The 434% Windfall
The funds used to target Japan at the turn of the millennium amounted to ten billion dollars. Yoo Jae-won had poured his Nasdaq investment profits generously into the White Tiger Fund and the IMF contribution. Among those allocations, a portion whose whereabouts had seemed uncertain was precisely the money in question. Even so, he had not stopped at a flat ten billion. Depending on the situation, he adjusted the scale of operating capital up or down, maximizing flexibility. Naturally, no matter the amount deployed, leverage was always pushed to its limit. In the Nikkei campaign, for instance, he made heavy use of short selling. With a modest margin deposit, one could short far more than the actual holdings; when the index was falling, profits came as easily as scooping water from a river.
“Wow.” Tiffany, who loved numbers, let out an involuntary gasp. The IDW file Jae-won had pulled up laid out, in clear chronological order, exactly how the capital had been deployed and what returns it had generated. Inside the file were spreadsheet tables and three-dimensional graphs so that even someone who struggled with figures could grasp the overall performance at a glance. When the attached graphs were stitched together and played back, the profit curve rose like a living animation—sinister and serpentine, its head rearing toward the sky.
“If it hadn’t been for President Clinton, we might have blown straight through the ceiling. What a shame.”
“Ceiling? If the graph kept climbing, wouldn’t they just change the numbers on the y-axis?”
At Tiffany’s remark, Jae-won shook his head. She was every inch the engineer; technical explanations came easily to her, yet emotional nuance sometimes missed the mark. In any case, after Clinton’s call they had begun liquidating, and the entire process had taken only a single day. Even before the president phoned, Jae-won had already sensed that the Japanese campaign was nearing its end. Most positions had already been shifted into instruments that could be exited quickly.
“So the final return was…”
Jae-won did not bother explaining every single trade to Tiffany. There were hundreds of line items, and besides, she had a habit of asking “why” about each one. Once he started answering those questions, there would be no end to it. He pressed the page-down key until the very last section of the document appeared on the monitor. A single graph. A single number.
“Final return: 434.41 percent.”
The figure 434 hung there, almost impossible to comprehend.
“You mean you made 43.4 billion dollars in Japan in just three months?”
Tiffany’s exclamation followed at once. The total balance now stood at 53.4 billion dollars—ten billion in principal plus 43.4 billion in profit. Even she had not anticipated a number this large; astonishment was plain on her face. Then a faint crease of discomfort appeared.
“This feels… wrong. Some people have to claw through dust and dirt just to pull a single well out of the ground.”
She had a point. While she had endured the brutal Texas heat and sandstorms to bring in an oil strike, Jae-won had simply sat in San Francisco and multiplied his capital several hundredfold. Nor was he alone. George Soros and a host of other hedge funds had joined the assault on Japan; some had cleared hundreds of millions, others tens or even hundreds of billions. Every winner implied a loser. In this case, the Japanese government, its banks, securities firms, and investment banks had taken the losses. The violent swings in the yen and the Nikkei’s collapse had vaporized the value of their holdings.
Still sensing something off, Tiffany pressed for an explanation of how such a return had been possible. Jae-won answered without hesitation.
“High risk, high return. That’s the essence of every investment. This Japanese campaign was no exception—it was a huge gamble even for me. Normally the Nikkei might have drifted lower, but it would never have collapsed the way Mount Fuji seemed to fall. I wove together every major scandal I knew about Japan and exposed the hollow core of its supposed creditworthiness to the world. The Nikkei dropped forty percent from its peak. Anyone who had bought put options at twenty thousand points could have made not hundreds but thousands of percent. Theoretically, at least.”
“I could have lost the entire ten billion if things had gone wrong. In the worst case, I might even have ended up in debt.”
Tiffany’s doubts eased a little. Then a new thought struck her and her eyes sharpened again.
“So it really was just gambling. Ten billion dollars on the table—even my grandfather couldn’t imagine that kind of stake.”
“Gambling is pure chance. This was different. Both I and the managers at ID Investment had already predicted the Nikkei would fall. We also knew about the uncertainties Japan was carrying.”
Knowing in advance turned what looked like reckless gambling from the outside into rational investment.
“Really?”
“Ask your grandfather.”
“Grandfather? You don’t mean…”
When Jae-won mentioned Fredrick Taylor II, confusion flickered across Tiffany’s face, then her eyes widened like a startled rabbit. The expression was so endearing he almost reached out to hug her, but he gave her time to reach the conclusion herself.
“The Kobe Steel scandal was your doing?”
She had found the thread at once. The collapse had begun with the quality-falsification scandal at Kobe Steel. Later events had buried it, yet the first crack in Japan’s golden tower had been Chevron’s challenge to Kobe Steel’s product quality. Most people never connected that incident to Jae-won, but Tiffany had.
“How did you even find out about the quality manipulation?”
She dug deeper, as expected.
“ID Technology builds iWorks and other computers. Unlike other PC makers, we machine solid aluminum alloy for the cases, and all the alloy came from Japan. When volumes were small, a minor specialty-steel supplier under Shin-Nippon Investment Bank was enough. Once orders exploded we had to expand our suppliers. One of them kept delivering noticeably inferior material.”
“That was Kobe Steel?”
“Exactly. The moment I saw it, I knew.”
Jae-won had prepared for this line of questioning. TG Computer’s quality-test data on every batch of specialty steel was voluminous; analysis pointed straight at Kobe Steel. Tiffany’s expression softened once her curiosity was satisfied. The fiancé she had promised to marry was not some lunatic willing to wager ten billion dollars on a single roll of the dice. Relief showed on her face.
“So what are you going to do with all this money?”
Jae-won had no immediate answer. Capturing the Japanese windfall had been the priority; he had not yet decided how to deploy the proceeds. Even the master plan had devoted only a few lines to the 1998 Japan campaign. He had told Tiffany the bet rested on solid data, yet even the most meticulously prepared investments sometimes failed. Too many participants, too many conflicting motives, too many variables generated in real time. The fact that George Soros and the other funds had aligned with him this time had made the alliance the largest player in Japan and allowed them to steer both the exchange rate and the Nikkei in their favor. Clinton’s last-minute intervention had also helped, but there was no guarantee the same alignment would occur again. Yesterday’s ally could become tomorrow’s adversary.
“Hmm. I’ll have to think about it. Shall we go eat?”
Time had slipped away while they sat before the monitor talking. Staring at profit graphs and bank balances could almost make one forget hunger, but the clock insisted it was mealtime. Today Jae-won craved something rich and spicy.
A few days later, ID Technology’s Silicon Valley headquarters buzzed with activity. San Francisco police officers mingled with broad-shouldered men in dark suits. President Jeon Myeong-heon had arrived in the United States two days earlier as a state guest. Surprisingly, he had stopped first in New York before moving on to Washington, D.C., for his official schedule. President Clinton treated him with exceptional courtesy. Jeon was considerably older, and American etiquette toward elders was not absent simply because English lacked honorifics. Combined with the promises made to Jae-won, the reception was markedly warmer than that given to previous Korean presidents.
Clinton had his own reasons for turning the visit into a major event. With the Lewinsky hearings looming next month, he needed to project presidential gravitas. Diverting even a fraction of public attention from the scandal to foreign policy served his interests. Consequently, he listened with unusual seriousness when Jeon conveyed North Korea’s proposals. He even indicated that a declaration ending the Korean War could be issued provided a few basic principles were agreed upon—principles North Korea was already observing: dismantling its nuclear program and freezing biological and chemical weapons. Human-rights issues, once a sticking point, were quietly set aside. In the absence of improved relations, raising human rights only provoked without producing results. Clinton stated that if Kim Jong-il spoke directly and signed, both the war-end declaration and the opening of liaison offices could proceed swiftly; he even offered to visit Pyongyang himself. The world’s attention shifted dramatically, and Clinton’s shoulders lifted.
Not everyone approved. Conservative voices still refused to recognize North Korea as a legitimate state. Yet Clinton welcomed their criticism; it was a hundred times preferable to being attacked over the scandal.
Jeon Myeong-heon had worn a constant smile throughout the summit. Born the son of a farmer, he had built Mirae Group through every kind of labor and had now, as president, been invited to America as a state guest—an achievement in itself. On top of that, he had taken a significant step toward ending the Korean War. Although formal talks between Washington and Pyongyang had not yet begun, the progress was remarkable. A proper declaration would take more time, but the adversarial posture between North and South had ended and inter-Korean economic cooperation was on track. The Kaesong Industrial Complex was already under construction; North Korean iron ore and coal would soon reach South Korea via Russia. Direct shipment would have been ideal, yet routing through Russia provided a buffer should relations sour again. North Korea could not easily weaponize its resources when a third party was involved. The price remained competitive, and with global commodity prices rising and South Korea short on foreign currency after the IMF crisis, the arrangement was advantageous. Food and electronics could be bartered directly, and even cash transactions were far cheaper than international rates.
Inter-Korean cooperation was flourishing, the critical American dialogue had gone smoothly, and an unexpected gift had appeared—one still too sensitive to reveal. Jeon’s face glowed as he arrived at ID Technology’s headquarters in San Francisco before returning home.
“The prestige of ID Group is truly formidable.”
Hearing about the group’s stature was one thing; standing inside its gleaming new Silicon Valley headquarters was another. The building had been completed less than a year earlier and still radiated power. Its appearance was not merely impressive. When prototypes of cutting-edge IT devices from the High-Tech Research Institute were displayed for the occasion, even Jeon’s entourage murmured in admiration. The truly classified items remained at the institute; only what could be shown had been brought out, yet the reaction was excellent.
Over lunch with Jae-won and ID Technology’s executives, the atmosphere remained warm. The most striking feature was the workforce itself—blond Caucasians, Black employees, East Asians, Indians, Russians—an international mosaic that felt both foreign and vibrant. President Jeon Myeong-heon’s American visit concluded successfully. As he prepared to depart for Korea, he felt a quiet reluctance to leave Jae-won behind. Jae-won shared the sentiment, but mountains of work awaited him; they would have to meet again later.
Yet the world had a way of delivering the unexpected.
—Jae-won, something terrible has happened. The principal is critically ill.
The call from his mother came the day after President Jeon’s departure. The school principal was in grave condition.