Daniel: "You need more money to open a shoe-shine shop than you do to buy a $2 billion company." Sophia: Whoa. That’s a bold statement. Let me guess, some cynical Wall Street trader said that? Daniel: Close. It was actually a comedian, Jackie Mason, in a routine about the 1980s. And the crazy part is, he was right. The financial engineering of that era was so wild that it made massive companies feel like they were built on air. Sophia: And the story we’re talking about today is even bigger than that. Daniel: Much bigger. That quote perfectly captures the wild world we're diving into with Barbarians at the Gate: The Fall of RJR Nabisco by Bryan Burrough and John Helyar. Sophia: A book that is consistently called one of the greatest business narratives ever written. What's amazing is that the authors were Wall Street Journal reporters who wrote it right after the events happened, based on over a hundred interviews. They were basically live-blogging the biggest corporate war in history, but for a book. Daniel: Exactly. They had front-row seats to the chaos. And it all starts with one of the most unforgettable, larger-than-life characters in the history of American business. A man who essentially lit the match that set the whole financial world on fire.

Sophia: Okay, I’m hooked. Who is this guy? Daniel: His name is F. Ross Johnson, the CEO of RJR Nabisco. And to understand the whole story, you have to understand him. He wasn't a traditional "company man" who worked his way up for 40 years. He was a dealmaker, a charmer, a master of corporate politics. His personal philosophy was basically, "We’re going to have a party, a very sophisticated, complicated party." Sophia: A party? He’s running a massive corporation, not a fraternity house. What does that even mean in practice? Daniel: It means the perks were legendary. Johnson believed in rewarding himself and his friends, handsomely. The most famous example is what became known as the "RJR Air Force." Sophia: A corporate air force? For a company that sells Oreo cookies and Camel cigarettes? Please tell me that’s an exaggeration. Daniel: Not at all. By the late 1980s, RJR Nabisco had a fleet of ten corporate jets, including top-of-the-line Gulfstreams. They employed 36 pilots. They built a private, multi-story hangar in Atlanta with Italian marble floors and mahogany walls that was so lavish it was nicknamed the "Taj Mahal of corporate hangars." Sophia: That is absolutely insane. How does a board of directors approve that? What was the business justification? Daniel: That’s the genius of Ross Johnson. The justification was whatever he said it was. He flew celebrity friends like Frank Sinatra and Don Meredith to golf tournaments. He even flew his German shepherd, Rocco, on the corporate jet, listing him on the flight manifest as "G. Shepherd." His overriding rule was simple, and he said it himself: "The chief executive can do whatever he wants." Sophia: Wow. So he's completely detached from the idea of fiscal responsibility. It sounds like he saw the company as his personal piggy bank. Daniel: Precisely. And this mindset wasn't just about perks; it bled into his business decisions. There's a classic story about his time at Standard Brands, before the Nabisco merger, that perfectly captures his style. He befriended the baseball star Reggie Jackson. Sophia: Of course he did. Daniel: And he decided to launch a candy bar named after him. The "Reggie!" bar. Sophia: A candy bar named after Reggie Jackson? That sounds like a 1980s fever dream. How did it do? Daniel: It was a complete and utter disaster. They launched it by handing out thousands of them at Yankee Stadium on opening day. The problem was, nobody liked it. Sales cratered almost immediately. But here’s the Ross Johnson twist: even after the product failed miserably, he kept Reggie Jackson on the payroll with a generous "personal-services fee" and a company-funded apartment. Sophia: So the business logic didn't matter. The relationship did. He was more interested in having famous friends than in selling candy bars. Daniel: You've got it. He was all about flash, relationships, and spending money, not necessarily about the nuts and bolts of running a company. He was the ultimate "noncompany man," a new breed of CEO for a new era of finance. And that very personality is what set the stage for the biggest corporate battle in history.

Sophia: Okay, so you have this CEO who treats the company like his personal kingdom. How does that lead to a corporate war? It seems like he has everything he could ever want. Daniel: Well, there was one thing that bothered him: the company's stock price. It was stagnant. In his mind, the stock price was his personal report card, and he was getting a C. He felt Wall Street wasn't giving him its "due." Sophia: The man with a private air force felt underappreciated. The irony is thick. Daniel: Incredibly thick. So in a board meeting in October 1988, he floats an idea. He proposes that he and his management team should take the company private themselves. It’s called a leveraged buyout, or an LBO. Sophia: Hold on, you have to break that down. What exactly is a leveraged buyout? Can you explain it like I’m not a Wall Street banker? Daniel: Absolutely. Think of it this way: it’s like buying a house with a very, very small down payment and a massive mortgage from the bank. But here’s the trick: you use the house itself—its assets—as collateral for the loan. And once you own it, you start selling off the furniture, the art, maybe even a spare bedroom, to pay down that huge mortgage as fast as you can. Sophia: Okay, so Johnson was proposing to buy RJR Nabisco using the company's own assets to secure the loans? He's using the company's money to buy the company for himself. Daniel: That's the essence of it. He thought it was a simple way to get the stock price up and reward himself and his team. But what he did, without fully realizing it, was put a giant "For Sale" sign on one of America's biggest companies. He had just put RJR Nabisco "in play." Sophia: He basically announced to the world, "This company is available to the highest bidder." Daniel: And the bidders who showed up were the titans of Wall Street. This is where the "barbarians" enter the story. The term was actually coined by one of the key players, a financier named Ted Forstmann. He was an old-school LBO artist who was horrified by the new wave of corporate takeovers fueled by "junk bonds." Sophia: Junk bonds. Another term that sounds bad. What are they? Daniel: They’re high-risk, high-yield bonds. Think of them as the subprime mortgages of the corporate world. The man who perfected their use was Henry Kravis, of the firm Kohlberg Kravis Roberts, or KKR. Kravis was the undisputed king of the LBO. Ted Forstmann saw Kravis and his junk bond financing as an existential threat. He famously said Kravis's money wasn't real, calling it "phony... funny money... wampum," and that they had to push "the barbarians back from the city gates." Sophia: So you have a three-way battle shaping up. You have Ross Johnson's management group, you have Henry Kravis and KKR, the LBO king, and you have Ted Forstmann, the moral crusader who wants to stop Kravis. Daniel: Exactly. And it became an all-out war. The bidding escalated furiously. It went from Johnson's initial proposal of $75 a share to over $100 a share in a matter of weeks. The final price tag would be an astronomical $25 billion, the largest takeover in history at the time. The fight was brutal, fought through secret negotiations, public relations battles, and strategic leaks to the press. Sophia: It sounds less like a business deal and more like a political campaign mixed with a spy thriller. Daniel: That's a perfect description. At one point, the board gets so fed up with Johnson's group that they start working on their own plan to break up the company. There are accusations of lies, betrayals, and backstabbing. Friendships of 20 years were destroyed over this deal. Sophia: This brings up a really interesting question the book poses. Who were the real barbarians here? Was it Kravis, the so-called corporate raider? Or was it Ross Johnson, the CEO who ran the company with such extravagance that a buyout seemed like a good idea in the first place? Daniel: The book brilliantly leaves that question open for the reader. Johnson saw himself as a hero liberating value for shareholders. Kravis saw himself as a disciplined financier bringing efficiency to a bloated company. Forstmann saw himself as the defender of capitalism's soul. In the end, KKR and Henry Kravis won the battle, acquiring RJR Nabisco for $109 per share. Sophia: And what happened to the company? After all that fighting, after selling the furniture to pay the mortgage, was the house still standing? Daniel: It was, but it was a different house. The company was saddled with immense debt. The RJR Air Force was sold. The Atlanta headquarters was shuttered. Thousands of employees lost their jobs. The lavish culture Ross Johnson had built was dismantled piece by piece.

Daniel: Ultimately, the RJR Nabisco saga was so much more than just one company's story. It was a public spectacle that exposed the raw mechanics of 1980s capitalism in a way nothing had before. It revealed a world where debt had become a weapon, where shareholder value was the only god, and where the line between financial genius and pure, unadulterated greed was almost impossible to see. Sophia: It really makes you question the fundamental purpose of a corporation. Is it just a machine for generating profit for shareholders at any cost? Or does it have a deeper responsibility to its employees, its products, and the communities it operates in? The people in Winston-Salem, North Carolina—the original home of R.J. Reynolds Tobacco—certainly felt the fallout. They got rich when their stock was bought out, but they lost a core piece of their town's identity. Daniel: That's the central tension, and it's a question that's even more relevant today than it was in the 80s. The book is a masterclass in human ambition, a corporate thriller, and a tragedy all rolled into one. It shows what happens when the game itself becomes more important than what the game is for. Sophia: A powerful and cautionary tale. We'd love to know what you all think. After hearing this, who do you think were the real villains of the story? Was there a hero at all? Let us know your thoughts. Daniel: This is Aibrary, signing off.