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Thursday, May 5, 2005

YANKEE-TWIT VS. EURO-JERK: Or Why The EU's Work Ethos Is Shot

This is the second article published since prof bug's return to this site on May 4th, 2005. If it interests you, you'll find an explanation in that article --- just below here --- for his long absence. Whether you read that explanation or not, what follows here will make more sense if you've at least looked over the substantive argument unveiled in that article. Toward the very end of today's follow-up analysis, you'll find an hilarious exchange between an American financial specialist who heads a dynamic, unusually successful hedge-fund and a half-British, half-French financial specialist whose own company in London just went belly up and wants a job with the American one. It's not just rollicking in its funny sarcasm --- on the American side --- but a vivid illustration of the huge gap in outlook and expectations that divides average Americans and Europeans about professional life and the work-ethos.

In the meantime, here are some buggy comments to help situate the exchange in a wider economic and social context.






What We're Up To Today

In the previous article, you'll recall, prof bug continued the ambitious, stretched-out series --- now in its 9th article --- on US ideologies on both the left and right: how they're unique; how they differ in the concrete from the dominant political heritages in Japan and the Continental EU-15 countries; and how --- the real payoff here --- they've shaped far different kinds of capitalist economies.

Those in Japan and in the EU-15 (aside from Britain) are statist-capitalisms, in which politics trumps economics, and the logic of political calculation and maneuvering dominates the logic of market incentives and adjustments to necessary changes --- whether to radically new technologies or to relentless, fast-moving globalizing forces --- that any economy has to undertake, sooner or later, to stay vigorous and competitive. No surprise really. Not, at any rate, where political calculations intrude and overwhelm the logic of market-oriented refoms. Politicians, after all, want to get elected, and their supreme guiding rule is easy to set out: if in opposition, get elected; if in power, get re-elected. It's that simple.

What follows?

The second a Japanese or EU-Continental government proposes major changes in the status quo, it faces the prospects of big backlashes in public opinion and mounting auguries that it will be punished in the next election. Until then, meanwhile, powerful vested interests that man and guard the existing status quo can be counted on to engage in their own backlashes . . . not excluding strikes, mass rallies, growing social conflict, and worse.

Exceptions?

Once in a while, it's true --- almost always in their last term in power, amid clear signals of an impending crisis --- a Prime Minister or a President might embolden himself and propose a tough-minded change in economic or social policy.

Chancellor Gerhard Schroeder in Germany, after frittering away 6 years of reform-possibilities, recently summoned the courage to overhaul his country's extraordinary featherbedding unemployment rules --- in the process of which he had to cut himself loose from his position as head of the Social Democratic party, so infuriated were the ranks of party members and activists. As a result, Germany is now about 15% of the way toward the finishing line: a rejuvenated, competitive economy, not that Schroeder has bothered explaining this to the German people, who --- after being beguiled and duped for a good 3 decades now by German governments of every hue --- expected miracles to occur the second the reform of the unemployment system went into effect. Bread-and-circus rhetoric, plus heads-in-the-sand denials, seem to mark almost all the social and economic policymaking in the EU for the last 20 - 25 years, whether on the national or regional levels.

In Japan, where there is no organized opposition, Liberal Democratic Party governments --- if anything --- outdo their EU counterparts in systematic denial, the tendencies here aggravated by factionalism in the party itself . . . not over policy matters, rather over which faction is on top and which pork-barrel handouts will be put in its members' hands.

Here, oppositely, President Bush --- convinced somehow that a tiny majority in the last election gave him political capital --- tried to prod Congress and the American people into believing that a Social Security crisis looms in this country (it doesn't) and hustle both into accepting a full-tilt privatization scheme. Fortunately, in this case --- as with Hillary Clinton's health scheme 12 years ago --- the US system is structured to frustrate a sweeping ill-thought change of the status quo. Our status quo is hardly perfect. There are problems with our health system, but a proposed fix like Clinton's would have been disastrous. And there will be problems with social security, but a good 35-40 years down the road. That leaves plenty of time for incremental adjustments in social security taxes and benefits, all depending on the state of the economy over the next four decades.




PART I
THE RESULT?


After 60 years of political and bureaucratic dominance, the statist economies of Japan and almost all the EU have buried themselves under heaped-up piles of market inefficiencies --- almost Alpine-size in height and jagged ridge-line--- that will require excavation projects on a heroic scale if they're ever to restore economic vitality and competitiveness. Will the projects materialize? Not likely; certainly not easily.

Then, too, those on the Continent of Europe who hope for a major excavation-specialist on the order of Margaret Thatcher to emerge in their countries will likely be looking in vain for a long long time; maybe always. British ideological conditions --- especially the heritage of a liberal (read: laissez-faire) economy of the 19th century have no counterpart on the Continent, let alone in Japan. What's more, Thatcher herself came to power by accident: the Conservative Party needed a new leader in the last 1970s, and the two lead candidates stalemated one another. In the upshot, she was given the leadership of the party, and scarcely any of the members in the Parliamentary party that chose her had any notion that she would prove to be the most radical Prime Minister in modern British history. Then, too, as a final difference, public opinion in Britain had grown contemptuous of the powerful trade-union leaders, who had emerged looking like the caricature played so brilliantly by Peter Sellers in a film of the late 1950s, I'm All Right Jack.

Above all else, as you'll see in a few moments, the existing Japanese and EU Continental populations are far more attached to their status quo than the British were in the 1980s. The former needed a large regulatory-and-welfare state, and they still do. As much as ever; maybe more so --- at any rate compared to any other period since the mid --- 1950s, and for a simple reason:

Economic costs and dislocations are bound to shoot up and multiply in every direction irrespective of what governments do or don't. The rapid shifts in economic dynamism, together with other globalizing forces, make that bet on the future a certainty. And in the EU, if not necessarily Japan, all these turbulent shocks will be aggravated by another near certainty: growing social strife and a swerving toward ideological extremism, especially on the right in almost all the EU countries on the Continent, made all the more turbulent and even possibly violent by mushrooming conflicts between the shrinking native-born European populations and the rapidly expanding Muslim minorities . . . more and more alienated and at odds with the post-modernist trends that continue to mark West European social and cultural life.

And there's more. Right now in 2005, violent crime has been soaring in the EU and making it a frightful prospect for average Europeans to go out at night in most cities. Typically, it's one more disturbing trend that the average EU government has preferred to sidestep and lather with reassuring rhetoric rather than confront head-on . . . much to the benefit of right-wing extremist parties, who fill the void in the political spectrum here.


The Near-Future Prognosis

No one should deny what the stakes are here, much as governments, opposition parties, and the EU media tend to do, evasion and the soft-soap treatment part of their operational modus vivendi. Still, now and then, an unflinching, hard-headed appraisal of the EU's economic and social prospects comes to light. One appeared last fall. It came from Wim Kok, a former Dutch Prime Minister who headed a team of 13 experts commissioned by the EU to look in depth at its economic problems and prospects. What they found shook them all, Kok definitely no exception. When his team's lengthy report was ready for publication, he observed to the EU media that without radical economic changes in the EU countries . . .

*A series of "devastating effects" might follow, including institutional "contraction and decline" on the regional and national levels alike. "In sum, Europe has lost ground to both the US and Asia; its societies are under strain; and some ugly forces are beginning to manifest themselves."

*If these trends continue, then "what is at risk ... is nothing less than the sustainability of the society Europe has built and to that extent, the viability of its civilisation".


Kok himself has subsequently come out for a massive switch in the EU-15 to an American style of capitalism. That, of course --- for reasons familiar to all buggy readers --- is a no-go in the European Union (or Japan). The populations there wouldn't like it, wouldn't accept it, and wouldn't tolerate governments aside from Britain's that would push for it.

The latter point is pivotal. It's worth repeating, and it will be later on here. Grasp it, and you'll be a long way toward understanding the dilemmas and trimming evasions that mark the EU governments' various approaches to their swarming economic troubles.



Part II:
THE AMERICAN CONTRAST


Unlike Japan and the EU countries on the Continent, the US political system is uncommonly decentralized, and in Washington D.C. there is a separation of powers that hems in that hems in the development of a large centralized state. If you ask why, the answer is simple. It reflects a strong ideological thrust in American politics going back to the first days of the US Constitution.

And Since 1789?

Obviously, history didn't stop in that year. Over the last two centuries, both the US left and right have been overwhelmingly reformist and pragmatic, largely accepting American capitalism as working in the interest of the great masses of people.

An unusually high wage level for unskilled labor from 1789 was one reason; another was uncommonly widespread property distribution; and a third was the most equitable income-distribution in the industrial world right down until the 1970s. A fourth reason has been a very high standard of living standard, so that if the EU-15 were suddenly to join the US federation, they would on an average be ranked the 5th poorest state in the union --- just ahead of four rural, non-urbanized, non-industrialized ones: Mississippi, Arkansas, West Virginia, and Montana. All this helped to generate a reformist attitude toward capitalism of a pragmatic, non-ideological sort on the US left, otherwise totally immune to Marxist and other socialist appeals.
As for the political right in this country, it emerged after 1789 essentially "liberal" in attitude toward capitalism and industrial society --- liberal meant here in the original sense of the term, which still prevails all over West Europe: a relatively laissez-faire view toward economic life. There were, it's true, always some exceptions --- Alexander Hamilton back in the late 18th century --- but they had little influence on subsequent conservative developments over the next two centuries. Only gradually, starting with Theodore Roosevelt at the start of the 20th century, did conservatives generally accept the need for a growing regulatory apparatus in central government to deal with the mushrooming problems of giant continent-size corporations, new concentrations of financial power, and rapid urbanization and threats to the environment . . . to which was added, after WWII, the acceptance of a social security system of the sort forged by Franklyn D. Roosevelt's New Deal of the 1930s.

Once again, by the 1950s when Dwight Eisenhower was our president, the Republican party absorbed these New Deal changes, and Ronald Reagan reaffirmed his support for them three decades later. His target was the Great Society's welfare initiatives of the late 1960s. Despite Democratic howls at the time, both Congressional Democrats and Republicans came to recognize that the existing welfare system was disastrous --- every 10% increase in welfare for families with dependent children entailed an 11% increase in illegitimacy, according to a definitive study sponsored by the National Academy of Sciences --- and both joined to radically reform our welfare system in 1996 during the Bill Clinton era).

By contrast, all the conservative parties in West Europe that emerged in the era of democracy and industrialization had strong roots in pre-democratic, pre-industrial heritages . . . many feudal in nature, and accepted the need for a strong state-guiding role in economic development decades before the modern welfare state emerged after 1945.

Something Else

Keep in mind one other point: American capitalism in the 19th century was never as laissez-faire as Britain's . . . at any rate until a more activist state emerged in the latter country starting in that century's final decades, and especially after 1906 (an era of radical Liberal governments). For one thing, the federal government owned most of the land in the Continental US and delved it out over the 19th century to independent farming-families and ranchers, spreading ownership in ways that had only a parallel in Canada, nowhere else. (This is one of the biggest contrasts between North America and Latin America, though there are plenty of others.) For another thing, local state governments were very active in promoting infra-structure development, and after the Civil War that was also true of the central government in some sectors, such as railways and canals. And unlike Britain, the first industrial country, the Federal government maintained tariffs in existence that began to be dismantled only in the 20th century.

Still, even the British Conservative Party after 1945 could draw on a lengthy pre-democratic, pre-industrial Tory heritage that facilitated its easy acceptance of a rapidly multiplying regulatory-and-welfare state form of economy, seen in paternalist terms. Only Margaret Thatcher's bold attack on that system amid a clear economic and social crisis at the start of the 1980s began to reverse three decades of statist-economic life. Even then, she not only antagonized the British left, she was hated by the patrician wing of her party; and at the start of the 1990s a rebellion in the parliamentary ranks of the Conservative Party brought her down, her replacement --- John Major --- a political disaster for that party's electoral fortunes from which it never has recovered.

 

Part III:
THE NET OUTCOME? A SUPERIOR ECONOMIC PERFORMANCE, THANKS TO . . .


. . . To A Different Ideological and Institutional Heritage



In contrast with the statist-capitalisms that prevail in the EU and Japan --- which vary to an extent, needless to add --- the US economic system has largely developed as a free-market system in which the logic of market adjustment and change aren't overridden by political maneuverings and calculations. These are, note quickly, statements that make sense only in a comparative context . . . a point made a zillion times in this series on ideologies, institutions, and economic performance here and abroad.

Viewed from that angle, the US economy enjoys a relatively light regulatory burden. It has uncommonly flexible labor markets, backed by a strong work ethos and an adaptable people willing to move around a Continent in search of a better job or future. Its capital markets are the most efficient world-wide; they support new business ventures in ways without parallel; and --- we hope --- are now reinforced by better regulatory oversight to ensure accurate accountability and transparency . . . to the extent it's humanly possible, given the huge incentives to shortcuts and criminally creative accounting. The willingness of Americans to take risks and start new businesses --- 75% of the Fortune 500 Companies today didn't exist 30 years ago --- has no parallel elsewhere either. Then, too, after three decades of unusually fast integration into the global economy, the US economy is strikingly open these days and across the boards --- including our service industries; once the negotiations are over and the new Pan-American Free-Trade zone emerges for the Western Hemisphere, it will be equally open in agricultural trade.

Oh, and one more thing. Americans have dominated the most recent long-term waves of revolutionary technologies for over a century now . . . the latest in Information and Communications, with Nantotech just over horizon. If you ask why, this country not only has a remarkably creative research-base, but also the venture capital and an obsessive entrepreneurial drive among its people to bring any promising product to the marketplace quickly and with fewer regulatory or financial obstacles in the way. To which bustling go-ahead creativity needs to be added the inflow over the decades of talent and ideas from millions of immigrants world-wide, all hopeful of making a better life for themselves here.

 

Are Americans then better in all technologies or products?

That would be an absurd claim. Even though American auto firms are more automated, Japanese auto firms are still the pace-setters; European train engines and systems are much better than ours; Airbus --- for which we should all be grateful as passengers --- is neck-and-neck with Boeing; Italian flair continues to be the pace-setter in clothing styles; Japanese and now South Korean firms still produce the best TVs and stereo equipment; Chilean and Australian wines are highly regarded even in California, both for quality and price; and despite Hollywood's dominance, an occasional French, Italian, Japanese, or Chinese film remind us that not only that there are other cinema-industries in the world, but that they offer a vision of it often at odds with American-made films, once again for everyone's benefit. And so on.





 

YANKEE-TWIT VS. EURO-JERK

All of which brings us to today's article --- a rollicking exchange between a dynamic, hard-driving financial entrepreneur in this country and a half-British, half-French leisurely type in Britain whose firm had just gone belly up and is looking for a job. The Yankee Twit term --- used in the L.A. Times version of the article (originally published in the Financial Times last month) --- should be read with an eye to what "twit" means as a verb. The Euro-Jerk part speaks for itself.

First, Two Or Three Theoretical Comments For

. . . a rounder perspective on the hilarious email to-and-fro.

  • Recall what prof bug said earlier here and at length in the previous article: the Continental countries of the EU-15 needed an advanced welfare-and-regulatory state after 1945 to ensure their social stability for the first time in a century, and they need it today no less. What's at stake is their social peace, noticeably tottery in some EU countries right now . . . reflected in growing labor unrest, the sharpening conflicts between native-born Europeans and increasingly alienated Muslim communities, growing racism on all sides, and the brusque breakthroughs of right-wing populist and extremist parties practically everywhere.


  • Violence too is at work in the EU, first and foremost violent crime --- much worse than in the US (which ranks toward the bottom third of the industrial league in rates of violent crime) --- that EU governments can't or won't do much about; but also violence carried out by terrorists, whether Muslim fanatics or Corsican zealots or left-wing and right-wing ideologues. Not to overlook ordinary street thugs and organized gangsters, all very active in EU life these days --- to a degree that the US, by contrast, ranks these days in the bottom third of violent crime in the industrial-country league. For the UN-sponsored surveys, click this buggy link. Who are the beneficiaries of this violence? Not mainstream political parties, whose cowardliness in confronting these violent trends have been a boon for the right-wing populist and extremist parties. As the economic crisis of the EU deepens, expect far more breakthroughs to ensue.


  • All these ideological heritages, institutional structures, and disturbing social trends limit the latitude open to governments to carry out sweeping changes in their countries' economic institutions and policies to regain economic vitality.


  • In overwhelming numbers ---as we noted earlier: it's always important to drive home this point --- West Europeans wouldn't like to live in the kind of manic freewheeling economy and society that Americans take for granted: full of high-powered competition, pressures to succeed, and pressures to work hard to that end, not to mention all the uncertainties and vagaries that the average US citizen more or less shrugs off in the course of constantly remaking his or her life. Europeans aren't like that for cultural and historical reasons, and they don't want to be. Nor do they have the kind of open, mobile society that undepins our system. If anything, it's almost totally lacking there. One London School of Economics study, about four years old now, found Americans were 50 times more willing to move to another locality (however distant) if it promised a better job and life. Then, too, whatever risk-taking once marked European life, the risk-takers themselves seem to have departed long ago for the New World, and those left in the EU --- after 60 years of Nanny-State dependency --- are probably the least adventuresome in the long history of that Continent. The faster the populations age there, the more timid and fretful about risks, uncertainties, and radical change they will become.


Sidebar Clarification: A mass of studies put out for two decades by EU and US scholars that find equal patterns of mobility on the two sides of the Atlantic have, to put it bluntly, been based on tangled confusion. In particular, looking at upward mobility as measured by advances in income, they have confused two entirely different things: an improved standard of living for Europeans and Americans thanks to economic progress for most people in any industrial country, plus any welfare benefits as income supports on the one hand; and on the other --- what most of us mean by upward mobility --- a re-ranking in the economic and social hierarchies, the movement upward of any one individual that moves others downward. It's an extraordinary mishmash of scholarly work, decades old now. For an excellent study by a EU scholar that clears away the confusions here, see Philippe Van Kerm, "What Lies Behind Income Mobility: Reranking and Distributional Change In Belgium, West Germany, and the USA"

Kerm finds that upward mobility is 33% higher in the US than in West Germany and 56% higher than in Belgium across all ages. For those older than sixty years, upward mobility in this country was 60% higher than in West Germany and 65% higher than in Belgium.


The Immediate Outcomes?

Tersely said, the EU peoples these days seem increasingly frightened of the future and fretful and full of anxiety about major changes of any sort. In the process, their political systems are now being riddled with uncertainty and growing turbulence; and though these disturbing signs vary across the EU-15, they are pervasive . . . even in formerly stable, predictable countries like Holland, Denmark, and Sweden. That pessimism isn't a buggy figment, please note. Far from that, it shows up repeatedly in EU-barometer surveys of European opinion towards politics, economics, and regional EU developments. A recent German opinion survey found that only 28% believed their lives would be very good over the next 5 to 10 years, and more to the point, 40% said they were unhappy.

And it shows up in clear behavior ways too --- above all, in astonishingly low birth-rates; so much so that most of the Continental countries will not only be very old by 2050, their native-born numbers will be down by roughly a third everywhere. Guess which rapidly growing minorities in the existing EU will, by contrast, constitute about a third of the populations everywhere?

Simultaneously, here in 2005, the pessimism relates to the now prevalent vacation-ethos that prevails in the EU . . . especially after 25 years of astonishing erosion of the work ethos there (a trend captured in the table and chart set out later here). In large number, West Europeans are beginning to grasp that with China, India, and most of Asia booming --- and with the new East European members of the EU filled with people far more willing to work hard for much lower wages --- their previously sheltered, comfy welfare-state lives are now in jeopardy. The current work week has sunk so low --- and the number of people actually working in their late forties and fifties has fallen so fast --- that it is impossible, it seems, to do more than offset it at the edges --- a few minutes a week here (already setting off mass protests in France), a lopped-off holiday there (ditto). Or, in Germany --- where, as we noted above, a more courageous change in unemployment support has been pushed through by the Schroeder government --- to do more by way of structural and policy reforms, the current change of unemployment benefits just a start; nothing more. It's too politically dangerous, and Schroeder's Social Democratic Party is itself increasingly restive and rebellious.

And It Gets Worse

Few politicians in the EU --- or in Japan for that matter --- will be frank with their peoples on any of these scores: economic stagnation, an eroded work ethos, the causes of increasing long-term unemployment, the failures of huge government deficits to jump-start short-term economic growth (the opposite of the US case), surging violent crime, and growing social strife. Admittedly, nowhere are democratic politicians known for their courage and forthright willingness to tell their peoples that big alterations in their lives will be necessary before economic vigor can be theirs once more. Their aim is to get re-elected if in power or, if not in it, to win the next election. All else is secondary, whatever the rationalizations offered.

All this is also true of American politicians, with two big diferences though:

First, Americans don't depend on or have big expectations about their government in Washington D.C. . . . just the contrary;

And second, there is a sharper policy-divide in this country now than in the EU --- over foreign policy and domestic policies. The divide is still, generally, within the limits of pragmatic politics, though that could change in time. More to the point, it leads to a much sharper exchange between Democrats and Repulicans than is the case in the EU these days, where the populist parties on the right are generally excluded (or, as in Denmark, parts of wider coalitions that dampen their rhetoric). In such circumstances, we have a much better idea of what's at stake in our foreign and domestic politics than West Europeans tend to these days.


The latter point is worth briefly elaborating on. For decades now, the Japanese and West European populations have been conditioned to expect almost everything from their governments except frank talk and cut benefits. And second, the differences between Democrats and Republicans about the role of government in the economy have been sharpened ever since Ronald Reagan came to office in 1981. In the EU, the electorates have only a choice between tweedle-dee and tweedle-dum on this role. In Japan, come to think of it, they don't even have that much choice. There is no organized opposition in that country, and there hasn't been for 50 years.

And So?

Enter A Millenium-Old European Sport: Scapegoating Others For Home-Grown Problems

In a nutshell --- instead of confronting their problems head-on --- it's been far easier in the EU to let the increasingly restive, worried populations protest others for their troubles: rally against globalization, rail at the US and casino-capitalism on a worldwide scale, denounce the Chinese (or other slinky Asian foreigners) for ruining their economies, or attack immigrant populations (the Muslim ones increasingly alienated and violent anyway), not to mention the alarming tendency --- never something to be ignored in West Europe, given the age-old European traditions here --- to trot in the all-purpose scapegoat: Jews. No, not just traditions; a European sport, now brought up from the dank cellars where the bats and other athletic equipment had been hidden until recently for the last 60 years. With Jews, you understand, seen as not only insidious once again within their own countries by more and more fretful, disillusioned Europeans, but no less insidiously in control of the US . . . itself viewed as the biggest bug-a-boo responsible for European troubles, weakness, confusions, and self-delusions on a vast scale. (For a lengthy, fairly close analysis of the thrusts in EU life to identify Jewish control with the US and to vent both anti-Semitic and anti-American outbursts, see this buggy professor link Among other things, it discusses the revealing commentary on these topics of Josef Joffe, a Harvard Ph.D. who edits the German weekly, Die Zeit)

Already the ugly signs of blaming foreigners are cropping up in the German and French economies, both performing badly, with Germany's set to stagnate for at least a couple of more years and France's not to do much better. In the German Social Democratic Party, "foreign locusts" are being publicly blamed for buying German companies on the cheap and restructuring them to make them more profitable, without expanding employment. The reality? To the extent the German economy's long-term prospects look even slightly better now, especially those of their major companies, it's due to that foreign capital --- British, American, and other --- and the determination of these investors to improve the performance of German manufacturing and service industries.

Not that these and related facts will assuage the growing ranks of disgruntled Germans, French, Belgians, Austrians, Italians, Dutch, Spaniards, and what have you. On current trends, scapegoating is very likely to be the biggest growth industry in the EU for years to come.



What Follows

What follow is the rollicking piece that you'll find later on here, an exchange between a sharp-witted, hard-driving American financial manager, the head of a dynamic, go-ahead hedge-fund famous, and some snobby half-British, half-French London resident who is trying to get a job with the American firm now that his own firm had gone belly-up. First, though, some relevant stats for proper perspective.

 

FIRST THE STATS

Both are taken from an article of Olivier Blanchard, an economist at MIT of French origins. It's a pdf article entitled A Macroeconomic Survey of Europe

AND NOW FOR SOME BELLY LAUGHS: Yankee-Twit vs. Euro-Jerk

The following exchange appeared originally a month ago in the Financial Times of London (a great newspaper), then was reprinted verbatim in the L.A. Times (a good newspaper) and picked up by wire-services all over the world . . . not to mention every email inbox of tens of thousands of financial specialists here and abroad.

On one side there's Daniel Loeb, a maverick, no-nonsense hedge-fund manager in this county who heads a very successful upstart firm --- worth billions of dollars in sales --- and who is famous for his tart, wildly funny oral and writing style. The New Yorker --- the single best weekly in the US, maybe the world (a constant fount for 70 years of brilliant journalism, poetry, short-story fiction, and cultural reviews) --- recently ran an article on him and his by now infamous correspondence with hundreds of CEO's in the US and elsewhere whose companies his firm deals with, especially when they look lazy or incompetent or manipulative when it comes to running their businesses. (Loeb holds no punches back. If the firms' managers don't correct their bungling quickly, he publishes all his correspondence in his weekly news-letters read by the financial community world-wide.)

On the other side is a very proper English-French financial specialist, Alan Lewis --- he says he's half-French, half-American, but Loeb calls him a half-Brit, half-French has-been --- whose own company has gone belly-up in Britain and who was looking for a job with Loeb's firm when the correspondence began. Rollicking as it is, the exchange is worthy of an appendix to your copy of Alice-in-Wonderland, but it also zeroes right in on the core differences ithat separate Americans and Europeans in attitudes toward work, performance, and leisure . . . not to mention the compulsively driving urges afoot in American life to succeed professional and a general indifference to proper family and social backgrounds, to a shrug-of-the-shoulder when it comes to knowing-your-place-in-society and the other desiderata of the highly structured class-societies that still prevail in many West European countries these days --- especially at the top in the prestigious professions, financial institutions, the upper civil services, and the media.



From: Alan Lewis To: Daniel Loeb March 22 2005

Daniel, thanks for calling earlier today. Enclosed is my CV for your review. I look forward to following up with you when you have more time. Best regards, Alan. From: Daniel Loeb To: Alan Lewis March 28 2005

What are your three best current European ideas?

From: Alan Lewis To: Daniel Loeb March 28 2005

Daniel, I am sorry but it does not interest me to move forward in this way. If you wish to have a proper discussion about what you are looking to accomplish in Europe, and see how I might fit in, fine. Lesson one of dealing in Europe: business is not conducted in the same informal manner as in the US. Best regards, Alan.

From: Daniel Loeb To: Alan Lewis March 28 2005

One idea would suffice.

We are an aggressive performance-oriented fund looking for blood-thirsty competitive individuals, who show initiative and drive, to make outstanding investments. This is why I have built Third Point into a $3bn (1.6bn) fund with average net returns of 30 per cent over 10 years. We find most Brits are a bit set in their ways and prefer to knock back a pint at the pub and go shooting on weekends rather than work hard. Lifestyle choices are important and knowing one's limitations with respect to dealing in a competitive environment is too. That is Lesson one at my shop. It is good that we learnt about this incompatibility early in the process and I wish you all the best in your career in traditional fund management. (Click continue below for the rest of the exchange.)





From: Alan Lewis To: Daniel Loeb March 28 2005

Daniel, I guess your reputation is proven correct. I have not been in traditional fund management for more than 11 years. I did not achieve the success I have by knocking back a pint, as you say. I am aggressive, and I do love this business.

I am half American and half French, and having spent more than half my life on this side of the pond I think I know a little something about how one conducts business in the UK and Europe. There are many opportunities in the UK and Europe, shareholder regard is only beginning to be accepted and understood. However, if you come here and handle it in the same brash way you have in the US, I guarantee you will fail. Things are done differently here. Yes, place in society still matters, where one went to school etc. It will take tact and patience (traits you obviously do not have) to succeed in this arena. Good luck! Alan.

From: Daniel Loeb To: Alan Lewis March 28 2005

Well, you will have plenty of time to discuss your "place in society" with the other fellows at the club. I love the idea of a French/English unemployed guy, whose fund just blew up, telling me that I am going to fail.

At Third Point, like the financial markets in general, "one's place in society" does not matter at all. We are a bunch of scrappy guys from diverse backgrounds (Jewish Muslim, Hindu etc) who enjoy outwitting pompous asses, like yourself, in financial markets globally.

Your "inexplicable insouciance" and disrespect is fascinating; It must be a French/English aristocratic thing. I will be following your "career" with great interest.

I have copied Patrick so that he can introduce you to people who might be a better fit. There must be an insurance company or mutual fund out there for you. Dan Loeb. From: Alan Lewis To: Daniel Loeb March 28 2005 Hubris.

From: Daniel Loeb To: Alan Lewis March 28 2005 Laziness.