SoftBank - an insider's story

Alok Sama had friends in high places

“You know, in every family there are hunters and cooks. We need the cook, he is important. But for me the hunter is the most important. I always value the hunter more than the cook” Masa Son to Alok Sama.

Alok Sama’s new memoir “The Money Trap: Grand Fortunes and Lost Illusions Inside the Tech Bubble” is well worth reading. Although it lacked the depth of a Ron Chernow or Walter Isaacson biography (let’s see if former FT editor Lionel Barber can deliver that in his upcoming book about Son!) it is well-written, fast-paced, and very easy to read. The book is marketed as coming from Masa Son’s right-hand man with the WSJ referring to him as SoftBank’s CFO.

There is no doubt that Sama had a seat at the table. However he was not CFO of the group but of SoftBank International, which was largely an extension of his expertise having been a very successful former Morgan Stanley M&A banker. Sama describes how he left Morgan Stanley in 2003 and had no relationship with either SoftBank or Son. But he was best friends with Google’s highest-paid employee Nikesh Arora and when Arora joined SoftBank in 2014 he takes Sama along as his right-hand man.

At its best, the book narrates dozens of meetings involving Son and other tech billionaires, has great anecdotes of seating arrangements in Masa Son’s Boardroom, stories of lots of private jet trips, expensive wine, and golf without excessive backslapping and is wonderfully self-deprecating and witty throughout. For instance, Sama says: “My finance training was as useful as playing darts to prepare for the Tour de France”

The story of the smear campaign against Arora and Sama is a continuous thread through the book. Sama treats this in a light-hearted way. He laughs at a report by those trying to dig up dirt on him: “The report concluded that “most of his career of nearly 3 decades was uneventful, minus the large transactions and advisory fees.” It was stated drily, with no intended irony, but as a summary of my career it was undeniably true and devastatingly boring”. He laughs at how he seems a less important target in the smear campaign: ““How come only Nikesh got the honey trap? I mean, what the fuck, I wasn’t important enough?” We both laughed.”

Unfortunately, there is little new information shared by Sama on the smear campaign. No big reveals. This book is praised by the WSJ journalist Bradley Hope who broke the smear campaign story several years ago. But when I compare this book to Hope’s own book Billion Dollar Whale there is neither the same level of scandal or plot level that there was with 1MDB and Goldman Sachs. Moreover, the characters are not as colourful as Hope’s Bond Villain Banker Dr. Tim Leissner and Malaysian frat-boy gone rogue Jho Low.

For the “The Money Trap” to fully deliver in the manner of a Billion Dollar Whale or John Carreyrou’s Bad Blood, Sama would have had to go hard for the alleged architect, the barefooted, vape smoking, structured credit guru Rajeev Misra and his band of merry traders from Deutsche Bank. There are passing references to Misra such as how they were all friends to start with “I knew Rajiv socially and respected his credit trading skills…Nikesh and Rajeev were friends too” and how in one joint meeting with a founder Misra says “Alok, this guy looks like your son”

But Sama plays it safe – perhaps out of out of deference to his other former SoftBank colleagues or concerns about libel.

On the broader “insiders story” there are nice descriptions of rave parties with Arora in Ibiza, Arora and Sama golfing with George Roberts founder of KKR, dining with Larry Ellison who loves all things Japanese, getting told by Scott Shleifer who ran Tiger Global’s private investing business “I don’t care about ARM. Assume it’s a bagel” dismissively and listening to Mark Zuckerberg talk about how the only meat he eats is from animals he kills. The most compelling are around the work Sama does with Son on the ARM deal and those who helped SoftBank acquire one of the few scale tech assets in the UK: “Old boy networks are great when deployed in your favour, and the trinity of Robey, Rudd, and Heywood all contemporaries at Oxford, served us well.”

As well as the old boys there is the Chairman of ARM who has the stereotypical background of the UK’s FTSE100 Boardroom having been the former CEO of Pilkington Glass and hence unlikely to have an idea of what ARM could be worth.

The challenge for Sama is that the SoftBank story and those of its investments in the likes of WeWork are very well known. This is very different to a book like the “The World is for Sale”, which tells us about lesser-known companies in commodities trading like Trafigura or Vitol and lesser-known entrepreneurs like Ian Taylor, Claude Dauphin and Andy Hall.

The tutelage of Sama’s professors on his recent NYU creative writing degree can be seen throughout “The Money Trap” but here’s the thing. I was hoping that as a former key insider Sama would not just write like a best-in-class WSJ or FT journalist but dig into what differentiates SoftBank and here I am none the wiser. We already know that Masa Son is a crazy guy who likes leverage, risk taking and visionary thinking. Sama as Arora’s best friend is perhaps too careful in his portrayal of Arora – we are none the wiser about what makes Arora tick beyond he is aggressive, well-prepared and deeply analytical.

Sama describes SoftBank’s investments, and the frothiness of the market but this is all straight-out of media articles of the time. He delves into the fact that WeWork is a real estate company and not a tech company and throws in bits on business models that sound like they are straight out of Peter Thiel’s Zero to One.

But in a few areas, I did learn new things.

Firstly, how telecoms was just as important as tech to Softbank. Although we all remember the story of the famous 20-minute meeting with Jack Ma and the home run Alibaba investment, Sama highlights how Vodafone Japan was a much bigger and riskier bet ($15bn at a time when SoftBank was teetering on the edge in 2006). Son stalked Steve Jobs until he agreed to an exclusivity deal for selling iPhones in Japan, but this was before Son had even bought Vodafone Japan or Jobs launched the iPhone.

Secondly, Sama insists that Son is not just an investor but an operator. He gives some anecdotes about Son getting involved in how to improve the running of telecoms operator Sprint in the US but again this is relatively high-level.

Thirdly, the inherent leverage in the SoftBank business model in terms of SoftBank co-investing using its balance sheet, the Vision Fund using derivatives on margin to invest in public securities and that mezzanine debt carrying coupons of 7% made up the bulk of the Saudi and UAE investment in the SoftBank $100bn Vision Fund is well known. But Sama reminds us that the Vision Fund’s mezzanine debt was in Japanese Yen and hence fund returns were further leveraged into the Yen depreciating.  

There is a great story about SoftBank raising bonds yielding below market rates under the brand of SoftBank’s own baseball team in Japan. Sama also tells the story of playing golf with the head of Mizuho Bank and how important it was to SoftBank. But again, you wish he had dug deeper into SoftBank’s relationships with Japanese banks.

Early on in the book Arora is quoted as saying during dinner with a SoftBank colleague and Sama “JB, what do you think, does Alok pass the Airport Test?” This refers to a famous philosophy of the Google founders that you should hire people that you would be happy to be stuck with in an airport lounge.

But perhaps your biggest takeaway should be why were you not invited to Nikesh Arora’s lavish Italian wedding to India’s Thapar family scion Ayesha Thapar an event attended by the likes of Larry Page, Masa Son, Rajeev Misra and Ashton Kutcher. Alok Sama was there!