THE OSCAR-WINNING SCREENWRITER William Goldman said he knew why all the major studios except for Paramount turned down Raiders Of The Lost Ark. He also knew why the mighty Universal turned down Star Wars. In his book Adventures In The Screen Trade he described executives who were confident they'd just seen the next Sound Of Music or the new Jaws, but hadn't. Others "just knew" when a mistake crossed their desk - flops such as ET.
Why? Goldman, being kind, said "not one person in the entire motion picture field knows for a certainty what's going to work". The screenwriter of Butch Cassidy And The Sundance Kid, All The President's Men, and Marathon Man, Goldman admitted "nobody knows anything". Nobody, not now, not ever, "knows the least goddam thing about what is or isn't going to work".
Now, the movie trade isn't global finance or political economics, but the events of the last few months suggests Goldman's thesis is applicable to all the so-called experts who we've assumed for a decade to be new-era Midases. But, it turns out, none of them knew the least goddam thing.
Dick Fuld, CEO of Lehman Brothers, which had total assets of $639 billion, filed for Chapter 11 bankruptcy protection in September. Lehman, worth $42bn last February, is now worth nothing. Universal losing Star Wars was a $1bn error - Fuld lost 42 Star Wars because, turns out, he knew nothing.
The scale of the "Ponzi" scam apparently perpetrated by Bernie Madoff shows not the deficiencies of US corporate regulation, but the length of the global queue of those who know nothing. He was paying clients 10%-12% annual returns and refused all access to the accounts. Warning bells ringing? None. Yet his hedge fund and fund management businesses were colossal fiddles.
Santander gave Madoff $3.1bn, HSBC $1bn, Royal Bank of Scotland $600 million, Nomura $303m - the list goes on and on. Why? Far from having perfect insider knowledge, or even slightly imperfect knowledge, it turns out nobody in the market knew the least goddam thing.
Running through all the various excuses is the refusal to accept they knew nothing. Nicola Horlick's Bramdean Alternatives, which lost $21m (9.5 per cent of their assets), claimed before Madoff was exposed that "Robust and due diligence" was "at the heart of our investment process". Horlick blames a "systematic failure" of the US regulators, saying: "It's astonishing this was allowed to continue for so long."
No it isn't - it's astonishing the Midases got away with so much for so long.
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