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In January 1982 a group led by former Treasury Secretary William E. Simon bought greeting card maker Gibson Greetings for $80 million while putting up only about $1 million of its own money. Sixteen months later Gibson went public at $290 million and Simon personally took home around $66 million. This episode explains the mechanism behind that return, the leveraged buyout, in which the target comp...

Kozmo.com launched in New York City in March 1998, founded by two young investment bankers, Joseph Park and Yong Kang. The promise was simple for customers: video games, DVDs, music, magazines, books, groceries and eventually hot Starbucks coffee delivered within an hour with no delivery fee, using bike messengers dispatched by two-way pager. The founders argued that skipping expensive storefronts...

Junk bonds, or high-yield debt, are bonds rated below investment grade by agencies such as Moody's and Standard and Poor's, paying higher yields to compensate for higher default risk. The U.S. average default rate is about 5 percent, rising to between 5.6 and 7 percent in the 1989 to 1990 liquidity crisis and to just under 9 percent during COVID-19. As of early 2022, U.S. high-yield bonds outstand...

In 1952 John Rigas and his brother Gus paid $300 for a cable television franchise in Coudersport, Pennsylvania, stringing wire down from hilltop antennas to homes the mountains cut off from broadcast signals. Two decades later they incorporated as Adelphia, Greek for brothers, and by 1998 the company had 2 million subscribers plus internet and phone services. After going public, Rigas still ran it...

Jay Cooke, widely called America's first major investment banker, was born in 1821 in Sandusky, Ohio, son of Congressman Eleutheros Cooke. He became a clerk at E.W. Clark and Company in Philadelphia in 1838 and a partner by 1842, then opened Jay Cooke and Company on January 1, 1861, months before the Civil War. He and his brother Henry had lobbied for Salmon P. Chase to become Treasury Secretary,...

Ingvar Kamprad started a mail-order business on his family's farm in Småland, Sweden, in 1943 at age 17, selling pens, matches and picture frames, and only began selling furniture in 1948. The name IKEA combines his initials with Elmtaryd, the farm, and Agunnaryd, his home village. Because Kamprad had dyslexia, he replaced numeric product codes with names: Swedish places for sofas and coffee table...

Hedge funds manage roughly $3.8 trillion, as of 2021, yet the name comes from a defensive idea. They are private pooled investment vehicles open in the U.S. mainly to wealthy individuals and institutions, which lets them use short selling, derivatives, heavy borrowing and credit arbitrage that mutual funds cannot. Warren Buffett cited the 1920s Graham-Newman partnership as an early precursor, but...

Harry Winston was born Harry Weinstein in New York City in 1896 to Jewish immigrants from the Russian Empire and grew up in his father Jacob's jewelry shop. At 12 he bought a green stone in a pawn shop for 25 cents and sold it two days later for $800; it was a two-carat emerald. He started his own business and changed his name in 1920 and opened his New York store in 1932. In 1926 he bought the je...

The eurozone crisis grew from a design flaw: member states shared a currency and central bank but kept separate budgets, taxes and pensions. The 1992 Maastricht criteria capped deficits at 3 percent of GDP, but France and Germany were among the first to break the rule without penalty. Markets priced Greek and German bonds almost identically, sending cheap capital south and fueling property bubbles...

Greece's borrowing costs are now lower than those of Italy and France, a reversal for a country that suffered the longest recession of any advanced economy. The episode notes Greece's debt was fairly stable at about 102 percent of GDP from 1993 to 2007, but adopting the euro in 2001 brought cheap credit, rising wages and lost competitiveness, with no option to devalue its own currency. In late 200...

Hubert de Givenchy opened his couture house in Paris in 1952 at age 24 with Les Séparables, a collection made from raw cotton shirting, the cheap fabric designers used for test patterns. Its Bettina blouse, named for muse Bettina Graziani, became a sensation, painted by illustrator René Gruau, and The New York Times Magazine headlined a review A Star is Born. In 1953 he was told Miss Hepburn was c...

In 1975 Giorgio Armani sold his Volkswagen Beetle for $700 to help launch the company he built with partner Sergio Galeotti. Lacking factories, he licensed his name, signing with manufacturer GFT in 1978 and later with Simint for Armani Exchange. In the 1990s he reversed course and bought back manufacturing, acquiring Antinea in 1990 and Simint in 1996. He expanded into beauty with L'Oréal in 1980...

The Panic of 1901 was triggered not by war or industrial failure but by a fight between a handful of Gilded Age titans. E.H. Harriman, who started on Wall Street as an errand boy at 14 and bought an exchange seat at 22, became chairman of Union Pacific's executive committee in 1898 and rebuilt the bankrupt railroad. He wanted the Chicago, Burlington and Quincy Railroad, the key to the Chicago rail...

The gig economy is now described as a $1 trillion sector of the U.S. economy, yet measuring it is surprisingly hard. Economists Lawrence Katz and Alan Krueger found a 50 percent rise in gig workers, freelancers and contractors between 2005 and 2015, accounting for 94 percent of U.S. employment growth in that decade. The Harvard Business Review counted 150 million gig workers across North America a...

The first Gap store opened in August 1969 near San Francisco City College selling Levi's jeans and vinyl records, with no Gap-brand clothing at all. Founder Donald Fisher was a commercial real estate broker frustrated by department stores' messy denim stacks, and he copied The Tower of Shoes, a Sacramento retailer in a Quonset hut that won on guaranteed stock. Levi Strauss president Walter Haas Jr...

Fendi began in 1925 when Adele and Edoardo Fendi opened a fur and leather shop on Via del Plebiscito in Rome, adding a second store on Via Piave in 1932. In 1946 their five daughters, Paola, Anna, Franca, Carla and Alda, each took a 20 percent share and split the business by function: furs, leather goods, purchasing, commercial strategy and sales. In 1965 they hired a young Karl Lagerfeld, who had...

An Wang founded Wang Laboratories in the Boston area in 1951 and built it into a $3 billion technology company. An early loss shaped him: he built the Linasec typesetting computer under contract for Compugraphic, which kept the manufacturing rights and cost him an estimated $1 million. In 1965 he released the LOCI-2 desktop calculator, built from more than 1,200 discrete transistors, and in 1971,...

Today's LG Corporation employs more than 220,000 people with subsidiaries in over 80 countries, but it began in January 1947, when Koo In-hwoi founded the Lak Hui Chemical Industrial Corporation, pronounced Lucky, in South Korea. Its first hit was Lucky Cream, the first domestically produced Korean makeup cream. In war-damaged early 1950s Korea, the cream's fragile, heavy and expensive glass jars...

In late 2013 Vitalik Buterin, a programmer and co-founder of Bitcoin Magazine, argued that a blockchain could run programs, not just track money, but Bitcoin's scripting language is deliberately not Turing complete. After a Colored Coins project with the CEO of eToro stalled, he proposed a new platform. In January 2014, around a Bitcoin conference in Miami, Buterin, Gavin Wood, Charles Hoskinson,...

Enzo Ferrari was an Alfa Romeo salesman and racing driver when he founded Scuderia Ferrari in 1929, using wealthy gentlemen drivers to fund a stable that hired professionals such as Antonio Ascari, Giuseppe Campari and Tazio Nuvolari. When Alfa Romeo withdrew its works team in 1933, Scuderia Ferrari raced its cars as an unofficial proxy, winning 144 of 225 races between 1929 and 1937. Alfa absorbe...

The Cavalieri Ducati brothers founded Ducati in Bologna in July 1926 to make radio components. By 1944 the factory was badly damaged, and with SIATA the company introduced the Cucciolo, or puppy, a 48cc clip-on engine for ordinary bicycles named for its yapping exhaust, which managed close to 200 miles per gallon and sold over 200,000 units. By 1950 Ducati was building complete motorcycles such as...

Detroit's population fell from about 1.8 million in 1950 to roughly 700,000 in 2013, while the city still spanned 139 square miles. More than two-thirds of its businesses closed between 1972 and 2015, revenue dropped over 20 percent from 2008 levels, and in 2011, 47 percent of property owners did not pay property taxes. Despite cutting operating costs 38 percent, the city had borrowed $1.6 billion...

Tyco was founded in 1960 by Arthur J. Rosenberg as a research and materials firm. After Dennis Kozlowski became CEO in 1992, it bought roughly 3,000 companies over a decade, including electronics maker AMP and Raychem in 1999 and security company ADT in 1997, a reverse takeover that moved Tyco's incorporation to Bermuda. By the end of fiscal 2000 Tyco reported a $141 billion book value alongside m...

John DeLorean left General Motors in 1973 and founded the DeLorean Motor Company in 1975, raising money from entertainers including Sammy Davis Jr., Roy Clark and Johnny Carson and requiring dealers to buy shares to win the right to sell the car. Ireland's Minister for Industry and Commerce, Desmond O'Malley, rejected his pitch as too good to be true, and a Puerto Rico deal fell through when the B...

At MIT's Lincoln Laboratory, Ken Olsen and Harlan Anderson watched students line up for 15-minute turns on the small, interactive TX-0 while a faster IBM mainframe sat ignored. In 1957 venture capitalist Georges Doriot funded them on the condition that they keep the word computer out of the name and not sell one yet. Digital Equipment Corporation set up in a Civil War-era wool mill in Maynard, Mas...