I was standing on the patio of a friend's house in Hastings, New York, talking to a partner at one of the nation's leading law firms. I asked him about his work. "You wouldn't believe how weird it is," he said. "On our side, we've never been busier. Insanely busy. I think that every investment banker and analyst at every major investment firm has hired a lawyer. All of the city's top criminal-defense lawyers are just swamped. They're working 12 or 14 hours a day. And then you walk across the hall to the lawyers in the corporate-finance group, and they're playing chess, they're playing solitaire, or they're watching TV. They have nothing to do."
These days, a new associate at the prestigious New York law firm of Davis Polk & Wardwell will spend the first two or three years of his or her time reading the emails of investment bankers, looking for what might be construed as incriminating evidence. Investment bankers write and receive probably 200 emails a day. In many cases, the emails go back seven years. All of them must be read, if only for defensive purposes. It's hard to imagine an economic activity less productive than reading the emails of investment bankers. But that's what 2002 was about. That's what we did, metaphorically, for a year.
It started with the collapse of Enron and the accounting firm of Andersen and proceeded headlong downhill from there. WorldCom, the nation's second-largest telecommunications firm -- the one that was the backbone of the Internet -- went belly-up amid charges that it had fraudulently counted $7.2 billion of costs as $7.2 billion in capital expenditures. AOL Time Warner lost roughly 80% of its market value amid credible allegations of accounting irregularities and an orgy of management intrigue. The breadth and scope of the self-dealing and mendacity and deceit of top corporate management boggled the mind.
More mind-boggling was the rationalization, minimization, and justification of that kind of behavior. There were the boards of directors of Enron, Global Crossing, Qwest, Tyco, and WorldCom claiming that they had no idea how any of this could have happened. There was William B. Harrison Jr., CEO of J.P. Morgan Chase, saying that his firm had been a "victim" in the Enron scandal. There was the spokesman for Goldman Sachs denying that that firm had spun IPOs for favored clients, despite the mountain of evidence.
"It's a whore business," an Alex.Brown veteran said to me last winter. "When I was on the desk, I'd look up and see these guys on TV or in the paper touting stocks that I knew for a fact they were looking to dump. These were not nitwit analysts. These were senior guys at brand-name firms. They had no qualms about it. It was just what you did to get out of a losing position. And I'll tell you this: It's everyday commonplace. It happens every day on TV, in the papers."
At the time, I thought that my friend was overstating matters -- exaggerating for effect. At one point, later in the evening, he seemed to lose it entirely. WorldCom, he proclaimed, was a "total fraud." Everyone nodded politely, and the subject was quickly changed. That was another 2002 metaphor. No one wanted to face the truth.
And then there was this news item regarding the packaging of Coca-Cola. The company announced that it wanted to put bubbles above the wavy white line. White bubbles against the red background. Its stock price in free fall, its market share under attack from Pepsi, its advertising turned to dreck, the greatest marketing machine in the world focused on the most inessential matter imaginable. Is there anything Coke's customers could be less interested in than little white bubbles above a wavy white line?
At company after company, the return to what you might call "inside the box" thinking was remarkable. It was as if they had meetings and said to one another, "Okay, let's think inside the box." MSNBC, falling behind in the ratings race with CNN and Fox News Channel, changed its slogan to "America's News Channel" and juggled its prime-time lineup. It anchored its evenings around Phil Donahue, a retired talk-show host. He was a brand name! That would stop the slide.
Of course, neither the slogan change nor the addition of Donahue stopped the ratings slide by even a tenth of a tenth of a percentage point. But in its lame attempts, MSNBC gave us an almost perfect metaphor for what happens when companies cease being creative and original: They become their own satire.
Now the rumor is that General Electric is looking to unload MSNBC, unravel its partnership with Microsoft, and spin off whatever "assets" may be said to exist. That makes sense. Much of what business will be doing for the next two years is unraveling, reconfiguring, and repositioning those existing companies and structures that have failed. The Big Daddy in this field will be AOL Time Warner. But there will be countless others. KPMG once estimated that 83% of all "big mergers" don't work out. They may have to revise that number -- way up.
All that said, a friend from Switzerland came to visit recently. He has a new company and is looking for partners in the United States. We talked at length about things in Europe, the German elections, the regulatory business environment in France. "Doing business in Europe," he said, "is becoming almost impossible. The labor contracts are so difficult. The regulations are top-heavy. What we can do in the United States in 18 months would take us five years to do in Germany or France. So as bad as you might think it is here, be grateful. The dynamic is here."
And that's true. The flame flickers.
John Ellis (firstname.lastname@example.org), a writer and consultant, works in media, politics, and technology. Read his weekday musings on the Web (www.johnellis.blogspot.com).