July 13, 2006
He was clearing out the desk in the study one Sunday afternoon when he found it. A small, silver key with an oval base and the letters JF8421 etched on it. It was lying in the middle drawer, hidden under the brown paper he’d used to line the bottom. He held it in the palm of his hand and stared at it. He couldn’t think what it was a key to.
Was it the key to the drawer itself? No, it didn’t fit. He tried the other drawers, then the bookshelf, then the closet in the study. No. He went around the house trying it in all the other cupboards that he never locked. It didn’t belong to any of them. He took out all the keys in the house and compared it to them, thinking it might be a duplicate of something. It wasn’t. He remembered that the refrigerator had a lock too and tried that. No. He pulled out his old bicycle lock from the back of his supply cupboard. No luck there.
What could it be the key to? Could someone else have left it there? Some visitor? He remembered how his friend Rajeev had come over and spent the night in his study once because his wife had thrown him out of the house. Had it really been six months ago? Could it be his? But surely he would have said something by now. They hadn’t spoken in a while though. No harm checking.
Rajeev and his wife, it seemed, had settled their differences. Their son had been really ill. No, he was fine now. Quite recovered. Was spending the summer vacations with his grandparents. Rajeev and his wife were organising a picnic next weekend. Would he like to come? Great, they looked forward to seeing him. It had been a long time. What’s that – a key? No, no, he hadn’t left any keys behind. The whole point of that night was that his wife had taken even the keys to his own house away from him. Ha ha.
So it wasn’t Rajeev’s. Where did it come from then? He stared at the key again. It wasn’t big enough to be the key to something important. It looked more like the key to a locker. Yes, that’s what it was, a locker key. But the lockers in his gym didn’t have keys. And he didn’t have a locker at work. But wait, what about his old office? He used to have a locker there. Could this be the key to that locker? Had he simply forgotten to hand it in when he quit? He never used that locker anyway. He tried to remember what the key looked like.
Next day he took off early for lunch and went down to his old office (it was just a block away, after all). The receptionist was new and didn’t know him. He was just trying to explain to her who he was and what he wanted there when his old boss showed up. He was even balder than he remembered, and still had that irritating accent. But he seemed less intimidating somehow. Pretty soon all his old colleagues had gathered around, telling him how he hadn’t changed a bit, how he looked completely different, how he’d lost weight. It felt good. His friend Gautam, the one who’d been swearing he was going to quit for as long as he could remember, was still there. They decided to go out for lunch. Gautam updated him on all the office gossip. It seemed strange, like peering through a window into another world.
The key didn’t fit though. Once he actually got there he remembered that the keys to the lockers looked completely different. He didn’t know how he could have forgotten. Now what? He spent an hour in his cubicle thinking over where else that key could have come from. It was beginning to annoy him now, not knowing what the key was for. Could it be from his earlier apartment? No, he’d given all the keys to that back to the landlord, even the spares. But maybe a duplicate to the mailbox? Yes, yes, it could be.
That night he stopped by his old apartment. Or rather, where his old apartment used to be. They had torn the building down. They were building some new high rise. The entire site was surrounded by a high asbestos fence. He was shocked to see it. All his fondness for the old house came flooding back. His first apartment. All the good times he’d had there, all the memories.
He stopped by the paan walla at the corner to get a cigarette. The old man recognised him, welcomed him back with the kind of eagerness one reserves for a favourite customer. Wanted to know how he was, what he was doing these days, why he never came by the shop anymore. He told him that he’d moved out, that he lived far away now, that he’d only stopped by to see his old place – he didn’t know it had been torn down. Yes, the old man nodded sagely, three months ago they started. Such a nuisance, sir, all these trucks with their dust and cement going up and down all the time. Constant traffic jams. Ruining the place, really. All the best people (like yourself, sir) moving out. Which reminds me sir, what happened to that friend of yours, the one who was always coming here with you, woh chashme walleh? Nikhil. He’s in the States now, he told him. He’s working there. In the i-shtates? Wah, wah, must be making lots of money no? Yes, he nodded, he was. How long since he had had contact with Nikhil? He must e-mail him once he got home.
But what to do about the key though? Could it have been the key to tha mailbox that had now been destroyed? A key without a lock, then, of no use to anyone. Somehow, the more he thought about it that night, the more he doubted it. No, this was the key to something else. He just knew it.
Finally, reluctantly, he decided to call her. They hadn’t spoken since the break-up. A part of him said it was a stupid reason to call – some unidentified key – she would think he was making an excuse, that he was checking up on her, or maybe even that he wanted to get back together with her.There was bound to be misunderstanding. Better not to call. But the riddle of the key just wouldn’t go away. He’d tried putting it back in the drawer where it came from and forgetting about it, he’d tried watching TV, reading the new Roth, listening to music. But he couldn’t get it out of his mind.
He called her. She recognised his voice instantly. Some things hadn’t changed. There were the awkward ‘how are you’s’ to begin with. The innocuous little ‘so, what’s new?’ like a bridge thrown over a seething river of questions, all desperate to be asked. She was fine. She was seeing someone new. He was a banker too, it seemed – some habits die hard. He told her how he’d been travelling. Slowly, the conversation thawed. Yes, she’d been to see the new play too. Alyque Padamsee HAD seriously lost it. Had he heard about the poetry reading at the British Council? She was thinking about going for it. Did she remember the last reading they’d been for, the one where the poet described the countryside as being the place where cows moo? She laughed. Of course she did. And how about that interminable poem of hers, the one about making mango pickle as a metaphor for memory. Like that hadn’t been done before. What was she reading? Yes, Carver was amazing, wasn’t he?….
It felt like old times, talking to her this way. He had that warm, singing sensation inside him again. Not that he was still in love with her or anything. No, no, that was all over. Still, that didn’t mean they couldn’t be friends. He wondered why he’d been hesitating to call her.
Towards the end of the conversation he brought up the key. Explained how he’d found it, how he couldn’t figure out where it belonged, how he thought maybe it was hers, something she’d left behind when she moved out. She said she didn’t think so. It wasn’t likely was it – she’d never kept any of her stuff in that drawer. Still, maybe a duplicate. She’d check. Would call him back later in the week to let him know.
So that was that. Somehow he didn’t think the key would turn out to be hers after all. He suspected she’d just said she’d check to give her an excuse to call back. Where did that leave him? He couldn’t think of anyone elsethe key could belong to. Could it have been the previous occupant’s? Maybe they’d just left it in the drawer and he’d put the brown paper over it without noticing? No, he remembered going through the house opening every drawer to make sure there was nothing in them. He would have found it then. This key was definitely his.
Staring at it long after midnight, it began to seem to him that this was no ordinary key, but something supernatural – an apparition, a metaphor. Perhaps the secret of the key was that there was no lock to it, perhaps in every universe there was a key that was just a key, in and for itself, that would open nothing. The opposite of a skeleton key – a key that would fit no lock. But why should it magically appear to him? And why now?
He was being silly. This was just an everyday key with a lock of its own. He was actually fairly sure he knew what it was a key to, he just couldn’t seem to remember. Was there a reason he couldn’t remember? Was he repressing the memory of what that key opened? Was he afraid of what lay behind what the key kept locked? Somewhere out there was a lock that this key fit into and he had to find it. What had he forgotten? What was he missing?
July 12, 2006
Dhoomketu asked for this one. Literally.
Guy calls you up. Knows your name. Wants to sell you a credit card. (see details in Dhoomketu’s post)
Ten Ways to answer the call:
1) The come-on: “What’s your name? Oooh, that’s such a strong, masculine name. So, tell me, what colour underwear are you wearing?”
2) The friend-who-can’t-be-fooled approach: “Arrey yaar, Dhoomketu, kyon mazaak kar raha hai re?  You think I don’t recognise your voice. Come off it.”
3) The talking-on-cellphone-while-driving approach: “Yes, yes, I’d definitely like a cre…oh shit! AAAAAAAA! *sound of squealing brakes. Cell phone switches off*
4) The Tom Cruise Approach: “Tell me, are you at all familiar with Scientology?…”
5) The manic-depressive approach: “What’s the point of a credit card? What’s the point of anything? My life is meaningless. I’m going to throw myself out of my 22nd floor window now. Goodbye.”
6) The Capt. Haddock approach: “No! This is not Cutts the Butcher!”
7) The check-out-the-competition approach: “ABN Amro credit card? Who would want that? Let me tell you about the Citibank Credit Card that I market. You give 0% APR. We give -0.5% APR. You give flexible credit limits. We don’t believe in credit limits at all…”
8) The flight-risk approach: “Sure I’ll take a credit card. Could you have it delivered to the airport by tomorrow morning though? The international terminal. My flight for Botswana leaves at 8:00 in the morning. Oh, and ask whoever’s coming not to use my name but to ask for Mr. Dhoomketu. I’m travelling under a false passport you see.”
9) The Harry and Walter approach: “Ah, so you work for a bank do you? Good, good. So, tell me, is it a liquid bank. Do you keep a lot of cash reserves? Take an average branch. What’s that? Your main branch in on Barakhamba Road? Fine, let’s take that one. On an average day, what kind of cash would that branch hold? Would it be in the safe or with the cashiers? Is the bank safe? How many guards do you have posted? Are they armed? When do they come off duty?”
10) The certified pothead approach: “What did you say the credit limit was again? Let’s see, that would mean…three whole weeks of dope. Wow! Yes, yes, I want the card”
Bonus: The Pankaj Mishra approach: “How can you offer me a credit card at a time like this? Don’t you know that the average Indian still earns barely a dollar a day and that we haven’t moved at all on the Human Development Index? Don’t you realise that communal tensions are on the rise and any day now the communists are going to be voted to power? The faster you credit card companies stop believing your own myths, and offering these western temptations to consumers, the better it’ll be.”
 Translation: Dhoomketu, old chum, what are you kidding around for?
How shall we answer such hatred?
How shall we stitch together,
Word by careful word,
This torn page?
It is not a question
Or forgiveness –
We have strength enough for neither.
Nor is it simply a matter
Of measuring the wounds
And adding them all up.
Statistics will not help us now.
We cannot hope to understand
What is inherently senseless.
We can only try to acknowledge
The truth of it,
Bear witness to it,
The way the negative bears witness to the image.
We can only try
Not to turn away.
And yet there can be no doubt of our judgement here:
For the windows of our city
Shake with outrage,
And against such horror
Even the light is defiance.
We are afraid, yes,
But fear too is an affirmation –
The trembling of leaves
That denies the wind.
If our silence has been shattered
So that we no longer recognise ourselves in it;
If our very shadows
Have turned to ghosts;
Do you really think we shall let this defeat us?
Do you really think we shall give in
No, tonight we shall find no comfort
In our own safety,
But live, in our imagination,
In a stranger’s house,
In a stranger’s place.
Except that there are no strangers now,
For the spilling of our common blood
Make us all family –
What we feel in these first moments
Is not sympathy,
But the grief of our own loss.
Time will mend all, we are told.
But Time cannot dismantle the explosions,
Or undo the pain;
Time can help us to forget,
But do we really want to?
It is up to us to retain
Our diminished humanity;
Up to us to recognise
That Death is not a visitor
We would wish on any other.
It is up to us to defuse
The anger ticking away inside us,
Waiting to explode.
It comes down to this then:
That we dare neither heal our wounds
Nor celebrate them;
That we can no longer tell
Relief from guilt,
Hope from complicity,
Moving on from desertion;
That our very need for prayer
Makes God impossible.
It comes down to this:
That the familiar ways are lost,
And the route back to peace
Is long and difficult.
It will be some time, at least,
Before all of us
Are safely home.
What can I do, in times like these, but write?
This post in special appreciation of the efforts of the folks at Mumbai Help, who did an amazing job last night of helping people get in touch with their loved ones.
And so, to the now (in)famous Zinedine headbutt.
Personally, I laughed myself silly watching re-runs of the thing on TV, and continue to maintain that it was an act of comic genius (as I argue in the comments here). I mean, can you imagine a wackier and more unpredictable way of ending a career? It’s positively inspirational. The day I finally get my PhD my advisor had better be wearing a sternum guard.
I’m even more amused by the reaction of Zidane fans. First, there’s this whole racial sledging thing. Everywhere I look people are going around speculating on what Materazzi must have said to Zidane to provoke the headbutt. Aside from the fact that at this point this is all unproven hearsay (even if Zidane does finally come through with a statement, I don’t see any reason why we have to take his word against Materazzi’s), I’m amazed that anyone would think that anything Materazzi might have said was justification for Zidane’s actions. The argument is not, as some people have suggested, that Zidane should not have reacted because it was the World Cup Final and he had a critical role to play. The argument is that, outside of Dharmendra movies and Shiv Sena Headquarters, it is not okay to respond to things you percieve as insulting with physical violence. That argument applies as much to Zidane as it does to the rioters protesting the Danish cartoons or the ‘desecration’ of Mrs. Thackeray’s statue. Physically assaulting someone on the playing field because they say something insulting is behaviour better suited to eight year olds. In a civilised society we don’t responds to words with fists. Or headbutts.
I’m also amused by the convenient fiction (implicit in much of the moaning about Zidane’s actions) that Zidane’s exit was the reason the French side lost the match. It’s certainly a wonderful face saving device, isn’t it? The fiction writer in me is almost tempted to speculate that maybe the very purpose of the headbutt was to get Zidane sent off so the French would have a ready excuse for losing.
Finally, I can’t help being a little curious about the headbutt per se. Who responds to insults with headbutts? Punches, yes. Kicks, possibly. But headbutts? Is this a cultural thing? Are there societies out there where the headbutt is the ubiquitous form of social assault? Do people actually go around saying “Say one more word and I’ll headbutt you in the sternum”? Are there martial arts movies where the hero and villain fight by exchanging headbutts? Has Zidane watched too many Animal Planet specials on the mating rituals of antelopes?
Or was Zidane, perhaps, concerned about using his hands in a football game? Because THAT would be a foul?
 The desire to escape being insulted is, of course, the principle reason that the French don’t speak anything but their own language – that way they don’t know what the English are saying about them. You could always try insulting a Frenchman in French, but the odds that you’ll actually pronounce it right are so low that it’s not a serious threat.
Okay, so I can’t resist having my two-bit say about Pankaj Mishra’s Op-Ed piece in the NY Times
For the record, there’s a lot that Mishra says that I agree with. My biggest problem with the piece is Mishra’s inability to articulate, to others or to himself, just what it is he’s opposing. Implicit in Mishra’s arguments, there are, I think, at least 4 different claims that have been made about India:
1. The liberalisation and globalisation reforms of the early 90’s have been beneficial for India – leading to a spurt in growth and improved standards of living for at least some sections of the population.
2. India is fast emerging as an important global player economically – both as an important market for MNCs as well as a pool for talent and services.
3. India is well on its way to becoming the world’s dominant economic superpower
4. India’s development has been broad-based and this century will see the majority of Indians enjoying lifestyles comparable to those in the West.
These are, in my mind, four very different claims – the links between which are tenuous at best. I personally happen to believe, for instance, that the first two are true, but that the last two are not.
What amused me the most about Mishra’s article is that he starts of by taking exception to the claim that India is a capitalist success story and argues against this by showing that the vast majority of people are still poor. Huh? Since when has capitalism been about prosperity for the masses? Everything that Mishra says in his story actually suggest to me that India is the quintessential capitalist success story – where the elite bourgeois amass large amounts of wealth while the common people continue to live in deplorable conditions.
At any rate. Here are the things that Mishra is saying (or at least, I think he’s saying, or trying to say) that I agree with:
1) The belief that large majorities of Indians will someday enjoy standards of living comparable to those enjoyed by people in the West is highly questionable, if not entirely untenable. Just given the sheer size of the population involved, the levels of growth and resources required to make that come true simply don’t exist.
2) The benefits of India’s growth in the last decade and a half have gone disproportionately to a small minority of Indians. Therefore, claims in the popular media about India’s development (e.g. India Shining) are premature and excessively optimistic. Unless serious thought is given to the very real issues facing India – both in terms of infrastructure and in terms of equity – these inequalities will perpetuate, and absent institutional efforts to enhance social welfare, they are unlikely to be ‘naturally’ overcome.
3) In the absence of equitable growth, income disparities between the rich and the poor will become more glaring and social unrest will increase over time. Worse, given India’s democratic context, the lack of equitable distribution of benefits will make it difficult to create strong political support for further reforms. Until the common people see a tangible pay-off from the liberalisation to themselves, they will continue to vote based on issues other than economic performance, and if the masses don’t care about it then the government won’t either.
4) Given all that, there’s good reason to be more cautious about India’s potential. India is far from well-set on the path to being an important global superpower. It’s too early to be celebrating India’s rise to global dominance.
Notice that none of the above implies any of the following:
1) That India would somehow have been better off by sticking to its pre-reform regime. There is no case, in any of this, for turning back reforms. The reforms have led to real growth – that the growth has been uneven is, at best, cause to reflect more closely on the welfare implications of some of the changes made. The fact that some people are getting richer while the majority remains poor doesn’t mean that development won’t eventually spread – if anything, high incomes and therefore high savings may well be critical to the accumulation of capital needed for rapid growth. We certainly need to think about how the disparities created by that shall be managed, and how the growth achieved will eventually be funneled into real development, but that’s no reason to dismiss the growth that has been achieved. That at least some sections of population are enjoying dramatically greater prosperity is an achievement, and cause enough for some celebration, however guarded.
2) That India can only play an important role in the global economy if it achieves broad-based development. Or that India becoming a key global player will necessary mean prosperity for all its people. This would be nice, of course, but it’s not, in my view, strictly necessary. I think Mishra is ignoring the sheer size of India, and exaggerating the unsustainability of unequal growth. It’s not hard to imagine an India where 5% of the population has extremely prosperous life-style while the remaining 95% remains little better off than they were originally. Yet that 5% alone could make India a key player in the global marketplace.
Understand that I’m not saying that such a scenario is desirable. Only that there’s no basis for Mishra’s assertion that India’s emergence as a key global player is contradicted by its poor performance on human development indicators. India is large enough to be a key global player even without development for all.
3) Echoing point 1 above, there’s no reason to believe that creating more broad-based development will require state intervention of the kind associated with the pre-1991 days. That government policy has a key role to play in ensuring the sustainability of India’s development is unequivocal, and that government spending is required to make development more equitable is certainly true. But none of that implies a return to a system where the government hijacks the role of the market and sets up inefficient and bureacratic monopolies to ‘serve’ the people. There is no reason why the government can’t intervene through the market to aid in the redistribution of wealth. And there’s a vast difference between the kind of clean, deregulated policy we need to let the market operate and the kind of policy that tries to replace and manage the market, which is what we’ve traditionally had.
Of course, Mishra isn’t necessarily saying that we should return to the old days or that the reforms are bad either. But it’s a pity that he doesn’t really articulate what he thinks the right answer is, leaving the door open for people to assume that a return to the pre-reform days is what he’s advocating.
Overall then, Mishra makes, I think, a convincing case for why India isn’t a superpower yet and why it’s yet to be proven that it ever will be. And in doing so, raises important and relevant questions about the distribution of growth and the challenges of growing inequity. What he doesn’t give us is any reason to believe that the changes over the last 15 years are in any way inimical to India’s chances of becoming an important global player. Saying we still have a long way to go isn’t the same thing as saying we haven’t made any progress. Just because something is overhyped doesn’t mean there isn’t some truth to it.
P.S. Mishra also says some exceedingly silly things about communist parties being voted to power, US nuclear policy towards India being driven by rich Indian-Americans and India not being able to serve as a counterweight to Iran and China because it trades with them. I’m just going to ignore all that, as not being worth comment. Notice though that if India can’t be a counterweight against Iran and China because it gets oil from the former and trades with the latter, then one wonders how the US can possibly be opposed to Iran and China to begin with.
July 9, 2006
Don’t you just love it when poets get peevish?
Take Robert Graves. At some point, some woman (I’m guessing it must have been Laura Riding, though I’m not sure) goes and leaves him to marry some other guy. So what does Graves do? He goes ahead and writes a whole bunch of poems about how women hook up with undeserving men.
First we get this:
Beauty in trouble flees to the good angel
On whom she can rely
To pay her cab-fare, run a steaming bath,
Poultice her bruised eye;
Will not at first, whether for shame or caution,
Her difficulty disclose;
Until he draws a cheque book from his plumage,
Asking how much she owes;
(Breakfast in bed: coffee and marmalade,
Toasts, eggs, orange-juice,
After a long, sound sleep – the first since when? –
And no word of abuse.)
Loves him less than only her saint-like mother,
Promises to repay
His loans and most seraphic thoughtfulness
A million-fold one day.
Beauty grows plump, renews her broken courage
And, borrowing ink and pen,
Writes a news-letter to the evil angel
(Her first gay act since when?):
The fiend who beats, betrays and sponges on her,
Persuades her white is black,
Flaunts verpertilian wings and cloven hoof;
And soon will fetch her back.
Virtue, good angel, is its own reward:
Your guineas were well spent.
But would you to the marriage of true minds
– ‘Beauty in Trouble’
(As an aside, do you think we’ll ever be able to read the word gay in its original sense again?)
Next Graves writes:
A perverse habit of cat-goddesses –
Even the blackest of them, black as coals
Save for a new moon blazing on each breast,
With coral tongues and beryl eyes like lamps,
Long-legged, pacing three by three in nines –
This obstinate habit is to yield themselves,
In verisimilar love-ecstasies,
To tatter-eared and slinking alley-toms
No less below the common run of cats
Than they above it; which they do not for spite,
To provoke jealousy – not the least abashed
By such gross-headed, rabbit coloured litters
As soon they shall be happy to desert.
And finally, just in case that was too subtle for you:
Why have such scores of lovely, gifted girls
Married impossible men?
Simple self-sacrifice may be ruled out,
And missionary endeavour, nine times out of ten.
Repeat ‘impossible men’: not merely rustic
Foul-tempered or depraved
(Dramatic foils chosen to show the world
How well women behave, and always have behaved).
Impossible men: idle, illiterate,
Self-pitying, dirty, sly,
For whose appearance even in City parks
Excuses must be made to casual passers-by.
Has God’s supply of tolerable husbands
Fallen, in fact, so low?
Or do I always over-value woman
At the expense of man?
It might be so.
– ‘A Slice of Wedding Cake’
Phew! Talk about Petulant Pterodactyls.
On a separate note, we’re thinking about running a series of poetry by people better known for their prose over at Poi-tre. Trouble is, there’s a whole bunch of people on the cusp about whom I can’t make up my mind. So I’m leaving it open to readers of this blog. What would you say would be the primary classification of each of the people listed below – Poet / Prose Writer:
1. Robert Graves
2. Jorge Luis Borges
3. Thomas Hardy
4. Rudyard Kipling
5. Lewis Carroll
July 7, 2006
Will everyone please get over the Mittal Deal? Or at least explain to me what all the exuberance is about?
To begin with, I’m sick to the teeth of the press going to town about how this is somehow a victory for India. You expect idiocy like that from the imbeciles at the ToI, but last week’s India Today (which I had the misfortune of glancing through – forgive me, I was bored) has Anand Mahindra telling us how the merger “proves the tenacity of Indian entrepreneurs globally and will raise the aspiration levels.” And, of course, politicians like Chidambram and Kamal Nath rah-rahing about how they’re so proud. Huh? Will someone tell me in what way Mittal is representative of Indian entrepreneurs, or of the health of the Indian Economy? Is the money for the deal coming from India? Not as far as I know. Is Mittal Steel primarily an Indian company? Not unless the nationality of a company is decided by the origins of its founder, in which case the Vikings are probably the greatest entrepreneurs in the world, or, if you go back far enough, all companies are African. Are we likely to see a spate of other Indian entrepreneurs pulling off deals as large as Arcelor-Mittal? I can’t think of a single one. Then why is Mittal’s success reason for India to feel proud and celebrate?
More to the point, is it a success at all? Empirical research on M&A over decades now has generally found that returns to acquirers are marginal or negative. This is especially true when the acquisition is hostile and contested – the general argument is that competitive bidding tends to drive up the price of the target, until the price finally paid equals, if not exceeds, the value of the target to the acquirer. This is the familiar winner’s curse – the person who bids too much wins the auction, but gets no profit from his purchase. A number of researchers have suggested that escalation of commitment plays a large part in this – once acquirers are publicly committed to a deal and have invested time, money and reputation in it, they are reluctant to back out and may continue to bid even after it ceases to be profitable for them, especially if the initial context is uncertain (see, for instance, Haunschild, Davis-Blake and Fichman, Org. Science, 1994 and Puranam, Powell and Singh).
Could this apply to the Mittal-Arcelor deal? We know that the deal was hotly contested, with Severstal being brought in to resist the Mittal bid. The New York Times (June 26th) article about the deal says:
Arcelor’s foot-dragging led to other concessions from Mittal as well. The offer that was agreed to is nearly 40 percent higher than Mittal’s initial offer in January. That bid was 27 percent higher than Arcelor’s stock price at the time. The current offer also represents a hefty premium to Mittal’s last bid of about 36 euros a share, and to Arcelor’s last trading price of 35.02 euros a share.
The report also says that in getting the deal completed “Mittal made several concessions, including his family’s voting rights”.
None of that is conclusive, of course. I’m the last person to trust the NY Times’ take on business issues, and I certainly haven’t looked at the Arcelor-Mittal deal in any detail. It’s possible therefore that there are huge synergies to be had here that outweigh the premium Mittal is paying (what kind of value multiples would that imply I wonder? And how would they compare to multiples for other steel companies?). It’s possible, given Mittal’s considerable reputation for turnarounds that he can make Arcelor yield high enough profits to justify the valuation he’s put on it. Maybe this is, in fact, a good deal to have made. But prima facie at least, the evidence would suggest the opposite. Everything I read about the deal suggests to me that it’s actually the Arcelor shareholders who are the winners here – that Arcelor has successfully used a number of classic defensive tactics to negotiate itself an extremely sweet deal from Mittal. And while it’s possible that I’m wrong (I don’t claim to understand global steel) I think it would be interesting if we were to see a discussion of why exactly this deal is a real success for the Mittals, rather than empty tom-toming of the fact that the deal got made. Not all deals are worth making.
One last thought on Mittal as the great Indian success story. Assuming for a minute that in some bizarre way Mittal is actually representative of India, how much of a paragon is Mittal Steel really? How much should we aspire to emulate him? Research on corporate governance in family businesses has generally found that heir-controlled firms tend to destroy shareholder value (see, for instance, Amit and Villalonga) . In fact, Morck, Stangeland and Yeung have argued that a large proportion of a country’s wealth being tied up in the hands of billionaire heirs may actually slow GDP growth. The abstract to their article reads:
The basic finding of this paper is that countries in which billionaire heirs’ wealth is large relative to G.D.P. grow more slowly than other countries at similar levels of development, while countries in which selfmade entrepreneur billionaire wealth is large relative to G.D.P. grow more rapidly than other countries at similar levels of development. We consider several explanations for this finding. First, old wealth may entrench poor management and control pyramids may distort their incentives. Second, a sharply skewed wealth distribution may create market power in capital markets causing inefficiency. Third, entrenched billionaires have a vested interest in preserving the value of old capital and thus in slowing creative destruction. Fourth, old money becomes entrenched through control of the political system, and most especially by rearing barriers to capital mobility. In contrast, substantial self-made billionaires’ wealth is observed where such forces are ineffectual and creative destruction occurs.
Yet we’ve all seen the picture of LN Mittal and his son grinning away after the Arcelor deal, and the Economic Times informs me today that Mittal’s 25 year old daughter is on the board of directors. Again, I don’t know anything about the Mittal children. For all I know they may in fact be the most competent people for the roles they play within Mittal Steel. Still, given the empirical evidence on value destruction by heirs, it does make you wonder.