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ADAM SMITH'S MONEY GAME Missed the show? Get a phone call half way through? Fail to catch the name of a stock in "Personal Best"? In case you did, we are happy to provide you with a transcript. If you would like a transcript from a previous season, please visit 800-All-News at www.800-all-news.com or call them at (800) All-News. ANNOUNCER: [voice over] This program is made possible by a grant from MetLife, helping people become financially secure for 130 years. Funding has also been provided by the Roy R. and Marie S. Neuberger Foundation. ADAM SMITH: [voice over] On the Money Game this week, why does investment banker Bruce Wasserstein say mega mergers can require special techniques like screaming? What can some foreign ads teach Madison Avenue about selling to women? What is the Rev. Jesse Jackson doing in the temples of Wall Street? And what is the personal best advice to provide for children in case of tragedy? Find out, next. [on camera] Hello, I'm Adam Smith and welcome to the Money Game. The mega mergers of the '90s have raised the art of the deal to a new level. Citicorp, Travelers in finance; Bell Atlantic-NYNEX in telecommunications; Disney-Cap Cities/ABC in entertainment _ deals where size is what really seems to matter. Everything seems to get bigger. In the middle of all this activity are the investment bankers who advise on the terms. Their fees are in the millions. What do they do for their money? Is this merger mania good for the country? What does it mean to you? One of the top investment bankers, Bruce Wasserstein, has just written book entitled Big Deal. I talked with him, face to face.
Face to Face Back to Top ADAM SMITH: In your book, you say when you go to a negotiation if you're not tough and alert the other guy will pick your pocket. BRUCE WASSERSTEIN: If people sense a naivete or a sense of weakness, their instinct is to abhor the vacuum, to go after the opportunity that's there. And the devil is in the details. ADAM SMITH: To clean you out? BRUCE WASSERSTEIN: To pick your pocket. ADAM SMITH: [voice over] In his deal-making life, Wasserstein has rubbed shoulders with some real legends. He recalled Warren Buffett in the landmark media deal that put ABC together with Cap Cities. BRUCE WASSERSTEIN: Capitol Cities brought in Warren Buffett as a base investor to help them consummate the deal. We had a dispute as to price and there was a gap. And we came up with this idea of giving out warrants because Warren was obviously such a clever fellow that if we were selling for cash, he knew something that the shareholders weren't getting. And we wanted some equity kick. And we asked for it and he said, ``Never giving out equity. The wrong thing to do. Won't do.'' And he was very adamant. And finally what was interesting to me was that after all the negotiations, he had that ability to walk around the block and have a sense of wisdom and say, okay, warrants it is. And he did it gracefully, in a decisive but gentlemanly fashion. And what I thought was impressive was the flexibility _ both the firmness but in the end the flexibility. Very different than most people's style. People get wrapped up in the intensity of their own negotiating position. Here's a guy who could obviously think with agility. ADAM SMITH: [voice over] Corporate raider T. Boone Pickens. BRUCE WASSERSTEIN: A lot of showmanship, smart guy. Right economic instincts. Over the top. Began to believe his own story, made a lot of errors, tactically in the end. And, of course, lost his own company in the end. Sort of a die by the sword type of story. ADAM SMITH: [voice over] Another famous raider from the 1980's, Carl Icahn. BRUCE WASSERSTEIN: He has a manner of talking in circles. Part of his strategy is to exhaust people on the other side. He goes around and around and around. ADAM SMITH: What does he talk about? BRUCE WASSERSTEIN: Anything. He'll talk about the weather. He'll talk about politics. And there's no linear relationship to the deal and what he's talking about. Or he'll talk about points and details of points forever. He'll talk about conditions in a deal. He'll talk about multi-decimal point variations on a theme. And it goes round and round and round. Finally most people are just so exhausted, they say ``I give up.'' ADAM SMITH: [voice over] '90s conglomerateur Ron Perelman? BRUCE WASSERSTEIN: The thing about Perelman that's unusual is his natural instinct isn't the financial one, it's industrial insight. So even though he's a financial buyer, he's fundamentally an operator. ADAM SMITH: [voice over] A flair for the deal and the dramatic seem to run in the Wasserstein family. Bruce Wasserstein's sister, Wendy, is an award-winning playwright. [on camera] Have you seen all her plays? BRUCE WASSERSTEIN: Oh, I've seen all her plays many times. ADAM SMITH: When you and Wendy were children, did you write little plays for your parents on holidays? BRUCE WASSERSTEIN: Well, I think more she was off doing skits and we had a deal. If she played Monopoly with me, I'd watch her skits. ADAM SMITH: [voice over] There is still big drama in Wasserstein's life, but the scenes are played out on the corporate stage now. With billions at stake and major egos clashing, the mega merger can produce extraordinary pyrotechnics, some of them scripted to a T. BRUCE WASSERSTEIN: I've seen dramatically one of the nicest fellows I know _ a lawyer at a major firm here in New York _ finally decide that the only thing he could do in a negotiation was to have an exhibition of anger. So he quite deliberately got up on the table. ADAM SMITH: He stood on the table? BRUCE WASSERSTEIN: And told the other side, ``Get out of here.'' ADAM SMITH: Have you been screamed at? BRUCE WASSERSTEIN: You get screamed at all the time. And what you tell people is when you're ready to control your temper we can resume. Or you can stand up and say_ and raise your voice and say, ``I can yell as loudly as you.'' If that's what you want to go do. ADAM SMITH: Have you done that? BRUCE WASSERSTEIN: I've done that as well. And sometimes you say, ``Wait a minute. I'll bring in my screaming team.'' And you walk out and you have someone else come in and their role is to mimic, to satirize the other person. It makes them seem ridiculous. ADAM SMITH: [voice over] The mergers of the '90s, says Wasserstein, are much different than the '80s. Deals are now more strategic. They're being done using stock, very high prices. And if you don't like merger mania, too bad. It's only just begun. BRUCE WASSERSTEIN: The basic print is to continue at a high level of activity. And that's because other than financial market reasons, the drivers of deregulation, technology and globalization are just beginning. In a way, this period is closest to the sort of turn-of-the-century period where you had a spurt of a new level of industrial development. And that bred a lot of consolidation, new companies, things of that sort. I think what's very difficult and one of the points I make in the book by going through history, is companies are very vibrant beings. They're not created in perpetuity as stone fortresses. GM was created. It was a bunch of mergers of companies that were developed on an entrepreneurial basis. GE was created from a group of companies. And we'll have the same phenomenon in our age because this is an inflection point; a unique period in industrial development. And that's something that's, on the one hand, fascinating to be part of, great to be living in, but it does have this aura of uncertainty. And there will be blunders, mistakes, errors. People will do stupid things. There will be cycles. And that's the nature of the development. But the choice is a static system that becomes archaic. ADAM SMITH: To a cynical observer, it looks like companies buy a lot of other companies, they stick them all together. And then a few years go by and then they take them all apart and sell them and you're in the middle. Buying and selling, getting it in both directions. BRUCE WASSERSTEIN: I'll give you the best example of that. We've bought and sold for various people a company called Entenmann's Donut Company, I think some five times. On the other hand_ ADAM SMITH: You mean the phone rings and whoever owns Entenmann's say, ``Hey, you want to sell it again?'' BRUCE WASSERSTEIN: Exactly. And they know who is expert at selling it. On the other hand, each time it sold for a higher price and the buyers have all been happy. ADAM SMITH: Let's just say a friend of yours has a kid who is about to graduate. He wants to make millions of dollars a year, so he wants to be an investment banker. What advice do you give him and what questions do you ask him about his own abilities? BRUCE WASSERSTEIN: Don't go in some business because of the money, that's the wrong approach. Go in it because of the curiosity, hunger, enthusiasm you have for it. What's interesting about this business is that it's a derivative of change. It is part of understanding people's stories, people's strategy; interacting with leaders at their point of poignancy, at their moment of pain and of challenge. And that's what makes it exciting and interesting. You get the inside story as this fable of the changes in the industrial economy unfold. [Graphic: Bruce Wasserstein's Big Deals
On the Spot Back to Top ADAM SMITH: The language of selling is truly global and Madison Avenue has no lock on creativity. With me now is Bob Garfield of AD AGE magazine to put some of the commercials nominated for top prizes at the Cannes Advertising Festival, on the spot. All right, the best commercials in the world and you want to show two that deal with female self image. BOB GARFIELD, Columnist, AD AGE: They take very different directions to talking about it. [Excerpt from Special K commercial - On screen: ``Designers should try wearing what they design for us. Look good on your own terms. Eat sensibly. Special K.''] ADAM SMITH: Where does that come from? BOB GARFIELD: That comes from Leo Burnett Company in Toronto. ADAM SMITH: In Canada? BOB GARFIELD: Yes. ADAM SMITH: But the Canadian one has a sense of irony. The American one for the same product, as I recall, tells you to eat Special K so you can get trim. BOB GARFIELD: Yeah. It's quite amazing, actually. Because there's kind of a feminist message about_ you have a body, be satisfied with it. Just try to be trim, eat sensibly and let Special K help. The campaign that was running for years in the states showed an incredibly beautiful and very slender woman standing in front of the mirror just admiring her feminine perfection; her idealized body and thanking Special K for getting her there. I mean, it was a ludicrous thing that played into the very sensibilities that that commercial we just saw is attacking. And it just shows that there's_ across the border they just have a slightly different view of how to get into the female psyche. And now that spot is actually running in the states as well. ADAM SMITH: Are you saying that Americans, American advertising has a blunter ``get this'' approach? BOB GARFIELD: Look, it's dangerous to make generalizations. But I would say yes, in general, advertising from offshore tends to be more ironic. Our culture of advertising is simply different than the culture of advertising experienced around the world. Commercial television as we know it has existed here since after World War II. Even in the United Kingdom, England_ you know, we think of England as being just like us only with fish and chips, really has only had a commercial television culture for the last, say, 15 or 20 years. And the hard sell was never a part of it. ADAM SMITH: All right. You brought another commercial to contrast. Let's take a look at that. [Excerpt from Dare commercial: 1st ACTOR: Does my bum look big in this? 2nd ACTOR: Yes. But at least it takes the focus off your face. ANNOUNCER: Dare to be yourself.] ADAM SMITH: What did he say? His Australian accent is so strong, I didn't get it. It takes the focus off your ``fice?'' BOB GARFIELD: Yes, off your face. ADAM SMITH: Off your face. BOB GARFIELD: She asked if the dress made her bum look too big and he said, yes, which was not the answer she was looking for in the first instance. And then he said that it takes the focus off of her face. ADAM SMITH: Well, he's a bumpkin. This is not a subtle commercial. What's this about? BOB GARFIELD: No, this is a commercial that would probably not show up on American television for a very different reason _ because it's so grotesquely, politically incorrect. ADAM SMITH: It is politically incorrect. BOB GARFIELD: But it's wonderful because, you know, it is about this issue of self image. And he is expected in this little dance to say a certain thing. But instead, because he is drinking this kind of beverage, Dare, he dares to say precisely what is on his mind. ADAM SMITH: Oh, I get it. The beverage is called Dare. He drinks the beverage and then he says exactly what is on his mind _ it takes the emphasis off your face. BOB GARFIELD: Off your face. And it's not what she's looking to hear from him. And it's certainly nothing that any male would be expected to say. But, of course, this is their way of getting it to the point. It's what men are really thinking. ADAM SMITH: It's funny, but it is politically incorrect. Will it sell whatever that is in Australia? BOB GARFIELD: Oh, I don't think so, but people will be talking about the commercial. It's a fringe product, you know. I don't think_ this is not going to be the next, you know, Coca-Cola of Australia. It will get some attention. ADAM SMITH: Maybe it will get noticed. BOB GARFIELD: That's what they're up to.
In Focus ADAM SMITH: Social activism used to feature demonstrations in the streets and huge rallies led by charismatic speakers. Few were as spellbinding as the Rev. Jesse Jackson. These days, Jesse Jackson, once a presidential candidate, is still working to change the system and his methods are much different. Correspondent Adele Malpass has that story, In Focus.
In Focus. Back to Top JESSE JACKSON, President, The Wall Street Project: Stop putting profit over people. Put America back to work. ADELE MALPASS, Correspondent: [voice over] No more jawboning corporate America from the campaign trail. Jesse Jackson has gone mainstream. Jackson is now a corporate insider. His new group, the Wall Street Project, has bought stock in 80 blue chip companies such as CBS, Coca-Cola and General Motors. His new approach has got the attention of everyone from President Clinton to Fed chairman Alan Greenspan. JESSE JACKSON: We use our access as shareholders to demand that these companies open up in terms of their board of directors, their employment, their management, their investors, their equity partners. We're simply demanding that the American dream be available to and apply to all Americans. ADELE MALPASS: [voice over] Jesse Jackson used to look to Washington to get results. Now he's looking to Wall Street. JESSE JACKSON: We stand to benefit more from relating to the growth sector of our economy than the political control sector. ADELE MALPASS: [voice over] The old Jackson used to meet with heads of state. The new Jackson meets with CEO's. His main targets _ stopping mega mergers. [on camera] Why are you opposing the NCI-WorldCom merger? JESSE JACKSON: WorldCom has had, to start there, an all-white male board. And yet, their market is diverse. Their board should be diverse. I think that's a recommendation for a change, this and part of a reaction to the pressure that we've applied. ADELE MALPASS: [voice over] The newly merged boards of WorldCom and MCI will include a minority director who has already been serving on the MCI board. Jackson is also questioning how the Chrysler-Daimler-Benz deal will affect minorities. [on camera] But here at the Big Board, most mega mergers are perceived as a positive for the companies and the stock market. Jackson disagrees and says they're leading to downsizing and layoffs. JESSE JACKSON: A big factor is that when I see profits up, wages down, workers ousted, that's a bad thing. Somehow the American workers who built these corporations must be a factor in the equation. BILL DAL COL, President, Americans for Hope, Growth & Opportunity: Those companies have a responsibility to their shareholders who are the American people. And in the end, we are all part of the same economic system. ADELE MALPASS: [voice over] Jackson is not solely focused on mergers. He's also trying to open up Wall Street. With 80 percent of all stock brokers being white males and only 6 percent of corporate directors being minority, Jackson is pushing Wall Street to do better. JESSE JACKSON: Bring to Wall Street the value system of our democracy. And that would make it more inclusive and would make all of us have a sense of shared security. ADELE MALPASS: [voice over] He also wants to use corporate pension funds to inject capital into low-income communities. This plan is controversial. [on camera] Don't you think pension fund money should be prudently invested to plan for people's retirement? JESSE JACKSON: We'll take risks_ more risks, say, in South Korea or Indonesia than we will in urban and rural America. The fastest growing markets in the world today is the underserved black and brown markets of America. ADELE MALPASS: Some say the Wall Street Project is simply your economic platform for a presidential campaign. JESSE JACKSON: That's true. That's the platform for my economic message for 1998-2010. The fact is we intend to use our strength to affect the behavior of the financial culture. [Graphic: Jesse's Complaint
Personal Best Back to Top ADAM SMITH: A letter we recently received from Lisa Reifsnyder of Rye, New York, struck us as important. Lisa writes, ``I think most people know how important it is to have a will, but does your will automatically determine who gets custody of your children if both parents die? I know it sounds terrible, but I wonder if most people have thought about this?'' Lisa, thanks for your question. Your signed copy of my book, The Money Game, is in the mail. With me now to answer Lisa's question is Deborah Jacobs of Bloomberg Personal magazine, to help make your custody and estate planning a personal best. What are you going to tell Lisa? DEBORAH JACOBS, Bloomberg Personal: Anytime you don't put it in writing, you leave it up to a state to decide_ ADAM SMITH: A state like New York, New Jersey, Illinois? DEBORAH JACOBS: The court in New York. What would happen is if you don't address it in your will and maybe two members of your family want the kids, they have to go before a court and a court decides. Or worse yet, nobody may want your kids. ADAM SMITH: You have to pick two things. You have to pick a trustee to see their finances and a guardian to make sure they get fed and clothed? DEBORAH JACOBS: Yes. It's the guardian who is going to take care of your children physically. The guardian does not have responsibility for your children financially, although of course as a practical matter if your children are living in their house, they're not going to not feed them. ADAM SMITH: Are they the same person sometimes? DEBORAH JACOBS: It can be the same person or a different person. And the advantage of having a different person is you have a system of checks and balances and you don't have to worry that the person who was the most loving individual to take care of your child is terrible with money or a bad investor or might steal your child's money. ADAM SMITH: A lot of people have a bank as a trustee. But a bank is never a guardian, is it? DEBORAH JACOBS: No. ADAM SMITH: A guardian is always a person. A bank can be a trustee. DEBORAH JACOBS: Right. But it's really_ it's fine to have a bank as a trustee, but it's even better if you know somebody who you trust with the child's money whose investment sense you trust and who you trust to make decisions about how money will be spent. Because what will happen is the guardian who is taking care of your child must go to the trustee and ask for the money to pay for the private school, the summer camp, whatever. ADAM SMITH: So you have to be sure the guardian and the trustee get along? Or you don't want them to get along because you want a little degree of tension? DEBORAH JACOBS: Ideally, you want them to get along. But you do want a system of checks and balances. Now many people say if I trust the person with my child, I should trust them with the money. I disagree with that. ADAM SMITH: There are a lot of divorces around now. What if you have conflicting instructions in two different wills? DEBORAH JACOBS: Well, both the husband and the wife will have a will, whether you're divorced or whether you're still married. And legally, the last person to die has the final say. So it would be best if both of your wills named the same person as the guardian. However, sometimes in real life it doesn't work that way and you do wind up with a situation where each will says something different. But it's better to know who is named ahead of time, even if you can't agree on, than have to have someone else. ADAM SMITH: All this goes into your will. Everybody should put this in their will _ who is going to handle the money; who is going to handle the kids? And then you have to revisit it, don't you? DEBORAH JACOBS: You should revisit it every five years. That is, you should think only five years ahead when you're writing your will because circumstances change. Maybe your parents, who were very_ in good health at the time that you made your will can no longer handle your toddler. Or maybe your sister, who you thought was living nearby and would take guardianship of your children, moved to California and you don't want your children relocated. Or maybe the person you've named as the guardian has died and you didn't name an alternate. So this is a subject you need to stay on top of, as unpleasant as it might sound. [Graphic: Deborah Jacobs' Advice ADAM SMITH: What question would you like answered to help you do your personal best in the money game? Get in touch with our e-mail address, letters@adamsmith.net. Or write to us the old-fashioned way at Adam Smith's Money Game, 885 Third Avenue, Suite 2800, New York, New York 10022. We look forward to hearing from you. And if we answer your letter on the air, I'll be sending you a personally signed copy of my book, The Money Game. I'm Adam Smith. See you next week as the Money Game continues. ANNOUNCER: For more of the Money Game, visit us in cyberspace at www.adamsmith.net. ANNOUNCER: This program is made possible by a grant from MetLife with over $330 billion in assets under management. Funding has also been provided by the Roy R. and Marie S. Neuberger Foundation. Back to Top CREDITS Produced by ADAM SMITH EDUCATIONAL PRODUCTION Thanks to: Special thanks to: 3-D Models Provided in Part by 3-D CAFE For a VHS cassette send $19.95 or $5.00 for a printed transcript to: Copyright _ 1998 Adam Smith Educational Productions Ltd.
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