Hold Co Fever and Speed Bump Hiring

Back when I was a burgeoning economic hitman at the original Booz Allen Hamilton during the pre-CDO crisis days of early 2008, my team and I coined the phrase “Hold Co Fever,” the symptoms of which were rampant and pandemic amongst our clients and the other various state-owned investment companies and family offices that were mushrooming all across the Middle East. The signs were simple, the Bahraini government is issuing a new Islamic insurance license? Boom, let us set up a new Takaful limited liability company or joint-stock holding company under the Family/Investment Holding Company. All we need now is an Islamic sounding word. Wait, real estate prices are going down for a change in Northeast Riyadh? Terrific, let us set up a real estate investment trust and name it after the little village our grandfather used to live it — we can call it Shaigir R.E.I.T. One more? Sure. Hello…healthcare is the hottest industry in MENA right now. But we don’t’ have any experience in healthcare. No problem, we are Hold Co.

In fact, the practice of creating multiple corporate entities was so juked, I remember one prominent GCC family company setting up close to 50 corporate entities under their Hold Co in just 10 months. They had so many investments and SPVs that one of the scions casually remarked that he had never even heard of the company we were contracted to advise him on…by the Hold Co. Mossack Fonseca would have been proud, Panama Papers proud.

Thankfully, like many contagions before it, a spectacular MEE or Mass Extinction Event was ready to lay waste to this terrible Hold Co. Fever. Enter the fall of Wall Street, when the company of the Brothers Lehman went belly up on September 15th, 2008. Unfortunately, as we all know, history does tend to have a habit of repeating itself and diseases tend to morph and mutate into new viral strains leading to new epidemics. Our economy is no different.

I would now like to also add a new term to the corporate zeitgeist, a recent trend in our region that is starting to take flight, I give you: Speed Bump Hiring. Having now shifted to the right side of the client-service provider relationship, I see similar symptoms spreading across the hallowed board rooms and executive majlis’ of the Middle East. I call it Speed Bump Hiring because business leaders would rather apply a band-aid to a core business problem, than simply fixing the root cause of the disease.

Speed bumps are annoying and their safety record, at least from my own personal observations in Kuwait, is dubious at best. Many motorists simply just speed over them and given the size and steep incline of some of the more modern speed bumps, many cars may even take flight. I personally prefer Bolivian Traffic Zebras.

But back to business. Speed bump hiring refers to the temptation for investors, Boards of Directors and decision-makers in general, to simply cure an underlying or inherently bad business model by parachuting in well-paid managers and executives. Essentially throwing good money after bad money. While a great manager or CEO can certainly turn around the worst of companies under the right circumstances, even the most astute of corporate leaders cannot simply wave a magic wand and cure a bad or (sometimes) even nonexistent business model. Similar to a speed bump, such hiring practices are an antithesis to fixing the underlying problem. In the case of road traffic accidents, studies have shown that teaching people proper road and safety practices (or in the case of our wasta driven culture, just driving basics) can dramatically reduce the risk of an MVA (Motor Vehicle Accident). In business, a good and workable business model is far more valuable than the best superhuman speed bump executive on earth.