Recently in Research in Investment Analysis & Securitisation Category


In November 2009, the Australian cultural policy author Ben Eltham and I published a conference paper and presentation on Twitter's role in Iran's 2009 election crisis. One of our conclusions was that as a social network platform Twitter can be prone to rumours and two dynamics: information cascades (people making the same choices) and rational herds (a form of social learning in which individuals self-organise into groups, usually on the basis of shared affinities, identity or preferences). We cited Christopher Chamley and Mark Schindler's work, whilst Cass Sunstein has written important work on how information cascades and rumours spread.

Collectively, these authors observe the tendency for people to forward and filter information without checking the pertinent facts, evaluating the motives of their source, personalising the 'other', and also not considering the original, appropriate context.

One of the best examples of this phenomenon is the pre-Twitter career of financier and philanthropist Michael Milken (personal site). In the early 1970s, as a young analyst at the leveraged buyout firm Drexel Burnham Lambert, Milken foresaw a new market in high-risk securities that blue-chip investment firms would not touch: high-yield or 'junk' bonds of debt-laden companies. As depicted in Connie Bruck's excellent book The Predator's Ball (New York: Penguin Books, 1989), a source for Adam Curtis' must-see documentary The Mayfair Set (BBC, 1999), Milken became a major driver of the 1980s private equity boom. Despite being implicated in the Ivan Boesky arbitrage case, and being barred for life from the securities industry, Milken has subsequently reinvented himself through the Milken Institute think-tank and other activities.

The power-users of social networks like Facebook and Twitter may joke about gaining 'world domination'. As a self-styled 'Master of the Universe', Milken actually achieved this goal, if only for a brief time. Consider the strategic dimension of how Milken did so. As a true innovator, he foresaw new markets and macroeconomic trends a decade before others did. He developed powerful, financial innovations in debt securitisation, mergers and acquisitions, and risk arbitrage. He built a loyal and private network, together with the organisational capabilities to leverage deal-flow. He also controlled the public dissemination of market information through conferences and media interviews. He understood the subtle power of crafting and framing a media image around themes which appealed emotionally to people --- entrepreneurship, freedom, and being the revolutionary vanguard --- which Curtis argues was really a personal agenda to cement Milken's influence, power and social status. Many of Milken's strategies tapped the dynamics of rumours, information cascades and rational herds, apparent in the 1980s private equity boom.

Perhaps this is why Milken tried (unsuccessfully) to convince Bruck not to publish her book.
Provisional go-ahead to work on a new journal article with Ben Eltham.

CFA Institute's strategies after the global financial crisis: raise awareness of the CFA Charter through regional investment conferences such as in Bahrain, with CFA Bahrain; and new memoranda of understandings with capital market regulators.

A profile of Lehman Bros. fallen CFO Erin Callan revisits an early chapter in Andrew Ross Sorkin's Too Big To Fail. Sorkin recounts how Callan is promoted too quickly by Lehman's board, and then forced into a corner by market volatility. As the firm's CFO, Callan then adopts a charm offensive strategy with analysts and financial media. The strategy fails, most spectacularly when Callan has a war-of-words with David Einhorn, the hedge fund manager of Greenlight Capital who 'shorts' Lehman's stock. Guardian scribe Andrew Clark blames the 'glass ceiling' and trader floor misogyny. Perhaps true, but for me there's another, more compelling explanation: Callan opted for media-savvy public relations strategies which Einhorn as a masterful short-seller was trained to see through. For more on his investment research process, see Einhorn's book Fooling Some of the People All of the Time (Hoboken, NJ John Wiley &.Sons, 2008).

CNBC: The Fall of Erin Callan, CFO (March 2010)

CNBC: David Einhorn on Lehman Bros. and Erin Callan (June 2008)
Burns, Alex & Eltham, Ben (2009). 'Twitter Free Iran: An Evaluation of Twitter's Role in Public Diplomacy and Information Operations in Iran's 2009 Election Crisis'. In Papandrea, Franco & Armstrong, Mark (Eds.). Record of the Communications Policy & Research Forum 2009. Sydney: Network Insight Institute, pp. 298-310 [PDF pp. 322-334]. Presentation slides here.

Social media platforms such as Twitter pose new challenges for decision-makers in an international crisis. We examine Twitter's role during Iran's 2009 election crisis using a comparative analysis of Twitter investors, US State Department diplomats, citizen activists and Iranian protesters and paramilitary forces. We code for key events during the election's aftermath from 12 June to 5 August 2009, and evaluate Twitter. Foreign policy, international political economy and historical sociology frameworks provide a deeper context of how Twitter was used by different users for defensive information operations and public diplomacy. Those who believe Twitter and other social network technologies will enable ordinary people to seize power from repressive regimes should consider the fate of Iran's protesters, some of whom paid for their enthusiastic adoption of Twitter with their lives.

Burns, Alex & Saunders, Barry (2009). 'Journalists as Investigators and 'Quality Media' Reputation'. In Papandrea, Franco & Armstrong, Mark (Eds.). Record of the Communications Policy & Research Forum 2009. Sydney: Network Insight Institute, pp. 281-297 [PDF pp. 305-321]. Presentation slides here.

The current 'future of journalism' debates focus on the crossover (or lack thereof) of mainstream journalism practices and citizen journalism, the 'democratisation' of journalism, and the 'crisis in innovation' around the 'death of newspapers'. This paper analyses a cohort of 20 investigative journalists to understand their skills sets, training and practices, notably where higher order research skills are adapted from intelligence, forensic accounting, computer programming, and law enforcement. We identify areas where different levels of infrastructure and support are necessary within media institutions, and suggest how investigative journalism enhances the reputation of 'quality media' outlets.

A 2008 academic publication that made the Top 25 downloaded papers of the past year on Victoria University's institutional repository:

Floyd, Josh
, Burns, Alex and Ramos, Jose (2008). A Challenging Conversation on Integral Futures: Embodied Foresight & Trialogues. Journal of Futures Studies, 13(2), 69-86.

Practitioner reflection is vital for knowledge frameworks such as Ken Wilber's Integral perspective. Richard Slaughter, Joseph Voros and others have combined Wilber's perspective and Futures Studies to create Integral Futures as a new stance. This paper develops Embodied Foresight as a new approach about the development of new Integral Futures methodologies (or meta-methodologies) and practitioners, with a heightened sensitivity to ethics and specific, local contexts. Three practitioners conduct a 'trialogue' - a three-way deep dialogue - to discuss issues of theory generation, practitioner development, meta-methodologies, institutional limits, knowledge systems, and archetypal pathologies. Personal experiences within the Futures Studies and Integral communities, and in other initiatory and wisdom traditions are explored.
Mark Pesce pointed me to Bernard Lunn's article which contends netizens now live in a real-time Web. Lunn suggests that journalists and traders are two models for information filtering in this environment, and that potential applications include real-time markets for digital goods, supply chain management and location-based service delivery.

Lunn's analogy to journalists and traders has interested me for over a decade. In the mid-1990s I read the Australian theorist McKenzie Wark muse about CNN and how coverage of real-time events can reflexively affect the journalists who cover them. As the one-time editor for an Internet news site I wrote an undergraduate essay to reflect on its editorial process for decisions. I then looked at the case studies on analytic misperception during crisis diplomacy, intelligence, and policymaker decisions under uncertainty. For the past year, I've read and re-read work in behavioural finance, information markets and the sociology of traders: how the financial media outlets create noise which serious traders do not pay attention to (here and here), what traders actually do (here, here, and perhaps here on the novice-to-journeyman transition), and the information strategies of hedge fund mavens such as George Soros, Victor Niederhoffer, David Einhorn, Paul Tudor Jones II and Barton Biggs. This body of research is not so much about financial trading systems, as it is about the individual routines and strategies which journalists and traders have developed to cope with a real-time world. (Of course, technology can trump judgment, such as Wall Street's current debate about high-frequency trade systems which leaves many traders' expertise and strategies redundant.)

Lunn raises an interesting analogy: How are journalists and financial traders the potential models for living in a real-time world? He raises some useful knowledge gaps: ". . . we also need to master the ability to deal with a lot of real-time information in a mode of relaxed concentration. In other words, we need to study how great traders work." The sources cited above indicate how some 'great traders work', at least in terms of what they explicitly espouse as their routines. To this body of work, we can add research on human factors and decision environments such as critical infrastructure, disaster and emergency management, and high-stress jobs such as air traffic control.

Making the wrong decisions in a crisis or real-time environment can cost lives.

It would be helpful if Lunn and others who use this analogy are informed about what good journalists and financial traders actually do. As it stands Lunn mixes his analogy with inferences and marketing copy that really do not convey the expertise he is trying to model. For instance, the traders above do not generally rely on Bloomberg or Reuters, which as information sources are more relevant to event-based arbitrage or technical analysts. (They might subscribe to Barron's or the Wall Street Journal, as although the information in these outlets is public knowledge, there is still an attention-decision premia compared to other outlets.) Some traders don't 'turn off' when they leave the trading room (now actually an electronic communication network), which leaves their spouses and families to question why anyone would want to live in a 24-7 real-time world. Investigative journalists do not generally write their scoops on Twitter. 'Traditional' journalists invest significant human capital in sources and confidential relationships which also do not show up on Facebook or Twitter. These are 'tacit' knowledge and routines which a Web 2.0 platform or another technology solution will not be the silver bullet for, anytime soon.

You might feel that I'm missing Lunn's point, and that's fine. In a way, I'm using his article to raise some more general concerns about sell-side analysts who have a  'long' position on Web 2.0. But if you want to truly understand and model expertise such as that of journalists and financial traders, then a few strategies may prove helpful. Step out of the headspace of advocacy and predetermined solutions --- particularly if your analogy relies on a knowledge domain or field of expertise which is not your own. Be more like an anthropologist than a Web 2.0 evangelist or consultant: Understand (verstehen) and have empathy for the people and their expertise on its own terms, not what you may want to portray it as. Otherwise, you may miss the routines and practices which you are trying to model. And, rather than commentary informed by experiential insight, you may end up promoting some myths and hype cycles of your own.
Paul Roberts pointed me to this Don Tapscott video about how wiki-type collaborative knowledge might transform risk management in financial institutions. Tapscott draws on his coauthored book Wikinomics (2008) to pose the following points:

(1). Financial institutions need to share their intellectual property (IP) about risk management in a commons-based model similar to the Human Genome Project or Linux.

(2). The key IP are algorithms and ratings system for risk.

(3). In response to an objection that the key IP should remain proprietary, Tapscott points to the failure of algorithms and rating systems to prevent the systemic risk of the global financial crisis.

(4). Tapscott appeals to financial institutions to act as peers --- "a rising tide lifts all boats" --- and that through sharing this information, they can compete more ethically in new markets, reinvent their industry, transform the practices in risk management, and act with a "new modus operandi."

Tapscott is a persuasive business strategist who manages above to integrate his advocacy of "wikinomics" with the current debate on financial institutions, and his earlier, mid-1990s work on how technology would transform business. He echoes Umair Haque's call for a Finance 2.0 based on transparency and social innovation in financial markets.

Here are thoughts, some 'contrarian', on each of Tapscott's points.

(1). Read Burton Malkiel or the late Peter L. Bernstein and you will see that finance is driven to innovate new instruments, methodologies and institutions to hedge or arbitrage risk. Some of these are commons-based such as the actuarial development of insurance. Some innovations are now blamed for the problem, such as RiskMetrics' Value at Risk methodology. The Basel II Accord which attempts to provide an international regulatory framework raises an interesting question: Under what conditions can a commons-based approach be successfully implemented in an institutional form and practices? Off-balance sheet items and special investment vehicles are two potential barriers to this goal. As for Tapscott's examples, their success is due to a combination of public and private approaches, such as the parallel research by the National Institutes of Health's Human Genome Project and Craig Venter's Celera Corporation. This combination dynamic can be left out of an advocacy stance for a commons-based solution.

(2). Tapscott and Haque are correct to identify these as points of leverage. Some of the algorithms and rating systems are public information, such as Google Finance and Morningstar metrics, and trader algorithms on public sites. There are however several potential barriers to Tapscott and Haque's commons-based view. Investors will have different risk appetites and decision/judgment frames despite access to the same public information. Philip Augar discloses in The Greed Merchants (Portfolio, New York, 2005) that proprietary algorithms rarely remain as private knowledge within institutions unless the knowledge is kept tacit, or in the case of ex-Goldman Sachs trader Sergey Aleynikov, through lawsuits. Aleynikov's expertise in high-frequency trading which uses complex algorithms and co-located computer systems highlights other barriers: access to technology, information arbitrage, learning curves, and market expertise. As Victor Niederhoffer once observed, this advantage renders large parts of the financial advice or investor seminar industry obsolete, or as noise and propaganda at best. Finally, although public information may help investors it may never completely replace risk arbitrage based on private information or market insight.

(3). Tapscott's observation about the global financial crisis echoes Satyajit Das, Nassim Nicholas Taleb, Nouriel Roubini and others on the inability of institutions to deal with the systemic crises which the complex instruments and methodologies created. Some hedge fund managers however have been very successful, despite the crisis. Others, notes Gillian Tett in her book Fool's Gold (The Free Press, New York, 2009) helped create the financial instruments which led to the crisis, yet largely avoided it. So, a more interesting question might be: How did such managers avoid or limit the effects from the systemic crisis, and what decisions did they make?

(4). This is Tapscott as inspirational advocate for change. He echoes Haque on momentum and long-based strategies for investors. He also channels Adam Brandenburger and Barry Nalebuff's game theoretic model of cooperating to create new markets and then competing for value. This is unlikely to happen in competitive financial institutions. A project to develop a commons-based approach to financial risk management may however interest a professional organisation such as the CFA Institute (US), Global Association of Risk Professionals (US) or the Financial Services Institute of Australasia. Will Tapscott lead an initiative to develop this?
For anyone attending Sydney's Luminous Festival curated by musician/producer Brian Eno, some lessons for researchers:

1. Develop a longer-term view for your body of work/research program: Eno's 40-year career demonstrates how creativity, foresight and role plularity may underpin a body of work or research program. Eno's career spans several phases: early Roxy Music, a solo career which popularised ambient music and generative art, and as a producer on breakthrough albums by David Bowie, David Byrne, Talking Heads, and U2 (sorry, Coldplay doesn't count). For most people, helming any one of the following projects would be enough: Talking Heads' Remain In Light (1980); U2's The Unforgettable Fire (1984), The Joshua Tree (1987) and Achtung Baby (1991); or David Bowie's epochal 'Berlin trilogy' of Low (1977), Heroes (1977) and Lodger (1979). Eno's hit rate and cultural influence suggests he has a greater embodied awareness. For an overview, see David Sheppard's recent biography On a Faraway Beach (Orion Books, London, 2008).

2. Develop a self-mastery of technique: As the creator of ambient music and generative art, Eno is frequently portrayed as a Renaissance-style creative mastermind with adaptive intent. Two more informed examples are Eric Tamm's PhD thesis and Elspeth McFadzean's study ('What We Can Learn From Creative People? The Story of Brian Eno', Management Science journal, 38:1, 2000, pp. 51-56). Eno's diary A Year With Swollen Appendices (Faber & Faber, London, 1996) illustrates the emotional strength; attitude to funding, project and organisational constraints; and granularity of focus that a research program needs in the face of adversity.

3. Honour chance and luck: The 'Law of Accident' plays an aleatory, randomised role in many of Eno's most influential creations: the car accident which led to the ambient music experiments for Discreet Music (1975), the Frippertronics tape delay experiments which resulted in Eno and Robert Fripp's album No Pussyfooting (1972), and the oracular deck Oblique Strategies (1975) created with the late painter Peter Schmidt. This period shows the value of a disposition for action that is informed by conceptual depth; rapid, iterative development for strategy execution; and quasi-experimental methods with collaborators that fail fast and leverage upside risk. Eno continues this line of development with the art installation 77 Million Paintings (2006).

4. Build a network of collaborators and mentors: Eno's collaborators range from David Bowie, David Byrne and U2 to journeymen producers Daniel Lanois and Robert Fripp. This network enabled Eno to transition from Roxy Music to a solo career, and then as an in-demand producer (where word of mouth and past credits are the equivalent of academic publications and grants). As recounted in Simon Reynolds' history of New Wave innovation, Rip It Up And Start Again (Faber & Faber, London, 2005), Eno also became a mentor and subcultural curator in the late 1970s to New York's 'No Wave' scene and artists such as Devo and Talking Heads. Many of these artists and producers would become influential in their own right, rather than followers of an Eno aesthetic. Of course, sometimes things can go wrong: the rest of Talking Heads blamed Eno's production as one of the catalysts for vocalist David Byrne's decision to leave the band. More recently, Eno has leveraged his 'public intellectual' status to promote John Brockman's Edge salon and The Long Now Foundation.
The global financial crisis has refocused commentators on the life of intellectual/vipra John Maynard Keynes. Hedge fund manager Barton Biggs devotes the closing chapter of a recent book to Keynes' aesthetics, investment style and economic influence. Ex-World Bank investment manager Liaquat Ahamed zeroes in on how Keynes became so influential in the first chapter of his new book Lords of Finance: The Bankers Who Broke The World (Penguin Press, New York, 2009):

As I began writing of these four central bankers and the role each played in setting the world on the path toward the Great Depression, another figure kept appearing, almost intruding into the scene: John Maynard Keynes, the greatest economist of his generation, though only thirty-six when he first appears in 1919. During every act of the drama so painfully being played out, he refused to keep quiet, insisting on at least one monologue even if it was from offstage. Unlike the others, he was not a decision maker. In those years, he was simply an independent observer, a commentator. But at every twist and turn of the plot, there he was holding forth from the wings, with his irreverent and playful wit, his luminous and constantly questioning intellect, and above all his remarkable ability to be right.

Keynes proved to be a useful counterpoint to the other four in the story that follows. They were all great lords of finance, standard-bearers of an orthodoxy that seemed to imprison them. By contrast, Keynes was a gadfly, a Cambridge don, a self-made millionaire, a publisher, journalist, and best-selling author who was breaking free from the paralyzing consensus that would lead to such disaster. Though only a decade younger than the four grandees, he might have been born into an entirely different generation.

Ahamed offers several lessons here on self-mastery strategies for intellectuals/vipra who desire to influence the objective universe. Keynes mastered a repertoire of roles which developed his intellectual strengths through a boostrap process. Although an establishment outsider, Keynes influenced the frames and contexts of economic decision-makers and political leaders, and in doing so, created the Keynesian school of economics.

Keynes used luck, timing and dramatic situational contexts such as the Treaty of Versailles negotiations in 1919 and the Great Depression in 1929-33 to protest against the establishment, create a reputation for asking difficult questions, and to envision solutions. Through each of these exogenous shocks he used his repertoire to gain influence and public notoriety, despite financial and health setbacks. From his initial antinomian commentary, Keynes' scale and scope of his solution design expanded to its zenith: the co-design of the Bretton Woods system for international fixed exchange rate and monetary policy management, which lasted from 1944 to the Nixon Shock in 1971.

For consultants and foresight practitioners who wish to cast their influence into the world, Keynes' career path and strategies illustrates one model of how to achieve this.


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Parker Conrad and Michael Sha launched Wikinvest in 2006 to gather user-generated security analysis. The project collates wiki profiles on investment concepts, fundamental analysis of companies and technical analysis of market price movements. It also appeals to MBA students with sections on personal investing, investment concepts and funds management. Conrad and Sha have graduated from Harvard dorm day traders to Web 2.0 knowledge entrepreneurs.

Claire Cain Miller's New York Times profile makes the obligatory link with Wikipedia, the online encyclopedia. Conrad and Sha go into some detail of their verification process for data and public sources. Actually, the wiki has some specific applications for the pooling or crowdsourcing of investor insights. Sell-side analysts in the research departments of investment banks can have dual allegiances if the underwriting departments incentivise their research products to drive sales revenues. The best will gravitate to portfolio managers, dynamic asset allocation and hedge funds that use event/risk arbitrage and short-sell strategies. An investor wiki could provide a counterbalance to these influences through a broader snapshot of investor sentiment, and strategies to delimit analyst biases and groupthink. A side-effect however is that investor views are more likely to converge to a mean, and the market efficiencies may thwart value investing strategies that require information asymmetries.

In fact, the Wikipedia analogy has some limitations because analysts, traders and portfolio managers all structure and use market information in different ways to online encyclopedias. This was one of wiki creator Ward Cunningham's insights when he devised the Portland Patterns Repository in 1995: the value of a repository to capture domain knowledge and processes, and to codify them from tacit to explicit form using a methodology such as design patterns or object oriented programming structures. If it stays within Wikimedia's online encyclopedia model then Wikinvest will be suited to fundamental analysis and introductory investing topics. However, it could evolve into a different form if it adopts insights from behavioural finance and tactical asset allocation into the wiki process. These areas augment Cunningham's original schema with strategies to deal explicitly with how information quality and source selection can affect investor decisions, judgment and verification. Even these vary depending on the end-user, their self-awareness, the intended contexts of use, and what potential outcomes may occur (a normative stance on the superiority of user-generated content over 'traditional' media is not sufficient alone to address the concerns that these processes are meant to anticipate and solve). The pressure to change and evolve may come from sell-side brokerages which now use Wikinvest as a cost-efficient data source for market commentaries. Alternatively, it may come from Wikinvest's end-users as the wiki gains more public prominence, and attracts a range of investor styles with knowledge of asset classes, inter-market volatilities and global dynamics. If this occurs then Wikinvest and other wikis could have a pivotal role in the democratisation of finance beyond London, New York and Chicago.

Just don't be surprised if Icahn Reports maven Carl Icahn (video) launches a wiki raid.
Hollywood recently honoured Steven Spielberg with a two-hour retrospective on his 40-year career as a film director and producer. FT's Matthew Garrahan reports however that the celebrations may be shortlived: Spielberg cannot raise debt capital for his independent film company DreamWorks after talks failed with HBO and NBC Universal.

DreamWorks has endured a difficult 14-year history. Spielberg co-founded the film studio as DreamWorks SKG in 1994 with music mogul David Geffen and Jeffrey Katzenberg who had just left Disney after a high-profile battle with Michael Eisner. Spielberg envisioned DreamWorks SKG as a 21st century successor to United Artists whilst Geffen and Katzenberg wanted their independence from the Hollywood establishment. However since 2004 the trio have rolled back their original vision and relied instead on the divestiture of the DreamWorks Animation division and distribution deals. They sold the studio to Viacom in 2005 partly because Geffen wanted an exit strategy from a daily operations role. Spielberg announced a $US1.5bn deal for independent films in September 2008 with India's Reliance ADA Group which specialised in Bollywood films. The announcement was a world is flat moment worthy of Thomas Friedman: would India invade Hollywood as Japan's Sony had done with its acquisitions of CBS Records (1987) and Columbia Pictures Entertainment (1989)? But as Garrahan notes, Reliance ADA Group's funding of Spielberg's independent vision was contingent on debt finance and distribution deals from other funding sources, which have now ended the negotiations.

There are several reasons for this outcome apart from the global financial crisis. Just before he announced the Reliance ADA Group deal industry analysts suggested that Spielberg had priced himself out of the United States market. Jeffrey Katzenberg's attention is elsewhere: a charm offensive to raise the investor profile of DreamWorks Animation and its 3D releases. NBC Universal, HBO and other funding sources have their own reasons to be wary of DreamWorks: the fledgling studio was too early on digital television in the dotcom era, Geffen and Katzenberg adopted hardball negotiation tactics on earlier distribution deals which make a repeat game difficult. The ancillary and complementary markets in cable television, DVD and Blu-Ray sales face a volatile near-term future. Collectively, these factors may weaken Spielberg's negotiation stance as the global financial crisis closes off other funding sources.

To have different negotiation options Spielberg may need to alter his game plan and overcome two barriers.

First, DreamWorks never developed the economies of scale and leverage to achieve Spielberg's strategic vision as an independent studio. It overestimated demand for its Shrek and Transformers franchises and made money instead on mid-level romantic comedies and animation films. DreamWorks faced firm-specific risks from distribution partners which it hedged using ancillary and complementary markets to control revenue forecasts. Instead of the prohibitive cost structures of a studio Spielberg could model an independent DreamWorks on a smaller vision: Francis Ford Coppola's Zoetrope and Harvey Weinstein's Weinstein Company.

Second, Spielberg could look at other options to raise capital. He could follow David Bowie's example of asset-based Bowie Bonds and underwrite the films through commercial bonds on the future revenues of individual films or a production slate portfolio. Commercial paper may be an option as the global finance crisis recedes. A far more disruptive strategy would be if Spielberg adopted a microfinance model that would enable a broader range of investors to participate than the traditional debt and equity markets. DreamWorks' legacy would then surpass the Hollywood studio system to encompass the bottom billion's dreams of financial independence.

J6M Returns

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At the nadir of the 2000-01 dotcom crash I worked for an Internet news portal that a high-profile US interactive consulting firm had acquired. As the stock price dramatically plummeted the firm's employees apparently left irate messages on the CEO's mobile phone and debated the merits of an (in)famous investor conference call. After a deathwatch period the ex-CEO formed a holding company, hit the university lecture circuit, launched a new company, and is now an inhouse entrepreneur at a venture capital fund. The company was Razorfish, the CEO/entrepreneur is Jeff Dachis, who now works with Austin Ventures.

Jo Johnson's Financial Times interview with Jean-Marie Messier (aka J6M) the fallen ex-CEO of French entertainment conglomerate Vivendi SA (Google Finance stock price) prompted me to follow Dachis's Twitter page. Dachis and J6M offer many lessons on how smart executives can make mistakes, survive the deathwatch period, and fire back. Both faced learning/experience curves as young, ambitious CEOs and grew their global footprint through acquisitions of smaller firms. Both gambled on bold Web 1.0 visions of digital ecosystems in which the acquisitions promised deal synergies. When the gambles failed they became media targets for value destruction which made the deal synergies a mirage: Johnson and Le Monde journalist Martine Orange pilloried J6M in their book The Man Who Tried to Buy the World (Portfolio, New York, 2003).  Just over five years later, J6M is frank with his former nemesis on his survival instinct: "The real motivation is to be alive, to restart, to kick yourself and stand up again."

Johnson believes many of J6M's decisions are gambits to resurrect his reputation on his own terms. He's reached out to financial media journalists who took him to task for Vivendi's hypergrowth. He's a longtime confidante and advisor to French president Niolas Sarkozy. He's joined George Soros, Paul Krugman, Robert Shiller and many others in writing a book on the global financial crisis. But perhaps J6M's smartest move like Dachis was to leverage his core skillset to create value, in a more favourable setting without the pressure of being a public company CEO. J6M founded Messier Partners in 2002 as a 20-person investment advisory boutique with offices in New York, Paris and London that provides cross-border M&A, divestitures and capital raising services (Forbes & International Herald Tribune coverage). Like many boutiques it leverages Messier's name, personal network and a cadre of young analysts whilst keeping a low profile: when I checked, the firm doesn't have a current public website for its Internet domain name and its Internet Archive cache returns errors. You'll have to settle for the boutique's LinkedIn page, BusinessWeek profile and data.

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