy, invisible hand, Jane Jacobs, land tenure, land value tax, Lao Tzu, liquidity trap, McMansion, means of production, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, new economy, off grid, oil shale / tar sands, Own Your Own Home, Paul Samuelson, peak oil, phenotype, Ponzi scheme, profit motive, quantitative easing, race to the bottom, Scramble for Africa, special drawing rights, spinning jenny, technoutopianism, the built environment, Thomas Malthus, too big to fail

For years, following conventional opinion, I thought the answer was “greed.” Why do sweatshop factories push wages down to the bare minimum? Greed. Why do people buy gas-guzzling SUVs? Greed. Why do pharmaceutical companies suppress research and sell drugs that they know are dangerous? Greed. Why do tropical fish suppliers dynamite coral reefs? Why do factories pump toxic waste into the rivers? Why do corporate raiders loot employee pension funds? Greed, greed, greed. Eventually I became uncomfortable with that answer. For one thing, it plays into the same ideology of separation that lies at the root of our civilization’s ills. It is an ideology as old as agriculture’s division of the world into two separate realms: the wild and the domestic, the human and the natural, the wheat and the weed. It says there are two opposing forces in this world, good and evil, and that we can create a better world by eliminating evil.


pages: 483 words: 143,123

The Frackers: The Outrageous Inside Story of the New Billionaire Wildcatters by Gregory Zuckerman

activist fund / activist shareholder / activist investor, addicted to oil, American energy revolution, Asian financial crisis, Bakken shale, Bernie Sanders, Buckminster Fuller, corporate governance, corporate raider, credit crunch, energy security, Exxon Valdez, housing crisis, hydraulic fracturing, Kickstarter, LNG terminal, margin call, Maui Hawaii, North Sea oil, oil rush, oil shale / tar sands, oil shock, peak oil, Peter Thiel, reshoring, self-driving car, Silicon Valley, sovereign wealth fund, Steve Jobs, urban decay

Thomas Langfitt, had indeed convinced Hauptfuhrer and Oryx executives that the trusts would sell their shares to a rival, threatening Oryx’s independence, unless the company bought the shares from the trusts, according to a lawsuit later filed against the trusts related to the deal. The genteel Pew Charitable Trusts, known for their support of civic journalism and other like-minded causes, had embraced a tactic that Jack Willoughby in Institutional Investor magazine later likened to “greenmail,” the hard-nosed tactic usually employed by corporate raiders. “They put a gun to our heads,” Hauptfuhrer recalled. “They said, ‘If you don’t buy us, we’ll shop the shares to another company.’ And I thought we were in the beginning of an important period for the company,” so it wasn’t the right time for a merger. It turned out to be a bluff by the Pew trusts, however. “Despite the fact that our own advisers told us that there was no third-party buyer out there on the horizon, we were able to induce them to believe that in fact there was,” Peter Brown, chief operating officer of the firm managing the trusts’ money, later asserted in court testimony, as reported by Willoughby.


pages: 545 words: 137,789

How Markets Fail: The Logic of Economic Calamities by John Cassidy

"Robert Solow", Albert Einstein, Andrei Shleifer, anti-communist, asset allocation, asset-backed security, availability heuristic, bank run, banking crisis, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Black-Scholes formula, Blythe Masters, Bretton Woods, British Empire, business cycle, capital asset pricing model, centralized clearinghouse, collateralized debt obligation, Columbine, conceptual framework, Corn Laws, corporate raider, correlation coefficient, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, Daniel Kahneman / Amos Tversky, debt deflation, different worldview, diversification, Elliott wave, Eugene Fama: efficient market hypothesis, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, full employment, George Akerlof, global supply chain, Gunnar Myrdal, Haight Ashbury, hiring and firing, Hyman Minsky, income per capita, incomplete markets, index fund, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), invisible hand, John Nash: game theory, John von Neumann, Joseph Schumpeter, Kenneth Arrow, Kickstarter, laissez-faire capitalism, Landlord’s Game, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, Louis Bachelier, mandelbrot fractal, margin call, market bubble, market clearing, mental accounting, Mikhail Gorbachev, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, Myron Scholes, Naomi Klein, negative equity, Network effects, Nick Leeson, Northern Rock, paradox of thrift, Pareto efficiency, Paul Samuelson, Ponzi scheme, price discrimination, price stability, principal–agent problem, profit maximization, quantitative trading / quantitative finance, race to the bottom, Ralph Nader, RAND corporation, random walk, Renaissance Technologies, rent control, Richard Thaler, risk tolerance, risk-adjusted returns, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, shareholder value, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, statistical model, technology bubble, The Chicago School, The Great Moderation, The Market for Lemons, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, unorthodox policies, value at risk, Vanguard fund, Vilfredo Pareto, wealth creators, zero-sum game

Rather, it comes from the great producing organization which reaches forward to control the markets that it is presumed to serve and, beyond, to bend the consumer to its needs.” Galbraith’s analysis proved poorly timed. Subsequent decades saw the rise of globalization and the removal of import restrictions, which left much of American manufacturing—from autos to textiles to toys to furniture to steel to chemicals—struggling to fend off foreign competition. Meanwhile, the rise of corporate raiders such as Carl Icahn and T. Boone Pickens, and leveraged buyout conglomerates such as Kohlberg Kravis Roberts and Texas Pacific, created an active market in the ownership of blue-chip companies. The cosseted top executives of Fortune 500 companies found their positions and perquisites of office under threat. The demise of the megacorporation shouldn’t be overstated, though. Of the top ten companies on the 1967 Fortune list—General Motors, Exxon, Ford, General Electric, Chrysler, Mobil, Texaco, U.S.


pages: 442 words: 130,526

The Billionaire Raj: A Journey Through India's New Gilded Age by James Crabtree

accounting loophole / creative accounting, Asian financial crisis, Big bang: deregulation of the City of London, Branko Milanovic, business climate, call centre, Capital in the Twenty-First Century by Thomas Piketty, centre right, colonial rule, Commodity Super-Cycle, corporate raider, creative destruction, crony capitalism, Daniel Kahneman / Amos Tversky, Deng Xiaoping, Donald Trump, facts on the ground, failed state, Francis Fukuyama: the end of history, global supply chain, Gunnar Myrdal, income inequality, informal economy, Joseph Schumpeter, liberal capitalism, Mahatma Gandhi, McMansion, megacity, New Urbanism, offshore financial centre, open economy, Parag Khanna, Pearl River Delta, plutocrats, Plutocrats, Ponzi scheme, quantitative easing, rent-seeking, Rubik’s Cube, Silicon Valley, Simon Kuznets, smart cities, special economic zone, spectrum auction, The Great Moderation, Thomas L Friedman, transaction costs, trickle-down economics, Washington Consensus, WikiLeaks, yellow journalism, young professional

“Narendra Modi in Goa Full Text: Once We Get Clean, We Need Not Worry about Even One Corrupt Mosquito,” Firstpost, August 11, 2017. 17. “Teary Eyed Narendra Modi Takes On Rivals, Reaches Out to People on Demonetisation,” Financial Express, November 14, 2016. 18. James Crabtree, “Modi Plunders India’s Cash. Indians Cheer,” Foreign Policy, November 28, 2016. 19. William Dalrymple, “The East India Company: The Original Corporate Raiders,” The Guardian, March 4, 2015. 20. Gill, The Pathology of Corruption, p. 44. 21. Oldenburg, “Middlemen in Third-World Corruption.” 22. Bhagwati and Panagariya, Why Growth Matters, p. 87. 23. Pei, China’s Crony Capitalism, p. 8. 24. Vaishnav, When Crime Pays, p. 31. 25. James Crabtree, “India: Lost Connections,” Financial Times, September 2, 2012. 26.


pages: 432 words: 127,985

The Best Way to Rob a Bank Is to Own One: How Corporate Executives and Politicians Looted the S&L Industry by William K. Black

accounting loophole / creative accounting, affirmative action, Andrei Shleifer, business climate, cognitive dissonance, corporate governance, corporate raider, Donald Trump, fear of failure, financial deregulation, friendly fire, George Akerlof, hiring and firing, margin call, market bubble, money market fund, moral hazard, offshore financial centre, Ponzi scheme, race to the bottom, Ronald Reagan, short selling, The Market for Lemons, transaction costs

Many at the agency saw Lincoln’s billion-dollar portfolio of junk bonds as a warning sign, but OPER did not. There were rumors that Drexel had captives, but that fact had not yet been proven. 3. The White House director of personnel told the Senate Ethics Committee investigating the Keating Five that he learned this when he inquired about Keating’s reputation in Arizona (U.S. Senate Committee 1991, 3:705–707). 4. Greenmail is a form of extortion. The “corporate raider” buys a large stock position in the target firm and threatens a hostile takeover. The target firm’s executives, who fear losing their high-status, high-pay positions if the takeover succeeds, cause the firm to buy back the raider’s shares at a premium. Lincoln Savings bought a great deal of Gulf Broadcasting stock at above the market price. This investment could have easily rendered Lincoln Savings insolvent if the shares had fallen even slightly in price.


Mastering Private Equity by Zeisberger, Claudia,Prahl, Michael,White, Bowen, Michael Prahl, Bowen White

asset allocation, backtesting, barriers to entry, Basel III, business process, buy low sell high, capital controls, carried interest, commoditize, corporate governance, corporate raider, correlation coefficient, creative destruction, discounted cash flows, disintermediation, disruptive innovation, distributed generation, diversification, diversified portfolio, family office, fixed income, high net worth, information asymmetry, intangible asset, Lean Startup, market clearing, passive investing, pattern recognition, performance metric, price mechanism, profit maximization, risk tolerance, risk-adjusted returns, risk/return, shareholder value, Sharpe ratio, Silicon Valley, sovereign wealth fund, statistical arbitrage, time value of money, transaction costs

Private equity deals looked very different than they do today. The asset class was new, and so too was its level of sophistication. As PE explored elaborate capital structures, new sources of funding, larger pools of equity capital and did so through variable economic conditions, we did not properly explain these complexities—or our mission—to the public. As a result, PE deals became associated with hostile takeovers at the time. Referring to PE as “corporate raiders” or “barbarians,” the public's reaction to the very same question I asked you—what is private equity?—was simply: an investment vehicle to acquire, strip and sell an asset for profit. We never thought of it this way; we were always focused on the opportunity at hand to create value at the companies in which we invested. Nonetheless, we and others did not pay enough attention to communicating this with our various stakeholders.


pages: 488 words: 144,145

Inflated: How Money and Debt Built the American Dream by R. Christopher Whalen

Albert Einstein, bank run, banking crisis, Black Swan, Bretton Woods, British Empire, business cycle, buy and hold, California gold rush, Carmen Reinhart, central bank independence, commoditize, conceptual framework, corporate governance, corporate raider, creative destruction, cuban missile crisis, currency peg, debt deflation, falling living standards, fiat currency, financial deregulation, financial innovation, financial intermediation, floating exchange rates, Fractional reserve banking, full employment, global reserve currency, housing crisis, interchangeable parts, invention of radio, Kenneth Rogoff, laissez-faire capitalism, liquidity trap, means of production, money: store of value / unit of account / medium of exchange, moral hazard, mutually assured destruction, non-tariff barriers, oil shock, Paul Samuelson, payday loans, plutocrats, Plutocrats, price stability, pushing on a string, quantitative easing, rent-seeking, reserve currency, Ronald Reagan, special drawing rights, The Chicago School, The Great Moderation, too big to fail, trade liberalization, transcontinental railway, Upton Sinclair, women in the workforce

The continued fear of inflation and the vast amount of fraud associated with bank deposits, stocks, bonds, and various other paper financial instruments, left the U.S. economy and financial system extremely vulnerable to sudden shifts in public mood. Even after the gold market crisis, Gould continued to operate with impunity, manipulating stocks such as the Pacific Mail Steamship Company to great profit. Memorialized as “The Mephistopheles of Wall Street,” Gould reportedly took $5 million out of his speculations in Pacific Steamship in the early 1870s, a return that in modern terms ranks with that of corporate raiders such as Carl Icahn and Kirk Kerkorian.33 Gould was hardly alone among the great investment operators of the age, including Jay Cooke and his Northern Pacific Railroad. Gould’s next operation, taking over the Union Pacific Railroad, allowed him to manipulate upward the prices on railroad freight rates in the West and begin a long period of accumulating equity positions in several major rail lines.


pages: 586 words: 159,901

Wall Street: How It Works And for Whom by Doug Henwood

accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, affirmative action, Andrei Shleifer, asset allocation, asset-backed security, bank run, banking crisis, barriers to entry, borderless world, Bretton Woods, British Empire, business cycle, capital asset pricing model, capital controls, central bank independence, computerized trading, corporate governance, corporate raider, correlation coefficient, correlation does not imply causation, credit crunch, currency manipulation / currency intervention, David Ricardo: comparative advantage, debt deflation, declining real wages, deindustrialization, dematerialisation, diversification, diversified portfolio, Donald Trump, equity premium, Eugene Fama: efficient market hypothesis, experimental subject, facts on the ground, financial deregulation, financial innovation, Financial Instability Hypothesis, floating exchange rates, full employment, George Akerlof, George Gilder, hiring and firing, Hyman Minsky, implied volatility, index arbitrage, index fund, information asymmetry, interest rate swap, Internet Archive, invisible hand, Irwin Jacobs, Isaac Newton, joint-stock company, Joseph Schumpeter, kremlinology, labor-force participation, late capitalism, law of one price, liberal capitalism, liquidationism / Banker’s doctrine / the Treasury view, London Interbank Offered Rate, Louis Bachelier, market bubble, Mexican peso crisis / tequila crisis, microcredit, minimum wage unemployment, money market fund, moral hazard, mortgage debt, mortgage tax deduction, Myron Scholes, oil shock, Paul Samuelson, payday loans, pension reform, plutocrats, Plutocrats, price mechanism, price stability, prisoner's dilemma, profit maximization, publication bias, Ralph Nader, random walk, reserve currency, Richard Thaler, risk tolerance, Robert Gordon, Robert Shiller, Robert Shiller, selection bias, shareholder value, short selling, Slavoj Žižek, South Sea Bubble, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Market for Lemons, The Nature of the Firm, The Predators' Ball, The Wealth of Nations by Adam Smith, transaction costs, transcontinental railway, women in the workforce, yield curve, zero-coupon bond

.-' But in 1995, Mesa found itself under attack by hostile suitors including Pickens' former sidekick David Batchelder. Rather than take his own medicine, Pickens had the board adopt a poison pill. Mesa's arguments sound like Sigler's a decade earlier — the outside group was in it just for a quick buck. Pickens' defense: "his GOVERNANCE days of trying to take over other companies were long gone and that he hated to be called a corporate raider. 'The last time I was involved in a deal was almost 10 years ago,' he said. 'There's no way anybody could characterize me as anything other than a hard working oilman" (Myerson 1995b). Hard work needn't guarantee reward; between 1985 and 1995, Mesa's stock fell 63%, while the overall market rose 171%. By Pickens' own standard, he was a disgrace. He was finally ousted in 1996. Pickens was behind an anempt to organize small shareholders into a formal pressure group, the United Shareholders Association, cutely abbreviated USA.


pages: 434 words: 150,773

When the Iron Lady Ruled Britain by Robert Chesshyre

Berlin Wall, Big bang: deregulation of the City of London, British Empire, corporate raider, deskilling, Etonian, Fall of the Berlin Wall, financial deregulation, full employment, housing crisis, manufacturing employment, mass immigration, means of production, Neil Kinnock, North Sea oil, oil rush, plutocrats, Plutocrats, Right to Buy, Ronald Reagan, school choice, Silicon Valley, the market place, trickle-down economics, union organizing, wealth creators, young professional

The victims included a twenty-three-year-old trainee accountant who lost £1 million gambling with other people’s money, and a schoolboy, whose £20,000 deficit on dealings put his family’s home in jeopardy. Despite its technology, ‘Big Bang’ failed to keep pace with itself, and a massive backlog of settlements accumulated. Few stockbrokers – even those who advertised their services to the small investor – could any longer be bothered with tiny deals; corporate raiders ignored the petty capitalist, who therefore could not take advantage when prices were momentarily forced up. Within a few weeks the prospects for a widely based share-owning democracy were set back years. The Thatcherite ideal – thrift, hard work, responsibility – had somehow been perverted by the mood music that played a tune of greed. Two Tory MPs fell from grace and Parliament (one of them briefly into jail) for making illegal multiple applications for privatized shares.


pages: 507 words: 145,878

The Predators' Ball: The Inside Story of Drexel Burnham and the Rise of the JunkBond Raiders by Connie Bruck

corporate raider, diversified portfolio, Edward Thorp, financial independence, fixed income, Irwin Jacobs, mortgage debt, offshore financial centre, paper trading, profit maximization, The Predators' Ball, yield management, Yogi Berra, zero-coupon bond

But now that Milken appeared able to raise almost any sum of money through the sale of junk bonds, Drexel had moved to the all-cash bid—which would be much harder to defeat in court. “Bust-up” referred to the plan, in most of these deals, to pay down the debt by selling off pieces—if not the entirety—of the company. During the course of the Revlon battle, Lipton would be moved to new heights, firing off to his corporate clients a memo entitled “Rape and Pillage in the Corporate Takeover Jungle”: “This year has witnessed the demise of the few remaining restraints on corporate raiders. They have been let loose to take over and bust up American corporations at will. . . .” Lipton was drawing a line between the kinds of hostile takeovers he had helped to engineer in the seventies and the Drexel-type wave launched by what he called “takeover entrepreneurs.” He drew this distinction in testimony before Congress in the spring of 1985, when about thirty bills to curb hostile takeovers or junk bonds or both were being debated.


pages: 504 words: 143,303

Why We Can't Afford the Rich by Andrew Sayer

accounting loophole / creative accounting, Albert Einstein, anti-globalists, asset-backed security, banking crisis, banks create money, basic income, Boris Johnson, Bretton Woods, British Empire, business cycle, call centre, capital controls, carbon footprint, collective bargaining, corporate raider, corporate social responsibility, creative destruction, credit crunch, Credit Default Swap, crony capitalism, David Graeber, David Ricardo: comparative advantage, debt deflation, decarbonisation, declining real wages, deglobalization, deindustrialization, delayed gratification, demand response, don't be evil, Double Irish / Dutch Sandwich, en.wikipedia.org, Etonian, financial innovation, financial intermediation, Fractional reserve banking, full employment, G4S, Goldman Sachs: Vampire Squid, high net worth, income inequality, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), investor state dispute settlement, Isaac Newton, James Dyson, job automation, Julian Assange, Kickstarter, labour market flexibility, laissez-faire capitalism, land value tax, low skilled workers, Mark Zuckerberg, market fundamentalism, Martin Wolf, mass immigration, means of production, moral hazard, mortgage debt, negative equity, neoliberal agenda, new economy, New Urbanism, Northern Rock, Occupy movement, offshore financial centre, oil shale / tar sands, patent troll, payday loans, Philip Mirowski, plutocrats, Plutocrats, popular capitalism, predatory finance, price stability, pushing on a string, quantitative easing, race to the bottom, rent-seeking, Ronald Reagan, shareholder value, short selling, sovereign wealth fund, Steve Jobs, The Nature of the Firm, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, transfer pricing, trickle-down economics, universal basic income, unpaid internship, upwardly mobile, Washington Consensus, wealth creators, WikiLeaks, Winter of Discontent, working poor, Yom Kippur War, zero-sum game

Saving $1 million a day on safety and research and development ended up costing the company’s shareholders $100 billion for the clean-up.32 Jack Welch, the former General Electric chief, who is thought to have coined the term ‘shareholder value’ in 1981, finally acknowledged the error of his ways in 2009, saying: ‘On the face of it, shareholder value is the dumbest idea in the world . . . Your main constituencies are your employees, your customers and your products.’33 Extraordinarily, in this new regime, it made sense for firms to avoid building up accessible cash reserves. Whereas this had been seen as prudent in productionist capitalism, it came to be seen as an invitation for corporate raiders to wrest control of companies so as to plunder their reserves. So reserves had to be reduced or made to look less inviting. One way of doing this was for companies to use them to buy back their own shares. This not only enabled them to reward management with shares, but pushed up the price of the shares by making them scarcer and reduced the amount of tax to be paid on dividends. Of course, while this appeased the shareholders and indulged top managers, it did nothing to improve the productivity and products of the firm.


pages: 482 words: 149,351

The Finance Curse: How Global Finance Is Making Us All Poorer by Nicholas Shaxson

activist fund / activist shareholder / activist investor, Airbnb, airline deregulation, anti-communist, bank run, banking crisis, Basel III, Bernie Madoff, Big bang: deregulation of the City of London, Blythe Masters, Boris Johnson, Bretton Woods, British Empire, business climate, business cycle, capital controls, carried interest, Cass Sunstein, Celtic Tiger, central bank independence, centre right, Clayton Christensen, cloud computing, corporate governance, corporate raider, creative destruction, Credit Default Swap, cross-subsidies, David Ricardo: comparative advantage, demographic dividend, Deng Xiaoping, desegregation, Donald Trump, Etonian, failed state, falling living standards, family office, financial deregulation, financial innovation, forensic accounting, Francis Fukuyama: the end of history, full employment, gig economy, Gini coefficient, global supply chain, high net worth, income inequality, index fund, invisible hand, Jeff Bezos, Kickstarter, land value tax, late capitalism, light touch regulation, London Whale, Long Term Capital Management, low skilled workers, manufacturing employment, Mark Zuckerberg, Martin Wolf, Mont Pelerin Society, moral hazard, neoliberal agenda, Network effects, new economy, Northern Rock, offshore financial centre, old-boy network, out of africa, Paul Samuelson, plutocrats, Plutocrats, Ponzi scheme, price mechanism, purchasing power parity, pushing on a string, race to the bottom, regulatory arbitrage, rent-seeking, road to serfdom, Robert Bork, Ronald Coase, Ronald Reagan, shareholder value, sharing economy, Silicon Valley, Skype, smart grid, Social Responsibility of Business Is to Increase Its Profits, South Sea Bubble, sovereign wealth fund, special economic zone, Steve Ballmer, Steve Jobs, The Chicago School, Thorstein Veblen, too big to fail, transfer pricing, wealth creators, white picket fence, women in the workforce, zero-sum game

This leveraged buyout (LBO) game, Kohlberg discovered, could be insanely profitable. So he left Bear Stearns in 1976 and with Henry Kravis, and Kravis’s cousin George Roberts he set up a new company, Kolhberg Kravis Roberts, or KKR – the same company I mentioned in the Introduction, which now owns Trainline. This was the first proper private equity firm, though in those days they and the others that soon emerged were known as LBO firms. Yet these corporate raiders faced a problem: persuading bankers to lend them the funds they needed to make the game work. Fortunately for them, a new player had entered the scene, the investment bank Drexel Burnham Lambert, under the buccaneering junk bond king, Michael Milken. Drexel played a different OPM game: lending the money for LBO deals, it then sold the loans (which became known as junk bonds because of their riskiness) to other less clued-up players like insurance companies or dowdy savings and loan organisations, tempting them with high interest rates and persuading them that the reward was worth the risk.


pages: 538 words: 145,243

Behemoth: A History of the Factory and the Making of the Modern World by Joshua B. Freeman

anti-communist, British Empire, Capital in the Twenty-First Century by Thomas Piketty, clean water, collective bargaining, Corn Laws, corporate raider, deindustrialization, Deng Xiaoping, disruptive innovation, en.wikipedia.org, factory automation, Ford paid five dollars a day, Frederick Winslow Taylor, global supply chain, indoor plumbing, interchangeable parts, invisible hand, James Hargreaves, joint-stock company, knowledge worker, mass immigration, means of production, mittelstand, Naomi Klein, new economy, On the Economy of Machinery and Manufactures, Panopticon Jeremy Bentham, Pearl River Delta, post-industrial society, Ralph Waldo Emerson, rising living standards, Ronald Reagan, Silicon Valley, special economic zone, spinning jenny, Steve Jobs, strikebreaker, technoutopianism, the built environment, The Wealth of Nations by Adam Smith, Thorstein Veblen, Tim Cook: Apple, transaction costs, union organizing, Upton Sinclair, urban planning, Vanguard fund, women in the workforce, working poor, Works Progress Administration, zero-sum game

The companies, their products, and the factories that produced them remained tightly bound to one another in reality and image.34 The severe global recession of the 1970s and a series of subsequent developments unraveled the ties. With profit rates declining as a result of increased international competition, rising energy and labor costs, tight credit, and inflation, many American corporations, under pressure from corporate raiders, sought to reduce costs and shed less profitable operations. To become leaner and more flexible and show a rapid drop in spending, they began outsourcing to other firms functions they had traditionally performed themselves. They tended to start with support services, such as data processing and communications. But over time, companies began outsourcing core functions, too, including manufacturing.35 Take sneakers.


pages: 519 words: 155,332

Tailspin: The People and Forces Behind America's Fifty-Year Fall--And Those Fighting to Reverse It by Steven Brill

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, activist fund / activist shareholder / activist investor, affirmative action, Affordable Care Act / Obamacare, airport security, American Society of Civil Engineers: Report Card, asset allocation, Bernie Madoff, Bernie Sanders, Blythe Masters, Bretton Woods, business process, call centre, Capital in the Twenty-First Century by Thomas Piketty, carried interest, clean water, collapse of Lehman Brothers, collective bargaining, computerized trading, corporate governance, corporate raider, corporate social responsibility, Credit Default Swap, currency manipulation / currency intervention, Donald Trump, ending welfare as we know it, failed state, financial deregulation, financial innovation, future of work, ghettoisation, Gordon Gekko, hiring and firing, Home mortgage interest deduction, immigration reform, income inequality, invention of radio, job automation, knowledge economy, knowledge worker, labor-force participation, laissez-faire capitalism, Mahatma Gandhi, Mark Zuckerberg, mortgage tax deduction, new economy, obamacare, old-boy network, paper trading, performance metric, post-work, Potemkin village, Powell Memorandum, quantitative hedge fund, Ralph Nader, ride hailing / ride sharing, Robert Bork, Robert Gordon, Robert Mercer, Ronald Reagan, shareholder value, Silicon Valley, Social Responsibility of Business Is to Increase Its Profits, telemarketer, too big to fail, trade liberalization, union organizing, Unsafe at Any Speed, War on Poverty, women in the workforce, working poor

As The Washington Post put it, the company was “swept away by the wave of corporate takeovers and buyouts that have come to dominate American business in the 1980’s.” The raiders’ victory didn’t last. As of 2016, the larger textile maker that had purchased the bulk of the Stevens operations in 1988 had gone through a 2003 bankruptcy stemming from foreign competition. It was then bought by corporate raider Carl Icahn. Most of its manufacturing is now done overseas, and what remains has been highly automated. The industry as a whole shared the same fate. In 1973, there were 1,024,000 textile workers in the United States. In 2016, there were 112,000, and the average hourly wage for those left in American textile factories was 30 percent lower than it would have been if the low, non-union wages prevailing in 1975 (the year closest to 1973 for which there is wage data) had only kept up with inflation.


pages: 486 words: 150,849

Evil Geniuses: The Unmaking of America: A Recent History by Kurt Andersen

affirmative action, Affordable Care Act / Obamacare, airline deregulation, airport security, always be closing, American ideology, American Legislative Exchange Council, anti-communist, Apple's 1984 Super Bowl advert, artificial general intelligence, autonomous vehicles, basic income, Bernie Sanders, blue-collar work, Bonfire of the Vanities, bonus culture, Burning Man, call centre, Capital in the Twenty-First Century by Thomas Piketty, Cass Sunstein, centre right, computer age, coronavirus, corporate governance, corporate raider, COVID-19, Covid-19, creative destruction, Credit Default Swap, cryptocurrency, deindustrialization, Donald Trump, Elon Musk, ending welfare as we know it, Erik Brynjolfsson, feminist movement, financial deregulation, financial innovation, Francis Fukuyama: the end of history, future of work, game design, George Gilder, Gordon Gekko, greed is good, High speed trading, hive mind, income inequality, industrial robot, interchangeable parts, invisible hand, Isaac Newton, James Watt: steam engine, Jane Jacobs, Jaron Lanier, Jeff Bezos, jitney, Joan Didion, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Joseph Schumpeter, knowledge worker, low skilled workers, Lyft, Mark Zuckerberg, market bubble, mass immigration, mass incarceration, Menlo Park, Naomi Klein, new economy, Norbert Wiener, Norman Mailer, obamacare, Peter Thiel, Picturephone, plutocrats, Plutocrats, post-industrial society, Powell Memorandum, pre–internet, Ralph Nader, Right to Buy, road to serfdom, Robert Bork, Robert Gordon, Robert Mercer, Ronald Reagan, Saturday Night Live, Seaside, Florida, Second Machine Age, shareholder value, Silicon Valley, Social Responsibility of Business Is to Increase Its Profits, Steve Jobs, Stewart Brand, strikebreaker, The Death and Life of Great American Cities, The Future of Employment, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Tim Cook: Apple, too big to fail, trickle-down economics, Tyler Cowen: Great Stagnation, Uber and Lyft, uber lyft, union organizing, universal basic income, Unsafe at Any Speed, urban planning, urban renewal, very high income, wage slave, Wall-E, War on Poverty, Whole Earth Catalog, winner-take-all economy, women in the workforce, working poor, young professional, éminence grise

It wouldn’t and couldn’t have been made just a dozen years earlier. The main plot points of Oliver Stone’s Wall Street were spot on: a superstar financial speculator engages in illegal inside trading, a predatory takeover strips a profitable company of its assets, and unionized workers are bamboozled into going along with a deal that will leave them without their good jobs and pensions. The corporate raider Gordon Gekko, played by Michael Douglas, does get his comeuppance in the end because his stockbroker, the Charlie Sheen character who provided him with the tradable inside information about his mechanic father’s airline company, flips on him. But Gekko is the star of the show, the exciting sexy late-model 1980s antihero. The most memorable scene from Wall Street is Gekko’s speech to a meeting in a big hotel ballroom in midtown Manhattan of hundreds of shareholders of a paper manufacturer in which he’s bought up stock to execute a hostile takeover.


pages: 543 words: 157,991

All the Devils Are Here by Bethany McLean

Asian financial crisis, asset-backed security, bank run, Black-Scholes formula, Blythe Masters, break the buck, buy and hold, call centre, collateralized debt obligation, corporate governance, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, Exxon Valdez, fear of failure, financial innovation, fixed income, high net worth, Home mortgage interest deduction, interest rate swap, laissez-faire capitalism, Long Term Capital Management, margin call, market bubble, market fundamentalism, Maui Hawaii, money market fund, moral hazard, mortgage debt, Northern Rock, Own Your Own Home, Ponzi scheme, quantitative trading / quantitative finance, race to the bottom, risk/return, Ronald Reagan, Rosa Parks, shareholder value, short selling, South Sea Bubble, statistical model, telemarketer, too big to fail, value at risk, zero-sum game

The firm’s offices in lower Manhattan lacked so much as a single sign identifying it as Goldman’s headquarters. Most of all, Levy subscribed to Weinberg’s lifelong belief that acting ethically on behalf of its clients was the single most important thing Goldman Sachs did. Anything that created even the appearance of a conflict with its clients was not just discouraged, but forbidden. That’s why, for instance, when corporate raiders like Carl Icahn and T. Boone Pickens began their takeover attempts in the late 1970s, Goldman refused to advise them, despite the substantial fees they were paying. The hostile takeover movement, the firm believed, was not in the best interest of its corporate clients. A few years after Levy died, in 1976, one of his successors, John Whitehead, set down a list of Goldman’s fourteen business principles.


pages: 568 words: 162,366

The Oil and the Glory: The Pursuit of Empire and Fortune on the Caspian Sea by Steve Levine

Berlin Wall, California gold rush, computerized trading, corporate raider, cuban missile crisis, facts on the ground, failed state, fixed income, indoor plumbing, Khyber Pass, megastructure, Menlo Park, Mikhail Gorbachev, oil rush, Potemkin village, rolodex, Ronald Reagan, shareholder value, Silicon Valley, telemarketer, trade route

His company was already a partner in Azerbaijan’s Early Oil pipelines out of Baku, which would serve the western Caspian fields; here was a chance to control a substantial piece of the energy flow from the eastern Caspian as well. Russia might even use his line for exports from petroleum-rich western Siberia, he thought. Imle’s opportunistic scheme fit perfectly with his strategy to remake Unocal. Just a decade earlier, the company had barely won a debilitating battle against corporate raider T. Boone Pickens. It was still recovering from the costly buy-up of shares necessary to beat back Pickens’s attempted takeover; its shareholder dividends were among the lowest in the industry. The new Unocal did not aspire to be a fully integrated producer like the world’s biggest oil companies. Instead, Imle sold off its California oil fields, its refineries, and its U.S. pipelines and went in search of high-octane profits wherever and however they could be had.


pages: 692 words: 167,950

The Ripple Effect: The Fate of Fresh Water in the Twenty-First Century by Alex Prud'Homme

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, activist fund / activist shareholder / activist investor, American Society of Civil Engineers: Report Card, big-box store, bilateral investment treaty, carbon footprint, clean water, commoditize, corporate raider, Deep Water Horizon, en.wikipedia.org, Exxon Valdez, hydraulic fracturing, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Joan Didion, John Snow's cholera map, Louis Pasteur, mass immigration, megacity, oil shale / tar sands, peak oil, renewable energy credits, Report Card for America’s Infrastructure, Ronald Reagan, Silicon Valley, The Wealth of Nations by Adam Smith, urban sprawl, William Langewiesche

He moved a double-wide trailer onto his property and used it as a getaway. Fueled with cheese, crackers, and six-packs of Big Orange soda, he’d spend hours with his dogs hunting quail on the property, before racing ninety miles back to Amarillo, where he was building Mesa Inc. into the largest independent oil firm in the world. In the 1980s, Pickens built a reputation as the country’s most fearsome corporate raider. He made hostile bids for companies many times larger than Mesa—including Gulf Oil, Phillips Petroleum, and Unocal—which helped to reconfigure the resource business and made him a billionaire. His enemies referred to Pickens as a “greenmailer,” and in 1985 Time magazine depicted him on its cover as a cagey poker player. But over the next decade Mesa was hobbled by a series of legal battles and business reversals that let it with a $1.2 billion debt.


pages: 559 words: 169,094

The Unwinding: An Inner History of the New America by George Packer

Affordable Care Act / Obamacare, Apple's 1984 Super Bowl advert, bank run, big-box store, citizen journalism, cleantech, collateralized debt obligation, collective bargaining, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, deindustrialization, diversified portfolio, East Village, El Camino Real, Elon Musk, family office, financial independence, financial innovation, fixed income, Flash crash, Henry Ford's grandson gave labor union leader Walter Reuther a tour of the company’s new, automated factory…, housing crisis, income inequality, informal economy, Jane Jacobs, life extension, Long Term Capital Management, low skilled workers, Marc Andreessen, margin call, Mark Zuckerberg, market bubble, market fundamentalism, Maui Hawaii, Menlo Park, Neil Kinnock, new economy, New Journalism, obamacare, Occupy movement, oil shock, paypal mafia, peak oil, Peter Thiel, Ponzi scheme, Richard Florida, Robert Bork, Ronald Reagan, Ronald Reagan: Tear down this wall, shareholder value, side project, Silicon Valley, Silicon Valley startup, single-payer health, smart grid, Steve Jobs, strikebreaker, The Death and Life of Great American Cities, the scientific method, too big to fail, union organizing, urban planning, We are the 99%, We wanted flying cars, instead we got 140 characters, white flight, white picket fence, zero-sum game

And he was sorry when, two weeks later, Jones resigned after Glenn Beck and other conservatives tied him to extreme views on the 9/11 attacks and the imprisonment of Mumia Abu-Jamal, along with the word “assholes” as applied to congressional Republicans. But Van Jones was never going to recruit the farmers in Rockingham County to the cause of green energy. They weren’t going to listen to a radical black man from San Francisco, and they didn’t like Obama any better—after Dean’s trip to Washington, some men at the local diner said, “You went to see that nigger?” The one man they might listen to was T. Boone Pickens, the billionaire corporate raider, who was old and white and had been appearing in ads for natural gas and renewable energy. On his trip to Washington, Dean got nowhere near Obama, who was vacationing that week on Martha’s Vineyard. But a few months later, he actually met the president. In March 2010 an event was held at Andrews Air Force Base to announce the first biofuel fighter jet, and Dean was invited. He brought his son Ryan, and they waited in line as Obama greeted the crowd.


pages: 585 words: 165,304

Trust: The Social Virtue and the Creation of Prosperity by Francis Fukuyama

barriers to entry, Berlin Wall, blue-collar work, business climate, business cycle, capital controls, collective bargaining, corporate governance, corporate raider, creative destruction, deindustrialization, Deng Xiaoping, deskilling, double entry bookkeeping, equal pay for equal work, European colonialism, Francis Fukuyama: the end of history, Frederick Winslow Taylor, full employment, George Gilder, glass ceiling, global village, Gunnar Myrdal, hiring and firing, industrial robot, Jane Jacobs, job satisfaction, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, Kenneth Arrow, land reform, liberal capitalism, liberation theology, low skilled workers, manufacturing employment, mittelstand, price mechanism, profit maximization, RAND corporation, rent-seeking, Ronald Coase, Silicon Valley, Steve Jobs, Steve Wozniak, The Death and Life of Great American Cities, The Nature of the Firm, the scientific method, The Wealth of Nations by Adam Smith, transaction costs, transfer pricing, traveling salesman, union organizing

The importance of foreign direct investment to exports has typically been insufficiently appreciated; it is often very difficult for a multinational corporation to market in a foreign country unless it also manufactures its products there.24 As Mark Mason has shown, the level of intra-keiretsu cross-shareholding increased dramatically in anticipation of capital market liberalization, so as to make it more difficult for foreigners to acquire majority ownership of Japanese corporations.25 This tactic proved quite successful: few American multinationals were able to purchase more than minority interests in Japanese companies, even after they were legally permitted to do so. The wellpublicized inability of American corporate raider T Boone Pickens to secure a seat on the board of the Japanese auto parts supplier he had bought a major interest in is testimony to the effectiveness with which keiretsu relationships can be used to limit foreign access to Japanese markets. As the last example indicates, some of the functions of the intermarket keiretsu may not be economic at all but political. The unique and intriguing features of Japanese network organizations have led some people to speculate more broadly that network organizations may be an economically efficient way of structuring modern business life, not just in Japan but in other countries as well.


pages: 598 words: 169,194

Bernie Madoff, the Wizard of Lies: Inside the Infamous $65 Billion Swindle by Diana B. Henriques

accounting loophole / creative accounting, airport security, Albert Einstein, banking crisis, Bernie Madoff, break the buck, British Empire, buy and hold, centralized clearinghouse, collapse of Lehman Brothers, computerized trading, corporate raider, diversified portfolio, Donald Trump, dumpster diving, Edward Thorp, financial deregulation, financial thriller, fixed income, forensic accounting, Gordon Gekko, index fund, locking in a profit, mail merge, merger arbitrage, money market fund, plutocrats, Plutocrats, Ponzi scheme, Potemkin village, random walk, Renaissance Technologies, riskless arbitrage, Ronald Reagan, short selling, Small Order Execution System, source of truth, sovereign wealth fund, too big to fail, transaction costs, traveling salesman

This is one of many revelations in Diana Henriques’ stunning new book... Masterful.” Reuters “Compelling.” The New York Times “[A] fascinating portrait… In this thoroughly researched and well-written account, Henriques skilfully manages to humanise Madoff without diminishing the monstrousness of his deeds.” Fort Worth Star-Telegram Also by Diana B. Henriques The White Sharks of Wall Street: Thomas Mellon Evans and the Original Corporate Raiders Fidelity’s World: The Secret Life and Public Power of the Mutual Fund Giant The Machinery of Greed: Public Authority Abuse and What to Do About It BERNIE MADOFF, THE WIZARD OF LIES BERNIE MADOFF, THE WIZARD OF LIES INSIDE THE INFAMOUS $65 BILLION SWINDLE DIANA B. HENRIQUES A Oneworld Book First published in Great Britain and the Commonwealth by Oneworld Publications 2011 First published in the USA and Canada as The Wizard of Lies: Bernie Madoff and the Death of Trust by Times Books, 2011 This ebook edition published by Oneworld Publications 2011 Published by arrangement with Times Books, an imprint of Henry Holt and Company, LLC, 175 Fifth Avenue, New York, NY 10010 USA.


pages: 558 words: 168,179

Dark Money: The Hidden History of the Billionaires Behind the Rise of the Radical Right by Jane Mayer

affirmative action, Affordable Care Act / Obamacare, American Legislative Exchange Council, anti-communist, Bakken shale, bank run, battle of ideas, Berlin Wall, Capital in the Twenty-First Century by Thomas Piketty, carried interest, centre right, clean water, Climategate, Climatic Research Unit, collective bargaining, corporate raider, crony capitalism, David Brooks, desegregation, diversified portfolio, Donald Trump, energy security, estate planning, Fall of the Berlin Wall, George Gilder, housing crisis, hydraulic fracturing, income inequality, Intergovernmental Panel on Climate Change (IPCC), invisible hand, job automation, low skilled workers, mandatory minimum, market fundamentalism, mass incarceration, Mont Pelerin Society, More Guns, Less Crime, Nate Silver, New Journalism, obamacare, Occupy movement, offshore financial centre, oil shale / tar sands, oil shock, plutocrats, Plutocrats, Powell Memorandum, Ralph Nader, Renaissance Technologies, road to serfdom, Robert Mercer, Ronald Reagan, school choice, school vouchers, The Bell Curve by Richard Herrnstein and Charles Murray, The Chicago School, the scientific method, University of East Anglia, Unsafe at Any Speed, War on Poverty, working poor

Within weeks, Adelson donated $5 million to Gingrich’s sputtering campaign, which otherwise in all likelihood would have fizzled out. Adelson’s cash temporarily revived Gingrich, unleashing a chain of unintended consequences. The pro-Gingrich super PAC used the casino magnate’s money to purchase more than $3 million in advertising time in South Carolina. Then it aired a half-hour video called “King of Bain: When Mitt Romney Came to Town” that eviscerated Romney as a greedy, “predatory corporate raider.” After the video was attacked, Gingrich called on the super PAC to take it down but not before he amplified the message by denouncing Bain Capital, the private equity company that Romney had co-founded, as “rich people figuring out clever ways to loot a company.” No left-winger could have made the case against high finance more convincingly. Romney became the face of “vulture capitalism,” which was depicted as heartlessly cannibalizing what was left of the country’s middle class.


pages: 552 words: 163,292

Boom: Mad Money, Mega Dealers, and the Rise of Contemporary Art by Michael Shnayerson

activist fund / activist shareholder / activist investor, banking crisis, Bonfire of the Vanities, corporate raider, diversified portfolio, Donald Trump, East Village, estate planning, Etonian, high net worth, index card, Jane Jacobs, mass immigration, NetJets, Peter Thiel, plutocrats, Plutocrats, rent control, rolodex, Silicon Valley, tulip mania, unbiased observer, upwardly mobile, Works Progress Administration

“I want authentic structures of cultural distribution,” he would exclaim, “based on people collecting the work in different price points!” Often he referred to himself in the third person, as if plucked from a Saul Bellow novel. “There’s not a guy in the world who has helped more young artists than Stefan Simchowitz, who’s risked more,” he declared. “But people don’t see it.” The son of a South African corporate raider and art collector, Simchowitz had early success with a tech start-up—MediaVast, which he sold for a reported personal profit of $4 million—and embarked on a seven-year quest to build a collection of unknown but, so he felt, commercially promising artists.7 He claimed to buy works for as little as $500, and whenever he could, he bought in quantity.8 One of Simchowitz’s first finds was Joe Bradley, the young abstract artist who had spent his formative Lower East Side days partying with his pals in the windowless Canada gallery.


Manias, Panics and Crashes: A History of Financial Crises, Sixth Edition by Kindleberger, Charles P., Robert Z., Aliber

active measures, Asian financial crisis, asset-backed security, bank run, banking crisis, Basel III, Bernie Madoff, Black Swan, Bonfire of the Vanities, break the buck, Bretton Woods, British Empire, business cycle, buy and hold, Carmen Reinhart, central bank independence, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, Corn Laws, corporate governance, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, currency peg, death of newspapers, debt deflation, Deng Xiaoping, disintermediation, diversification, diversified portfolio, edge city, financial deregulation, financial innovation, Financial Instability Hypothesis, financial repression, fixed income, floating exchange rates, George Akerlof, German hyperinflation, Honoré de Balzac, Hyman Minsky, index fund, inflation targeting, information asymmetry, invisible hand, Isaac Newton, joint-stock company, large denomination, law of one price, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, margin call, market bubble, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, new economy, Nick Leeson, Northern Rock, offshore financial centre, Ponzi scheme, price stability, railway mania, Richard Thaler, riskless arbitrage, Robert Shiller, Robert Shiller, short selling, Silicon Valley, South Sea Bubble, special drawing rights, telemarketer, The Chicago School, the market place, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, tulip mania, very high income, Washington Consensus, Y2K, Yogi Berra, Yom Kippur War

Merrill Lynch – ubiquitous Merrill – began to broker deposits for thrifts; the thrifts in California and the Southwest began to offer much higher interest rates and Merrill’s army of thousands of brokers became the channel for moving money from around the country to the thrifts controlled by Milken’s friends. The deposits that the thrifts were selling were guaranteed by the US Treasury – which was all that the buyers of these deposits wanted to know. Few of the corporate raiders financed by Milken had much industrial experience. They used Uncle Sam’s money – money obtained from the sale of deposits guaranteed by the US government – to acquire more than fifty firms. They often ‘overpaid’ for these firms, but then they were paying with Sam’s money. Many of the firms were unable to earn enough to pay the interest on the outstanding junk bonds. Not to worry, these firms issued some new securities that relieved them of the obligation to pay the interest on their outstanding bonds and the Milken-friendly thrifts bought these securities too.


pages: 612 words: 179,328

Buffett by Roger Lowenstein

asset allocation, Bretton Woods, buy and hold, cashless society, collective bargaining, computerized trading, corporate raider, credit crunch, cuban missile crisis, Eugene Fama: efficient market hypothesis, index card, index fund, interest rate derivative, invisible hand, Jeffrey Epstein, John Meriwether, Long Term Capital Management, moral hazard, Paul Samuelson, random walk, risk tolerance, Robert Shiller, Robert Shiller, Ronald Reagan, selection bias, The Predators' Ball, traveling salesman, Works Progress Administration, Yogi Berra, young professional, zero-coupon bond

At Cap Cities, Buffett had bought the common stock, as anyone could, but in the new deals, he had negotiated a special security, available only to him. Linda Sandler, writing in the Wall Street Journal, charged that Buffett was pocketing rich coupons for Berkshire in return for safekeeping the other CEOs’ jobs: Many Wall Street investors say Mr. Buffett’s special deals amount to a kind of gentlemanly protection game. In the old days, these investors say, corporate raiders such as Saul Steinberg got paid “greenmail” to go away. But Mr. Buffett is getting “whitemail” to stick around and hold management’s hand.17 Such sweetheart deals with the CEOs, so the argument ran, were depriving the stockholders of the freedom to sell out in takeovers. According to Forbes, Buffett gets a special deal, but so does management.… Put differently, how much does Warren Buffett charge for takeover protection?


pages: 602 words: 207,965

Practical Ext JS Projects With Gears by Frank Zammetti

a long time ago in a galaxy far, far away, Albert Einstein, corporate raider, create, read, update, delete, database schema, en.wikipedia.org, Firefox, full text search, Gordon Gekko, Kickstarter, Larry Wall, loose coupling, Ronald Reagan, web application

There are some top-notch financial tracking/planning software products out there. Quicken is probably the most well-known name. That product is developed by a team of dedicated engineers and has been developed over a very long period of time to be the polished, powerful solution it is today. At the end of the day, however, it all comes down to the relatively simple 1 Gordon Gekko is the main antagonist in the classic movie Wall Street. Gordon, a corporate raider played by Michael Douglas, embodies all that was wrong with those involved in the stock market in the 80s (and now too it seems!). 497 498 Ch apt er 9 n Ma Na G ING YOU r FINa NC eS : F I N a N C e M a S t e r concept of a diary2 for your money! That’s exactly what Finance Master is. It won’t tell you how to invest your money and it won’t balance your checkbook or simulate investment scenarios.


pages: 686 words: 201,972