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I was in my late teens when I first read "Barbarians at the Gate," the account of the 1988 landmark leveraged buyout of RJR Nabisco (and the GOAT of mass-market business books in my opinion). I remember thinking then that I wanted to "go long" Ted Forstmann, in the...
...Buffett-thought-experiment sense of wanting to own 10 percent of his future income circa 1988. Forstmann struck me as the lone "good guy" in the book, the principled Jeremiah warning of the excesses of the 1980s junk bond era who would eventually be vindicated. I wasn't...
...exactly wrong about that, and I believe Forstmann did go on to have a successful later career in private equity until his death in 2011. But I also think the teenage me didn't quite understand the subtle difference between a man who behaves in a principled way and a...
...man who behaves in a principled way while constantly telling everyone how principled he is. So I misjudged that one a bit—it would have been suboptimal to own 10 percent of his future out of all the many characters who populate the book. [What I should have done though was...
...buy 10 percent of Forstmann's......let's call it his "social life." That part did extremely well—you can look it up.] Owning 10 percent of Henry Kravis' post-1988 future would have been an obviously better choice, but the teenage me got that wrong too. I was too distracted...
...by and preoccupied with his obvious "faults"—his tendency to overpay, his high-society lifestyle, his insistence on being paid hundreds of millions in fees on every deal, etc. (I was not the most carefree and relaxed teenager, was I?! I'm better now—it's a Capricorn thing).
Anyway, where was I...Oh yes: I was filled with a lot of moral rectitude on the subject of Kravis' "faults," but I of course didn't realize that the private equity industry, like most of life, isn't set up to reward the most visibly saintly characters. And so I missed a lot...
...of the positive signs too: Kravis had a lot of sincere admirers, including Jay Pritzker, the Hillman family of Pittsburgh, and even his former enemy-in-the-book Ross Johnson; he was extremely technically competent at his job; and his firm KKR operated with a kind of...
...pirate-ship integrity and egalitarianism that was apparent even then: Kravis and his cousin George Roberts disagreed a lot privately, but there was never any daylight between them as far as outsiders could see; before any big decision the entire KKR deal team sat down and...
...they went around the room, junior guys speaking first until everyone had a chance to weigh in; and Kravis had the street-smarts to make peace with his enemies while understanding that his allies (mostly the investment bankers he hired) could hurt him too. These things are...
...all easier to see when you read the book through middle-aged eyes. What else...? With the benefit of hindsight, I definitely should have "gone long" that tiny stretch of Manhattan bounded by 9 West 57th street and 767 Fifth Avenue just to the northeast. A good chunk of...
...the book took place in those two office buildings or the Plaza Hotel in between them—that whole area went on to great things in the 30+ years since 1988. And I should have gone long Stephen Fraidin, who played a minor role in the book as Forstmann's lawyer but who came off...
...extremely well. Fraidin did not go on to become a billionaire as far as I know, but he became one of the country's top M&A lawyers, so if I had issued junk bonds to finance the purchase of 10 percent of his future income, my risk-adjusted equity return would have done...
...Michael Milken and John Malone very proud. BUT...the book's biggest dark horse of all was a man mentioned only once in passing, rather dismissively, as the "fast-talking president" of a "leading merger boutique" that nevertheless was completely shut out and excluded from a...
...deal that everyone on Wall Street and his mother managed to play some role in. That man was of course Stephen Schwarzman of Blackstone. How he, out of all the hundreds of hyper-ambitious, hyper-competent investment bankers in the late 1980s who were all gunning for exactly...
...the same thing, managed to rise to the very top of the pyramid—even becoming the employer of many of the star characters of the book—is a fascinating story on its own. But it's a story for another day......!🤓
