How much money do you need to have before you know that you are rich?
I found myself thinking about this earlier this week when reading the New York Times report of the conviction of Raj Rajaratnam, billionaire investor who formerly headed the Galleon Group, and who has become the most prominent target of the US government’s crackdown against insider trading.
The story makes for fascinating reading. To summarise, in 2003, one Anil Kumar earned several million dollars a year as a senior executive at McKinsey. According to the New York Times “He had a gruelling work schedule, traveling some 30,000 miles a month, consulting for corporate clients across the globe. In 2003, Rajaratnam, who was fast on his way to becoming a billionaire, told his business school classmate (Kumar) that he was underpaid.”
A Swiss bank account was opened in the name of Kumar’s housekeeper. When Kumar provided Rajaratnam with information about secret merger negotiations between AMD and ATI Technologies, Rajaratnam generated about US $23-million in profit buying ATI stock, and paid Kumar a US $1-million bonus.
And the thing that struck me was the word “underpaid. Huh? At several million dollars a year?
I knew I was rich in 1996. I had pulled my Volkswagen CTi into a service station and said to the attendant “fill it up” without thinking about it. When I realised that this had happened, I called a friend and said: “Guess what? I’m rich!” The point is that for most of my life up until then (I started working at age 19), the question of where my next tank of fuel would come from was the most important thing in my economic landscape.
So how do rich people spend their money? Well, as a self-proclaimed rich person, I can give you one answer. Earlier this year, I spent about R400 buying a single share in Anglo Gold Ashanti. The reason was that in early 1997, I had had dinner with one Tito Mboweni (who was then Labour Minister).
I had quipped to Comrade Mboweni at the time that he actually worked for me, given that I am a taxpayer and that he as a government minister was spending my hard earned money. Mboweni went on to head up the SA Reserve Bank (where he did a superb job, in my opinion) before becoming victim to what history will record as the Polokwane Pogrom.
After leaving the SARB, Mboweni became chairman of the board of Nampak and of Anglo Gold Ashanti. And my sole reason for frivolously spending R400 on a share of that company was so that when I meet Mboweni again, I will be able to tell him: “Comrade, you still work for me!”
But those were not the only positions taken up by Mboweni. Almost exactly a year ago, the former Reserve Bank Governor accepted a position as international adviser to Goldman Sachs. It was interesting timing, given that Goldman Sachs had received bad press for its role in the Wall Street economic meltdown.
Mboweni said at the time that he regards GS as a friend because “when it was not fashionable it opened its doors to young African National Congress economists and took them for training in New York, exposing them to the world of financial markets.” (Yes, Mboweni was one of those trained by Goldman Sachs.)
Goldman Sachs’ influence over South Africa post 1994 has been significant starting with the ANC government’s first bond issue in its first year in power. It was involved in the purchase of a 20% stake in Standard Bank by the Industrial and Commercial Bank of China in 2008 and Barclays’ acquisition of a majority stake in Absa in 2005.
(Coincidentally, Absa CEO Maria Ramos, who in my view is also a victim of the Polokwane Pogrom, is also a former Goldman Sachs trainee)
This week, in its 26 May 2011 edition, Rolling Stone Magazine publishes “The People vs. Goldman Sachs: Why Top Execs Should Stand Trial”. In the words of reporter Matt Taibbi: “They weren't murderers or anything; they had merely stolen more money than most people can rationally conceive of, from their own customers, in a few blinks of an eye. But then they went one step further. They came to Washington, took an oath before Congress, and lied about it.”
Now I don’t believe in guilt by association. Fact is that if either Mboweni or Ramos decided to run for president, I would vote for them.
But blind loyalty to one's friends because they helped us during the struggle is just pathetic. Think about this next time you vote.