Present Value Read online

  “What was that voice-mail thing about Eduvest?” Greene asked.

  Larry cleared his throat. “Ah, Peter, there could be a problem with the Q2 revenues.”

  Jellicoe got the over-the-bifocal freeze. Then the pause for effect. “How much of a problem?”

  “We might have to restate.”

  Peter Greene leaned forward, still staring over his bifocals, like the secretary of defense upon learning that the Mexican army had stormed across the Rio Grande. That was the effect.

  “Restate? Say again?” Peter asked.

  “Yeah, I’ve just been with sales, and—”

  “You shitting me? How much?”

  “Could be, well . . . kindasorta a hundred or so.” (“Well, it might be a hundred thousand Mexicans or so, Mr. Secretary.”)

  “A hundred? Jesus, Larry.”

  In Peter Greenese, “Jesus, Larry” was three declarative sentences. “Jesus” meant, “This is a very big problem.” “Larry” meant, “The problem is your problem, Larry.” The abrupt conjunction of the two words said, “I don’t need to hear the details.” But Larry, who understood all three statements distinctly, ignored the third and began to tell the woeful tale of how sales had hidden the side letter, and now there was this new thing from the California board of regents. “Which is just a reservation of rights letter, but—”

  This showed signs of becoming too much data for Peter Greene. “Will Settles make us restate?” he interrupted.

  “Probably,” Larry said. Greene looked at Fink, and Fink nodded sagely. “Probably” was a good answer, because it was always probable that accountants would be a pain in the ass. Don Fink didn’t know very many accounting rules other than that one.

  “Can you roll them?”

  Don gulped. He would have preferred another formulation, like, say, “Can we discuss this with Settles?”

  “Can I roll them?” Larry answered. “I, I don’t think so, not on something like this.”

  “They did fourteen mil of consulting business here last year. Is it a close call, some accounting thing? Should I call Settles’s managing partner—what’s the guy’s name?”

  “Ah, no, Peter, it’s not close. I don’t think. From an accounting perspective.”

  Not close? Don Fink awoke. If it was not close, then there must be some blame to manage. (Fink had missed the third point of “Jesus, Larry.”) He harrumphed and started to say, “I’m wondering, Larry, how this—”

  “Never mind,”Greene cut him off. “Larry, do a report by tomorrow to Don on how this happened. Make it privileged and all that crap. I don’t want to be copied on it. Okay?”

  “Okay.”

  Silence. Done. Larry ventured, “Ah, Peter, how do you want to handle—”

  “I’ll take care of the board. We’re expecting some unevenness in the numbers. The economy is uneven. Which is exactly why we’ve got to diversify this company a little bit, and raise a prudent amount of capital to do it. We’ll point that out to them. I don’t know if it would be material to the meeting agenda to start speculating about restatements.” (“Listen, gentlemen, we’re not going to get the president all riled up about a few Mexicans on the border until we’ve confirmed the intel on this. Maybe it’s just a mariachi convention or some goddamn thing. Check it out first.”)

  Alarm bells were ringing in Don Fink’s head. He was general counsel to Playtime. He owed allegiance to the company—an inanimate but nevertheless legal person, and this meant, roughly, that Don’s client, the person or thing he was supposed to be protecting, was Playtime’s board of directors, not Peter Greene. Public companies and their boards could be liable for sitting on information like this for too long. Lawyers of companies ought to tell them that, or they could be liable.

  On the other hand, Fink knew that when Peter Greene had hired him, it wasn’t to worship at an altar of legal correctness. Fink was paid $350,000 a year to cover Peter Greene’s ass; specifically, to ward off evil in meetings through the privilege force field, and otherwise to be Greene’s general-purpose Secret Service agent, scanning the crowd for enemies and, if it came to that, taking a bullet. If Greene detected any fastidiousness on the lawyer’s part, any metaphysical lawyer bullshit about fiduciary duties to the board, Don Fink’s resignation would be accepted before he knew he’d written it.

  And, not that it made any difference to the issue, in the current market, Don’s options were all upside down.

  “Peter,” Don began, clearing his throat, “I don’t know if it’s prudent to . . .” His voice trailed off.

  Larry said, “If we have to restate, it will be out there, and—”

  Greene repeated, “Larry, has Settles told us we have to restate yet?” (“Has satellite intel confirmed the precise number of Mexicans, General?”)

  “Well, they don’t exactly know about this yet, so—”

  “So they haven’t told us to restate. There’s nothing to report.” Peter pressed the button on his intercom. “Nancy, call down to Hanscom, cancel Chicago, and tell them to get the G-IV ready for a flight this afternoon to Sacramento, okay? Thanks!” He rang off, pushed another button. “Donna, find out who we know on the California board of regents, and figure out who we’ve given money to, governor, senators, any congressmen, all of them. Okay? Meet me after lunch on this. Thanks!” He pushed the buttons again. “Marie? Hi, it’s Peter. Find me three pet causes of the governor of California. Find out if his wife runs a charity or anything. I need this in an hour. Okay? Thanks!”

  Peter Greene put the phone down and looked at his watch. Fink and Jellicoe rose with awkward smiles. Fink was formulating his file memo—how he would remember this conversation—basically, that he’d suggested management advise the board about problems with the financials, and that they’d said the matter was preliminary, as an accounting matter, and they were pursuing it fully in an effort to understand whether the accounting issues were material. Then the CEO had made a few quick phone calls, directing his staff to investigate the, er, accounting issues surrounding the problem.

  It was 11:01 A.M., time to pump up the outside directors for another round of bond financing. Then time for Peter Greene to go to California and roll the board of regents.

  4 AMHERST COLLEGE, 1976:

  ECONOMICS 101

  (FIRST LECTURE)

  “WHAT IS ‘VALUE’?”

  Professor Hugh Vorblen raps his ferule sharply, three times on the lectern. Economics 101 will come to order. When the murmurs in the Red Room—the grand old lecture hall in Converse—die down, the lecturer commends himself to the students by bringing out a glass, which he places on the lectern, and a bottle of Molson Golden ale, which he places next to the glass. The students view the green bottle with interest. Then the lecturer uncaps the bottle and pours the ale into the glass. He holds up the glass for them to see.

  “What is the value of this glass of beer?” he asks. Professor Vorblen wears a three-button dark green tweedy suit. And a blue bow tie. He is a short man, and the light streaming into Converse reflects off his glasses, making it difficult to see his eyes. He doesn’t look like the kind of guy who would value beer very much.

  “Anyone?”

  There is no one.

  The lecturer asks, “Is it the cost of the hops, and the cost of the barley, and the cost of the water?” He puts the beer back on the lectern and strides to the blackboard. Soon he is filling the board with figures: commodity prices for malt, hops, barley; equipment costs, labor costs, utility costs.

  “Just do the math, class, and we’ll have the value of the glass of beer, right? The beer is the sum of its parts. Surely.”

  The lecturer returns to the lectern. The glass of beer is standing tall, its head firm. “Or is it?”

  It seems a trifle hot in the lecture hall this afternoon, a little . . . close. The students heard the sound that the beer made, frothing into the glass. They saw the bubbles gather into the head. They haven’t taken their eyes off the glass, and now they follow it as the lectu
rer takes it in hand, walking up the steps to the rear of the lecture hall. The beer is golden and clear. It looks cold and refreshing.

  “Maybe the beer’s value is purely an aesthetic matter? Can it be calculated by asking a master brewer to critique clarity, tang, taste, color? Shall we set its value based on purely objective or even aesthetic criteria? Anyone?”

  The class looks uncertain. This does not seem quite right.

  “No? No aesthetes? Of course not! You’re economists! Budding investment bankers, accountants, stock traders! Immune to all that sentimental rubbish. Not an aesthetic bone in your bodies, right?”

  Nervous laughter.

  “Well, all right then, let’s see if we can understand value a different way. Anybody thirsty?”

  More laughter in the auditorium.

  “It is hot, after all, but my beer is cool. Your throats are dry, parched . . . you’ve been crawling through the desert of economics, and I hold in my hand the oasis. Anyone want my beer?”

  Tentative hands are in the air. Then not so tentative. A forest of hands.

  “Ah,” says the lecturer. He smiles. “We have hands. Anyone know what the hands represent?”

  The golden liquid flashes as the sunlight catches it, the light diffused and refracted by the forest of hands.

  “The hands, dear students, are demand. You now understand fifty percent of the first law of economics. But we need to look at the other fifty percent. Let us now inquire into the nature of . . . supply. What is the current supply?”

  Puzzlement. What does he mean, exactly?

  “Has anyone else in the hall got any beer?”

  More wry laughter. A searching glance from the professor, who has returned to the podium. “No? No beer at all, any of you? You’ve come to class unprepared!”

  Laughter.

  “The doors are shut. No one can enter my hall. No one can leave. Oh, dear. That means my beer constitutes all of the supply. For the balance of the lecture, I have market power in beer. Indeed, I have a monopoly of beer. No undergraduate cometh unto beer but by me.”

  Laughter. This guy is great! And that last line, some of the students think, sounds familiar from somewhere.

  The lecturer smiles. “Well then, let us determine the value of this beer in the way we economists can understand. We know who wants it. Now let’s explore who wants it the most.”

  A hand waves. Then another.

  “You, sir, gentleman in the lemon-yellow golf shirt and Bermuda shorts. What will you pay for my beer?”

  The lemon-yellow gentleman will pay a dollar. But blue jeans at the back of the room offers $1.25. A young lady in a green T-shirt, two dollars. And so on. In the end, the beer sells for $3.05. Congratulations to the left tackle in the tenth row.

  “Now, while we were exploring the nature of value, did you notice what drove our dialogue? Was it the cost of the hops? The cost of the barley? The cost of the water? Was it the aesthetic worth of the beer? Did any of the bidders argue with me about these things?”

  Heads shaking.

  “No one even discussed those things. Would you say it turned rather on the question of how many people—the demand—were chasing this one glass of beer, the supply?”

  Clearly it had. “Supposing I’d had six glasses of beer, or sixteen. Suppose I’d had one hundred glasses of beer. Do you think the gentleman in row ten would have paid three dollars and five cents? Yet it would have been the same twelve ounces of ale that he consumed with such relish.”

  Nervous laughter. The left tackle grins sheepishly.

  “So, I ask you, what was the value of that beer? Was it three dollars and five cents?”

  Frowns of concentration around Converse Hall. The undergraduates are wondering about that very question themselves when the professor says:

  “Class dismissed.”

  5 A GOAT IN

  THE PARLOR

  WHY WAS LINDA LEBRECQUE HAVING AN AFFAIR? She frequently discussed this question with her therapist, whom she saw every other week for an hour, at a cost of $400 a session. (BlueCross BlueShield would cover only $220 of this cost, but the copay was only slightly more expensive than Linda’s hairdresser.) The discussion went on at some length but reduced mainly to one theme:

  “Serves him right.”

  Dr. Helga Schadenfrau’s office was an airy parlor in a rambling Wellesley Hills Victorian with pale blue shingles and white shutters. The room was painted light lemon and had a nine-foot-high plaster ceiling and lovely bay windows. The doctor had worked hard to eliminate the sterile-office feel that can be so nontherapeutic. She and her patients sat across from each other on easy chairs. Chai and other beverages were available on a coffee table. Antique-white roses were arranged in a vase of blue glass. Classical music played very faintly from two small Bose speakers in the bookshelves, surrounded not by medical tomes or journals but rather by books that would give the patients a sense of serenity. These were books about children with incurable cancer or lovers returning after twenty years: in other words, books that had been on Oprah.

  Most of the patients were wealthy professional women in their thirties and forties. If Dr. Schadenfrau had been dosed with sodium pentothol, she might have admitted that very few of them had any confirmed diagnosis of depression or cognitive/emotional disorder. The doctor’s income (around $500,000 per year) was mainly a function of her willingness to advise BlueCross BlueShield to the contrary, and to spend her days in an exquisitely comfortable living room listening to rich women gripe.

  It served Fritz right. Dr. Schadenfrau found this an interesting explanation. She might have asked another patient why she justified her own conduct by its relative immorality rather than attempting to portray it—if only to herself—as moral per se. But Dr. Schadenfrau declined to pursue this line of inquiry with Linda. Confronting the patient in this manner would not have been therapeutic (and might indeed lead the patient to take the highly nontherapeutic step of canceling her biweekly $400-an-hour sessions).

  So they discussed why it served Fritz right. This elicited a frightful bill of particulars, including that things came too easily to Fritz; that he probably was having all kinds of women himself, since women swooned around him and always had; that he was too athletic; and that Linda had to do everything to support the family. Well, not everything. He made $155,000 a year as senior assistant controller at Playtime, but what was that? Did he think $155,000 was going to pay the mortgage on their $2.1 million brick mansion? Did he think $155,000 a year and a few stock options were going to support the children’s education? Linda and Fritz’s retirement? The summer house in Nantucket? It barely covered the nanny and the nanny’s car (when they could get a good nanny, which was getting harder and harder). Fritz had been content to float along in the assistant controller’s office, not working to get ahead, when he could have been a CFO a long time ago. No, not him. He wanted to leave at five, he wanted his sailing and his latest thing, this cycling (don’t get me started on that!), leaving Linda with all the responsibility in the marriage. He didn’t even check e-mail on weekends. He was just lazy, and if it weren’t for her, they wouldn’t be able to afford Dover at all. So it served him right.

  Dr. Schadenfrau wanted to explore the interesting character defect of Fritz’s athleticism. Well, Linda explained, anything that had to do with a ball and bat, or a racket, you name it, was effortless for him. Which was the point—he did only what was easy. From Ping-Pong to Frisbees, golf to tennis. “He doesn’t play golf that much, and he’s what, a six handicap? I took a solid summer of lessons that cost me twenty-five hundred dollars, and I still can’t even address the ball. Tennis? I’ve taken lessons for years. I play regularly in the summer. The only time he plays, as far as I can tell, is at the annual law-firm outing, where, just to make me angry, he sizes up the best young player and then crushes him.”

  Why was this a bad thing?

  “It’s bad because Fritz doesn’t have to work for anything. I’ve had to work for everything. I still d
o. I run on the gyrotreader, I manage the kids, I work my fingers to the bone”—this was a figure of speech; the manicurist did an excellent job maintaining Linda’s nails—“to create this effortless life that he enjoys, this . . . this . . . paradise that he’s living.”

  “Paradise? How do you mean?”

  “I mean cruising along effortlessly, living in a lovely town like Dover without a care in the world. He never does anything he doesn’t want to do. Becoming CFO might mean playing some golf with some of the financial guys. But they aren’t good enough golfers, so he’s not interested. Or maybe working a little harder. Or trying to get along with the people in the organization. Or checking his e-mail once in a while. Being a member of the team. Playing the game, so to speak. But will he do that? No. So it serves him right.”

  This was deep, this resentment of Linda’s. Dr. Schadenfrau thought that they had only begun to unearth its roots.

  Linda said, “And maybe the most infuriating thing about him, the most infuriating thing of all?”

  “What is that?”

  “What he would say if he knew about—you know, if he knew about it.”

  “The affair?”

  “Right.”

  “What do you think he would say?”

  “It’s not what I think he would say. I know what he would say. I know exactly what he would say and the way he would say it.”

  “And that is?”

  Linda cleared her throat. Dr. Schadenfrau could tell that she had rehearsed the delivery.

  “Here’s what he would do. Suppose I came to him and said, very seriously, very gently and contritely, said, ‘Darling’ ”—Linda hadn’t actually called Fritz “darling” in about five years; this was for show—“darling, we need to talk. I’ve a terrible confession to make. I’ve—I’ve been seeing another man.’ Right? Suppose I said that?”

  “Yes?”

  “He’d ask, ‘Who?’ And I’d say, ‘Marvin. Marvin Rosenblatt.’ ”