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Saturday, March 04, 2006

Who's the Man? Part 2

A while back I made the acquaintance of Bob and Doug, two finance pros who were trying to make good in Japan. Later I hired their boss, who I call The Man. Whatever you may think of me, favorable or not, multiply it by ten for The Man. Part 1 is here; now for part 2 of the story:


Doug is waiting in the hotel lobby at the Grand Hyatt. He knows that Mr. F came in at Haneda off a Global Express from Alaska where he had been sport fishing with some potential investors. Investors who can fill entire countries with money. Doug checks his tie for drool.

His attention wanders to the scene in the lobby; the newly elected Governor of California has arrived with an entourage — all smiles and biceps, a model is hugging a long-haired movie director, a few other women, perhaps escorts, are waiting in seats by the strikingly lit curving staircase. Bob openly gawks at some women — his right as a gaijin — the model catches him doing it and winks. Doug checks his pants for unseemly bulges.

The Man calls. Bob is on three-way conference, on his way in a taxi. The Man is in BVI. Bob is saying that it’s difficult to formulate a strategy given such little information. “Just check him out,” growls The Man. “Find out what he can do; find out he wants; find out what kind of guy he is. It isn’t rocket science, dammit.” Doug checks his shirt for sweat stains.

Soon enough Bob arrives. They call up and are told to come up to Mr. F’s suite.

It’s Show Time.


Mr. F has VIP treatment at the hotel. A concierge escorts them to his suite, oozing obsequiousness, and asks if they know the billionaire family owners, too. Doug mines her for information, without success. Meanwhile Bob checks his tie for drool.

The door is answered by a striking Caucasian woman in a rather sexy business suit. Bob can’t tell if the skirt is indecently short or it’s just that her legs are indecently long. Mr. F walks in from an adjoining room. Doug suddenly recognizes the two of them from downstairs: he’s the “movie director”; and she’s the “model.” The one that winked at him. Doug gapes, stumbles a bit through the introductions. Meanwhile Bob checks his pants for unseemly bulges.

Mr. F explains that his assistant was just hired away from Soros in Russia, and her job was to make sure that Bob and Doug “weren’t morons who wouldn’t rate a deal for a McDonald’s Happy Meal.” He went on to explain that she helped ensure that he didn’t waste his vocal cords on idiots. Bob checks his shirt for sweat stains.

The next hour passes in a haze. Afterwards Doug isn’t sure that he wasn’t drugged, the experience was that surreal. Mr. F’s conversation jumped from topic to seemingly disconnected topic, and then would try to tie it together. It was like watching Jackson Pollack paint. Mr. F had a Bluetooth earplug stuck in one ear. He explained it was giving him Russian language lessons in preparation for an upcoming trip to Moscow, but not to worry because their business conversation was processed by the other hemisphere of his brain. The blue blinking light on the earplug was surprisingly distracting.

And there were other distractions. The woman was gorgeous and sexy, but she would make vague comments that would throw him off balance while he tried to figure out what they meant — they could be insightful or vacuous, but, by God, she was a protégé of Soros! Doug knew that Mr. F did not speak Japanese and the girl was obviously European, but when trying to make some private comments to Bob in Japanese, she turned to him and told him, in fluent Japanese, “Be careful in what you wish for; all is not as it seems.”

Mr. F’s assistant would alternate between business questions and serving Mr. F: she made exact duplicate plates of food for Bob, Doug and Mr. F. If Bob took a carrot stick, she would add one to Doug and Mr. F’s plate. Bob was going crazy with a desire to ask why, but had to keep on target. And even more bizzare, every food or drink item placed before Mr. F first went into her mouth for tasting. She would sip or nibble a small bit of it before giving it to Mr. F. It was oddly distressing to see perfectly identical plates for all of them, except for Mr. F who would have one tiny little bite taken out of all of his food, and the woman, who would have nothing at all in front of her.

And to top it off, she seemed to be always on the verge of laughing, like whatever Bob and Doug had to say was the funniest joke she’d ever heard. Added to that was the sense that, occasionally, there were some kind of coded semaphores going on between the two. An unnaturally raised eyebrow with an odd hand movement, or tug on the earlobe, or a deliberate rotation of a glass over an exchanged look.

It was the strangest meeting he had ever had.


After the meeting Doug consulted with Bob. Bob’s verdict, “He’s smart, but crazy. He’s tough, but weird. He’s sociopathic, but charming. He says brilliant things and nonsense. He must have ADD, Ausberger’s Syndrome, bipolar disorder, God, everything in the book, but he’s obviously functional. Negotiating with him will be difficult because I can’t follow him half the time. And the girl, I don’t know what the fuck to think of her other than thinking of fucking her.

“I don’t know what to tell The Man... we’re hosed!” concludes Bob.

Doug sighs, and slides open his phone. Not every day is a good day.

It’s time to call The Man.

(continued in [part 3])

Who's The Man? Part 1

A while back I made the acquaintance of Bob and Doug, two finance pros who were trying to make good in Japan. Later I hired their boss, who I call The Man. Whatever you may think of me, favorable or not, multiply it by ten for The Man.

Here’s the story:


Doug

Doug was highlighted in a book about the heyday of Asian investment banking where he rode the elevator up, and partway down. During that ride, he invested eye-popping sums of money in The Man. Use-Benjamins-as-toilet-paper sums of money. Wallpaper-your-office-building-with-Benjamins sums of money. Scrooge-McDuck’s-swimming-pool-full-of-Benjamins sums of money. Let’s just say he handled a lot of money.

And he did it with balls. Brass balls just shy the size (and possibly texture) of coconuts that he’d swing around and occasionally bludgeon his testicular-challenged prey, aw, just for the hell of it. Playing with dangerous tools like phantom debt, leverage, and beta hedging — at that time the finance world’s version of juggling chainsaws — he made and threw away fortunes like a Chinese bakery. He left a litter of formerly-human successes and burn outs behind him, some still twitching and clutching their sadly withered gonads.

Fortunately Doug got off the Asian finance elevator before it crashed on the basement floor. After spending some time on an island in Southeast Asia cultivating a personal collection of melanomas, he was convinced to invest and join in a new endeavor, led by The Man himself. Unaccustomed to the envy problem he had with the indigenous coconut trees, he decided to go back to the land of the hardly endowed and easily cowed.

So Doug did this for a couple of years. He’s having fun. Sure, the rules are tighter but the gals are looser, and though the money is harder to find, everthing else is easier to find... and intimidate. And that’s what Doug likes to do... be King of the World. Or at least Duke Nukem.

Then one day he gets a call from The Man. One of The Man’s mentors has recommended he meet a certain Sigmund Fuller, “Mr. F,” but is vague on specifics. There may be a deal in the works, a very big deal. Mr. F has huge backers, but nobody can seem to get a read on him. Can Doug check this guy out?

No problem for Doug. He does a quick testicular self-examination. Yep, no problem at all.


Bob

Bob is a the junior fellow. He looks like he’s just finished skiing from Finland by way of Siberia — about as Nordic as they come — but he speaks Japanese better than a native. He is a calm guy. Once upon a time he was a trader, but he’s one of the rare breed that made the cross over to a true deal man.

Sang froid? They say after years in trading his blood pressure never gets in the triple digits. Others say it never even gets into the double digits, that you could tear his arms off and he’d stay focused on the deal, so focused that he wouldn’t even bleed. The ideal companion to spot for a chainsaw juggler.

Bob didn’t make out as well as Doug and doesn’t want to retired on a measly investment income of a half million a year, so he still has to work. But he’s paid the big bucks for closing deals in one of the most patience-trying markets for deals: Asia. If there’s a deal to be had, he’s going to have it. Doug may take the lead with the chainsaws, clearing the trail and hacking down the unwary obstacle or passerby, but Bob will be right there behind him with the bulldozer, clearcutting everything else... just to make sure. Why leave anything to chance?


Doug and Bob have done their diligence. Enough about Mr. F is discoverable on paper, but very little about who he really is or what he is doing. Is his success his own? Is it luck? Is it skill? Is it staff? What kind of person is Mr. F? Cautious investor? Reckless entrepeneur?

Bob and Doug aren’t nervous about meeting Mr. F. After all, they are working for The Man. And The Man is, well, The Man!

Was that not a helpful description? Well, okay... here’s what I knew of The Man:

The Man is part of the Finance Pantheon of Asia, a God. Not only does The Man’s shit not smell, he shits refined platinum bricks. When The Man breathes his body just strips out extra O2 and exhales carbon in the form of diamond dust. He hires people to follow him around, collect his waste, and sell it on eBay. Yes, that’s right, with the help of free markets, the man turns the very air and food he consumes into cash-covertable commodities. There’s even a song about The Man. He raised and destroyed entire country economies in the go-go days of Asian finance. Why? Because he’s The Man.

So Bob and Doug knew The Man... but who was Mr. F?

(continued in part 2)

Girlfriends, Mistresses, Providers and Wives

I wrote about the cost of relationships in a post about 18 months ago. Here is a summary of what I wrote then:

Annual cost Investment cost
Girlfriend $140k $2.5M
Mistress $300k $5M
Wife $400k $10M

I have a friend who was discussing with me the finer points of financing a mistress. In his case, in fact, multiple mistresses. He was complaining about escalating long term costs and the diminishing benefits versus his wife. I pointed out that he wasn't collecting antique collectables, and he must have known about this going in. It wasn't like an adverse economic event, or corporate malfeasance, was at fault. He sighed and admitted that he did not look at it closely enough, in particular the bidirectional value in different kinds of relationships that drove future behaviors.

I don’t really have any other point to this posting; other than an update on the old post and to try to jot down some of my responses to my friend. So recently I tried the numbers a different way, taking into account some other expenses and removing others. Rather than looking at my peak cost girlfriend (who required therapy and living support, and who, therefore, I hope is an extreme case) I looked at more typical numbers... for me. More importantly, I counted the amount of time spent together in activities over a typical year and computed the hourly cost for each relationship. Your numbers, of course, would vary.

Annual cost Hourly cost
Girlfriend $80k $77
Wife $430k $207
Provider $120k $385
Mistress $165k $1585

Even if you quibble with the exact numbers, the basic ratios are of interest. Given this table, the rational actor economics of the long-term commitment become clearer:

A provider has to provide tremendous value compared to the other options. This value is no longer-term attachment: you can switch, cheat, or leave. In return the provider needs insurance in the form of higher costs and the reciprocal ability to retire, leave, deny service, and have other customers.

Beyond a provider, a mistress does provide love and fidelity. Compared to a provider she trades away the ability to leave or have other partners in return for more support. In so doing, she makes herself vulnerable to her partner switching (as well as affairs of the heart), so her insurance costs are higher. In many cultures the form of that insurance is real estate ownership from her patron. Real estate is actually a very sensible approach since is remains both useful when illiquid and investable when liquid, has more favorable tax treatment when gifted in most countries, and tends to appreciate over the long term.

The wife uses family and social convention (and possibly children) to bind her partner with a commitment. Note my figures do not include the cost of shared resources. There is a significant difference if we factor in shared resources and independence variables. For example, providers or girlfriends are usually self-sufficient (e.g. have their own living setup) whereas a mistress needs her own living setup and a wife shares one with you. If we factor that in, wives and families become enormously expensive, although you can extract back some of that value, in most states between your pro rata share and half, plus whatever appreciation occurs. All that is lost In the Mistress case.

Girlfriends are very economical. One wonders if this reflects some kind of risk or painfulness in the relationship, or if it’s more an issue of a statistically-adjusted game wherein one or more partners may be trying to establish a high value commitment and therefore are willing to take an early discount for a later payoff. It is not unlike taking a salary cut to join a startup, hoping for a big payout.

The figures also indicate that a wife must add value over a girlfriend, presumably the fidelity, constancy, familiarity, long-term commitment, comfort, family, and so on.

It is interesting to look at this from the other direction. A mistress can obtain the highest hourly payout, meaning that for a fixed financial requirement she can enjoy the most free time to pursue her own interests. In return, however, she has the highest risk of being left "high and dry." A wife has far lower risks, but also a lower payout. But this is deceptive. Consider the following counter-example. Let's say there is a woman whose life ambition is a major charitable vision. If she is a mistress to a centi-millionaire she may have time and income to express that vision, but at considerable risk. And the income is large, but not fabulous. On the other hand, mated to the right Mr. Right, she would have a portion of his centi-millionaire wealth (in partnership) at her disposal. Put another way, for a wife, certain expenses can be carried interests on her partner rather than absolute fees. On the other hand, perhaps a mistress could find a similar situation if she were employed as the director of her patron's foundation.

I would present a more comprehensive model based on shared interests, but that will have to come later.

Again, no profound point here.