#115 - Disastrous Deals
Maynard, deal, and bandits
A good deal is a fair deal.
Sure, look after yourself. But be sure to look after the other person too.
Too demanding and egos run wild whilst resentment builds.
It’s there that one finds the seeds of disaster.
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Maynard
Perhaps no deal has cast a longer, darker shadow than the Treaty of Versailles.
The Treaty called the end to the horrors of the First World War. Europe lay in runs and the victors wanted retribution. The results were disastrous.
In the front row was a 35 year old John Maynard Keynes.
Keynes, for those not familiar, is the most famous economist of the 20th century. If not ever. And it was here, in the shimmering halls of Versailles, that his reputation began to form.
The British government asked Keynes to estimate what Germany could afford to pay. He settled on £2bn, half upfront and half spread over three decades. Any more than this, he suggested, would be detrimental.
“If Germany is be milked,” Keynes wrote, “she must not first of all be ruined”
To his horror, just a couple of months later, another pair of brits came up with a very different figure. Walter Cunliffe, former BoE governor, and a judge called Lord Sumner came up with £24bn.
This, they said, was the most Germany could afford to pay. Conveniently it came in at roughly the entire cost of the war.
Keynes was adamant: Such a large figure would spell disaster. This was sheer lunacy.
But the die had been cast.
Deal
Once the number was out there it could not be put back in the box. Negotiations dragged on, leaders began thinking of their upcoming elections. Keynes dismay grew.
Clemenceau, the French premier, landed on the idea of a treaty with no amount agreed. A blank cheque so to speak. With upcoming elections this was advantageous to the three World Leaders.
Finally in the spring of 1919, a deal. Keynes grieved in a letter to his Mother.
… I’ve never been so miserable as for the last two or three weeks; the Peace is outrageous and impossible and can bring nothing but misfortune behind it. Personally I do not believe the Germans will sign, though the general view is to the contrary (i.e. that after a few moans and complaints they will sign anything). But if they do indeed sign this will be in many ways the worst alternative; for it is out of the question that they should keep the terms (which are incapable of being kept) and nothing but general disorder and unrest can result…
The German’s signed.
Somewhere in a German hospital an injured Austrian corporal heard the news.
He was devastated. For the rest of his life he’d view the signing of the treaty as the biggest betrayal in German History. He vowed never to rest until it was avenged.
That man’s name was Adolf Hitler.
Bandits
Some negotiations are purely transactional. Haggle in a Turkish bazar and it’s likely you’ll never see the seller again. If you can save a few lira then go for it.
But most negotiations aren’t like that. Most negotiations begin a relationship. You’ll be seeing plenty more of each other.
I vividly remember witnessing this at my previous job. We purchased Salesforce and hired an agency to help implement, a big job. My boss negotiated a cheap deal. We felt smug.
The result? They put someone junior on the job. A relatively painless exercise turned into a nightmare. We spent many times the money saved on cleaning up the mess. Lesson learnt.
Keynes was right about the Treaty of Versailles. The German resentment ran deep. Fertile ground for a brutal retaliation to hatch.
People reciprocate.
Act like a bandit and you’ll find the world full of bandits. Act kind and fair, and the world gets kinder and fairer.
Good faith is a valuable thing in this day an age.
Do try and hold on to yours.
My Week in Books📚
This is a scheduled post. Away at a retreat this weekend. Will do two weeks worth of books next week. 🙏
Unplugged 🌳📵
As above..
A Final Thought 💡
“The most important trip you may take in life is meeting people half way.”
– Henry Boyle
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