Friday, May 11, 2007

The new enlightenment: Enron and the Nuclear Deal

Once upon a time, in a place I had almost forgotten, I had the pleasure of having coffee with two gentlemen. The first was a new age Raushania(*) somewhat ambitious and adventurous sort, the second was enthusiastic but steeped in the ways of old. Both were keen to be the next big thing on Wall Street and both had that most annoying of Wall Street youngling habits - incessantly talking big. Their differences however became apparent as soon as the talk turned to Enron.

I was young then, and quite frankly not the malevolent old bat I have become of late, so I chose to keep quiet and listen when the Raushania sang out in favour of Enron and its "business model". The first chap argued that Ken Lay was genius, because he constantly sought out new ways of making money and quite frankly as long as he found *a* way of making money, the rest didn't matter. This stance produced an extremely discordant note from the second. The second abandoned his traditional southern drawl and in a voice more reminiscent of old New England, said that Ken was playing with fire, for all his new ideas, he had to show returns on old ones and demonstrate that he was actually capable of making projects work. Rolling in debt, was not going to work to his credibility, the second man boomed.

Predictably the conversation ended there and I drifted off to get something to eat. Once the second gentleman was out of earshot, the Raushania started up again, and I let him continue. "They have lived in darkness all their lives, and are afraid to come into the Light" he thundered, "In a globalized investment environment, with imperfect access to information, it will always be possible to sell yourself." I couldn't decide whether I wanted milk in my coffee or not and I forget where his rants went after that.

In retrospect, it seems the Raushania was on to something.

In the corporate world it is not so much about how well your current enterprise does. Ultimately all enterprises have a lifespan and it is difficult to keep any enterprise profitable at all times. So what really matters is your mental agility. How quickly can you turn a bad situation around into a good one... You have to show the ability to come up with new ideas and turn them around into new ways of making money. There is really no emphasis on sustainability.

In the US this culture is particularly prevalent. At the top echelons of the corporate ladder, everything below you largely runs itself and your input is only required when it doesn't. So after a point the only thing for the corporate people to do is strategise new ways of making money. The strategising involves doing all manner of paper work and intelligence gathering to evaluate risks in possible future ventures. The higher the project future value of a venture, the higher is your apparent stock inside the company and the corporate world. Your wealth is virtual, in much the same way as the feudal lord had "family wealth", i.e. a position of social dominance transmitted via inheritance - not necessarily translatable into actual physical wealth.

This culture influences the way things are done in the US. Per the dictates of this culture, every attempt is made to overproject the apparent value of a"deal". All manner of histrionics and public dramas accompany the pitch. A very targetted psywar is an integral part of the "deal". The emphasis is on creating as much interest in the venture as possible while making as little commitment on the ground as possible. In the US itself, if the deal does not eventually go through it is fine, because all that is important is that it look like the deal maker "at least tried to do something about a difficult problem" and the spin machine can always make it look like it was a "no fault or someone elses' fault" failure. No one asks whether he or she actually made the situation worse by "trying" (i.e. indulging in a foolish publicity stunt), the British concept of "queering the pitch" does not exist in the US. Since so much of the American grand narrative is about "starting afresh in a land of opportunity", Americans actually believe that there is no such thing as lasting negative consequences.

Everyone in the US loves getting cash in hand (and who doesn't!?), but only the US is a vague promisory note of payment considered equivalent to actual cash in hand, only in the US are they willing to use a "Future Projected Value" as some sort of indicator of how valueable a transcation might be. This culture of "Projected Value" worship is supported at the very least by a large pool of individual investors - gamblers - that access the market via the internet, but also many a time, larger financial institutions keep this going as well. Despite all the appearances of a studied sense of neutrality and objectivity, as Arthur Anderson proved, people are always fallible.

We Indians think differently. Given the peculiar situation regarding resources in our country, we cannot afford any other way of thinking. Ours is not a forgiving political culture, memories tend to be nearly infinite on our side and having suffered a lot during the thousands of years of evolution as a culture, we tend not get carried away by youthful exuberance that pervades all things American. We are open to change if it takes us towards our goals (note emphasis). We are less interested in youthful frivolity if we aren't really going to get anywhere with it. A billion Indians offer us overwhelming amounts of mindless crap to deal with on a day to day basis, we are not interested in travelling 10,000 miles to get more of the same. A situation where there is no immediate progress towards our goals will be left as is. There are too many demands on our time in India.

Ofcourse my friend on the disreputable forum would argue that this is identical to a "Monkey Trap" scenario that he so ablely crafted years ago.

Yes, as always, what he says is true also.

(*) Raushania: a follower of the Prophet "Roshan" Bayazid. Raushanias (or Illumnati) accepted the arguments of Pir Bayazid that the soul was the only transmigrant and that the Divine manifested in through Prophets (note plural! that kind of thing in 1500-1800 period could get you into a lot of trouble). They mounted a rebellion against the Mughal Empire after a complicated series of political circumstances, and were defeated in the battle of Nangarhar. Pir Bayazid's was rumoured to have made an association with "Hindu Seers" and his challenge to Muslim orthodoxy during the reign of Abul Fath Jalalluddin Akbar was not well recieved....


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