Tuesday, December 22, 2009


“Now he's got Paulie as a partner. Any problems, he goes to Paulie. Trouble with a bill, to Paulie. Trouble with cops, deliveries, Tommy... ...he calls Paulie. But now he has to pay Paulie... ...every week no matter what. "Business bad? Fuck you, pay me. Had a fire? Fuck you, pay me." "The place got hit by lightning? Fuck you, pay me." Also, Paulie could do anything. Like run up bills on the joint's credit. And why not? Nobody will pay for it anyway. Take deliveries at the front door and
sell it out the back at a discount. Take a 200 dollar case of booze and sell it for one hundred dollars.
It doesn't matter. It's all profit.”
– Goodfellas

The merger of good business practice and racketeering in the 00s was embodied by the private equity firm, which made the Mafia look like punks. Two hundred dollar cases of booze were nothing when you buy a company with money you borrowed with your potential purchase as capital, thus adding the company’s cost to you to the company’s total debt load, from which – because you have been so successful! – you paid yourself a management fee, and then appointed undertakers to break the balls of any of the employees who’d been there long enough to, say, get a pension, or to have an emotional stake in the company’s success – deadwood, in other words; then you sell off the parts of the company that are working, which earns the management company, those private equity sweethearts, another management fee; and finally lead the company into bankruptcy, thus screwing the banks and the investors, the latter of which had been sitting on the sidelines swallowing pap about the efficiencies brought to the company by the private equity junta. Having followed the fuck you – pay me! Business plan, the private equity partners have long moved on, although not before putting a proper legal distance between the business they picked apart and the consequences.

Mattress companies, shoe companies, if it lives and breaths, if it produced value, if it employed people and was the result of honesty, toil, and the identification of the employees – well then, it deserved, from the racketeering rational choice point of view, to be fucked.

That was the trade – the bright side was that it got the thumbs up from economists, politicians, everybody in the know, all the bright ones in our Bush-Obama culture. You know, the ones who have shoved so much shit down our throats that we have gotten to like it, that it just seems normal to wake up with that taste of plutocratic turds in our mouths, it is just who we are, it is just what living in the Do Tread on Me Nation we call home is all about.

That this was done to Readers Digest sorta figures. Symbols are attractors, and what better symbol for a brisk deathmarch through the valley of the shadow of fuck you than the magazine that, in its humble way, embodied conservative middle brow Cold War culture? The army jokes, the first person accounts of American heroism, the vocabulary builder, the Cold War rants about all the usual topics: drugs, Communism, delinquency. Plus the condensed books, Ultra-Moderne – much like Campbell’s Condensed soups, showing that the process of assembly line production could be applied to the novel. It was a sign of middle class tastelessness – of working for the Middle Brow man - to have bookshelves full of Readers Digest books – in my family, we certainly did. I eagerly went through those books when they came, laughed at the humor in uniform, built my vocabulary with the vocabulary builder, and learned the anti-Communist facts of life. Ronald Reagan’s biographers say that he was an earnest reader of the Digest, and he often quoted from it – which makes sense. In a sense, Reagan embodied the whole RD ethos.

Including the reversal of what you would expect a conservative company to do. Just as Reagan’s experience of the only business he ever knew – the movies – gave him a, to say the least, skewed notion of the relation between labor and business, Reader’s Digest evidently treated their employees, in the HQ in Chattaqua, NY, with the kind of princely beneficence that would have softened Karl Marx’s heart. The Sunday NYT story about the decline and fall of the magazine includes this anecdote about the owners, DeWitt and Lila Wallace:

Al Perruzza, now a senior vice president, recalls a dinner in the early ’70s at which Mr. Wallace rose, clanked a glass and announced that, effective Monday, everyone at Reader’s Digest would get a 10 percent raise. He sat for a moment, conferred with Mrs. Wallace and then stood up again.
“My lovely wife doesn’t think that’s enough,” he said. “So effective Monday, it’s 15 percent.”
He rose a third time and announced a cost-of-living increase.
“We had spent literally weeks preparing a budget,” Mr. Perruzza says with a grin. “I was sitting with the president of my division. The guy went ashen.”

As the NYT tells the story, Readers Digest, back then, was an incredible cash cow – much to the Wallace’s amazement. Having figured, when he began the business, that he could make as much as 5,000 dollars per year, DeWitt and his wife were rather stunned by how much they really did make:

“By 1929, circulation stood at 290,000 subscribers and brought in $900,000 a year — more than $11 million in inflation-adjusted dollars — according to “American Dreamers,” a book about the Wallaces. By the 40th anniversary of Reader’s Digest, Time tallied up the magazine’s achievements: 40 editions, in 13 languages and Braille, and the best-selling publication in Canada, Mexico, Spain, Sweden, Peru — and on and on. Total worldwide circulation was 23 million.”

So they did things like make their Chappaqua campus a nice place to work by hanging art on the wall: "Paintings by Picasso, Monet, Degas,Matisse, Renoir and van Gogh — museum-worthy décor was just another perk of working for a publishing phenomenon, one that sold millions of magazines and books a year, a readership rivaled only by the Bible. Although comparing sales of the scriptures to those ofReader’s Digest has always been unfair, because, as The New Yorker noted in 1945, “the Bible had a head start.””

That art, seen by the 3,000 employees and their family members, has now, of course, been stripped (“Take a 200 dollar case of booze and sell it for one hundred dollars. It doesn't matter. It's all profit.”). In the place of those paintings – o symbol calls to symbol, the worm that turned calls to the mindboggling serfs we are today! - we have this:
“…the walls are dominated by inexpensive prints and lots of corporate propaganda.
That’s right: corporate propaganda. Posters in the corridors of this mostly empty building trumpet something called the FACE plan, an acronym for fast, accountable, candid and engaged. One poster offers simplistic how-tos for running a meeting. (“Ensure that the right people are at the table.”) Another is headed with the words “Vision Statement” and uses lots of empty white space to underscore the point: “We will create the world’s largest multiplatform communities based on branded content.”
That mantra, and all the posters, are the brainchild of Mary Berner, the kinetic former president of Fairchild Publications who landed here with the backing of Ripplewood Holdings, the Manhattan private equity firm that orchestrated the debt-fueled takeover of Reader’s Digest.”

Our fast, accountable and engaged Mary, at a modest 125,000 a month, has surrounded herself with a coterie of “blondes” – as they are called by the stunned remnant of RD culture – to ‘reconfigur[e] the innards of the company’ – as NYT says, building up our biz vocabulary. Reconfigure – strip what isn’t nailed down, burn employees, create on-line presence.

It is a heartwarming story, this, the rescue of Readers Digest, with Ripplewood Partners throwing the company a big life preservers, made out of lead, after RD fell on hard times post-9/11. It wasn’t just that Readers Digest had been rendered rather useless by the internet. It was also that the Feds shut down RD’s sweepstakes. That killed the company with its base. It is one thing to have the condensed works of Taylor Caldwell on your shelves, but quite another not to have a shot at winning the sweepstakes. Underneath the idea of earning your money, we all long for the main chance. Ripplewood saw the bleeding, and stepped in to suck the creature dry.

“Ripplewood, led by Tim Collins, its chief executive, saw turnaround opportunities as well as a chance to roll up the fund’s own media properties, including Time Life Inc., the direct-marketing company that was formerly part of Time Warner. Ripplewood put in $275 million of its own money and had a bunch of partners, which included Rothschild Bank of Zurich and GoldenTree Asset Management of New York.
But the $2.4 billion deal piled so much debt onto Reader’s Digest’s balance sheet that it tripled the company’s interest payments, to $148 million a year. The Great Recession hurt ad sales, of course, and devastated sales of direct-marketed books. Instead of the single-digit percentage growth in revenue that Ripplewood was banking on, revenue declined.
In January, the company laid off 300 people, about 8 percent of its staff.
But even with those measures, the company did not, as Ms. Berner might put it, make its number. In August, it filed for Chapter 11 bankruptcy.”

And, finally, when there's nothing
1 left, when you can't borrow
another buck from the bank or buy
another case of booze, you bust
the joint out.



making rolls of toilet paper being kneaded into long rolls
with Sterno.


HENRY AND TOMMY shoving wads of Sterno paper into the
ceiling rafters.

You light a match.


Anonymous said...

RICO Capitalism. That is quite clever.

Ed said...

One thing that confuses me is that when this was done in Russia in the 1990s, we saw actual gangster activity, thugs invading corporate offices and forcing the people there at gunpoint to sell their businesses and the like. If this has happened in the US yet, its been really underreported.

Roger Gathmann said...

Ed, I think some verses from Woody Guthrie, written about Pretty Boy Floyd, suffice to explain the situation: Yes, as through this world I've wandered/
I've seen lots of funny men;/
Some will rob you with a six-gun,/
And some with a fountain pen.

Brian M said...

I love your analysis, roger. Why are you not writing for the NY Times instead of Bobo?

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