Dan

Jan 122014
 

Barbarians at the Gate: The Fall of RJR Nabisco by Bryan Burrough and John Heylar  

I love books about business. I also love books on history. When I unwrapped this book at Christmas, I knew my son had me pegged. This was a great book for me. I devoured all 624 pages in two weeks. It reads like a thriller, almost as much a page turner as Tom Clancy, better than his later novels. Even though the outcome is history and I even vaguely remember it happening, I was on pins and needles to see how the last moments were going to evolve.

Barbarians traces the history of RJR Nabisco, the separate beginnings as the National Biscuit Company, makers of the Oreo and other snacks, and the R J Reynolds Tobacco Company, makers of Winston and Salem cigarettes. It covers each company’s histories, the men who created them and the CEOs through time who brought them to a giant merger that resulted in RJR Nabisco in 1985. Nabisco CEO Ross Johnson, a driven, deal maker Canadian, took the helm of the new company.

With all the bad press smoking was receiving, RJR Nabisco stock was taking a beating on Wall Street, despite strong profits. Johnson tried everything he knew to get the stock price to rise to the levels he felt it deserved. All during the three years after the merger, he was adamantly opposed to the sexy, new Wall Street fad: the Leveraged Buy Out or LBO. LBOs target companies with tremendous cash flow, but for whatever reason, poorly performing stock prices. In an LBO, the management of the company partners with banks and investments companies and raises enough capital to buy out all the stockholders of the publicly traded company, essentially taking it private. The “leveraged” part means they do it by taking out loans and selling bonds, often “junk” bonds, to raise the necessary capital. This essentially saddles the new company with enormous debt. The management then uses the cash flow in addition to selling off large parts of the company to retire the debt, clean up the books and then take the company public again. In the process, everyone involved usually makes boatloads of money in fees, bonuses and such.

After years of trying everything possible, Johnson gave in to the idea of doing an LBO. The problem was he didn’t move fast enough and other players, particularly Kohlberg, Kravis, Roberts and Company, were able to jump in on the action and bid against the management team. Suddenly a bidding war erupted and over the next 6 weeks, the world watched as the prices spiraled higher and higher. Bad press on all sides came out and the event quickly became the poster child of corporate greed, with Time Magazine revealing the $100 million Johnson stood to make on the buyout.

In the end, KKR prevailed and bought RJR Nabisco. However, the price was so high and tobacco’s future so troublesome, the deal never quite worked out as they had planned. They cover the resulting struggles in an afterword, written for the 20th anniversary edition of the book.

Burrough and Heylar are excellent writers, both having worked journalism for many years. They took on the task of explaining complicated finance topics and explained them exceedingly well. Their piecing together the story through hundreds of hours of interviews yielded a very detailed portrayal of the events, right down to the dialogue. When they weren’t sure or some accounts differed, they noted it.

I highly recommend this book to anyone wishing to learn more about corporate greed and the decisions that drive it. Well meaning efforts often turn into things unintended when large sums of money are in the balance. This book serves as a cautionary tale that has not yet been learned. I know of several universities who use it as a textbook in their business classes. There are many lessons businesses should learn, particularly tying CEO incentives to stock price and quarterly earnings. Often these short-term indicators drive quick behavior that seriously damages the company in the long-term. Consequently, we end up with the situation we have in corporate business today.

 Posted by at 9:15 pm
Dec 232012
 

Merry Christmas! Happy Holidays! I love this time of year. There are many wonderful traditions surrounding the many holidays that coexist at the end of the calendar. It seems everyone has something to celebrate. Whatever your inclination, I hope this time of year is wonderful for you and yours.

Growing up, my family had so many traditions around Christmas. We used to hike into the woods and cut down a Christmas tree (always cedar). There was inevitably a bare side we had to disguise with something. Christmas morning, we had to make our beds, get dressed, make breakfast and have the table ready before we could wake Mom and Dad. Then we had to eat breakfast together before we could go see the tree and what Santa had brought. What an excruciating experience for a young child! Those few minutes seemed like weeks to me.

Many of my childhood traditions have hung around for my own family. We have a caroling party every year. We invite a few families over and we wander the neighborhood, singing to anyone who will listen. Once we get cold, we head back to the house for lots of goodies and hot chocolate. I remember doing this for as long as I can remember. When I was a kid, we did it Christmas Eve, probably as a method of killing time and tiring us kids out. I remember some of our neighbors checking with Mom and Dad early in the month to make sure we were coming, as “it wasn’t Christmas without the Strattons coming to sing.”

Another tradition is having little green army men hiding in our Christmas tree. That started the year Toy Story came out and our son received a Bucket Of Soldiers. Santa Claus took a few extra minutes out of his schedule to hide them all over the tree. The tradition stuck. Every year, no matter how much I protest, soldiers show up in our tree. We are down to only one this year, but he is on guard, up near the top, next to a silver ball. His lonely vigil is almost sad, yet wonderful. I hope we don’t lose this one.

That is the challenge for this week. Honor your family traditions. Make a few new ones. Step outside your comfort zone. Let us know your favorite traditions we might incorporate ourselves. What are your favorite memories? Please share!

 Posted by at 6:00 am
Jul 252012
 

If you are just joining us, we are building cutting boards in a concept I call social woodworking. First, we planned them and then went shopping for wood. After cutting wood strips, we assembled the boards. Today, we finish them up. If you would like to buy a cutting board, they are available in the Store

To finish up our cutting boards, we next round over the edge and corners. To finish over the corners, I loaded a 1/2″ round-over bit in my router and mounted it in the table. To round over the corners, I stood the boards on edge and ran them through the router.
 The result is a nice, round corner.  
 Next, we want to round over the edges to make them easy to pick up and keep them from splintering. Rounded edges are visually appealing, too. I like to have the edge rounded over to nearly half the width. These boards ended up about 3/4″ thick. If I used a 3/8″ round over bit, it would have left the edge looking like a half circle (3/8″+3/8″=3/4″). To leave a slight flat spot on the edge, I used a 1/4″ bit (1/4″+1/4″=1/2″ leaving 1/4″ flat side). It adds a little more “bulk” to the look of the board.
 As you can see, there are a few sides to smooth over. It takes awhile. There are some burn marks on the corners. They are a result of my not moving the wood through the router bit quickly enough. Since It was on edge, I moved it slowly to control it better. However, the slow speed allowed heat to build up and the wood burned. It is easy to take off the burn marks with sandpaper.  
  Speaking of sanding, let’s do some. You can see the nicely rounded edges and corners. Looks much nicer. I used some 100 grit sandpaper in palm sander and took off all the burn marks and the other unevenness. The results were very nice. I could have sanded them with a higher grit, but honestly, it doesn’t make that much difference in a cutting board  used in a kitchen. These aren’t fine furniture. 100 grit sanding is good enough.
 Here is a great picture of the edge of a board. You can see where the 1/4″ flat side has some burn marks from the table saw on it. I was able to quickly remove these with the sander. I don’t know what I would do without a power sander. It takes forever by hand.  
  With the sanding done, it is time to apply some finish. Cutting boards are used around food, of course, so we need a food safe finish. There are a few to choose from. I like mineral oil because it is available everywhere, inexpensive and completely safe. Walnut is another I have heard of being used. I have a friend with an allergy to walnuts, so I never really warmed to using it for fear of causing someone harm. Mineral oil’s downside is it doesn’t last very long. To keep a board looking its best, it will need a thin coat of mineral oil rubbed on every few months or so.
Mineral oil is dead easy to apply. Pour a small amount on the board. Take a paper towel, fold or wad it up and rub.  
   You can see how quickly the beauty of the wood appears with just a little oil on it. This is the first coat of oil of three or four I apply when finishing it for the first time. It will soak into the wood a little more with each application.
 It is quite therapeutic to apply finish this way. There is something about watching the oil absorb into the surface and the way it feels in my hand. Sometimes I think I perhaps do it a little too much, but it can’t hurt the wood. Get yourself a board and some mineral oil. It really helps to remove the stress of a rough day.  
 Here are the finished boards. They turned out very nice. There are five different patterns to choose. Which do you like the best? I would really like to hear your favorite. Let me know in the comments, please. If you would like to buy one, they are available in the store.

Cutting Board Pattern 1

Cutting Board Pattern 2

Cutting Board Pattern 3

 

Cutting Board Pattern 4

Cutting Board Pattern 5