Calculating Risk
“It won’t take Chairman Kim long to confirm the facts. Duojardin’s investment value is converging on zero.”
Duojardin’s expected return had already blown past zero and settled firmly in the negative.
Some of the researchers inside the company had reported upward that their findings did not match what the media had published, but Tarantis and the rest of the executives were doing everything they could to bury the truth. They fired some of the complaining researchers and bought off others. Even so, not everyone could be silenced. A few of the in-house researchers were still reaching out to journalists. That much had been learned through a reporter waiting outside the company to meet Tarantis. Once those facts started leaking into the press one by one, more and more people would begin to doubt the story.
“Then I understand this means ST Group is backing out of the biotech investment.”
“If it hadn’t been for you, that really would have been... disastrous.”
The tiny beads of sweat gathered on Chairman Kim’s forehead made it plain just how shocked he was.
Just how much was he planning to invest?
James couldn’t hold back his curiosity and asked, “Chairman, how much were you planning to put in?”
“We assessed Duojardin’s enterprise value at one trillion won. So I was prepared to invest three hundred billion.”
ST Group had been planning an investment on an enormous scale, one befitting its size.
“So ST Electronics’ quarterly operating profit nearly vanished.”
“This quarter, our operating profit won’t even reach a hundred billion. I’m not even sure our net profit for the year will make it to three hundred billion.”
“Then you’ve avoided an enormous risk. Congratulations, Chairman.”
“That’s thanks to you.”
“I’m glad I was able to help.”
James was relieved that everything had turned out well, but then he remembered Duojardin’s CFO, Blody, who had come to visit ST Group.
“I heard you met with CFO Blody, Chairman. When was that?”
“Not long ago. He’s probably still in Korea. I’m so angry at that bastard I could chew him up and spit him out.”
Grit.
Watching Chairman Kim grind his teeth in fury, James’s eyes gleamed.
Oh? If Blody is still in Korea...
An idea worth using had just come to him.
“More importantly, James.”
“Yes, Chairman.”
“I called you here to give you a gift, and you ended up giving me one instead. I can’t just let that pass. Business is business, after all. We have to keep the line clear.”
“You’re far too kind.”
James’s answer and his true thoughts were not quite the same.
Still, I won’t refuse the return favor, Chairman.
He waited with growing anticipation to see what Chairman Kim would give him. Not that he expected anything extravagant. A modest gift would have been enough. Anything that left neither of them feeling burdened would have been ideal.
“There’s something more important than never hesitating when it comes to making a profit.”
“What would that be?”
“Never spare the expense of investing in avoiding danger.”
Kim Seong-oh had always been famous for his extremely conservative investments. In his view, any new venture that involved risk wasn’t investing at all; it was gambling.
“Sometimes, a reckless challenge can bring you tremendous gains.”
Whenever James met members of the Las Vegas VIP club, he sometimes had to stop by a casino, and he liked the gambling that Kim Seong-oh was known to despise. His approach to investing was no different from his approach to casino games. He wanted sweeter rewards through high-risk bets.
To me, it isn’t reckless at all. It just feels like picking up money that’s already fallen on the ground.
“If you invest in a high-risk area, you might get a return to match. But what if you fail? You lose everything. If you calculate the odds of failure and success and then weigh the profit, investing in risk will probably show a lower return overall.”
James preferred high-risk investments, but if you looked at it closely, he wasn’t all that different from Chairman Kim’s philosophy.
“I wasn’t trying to argue against your sound investment principles, Chairman. I simply meant that even a risky investment is only worthwhile if it stays within a controllable range.”
That had been true of Duojardin as well. James had gone there precisely to reduce the risk and verify that the profits were real. Whenever he chose another investment target, he always finished his own review before making a decision.
“Exactly. That’s it. The moment a risk looks enormous to everyone else, yet feels like nothing to me—that’s when I pour in massive amounts of capital faster than anyone else and make it mine!”
“Oh.”
That part was definitely different from James. James invested to earn a profit, but Kim Seong-oh wanted to seize outright ownership.
So while other people were thinking about investing a few hundred billion and calculating the returns that would follow, Kim Seong-oh had been planning to invest three trillion won, then join the management afterward and turn Duojardin into an ST Group company. Those plans were all laid out in detail in ST Group’s internal reports.
“The first round of investment into Duojardin was three trillion!”
“……”
First round? Then there was a second?
Just as James had suspected, Chairman Kim had been planning additional investments.
“There were plans lined up for a second and third round of funding. The total expected investment was ten trillion!”
Gulp.
It hadn’t actually been invested, but just imagining it made James dizzy. As though he had sensed James’s reaction, Kim Seong-oh asked back, “You feel it too, don’t you?”
“Yes. If ten trillion won had actually been invested, ST Group would have faced the biggest crisis in its history.”
That was ten trillion in spare corporate capital going up in smoke. No matter how large a conglomerate ST Group was, losing that much money would not be easy to recover from, and whether it could recover at all was another question entirely.
It wouldn’t even be strange if they collapsed outright.
If things had gone badly enough, ST Group could have ended up on the brink of bankruptcy.
“...That’s right. I let myself get blinded by the promise of a new biotech breakthrough and never stopped to think the technology might be fake from the ground up.”
“Anyone would have. If top experts in the United States were investing in it too, there was no reason to doubt it.”
“But you did doubt it. Which is why, even when club members with names that carry weight overseas were preparing to invest, you went there yourself and visited Duojardin.”
“I simply wanted to see how much my investment could grow.”
“And that is precisely the wisest way to reduce risk, isn’t it? Seeing it with your own eyes and confirming it for yourself.”
“……”
The end result of that action had been the exposure of a company built on lies, so it wasn’t wrong.
“These so-called experts are full of it!”
Thud.
Chairman Kim hurled the analysis report made jointly by company employees and outside analysts onto the floor and shouted, “They reported to me that I should invest ten trillion without even understanding the real technology! They were trying to ruin the company! Those idiots!”
After flying into a rage, Chairman Kim leaned back against the sofa for a moment and caught his breath.
“I’ve shown an unseemly side of myself in front of my future son-in-law.”
“Not at all, Chairman.”
“...Anyway, what I want to say is this.”
Chairman Kim returned to the original subject—the reward he intended to give James.
“Even leaving aside the experts within our own company, the consulting fee we were going to pay those foolish analysts was ten billion won. We’d already spent nine billion on the deposit and the interim payment.”
“...Ah.”
“On top of that, a success bonus of another twenty billion was set separately.”
James wondered if Chairman Kim was calculating the maximum amount he planned to reward him with.
Is the ceiling thirty billion? That’s not bad income for a few words.
But that was only the beginning of Chairman Kim’s calculations.
“Then there’s the first-round investment of three trillion won, plus the interest cost on that.”
“……”
“And the additional seven trillion we were going to inject, along with the interest on that as well... We’d also have to include the profits we could have earned if all of that money had instead been invested in stable bonds.”
That was the opportunity cost of the ten trillion won they had expected to pour in.
“...That’s the end of it, right?”
Just the rough investment amounts and interest he had mentioned so far already came to at least ten trillion five hundred billion won.
“Lastly, if we assume all of this had been lost...”
James couldn’t imagine why he was calculating this at all.
Is he trying to complain about his misfortune?
The total had grown so absurdly large that it no longer sounded like a reward.
“Ah! We’d also have to factor in the crisis our group would have faced when that additional ten trillion vanished into thin air, and the solid subsidiaries we might have been forced to sell off because of it.”
Chairman Kim was thinking about how to survive by selling off affiliates. If the loss had been partial, they could have covered it by borrowing from the financial markets, but if most of the company’s liquid capital disappeared, there would have been no real choice but to dispose of subsidiaries.
So ST Group still wouldn’t have gone under after losing ten trillion. Incredible.
What surprised James most was the sheer size of ST Group—the fact that even after losing ten trillion, they still had ways to recover.
“The latest information you brought to ST Group has saved us at least one hundred and fifty billion won, even with a rough calculation. And for reference, I haven’t even included the future benefits we’d have gained through our affiliates.”
As the compensation kept climbing, James strangely found himself growing calmer.
That’s not exactly the kind of return that leaves both sides feeling unburdened.
He looked at Chairman Kim for a moment, then said with a hint of grievance, “Chairman, are you only calling me your future son-in-law in name?”
“What?”
“Aren’t you treating me a little too much like a stranger? I’m hurt.”
Chairman Kim’s face tightened, then loosened again as he wrestled with his emotions.
Paang.
Then he slapped the sofa arm with his palm and let the feeling burst out.
“Hwahahaha!”
Paang. Pang!
The sofa was taking a beating.
“How could I possibly not like you after this! Hahahaha!”
Apparently in a splendid mood, Chairman Kim burst into loud laughter, and James could tell his own words had hit the mark.
Expecting repayment for information that just happened to line up by chance would be short-sighted.
If he accepted a reward this time, it would create the expectation that help in the future should also be repaid. And even when James asked for help, he would have to offer something in return. But if he took nothing at all, their mutual trust would deepen, and James would be able to reach out to ST Group without hesitation in the future.
“If you’re this pleased, Chairman, then I’ll count that as my reward. That’s more than enough for me.”
James had assumed the reason Chairman Kim had gone on and on about the enormous opportunity cost was because he wanted to hear a refusal from James.
If you don’t want to give it, just say so. Why make the story so long?
“Ha ha.”
Still laughing so hard that tears had nearly sprung to his eyes, Chairman Kim called for the secretary outside.
Beep.
“Tell Assistant Ma to come in.”
- Yes, Chairman.
A short while later, Ma Sang-hoon, who oversaw ST Group’s Strategic Planning Office, entered the executive office with an expressionless face.
“You called for me, Chairman.”
“You reviewed this too, didn’t you?”
At the chairman’s words, pointing at the report lying on the floor, Ma Sang-hoon quickly picked it up and checked the contents.
“……”
He could immediately tell it was a report on investment in a biotech company that had been touted as the next future growth engine. The Strategic Planning Office had mobilized the entire team to evaluate the report’s realism, so he remembered every detail of the case.
The final report came out, and the interim payment had already been made...
“Yes, Chairman. In order to assess the company’s investment suitability and future returns, our Strategic Planning Office...”
“Stop right there.”
“Yes, sir.”
“The suitability of the investment is settled. How much return were we expecting from it?”
“Yes, Chairman. The expected return was...”