Tom Hooper’s The Damned United (2009) dramatises Brian Clough‘s 44-day stint as Leeds United football coach. You don’t have to be an English football film to appreciate the film which is a cautionary lesson on leadership, set in the downtrodden, rainy Northern English landscape that has become a Screen Yorkshire aesthetic.
Clough (Michael Sheen) makes several classic mistakes which self-saboages his leadership. He accepts the job because of personal animus with his predecessor Don Reavey (Colm Meaney), whose team has used dirty tactics in games with Derby County, a third league team which Clough and assistant coach/talent scout Peter Taylor (Timothy Spall) have taken into the first league. Clough’s aggressive leadership style alienates the Leeds players who still feel loyal to Reavey, and who undermine their new coach. Clough does not have a 100-day transition plan and improvises his training sessions. Nor does he brief the Leeds players on pre-game tactics, whereas Reavey compiled detailed dossiers, in advance, on Leeds’ competitors. Clough’s overconfidence and chutzpah becomes a liability to the Leeds board when he fails to deliver results, and he blows-up. Anyone who has been through an exit interview will empathise with Clough’s sad observation outside the boardroom, ‘every story ends with two words . . . the end.’
Peter Morgan’s script (The Queen, Frost/Nixon, The Last King of Scotland) based on David Peace’s novel (The Red Riding Trilogy) contrasts Clough’s troubles with his earlier success with Derby County. A sub-narrative reveals how Taylor’s expertise was essential to Clough’s success, and how the assistant coach ‘grounded’ Clough’s all-consuming ambitions. The relationship frays when Clough miscalculates during a brinkmanship negotiation with Derby County’s board, which accepts Clough and Taylor’s resignation, despite them getting the club to the top of the English league. On reflection, The Leeds board suggests that their error was in the wrong hiring decision: they should have hired Clough and Taylor, rather than Clough alone. Clough’s blindspot was a lack of political savvy: as a manager he refused to negotiate with Derby County’s owner or to heed his advice, and to listen to the Leeds board.
The film’s epilogue shows Clough and Taylor’s later success with Nottingham Forest, which won the European Cup in 1979 and 1980.The Damned United alludes to a deeper reason why Clough failed at Leeds: the ‘situational fit’ of talent to strategic circumstances that may only become clear in retrospect. Clough was a gifted turnaround coach whose chutzpah was needed to energise and motivate teams. Leeds had hired Clough with a different aim, to sustain and build its high performance team. Clough was correct to see how money would redefine English football, but in this transitional period, managers did not yet have the power to out-negotiate boards and club owners.
Media personalities who took a career detour into managing hedge funds are the latest casualty of the subprime fallout, reports New York Times journalist Andrew Ross Sorkin.
Sorkin profiles Ron Insana the former CNBC news anchor who founded Insana Capital Partners at the height of easy credit in 2006 and closed ICP in August 2008. Insana raised $US116 million from major investor Deutsche Bank and media contacts. Rather than invest directly in complex financial instruments Insana chose an intermediary position: a fund of funds investor in a diversified portfolio of hedge funds.
Insana made several errors that led to ICP’s blow-up. Sorkin notes the US$116 million was a smaller capital raising than its blue chip competitors. The fund of funds positioning meant a rational herds strategy on the hedge funds that ICP invested in. Subprime-caused market volatility set off a cascade: the hedge funds didn’t make alpha returns above the market and ICP didn’t have the diversified portfolio to weather the volatility. Consequently, ICP still had to pay out investors in full for their original investments (the ‘high water mark’ rule) before it could earn its ‘1.5 of 20’ fee (1.5% management fee on funds and 20% of fund profits).
Sorkin is insightful about the cost structures of hedge funds:
That would have been enough if it was just Mr. Insana, a secretary and
a dog. But Mr. Insana was hoping to attract more than $1 billion from
investors. And most big institutions won’t even consider investing in a
fund that doesn’t have a proper infrastructure: a compliance officer,
an accountant, analysts and so on. Mr. Insana had seven employees, and
was paying for office space in the former CNBC studios in Fort Lee,
N.J., and Bloomberg terminals — at more than $1,500 a pop a month —
while traveling the globe in search of investors. Under the
circumstances, $870,000 just wasn’t going to last very long.
This ‘contrarian’ observation highlights the leverage of institutional investors, and, in contrast to the usual media portrayal, the regulatory burdens of institutional compliance on funds.
Sorkin’s profile raises some interesting questions beyond his comparison of Insana and the media-savvy millionaires who blew-up after the April 2000 dotcom crash. Did ICP adopt the trend following strategy from CNBC’s media coverage and Insana’s popular books? If so, could Insana distinguish between market noise and critical events? How did Insana grapple with the career change from CNBC news anchor to hedge fund head? What risk mitigation steps did ICP’s investors demand, and did Insana exercise prudential caution? When he had to close ICP was Insana able to be self-critical about his past decisions and errrors? Are there firm-specific, operational and positioning risks for fund of funds? That would be a really interesting post-implementation review for aspiring hedge fund mavens.
Don’t expect to see it in CNBC European Business or Bloomberg Markets anytime soon.
Former securities analyst Henry Blodget recently launched ClusterStock which provides daily news, commentary, and research analysis on the economy, energy, financial services, retailing and technology sectors. ClusterStock’s parent company Silicon Alley Media appears to follow the Web 2.0 nanopublishing business model of Gawker Media‘s Nick Denton and Mahalo founder and entrepreneur Jason Calacanis.
In a 2008 last-minute submission to Australia’s Review of the National Innovation System I contended that market-based approaches may resolve some challenges in the organisational design and concept to cash/concept to market processes of R&D consortia and institutions. ClusterStock provides an example for strategic implementation: coverage of market events by sector specialists, near real-time commentary on conference calls, and assumptions testing via reader/user feedback. The public face provides an information filter and feedback loop in the incubation and idea generation phases of creative innovation. R&D consortia could implement this web publishing model as a peristyle public face with separate internal processes for ‘commercial in confidence’ information and corporate/government partners.
For his side of the infamous dotcom era blow-up plus an insider’s critique of the investor ecosystem see Blodget’s informative consumer guide The Wall Street Self-Defense Manual (Atlas Books, New York, 2007) and Slate Magazine’s accompanying articles.