January 14, 2011 5:07 pm

Lunch with the FT: Nicolas Berggruen

The homeless billionaire flies from hotel to hotel, his ‘very few’ possessions in a paper bag. Over a ‘very expensive’ salade niçoise, he tells Gillian Tett how he hopes to save California
An illustration of Nicolas Berggruen

As I walk into the lavish dining room of the Carlyle Hotel in New York, I notice a figure who looks vaguely like an elf. He is hunched on a very low red stool, partly behind a door, so close to the floor that his frame seems diminutive, with a slightly pointed face and watchful, intense manner. Is that Nicolas Berggruen, I wonder?

If I am unsure of what to expect, it is no surprise. Berggruen, 49, has spent most of his life in the shadows. The Paris-born investor is reportedly one of the world’s wealthiest, having conjured a $2.2bn-plus fortune buying real estate and stakes in companies such as Karstadt, the German retailing group, and Prisa, the Spanish media conglomerate that publishes El País and owns Le Monde. Normally, this kind of success comes with lavish houses, cars and paintings – maybe even a football club. And, until recently, Berggruen did own such toys, including plenty of art (a passion instilled by his father, Heinz, a renowned German Jewish art dealer who fled the Nazis and later became a friend of Pablo Picasso). But a few years ago, he apparently tired of what billions can buy. So he gave his art to museums, on long-term loans, sold his homes in New York and Florida along with most of his possessions. Except, that is, for a jet that now spirits him around the world, a “homeless billionaire” moving from hotel to hotel – or so the urban legend goes.

Berggruen (for it is he) springs to his feet, up to a normal height, and we are quietly ushered to the only free table in his current temporary “home”, in an annexe full of tapestries, cushions and mosaics. It is quite different from the austere sea of white marble found in the Carlyle’s main restaurant and feels like a slightly whimsical, magical place. Is it really true, I ask, that you don’t live anywhere.

“That’s the truth,” he replies, in an accent that is not entirely French or American or German (German is his family’s first language). “I spend time in London, New York, California and in, let us say, ‘standard’ places and much less standard places.” These, it transpires, include destinations ranging from Japan to the Congo.

So where does he keep his clothes? Today he is decked out in an understated but clearly expensive dark blazer and open-necked shirt. “Luckily, as a man you don’t need much,” he says, pointedly eyeing my dress. “I have very few possessions ... a few papers, a couple of books, and a few shirts, jackets, sweaters. It fits in a little thing, in a paper bag, so it’s very easy.”

My mind boggles; I cannot conceive of a 21st-century billionaire nomad carting his possessions about in a paper bag. Even on a private jet. “You seem very stern ... very disturbed by this,” he observes, searching my face with intense blue-grey eyes. “You are funny.”

I’m the funny one, I wonder indignantly; his Teutonic style of delivery is such that I cannot tell whether he is jesting, needling, or flirting.

“I don’t recommend this lifestyle for others,” he continues, explaining that he first started to turn “nomadic” 10 years ago. “I have always spent a lot of time in hotels, so it started to seem easier to do this, I feel happier. I am not that attached to material things. And the good thing is I can make choices.

“Now, si prego!” He summons a waiter, with the air of a man who always gets what he chooses. “The lady is going to have a lobster salad, right? Can I have a salade niçoise please, no anchovies. And the sauce, not the garlic sauce, you have a horrible garlic sauce. There is one sauce that is excellent but it’s not the garlic one. Thank you! Now, back to you ... ”

I suggest wine but it is summarily rejected: “I don’t drink, I don’t indulge. Quite sad. Boring.” We both order water and double espressos instead. He has just arrived from California and confesses to being “a little jet-lagged”.

Berggruen’s unusual approach to life began early. Born in 1961, with one brother and two half-sisters, he enjoyed a privileged childhood, courtesy of his father’s art business, and went to school in Paris, where he became a wildly leftwing teenager. “I wouldn’t learn a word of English [at school] because that’s the language of imperialism,” he recalls. He later attended a Swiss boarding school, to broaden his experience, but was expelled for sedition.

In 1978, still a teenager, he moved to London and a year later attended New York University to study business. “I decided to reverse. I said, ‘OK, let’s learn about the real world and capitalism.’ The real world for me was a game and I wanted to work out how to function in it, to use it as a platform.”

In 1988, he co-founded Alpha Investment Management, a fund of hedge funds, with Julio Mario Santo Domingo Jr, the eldest son of a Colombian tycoon. They later sold it to Safra Bank for an undisclosed sum. He also created Berggruen Holdings, a private vehicle that buys stakes in companies around the world. Berggruen has never explained in detail the secret of his investment success. Indeed, when a Dutch magazine ran a profile a few years ago, he tried to buy all the copies and destroy them. “I wanted to be private,” he says. But these days Berggruen Holdings has a website, which says that the group holds real estate and long-term stakes in ventures ranging from GLG hedge fund to Karstadt and La Prisa and, more recently, the British Resolution insurance group. These, he says, have created his wealth. “My father helped me through school but everything else I did on my own.”

And, having conjured a fortune, he has now a second more ambitious goal: a bold initiative to change the way that western politics and government is conducted. A few years ago, he started attending university courses and became fascinated with the flaws in western government systems. “I have always been very interested in history, so I sat down with a group of intellectuals and wrote a utopian constitution.”

He also used $100m of his money to create a think-tank, the Berggruen Institute, which promotes fresh debate about politics and constitutional reform. Then, four months ago, he used $25m to launch a more specific campaign to “save” California, a place where he spends several months each year, usually living at the Peninsula Hotel in Beverly Hills.

The institute is now promoting radical fiscal measures to tackle the state’s ballooning debt burden and to implement longer-term structural reforms, under the rubric of the “Think Long Committee for California”. Berggruen has so much clout that his committee is now backed by a formidable array of political and business heavyweights, such as Condoleezza Rice, former US secretary of state, Eric Schmidt, chief executive of Google, and Gray Davis, former governor of California.

But why does he care so much about the Golden State? Until now his most notable contribution to the region has been to throw a star-studded party each year for the Oscars (where he is usually photographed with a bevy of beautiful stars; he does not have a long-term companion).

“California is the kind of place where change is possible,” he explains. “California is in trouble – but I think California is ready.” More specifically, the severity of the debt problem in California – which is almost comparable to that of Greece or Ireland – makes it a bellwether for the rest of the US but has also bred a sense of crisis and receptiveness to change. And, since California has a constitution that allows politicians to introduce new reforms through a popular vote, Berggruen plans to put his ideas directly to the electorate. “California is worth saving,” he insists.

Our food arrives but Berggruen barely notices. Earnestly, he explains that since his teenage years he has always wanted to write a better constitution for the modern world, drawing on the best traditions of both east and west. “I feel very strongly that the two things that make a country good or not are culture and government ... my utopian constitution combines western values of the individual with the excellence of government and ideal of harmony that exists more in the east ... The key issue is: how good are the structures of government, how good are they at delivering to citizens?” And now, he argues, this issue is doubly relevant given that so many western government institutions appear to be hopelessly paralysed and deficient.

But if you want to fix something, I say, why not start with Germany? “If I went to Germany and said, ‘Listen, I’ve got a bag of reforms for you,’ they would throw me out. They would say, ‘We’re Germans, we’re wonderful, we’re perfect,’ ” he says. “But here [in the US] there is a very different attitude. The system is broken, people realise it’s very broken. In California they’re all unhappy.”

So what model does he want instead? Singapore? “I think it’s probably the best-run country in the world. It probably is on the authoritarian side and it needs to loosen up a little bit,” he observes. “But the ideal system is not necessarily the most exciting system. Probably, on average, boring is good for the average person.”

That medicine is presumably not intended for him, I observe; after all, he would not park in “boring” Singapore for long. “I am a hypocrite,” he admits. “But I am not thinking of me but what is good for most.”

I laugh but, as I eat my lobster salad, I feel torn. Is it just a crazy fantasy to hope that a billionaire could solve California’s fiscal woes simply by sprinkling about some intellectual fairy dust? Perhaps. Yet his passion is mesmerising; this is a man who truly believes that he can conjure a new future. And having worked in the US for the past year, I agree with Berggruen’s criticism of the modern political system. I am also impressed that he wants to do more than just grumble.

So, I ask, is this going to be your legacy? He confesses that these days he gets “bored” making billions through business ventures. He plans to continue with his investments but wants to put more effort into politics and philosophy; one model, he concedes, is George Soros, the financier and philanthropist. Since Berggruen does not have any children, he also plans to give his money away to his political think-tank and other reform causes. He is considering creating a media empire to provide an alternative to Rupert Murdoch’s, and promote civil society.

“The biggest problem is time, not enough time to do everything and not enough time to be bored,” he complains. “My greatest luxury is boredom, but it never happens.”

I glance at my watch and say that I should get the cheque; his plate is barely touched but I have eaten most of my salad.

“You seem to be in a rush, I’m much more relaxed than you,” he chides.

I point out that his office had told me that my allotted time was one hour.

“No, you had an hour and a half,” he insists. “In six minutes, I go.” Being a global nomad might sound bohemian, but a team of earthly staff is clearly organising his diary with Teutonic precision.

I gesture for the cheque, and he grabs it. Equally firmly, I lunge. But he pulls it away. “I live here, this is my house,” he declares, laughing. “I pay.”

No, I argue, I have to pay. It’s the rules of the article.

“I know. But in this case, we’ve bypassed the rules.”

We sit frozen in a stand-off, staring at each other. Then he glances at the bill: “Hold on – oh my God, it’s very expensive!” he says. “That’s very embarrassing.” I glance too: it is, indeed, startlingly expensive; though my lobster salad tasted very pleasant, it was not so extraordinary.

“See, I must pay,” he says.

I wonder whether I dare make a huge scene – and then give up. Being a homeless billionaire, I reflect, can clearly be a very expensive business; especially if you camp in places such as the Carlyle. But as I leave the ornate restaurant, without the bill, I also feel oddly cheered.

If Berggruen displays as much stubborn determination in pushing his ideas as he did with this bill, then maybe – just maybe – they might actually fly. In any case, I would like to dream so: right now, the western world certainly needs political magic.

.......................................

Carlyle Hotel Gallery

35 East 76th Street, New York

Espresso $8.00

Double espressos x2 $20.00

Large bottle Pellegrino $12.00

Seafood salad $38.00

Salade niçoise $27.00

Cappuccino $9.00

Total (including tax/service) $150.12

Gillian Tett is the FT’s US managing editor

.................................................

Boom to bust in California

The notion that California needs to be saved, as Nicolas Berggruen intends, is, at first glance, ridiculous, writes Matthew Garrahan. After all, the state is America’s biggest economy and the home of Hollywood and Silicon Valley, the innovation hotbed that gave birth to technology giants such as Google and Facebook. It is blessed by year-round sunshine, stunning national parks and beautiful beaches. It grows more than half of America’s fruits, vegetables and nuts.

 
Arnold Schwarzenegger celebrating his election with wife Maria in 2003

Arnold Schwarzenegger celebrating his election with wife Maria in 2003

And yet despite its plentiful natural resources, creative thinkers and entrepreneurial culture, the Golden State is in deep trouble. Its economy is on its knees, hindered by a disjointed tax structure and an unwieldy constitution that allows voters to pass new laws and regulations irrespective of cost. It has yet to recover from the housing crisis and, for a time, was the US capital of mortgage foreclosures.

Successive governors including, most recently, former action-hero Arnold Schwarzenegger have failed to restore financial health. A budget deficit that has ballooned to $25bn has forced Jerry Brown, the Democrat who replaced Schwarzenegger, to propose billions of dollars of cuts.

The cuts will be keenly felt in the state’s acclaimed higher education system. Last year students protested in numbers not seen since the demonstrations against the Vietnam war to rail against fee rises of 30 per cent. The students’ anger will only intensify, with Brown promising to cut an additional $500m from universities. Billions are also to be cut from welfare spending and programmes for the disabled.

California’s priorities have shifted since the 1960s, when it enjoyed growth. Roads were built, new towns grew in the desert and then governor Pat Brown, Jerry’s father, created a mandate for the state university, giving young Californians access to a world-class education.

Thirty years ago, 10 per cent of California’s general budget was spent on higher education and 3 per cent on prisons; since then, spending on prisons has risen to 11 per cent of the state’s revenue, while higher education’s share has slipped to 7.5 per cent.

Berggruen says California’s problems cannot be fixed without broad structural reforms. Change will not be easy: California’s government is deeply divided. The state’s politics has become increasingly polarised.

And yet California is worth saving. The state that gave us the iPod, the first satellite and the skateboard surely has more innovation up its sleeve. It is too important to the rest of the US to fail.

Matthew Garrahan is the FT’s Los Angeles correspondent

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