We're back with our second weekly round-up of great in-depth business stories. It may seem like the entire U.S. media is devoted exclusively to our looming (and profoundly enervating) presidential election right now, but we've discovered some worthy exceptions buried underneath the avalanche of election coverage: tales of political maneuvering in a giant antitrust case...an incisive exploration of why Chinese industrial disasters are endemic... skullduggery in a long-running billionaire vs. billionaire blood feud centered in an island paradise...plus some riveting true crime offerings. Read on.
Did Chicago's Mayor Save an Airline Merger?
The Obama administration has been perceived as resistant to big mergers, but ProPublica has a deeply detailed dissection of one case in which the feds filed an antitrust suit to block a mega-merger—between American Airlines and US Airways—and then backed down right before trial in 2013 and blessed the marriage. It’s entitled “The American Way: President Obama promised to fight corporate concentration. Eight years later, the airline industry is dominated by just four companies. And you’re paying for it.”
The transaction may be three years old, but ProPublica used open-records requests to unearth a trove of never-before-published government and company documents. The results are illuminating. The article shows that among the key movers and shakers for the airlines were former Obama appointees, including Chicago mayor Rahm Emanuel, of all people. Emanuel who'd been Obama's first chief of staff, lobbied the Department of Justice forcefully (does he do things any other way?), according to the article. ProPublica turned up emails showing an apparent quid pro quo for the support: Emanuel hoped to get American Airlines' help to overhaul Chicago's O'Hare airport.
Some of the documents cited in the article are damning, including ones the Justice Department had uncovered, “showing airline executives crowing about how mergers allow them to charge travelers more. ‘Three successful fare increases – [we were] able to pass along to customers because of consolidation,’ wrote Scott Kirby, who became the president of the new American Airlines, in a 2010 internal company presentation.”
But in the end, the Justice Department backed down, enraging its own staff: “Some Justice Department staff attorneys who built the case against the merger were dismayed when they were summoned by a superior to a conference room at the Antitrust Division’s Judiciary Square offices and told the case was done. ‘People were upset. The displeasure in the room was palpable,’ said one attorney who worked on the case. ‘The staff was building a really good case and was almost entirely left out of the settlement decision.’”
(As long as we’re mentioning ProPublica, its series—it qualifies as longform more in the aggregate than in its individual parts—that examines how algorithms rule our lives is also worth reading. This entry explores how publications, including the New York Post and New York Times test the headlines they use and even offers examples of headlines that were tested and which won.)
Behind China's Industrial Calamities
If you’ve had the opportunity to travel in China in recent years, you might have had some version of my own experience: I was on a bicycle in the southern Chinese countryside, pedaling for hours on narrow roads past concrete hovels with impoverished people living in squalor—only to round a bend and find myself stunned by the sight of a half-dozen identical gleaming new 30-story residential towers planted seemingly in the middle of nowhere. Something like this happened multiple times on my trip and as a tourist, I always wondered, what’s happening inside those new high-rises?
Now comes a writer named James Palmer with an essay in on online publication called Aeon that takes you inside those buildings, and the national psyche, in an article called “Chabuduo! Close Enough…”
It’s particularly relevant if you have imbibed the 20 years of media coverage of China as an economic miracle and yet wondered why a country capable of throwing up highways, high-speed rail lines, Olympic stadiums, high-rises and much more seems to suffer an epidemic of industrial disasters.
Palmer detects something more profound than a series of rush jobs or the traditional frenzied chaos of the transition to industrialization. Unlike, say, the United States, China has industrialized after decades of living under communism. In his view, the very same creative self-sufficiency that allowed people to improvise little quality-of-life improvements inside the privation of Maoism—improving some broken item into the state of “good enough” (chabuduo, in Mandarin)—now plays out as a fatalistic attitude that accepts compromised quality in everything from apartment construction to food to products for export.
Here’s how he puts it: “[B]ehind China’s disasters, ‘good enough’ squats more often than actual malice: compromises that are mere annoyances in daily life become fatal when undertaken on an industrial scale. Problems that a keen eye or a daily routine can circumvent transform into deadly rifts when reproduced millions of times nationwide. Take the last year alone. You don’t have a proper cold-storage chain to send vaccines? Well, stick some ice in the parcels and put them in the post. Chabuduo, and children cough to death. Why take the sludge to a disposal site? Just pile it up here, where everyone else has been putting it. Chabuduo, and 91 people are crushed by a landslide in Guangdong. Separate out the dangerous materials? What does it matter, just stick that nitrate over there. Chabuduo, and a fireball goes up in Tianjin, north China’s chief port, incinerating 173 people.”
Palmer makes it clear that the same phenomenon is ubiquitous on a smaller scale, and captures it with disturbing vividness: “[T]he small deaths pile up: on construction sites where men wield blowtorches without safety goggles, or dangle from tied-together lengths of old rope; from food poisoning from meat carried in unrefrigerated vans; from fires in badly wired apartments. The toll grows every day, especially among the poor, unnoticed and unrecorded by the institutions supposedly guarding them. Many Chinese cities are half building site; I’ve gone on walks through back alleys that resembled Super Mario levels, full of grinding wheels shooting out flurries of super-heated sparks, bricks dropped from scaffolding above without warning and cords strung across the pavement. ‘Why don’t you put tape around that?’ I asked at one spot, pointing to a guttering pit next to the road, deep enough to break a neck. The migrant workers shrugged. ‘Nobody told us to.’”
A key part of his explanation: “Why is China caught in this trap? In most industries here, vital feedback loops are severed. To understand how to make things, you have to use them. Ford’s workers in the U.S. drove their own cars, and Western builders dwelt, or hoped to dwell, in homes like the ones they made. But the migrants lining factory belts in Guangdong make knick-knacks for U.S. households thousands of miles away. The men and women who build China’s houses will never live in them.”
Hatfields vs. McCoys: Billionaire Edition
Has your neighbor ever hosted a late-night bacchanal with pounding music and boisterous attendees? It’s surely irksome, and even if it’s never happened to you, you can no doubt imagine the frustration. Of course, it’s slightly different when the two neighbors are billionaires—one an apparel retailer (a “hard-partying tycoon” who reportedly once had a stripper pole in his private jet) and the other a hedge fund titan (who apparently craves peace and devotes his free time to environmental concerns)—and the houses are elite vacation properties cheek-by-jowl in an exclusive gated community in the Bahamas. Oh, and in this instance, the feud has been boiling for nearly a decade, spanning a reported 16 legal actions (so far) between the two sides. In the midst of the conflict, one of the combatant’s houses burned down—and needless to say, he blamed the other (who, for his part, denied any culpability). All of that is merely the background.
The combatants in question are apparel entrepreneur Peter Nygard and Louis Bacon of Moore Capital. And “The Billionaire’s Pawn,” in the Wall Street Journal, is an improbable narrative that tracks one episode in this crazy fight. As the story tells it, Nygard was looking to get back at Bacon and, with the help of intermediaries, he recruited an unlikely person to try to get Bacon in trouble with U.S. prosecutors: A former trader for Bacon who had been fired from the firm, and later convicted of, insider trading. It’s a very tangled tale—so complicated that the story bogs down a few times—and one that doesn’t stand for a bigger idea. Yet the details are rich and sometimes even touching. (The fired insider trader thought Nygard was hiring him for his market acumen and nurtured hopes of a comeback—then was devastated when it became clear he was wanted only as a stool pigeon.) More fundamentally, though, it’s a Hatfields vs. McCoys set in the wood-grained conference rooms of international law firms.
If you want even more prurient details, read the Wall Street Journal story, then read this Vanity Fair profile from earlier this year (which is the source of the juicy tidbits in the first paragraph of this entry).
This feature from Washingtonian is only very tangentially about business, stemming as it does from the firing of a lawyer at a Virginia trademark and copyright law firm and the subsequent attempted murder of the person who terminated her. Still, it’s a taut crime tale with an interesting legal twist: The defense of the man accused of the crime—the husband of the fired lawyer—was built on a form of temporary insanity; he argued that a bevy of pain medications he had been prescribed for a spinal injury left him effectively unconscious and therefore not responsisble.
Sports Illustrated also has a true-crime narrative, “The Saint and the ‘Thug,’” and it’s riveting. (Thanks to Alan Murray for pointing me to this one.) This one isn’t remotely about business, but it’s still well worth reading. Perhaps you remember the murder of a former New Orleans Saints football player earlier this year; he was shot on the street in the Crescent City after a dispute apparently caused by a fender-bender. The shooter was arrested on the spot and the press instantly packaged the tale using all the expected stereotypes: Armed young black man kills another black man in a meaningless spat inside a bloody urban location. Richard O’Brien digs far, far deeper into the events and the lives of the two protagonists. I don’t want to spoil the twists in this one; suffice it to say that the reality is much more complicated.