CAPITALISAM Italian-Style

U.S

Gianni Agnelli, the rakish ruler of Italian business, is being challenged by a new breed of entrepreneurial princes, like Carlo De Benedetti and Silvio Berlusconi, the Italian equivalents of Carl Icahn and Rupert Murdoch. ALAN FRIEDMAN reports, in an adaptation from the book that rattled Agnelli—Agnelli: Fiat and the Network of Italian Power, to, be published in the U.S. this fall

The new Italian princes have been currying favor

Gianni Agnelli is having a party, and it's a big one. By eight o'clock on a warm September evening, inside an enormous steel-and-fiberglass tent erected on the outskirts of Milan, nearly two thousand formally clad people have taken their seats for a bit of pre-dinner entertainment. There's not much milling around, although we are still two and a half hours away from the lobster, shrimp, salmon, caviar, and champagne that will be devoured in a matter of minutes by the social, political, and business elite that make up the crowd. Agnelli's bash, the purpose of which is to introduce a new model car from Alfa Romeo, a subsidiary of his Fiat organization, is being broadcast to six million Italian living rooms on the RAI state television network, and no one in the tent is permitted to move from his seat.

The lights go down, and suddenly great waves of Wagnerian choral music (live) fill the air, while images of a Formula One racetrack at Monza are projected onto a giant wall screen. A famous Italian television star drives a 1925 Alfa onto the stage as the cameras scan the front row and close in on the satisfied faces of Gianni and Marella Agnelli. Futurist images from the Mussolini era flash across the screen, a poem about the Automobile is recited, and forty high-kicking girls in red plastic hot pants and matching stiletto boots prance in. Out on the street anti-Fiat protesters are waving placards and shouting, "Don't eat Agnelli's dinner. It's poisoned!" But inside more chorus girls in white taffeta and silver sequins appear, followed by a dance troupe on roller skates, a lengthy monologue by a comedian who ridicules non-Italian cars, a transvestite magician, and a film that features still more dancers, who skip through one of Agnelli's Rinascente department stores, the offices of Agnelli's Corriere della Sera newspaper, and Agnelli's Alfa Romeo factory.

Stomachs are beginning to rumble, but the million-dollar spectacle goes on until it culminates in the arrival of another antique Alfa Romeo, this one bearing astronaut Buzz Aldrin, who has been flown into Milan for the occasion, along with Soviet cosmonaut Valerii Kubasov. The two astronauts are made to shake hands while a children's choir sings "Blue Moon" and dancing "astronauts" in silver uniforms jump up and down in front of the new Alfa. When it is all over, the lights come on again and everyone makes a mad dash for the lobster.

with Wall Street,Tokyo, and the City of London.

Some of Gianni Agnelli's friends say the Alfa extravaganza was over the top, amazingly vulgar even by the standards of Italian pop culture. But others simply shrug and explain that it was only a case of the court jesters entertaining the king. And, indeed, in the late eighties it is not misleading to speak of Gianni Agnelli in imperial terms. No other Western businessman is to his country what Agnelli is to Italy. He can be compared only to a monarch, except that no monarch these days is as influential as he is. Agnelli controls a corporate empire that frequently resembles a sovereign entity and has more staying power and clout than most elected governments. No national government in Rome, in fact, has ever been strong enough to challenge the Fiat empire in Turin, the largest private-sector conglomerate in the country, with annual sales of nearly $34 billion (roughly those of AT&T). Agnelli's family holdings give him control of a quarter of the Italian stock exchange, or around $25 billion worth of capital. He is the effective proprietor of two of Italy's three leading papers, La Stampa and the Corriere, plus twenty-two magazines. He controls 99 percent of Italian car production and 60 percent of Italian car sales. He is the most admired figure in Italian society, a man whom prime ministers and presidents frequently consult before making important decisions.

Agnelli wields his power in a country that still plays by the Machiavellian rules that applied to the palace intrigues of sixteenth-century Florence. Italy has no antitrust laws, the stock exchange is riddled with insider trading (which is not yet considered a crime), and the country's oligopolistic business culture almost always defers to the House of Agnelli. The high temple of this power structure is a strange and secretive Milanese bank called Mediobanca, which is presided over by an eighty-one-year-old gnome named Enrico Cuccia. In the Mafia, say the harshest critics, every Godfather has his consigliere, his adviser. In the world of Italian business, Gianni Agnelli, although he is of course not a mafioso, has Cuccia, who has wielded nearly absolute power over the country's financial network during much of the postwar era. Cuccia, they say in Italy, knows everyone's secrets, and he does not confide even in his own shadow. He is one of the few people Gianni Agnelli still looks up to.

For most of his four decades at Mediobanca, Cuccia (who is officially retired but still very much in command) was at least technically an employee of state industry. But at some point in his career the state employee came to identify with the wealthy old families of Lombardy and Piedmont, and he has used his privileged position to weave for them a spider's web of industrial cross-holdings. In the Cuccia design, shareholding control of companies has little to do with who owns the majority, because share stakes are "weighted" rather than "counted." This is very unlike American capitalism: in Italy the idea is to control a company's destiny with as little as a 5 or 10 percent minority stake, plus some help from friends and like-minded shareholders. The most powerful businessmen are not necessarily those with the most cash. The point is, rather, to keep everything "in the family." It is all very Italian.

The Mediobanca-Agnelli network is known as the Salotto Buono, or the Good Drawing Room, of Italian business. To understand the power this network has enjoyed you would have to imagine a situation in which there was only one investment bank on Wall Street, with that bank owning strategic minority stakes in nearly all the leading corporations, through which it was able to exert effective control with the help of shareholder syndicates. And every merger or takeover in America would have to be personally approved by just one man. It is at the top of such a heap that Gianni Agnelli sits.

Agnelli has been representing the interests of Europe's ancien regime of businessmen since the late sixties, when the "Great Rake of the Riviera" decided to settle down to try to run the empire he had inherited. But il Re, the King, as Agnelli is called in Italy, is now nearing seventy, and although he recently reorganized his family's holdings to guarantee the dynasty's grip on the business for years to come, he is facing an unexpected challenge from a new breed of European entrepreneur. Not everyone believes that Italy's future will be oligarchic, and the usurpers are betting on the trend symbolized by 1992, when Common Market reforms will bring protectionist barriers among European nations crashing down. At this point the Agnelli empire will be vulnerable, and there is a whole generation of new Italian princes who have been currying favor with the moneymen of Wall Street, Tokyo, and the City of London, and who are ready to take on the old order. Men like fifty-four-year-old Carlo De Benedetti, the upstart Olivetti chief who last year launched Europe's biggest-ever hostile-takeover bid, and Silvio Berlusconi, the media mogul who is rapidly becoming Europe's Mr. Television.

Predictably, all three tycoons—Agnelli, De Benedetti, and Berlusconi—have deluxe chalets in St. Moritz; indeed, Agnelli's chalet is just a few hundred yards from the other two. But the fact that the three are denizens of St. Moritz and that both Agnelli and Berlusconi own famous Italian soccer teams is just about all these men have in common—besides, of course, a taste for power.

Carlo De Benedetti is the ambitious loner, the maverick, the Carl Icahn of European high finance. Berlusconi is its Rupert Murdoch, with a little of Donald Trump thrown in. The fifty-two-year-old Berlusconi came out of nowhere in the 1980s to build up a European entertainment-retailingand-financial empire that now has annual revenues of $7.2 billion and a breakup value of more than $5 billion. Berlusconi is a specialist in razzmatazz, an enthusiastic and even raunchy showman who spent his formative years in the 1950s as a tour guide, a photographer, and a crooner of Frank Sinatra melodies in the Italian beach resort of Riccione, a sort of Atlantic City on the Adriatic. But he is a brilliant entrepreneur and determined, like De Benedetti, to go it alone. When, for example, he was invited to buy a 2 percent stake in Mediobanca, Berlusconi declined the offer. "I don't need to join clubs or frequent salons," he says bluntly.

During a dinner party at his villa I asked him what he thought of Gianni Agnelli as the leader of Italian capitalism. While eighteen guests fingered their cutlery nervously, Berlusconi the Showman pushed his chair back and got down on one knee. "You have to kneel when you go to see Agnelli, because he is the Prince," he deadpanned. When dinner was over Berlusconi showed us just how new his new money is. He had his waiters place red gift-wrapped boxes in front of his guests, and shouted, "Open them! Open them!" This we did, to find silver-plated goblets by Cartier, which were promptly filled with champagne. When we left the table I noticed that most of the Italians had plonked their silver goblets back in the boxes and taken them with them. The butler spotted me leaving without mine and whispered something about not offending Mr. Berlusconi. I pointed out that my goblet was still half full and the butler said, "No problem," as he emptied the drink into a water glass and shoved the goblet under my arm.

Berlusconi's $7 billion or so isn't much compared with the resources of Gianni Agnelli, but he has definitely become a force to reckon with. So has De Benedetti, although neither man is yet in Agnelli's league. De Benedetti's personal wealth of just $500 million makes him a minnow in those terms, and not so deep in the psyche of this darkly handsome and aggressive man must lurk a feeling of inferiority to il Re. As a child growing up in Turin, the young De Benedetti lived for a time in the same palazzo as the Agnellis. He was often driven to school with Gianni's younger brother Umberto, who is De Benedetti's age. Carlo's family was not poor, but the wealth of the Agnellis was simply of another dimension. And while members of the Agnelli family hobnobbed with the Fascist inner circle when Mussolini came to power, the De Benedettis, in spite of the marriage of Carlo's father to a Catholic, were branded Jews and designated "B Class" citizens. As Gianni Agnelli was winning a medal in Mussolini's army on the Russian front, the De Benedetti family was planning its escape. When the Germans occupied Turin in 1943 the nine-year-old Carlo fled with his family to Switzerland. The De Benedettis left everything behind except a few gold coins, which they carried with them, hidden in a soap dish. They went on foot and at the Swiss border Carlo's father drew lots with his brother to decide who would crawl through the fence first. Carlo's father won, and they made it safely across. Minutes later, Nazi soldiers caught Carlo's cousins on the Italian side. Two of the children were shot and the adults were shipped off to a concentration camp.

The Italian business world may seem like a spaghetti version of Dallas, but it is not.

If a Freudian were to examine the making of De Benedetti as Europe's boldest and most modern entrepreneur, he would undoubtedly have a lot to say about Carlo's childhood war years in Lucerne. Seated in the chestnut-paneled office of his Milan headquarters, a beautifully restored nineteenth-century palazzo just behind the Scala opera house, the otherwise cheerful De Benedetti looks suddenly depressed when asked about this period. He remembers how "painful and frustrating" it was to live as a refugee in Lucerne and not be able to speak German. "I was humiliated by being poor and I was frightened by the total uncertainty of life. The experience made me grow up very quickly."

After the war De Benedetti returned to Turin and by the late seventies had made a name for himself as a fast-moving and talented manager who turned a small tobacco-machinery and metal-hose business into a profitable components producer. In 1976 Gianni and Umberto Agnelli invited him to help run Fiat, but De Benedetti lasted only a hundred days with them. The Agnelli brothers rejected his proposals for massive layoffs, heavy new investments, and fund-raising on the stock exchange (although they followed precisely this plan four years later). And they found "Tiger," which is what they called him, impossible to get along with.

For example, one day De Benedetti was in a meeting when Gianni Agnelli telephoned to ask him to come to his eighthfloor office at Fiat headquarters. De Benedetti said he would come as soon as the meeting was over. An hour later he walked into Agnelli's office and was told condescendingly, "My dear fellow, you are young and handsome. Why don't you think about enjoying yourself a bit instead of coming in each morning prepared for an attack on Entebbe?" And here lies the fundamental difference between Agnelli and De Benedetti: the languid Agnelli waited until he was forty-five years old before taking the reins of corporate power as Fiat chairman, first following the advice of his grandfather (the Fiat founder) to "have a fling for a while and get it out of your system." De Benedetti, on the other hand, has never felt he had any time to waste. He is an obsessive workaholic, Mr. Blitz. When he is in a rush he will work in Milan until four in the afternoon, then take his ten-seater Falcon 20 jet to London's Heathrow and catch the 6:45 Concorde to J.F.K. in time to have dinner in New York, work the next day, and fly Alitalia straight back to Italy that evening.

When he has more time to relax, De Benedetti will often spend the weekend in New York, Concording over on a Friday night in the company of forty-two-year-old Paola Zanussi, the washing-machine heiress who is his newest flame. La Zanussi is, ironically enough, the ex-wife of a sworn business enemy of Carlo's, Leonardo Mondadori, the publishing magnate who last year lost control of his business when De Benedetti engineered a coup by buying up stock and forging an alliance with other members of the Mondadori family. De Benedetti secured control of the company and guaranteed himself a steady flow of vitriol from Leonardo, who was left outmaneuvered and out in the cold. The elegant Paola, whom he describes as his friend (adding for good measure that "it is official"), stepped into De Benedetti's life two years ago, after the departure of Sandra Monteleone, the former wife of Luca di Montezemolo, a yachting pal of Gianni Agnelli's. De Benedetti's wife (and mother of his three children), Mita, now awaiting an official divorce, has the use of the De Benedetti villa at Porto Cervo on Sardinia's Costa Smeralda and so this summer Carlo and Paola are vacationing at a rented villa near Tamariu on the Costa Brava.

De Benedetti's emergence as a New Italian Prince is a tale of the 1980s. Once he was out of Fiat in 1976, "there I was with no secretary, no desk, no telephone," he recalls, pausing to put on his glasses and glance over at a nearby Reuters screen to catch the latest exchange rates and stock prices. But two years later he bought a small stake in Olivetti, the lossmaking typewriter company. He was installed as chief executive and then chairman and in just five years pushed through a textbook turnaround. Today, Olivetti is the biggest European-owned personal-computer and office-automation group, thanks to a series of ambitious moves, including a major alliance (now fading) that De Benedetti struck in 1983 with AT&T.

With Olivetti making profits, De Benedetti decided to expand his empire. He became the first Italian to make largescale use of the equity market as a source of capital, raising a staggering $3 billion between 1985 and 1987. He went on a financial rampage through Europe's stuffy markets, buying up effective control of dozens of companies as diverse as Acorn computers in Britain, Yves Saint Laurent in France, and Triumph-Adler typewriters in Germany. The Agnelli crowd was none too pleased at the progress of "Tiger." In 1985, when Agnelli's banking allies were fixing up a cozy deal for a French food group to buy the ailing Buitoni-pasta and Perugina-chocolate concern, De Benedetti swooped in at the last minute, Learjetted old Mr. Buitoni up to Olivetti headquarters in Piedmont, and offered more cash on the spot. In Italy that operation was like an earthquake, because everyone knew that the House of Agnelli had favored the French. When De Benedetti sold Buitoni last year to Nestle of Switzerland for $1.4 billion, or ten times his initial investment, Agnelli's allies scoffed that this was an example of De Benedetti the Short-termer. Europe's old-style industrial barons believe that companies are meant to be controlled forever, preferably by families.

De Benedetti's growing prominence can be seen in the way the Italian press dubbed him I'lngegnere, or the Engineer. It used to be that only Agnelli had a title: he was, and is, I'Avvocato, or the Lawyer (he took a law degree, though he has never practiced). But De Benedetti's rise has not been without its frustrations. In the last few years, as he has increasingly played the role of usurper, a number of his attempted deals have been curiously stymied.

In early 1988, complaining that he was being "blocked" on every front at home in Italy, De Benedetti launched the most audacious takeover bid of his life and the biggest Europe had ever seen. He spent more than $1.5 billion trying to gain control of Societe Generate de Belgique, the giant Brussels-based group that accounts for a third of the Belgian economy. The financial world wondered if the long arm of Gianni Agnelli would try to block De Benedetti abroad, and at least one of Agnelli's closest European allies—Lazard Freres, the merchant bank—did act against him. He eventually failed in his bid, which Agnelli backhandedly described as a coup de theatre. But the mere mounting of the largestever takeover attempt in European corporate history, failed or not, established De Benedetti as the Old World's only bigtime Wall Street-style operator.

In April of this year De Benedetti once again ruffled feathers when he launched the biggest publishing takeover southern Europe had ever seen. Having invested more than $500 million in Mondadori, De Benedetti arranged for the company to take control of the L'Espresso group, which owned both L'Espresso magazine and La Repubblica, Italy's most popular daily newspaper. This led to an outcry from journalists who accused De Benedetti of behaving just like Agnelli and who bemoaned the demise of L'Espresso, the last "pure publisher." But De Benedetti points out that MondadoriEspresso is now a publishing group with $1.8 billion in annual revenues and a place in the ranks of the world's top ten media groups. The most striking aspect of the $540 million Mondadori takeover of L'Espresso, however, is that De Benedetti bought 51 percent from two main shareholders and is now making a tender offer at the same price for the remaining stock. This is unheard of in Italy, where there are still no laws requiring a full share offer and where majority control of a company is usually bought at a premium, after which the minority investors are left to rot.

The differences between De Benedetti the Usurper and Agnelli the King are on the one hand obvious. De Benedetti has alliances with Wall Street backers such as Shearson Lehman and the thrusting Wasserstein Perella (his son Marco works there), and some of his closest friends in New York are investment bankers, such as Shearson's Nat Samuels, an assistant secretary of state during the Nixon era, and Wasserstein's Yves-Andre Istel, a former chairman of First Boston International. Agnelli is more at home with the likes of David Rockefeller, and his trusted banker in Milan is the crafty Enrico Cuccia. Aside from Cuccia, Agnelli's greatest financial mentor was the late Andre Meyer, the controversial and despotic Lazard Freres partner who in the 1970s got both Cuccia and one of Agnelli's Luxembourg financial companies mired in an S.E.C. investigation of some unusual international stock shuffling. (Cuccia later became the target of two criminal investigations in Italy, and while he managed to emerge unscathed from allegations of involvement in an embezzlement scheme in 1985, he was indicted this June on charges of falsifying balance sheets at Mediobanca and operating a hidden slush fund of $17 million.) While in the 1960s and 1970s Andre Meyer served as the New York-based "eyes and ears" for both Agnelli and Cuccia, today that role is filled by another Lazard's maestro, Michel David-Weill, the wealthy banker-socialite who commutes between Wall Street and Paris and who sits on the board of IFI, Agnelli's family holding company.

But the difference between Agnelli and De Benedetti is more than just the chasm between old money and new. It is a state of mind. "Agnelli was educated to be the prince of Piedmont and everyone has always treated him that way," says Carlo De Benedetti. "People never ask if Gianni Agnelli is good at business, if he has made or lost money. They ask if Agnelli is optimistic or pessimistic, if he is favorable or unfavorable. He's from the royal family." But what was it like to work for him? "He is always driven by events, but it always looks like he is driving events. I do admire one attribute of his, though, and that is his ability to summarize. You go and talk to Agnelli for ten minutes and of course he is already bored after three minutes, but at the end he sums up everything you've just said in three or four words."

"Agnelli loves everything that is theatrical, loves the spectacle," says De Benedetti. "He accuses me of coup de theatre, but he adores it. I remember in 1976 when he got Colonel Qaddafi to buy into Fiat at three times the market price and I remember in 1986 when Agnelli was having trouble with Pentagon contracts and the Libyans sold out their Fiat stake. Agnelli loved both of these events." But what about details? Both Libya-Fiat deals were highly controversial. "Details?" shrugs De Benedetti. "He wouldn't know about details. He wouldn't even know how to execute a share purchase."

Agnelli may not, in De Benedetti's view, know how to execute a share purchase, but his army of advisers certainly know their way around balance sheets. And the way Agnelli managed to get rid of Qaddafi as a Fiat shareholder in 1986 is probably as good an example as any of the contrast between old-style European business and the new.

In early 1986, Fiat was in a tough spot. A spate of Libyan-backed terrorist attacks, including the bloody murder of American passengers at Rome's Fiumicino airport, had made the company's Libyan links a hot issue in Washington. A growing number of members of Congress were demanding that Fiat be banned from receiving U.S. military contracts, since 15 percent of the company was owned by Libya and since President Reagan had imposed sanctions designed to stop cash from flowing, even indirectly through dividend income, to any terroristsupporting nation. A week after the U.S. bombing of Tripoli, Fiat's Qaddafi connection became an even greater liability for Agnelli when Italian police arrested an official of the Libyan investment company in Rome that owned the Fiat stock and charged him with being involved in a plot to kill Maxwell Rabb, the U.S. ambassador to Italy. Agnelli insisted that inside the Fiat boardroom the Libyans behaved just like "Swiss bankers," but he realized that if Fiat were ever to win sensitive contracts for the Star Wars project he would have to find a way of ditching Qaddafi.

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When he finally got rid of Qaddafi in September 1986 in a controversial deal that saw the Libyan dictator walk away with $3.1 billion in cash, Agnelli first telephoned his friend George Bush with the news and then went on national television in Italy and proclaimed his satisfaction. But the deal, which eventually triggered a judicial investigation in Turin, left dozens of international banks with multimillion-dollar losses and the Italian stock exchange depressed. Thousands of small investors have suffered as a result of the 40 percent drop in Fiat's share price that followed the Libyan deal, a deal engineered by Agnelli's faithful consigliere at Mediobanca, the wrinkled but ever lucid Enrico Cuccia.

The Libyans wanted nearly eight times what they had originally paid for their Fiat stock, but the price of the shares on Milan's clubby stock exchange was too low to make this feasible. In the days preceding the closing, however, the share price soared mysteriously to a historic high, at which point the deal was done. An Agnelli aide later admitted that one of Agnelli's companies had been buying up Fiat stock "to keep the share under control during the negotiations." In fact, the Agnelli company accounted for nearly a fifth of all trading in Fiat common stock at the time.

Some $2 billion worth of Libya's Fiat stock was shoved into the hands of Deutsche Bank, which so mishandled the international sale that the underwriters and other investors have made book losses totaling around $800 million since. Agnelli himself took advantage of the episode to boost his own family control of Fiat up from 33 to nearly 40 percent. But in order to do so he needed $1.1 billion in cash. And neither of Agnelli's holding companies had the funds available.

This was a case for Dottore Cuccia, who put together an incredibly complex financial jigsaw that made use of the stateowned Mediobanca's offices to allow Agnelli to effectively borrow the money from Fiat shareholders at ridiculously low rates. The most controversial part of the transaction was a ten-year, $1.1 billion loan from Mediobanca to an Agnelli company at an interest rate of 2.6 percent, equal to less than a fourth of the prime rate that other Italian companies would have had to pay for borrowing far smaller amounts. Minority shareholders were left holding the bag and at the end of the day only two parties emerged unscathed from the affair: Colonel Qaddafi and VAvvocato Agnelli. For everyone else it was a disaster.

The network of power that helped Agnelli make his Libyan deals has never looked fondly on newcomers who have actually made their money rather than inheriting it. Aside from De Benedetti, Europe's most famous new Italian entrepreneur is Silvio Berlusconi, who in the early 1960s, while Agnelli was still living it up with the Beautiful People and De Benedetti was laboring amid the gray of Turinese industry, got a loan from his banker father in Milan and turned his hustling talents to the real-estate market. Thus began the "Donald Trump" phase of Berlusconi's roller-coaster career. By 1969 he had secured sufficient financing (and some would say local political backing) to start construction of his beloved Milano 2 housing project, an incredibly tacky and yet fabulously remunerative satellite city for 10,000 middle-class inhabitants on the outskirts of Milan.

The great move into television began in the late 1970s at Milano 2, where Berlusconi wired up a tiny cable network he called Canale 5 and began broadcasting. Then, as now, Italy had no national broadcasting authority, so anyone with a bit of cash and equipment could set up a local station. The catch, then as now, was that Italian law allows only the three stateowned RAI stations to broadcast live as a national network. Today, Italy has over a thousand local stations, many of which began life in the early 1980s by broadcasting softand hard-core pornography in order to gamer audience shares. Berlusconi devised an outrageously clever scheme to circumvent the law: he bought up American serials and started shuttling prerecorded videocassettes by motorcycle messenger to hundreds of local relay stations up and down the one-thousand-mile-long Italian peninsula. When all of these stations transmitted the videotapes simultaneously, a "network" of sorts was created. Newspapers could list regular programs for viewers, and advertisers could buy time on specific shows with audiences as big as those for the RAI stations.

Since 1983 Berlusconi has bought up two other private networks, a three-hundred-outlet cinema chain, and has spent more than $1 billion buying more American tapes and films. He did the buying before Hollywood realized how much the sale of European rights could be worth. The result is that today he owns Europe's biggest library of U.S. sitcoms and two hundred Hollywood titles (valued at $3 billion), and his Italian television empire has given the state network a thrashing. His sometimes lurid programs command an impressive 45 percent of Italy's primetime audience, and his advertising subsidiary handles 30 percent of total national billings. He has barged his way into France, Germany, Spain, and Yugoslavia, spreading a garish mix of Hollywood films, quiz shows, dubbed Dallas and Dynasty, and his own inimitable brand of extravagant chorus-girl-filled variety shows—what the French sniffily describe as "spaghetti television." "I am the fourth-biggest television network in the world after CBS, NBC, and ABC," Berlusconi likes to tell foreign visitors.

The trappings of Berlusconi's success are straight out of one of the B-movies that his stations show. If you make an appointment to see him at his seventyroom villa outside of Milan he will insist on sending a bulletproof limousine to collect you. Some of the drivers double as guards (they are all equipped with the standard, bulging .44-caliber Magnum) and as they speed toward the villa they bark news of their progress into a twoway radio so that the electronic gates swing open exactly ninety seconds prior to arrival. Berlusconi often takes the quick way in, helicoptering down to a pad located in the middle of his 250-acre park. Once at the Villa San Martino, an eighteenth-century pile that contains more electronic gadgets than a James Bond movie, one gets a taste of this New Prince's fantasy-come-true. The seventy rooms contain plenty of space for the two children Berlusconi had with his first wife and the three he has had with Veronica Bartolini, his blonde-bombshell companion. "I met Veronica nine years ago backstage at a theater I owned," recalls Berlusconi, "and I fell in love immediately." The villa that he and Veronica inhabit features a two-story office for him, crowded with photos of his soccer club, A.C. Milan, and of his favorite real-estate projects. As we walked along from the office wing, Berlusconi gestured toward a strangely sterile white art gallery that is supposedly stuffed with Tintorettos and Brueghels. "Impressive, eh?" he inquired, but when I asked him about one of the old masters, he looked embarrassed and told me that "the names of the painters are all on the labels." We moved past a kitschy red-painted private chapel, where Berlusconi flicked a switch and religious Muzak seeped into the room, then past a dining area that I was told is for working lunches for fifty people, and on to an underground screening room that seats a hundred. Berlusconi beamed with pride as he shuffled me into a "rest area" that turned out to feature a sauna, steam bath, Jacuzzi, indoor swimming pool with a six-foot-wide wall screen designed for television viewing from the water, a little gym for working out, and the piece de resistance, a Scandinavian-pine and couch-filled comer with one wall covered by nine television sets, each broadcasting Berlusconi programs or advertising. My host pointed to a roll-out drawer that had enough buttons to trigger music, special lighting, or the butler's attention. And finally we came to the bathroom where he shaves in the morning. Installed in the wall on either side of the mirror were little television screens, "so I can watch without cutting myself."

Berlusconi is a talented and calculating New Breed entrepreneur. His most recent deal was to buy control of Standa, one of Italy's biggest department-store and retail chains. He paid twice the market price, but there was method to his madness. To facilitate his goal of doubling the chain's annual sales of $1.7 billion, every day of the week Berlusconi's three television "networks" are studded with sixty-second spots for Standa. The commercials star the Italian equivalent of Robin Williams, and they are patently inane, but the result has already been a 25 percent jump in retail sales. An analogous concept in the U.S. would be for Capital Cities to buy J. C. Penney and then saturate ABC Television with daily spots for "today's bargain at Penney's." Whatever one says about Berlusconi, he is full of profit-making ideas. He is also full of himself.

"I am the Italian dream personified," he told me, adding that private opinion polls his organization has conducted show that "I am enormously popular with the people, rated number one among businessmen." Since he is Mr. Television, Mr. Retailing, and an Italian version of Horatio Alger, it is not surprising that he should get a lot of press, which he seems to enjoy. "I am in the papers every day," he reminded me, noting that his photo is featured not just on the financial pages but, given his ownership of A.C. Milan, the current champion of European soccer, also on the sports pages.

Out in the park I asked Berlusconi about the helicopters stationed nearby, emblazoned with his Canale 5 television logo. He told me that he generally uses the choppers on Sundays to go to the stadium and watch his soccer team in action. But lately Berlusconi has been flying with Gianni Agnelli, whose Juventus team in Turin is a bitter rival of Milan's. And that's where Berlusconi's jokes about Agnelli begin to look a trifle suspect, at least to Carlo De Benedetti, who does not own a soccer team and who found Berlusconi on the side of his girlfriend Paola's ex-husband, Leonardo Mondadori, in the Mondadori takeover fight last year. Berlusconi, according to De Benedetti, "submits entirely to the Agnelli charm and thinks of Agnelli as an inspiring father figure." Agnelli, on the other hand, "likes Berlusconi because he finds him funny, a clown," says De Benedetti, claiming that "Agnelli does not feel threatened by him."

I remind De Benedetti that Berlusconi owns a big department-store chain that competes head-on with Agnelli's Rinascente department-store group. But De Benedetti merely rolls his eyes and says that "Agnelli probably doesn't even remember that he owns La Rinascente." Then he tries (successfully this time) to get the analogy right. "Berlusconi," he says, "is like the guy who plays the piano in the bar of some cruise ship and Agnelli is the elegant passenger who strolls by and gives him a tip. The fact that Berlusconi can sit down to dinner with Agnelli or ride in his helicopter is a dream for Silvio." This kind of carping makes the Italian business world seem like a spaghetti version of Dallas, but it is not. 11 Re and the New Princes operate in a multibillion-dollar national and international political and financial context, and their travails are symptomatic of an extremely important battle that is gradually casting its shadow across the whole of Europe. As De Benedetti explains, it is the "geographic dimension," or the ability to look at Europe as one big market like the United States, that identifies the new breed of entrepreneur. "Frankly, I wouldn't care if I had to work out of Paris tomorrow instead of Milan. I work well with my colleagues, be they French, Spanish, German, or Italian. I am indifferent to nationality."

But it will be later than 1992 when all restrictions, even if they are cultural rather than legal, are lifted in Europe. "There are too many closed markets where the governments intervene to block foreign takeovers," Berlusconi says. "I am not convinced that all the barriers will effectively fall by 1992. The creation of a real European single market will be a long and difficult process." As De Benedetti points out, "1992 is a trend, not a magic date." Aside from geographic freedoms, there is still the question of how newcomers in Europe can tackle the Continent's Old Guard business establishment, how they can break through the Great Wall of traditional cliques, coteries, and alliances. For people like De Benedetti and Berlusconi it is not enough to launch big corporate transactions in the light of day with American-style disclosure instead of Mediobanca-style secrecy. "I have to admit," recalls De Benedetti, "that in my Belgian takeover attempt I underestimated the reaction of the establishment. They were very angry." In Italy, Agnelli's lieutenants have done their best over the years to thwart De Benedetti. As for the Fiat boss's fraternizing with Berlusconi, this is seen as a sign that Mr. Television may be in danger of being slowly and subtly co-opted, a danger that he discounts vehemently.

The role of Italian businessmen both New Breed and Old is likely to continue to grow in the more unified Europe of the 1990s. Agnelli remains Europe's leading low-cost car producer, De Benedetti's Olivetti is the biggest Europeanowned manufacturer of personal computers, and Berlusconi's position as a media giant is firmly established. Of these three, however, it is Agnelli who stands to lose the most after 1992. What will it be like doing business in Europe when the newcomers infiltrate the system? "There will undoubtedly be a problem when the great captains disappear," says Henry Kissinger, a usually astute observer of such things. "I guess they'll have to be more systematic then. They may be less fun. It is hard to imagine these companies without these characters."

But Kissinger may be missing the point. Like other American pals of Agnelli and the Old Guard of European capitalists, he does not seem to appreciate that the style and substance of some of Europe's ruling business power networks are closer to those of the robber barons of the nineteenth century than to anything else. And that way of doing business simply is not going to work much longer. This is as true in France and Germany as it is in Italy. For example, Imhausen, the German firm involved in the illegal sale of equipment that went into building Libya's chemical-weapons plant at Rabta, would never have had any problems if its business dealings had remained a "family" affair. Likewise, Gianni Agnelli himself has been criticized by both Reaganand Bush-administration officials and by Republicans and Democrats in the House and Senate for controlling a company that has had some highly curious dealings in the nuclear-missile market. Agnelli's company stands accused in Washington of having violated an international treaty by supplying technology to Condor 2, a dangerous missile project backed by Iraq, Egypt, and Argentina. There are even calls on Capitol Hill to approve laws that would punish Fiat and other European companies involved by cutting them off from U.S. defense contracts. The worry of many is that these new missiles could fall into the hands of Colonel Qaddafi and become the ultimate Islamic rocket. In Italy, Fiat has been able to deny all involvement and quash concern about the affair. But as Europe's big corporations are learning, their deals cannot much longer be treated simply as in-house matters. Things are changing inexorably. The struggle between the old and the new is getting under way for real and it will probably continue for most of the next decade. It could take that long for the idea of shareholder democracy, hostile takeovers, and greater disclosure to catch on after generations of stuffy and secretive industrial dynasties. It has been quite a gala event, but it now looks as though Agnelli's postwar party is finally about to poop out.