The Baht's Collapse
George Soros’s deliberation at Hell’s Gate lasted longer than expected. Yoo Jae-won had assumed that anyone who had identified Thailand as the starting point would naturally have considered the final link in the chain reaction, so this hesitation genuinely surprised him.
“Hmm, would you mind giving me a moment?” George Soros prolonged the silence, speaking as though he had never truly pondered the matter before.
“Of course.”
Soros then picked up his phone and made a hurried call. Yoo Jae-won allowed a faint smile. The device that emerged from Soros’s jacket was neither a Motorola nor a Nokia—it was a Tiffany Phone 2.
The Tiffany Phone 2, released the previous year, had become a runaway hit in Korea and enjoyed explosive popularity worldwide. With the European GSM model now available, it could finally be used officially in Europe and the United States. Global dominance, however, remained a work in progress. The reason was simple: it was the most expensive phone on the market. Equipped with a large LCD screen, a powerful mobile application processor that fully utilized it, and high-capacity flash memory, its production cost was inherently high. While Nokia and Motorola’s entry-level models could be purchased for around 300,000 won, even the most basic Tiffany Phone 2—with the smallest flash memory—started at 600,000 won. Absolute sales volume therefore lagged behind Nokia and Motorola, yet brand perception among consumers was unmatched. When asked to name the most coveted premium phone, everyone mentioned the Tiffany Phone 2.
Soros’s Tiffany Phone was the top model. Its advantages over the base version included 512MB of flash memory—enough to store nearly two hundred high-quality music files—and a distinctive gold color reminiscent of fine champagne. The price was 990,000 won. The cheapest 600,000-won model came with 128MB of flash memory and offered silver or black as standard colors. LCD size, resolution, and the mobile application processor were identical across all variants; any app developed for the Tiffany Phone standard would run on every model. The larger LCD compared to the first-generation Tiffany Phone made internet access easier and allowed users to view text files. One more step forward and it could have been called a smartphone, but it had not yet reached that level. The input method remained a dial pad, and touch input was unsupported. More critically, the public was not yet prepared to accept smartphones. Even the basic music playback function—the Tiffany Phone 2’s flagship feature—was used by fewer than half of its buyers.
Still, while Tiffany Phone sales trailed Nokia and Motorola, they were not poor by global standards. In 1996 alone, 2.38 million units had sold, and projections for the current year exceeded 4 million. Yoo Jae-won judged it wise to wait until demand for smartphones reached a certain threshold.
“Sorry to keep you waiting. My analysis team and I needed time to align our views.”
Having finally finished the call, George Soros offered an immediate apology.
“Not at all. I was impressed that you gave such careful thought even to a simple question.”
Yoo Jae-won had not expected Soros to consult his team for a precise answer, yet he had never forbidden consultation either, and Soros had used that opening effectively.
“Thank you. Unfortunately, my answer must be rather disappointing.”
“Disappointing?”
“My answer is Korea. If a genuine chain reaction of financial crises sweeps through East Asia, I believe the final stage will be Korea.”
As expected.
“Yet it seems your view differs, Chairman Yoo.”
Just as Yoo Jae-won could clearly read Soros’s expression in Manhattan, Soros could read the subtle shift in Yoo Jae-won’s face upon hearing his reply.
“Ah, yes. My homeland, Korea, cannot escape the financial crisis. But I do not believe it will be the final destination of the chain reaction.”
“If not Korea, then?”
“Japan.”
At the mention of Japan, Soros’s expression grew slightly complicated.
“Well, that is certainly outside our expectations. The scale of the East Asian currency crisis exceeds what developing nations like Thailand or Indonesia can withstand, and Korea will be precarious as well. But Japan is different. It holds one of the world’s largest foreign reserves.”
“That is true.”
Yoo Jae-won had, of course, devised his own solution to the Korean foreign-exchange crisis while constructing his master plan. It had not been assembled overnight but refined over a long period, polished until the day he died. It was no haphazard guess; he was confident it would work. At the same time, he had naturally prepared measures to punish those who had triggered the crisis. The list included high-ranking Korean officials, but Japan was not absent from it. In truth, Korea’s foreign-exchange crisis could have been contained early on. The country that delivered the fatal blow, driving it to complete collapse, was Japan. Through yen-carry trades, Japan had poured funds into Korea and other East Asian markets, then withdrew them far more abruptly than necessary. In Korea’s case, the withdrawal was swift and merciless. With foreign currency already scarce, Japan’s sudden pullout proved devastating. Many scholars later concluded that Japan, already resentful of the civilian government’s anti-Japanese policies, had seized the chance to strike from behind without hesitation.
Therefore, Yoo Jae-won intended this time to extend the East Asian crisis beyond Korea and all the way to Japan.
“Contrary to popular perception, however, Japan’s fundamentals are extremely fragile.”
He spoke with complete confidence. Soros found himself wondering whether Yoo Jae-won knew something more. In reality, Yoo Jae-won’s certainty was not absolute. Japan carried its own risks, and he planned to apply leverage to push the crisis that far. Yet he could not be sure that his actions alone would drag Japan into the turmoil. What he did intend was to deliver a sufficiently bitter taste to shatter the Japanese consciousness that clung to the idea of “leaving Asia, entering Europe,” and to make them acknowledge that Japan, too, belonged to East Asia. There was an old saying about returning a blow with interest.
“Fascinating.”
George Soros still did not believe Japan would be the endpoint. Yet given who his counterpart was, he could not dismiss the claim lightly.
“If you agree that Japan is the final destination, we can work together. If not, I can only wish you luck.”
Soros’s face grew conflicted. He did not think the East Asian crisis would bring Japan down, yet Yoo Jae-won’s absolute confidence made him suspect there might be more to it.
“Could you give me some time to think?”
“Hmm. Would that serve any purpose? Even if we reached an agreement, we would not be signing a formal pact between ourselves.”
After all, George Soros had no place in Yoo Jae-won’s master plan. It was better for Soros to move according to the original flow, reducing variables. Still, if Soros lent his strength when the time came to target Japan, that would not be unwelcome.
“That is also true.”
Soros nodded at Yoo Jae-won’s cool assessment. Hedge funds showed unity only when easy prey appeared. When losses stemmed from a nation’s miscalculation—as with the British pound short—they each exploited the weakness individually, yet to outsiders it looked as though countless hedge funds moved as a single capital. The East Asian currency crisis would unfold similarly. Swift actors like Soros would enter first, but eventually every hedge fund would pile in, just as they had in Britain.
“I asked on the off chance, but thank you for speaking with me in earnest. It was a most instructive conversation.”
“I enjoyed speaking with you as well, Mr. Soros.”
“May I contact you again in the future?”
“Of course. I’ll give you my ID Talk ID. You can use a computer with a camera and microphone or the ID Talk app on your Tiffany Phone to speak just like this. No need to come all the way to our headquarters.”
“Ah! ID Talk works on the Tiffany Phone as well?”
George Soros exclaimed in surprise, lifting his Tiffany Phone 2.
“Of course. Video meetings are possible, though not in the same high definition. The front-facing camera module is not only for selfies. Just be careful—if you are not on an unlimited data plan, you may receive a hefty bill.”
Unlike in Korea, Yoo Jae-won’s influence in the United States was limited. Although he supplied Tiffany Phones to American carriers, he was not in the dominant position. Consequently, both the front and back of the Tiffany Phone bore not only the ID logo but also the logos of U.S. carriers. He also had no say in data pricing, which frustrated him. In Korea, his stake in TG Mobile allowed him to keep data rates extremely low. Even the initial subscription fee, once a point of contention, had been reduced to 20,000 won. A reasonable amount of data was included even without the expensive unlimited plan, and charges never reached millions of won even after the base allowance was exhausted. America was different. Data was still charged per packet, as it had been when 2G first arrived in Korea, and the rates were steep. Downloading a single megabyte game after exhausting the base allowance could easily add twenty dollars. A lengthy video meeting like the one they had just held without base data could run into hundreds of dollars. The data-call pricing issue was one that could not be resolved before the smartphone era, so Yoo Jae-won could only sharpen his resolve in silence.
Time, precious as gold, flowed swiftly. Life in America remained steady. ID Group continued its smooth operations, showing strong performance across internet services, software sales, and other sectors. The merger between Time Warner and Nextcomcast proceeded likewise. Vice Chairman Remington, who practically lived in New York, held his ground against Time Warner CEO Gerald Levin while faithfully executing Yoo Jae-won’s directives. Accordingly, Nextcomcast would pursue relisting immediately after the review concluded, with the merger ratio based on the average share price over the subsequent six months. Time Warner’s value would likewise be calculated using its six-month average after Nextcomcast’s relisting. The half-year observation period had been insisted upon by Time Warner, citing ID Investment’s ability to artificially inflate listed companies’ stock prices in the short term. The argument had merit, so Yoo Jae-won accepted it without complaint.
ID Group also demonstrated solid growth in Europe. Nextcom, having firmly secured the United States, had strengthened services across European nations for several years and now held clear first place in most markets. Complacency was still impossible. Yahoo, spun off from Nextcom, was growing at a frightening pace and closing the gap. Originally Nextcom’s default search engine, Yahoo had established itself as a full-fledged portal after independence and, leveraging the expertise gained through its partnership with Nextcom, had quickly broken into the second tier. Yoo Jae-won welcomed Yahoo’s rise. Having returned from hell, he felt no complacency whatsoever, yet the employees of Nextcom—who had always been number one—were different. Moreover, the merger with Time Warner had left the organization unsettled; the emergence of a strong challenger helped maintain internal tension.
While ID Group achieved strong results in the United States and Europe, Korea’s situation deteriorated steadily. The much-discussed Hanbo hearing proceeded without the central figure, Kim Young-chol, ever appearing. Meanwhile, Sammi Group went bankrupt, followed a month later by Jinro Group. The government raised the foreign stock investment ceiling from 20% to 23% to attract foreign capital, yet the measure proved meaningless when Samlip Foods, Korea’s largest bakery company, collapsed days later—another ripple from the Hanbo Steel bankruptcy. Politicians loudly demanded investigations into whether other banks held similarly bad loans, prompting both internal reviews and emergency inspections by the bank supervisory authority. New lending ground to a halt, and collection of dubious claims began. Companies that had pursued reckless expansion with borrowed money started collapsing one after another. With domestic firms failing in rapid succession, foreign investors had no reason to enter Korea’s securities market. The government’s measures had therefore missed the mark entirely.
While the civilian administration squandered golden time and revealed only its amateurish side, the inevitable finally arrived.
July 2, 1997.
The Thai baht crashed.