Thursday, January 21, 2010
David Jackson: casualty of hubris... though not only his own.
Back in September of 2006 I went to the IMF meeting in Singapore. You can think of the IMF meetings as part Model UN part speed dating. They’re like model UN in that most of the sessions I went to had a bunch of guys trying to explain the massive American fiscal and current account imbalances and why they had been so persistent. No one really understood it but you can’t go to the IMF meeting and get up on stage and say “I really have no idea” so they looked like a lot of high school kids pretending as though they knew what the stance of Sudan would be on refugees in Bosnia. It was charming and made me feel good about the education I had received.
The IMF meeting is also a lot like speed dating. I know it sounds strange to say that about a gathering of the worlds central bankers, who wants to hang out with those guys? Easy the world’s financial institutions because central banks are where the money is. Trouble is, there are so many clients and so many rivals and so many potential clients and rivals, that you only get a little time with each one. Most financial institutions throw parties each night of the conference in an attempt to woo the clients. If you’re a young freebooter like me you check out the parties of the other firms and then work the room at your own so the boss can see you pressing the flesh.
So that night back in 2006 I hit the Saudi party, there were a lot of interesting people there and the most money but, sad to say, no drinks. The Qatari party was truly outstanding. They had all the martinis you wanted, seven different kinds of buffets and I want to say Cirque de Soleil or something there for entertainment, my memory of it is a little fuzzy. The QFC may not have had too much game as a financial center but they threw a mean bash. Then I headed back to my own party. After the riot of the Qatari party my own was pretty lame. I was pigeonholed by some really dull guy from the accounting department or something. He was an important person to cultivate but really not what I had in mind. As I was trying to figure out how to change the conversation to something more interesting than the Venetian discovery of double entry bookkeeping from the Arabs a group of men behind me burst into absolutely uproarious laughter.
As I turned around and as I did I caught the eye of the man at the center of the group, a large and boisterous African American. “Let’s ask him!” The man said, pointing at me. “Ask me what?” I replied. “Well, today we have been playing a game with all our bankers. People have been pitching us deals all day. We have provided them each with a simple test and whoever can pass it wins our next deal. Do you think you can pass?” I wasn’t sure, “I’m not sure, try me” says I. “OK, here goes: I’m going to sing a verse from a song and you have to tell me the name of the song and the artist. OK?” This was really odd but it beat the history of accounting so I told him to shoot. Then the enormous African American began to sing:
“I got in town a month ago, I’ve seen a lot of girls since then”
“If I could meet ‘em I could get ‘em”
“But as yet, I haven’t met ‘em”
“That’s why I’m in the shape I’m in.”
I knew it instantly: “Another Saturday Night, by Sam Cooke from... I think... 1963.” (BTW, that song is quite the theme song for non-Muslim males in Dubai)
Explosive Guffaws, from all the men in the circle but one, our salesman Imran. Imran just stared daggers at me. The man put his arm around Imran with his huge paw coming to rest on Imran’s shoulder. “You see, Imran you should have brought this guy along. Then you would have gotten your trade done. Heh heh heh.”
Then he looked at me, “So, Mr. Soul Man, what is it that you are trying to sell here in Singapore?” As it happened I was there to lobby support among some western finance ministers for a clandestine financing project related to the reconstruction of Lebanon after the recent war, so I told him that I wasn’t selling anything. “That can’t be!” He bellowed, I had been out of the US long enough for the loudness of other Americans to be noticeable. “Why I’ll bet you spent half an hour to get that dimple in your tie exactly perfect this morning. No one who isn’t selling something would go to that length to look so dapper.” It made me a little uncomfortable how right he was. “OK, OK, so you’re selling something but not right now, and not to me. Fine, you get a rain check. One free deal with Istithmar.” The man stretched out his hand to me, “My name’s David Jackson. What’s yours?”
You may recognize that name because David Jackson was the CEO of Istithmar the private equity wing of Dubai World who was forced out yesterday.
I tell this story to give you a sense of the kind of guy that he was. I joined up with David Jackson and crew that night and party hopped the IMF meeting with them, he was a fun guy. Back in 2006 the memory of his time slaving away at an investment bank was still fresh. He has been on the other side of the table pitching deal after deal to sceptical clients. Now he was on the fun side of the table, with a big pile of money and all his former bosses hoping that a few words in the right key some of it would rub off on them. So he had fun with them. He would make them jump through hoops like asking his Arab coverage people to name soul tunes. Or winding them up over their dimple tied ties. He was having fun with it, and why not. He felt he had earned it.
In a lot of ways he had. I think that over time it is possible that he fell under the spell of Dubai Sorcery, and the power of the Dubai Sorcery for expats is that it makes them fall under their own spell. David Jackson was probably a better than average investment banker in New York where he worked for ten years before coming to Dubai. Once in Dubai however, he was a rock star. As the head of a major private equity firm with “middle eastern money” (borrowed in his case) behind him people were lined up around the block trying to pitch him investments. The trouble is, when people are lined up around the block telling you how smart and important you are you start to believe them.
During the depths of the financial crisis Jackson gave a talk where he said that Istithmar was patient capital and that they were putting money to work while everyone else was selling assets. I’m sure that Mr. Jackson had access to the balance sheet and income statements so he must have known this to not be true. Still, I think he believed it. He believed it because he had begun to believe the stories his admirers told him and then he began to admire himself and that can be fatal. But David Jackson was not undone by his own hubris, he was undone long before that.
A lot of life is more about knowing the game than playing it well. David Jackson was a bright guy. Perhaps not so bright that he would have done as well in New York as he did in Dubai but bright nonetheless. He knew the game. He knew that the people who hired him wanted to be on the front page. They did not want to own 20 million shares of Costco, they wanted to own Barneys. They didn’t want to own six dozen holiday inns in the Midwest, they wanted to own the W Union Square in New York. They didn’t want to own 3% of Federated Investors they wanted to own Perella Weinberg and GLG. For the powers that be in Dubai making levered investments into high profile companies was part of building “Brand Dubai.” If higher volatility and lower returns were the result they would make it back in hotel bookings back in Dubai. In the beginning as I have told you he took it lightly, later on he took it seriously. David Jackson understood the game and David Jackson delivered.
The hubris that has destroyed the career of David Jackson was the hubris of the people who hired him. They hired him because he was outgoing and flamboyant and bright. They set up a game in which he had every incentive to buy trophy assets and he delivered in spades. They did this in the belief that the more widely the name of Dubai was known, the better it would be for Dubai. The trouble is buying trophy assets with massive leverage on the eve of a massive credit contraction is a spectacularly bad trade to make. So now the people who have set up the game have taken David Jackson off the board. Now the creditors and Abu Dhabi are the most important pieces. The players change. The game goes on.