Correspondence/The Spy Letters, Takeover Talk, and Jazz
CORRESPONDENCE "I Am Not Nor Have I Ever Been" Philip Barry's article in your September issue concerning Spy magazine ["Scabrous Spy"] was intermittently amusing. It was also riddled with errors,...
...The article has scarcely begun when there is a long digression—yes, Watergate again...
...Industrial productivity has been distinctly lower in the 1980s than in the entire postwar period on average...
...Pickens has not once succeeded in a large takeover...
...What matters is whether the owners will control the company or whether they will simply be passive shareholders and have to rely on the goodwill of management to pay dividends...
...The great fortunes of the investment bankers, recently gone-private managers, and their lawyers—who mainly serve to make sure that no laws need be obeyed—is today's evidence of that universal truth...
...Without Watergate you don't have Carter...
...Frankly, I do not doubt that it is...
...This too would be Spy...
...Contrary to Barry's assertion, I do not write Spy's column on the New York Times, as he could have rather easily confirmed with a few phone calls...
...in Spy's case a humorlesspolitical diatribe said to be written by Mr...
...Skutch is underscored by the fact that AABA is only one among many of the forms employed down through the years with astonishing brilliance and variety by all the top composers in American popular song...
...You have crypto-Fascist tendencies...
...Many, many unkind facts, unkind non-facts, extremely unkind anonymous quotations, almost frighteningly unkind suppositions followed in Spy, often in articles by mean-sounding people who prefer to remain pseudonymous—people who turn out later to have the real name "Kurt Andersen...
...The writer of the piece was Bruce Handy, who interviewed more than thirty people for the article...
...The companies put into play are forced to "restructure," which usually means making the shareholders borrow from themselves to pay off a raider and themselves, or else they are bought by another large company, presumably with the same calcified management Mr...
...Privately managed takeovers are another matter entirely, however...
...Barry's quaint phrase, to do so openly, and not by creaky innuendo...
...Our news media offer many superficial explanations for takeovers and Ben Stein spends most of his article slaying these straw men: the cheap dollar argument...
...Yet people who don't seem to have a firm understanding of the restructuring movement generally bunch these activities under the headings of "Takeover Craze," "Merger Mania," or "M&A Fever," giving the impression that there is something uniformly sick and mindless about it all...
...is a disappointing departure from his usually rigorously fair and highly entertaining analyses...
...It isn't anomalous that acquirors are willing to pay more than prior market prices for companies they want to take over...
...But I must frankly say that I am puzzled by his letter...
...It shouldn't surprise us that passive shareholders of large corporations benefit little when their company takes over another...
...A nice conceit—Spy could use some chastening, as even a contributing editor—like me—would concede...
...Evidently, writing "good travesty" is hard...
...Andersen, there are very few...
...The recent history of management buy-outs shows that managers often became rich after taking their companies private despite paying significant premiums for the companies' stock...
...Washington, D.C...
...Before he is done with "these songwriters," Mr...
...Moreover, Barry's suggestion that liberals and Democrats escape Spy's attentions is untrue: last November, we devoted a long, liberal-discomfiting cover package to Ted Kennedy, and among those we have unflatteringly mentioned during the last year are Jesse Jackson, Dick Gephardt, Kitty Dukakis, Mike Dukakis, Bill Cosby, Al Sharpton, Gloria Steinem, Victor Navasky, John Lindsay, Arthur Carter, Pat Caddell, young bleeding-heart-liberal movie stars, save-the-whales activists, and the New Yorker...
...Even in justifying all the unkindness, Andersen sounded rather mean: It's impossible to insult these people, he said...
...When "raiders" have sufficient capital to buy entire companies, "waves" of takeovers occur even if it is other corporations or management that actually buy the company...
...Attacking Abe Rosenthal and the New York Post's editorial pages are commonplaces of the New York left, along with constant allusions to the McCarthy era, Watergate, the Iran-contra affair, as well as calling anyone who might vote Republican "cryptoFascist...
...And why not...
...Andersen states that no Spy editors were quoted in it...
...But then, the people who make history will have realized restructurings' potential and will be busy writing the next chapter on shareholder rights...
...Gershwin were creative geniuses—two in an outstanding pantheon of others during what must be called a renaissance in American popular culture...
...Why else would he take literally such obviously mocking comments in Spy as that G. I. Joe is a "war criminal" save to illustrate the dangers of removing quotations from their context...
...All for ourselves, and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind," said Adam Smith in The Wealth of Nations...
...and a Spy spokeswoman claims that Hunsecker is a real persona terribly nice chap," she insists falsely...
...John L. McCormack President, Mineral Market Research Chicago, Illinois Benjamin J Stein replies: There are few people whose audacity, intelligence, and tenacity I respect as much as Mr...
...But this duty should not include selling the company to themselves and appropriating its real value beyond stock prices for themselves rather than the people who have employed them...
...the Brand Name argument...
...Takeovers, LBOs, mergers, spinoffs, restructurings, and the like are all part of a corporate restructuring movement that began in the early 1980s and has, in large part, been responsible for this country's record economic growth...
...Bonds are often sold for half a percent or less in commission...
...Good luck to Mr...
...Andersen and others like to compare Spy and The American Spectator as if there were significant similarities...
...It is sad the sort of acrimony that can result when presumably good, kind people begin writing long, extremely mean, highly personal articles about other people—but the fashion-magazine field was crowded when Spy magazine entered it in the mid-1980s and, in search of its own market niche, decided to become the first fashion magazine with an all-malice editorial mix—the New York Woman for nasty people...
...McCormack's third point is that management must sometimes make "going private" bids to compete with outside raiders (if I understand him right...
...The Spectator does not dissemble regarding its political ideology...
...Elliot West Fairlee, Vermont (The American Spectator welcomes letters to the editor, even those that do not threaten libel action...
...In a nutshell, that's what is behind the restructuring movement...
...The same relationship exists between management and shareholders of any widget maker...
...A distinction cries out to be made...
...T urning from journalism's glamor- 1 ous side back to the sordid complaints of Mr...
...Closed-end mutual funds often sell for discounts to the value of their assets even though these assets are easily marketable at prices that anyone can see...
...Companies are more valuable when owned by the people who run them...
...Why else would he declare, without attribution, that "personal experience has embittered Spypeople to sex-preference-based prejudice," but to prove the reckless license given an author by the use of unattributed sources...
...Barry has done, I think, is inadvertently prove how very hard it is to write good travesty...
...The phenomenon that concerns him is that "takeovers seem to fly in the face of efficient markets...
...He claims the takeover wave is controlled by investment bankers who find it more profitable to trade entire companies than round lots of bonds...
...A bulldozer may be worth $50,000, but if the owner can't operate it and won't let someone else do it, yet refuses to sell or trade the equipment, it's not worth much to anyone...
...Then the writer explains why Chappaquiddick should be of interest to Spy readers: The political ripples tantalize: one line of reasoning is that if you erase Chappaquiddick, then Nixon isn't reelected in 1972...
...The answer to that is simple...
...The factual errors begin in the first paragraph—Spy published its first issue in 1986, a year earlier than Barry says...
...The idea is to maximize the value of a company's holdings, thereby maximizing returns to the shareholders who own the companies...
...Andersen's letter and apparent threat of libel action, he isunfortunately—mistaken...
...Ben Stein's "Takeovers and Acquisitions: Who's Responsible...
...lames Stuart Traub New York, New York Philip Barry replies: Apparently Mr...
...Picture lots and lots of interviews—Spypeople talking with candid pride about their new serious journalism interest...
...What Mr...
...Obviously, the value of an entire company is vastly larger than the value of a periodic financing of part of the company...
...Spy makes a living at the borders of responsible journalism, but goes to great lengths to stay on the right side, as I can testify from exhaustive fact-checking...
...it does not seek to reveal details of people's personal, sexual, and family life...
...We kept the lies and libels out of this article...
...Anyway, thanks for trying...
...It is very possible that the acquiror's management will improve only marginally on prior management's performance...
...and the Reagan anti-trust policy argument...
...And without Reagan and Carter and Watergate and Nixon and Chappaquiddick, maybe there would have been no Spy magazine...
...the cheaper-thanbuilding-it-from-scratch argument...
...And if Harold Arlen were to come back today and be at the peak of his powers I am sure that those of us whose tastes are, I would hope and trust, as sophisticated as Mr...
...J. Hunsecker," Mr...
...The error the article is "riddled with" is a one-digit typo—on my computer's keyboard "6" and "7" are right next to each other—about which he rather meanly gloats...
...I am a small unit holder of Mesa, and I wish Mr...
...Andersen falsely says I suggest that Democrats and liberals escape Spy's attention...
...Among the more than 100 people Spy might slander in a single issue, sure there might be a few token liberals and Democrats "unflatteringly mentioned...
...As the New York Post reported: Andersen said "a lot of jealousy is involved" in the attack, because the Spectator tries, like Spy, to be an "irreverent magazine in the tradition of H. L. Mencken," but whereas Spy is successful and well-read, the Spectator is "a crypto-Fascist cult magazine...
...Spypeople who frequented some of the same circles as Handy-Victim include (besides Philip Weiss and Kurt Andersen): Paul Rudnick, Maura Moynihan, David Michaelis, John Seabrook, E. Graydon Carter, THE AMERICAN SPECTATOR NOVEMBER 1988 53 Thomas L. Phillips, Jr., and apparently a number of others...
...The tone of Mr...
...Rather, he has made huge profits—especially for himself—by putting a company into play without any real intention of actually buying it, at least as far as results show...
...That is a legal compulsion under Delaware law (although far more honored in the breach than in the observance...
...Of many quotes from many sources—okay, of anonymous quotes—but lots of them...
...Skutch's, would thrill to anything he would write within those musical terms...
...There is a clear duty of managers to maximize shareholder value when a bidding situation erupts...
...In contrast, The American Spectator's editors generously allowed Mr...
...Pickens regrets...
...Constantly cited by Spy as an example of its impartiality and serious journalism is its "long, liberal-discomfiting" report on Teddy Kennedy at Chappaquiddick (though shorter and far less discomfiting than what Handy-Victim got for criticizing the Hollywood Ten...
...TAS, September 1988...
...Pickens's...
...Andersen's stated objective: to "humiliate...
...In press interviews and private boasting much is made of Spy's newsmagazine editing style, with the strong impression given that masses of raw reporting pass through the hands of the skilled parodist himself...
...Berlin and Mr...
...Hunsecker could be more than one person...
...Please include a daytime phone number with all correspondence for purposes of verification by our small army of fact checkers...
...When the business history of the 1980s is finally written, the success of the restructuring movement will be clear...
...Can one management really be counted on to use the company's assets so much more effectively than another that a 50 or 75 percent differential is warranted...
...it does not seek to smear people as homosexuals, as Spy and Mr...
...Regarding Mr...
...Such mutual funds only reach asset value when "raiders" force management to buy back shares or when management decides to liquidate...
...McCormack basically challenges my article on three grounds...
...Now forget that too...
...What has been proved time and again, however, is that the market properly evaluates the worth of the assets . . . in the hands of current management...
...Andersen's letter—though mean and insulting—is far, far nicer than what he puts in his own magazine...
...It would be an insult to Mr...
...Takeover Talk Benjamin J. Stein—the writer, producer, and economist from Hollywood—displayed a confused understanding of this country's financial markets in his commentary "Takeovers and Acquisitions: Who's Responsible...
...In answer to Mr...
...In short, Spy could teach the "icon-busting," etc...
...Corporate acquirors may be motivated by expansion for its own sake rather than a desire to increase shareholder wealth...
...Oh the might-have-not-beens...
...In this way articles written in turgid Traubstyle (see letter above) would come out in shimmering, malicious Spystyle...
...Most of them are to the right of Spy, too...
...The difference is not only large, it is staggering...
...Why this is so is not explained...
...Without Nixon you don't have Watergate...
...Stein's indisputable observation that the financial markets are made up of self-interested people should be extended to corporate managements as well...
...Which of the many Spypeople who know Handy-Victim were quoted anonymously is impossible to know given Spy's serious journalistic practice of relying on unverifiable anonymous sources...
...no Spy editors were quoted in the piece...
...No, in fact, I quote Spy calling Senate Democratic Majority Leader Robert Byrd "especially dumb" and a "former Klan member" for urging caution in making treaties with the Soviets...
...But I fear I was being too generous...
...But when New York gossip columnists noted the incongruity of an editor of the self-described "wicked," "mischievous," "scabrous," "somewhat unscrupulous," "hip, smart, irreverent and tough," "playful and stylish and hard headed" Spy magazine writing pompous lettersto-the-editor threatening libel action, he reverted to standard Spystyle...
...Philip Barry's article was so jejune in all its parts, from the neologisms like "Spy-style" to the dismal wisecracks about "the heartbreak of scabrousness" all the way to the preposterous conclusion that malice was a private affair until Spy started paying for it, that I realized it was meant to be taken literally...
...Perhaps so, but I have the feeling that a feeding frenzy and the exhortations of investment bankers who do not want to be left out of the commission paid on a successful acquisition have much more to do with it...
...Pickens well, but if he seriously thinks there is empirical evidence that the thrashing around on Wall Street has led to an increase in productivity in American industry, he is seriously mistaken...
...The Chappaquiddick piece turns out to be an author interview with Leo Damore filled with gentle publishing chit-chat about his problems placing his book Senatorial Privilege with a major publisher...
...Barry suggests that I am homosexual...
...But in fact, the commission rate on selling a whole company is far higher as well...
...Regarding Spy's pseudonymous column on the New York Times credited to "J...
...Barry's theory that the Times column's scrutiny of former executive editor Abe Rosenthal and of former Times magazine editor Ed Klein was provoked by their anti-Communism is ridiculous...
...How they would envy and hate Kurt for his success in journalism...
...Companies sometimes fetch a four percent commission...
...Why was the market unable to see what the 'real' price of the stock should have been...
...I do not buy this at all...
...noting the mass of nasty, anonymous quotes, I suggested that Spypeople might have been interviewed for it...
...Barry to interpret his transparent devices otherwise...
...our lawyers thought it would be amusing to do so...
...no Spy denials will be credible until authorship is openly acknowledged, and maybe not even then...
...T Boone Pickens, Jr...
...As for shareholders' rights, I agree that the small holder of today is simply a piggy bank for managers and investment bankers to loot as they wish...
...And without Carter you don't have Reagan...
...Unfortunately, there is no way to compel management to act in shareholder interest without the threat of takeovers...
...he then "rebuts" them, taking the trouble to add some new false material...
...Finally, the libel...
...Hard journalism was parodied and it turned out not to be so hard after all for a skilled parodist...
...THE AMERICAN SPECTATOR NOVEMBER 1988 55...
...Even if the commission on bonds and on companies were identical, the basis sum on which the commission would be computed would be far larger for a whole company than for a supplemental offering of bonds or stock...
...Andersen's letter—a listing of his reading comprehension mistakes and odd Lillian Hellman impression—will be explored more fully below...
...It is this activity that allows ordinary shareholders to realize more of the "value" of their shares...
...Now put all three exciting editorial concepts together...
...Think of a funny magazine, a magazine with laughs on every page or dozen pages despite the absence of lies...
...All That Jazz The letter from Lawrence Skutch concerning John Podhoretz's article on the demise of the American musical raised some highly questionable points [Correspondence, TAS, July 1988...
...Like The American Spectator, Spy is an irreverent, sometimes scurrilous publication...
...editors of The American Spectator a thing or two about critical journalism...
...Andersen's letter, he sees in my article a welter of suggestions and assertions which are not there...
...Skutch pulls off a nifty piece of praise with faint damn by conceding that they "were certainly talented musicians...
...Even the astoundingly shameless phrase "Although, like Cole Porter, married . . ." was only unintentional comedy...
...I very much appreciate Mr...
...The nation's greatest expert on productivity and inputs to its increase, Edward E Denison, has told me that if the merger excitement has had any effect, it is to lower productivity because it distracts management from managing...
...apparently, in writing to a respectable publication, he felt somewhat constrained...
...I did not say that Mr...
...If you see anything contradictory here, be quiet about it...
...It does not publish long articles full of highly-personal character assassination...
...Pickens in defeating it...
...Think of serious journalism, responsible journalism, lots of fact-checking and of fact-checkers to do it, of (remember) not lying—even when it might be amusing to do so—of major pieces of journalism, serious pieces...
...Traub is offering some sort of journalism course...
...See, he was saying between the lines, what it feels like to have done to you what you do to others...
...Andersen says he is not the author but then falsely states that this could have been "rather easily confirmed with a few phone calls"—no numbers are provided...
...McCormack's attention...
...Second, Mr...
...How it is that such apparently cunning and tenacious investment bankers can juggle entire corporations among Fortune 500 management but cannot extract corresponding profits from the sale of bonds remains a mystery...
...To revive a phrase that the Barrys of the world have heard before, I am not nor have I ever been...
...Unlike The American Spectator, however, Spy does not lie, even when it might be amusing to do so...
...But the jealousy...
...This city eats up fashionableness so quickly, there's always a new trend that is raw material for us," Andersen would say...
...Andersen do of prominent capitalists and conservatives...
...Except for the opening columns...
...Andersen wrote the mean and untruthful article about his Harvard contemporary, the New York Post editorial page editor Handy-Victim (name changed so as not to further Spysmear...
...McCormack wonders why I doubt that control of a company is worth more than passive investment...
...Nor did I write the piece in our June issue on New York Post editorial editor [name withheld—Ed...
...It was also riddled with errors, at least one of which is libelous...
...Takeovers generally occur when the value of a company's assorted assets greatly exceeds the price the market puts on the company as a whole...
...Managements that lock out other bids when taking companies private in LBOs are harming their shareholders, as are managements that use cash hoards to acquire businesses in which they have no expertise or competitive advantage...
...I would have the same confidence in the use of AABA by Richard Rodgers, Cole Porter, Jerome Kern, Rube Bloom, Harry Warren, George Gershwin, Irving Berlin, and any number of others, assuming they would still be in possession of their halcyon talents and energy...
...First, he says that he finds it incredible that in-vestment bankers would be able to make more money buying or selling whole companies than buying or selling bonds...
...Spy heaps ridicule with a mighty ladle, but it is "manly" enough, to use Mr...
...In fact, Spy Contributing Editor Philip Weiss is quoted by name...
...Kurt Andersen Spy magazine New York, New York cc Michael Rip.% Grand & Ostrow It occurred to me, after setting down Philip Barry's low-yield thermonuclear assault on Spy magazine, that the author had crafted an ingeniously subtle object lesson in the sort of reprehensible journalism of which Spy stood accused...
...The rest of Mr...
...I (continued on page 53) THE AMERICAN SPECTATOR NOVEMBER 1988 9 CORRESPONDENCE (continued from page 9) didn't come to Spy as a serious journalist," Andersen confessed in one "I wasn't really skilled at hard journalism, but I was at parody...
...It is Billy Taylor, Oscar Peterson, Benny Goodman, Ben Webster, Wynton Marsalis, Lionel Hampton, among many others, who were, and in some cases still are, talented, or even brilliant, musicians...
...Beyond which the obvious misuse of argument by Mr...
...The unmistakable pejorative implication is that whatever these two hacks in particular were able to achieve was owed chiefly, if not solely, to that special source...
...But in the current restructuring movement, cases such as these have so far proven to be the exception rather than the rule...
...I did not say that "Spy editors" were quoted in the piece...
...Skutch's assertion that the AABA form has lost its vitality to support real creative effort, I think it is safe to insist that talent is all, not merely an arbitrarily chosen form or structure...
...In his own career, Mr...
...Unfortunately, the explanation he offers is as weak as those he disposed of...
...Why, finally, would he debase himself and his publication by accusing—that seems to be the right word, late though we are in the twentieth century—the editors of being homosexuals, but to point out to them the comparable injustice they had supposedly done in an article of their own...
...could not have existed without the "evolving jazz form" just doesn't stand up...
...Stein and some others argue that the price discrepancy proves the market is not efficient, that investors don't properly evaluate a company's worth...
...The notion that the Kerns, Porters, Berlins, Arlens, et al...
...Mr...
...Now forget all that...
...They took what was in the air as they perceived it and were individually moved by whatever it happened to be, and out came songs that enriched America, and the world, in fact, beyond measure...
...Andersen to correct a larger error in his own letter—one of those embarrassing double negatives...
...The fact of the matter is—and there is a preponderance of evidence available—that the majority of such activity has been highly productive...
...Companies are getting out of businesses where they have no expertise and are acquiring assets that fit their core businesses...
...I do not think I want to take it, though it is always interesting to see "jejune" used in a sentence...
...This does reflect 54 THE AMERICAN SPECTATOR NOVEMBER 1988 poorly on management's prior fiduciary responsibilities to shareholders...
...As long as their names are mentioned, they're happy...
...That's not to say that every deal's a good deal...
...elsewhere the Spyeditors boast of Hunsecker's identity as one of the most closely guarded secrets in New York...
...Welcome to the icily glamorous world of fashion journalism...
...In the 1970s it was Larry Flynt and Hustler, in the 1980s it would be Kurt Andersen and Spy who seemed headed for a colossal success through their willingness to lower journalistic standards far below where anyone thought they could or should ever go...
...Stein laboriously searched the peripherals of the takeover issue for the movement's primary cause before coming to an erroneous conclusion...
...In discussing Irving Berlin and George Gershwin he indulges in foolish condescension by referring to them as "Tin Pan Alley boys" who "spoon fed" the American public on what he calls the jazz idiom...
...But the scale of the differential is what surprises me...
...In any case, Spy's mean attacks on occasionally anti-Communist Times columnist Abe Rosenthal are not limited to this column...
Vol. 21 • November 1988 • No. 11
