Keenan's Book Reviews: Search results for Wall Street

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Wednesday, June 3, 2020

Billion Dollar Whale by Tom Wright and Bradley Hope

I’m feel stuck in trying to describe Billion Dollar Whale, by Wall Street Journal reporters Tom Wright and Bradley Hope. Part of what boggled my mind is the sheer size of the crime they describe, the theft of an estimated $5 billion dollars. That’s right, billion. The other is the number of corrupt people needed to pull it off. Some were neck deep in the scheme, but a lot of people had to look the other way or squelch concerns in order for this to occur and for it to go on for so long.

The true story focuses on a man name Jho Low. He grew up in Malaysia. His father made millions in business and sent a young low to be educated in the UK and US (the Wharton school at University of Pennsylvania), where he started making connections at the prestigious schools he attended. While the Lows were wealthy—even in the US, $15 million is a lot of money—he was rubbing elbows with scions of families that controlled orders of magnitude more wealth. He wanted to run in those circles.

I once read that you can’t con and honest man—traditional cons involved roping a mark into something that is morally dubious if not outright criminal. Low was fortunate to have found many dishonest people who were willing to help him, including the prime minister of Malaysia at the time, Najib Razak, the stepfather of one of Low’s Wharton friends. He also made contacts in the Middle East through Wharton and his British prep school. With the help of Razak and a Saudi ambassador, Low created a Malaysian sovereign fund. Instead of investing the billions of dollars the fund borrowed from investors—with the aid of American banks—Low and his conspirators siphoned of most of the money. He never intended to pay it back.

Low like to party. This is where the story gets really crazy. His partying led him to contact—and in some cases even friendship—with American celebrities. Low pulled money out of the Malaysian fund to finance the making of the film The Wolf of Wall Street, which is about the huge fraud committed by Jordan Belfort, who was played by Leonardo Dicaprio in the film. (Dicaprio was far from the only celebrity in Low’s circle, and part of the fascination of the book is seeing how he used his access to access these people.) Low’s theft and excesses almost makes Belfort seem like an amateur.

As the book was published, Low’s scheme had finally collapsed after seven years, though he and some of his conspirators were still at large and had access to at least some of their stolen money in spite of American, Swiss and Singaporean efforts to seize assets of those involved in the scam. It is frustrating to think that he may get away with it. It is also frustrating to realize that billions may never be repaid to investors, the people are Malaysia are stuck with enormous debts that will be a drag on their economy for decades and the truly beneficial investments that might have been made with that money will never occur.

Wright, Tom & Bradley Hope. Billion Dollar Whale: The Man Who Fooled Wall Street, Hollywood, and the World. New York: Hachette, 2018.

Monday, November 14, 2016

Empires of Light by Jill Jonnes

In the last decades of the 19^th Century, inventors and industrialists battled for dominance in the emerging market of electric energy. One of the major fronts of this conflict was the choice of DC (direct current) or AC (alternating current). Jill Jonnes explains the history of this pioneering age of electricity in Empires of Light.

Thomas Edison was a major player in the early days of electrification. He is known for developing a commercially viable incandescent light. The innovation that made his light commercially successful was that he developed an entire system for generating a distributing electric energy to make those lights work.

Edison designed a DC system, and he was a major proponent of DC. A weakness of his system was distance. He could only supply power over a distance of about a mile. If large areas were to be lit, a power station would be needed every mile. This made it hard for Edison to market the system for community lighting, though he successfully sold many systems to manufacturers, commercial establishments and very wealthy homeowners. In spite of the limitations, he built a system to light a portion of Manhattan; his Pearl Street station began powering lights in 1882.

Though it was not obvious at first, it soon became clear that high voltage AC could be transmitted over very great distances. The invention of transformers in Europe provided a way for voltage to be stepped up for transmission and stepped back down to levels appropriate for lighting.

George Westinghouse adopted the AC system. The advantages of AC soon make Westinghouse Electric Company a major competitor with Edison. Even Edison’s own salesman began to ask for an AC system to sell, though he was reluctant to have any involvement with AC.

Edison believed that AC and the high voltage used for its transmission were dangerous. He also had business and personal reasons to oppose the introduction of rival systems. He attacked the use of AC. He even went so far as to aid an AC opponent who successfully lobbied to make electrocution by AC power the official means of executing condemned prisoners in the state of New York.

Westinghouse pressed on and won high profile contracts that proved the safety and efficiency of his AC equipment. Notably, he had the major lighting contract for the White City of Chicago’s World Columbian Exposition of 1893. He also won the contract to build generators for the hydropower plant at Niagara Falls. The promise of inexpensive power drew major manufacturers to the area before the plant starting operating in 1895. This surprised the investors, who had though the city of Buffalo would be the target market.

Though transformers made AC a very viable system, it had other technological hurdles, such as difficulty powering motors. Serbian-born inventor Nikola Tesla solved this problem with his induction motor. Like Edison, Tesla invented an entire system for supplying electrical power to his motors, which could also easily accommodate incandescent and arc lighting. The Niagara Falls system was based on Tesla’s patented technology.

Tesla went on to invent and explore the potential of other electrical devices, notably fluorescent lights and radios. Unfortunately, he was never able to create commercial products from these later works. He fell on hard times and was quite poor for many of the last years of his life. He died in 1943.

After the formation of General Electric, which largely pushed him out of the management of the company, Thomas Edison moved on to other things. His later ventures were of mixed success, but his work on the phonograph and improvements to motion picture helped to launch the American entertainment industry. Edison passed away in 1931, semi-retired in Florida.

Westinghouse continued to grow his electrical empire. After the Panic of 1907, in which a banking crisis shook the economy, investors forced him out of the management of Westinghouse Electric. He had four other companies to run. He didn’t care for the way Wall Street did business so he got involved in Progressive politics. He died in 1914.