Academic

What makes a dealmaker?

By Gordon Smith, Christine, Hurt, Vic Fleischer, Fred Tung, Lisa Fairfax, David Zaring

My prolific fellow blogger Dave, and equally productive Steven Davidoff have a terrific article up on SSRN, a third rough draft of history that does a great job of placing the events of the last year in context. For me one of their most intriguing themes was of the government as dealmaker, led by Paulson, who as former CEO of Goldman Sachs qualifies as a "veteran dealmaker."

What makes a dealmaker? According to the authors, dealmakers use contract to avoid legal constraint. They are reactive and suffer from path dependency (like generals, they always try to fight the last war). Sensitive to reputational effects, dealmakers sometimes walk away from deals (viz. Lehman Brothers). They focus on arm's length negotiation for legitimacy, rather than legislative authorization. Dealmakers forget a deal once it's done, always looking towards the next deal. The authors recount how the government's response shifted from dealmaking to a more comprehensive response.

The article's thesis thus makes an interesting move, recasting behavior that most have described simply as as "ad hoc decisionmaking" into something more quintessesntially characteristic of Wall Street dealmakers. Is it a fair portrait the dealmakers you have known?

Full post as published by Conglomerate on November 29, 2008 (boomark / email).