Log in

No account? Create an account

Previous Entry | Next Entry

Tory Book Club: Freud In The City

It may not be the headline issue in the recent report of Lord Freud’s unguarded comments at a Tory conference fringe meeting, but there’s something gratifying about seeing a verbatim transcript of the noble Lord’s pronouncements, displaying his characteristic crispness and clarity of thought, suddenly being flung into the public domain like a sack of soiled underwear. Compared with some of his more gnomic babblings this is still pretty straightforward, but it gives a sense of the amount of industrial activity required to make him make sense on the pages of Parliament’s Official Report. For those who missed it:

“You make a really good point about the disabled. Now I had not thought through, and we have not got a system for, you know, kind of going below the minimum wage. But we do have… you know, universal credit is really useful for people with the fluctuating conditions who can do some work—go up and down—because they can earn and get… and get, you know, bolstered through universal credit, and they can move that amount up and down.

“Now, there is a small… there is a group, and I know exactly who you mean, where actually as you say they’re not worth the full wage and actually I’m going to go and think about that particular issue, whether there is something we can do nationally, and without distorting the whole thing, which actually if someone wants to work for £2 an hour, and it’s working can we actually…”
Here either the transcript or his actual sentence just tails off, possibly out of sheer ennui. Unfortunately, the part of that passage that's clearest, that requires the least parsing or interpretation, is the part where he readily agrees with the contention that disabled people are worth less, and this is worth building into policy.

The problem for the noble Lord is that this is what his opponents have contended all along that he thinks and says in private. However much he denies that, the fact that he agreed with such alacrity, safe in the knowledge that he could speak freely as he was among Conservative friends, will from now on trail round after him like a swarm of angry bees. “I care passionately about disabled people,” he says in his apology, a statement—in the light of what’s being done to them with the sweeping away of vital benefits and meaningful support—eerily similar to the dependable claim that “I love women” made by irredeemable misogynists.

His manner is very controlled—he speaks quietly, even when he's winging it and not making any sense, and smiles when he is told stories of the hardships his reforms are causing—but his claim last year not to understand why there was a huge increase in people visiting food banks, coming from a man whose entire career was built on analysis, suggested a deadpan sarcasm at work, a knowing wink to the right-wing gallery.

But what makes this inscrutable man tick? What are his inner thoughts? Oh God, there’s only one thing for it, isn’t there?

2. David Freud, Freud In the City, 2006

The book joins our hero at the end of the 1980s as he makes the journey from financial journalist to corporate finance research wonk, usually overpromoting share sales and often in ill-advised utility privatisations. There are laughs!

We learned that the TSB’s salesmen sold 40 policies a month, compared with the industry average of six. Presumably the high rate was due to the way the TSB managers recommended their clients to be approached. “That’s not cold calling,” observed Nick, “that’s warm calling”.
There are thrilling cliffhangers!

I set out to put together a piece on the fund managers. Initially I covered only five of the companies, gathering the material by going to see the finance directors. I concluded that they were all cheap, because of the savings boom, but working out how they were valued relative to each other was a puzzle. I needed to build a picture of the different types of funds that they specialised in—unit trusts, investment trusts, pension trusts, or foreign funds of one kind or another. I decided to value each type of fund running an equation of each company’s fund mix against the other companies’ mixes. But how—against a tight print deadline and moving share prices?
And there’s an amusing story about the time he went to catch a plane to Brussels but forgot his passport.

Freud is a maverick, he’s outspoken. He’ll admit to getting things wrong but only so that he can show how his quick wit got him and his colleagues out of another scrape:

We did not always catch the errors in time.

“I just need to pop over to see you quickly,” Andrew Barker phoned one day in 1997. Settled in my office a few minutes later he explained, “We’ve just uncovered an error in the airport data.”

“Go on,” I encouraged.

“Specifically the figures for South African Airports. They’re a bit flattering.”

“How flattering?”

“Well, it looks as if we didn’t translate the Rand figures into US dollars to compare the airport’s performance with the others in the sample.”

“Oh,” I said, realisation dawning. “I wondered why South African Airports was the best performer across the universe.”

“Yes,” said Andrew mildly. “If you multiply all the revenues by four it does tend to give you a boost.”

“The trouble is that Dirk Ackerman, the chief executive, has been going round the airport conference circuit using these figures to show how well he’s performing,” I pointed out.

“It is difficult,” Andrew agreed.

I thought through the implications. “As I see it, we have three options,” I said. “First, we can own up, admit we’ve made a mistake and never do business in South Africa, and probably the rest of the airport industry, ever again.

“Second, we can jump out of the window, all of us.

“Or third, we can try to cover it up. In the next 24 hours we can invent a completely new way to analyse airports which can’t be cross-checked back to our current way.”

Andrew nodded philosophically, “So it’s the cover-up?”

“Yes. I suppose there is a small chance we won’t be caught. We’ll have to change all our tables and graphs so that nobody will be able to compare the new correct figures with the old mistaken ones.”

“How will we explain that?”

“We’ll just have to say that we’ve decided to update our approach.”

To my amazement our new presentation passed without comment, apart from some irritated phone calls from junior personnel in South Africa complaining that they couldn’t make direct comparisons with past statistics.
He'll also cheerfully admit to being a bullshitter just for the sake of it:

We were working on the purchase of a stake in British Midland for [Lufthansa]... “How much do we need to pay?” Karl demanded. “I don’t want any of your bullshit.”

We worked out a price of around £450m.

“You should have the figure seven in it,” I contributed. “All my offers end in the figure seven.”

“Good, that’s agreed then,” said Carl. “£457m it is.”

It took another couple of months, but by November a complicated transaction had been agreed in which Lufthansa obtained an initial 20% stake in the British airline. The precision of the £457m valuation placed on British Midland puzzled analysts in rival investment banks for years to come.
And he has some useful advice for his colleagues that will stun connoisseurs of his later parliamentary performances:

“I think you shouldn’t over-prepare the presentation, otherwise you’ll come out stiff and wooden,” I said. “You should just know the points you want to make and then explain them naturally.”

There's precious little sign of reflection in the book on whether all-out privatisation, either in principle or in execution, is a positive or sensible step. Like a virus, he has a single function to perform and he performs it as efficiently as he can, sometimes even mutating the process along the way ("It was a pure Eureka moment," he says; "I had taken an academic theory and turned it into a specific valuation, which was relatively easy to understand"—a couple of years later, the Eurotunnel shares about which he had his Eureka moment, and which he was therefore able to wildly oversell, tanked and cost their investors very dear indeed) while getting paid a lot of money to do it, which for the sake of this analogy let's assume happens to viruses as well. On the one hand, he’s not always able to spot trouble ahead with privatisation. He seems flummoxed by suggestions that the—as it turned out—doomed flotation of Railtrack is a bad idea. Luckily, a colleague has a reassuring explanation ready:

“The unpalatable truth about Railtrack… is that almost no one in Britain believes that breaking up the network into more than 60 units and selling them individually will be anything other than a disaster for the customers and very possibly for investors as well,” the Independent informed us on 12 April,

“If British Rail devised its timetables on the same basis of optimism employed by government ministers forecasting the progress of rail privatisations, it is doubtful whether a single train would run on time,” the Financial Times wrote on 5 June, adding to good measure that Railtrack was “the most controversial and unpopular privatisation of recent years.”

By 16 August the Guardian had decided that: “Privatisation of the railways, which looked bizarre… is now looking positively loopy.”

The flood of hostile commentary was unstoppable. “Where is all this stuff coming from?” I asked Jenny Williams, the undersecretary of the Department of Transport who was in day-by-day charge of the Railtrack flotation.

“It’s all the British Rail people who see their jobs disappearing,” she hypothesised.
Though, to be fair, he also struggles with even the basic concepts of imagination and empathy:

[My colleague] was apprehensive. “We’re going to fire them in groups of 10,” he said. “There are too many to do individually. We’ve had the specialists in all day to train us in how to handle it.”

[I replied:] “What on earth do you need training for? Surely you just tell them you’re closing the division down and let them know the terms.”

“Oh yes, wise guy, so what do you do when one of them rushes at you brandishing a chair? And what do you do if one of them collapses on the floor with a heart attack? And what do you do if one of them breaks down and starts shrieking abuse at you?”

“Okay, so you need training.”
On the other hand, he allows a brief glimpse into his thinking on privatisation here:

I was sitting at my desk working up our pitch to the [water] industry when I was suddenly disturbed.

“And what are you working on?”

I turned round to see Queen Elizabeth, the Queen Mother. I knew, of course, that she was due to be shown round our offices that morning but was not involved in her reception and had hardly expected her to arrive at my open-plan desk. I was a little taken aback.

“I’m working on our presentations to the water companies,” I explained. “For the planned privatisation.”

“How interesting,” she replied. “And do you think that privatisation is a good idea?”

That was a stinker. I opened my mouth. “Well…” I hesitated.

John Littlewood, her host for the morning, was ready with an instant reply. “We do think this approach has great benefits, Ma’am.”

“Fascinating, fascinating,” she replied, disguising any disappointment at this courtier’s response.
As Freud relays it, he has an easy, conversational style—snappy, punchy and certainly not given to labouring a point.

As for me, with the transaction effectively closed, I came down to earth with a bump. Suddenly the code allocated to the NATS rescue by my colleagues appeared prophetic. Investment bankers always use project and company codes, to allow them first-level security against information accidentally leaking. The device allows team-members to avoid using company names on the telephone and other semi-public places. In this case my team had called the NATS transaction “Project Swan”.
Ah, so it was his swansong. He can't—oh, sorry, he hasn't finished:

It is apparently a myth, widely believed by the ancients, that the swan sings beautifully before it dies. Certainly no one in modern times has come across the phenomenon.
Right, exactly, his swansong. Now—oops, there's more:

Nevertheless the expression “Swansong” has come to mean a person’s last piece of work or farewell performance.
And this was your swansong, we get it. Moving on—

All too appropriately Project Swan was the last substantial investment transaction I was to undertake—

—my Swansong.

He can't be accused of straying from his brief. After all, the book’s not called Freud At Home or All The Thoughts Piling Up Inside Freud’s Head; Freud in the City is what he was paid to deliver, and that's precisely what he does. So it's a bit of a jolt when, about a third of the way in, he mentions an incident where he was so preoccupied with work that while on holiday he backed the family car into a tree, to the shock and delight of his children in the back. Wait, he has children? The only other glimpse of family life is on page 172, the one time the reader is introduced to his wife, in a 1970s-sitcom-esque anecdote about how he springs on her the fact that he will have to spend some of the family holiday in Denmark in business meetings, in revenge for which she calls in an architect without warning her husband:

The two of them then proceeded to redesign the back of the house with the greatest relish and at no inconsiderable cost. I had no moral authority to interfere. It was only later that I was able to draw up the balance sheet of the financial implications… we were awarded a mandate from KLM to provide a fairness option on their proposed merger. But all we could manage to negotiate as our fee was a miserable £100,000. This approximately matched the costs of rebuilding the back of my house. It was a useful lesson. In future I virtually never allowed business to break my family holiday.
It's a shame that he chooses not to share more of these adorable tales of likeable, everyday folk.

Perhaps rashly, he also shares a tale of his father's escapades during the war. He must have realised that this single story would overshadow everything in his own book.

In April 1945 he parachuted into in Austria, with the triple aim of sabotage, raising resistance and establishing a British presence ahead of the Russian advance. Unfortunately he became detached from his colleague and equipment. After some days scavenging in the mountains, finding nothing to sabotage and virtually no-one fit to mount acts of resistance, he addressed the third of his objectives. With the Russian advance progressing rapidly, he made his way to the town of Schiefling. Here he strode into the mayor’s office and demanded transport to the aerodrome of Zeltsweg. The mayor commandeered the only vehicle with fuel in it, the fire engine, and drove him to the airport. With astonishing bravery, my father marched into the Commandant’s office and announced, “I am Lieutenant Freud of the British Eighth Army; I have come to take over your aerodrome.” This was a slight exaggeration, as my father was certainly not a member of the Eighth Army. The Commandant slumped down on his desk and started to cry: “All our efforts, all our sacrifices, all in vain.”

At the meeting the next day attended by the local army and Nazi officials of the district, it was decided to send my father to Linz to confirm the takeover of the airport. Escorted by a major he was driven to the headquarters of Gen Rendulic at Linz, where his capture of the aerodrome was confirmed.
In the wake of that, he can talk up his working environment all he likes...

It was the heroic age for equity; the period in which a handful of participants made up the structures and practices of the market as we went along. Winning business was a matter of flair, instinct and luck. Success required the raw grit of a cowboy combined with the polished confidence of a Victorian gentleman.
... but ultimately, as he essentially acknowledges, the deals were grubby and benefited few but those making them. Perhaps it was a desire to do something more meaningful and even beneficial when, after his early retirement, the Labour government asked him to look at how to overhaul the welfare system. However, as Chris Blackhurst points out, Freud came to the job with the impatient outlook and narrow beliefs of a City worker fully intact, laden with the obligatory prejudices and lack of imagination. Convinced the answers were simple if only someone had the courage to implement them, he came back to the government with a finished report in double quick time. Ministers were reportedly appalled by what he'd come up with (remember, kids, “fair” is never simple and “simple” is hugely unlikely to be fair) and turned him down flat. Stung, he took his proposals to their natural home, the Conservative party, where they found a delighted audience and he was ennobled on the strength of them.

A relaxed Lord Freud shows us around his beautiful home.

On only one occasion the book hints at a side of him that is not geared simply to profiteering or wisecracking, with a display of actual sentiment:

I wept as I wrote his obituary for The Times. I had lost the man who had hired me, encouraged me, protected me. I had lost one of my closest friends. I was, and remain, convinced that the illness had been stress-induced by the events of the previous year; the most damaging fallout, as far as I was concerned, from the collapse of Warburg.
This might be a more affecting passage if it weren't for the fact that the benefits regime he designed a decade later has very deliberately piled intolerable stress on to people with this and other illnesses and conditions with no thought for their welfare, in the name of saving money (it hasn't) but in fact to try to condition the populace out of its sloppy, vaguely leftish notions of compassion and empathy that have tethered it so intractably to the concept of a universal health service and welfare state. Would Freud have forced his ailing friend out of bed to attend a "work-related activity group" on pain of losing his financial support? If not, is this because his wealth meant that by definition he was decent and had earned the right to be ill?

Freud winds up his dead-eyed recollections of deals concluded, investors hornswoggled and office politics navigated with another personal moment:

On my last day, in mid-December, my team took me out for a farewell lunch of the Real Greek restaurant in Hoxton Market, just north of the City. It was an extended occasion, laden with reminiscence and alcohol; too much alcohol in fact. I have always had a weak head for drink and the life-style of an investment banker had left little room for toughening it. I arrived back in my bare office on that Friday evening at 6.00pm also feeling the worse for wear. Luckily there was still a waste-paper basket under the desk, lined with a plastic sack. I was copiously sick into it. “This is not a fair representation of my parting views,” I muttered to myself ruefully, as I contemplated the contents.
It's a fitting note to finish on, as gazing into his own sick is his single most heroic act in the entire book.

Latest Month

December 2015
Powered by LiveJournal.com
Designed by Lilia Ahner