Byrne's Eye View

I recently found a copy of this biography of Robert Maxwell. I've wanted to read about Maxwell's actual career ever since I heard that he was used as a fictional foil to a thinly-disguised Rupert Murdoch.

The fictional portrayal falls flat -- they were English-speaking media barons who made most of their money in acquisitions, so it sounds like they'd often bump into each other. But besides a bidding war or two, and the coincident near-collapses of their media empires in the early 90's, they rarely crossed paths.

But what's interesting about Maxwell is that he's completely misunderstood. The usual narrative is that Maxwell was simply a fraud. He bought companies with money he didn't have, took from them money he didn't own, and would have kept it up had his crimes not been exposed, leading to his suicide. Actually, he was a complex sort of fraud: he started his career money-poor but asset-rich, thanks to his extensive contacts in postwar Germany and the USSR. Most of his early business deals arbitraged this: he bought scientific books from German publishers who had to have an English contact to stay in business, he traded up to a British wholesaler, and after that company fell apart he used his remaining assets as a basis for a publishing and education conglomerate.

Maxwell tended to buy companies on the cheap because they were poorly managed, poorly capitalized, and about to go under. It's no accident, then, that his operations often lost money. Like Templeton, he bought when there was blood on the streets, and like Templeton he was occasionally bloodied himself.

What's surprising, then, is how Maxwell's empire collapsed. He ran his public and private companies in parallel, and occasionally made deals between them to keep everything stable. What ruined him wasn't fraud -- it was hubris. When shares of his public company, Maxwell Communications, started dropping, he mortgaged them to buy more; when he ran out of collateral, he started selling his private assets to put more money into the public stock. As his company continued to lose value, he used up all of his collateral, fled the country, and was found dead (circumstances say suicide, autopsy says stroke, conspiracy theorists blame the KGB or Mossad) a few days later.

Maxwell's juggling of public and private partnerships is reminiscent of Enron: some Enron executives used the partnerships to extract money from the company, but they also used partnerships collateralized with Enron stock to keep the company's earnings high. Unlike Maxwell, it took a huge staff of accountants inside the company and out to keep things running -- amazingly, Maxwell handled a similar structure all on his own. Like Enron, what brought him down wasn't that he'd overstated earnings, but that he had borrowed too much on the expectation that his stock would always trade at what it was worth, rather than what the market worryed itself into believing. Even though Maxwell lied, it's hard to see him as a crook: what ruined him was that he believed too strongly that he was doing the right thing all along.