Stratagem 31:Fool the Emperor and Cross the Sea

 

“The perception of perfect preparation leads to relaxed vigilance. Familiar sights lead to slackened suspicion. Therefore, secret machinations are better concealed in the open than in the dark, and extreme public exposure often contains extreme secrecy.”

—From The Thirty-Six Stratagems

Industries tend to focus on a common set of variables to monitor competition. The television industry focuses on ratings; the pharmaceutical industry on new patents; and investors on transactions. If you are particularly careful not to disturb these variables, you can hide your actions in them. This is moving under the cover of stillness.

As an example, consider Krupp AG’s 1991 acquisition of Hoesch AG in Germany. Throughout the 1980s, Krupp courted Hoesch with proposals of friendly mergers, all of which were rejected. Krupp nevertheless believed that a merger would be beneficial, perhaps even necessary, so it chose to pursue a more aggressive tactic. It decided to attempt to take over Hoesch by buying a controlling interest in the company.

Krupp knew, however, that Hoesch could easily mount an effective defense if it became aware of the plan. Krupp also knew that industry players would look for evidence of such takeover intentions in financial transactions, such as unusually concentrated purchases of Hoesch’s stock. Therefore, the company had to find a way to hide its stock purchases and fend off a defensive response by Hoesch.

Both Krupp and Hoesch are German firms and, as such, practiced the “house bank” tradition, whereby a company maintains close ties with its primary bank. Typically, a German company’s house bank is a significant shareholder in the company, sits on the company board, and is involved in upper-level management. In order to hide its actions, Krupp would have to deviate from this tradition. It did not inform its house bank or any of its major banks of the actions it was about take.

Over the course of six months, Krupp slowly and anonymously purchased Hoesch shares through a Swiss bank. Because the stock purchases appeared to be normal, everyday transactions, Krupp was able to collect 24.9 percent of Hoesch without triggering suspicion. By the time Krupp announced its holdings in October 1991, it was too late for Hoesch to defend itself effectively or for competitors to provoke a bidding war. Krupp successfully gained control of Hoesch by hiding its unusual actions behind a veil of normalcy.

The Walt Disney Company employed the same tactic when it purchased land for Disney World in the 1960s. Had landowners discovered that Disney was purchasing 30,000 acres of land in Florida, land prices would have risen quickly. By assembling the land from pieces purchased anonymously, Disney hid its intentions and avoided paying premiums.

Lulling an Opponent with Repetition


In the late 500s, the founder of the Sui dynasty defeated the northern kingdoms and decided to expand his successful military campaign south of the Yangtze River. He assigned a general named He Nuobi to lead his first southern effort: a siege of the Chen kingdom just across the Yangtze.

He Nuobi assembled an army and set up camp on the river’s edge just opposite Chen’s northern border. The Chen king ordered his troops to set up positions on the other shore in preparation for the attack. Both armies were poised for battle.

Soon, He Nuobi ordered his army to prepare for battle. At the sounds of the activity, the Chen army took their positions and prepared for an attack. The Sui army marched, drums beat, and dust rose into the air, but no attack came.

The Sui army was conducting maneuvers. These continued for several days. Eventually the Chen army grew weary of maintaining their vigilance. They grew accustomed to the sounds of war and stopped associating them with an attack.

He Nuobi had purchased boats and hidden them for just this moment. One evening, once he was sure he could move his troops without triggering a reaction from the Chen army, he quietly crossed the river. He and his soldiers reached shore at dawn and surprised the Chen forces. They easily defeated the Chen and established a foothold south of the Yangtze.

 

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