Saturday, March 7, 2015

No Real Heroes: Reading "Barbarians at the Gate"



Reading this, my wife asked if I liked the book, and what it was about.
My quick answer was that it was the real life version of American Psycho.
Maybe that is too harsh a criticism. I know Ellis was mocking this milieu when he was writing his books in the late 80s and early 90s. He has a lot of crossover between characters in different situations, and shows how small the Wall Street world of the time was, but also how faceless. The only difference is that in this book there is not a lot of murders, real or imagined.
It actually took me a while to finish this book. I’m just young enough I don’t remember the RJR Nabisco buyout, and I had never heard of Ross Johnson before reading this book. My memory of Barbarians at the Gate was an advertisement for the movie on TV.  Basically it took me a whole to read because there was no good guy to root for. Everyone had some weakness, and the narration didn’t construct the story of the buyout in such a way that it was the vindication of Kravis or the downfall of Johnson. It felt indifferent and impersonal – here’s a thing that happened. I don’t know if that was intentional by the authors or not. The one thing that really comes out from the book is that the whole LBO or private equity industry looks bad.
I think the authors wanted to show how bad the LBO industry was. If that was the goal, they succeeded. It did die down for a while. But the real funny thing is that the amounts that are supposed to seem obscene now seem tiny after the financial crisis. I’m not going to a 1989 inflation calculator to get the real terms of the buyout, but 25 Billion in nominal terms just seems small. The authors touch on this in the afterward.  
The short termism and the greed that are illustrated here are still in play on Wall Street. Kravis is still doing buyouts. The names of some of the firms have changes. The suits look a bit different. The securities laws have been amended.
The barbarians still wait.