Tuesday, December 26, 2006

The business of war, the war of business

Israel is a place full of conundrums and contradictions, not least when it comes down to commerce. I am privileged to do business with some of the country's finest, as well as a plethora of wealthy and staunchly Zionist Diaspora Jews.

Some interesting thoughts have occurred to me in the past couple of weeks, as I am in the middle of constructing a deal between an Israeli investor and an Irish property development group. I have especially enjoyed the wonderful way in which Irish blarney has met Israeli chutzpah at the meeting table.

One outcome is that we decided to set up an Israeli-Irish venture (in the words of the Irishman, "imagine the trouble we'll be in when we get Israeli blarney and Irish chutzpah", and the Israeli response of "do they do Gaelic-Ivrit dictionaries?"). This would compete with Candy & Candy, and we all agreed should therefore be called Sukariah & Milchon. Make use of said Gaelic-Ivrit dictionary to translate that one...

On a serious note, what I have found from negotiations with Israelis (and the words of warning from my Tel Aviv & Jerusalem relatives about not wasting effort trying to do business there) is that there is a zero-sum attitude. If he gets a win out of it, then by definition I have either lost or at least not won by as much as I could have, which for me feels like a loss. So the objective of any business deal is to ensure I not only demonstrably come out on top, but that my adversary knows he has been squashed like an Iranian nuclear reactor (oh, that's next year's simile of choice, sorry).

This makes for a rather aggressive and uncomfortable final round of negotiations, a far cry from the jollities of breakfast meetings at the Cinnamon Club (the only place in London with a kedgeree even close to a par with Freedman's own). Ultimately, it also destroys trust, removes any possibility of repeat business (especially when the non-Israeli firm has been screwed so far into the ground it might go bust), and more often than not simply blows the deal anyway. Then the Israeli has also missed an opportunity - but at least gets to boast about how stupid the other guy was and how badly it will all work out for him for not taking the deal on offer.

Now Israeli business uses this skill to grab the second spot in the whole world as a hub for venture capital investment. In that market, it is predatory and the idea is either to ruthlessly exploit companies in distress or undervalued, or to seize total control of the newbies whilst leaving enough fat in the deal for the PhD'd inventors to feel incentivised to make money for the MBA'd investors.

Even then, there is substantially more money floating around than so-called "good" deals to put it into. This might be in part because non-Israeli companies seeking friendly investment run a mile when the Ramat Gan VC shark comes snaffling in their direction. It's also because everyone in Israel is looking for what elsewhere in the Middle East is called baksheesh but in the Holy Land, where the trend is bizarrely edging towards three-piece suits and ties, it is called "professional fees", "raising charges" or "consultancy".

In English, I call it "backhander" or perhaps more precisely "money for nothing, demanded by lazy, greedy, arrogant, pig-headed men in glass-clad towers, who give Jews in commerce a bad name."

A good example - about two years ago, I had some very brief exclusivity on a £460m piece of commercial real estate in London fall into my lap. After getting some London institutions interested in the deal as the debt providers, I needed to find a nice equity investor but was heading to Tel Aviv for Pesach. Knowing a couple of well-placed Israelis in said glass-clad Ramat Gan skyscrapers, I set up some meetings.

First time lucky, one of them tells me he knows the perfect company to make such an investment, who are on the lookout for trophy buildings in London. Of course, there is the small matter of fees, he says. No problem, say I: there is plenty to go round, I have an agreement for 0.25% of the transaction value (at that time $2m), which I will gladly split with you.

The guy snorted and said he was looking for an introductory fee of 4%, and didn't I know this was typical in Israel? I explained that no introduction was worth $35m to the vendor, so he brought the meeting to an abrupt end and I left.

A year later, I had a similar experience with a lawyer who wanted me to find an investor for a major European football club. Before he could even tell me who the club was or how he was involved in the transaction, I had to sign a fee agreement for 4% (maybe it is typical in Israel, I thought). Now a bit older and wiser, I said I would sign whatever he put in front of me, on the understanding that at a later date, I would take great pleasure in un-signing it.

He asked me what this meant, and I explained that should it become a deal-breaker with the buyer I brought, or if it were to contravene any law or regulation in the UK, USA, Israel or the country where the club was, I would simply rip it up in his face, and they would all have to renegotiate if they wanted to complete the deal.

After picking himself up from under his desk, and having a glass of cold water to get over the shock of a non-Israeli being so brash, he agreed. It later transpired of course that there was a broker chain as long as my mother's Tesco bill, a whole load of indiscreet baksheesh to pay, a football club with no real idea how to run itself or create a viable deal for a solid Western investor, and a whole load of Israelis making everything even more undeliverable through a refusal to step aside and let me do the work.

Irony of ironies on both these deals: the London commercial space later sold for £520m but my chance of making it work had long gone, and the football club remains unsold and sliding into bankruptcy and disrepair to this day.

Compare the confrontational way that Israel does business with the way Israel has come to run its wars. Gone are the days of pre-emptive and ruthless surgical air strikes, land wars conducted swiftly with waves of fast tanks and long-range foot missions, and clever removals of our enemies through exploding mobile phones and car headrests.

Instead what we have is a row of calamitous decisions that are governed by international diplomatic requirements and domestic political pressures before translating into poor battlefield decisions. At the end, we beat our breasts over whether we won or lost, and at all times seek to appease everyone, usually managing to offend them all to some extent.

Israel needs to succeed in war and peace. Hence it is about time it learned that business is NOT a zero-sum game: both sides should come away feeling like they got a win out of it. And more important to their immediate survival, they should understand that war IS a zero-sum game, at least in the Middle East. Whilst Israel clearly did not win outright against Hizballah, it also did not lose militarily.

But that is enough to give Israel's enemies the confidence to come back harder and push their luck further. The ham-fisted methods used, whilst we all know they were manipulated and exploited by the international press and Hizballah, have created many more enemies and caused doubts amongst our allies. So by not winning, I think we can assume to have lost.

The only thing that stands between the Arab world and international isolation is oil. Let's be honest: apart from a handful of enarques in France, members of the Camel Corps in Whitehall, and a few Beltway antisemites, nobody wants to deal with them, and nobody would have a need to if the black stuff ran out tomorrow. A combination of OPEC cartel wizardry keeping the price in a range low enough to disincentivise the search for replacements but high enough to rake in the petrodollars, and the veiled threat by the ruling elites that terrorism could "slip out of control" at any time (ie they can turn a blind eye), keeps everyone face-down in the trough of the Persian Gulf.

The only thing that stands between Israel and international isolation is... what, exactly?

I would argue that a withdrawal of half the world's Intel computer chips, a bundle of the best drugs against cancer and other medical nasties, agricultural knowledge that could make Africa bloom, and stunning women like Bar Refaeli and Natalie Portman, might cause some pretty big problems.

So in the same way as the Arab world has used its grip on oil to protect its relationships with the rest of the world, Israel should look to business as a means of forging links. In the last year, Warren Buffett and Donald Trump have made huge investments there. Ryanair even think it's worth flying in (I can't wait for Michael O'Leary to achieve his preferred 20-minute turnarounds at Ben Gurion, let alone enforce the baggage size policy).

But to do that, they need to show that the country is able to protect itself (and hence any investment therein) robustly and swiftly when attacked, at the same time as showing that it can create win-win situations, both politically and economically with its neighbours, and on a business-to-business level with its international counterparts.

Israel has earned plaudits from its friends for its innovation and industry against staggering odds, and even a grudging respect from its neighbours and enemies. It has paid its dues on that respect many times over. How effectively it invests the balance will determine future yields.

Monday, December 25, 2006

He's back!

So, the holidays are upon us, I'm home alone, and feeling inspired to recapture the peaks of Freedmanslife (summer last year) when 1,000 people a month - yes, that's right - were reading the wisdom of the Podger from Pinner.

But what to write? Sadly, ennui has set in, for both author and reader. Fighting the good fight is supposed to be an altruistic thing, where I plough on feeding out opinions on everything from Anti-capitalism to Zionism (perhaps the bookends of that spectrum contain a root cause). But finding new things to say, and getting no response, is rather a tedious monologue. Easy as it is to assume everyone agrees with me, the more logical conclusion is that my readership is down to the bare bones.

So here is the rescue plan. Incidentally I have recently applied this methodology to my professional and personal lives. Businessmen worldwide are being cowed into doing fair deals that actually work, and women are being shamed into seeing beyond my portly exterior and loving the man inside.

The fact that I am still writing this in casa parentalis should not distract either the businessmen or the women from considering a successful relationship. So as I was saying, here is the recovery programme:

- Readers will be attracted back to the glories of Freedmanslife through the increased shock value of the content to be published here over the festive season (by the way, this will include a dangerous rant about bland multicultural terminology). We wish to assure all readers that this does not represent the "tabloidisation" of Freedmanslife, except in the way that the Guardian and Independent got even more rancid when they shrunk, which was a response to dwindling readership. Therein lies a canny parallel.

- We are also going to feature more guest postings from Freedmansmum and perhaps even a contribution from Freedmansdad. Loyal readers are also welcome to submit articles of their own or that they see elsewhere. Note that wishy-washy pandering claptrap will probably end up on the cutting-room floor. We're not going after the readers of Time magazine.

- There will be some more personal content here, which is a return to the origins of Freedmanslife, back when it was a mere Yahoo Group and blogging was just a twinkle in the eye of some Silicon Valley stoners and/or nerdy Harvard grads. Women who fail to reject your author gracefully enough (now now, that's very negative, some might not reject me at all) will make a cryptic appearance - you have been warned.

That's about it. We shall see whether I can regain my writer's mojo in the next few weeks, otherwise I can just do what all the other great internet behemoths do and get Google to buy me out...

Friday, December 22, 2006

A Christmas carol for the New Europe

Here follows a short and rather un-PC Christmas carol for the New Europe. This year we have experienced a level of pandering beyond the wildest dreams of the Taleban. Anyone who stands up against this is shouted down as an extremist or racist, but I think there is a basic problem that remains unaddressed. People have responsibilities that go alongside rights. They must live underneath the law that protects them and expect it to be used in their favour and against them according to how they behave.

The hypocrisy and cynical exploitation of their position by both the extreme so-called fringes of the British Muslim community, as well as - if not more so - by the so-called moderate political leadership, is met with a wall of slient acquiescence, or even assistance. The more we buckle to an agenda that runs counter to the national good, the more this agenda is pushed and made more extreme. We have a precedent for what might happen next, but this is different and more insidious. The Nazis lived in Germany, and subverted an entire nation. Now we have a community within a community within a community, subverting firstly their co-religionists, and then entire national agendas, one by one. Where do we think it will end? They are pretty clear about that; they want us to change or die.

First the Saturday People, then the Sunday People. Remember that.

Catholics roasting on an open fire,
Jack Straw's dripping bloody nose,
Yuletide carols causing Muslim ire,
Sharia law they would impose.

Everybody knows in Turkey they will overthrow,
Help to make the region right.
Synagogues with their aisles all aglow,
Jews find it hard to sleep tonight.

They know that Allah's on his way;
He's goaded lots of boys in hoodies on to slay.
And every Muslim child is going to try,
To sit on trains here, blow up and die.

And so I'm offering this simple phrase,
To kids from one to ninety-four,
Although its been said many times, many ways,
A very Merry Christmas no more

Tuesday, December 12, 2006

Count to 10, bait the Jew

I am confused. I'm sure it's the evil Zioneoconazi IDF who are supposed to be the child-killers. Guess what happened yesterday must have been a "false flag" operation, just like in true-to-life BBC series Spooks.

Meanwhile, I notice that 4 people were injured in a shoot-out at a rally against increasing lawlessness in Gaza. Does anyone else see the irony?

Anyway, I promise to get back into the swing of writing shortly, it's been a busy few weeks and I note that my dear readers have been maintaining a respectful silence on this (ie don't really miss me, boo hoo)...

Wednesday, December 06, 2006

The First Rule Of Flight Club...

Did you hear the one about the six imams on a plane? Well, I won't ruin the punchline for you, but I think this tells the story quite nicely...