Investment Biker Read online

  Without warning we came across a long patch of snow, several inches deep. Several bulldozers were plowing the road, bearing down on us. We inched forward, careful not to allow our wheels to slip. As usual Tabitha was in front.

  To my horror, two bulldozers drew up on either side of her, closing together toward her bike. I yelled. Either they didn’t see her or were playing a bizarre game of tag. I shouted a warning.

  She turned to one and then the other and cursed the drivers, raising her fist, her helmet snapping back and forth from bulldozers to the patches of ice on the slippery road. If she lost her nerve and skidded, she’d be under the clanking iron treads of these behemoths.

  She shot free, sliding and skidding, and pulled away. A hundred yards farther, she pulled over and turned and gave them hell in English, both fists raised and shaking with fury, berating them for almost killing her.

  I was overwhelmed with relief, pride, triumph, and adoration. I immediately understood the delight she’d felt that night we’d finally made it to Istanbul. An extraordinary heroine! My partner!

  In Santiago we saw at once that this was indeed the most prosperous country in South America. Everybody in Chile noticed the difference between this economy and that of his neighbors—in fact, between Chile now and the Chile of twenty years before, when it had been a basket case. Here was a currency that was even appreciating against the dollar.

  I grabbed one of the last seats on the weekly flight to Easter Island. Wanting to rest and shop, Tabitha stayed behind. While I was gone she would do what she could to find a clutch cable and some chart books I needed. That check for stock purchases still hadn’t arrived in New Zealand. She would cancel it and send a replacement to New York.

  Easter Island is a triangular island of about sixty-five square miles, formed by three volcanoes that stand extinct in each corner. Lakes lie in the centers of the volcanoes, surrounded by rolling grass and volcanic soil broken by frozen lava flows. I wondered how its original inhabitants had gotten here—twenty-three hundred miles from Chile, eight thousand miles from any Asian landmass, and thirteen hundred miles east of Pitcairn Island, its nearest neighbor.

  Of course, the astounding thing about Easter Island is its giant heads, the moai. A thousand or so in number, carved in nearly identical styles from volcanic rock, many weigh twenty tons and stand ten to twenty feet high. The largest weighs ninety tons and rises thirty-two feet. The chief difference is between those carved with short ears and those with long.

  Majestic and disturbing, scrutinizing with brooding and disdainful expressions, these stone heads, standing on giant ahu, or altars, have been a mystery since the island was first encountered by Europeans in 1722. The few thousand surviving islanders lived in thatched huts and scratched out a living from the sparse plant life. They were demoralized by years of internal strife. War and cannibalism were common, perhaps an outgrowth of earlier population pressures and a shortage of protein. They didn’t even remember the stories behind the moai.

  Who built these heads, and why did they build so many? How were they transported miles to their perches overlooking the sea? How were such heavy monoliths stood upright? And how were the red topknots, separate stone carvings of red scoria weighing as much as twelve tons, raised onto the moai? How had an island twenty-three hundred miles from the South American mainland become peopled?

  The ancient stonework in Bolivia and other South American countries so resembles the moai and ahu that I am convinced that the islanders must have come from there, not Asia or the Polynesian Islands. Periodically earthquakes in South America produce tidal waves reaching all the way to the island.

  My guess is that a tribe of South Americans, on a sailing expedition, maybe trying to escape the aftershocks of an earthquake, were caught by one of those giant waves and driven the necessary two thousand three hundred miles to their new home.

  The largest platform of all had supported fifteen massive moai. As late as 1960 it was still in pretty good shape, but a tidal wave has since scattered it beyond recognition.

  Near one volcano were the ruins of a sizable town, but all that was left were scattered rocks giving no clue as to why the carving had stopped. Scientists estimate, as they did with the Sahara, that hundreds of years before, the island had been covered with trees and denser plant life.

  This is on a par with the mystery of how the pyramids were built. Scientists calculate that to carve, transport, and raise Paro, the ninety-ton moai that is the largest example of these stone-carvers’ art, took approximately twenty-three thousand man-days, nearly seventy-five man-years. And Paro is only one of a thousand such monuments. If the completion of an average moai took a third of this time and a thousand were carved, then this tiny island devoted twenty-five thousand man-years to sculpture. And how long had it taken to carve the ahu and the red topknots?

  Three hundred moai had been in the midst of being carved in place in the side of Ramo Raraka, the mountain from which the heads were produced, when the carvers had suddenly stopped, their work now frozen in both its early and late stages. When finished, these moai would have been severed at the back and moved down the mountain, sometimes fifteen miles away, where they would have been erected on stone ahu built for the purpose. A few finished statues had even been on their way down the slope.

  As these moai in the quarry and on the way down hadn’t yet had their eyes carved, they were called the Blind Giants. Archaeologists wondered if the eyes would have been carved only after the moai had been placed facing the sea, at last enabling them to see.

  I figured the people who carved the heads must have entered a period of great prosperity, because at one point they were making a lot of them—to my eye it looked like a bull market that had gotten out of control. After all, a poor society cannot develop such extensive art. Somehow this tiny island piled up enough of what here counted as capital to afford what, for the size of its population, must have been one of the largest art projects ever constructed. The question remains, how many people can prosper on a sixty-five-square-mile island?

  As the boom expanded, the heads became ever bigger. In the quarry where they were produced, some were twice the size of the finished ones, a full twenty-one yards long. I guessed the market had become saturated when carving had stopped for an unknown reason. Was it famine, earthquake, tidal wave, epidemic, civil war?

  The ancient stories had it that this once-glorious civilization had been reduced to a primitive state by a war to the death between the island’s two factions, one tribe called the Long Ears, the other the Short Ears. Armageddon in a compass of six and a half by ten miles with no exit—and today no one even remembers why. Madness. One more absurd war. Yet another Saturday-night brawl at the bar between power-drunk plug-uglies prepared to ruin not only their own lives but also those of their families and friends.

  In a few hundred years nothing of all this will be left, just as other wonders of the world have disappeared.

  In Santiago, I saw that Chile was not only a perfect lab for the war between statist and capitalist ideas, but that the experiment was almost complete. After a good deal of socialist mismanagement, Chile was completing one of the world’s most profound economic transformations, its economy roaring, its exports soaring. It had been the first South American nation to undertake deep structural reforms. After fifteen years of efforts, it was reaping huge benefits.

  Salvador Allende’s Marxist government ruled Chile from 1970 to 1973. His statist regime was marked by four-digit inflation and daily demonstrations against shortages of basic necessities. In this economic debacle, Chile lost many years of work. If ever a country was behind the economic eight ball, seemingly doomed forever to Zairian-type poverty, Chile was it.

  In 1973, Allende was overthrown in a bloody military coup. General Augusto Pinochet returned six hundred expropriated companies to their former owners, privatizing part of the public sector. His seventeen-year rule was marked by massive human-rights violations, including two thousand to three thou
sand deaths and disappearances.

  In 1976, his government implemented free-market reforms, established a sound-money policy, and raised interest rates. Whenever a fiscally unsound household, company, or economy faces reality and bites the bullet, the initial stages are always terribly painful, as these steps were. This was part of Chile’s process of recovering from decades of statist mismanagement. Overseas goods became cheaper and Chile’s more expensive. Now domestic producers had to learn to compete or fail. By as late as 1982, Chile’s GDP had fallen 14 percent. Many inefficient companies went bankrupt, a necessary part of making a country more competitive.

  In spite of making some mistakes, the finance minister instigated a number of sound policies that worked for the economy’s good. State enterprises were sold off. The government lowered import tariffs and deregulated the economy. Companies were forced to compete globally or die. The government replaced the state social-security system with obligatory individual retirement accounts, a savings plan used in parts of Asia for decades with excellent results to create investment capital. State subsidies to private businesses were eliminated. Interest rates were allowed to be set by the market, not the government, and wages were set by the supply of labor.

  The results of these fifteen years of tough economic decisions have been significant. Exports have zoomed from $4 billion in 1985 to $10 billion today. The GDP has grown at 6.5 percent annually since 1984, and since the nineties it has grown by 10 percent. The government has run a surplus since 1990 while increasing expenditures on health, education, and housing. Inflation has been controlled, and the GDP doubled to $36 billion, in two decades. Unemployment has fallen from 20 percent in 1982 to 4.8 percent today. Per-capita income has neared $3,000, on a par with that of Korea and Portugal. Chile has even run a trade surplus with Japan, its leading trade partner. The country had become the engine, the model, of South American growth.

  Very important, the political parties, the unions, the military, the church, the universities, and the entrepreneurial sector all had a stake in the new democratic system. It has become respectable to be a businessman, to own property, to build a company, to create jobs, even to acquire wealth.

  We saw prosperity everywhere. American companies such as Procter & Gamble, Pepsico, Pizza Hut, and Kentucky Fried Chicken were making large investments. Au Bon Pain and Baskin-Robbins, two specialty-food retailers, were planning to open outlets. Chilean businessmen were making investments in nearby countries. But it wasn’t only the rich and managerial class who were benefiting. Telephones were now easily available—something that never happens under Communism—and malls with inexpensive items for workers were opening.

  Chile might become South America’s first developed country—without the benefit of socialist, Communist, International Monetary Fund, or United Nations planners. This has happened because the government stopped being a drag on the economy, got out of the way, and allowed its citizens’ natural desire to do better economically to be put to work.

  As important as what the Chileans did was the time it took to accomplish the change. Having lost many years of development from their roll in the hay with Communism, the country had a lot to rebuild. Chile’s was a transformation that took fifteen years, and might have taken many more. People everywhere want results now, but unfortunately economies aren’t transformed in two or three years.

  In any event, Chile did it. Other statist governments in Latin America are going to have a lot of explaining to do to their citizens if their economies aren’t doing as well.

  Naturally, this hadn’t gone unobserved by Chileans, who so bid up their stock market that news of it was on every front page.

  While I wish I’d been here five years before, when I would have put money in, I don’t invest when the stock market is on the front pages. I normally sell markets short at that point. Chile’s growth and structural position, however, was too strong to short. The market might pull back temporarily, but I would bet that, having tasted blood, it would roar ahead for a long time.

  Chile is now democratic and prosperous for the first time in decades.

  I was further amazed that Chile had sharply reduced poverty. According to government and United Nations figures, during the past three years the government had reduced the ranks of the poor from 5.2 million to 4.2 million through widespread prosperity. To raise the standard of living of the poor, the Chilean government did more. It injected capital into micro-companies, lending sums as small as $350 to tiny companies, such as sewing-machine factories, in the poorest districts. These loans enabled families to buy machines and take in piecework from overburdened factories. These micro-companies, many working out of a spare bedroom, were surprisingly efficient. They employed 40 percent of the workforce and 80 percent of the country’s very poor.

  In the United States, as you might expect in a country becoming more statist every day, it’s illegal to farm out piecework so women can care for their children and simultaneously earn money. Better for them to be on welfare or find a job taking them away from their children. The cant is that these women have to be protected for their own good from making a voluntary arrangement with evil factory owners, who will mysteriously take advantage of them. The truth is that the unions have rammed through a law protecting their factory jobs and that they have effective lobbyists to make sure the law stays on the books—otherwise the unions won’t vote for the lawmakers. Women with children have no union, lobbyists, or block vote.

  In addition, the Chilean government grants scholarships to thousands of students to keep them in school, paying for books, meals, transportation, and prizes, such as bicycles, for those who excel. As well, it has work-study programs, subsidizing employers to employ students and give them on-the-job training at a small salary. When it started, many thought the kids wouldn’t be interested, but this program quickly became oversubscribed.

  Although prosperous Santiago is lively, it isn’t Buenos Aires. Smog is heavy even though strict laws keep some cars off the streets every day.

  Normally I would call my New York office in the afternoon. One day I called at an odd hour to check on a late shipment. Judd wasn’t there. In his stead was a temporary bookkeeper, Sally. This puzzled me. Judd hadn’t said he had hired anyone to do his work.

  “How should I handle this eight-thousand-dollar transfer to Judd?” Sally asked.

  “What eight-thousand-dollar transfer?” I asked.

  “And what do I do about the fifty-thousand-dollar loan he’s moving out of your brokerage account?”

  “What the hell are you talking about?”

  “You don’t have to shout, Mr. Rogers. I can hear you perfectly fine.”

  Calmly I explained, “I’ve never agreed to loan Judd any money.”

  Thoroughly alarmed, I called Barbara Robinson at Debevoise Plimpton, my lawyers in New York.

  “Great connection,” she said. “But slow down.”

  I briefed her.

  “I could go right over,” she said.

  “Please.”

  “Does he know we’d be coming?”

  “No, I’ve never even met him. Maybe you’d better bring a guard or something, too.”

  “Right away,” she promised. “Give me your number. I’ll have them call you down there once they reach your office.”

  I paced around the small hotel room. Fifty-thousand-dollar loan! What else was missing? All those excuses about shipping services, about their losing packages in Miami, about their mixing things up, the little things in his reports that hadn’t dovetailed—what was going on? Had he “loaned” himself more? He couldn’t take money out of my brokerage accounts—could he? How clever was he? He didn’t have signatory power over them—but suppose he’d forged my signature? I might win in a court battle with brokerage firms, but not without a long fight with their insurance companies. I would not only be deprived of my money, but whatever foolish investments he made might be locked in place—even now they could be declining. Here I’d been meandering around
the world, supposing myself well heeled enough to afford a couple years away, and this kid—my God, an employee of mine whom I’d never met—might have bankrupted me. What had I done? How could I have been so stupid? This was the kind of elementary mistake I sneered at others for making. Not only was the trip ruined, I might be ruined. I would have to cut everything short and fly us and the bikes back to New York to straighten out this mess.

  The phone rang.

  “Jim,” said Barbara, “I’m in your office. What would you like me to do?”

  “What’s going on? How much has he taken? Where is he?”

  “Slow down. One thing at a time. I’m just not sure what to do now.”

  “Is he there?”

  “No, the bookkeeper says he’s taking flying lessons today.”

  Flying lessons? He was supposed to be working for me full-time. Was he going to fly to Mexico or the South Pacific on my money—with my money?

  “Jim, are you there?”

  What would I like her to do? It wasn’t the stereo or air conditioner I was worried about. How could Barbara figure out if something was missing?

  “The books,” I said. “Go over them and see if there are suspicious transactions. This fifty-thousand-dollar-loan is a good example. See if Judd loaned himself any more money. See if there are any loans to him at all, as there shouldn’t be.”

  Quizzed about unusual transactions, Sally said she hadn’t understood how I had bought stereo equipment on Long Island with a credit card when I was in South America.

  “This place is a mess,” Barbara reported an hour or so later. “Stuff heaped on the desk, papers, bills, and files in disorderly piles, very little filed. We have no idea what’s been paid and what hasn’t.”

  “Has Judd come back?”

  “No. There are a couple of checks here made out to a New Zealand broker. What should we do with them?”

  He had had the missing check all along? He hadn’t mailed off the second check? What was he planning—some scam to make off with my funds?