How a Corporate Raider Actually Makes Money.
The Most Effective Activist Move Right Now Isn’t Aggression. It’s Restraint.
Most people who make a billion dollars do it by reading something correctly that everyone else missed. Goldsmith did it three times: a corporate balance sheet in 1984, a market top in 1987, and the politics of globalization in 1994. The first two made him famous. The third one made him a footnote until history caught up.
“In our obsession with antagonisms of the moment, we often forget how much unites all the members of humanity.”
Introduction
The Goldschmidt family had been in merchant banking since the 16th century, neighbors and rivals of the Rothschild family in Frankfurt. James’s great-grandfather founded the B. H. Goldschmidt bank and served as consul to the Grand Duke of Tuscany. His grandfather moved to London in 1895. His father changed the family name from Goldschmidt to Goldsmith before James was born. In 1940, when Nazi Germany overran France, the family fled on the last overcrowded ship out of the country, leaving their hotels and most of their property behind.
James Goldsmith was born in Paris on February 26, 1933. He attended Eton College and left at 16, in 1949, after winning £8,000 on a £10 three-horse accumulator bet at Lewes racecourse. He told his boarding house that “a man of my means should not remain a schoolboy,” and left. He would come close to bankruptcy several times in the following decade.
The early years were not glamorous. He took over a Paris business from his brother Teddy, selling rheumatism remedies and electrical goods. He won the British franchise for Alka-Seltzer. He introduced low-cost generic drugs to the UK. In the early 1960s he co-founded the Mothercare retail chain with Selim Zilkha, then sold his share; Zilkha developed it into a major national chain without him. What he was doing across those years was learning to read a business before anyone else in the room had finished their first look.
In 1965, with financial backing from Sir Isaac Wolfson, he assembled Cavenham Foods from a series of acquisitions on the London Stock Exchange. The company started with £27 million in annual turnover and negligible profit. By 1971, after he had closed inefficient factories, replaced management, and restructured operations, turnover had reached £35 million and profit had reached £2 million. That same year he launched a bid for Bovril, then a sprawling conglomerate running brands including Marmite and Ambrosia alongside dairies, farms, and cattle ranches in Argentina. The board contested the bid and the financial press attacked him. Neither stopped it. After acquiring Bovril, he sold the dairies, the farms, and the South American ranches, recouping almost all of the £13 million the acquisition had cost him. He later sold the brand names to Beecham for £36 million. The template was already visible: find a company whose management had stopped reading its own balance sheet, take it over their objections, and separate what was worth keeping from what was not.
What He Did in America
From 1979, Goldsmith began building a position in Diamond International Corporation, a company with $1.2 billion in annual sales that had wandered into businesses it had no reason to be in. He accumulated shares, pressured management for restructuring, and eventually merged the company into a Goldsmith-controlled entity for $400 million. The approach was the same one that defines corporate raiding in every era: identify the gap between what the market says a company is worth and what its assets are actually worth, then do something about the gap.
Crown Zellerbach made the gap visible in a way that is hard to argue with.
In late 1984, Goldsmith began acquiring shares in Crown Zellerbach, a San Francisco-based pulp and paper conglomerate. He had identified something specific: the company’s timberland holdings, carried on the balance sheet at $12.5 million, were worth more than Crown Zellerbach’s total market capitalization of approximately $900 million. Crown’s management offered Goldsmith $100 million to go away, the maneuver known as greenmail: pay the unwanted buyer enough to make the problem disappear, at shareholders’ expense. He turned it down. He wanted the company, not the exit payment.
He upped his stake to over 40 percent, became group chairman, and bought a controlling 51 percent by July 1985. The company was split. Most shareholders joined James River Corporation, which acquired the paper and pulp business. Goldsmith kept 1.9 million acres of timberland, plus $90 million in cash, plus additional assets, from a total outlay of $550 million. By the end of 1985 his paper profit on the investment was between $330 million and $440 million. The timberland was eventually valued at approximately $723 million. That gap between book value and real asset value is where the money was, and the only thing that had been missing was a buyer willing to force the issue.
The Goodyear raid in 1986 produced a different result. Goldsmith built an 11.5 percent stake at an average acquisition price of $42.20 per share and threatened a $4.7 billion hostile takeover at $49 per share. Goodyear’s management coordinated a campaign against him involving unions, the press, and politicians at both state and federal level. Goodyear ultimately agreed to buy his shares at $49.50 per share, paying $620.7 million total, contingent on him refraining from purchasing Goodyear stock for five years. He made approximately $93 million on the transaction. He described this afterward as an inadequate consolation for not completing the takeover. That description matters because it contradicts the account of him that was circulating at the time: that the greenmail payment was the point. At Crown Zellerbach he had refused the greenmail offer. At Goodyear he regarded the payment he received as a loss.
By 1987, Goldsmith was one of fifteen billionaires on the Forbes 400. He was also the partial inspiration for the character Sir Larry Wildman in Oliver Stone’s Wall Street, released that year. The fictional version got to win.
Before Black Monday
On October 19, 1987, the Dow Jones Industrial Average fell 22.6 percent in a single trading session. It remains the largest one-day percentage decline in the index’s history. Goldsmith had liquidated his US portfolio before it happened.
He retired to Mexico, to an 18,000-acre estate at Cuixmala on the Pacific coast of Jalisco. He did not stop entirely: in 1989 he joined Kerry Packer and Jacob Rothschild in an attempted hostile takeover of British-American Tobacco, which failed; in 1990 he exchanged his American timber assets for a 49.9 percent stake in Newmont Mining, then North America’s largest gold miner, and remained on the board until he sold that stake through open-market trades in 1993. But the center of his attention had moved. By the early 1990s the project he was most focused on had nothing to do with a balance sheet.
The Argument
In 1993, Goldsmith published a book in France called Le Piège. It was released in English the following year as The Trap. A second book, The Response, followed in 1995. In September 1994, he published an op-ed in the Washington Post arguing against ratification of the General Agreement on Tariffs and Trade. On November 15, 1994, the same day he testified before the US Senate Commerce Committee, he appeared on the Charlie Rose program opposite Laura Tyson, then chair of President Clinton’s Council of Economic Advisers. He was using every platform he could find to make one argument: GATT would restructure the global economy in a way that would destroy the living standards of the Western middle class, and it would do so without the populations of the countries ratifying it having any meaningful say in the matter.
The core of the argument was not political. It was mechanical. GATT opened developed-world labor markets to direct competition with workers in countries where wages were a fraction of what a manufacturing worker in the United States or Western Europe could expect to earn. Goldsmith testified that East Asia alone represented billions of workers earning a fraction of developed-world wages, now being integrated into the same competitive market. The incentive for any company in that market was to move production to where labor cost least. The consequence in the countries labor moved away from was wage pressure, unemployment, and a narrowing of options for workers without skills that could not be offshored.
In his Senate testimony, he confirmed something specific about what the WTO, the institution GATT was creating, would actually mean for national sovereignty. If a trade dispute between two member nations could not be resolved through standard procedures, it would go to a three-person commission appointed by the WTO. That commission would meet in secret. Its decision would be binding. The only way for a losing nation to overturn the decision would be to secure unanimous agreement among all 113 member nations, including the country that had brought the case. The senator asked whether that was a fair characterization of what the treaty did to sovereign authority. Goldsmith confirmed it was.
GATT was ratified. The WTO came into existence in January 1995.
He had made a more specific prediction about NAFTA, which had come into force on January 1, 1994. He argued that US manufacturing jobs would move to Mexico, that living standards would fall on both sides of the border, and that the aggregate economic gains would concentrate at the top while the middle class bore the cost. President Clinton, promoting NAFTA, had promised the agreement would create 200,000 American jobs within two years and a million within five. The trade surplus the United States held with Mexico before the agreement came into force became a chronic deficit afterward. The Economic Policy Institute estimated in subsequent analyses that NAFTA caused the net loss of approximately 700,000 US jobs as production moved to Mexico, concentrated in manufacturing states including California, Texas, and Michigan. Economists using different methodologies reach different conclusions on the precise figure, and the debate has not settled. The surplus-to-deficit shift is not in dispute.
The Campaign
In March 1993, Goldsmith gave a televised lecture on Channel 4 opposing European integration, published in The Times the following day under the title “Creating a Superstate is the Way to Destroy Europe.” In 1994, he was elected to the European Parliament representing a French constituency and became leader of the eurosceptic Europe of Nations group within the Parliament. That same year he founded the Referendum Party in the United Kingdom, with a single stated objective: to obtain a referendum on British membership in the European Union.
For the 1997 general election, the party stood candidates in 547 of 659 constituencies, more than any minor party had ever fielded in a British general election. Goldsmith spent approximately £20 million of his own money on the campaign. He also mailed approximately five million British households a VHS cassette tape containing a direct address from him, bypassing what he regarded as the editorial filter of the mainstream media. In the period before the vote, the Referendum Party spent more on press advertising than either the incumbent Conservative Party or the Labour Party.
The party received 811,827 votes, 2.6 percent of the national total. It won no seats. Psephologists argued afterward that the Referendum Party had cost Conservative candidates between four and sixteen parliamentary seats. Goldsmith stood in Putney against the Conservative David Mellor. Mellor lost his seat that night to Labour. Goldsmith polled 1,518 votes and lost his deposit.
What Goldsmith had not announced at any point during the campaign was that he was dying. He had been diagnosed with pancreatic cancer and kept it from everyone outside his immediate circle. He campaigned for a cause he knew he would not live to see resolved. He died on July 18, 1997, two months after the election. The Referendum Party disbanded. The same man whose career had been defined in the press as the pursuit of purely financial self-interest had spent £20 million on a political campaign that returned nothing. The question of what that means for the standard account of what corporate raiders actually want is one the category has never fully resolved.
On June 23, 2016, the United Kingdom voted on its membership in the European Union. The result was 51.89 percent to leave and 48.11 percent to remain. Goldsmith had been dead for nineteen years.
The Record
Three calls, in order. A San Francisco paper company whose timberland was worth more than the entire business: correct, confirmed by the numbers within a year. A US equity market at its top in the summer of 1987: correct, confirmed on October 19 of that year. A trade architecture that would hollow out the Western working and middle class over the following three decades: contested when he made it, and still contested in its specifics, but less so now than then.
Conclusion
What he left behind was a dated record: the books, the Senate testimony, the Washington Post op-ed, the 811,827 votes, the £20 million, and the Putney count. The argument can be checked against the outcome. That is not something every prediction can offer.
