On PBS’s site, John Weir Close writes on “The Lucky Sperm Club: Jews, M&A and the Unlocking of Corporate America“. PBS’s Paul Solman first provides this intro:
“Since 1975, the US economy has been transformed in ways that are not yet well understood,” wrote economics journalist David Warsh recently in his weekly Economic Principals column.
“As it happens,” Warsh continued, “I have been reading a book about one of the major engines of that transformation, the merger and acquisitions movement of the last thirty years. Not since Barbarians at the Gate and The Predators Ball have I enjoyed a book about Wall Street as much as A Giant Cow-Tipping by Savages: The Boom, Bust, and Boom Culture of M&A, by John Weir Close. (The title derives from a line attributed to Ted Turner to describe the merger of AOL and Time Warner).”
Being a great admirer of Warsh, whose column I have long touted on this page and read devotedly, I contacted author John Close, book unseen, and asked him if he would adapt from his book something about the merger and acquisition movement for the Making Sense Business Desk. He was gracious enough to oblige us.
From Weir Close’s column which follows Solman’s intro:
As explored in my recent book, “A Giant Cow-Tipping By Savages,” modern M&A has not been driven by Scottish immigrants in Pittsburgh or French Huguenots in the Hudson Valley capturing entire swathes of the nation’s resources in the absence of government regulation. To the contrary, in the late 20th century, M&A was driven by two Jews, Marty Lipton and Joe Flom, who had simultaneous epiphanies about how to take advantage of new government regulation — in other words, how to turn the rules into an instruction manual for transforming the buying and selling of companies into a profession in itself. But rather than seek to buy, sell or keep companies themselves, they became the Sherpas, interpreting regulatory maps and making up new law as they went along.
As recently as the 1970s, Jews and all others not of the white Anglo-Saxon Protestant ascendancy were still excluded from any position of real power at the bar, on the bench, at banks and in boardrooms. America was still an agglomeration of ghettos: Italians knew Italians, Jews knew Jews, Poles knew Poles, Irish knew Irish, WASPs barely knew any of them existed and the Cabots spoke only to God.
“When I came to New York in the ’70s, the WASP aristocracy still reigned,” the Lucky Sperm Club’s Shapiro recalls. “You didn’t see an Asian face above Canal Street. You didn’t see a black face in a law firm unless it was the mailroom. You certainly didn’t see an Hispanic face. Swarthy Italians and Jews? They were not people you dealt with.”
Yet again, as happened so often in their history, the Jews somehow found their own methods to carry them past such barriers, and once those blockades were destroyed, other demographics followed.
But it was primarily Jews who first became expert in taking over companies against the will of their existing executives. The white-shoe law firms and elite investment banks found this simultaneously distasteful and tantalizing in the same way medieval merchants viewed the lending of money at interest. Both groups were discouraged from joining in one of the most profitable enterprises of their day: the old merchants by, among other things, an ecclesiastical ban on the practice of usury; the new lawyers, by the establishment’s social codes of behavior. Again, the Jews found themselves in control of an industry that then perpetuated the stereotype: the omnipotent, venal Machiavellian, hands sullied by the unsavory. But the business of takeovers paid the rent. And then some.
Yes, they were making money. And yes, that got the attention of the rest of Wall Street. But the takeover gang was also having fun. They were running through the streets wielding megaphones and announcing the revolution. They changed everything. Like West Indian slave revolts in the 1800s, which disrupted the fortunes of the likes of Jane Austen’s Sir Thomas Bertram, the new M&A industry transformed public corporations — the establishment’s repositories of power and wealth — into very public, very visible and very vulnerable sugar plantations open to all with the will, the intelligence, and sometimes, the personality disorders needed to gain entry.