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Bullshit. Hire a bunch of consultants without any ability to judge which are worth the ticket, and you’ll spend a measly $10 mil in no time.

vinceguidry 8y ago
Knowing which consultants to hire and when is presumably the domain of the finance guys. You can buy competence, it's just expensive. $10 million is enough to hire a full turnaround team. The key is you have to have it as cash in the bank. You can't finance a turnaround, the better move at that point from a financial perspective is to just fold up the business, but if you have it, you can use it as collateral for a more aggressive expansion. That way if you run into enough problems, the money guys can 'foreclose' and use the reserve capital to enact a turnaround plan, and eventually earn their money back. It's an extra form of security.
- __blockcipher__ 8y ago
  lol, how do you hire the right finance guys? You didn’t address the central paradox.
  - vinceguidry 8y ago
    The finance guys are running the company at that point, so presumably they already have that knowledge. And most companies do retain a finance guy in a senior management role as the CFO. So their perspective gets heard and in some cases actually listened to. It's just that running a company purely with safety in mind generates far less profits than aggressive investment in a business model. If a finance company is running a business, it's because the industry people that started the company managed to run it into the ground, finance people never seek to start businesses in any other space than the finance space. It's just not interesting to them. When they wind up running companies, they mostly just delegate all the decisions to the consultants they have a working relationship with. It's simple, you go to a lender who demands you keep $10MM in the bank as a contingency fund. You run the company into the ground, and the lender has to foreclose on the loan, taking control of the business. They then use the $10MM to turn the company around, eventually recouping their investment over the long run. You're bringing the $10MM in collateral, not the bank, so the bank doesn't have to use their own money for the turnaround. It's a hedge against risk, not some kind of magic bullet like you seem to think. No paradox needs be invoked, the finance company simply runs the company differently than you would, from a purely financial perspective.

vinceguidry 8y ago

Knowing which consultants to hire and when is presumably the domain of the finance guys. You can buy competence, it's just expensive. $10 million is enough to hire a full turnaround team. The key is you have to have it as cash in the bank. You can't finance a turnaround, the better move at that point from a financial perspective is to just fold up the business, but if you have it, you can use it as collateral for a more aggressive expansion. That way if you run into enough problems, the money guys can 'foreclose' and use the reserve capital to enact a turnaround plan, and eventually earn their money back. It's an extra form of security.

__blockcipher__ 8y ago
lol, how do you hire the right finance guys? You didn’t address the central paradox.
- vinceguidry 8y ago
  The finance guys are running the company at that point, so presumably they already have that knowledge. And most companies do retain a finance guy in a senior management role as the CFO. So their perspective gets heard and in some cases actually listened to. It's just that running a company purely with safety in mind generates far less profits than aggressive investment in a business model. If a finance company is running a business, it's because the industry people that started the company managed to run it into the ground, finance people never seek to start businesses in any other space than the finance space. It's just not interesting to them. When they wind up running companies, they mostly just delegate all the decisions to the consultants they have a working relationship with. It's simple, you go to a lender who demands you keep $10MM in the bank as a contingency fund. You run the company into the ground, and the lender has to foreclose on the loan, taking control of the business. They then use the $10MM to turn the company around, eventually recouping their investment over the long run. You're bringing the $10MM in collateral, not the bank, so the bank doesn't have to use their own money for the turnaround. It's a hedge against risk, not some kind of magic bullet like you seem to think. No paradox needs be invoked, the finance company simply runs the company differently than you would, from a purely financial perspective.