From 1870 to 1914 financial institutions operated on the basis of trust, relationships, family ties and politics. In a fairly globalized world, where the British reigned supreme and ensured European supremacy, exchange rates were fairly stable and cross-border finance relatively less risky and easier to implement. London was the primary banking centre while US and Germany were growing at a prodigious rate, and German technical know-how was already gaining respect and recognition. In this atmosphere, Deutsche Bank led the German effort to invest in the US and other parts of the world. After reading the first part of the book, I feel that in the US operations bad management and over-reliance on only few key people(Siemens, Villard and Adams) were the bank's Achilles heel. Notably, Villard played a roguish role, but managed to thrive due to his charisma and contacts. The bank ended up investing in companies that either took too long to give a reliable (or any) return on the deployed capital. Deutsche Bank found itself frantically trying to manage defaults by American companies and being stuck with investments it did not want. The biggest fiasco were investment in some railroad companies and in an upcoming coking facility. Only the investment in Edison General Electric (later General Electric), though not completely free of problems, turned out to be relatively good. Essentially, the bank found itself playing second fiddle to Morgan and Speyer in the American financial arena. Nevertheless, it seems it managed to turn out a respectable, if not excellent, profit.
WW1 saw finance and economics being made secondary to nationalism. As a direct result of the war protectionism and many socialistic values took deeper roots in many societies across the globe, perhaps with the hope of making a more just society. Nazism, fascism and communism found their roots as a result of economic problems, racism and aggressive nationalism. The period also saw the emergence of US as the world's richest nation, transforming itself from a debtor to a creditor nation, essentially fuelled by its managerial revolution and profits from war. Its strong influence shaped banking regulations with retail banking, investment banking and management consultancy coming out as three distinct fields. Germany, from advising the US to have better financial policies, found itself on getting lectures from Americans about the same; a remarkable reversal of roles in the span of few years. It also found its concept of universal banking directly at odds with its American counter-parts.
Between the two world wars, Deutsche Bank increasingly found itself between a sharp rock and a very hard place. From managing the default of American companies it found itself managing the anger of US investors over default of German companies. Its role in the Nazi government brought it a great deal of notoriety. The wars also saw it loosing many assets to "legalized theft" or Government confiscation. Two wars, strong nationalistic policies by Government around the globe, a hostile dictator at home and effort to help its clients retrieve the assets lost to confiscation took a toll on its profits and performance. It continued with its reliance on relations and a few key people to get things done. Overall, I feel that even though Deutsche Bank's performance was below par in this era due to a host of difficulties and adverse situations, there are quite a few lessons that one can learn by reading this text. It nicely brings out the various pitfalls of an overly centralized management, problems inherent to operating in a different cultural environment, the pros and cons of over-reliance on contacts for business, problems with a leader who can get things done but cannot mentor and the possible effects of unforeseen circumstances, natural disasters and wars on a corporation.
WW1 saw finance and economics being made secondary to nationalism. As a direct result of the war protectionism and many socialistic values took deeper roots in many societies across the globe, perhaps with the hope of making a more just society. Nazism, fascism and communism found their roots as a result of economic problems, racism and aggressive nationalism. The period also saw the emergence of US as the world's richest nation, transforming itself from a debtor to a creditor nation, essentially fuelled by its managerial revolution and profits from war. Its strong influence shaped banking regulations with retail banking, investment banking and management consultancy coming out as three distinct fields. Germany, from advising the US to have better financial policies, found itself on getting lectures from Americans about the same; a remarkable reversal of roles in the span of few years. It also found its concept of universal banking directly at odds with its American counter-parts.
Between the two world wars, Deutsche Bank increasingly found itself between a sharp rock and a very hard place. From managing the default of American companies it found itself managing the anger of US investors over default of German companies. Its role in the Nazi government brought it a great deal of notoriety. The wars also saw it loosing many assets to "legalized theft" or Government confiscation. Two wars, strong nationalistic policies by Government around the globe, a hostile dictator at home and effort to help its clients retrieve the assets lost to confiscation took a toll on its profits and performance. It continued with its reliance on relations and a few key people to get things done. Overall, I feel that even though Deutsche Bank's performance was below par in this era due to a host of difficulties and adverse situations, there are quite a few lessons that one can learn by reading this text. It nicely brings out the various pitfalls of an overly centralized management, problems inherent to operating in a different cultural environment, the pros and cons of over-reliance on contacts for business, problems with a leader who can get things done but cannot mentor and the possible effects of unforeseen circumstances, natural disasters and wars on a corporation.
No comments:
Post a Comment