Category Archives: financiers

WeWork’s guru-led business model

Dalrymple writes that Adam Neumann, with his long hair, T-shirt, and microphone, indulged, like any guru worthy of the name, in

malversation of funds, morally if not legally, on a large scale.

Neumann claimed — without being laughed down — that his business was worth $47bn, yet it was

nothing but renting out office space to people who could not afford permanent offices. This is a good idea, no doubt, though it was not his, but to have parlayed it into a business allegedly worth many billions while making heavy losses takes genius of a kind.

WeWork, Dalrymple notes,

had a private jet while losing more money than it turned over ($1.9bn against $1.8bn). I don’t know whether this is a first in history.

The company could survive

only by finding someone to throw good money after bad. As Macbeth might have said if he had lent money to it, ‘I am in loan stepp’d in so far that, should I lend no more, returning were as tedious as go o’er‘ — indeed more tedious, in so far as it would imply that the original loans were not performing and might give rise to awkward questions about the wisdom and competence of those who made them. Meanwhile, my bank tells me every month that it is prepared to lend my tiny company up to 4% of the amount of money I already have in the bank. Thanks very much. Such is the wisdom of bankers.

Dalrymple says he finds it difficult to think of the WeWork story without recourse to metaphors of parasitism. He notes that in the modern world, the path to fantastic personal success is not that of inventing something that people want and that can be developed and sold at a profit, but of persuading investors to part with their — or more often, other people’s — money to finance a bubble. For that you need the skills and confidence of gurus, who

fleece by promising new meaning to the gullible. Their eyes shine, they gesture, they are alternately passionate and calm. They don’t believe, they know. If you are lucky, you have never met such a person, for we are all, to varying degrees, susceptible to him. One might have thought, though, that bankers of all people would not fall easily for their wiles.

The most successful gurus, Dalrymple observes,

are not straightforward crooks, at least not to begin with. If they deceive, they are also to a large extent self-deceived. But with repetition and success comes more straightforward skulduggery, swindling, misappropriation of funds, sexual predation, and so forth, all because they believe themselves to have been granted impunity, as with a diplomatic passport.

Many gurus

mark themselves out by their dress — in this case, T-shirt — despite immense wealth. How can such a man not have seen through the triviality of mere appearance to a deeper reality?

Dalrymple asks how

companies that have never made a profit, however long they have been in existence, can be valued so much more highly than those that make profits almost without fail.

No doubt the companies in question

promise at some time in the future to make eye-watering profits once they have cornered the market and can charge monopoly prices, having driven everyone else from the field. But this glorious future (glorious for holders of the stock, not for the average or below-average customer) seems rarely to arrive. Meanwhile, financiers finance, at least until, like socialists, they run out of other people’s money. Then they can ask the government to create more money, so that they never run out of other people’s money.

The sport of banker-bashing

Nothing is more tempting, writes Dalrymple,

than to blame the financier, merchant, or banker—in short, the scheming middlemen—for the woes of the world. They are parasites, goes the cry, mere bloodsuckers; they create nothing, but take advantage of everything and everybody. They make profits on the way up as well as on the way down, in abundance and in scarcity, no matter how others suffer in the process.

Such ideas, he points out,

are the stuff of propaganda, both Bolshevik and Nazi. For such propaganda, only the producers of simple tangible goods—the shirtsleeved proletarian in his forge pouring pig iron, say, or the happy flaxen-haired peasant hoeing the land to produce turnips—make a real contribution to wealth, everything else being but a form of hidden confiscation of what the sweat of their brow has produced.

Those who have believed this,

or at any rate acted as if they believed this, have been responsible for a great deal of misery in the world.

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The ludicrous cult of long hours

Screen Shot 2015-08-08 at 07.50.56Dalrymple’s principle states that

efficiency declines as the number of hours worked grows.

Dalrymple himself is at his best, he explains,

for about two hours a day—shortly after waking—and it is downhill all the way thereafter.

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The suddenly and unwontedly efficient and alert essayist

Only one thing restores his efficiency or alertness, if not his soul:

the prospect, previously unexpected, of earning a good sum of money. This acts on my brain in the same way as amphetamine.

(Johnson: No man but a blockhead ever wrote, except for money.)

Young lawyers, Dalrymple points out,

are expected to examine documents and research precedents for hours on end, though nothing is easier than to overlook the single key fact in a case in which there are hundreds or thousands of pages of dreary documents.

OBBB (overworked banker behaving badly)

Machismo in the empire of imaginary money

For the macho workers in finance,

their absurdly long hours are a source of pride, a seeming justification for what they earn and an excuse for behaving badly once the pressure is relieved. Perhaps there would be fewer financial crises if financiers and their junior aspirants worked fewer hours.