Barbarians at the Gate (Part 1)

Okay, among the other things I never thought I’d be doing (and loving) was reading about the fall of RJR Nabisco. But here I am, halfway through the book and at the edge of my seat. The learning curve is pretty steep here – I get a bit lost on the technical bits and have to go back to have things make sense – but I’m liking that I’m learning about leveraged buy-outs in an impressionistic way – a real rough-and-tumble, gritty real-life adventure.

"BARBARBAR" Barbarians at the Gate by Burrough and Helyar

Burrough and Helyar did a stellar job telling the tale. They masterfully navigated the Bermuda Triangle of meticulous investigation, consistent application of tone and diction that fit the story to a tee, and skillful, strategic revalation of information and made this history more than names, dates and scandals. And they did it in such a way that a person with little to no banking background can look up chapters later and say to herself, “Hey! So THAT’s what [KKR, an LBO, merchant banker, insert corporate finance term here] is!”

The advantage of reading this stuff in novel form, though – especially the way B&H wrote it (after hours and hours and hours of interviews with all but a handful of the players involved) – is that you learn things beyond the “technical business” side of the deals. That is, you get a glimpse of what drives the people behind the deals. And that’s what the biggest bit of the… deal… really is – the people. You also get to look at the circumstances and chain of events in a setting conducive to the connection of neurons and the snapping of synapses.

So, apart from the trivia-epiphany-type things I learned (oooh Winston and Salem is from the town’s name??? … the “Newton” in Fig Newton is from Newton, MA??? … oh THAT’s Skadden Arps!!!), here are five morsels of yumminess I got from the read so far (at least how B&H presented the story):

1. Pay attention. Johnson and his boys for some odd reason seemed to rest on their laurels about Kravis. It was like the RJR folks were driving using the windshield, indicator lights, and mirrors but didn’t bother to look out the side windows. Blindsided. (WELL. Not just yet ‘cos I’m not at that bit yet!)
2. Take care of people and take care not to piss off the wrong people. The people you deal with (or don’t) have feelings, insecurities, wants, hopes and desires… They are flesh and blood (most are, anyway). It’s reminiscent of Get Smart the film (you know, with the terrorist and the sister-in-law or something…). Take this into consideration – you’ll find it a great advantage. In fact, you just might screw yourself if you ignore this.
3. Take calculated risks – you can’t steal second with a foot on first. Okay so I didn’t learn this from the book (and I’ve got the slogan on a No Fear shirt I nicked from my brother back in the day). But the RJR Nabisco saga reinforces this, especially in the telling of the rise of the company. If you don’t stir things up (calculatedly so), you might just ossify into irrelevance.
4. Death, taxes… and cause-and-effect on the wheel of fortune. There are and will always be reasons and consequences. Always. This implies that things that happen by chance may also set off a chain of events that leads to a precipitous downfall or serendipitous rise. O fortuna, baby. Of course, thinking this way could also lead to a chain of counterfactual… thinking. If Black Monday hadn’t happened, if Ross Johnson was the type of man who could leave well enough alone, and if Bruce Johnson didn’t get car-wrecked, would Ross Johnson have gone ahead with the LBO? But then if Ross Johnson could leave well enough alone, would he have ended up sitting on the shoulder of the tobacco and food giant – the very position from which he would be able to make this decision in the first place? And so on and so forth… Butterfly wasn’t just a Mariah song.
5. The  Next Big Thing keeps getting bigger and bigger. LBOs haven’t been around forever. Whenever Brother told me what he did, or whenever the FT or Economist mentioned the three letters, my eyes used to glaze over. These seemed like run-of-the mill things that everyone was doing. But there was a time when only a Chosen Few were doing LBOs, and when a 20-billion dollar LBO elicited whistles and raised eyebrows. Just thinking about the magnitude of losses reported per bank per quarter over the past year makes the development of LBOs even more interesting. If you look back from the 1980′s, you will see somthing that was the Next Big Thing (NBT) until LBOs came along. There was another NBT after, and after. We are just now trying to recover from the last NBT. We will always find a NBT, and they will probably be bigger than the last NBT. (And we’ll always find a way to fall from that, it seems.)

I’m at a very climactic part now – a part where everyone is scrambling about and things are beginning to dawn on people about what’s happening and what’s going to happen. I hope to finish the book very soon. I’m itching to find out what the fallout was like, and to discover Where They Are Now (WTAN), but I won’t jump the gun.

For now, I’m in October 1989, with the rich, WASPY professional types in three piece suits and enormous glasses in the board rooms – but this time I’m not 8 years old and this time, I’m paying attention.

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