Tuesday, October 22, 2013

Making It Happen: Fred Goodwin, RBS and the Men Who Blew Up the British Economy by Iain Martin

Making It Happen is the story of the crash of RBS (née Royal Bank of Scotland), momentarily Britain’s largest bank. Iain Martin tells a peculiarly Scottish story in Making It Happen (Martin himself is a Scot): the expansion of RBS was driven by a blend of Scottish pride and insecurity. He takes us through the life history of the Royal Bank (though RBS, as of this writing, is not yet dead). The bank is founded in 1727 in the aftermath of an earlier Scottish financial misadventure, the Darien enterprise: a failed outpost located in present-day Panama. Chastened by this experience, the early masters of the Royal Bank of Scotland exercised prudence of a Presbyterian kind (caution and care) in growing the bank, yet remained open to innovation (such as the use of the joint-stock company) that the English ignored. RBS quietly prospered in Edinburgh, and then the financial world shifted. In short: the Scottish economy was too small to support independent Scottish banks, and so, for RBS to survive, it would need to vault itself to a much larger scale (first UK-wide and then global). Two absolutes are then fixed for RBS: the bank must remain independent and it must be directed from Edinburgh. And this is where the Fred Goodwin story starts.

Fred Goodwin is (if nothing else) devoted to Scotland and hence to building RBS as a Scottish national champion. Goodwin did this is a fairly straightforward way -- he bought other banks (including quite large banks) and proceeded to meld them into the RBS structure. Gains to RBS shareholders -- prototypical raider profits -- resulted from the ensuing ‘rationalizations.’ Goodwin’s fame at slashing employment earned him the nickname ‘Fred the Shred.’ Those who were lucky to remain employed remained exposed to Goodwin’s brutal management style -- such as the daily “morning beatings.”

Wednesday, October 16, 2013

Lean In: Women, Work, and the Will to Lead by Sheryl Sandberg

Sheryl Sandberg’s Lean In has been a major event; it’s been well received and thoroughly discussed. The book and the debates it stimulated appropriately returned attention to the ongoing gap between success promised and achieved by women in the corporate world.

Sandberg is herself an over-the-top success story. She has held top positions at both Google and Facebook. She, at least, is a take-all winner, one who managed to burst through the glass ceiling. But she remains aware of the many women around her who fail to speak up, who make unneeded compromises and veer off track. And she’s aware as well of those women damaged by unrealizable ‘have it all’ fantasies. Her prescription (which she makes clear is not intended for all) is to “lean in” -- to remain ambitious both for one’s personal career and for establishing a more equal world.

Lean In, Sandberg writes, is not a memoir, nor a self-help book, nor a career management primer. Maybe, she admits, it’s a manifesto. So perhaps it is not unfair to look at Lean In from a scientific perspective: what is Sandberg’s understanding of how one can effect social change? Sandberg herself is a prominent vertex in a social network that famously connects Google and Facebook (the ongoing migration of high tech talent from Google to Facebook, the smaller and more cool company, is partly inspired by Sandberg’s at-the-helm example). She can and does span these communities, as well as those built around Harvard, TEDTalks, and whatever Larry Summers happens to be doing (she describes Summers as a mentor). And no doubt her connections lead elsewhere, to centers of power unrevealed in Lean In. The trick then for Sandberg is how to maximize the influence that comes with such auspicious positioning.

Tuesday, October 8, 2013

The Billionaire’s Apprentice: The Rise of the Indian-American Elite and the Fall of the Galleon Hedge Fund by Anita Raghavan

Forgive me for being thick: after reading Anita Raghavan’s book I had to think a moment in order to name the billionaire’s apprentice. The apprentice has to be Rajat Gupta -- himself a humble multi-millionaire -- who services the only billionaire in view: Raj Rajaratnam, founder of the Galleon hedge fund. Raghavan recalls Goethe’s Sorcerer’s Apprentice in her title to capture Gupta’s doomed adventure. But it is the sorcerer Rajaratnam, and not his apprentice, who brings Galleon crashing down; Gupta is destroyed in the process.

So what did Gupta do? The government taped a compromising phone call by Gupta to Rajaratnam where
Gupta reports the confidential discussions of the Goldman Sachs board (Gupta was then a Goldman director). Gupta was only one of Rajaratnam’s many sources, and it is not clear that his information was that useful. (Rajaratnam argued that he traded on a ‘mosaic’ of information; no one item served as the basis for his actions).

It is hard to dispute that Rajaratnam regularly traded on inside information.  But was all (or most) of Galleon’s fortune built on inside information? I asked the same question in my review of The Buy Side, a tell-all by Galleon-insider Tyler Duff. My question is scientific in spirit, not legal.