At the other extreme, a genuinely conservative but also progressive business like Marks and Spencer, anxious to ease its dependence on its enormous and deserved UK success, paid a huge $750 million for Brooks Brothers. This American menswear firm, of totally different culture and nature, has just reported a vestigial half-year profit of $1.5 million. The desperate remedy now adopted is to link the employees' pay (possibly cutting it by 25%) to their success or failure in selling suits etc. - a measure which runs totally contrary to the new management wisdom which I referred to earlier.
It demonstrates that the success or failure of the Brooksites must depend overwhelmingly not on individual efforts but on the quality and appeal of the merchandise, the attractiveness of the stores, the strength of the promotional spend, the effectiveness of training, and the relationship between managers and managed - something which is hardly helped by putting the latter under the financial lash. The M and S managers have long known and practised all of this instinctively on their home ground: but that is what happens when businesses move away from first principles.
Time and again Gadarene management spreads the damage: many boards of directors as one swine plunge over the same edge, ignoring the well established fact that the conventional wisdom is usually stupid. If everybody else is bankrolling Australian entrepreneurs, or expanding expensively into the United States, or financing umpteen deals with untold debt, that is a very good reason for doing something completely different. Witness the 24% rise in fourth-quarter income reported by JP Morgan amid the flood of red ink submerging the likes of Chase Manhattan: that is Morgan's reward for going against the swine in, of all things, its conservatism.
Yet the banking Brits, too, chose to ignore the lessons of previous fiascos and bankers on both sides of the Atlantic are now trying to recoup by exacting most onerous prices, thus breaching another first principle. It is a hoary one at that: the higher the interest, the greater the risk - which, of course, cuts both ways.
But the risk-taking borrowers have compounded their danger by other stupidities. Two UBS Phillips and Drew analysts, for example, have just shown how Coloroll "created" its 1988-89 profits by writing off the goodwill on the Crowther carpet acquisition - the very buy that broke its back. The same team shows that WPP, while crippling itself by debt, threw away its crutches by taking on so many small earn-outs (over 30) that it risks, on this count alone, a 150% increase in share capital - with awful implications for dividends.
In taking new-fangled ideas to such excess, of course, WPP was by no means alone. The many variations of Gadarene behaviour imply that the fault lies not with the system but with those who operate within it: auditors, regulators, investors, commentators, but above all managers themselves. After all, most of the busts would have been avoided by applying the oldest management technique that there is: common sense.