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Imagine you are a bank or investment firm or hedge fund or VC. You want to do business with person A, I shall call them “Alice.” Alice says to you, right up fr
by braythwayt 7y ago
Imagine you are a bank or investment firm or hedge fund or VC. You want to do business with person A, I shall call them “Alice.”
Alice says to you, right up front, “I need to make one billion dollars, or I look for a different partner.”
Are you going to accuse Alice of being greedy, when your entire business consists of making money? You don’t cure the sick, or bring the Internet to rural communities, or manufacture safe transportation, or serve healthy food. You just make money.
So you say, “Fine, Alice, but a billion dollars is a lot of money.” Alice says, “How much do you need to make, such that my dream can come true?”
So you work out how you can make ten billion, while Alice makes one billion.
Now the conversation becomes, “How does Alice take her one billion out of the business, tweaking the knobs for risk, tax advantage, estate planning, and so forth?”
You bought into Alice making a billion dollars, so everything else is just details about when she gets the various bits of her billion.
- dnadler 7y agoI don't understand what the point is here besides a vague loathing of the financial industry...
- braythwayt 7y agoWhat loathing? Finance serves an important purpose. But its purpose is NOT to police self-dealing. And the people putting the money in are exactly the people who are directly responsible for governance. Likewise, due to regulatory capture, the people who put money into businesses are closely related to the people who write laws about what is or isn’t legal, and enforce those laws. So if Adam’s choices are ok with his investors, they are going to be structured in such a way that they are perfectly legal. The bottom line: If Adam provides an opportunity for his investors to make their “ten billion,” why would anyone object to his self-dealing? Why do we, for that matter? What crime is being committed, if everything is disclosed? What puritanical streak runs through us that we object to his leasing his own buildings back to his business on moral grounds? Either he follows through and makes his investors rich, or he doesn’t. I have opinions about that, but at the end of the day, that is all that matters to his financiers, which is why he so-called “got away with it.” And the things that were unwound were only unwound because they impacted the likelihood of his investors making money. It had nothing to do with crimes being committed or moral turpitude. What you mistake for loathing is actually me putting money in black and white. Money is neutral. It’s not good, it’s not evil. What people do or don’t do to make it is good or evil. What people do with it is good or evil. Leasing your trademarks to an entity you own? That’s just shuffling money around. It’s not evil and not a crime. It may affect somebody’s calculations about whether they want to buy a stock, but that’s exactly what the S-1 is for.
- jakelazaroff 7y ago> If Adam provides an opportunity for his investors to make their “ten billion,” why would anyone object to his self-dealing? On the other hand, why would anyone care whether or not his investors make their “ten billion”? We object because it’s a you-scratch-our-back-we-scratch-yours situation in which the rich get richer and no value is produced for the rest of society.
- braythwayt 7y agoWell, that is certainly a valid position to take, and I am not unsympathetic. But my parent comment was responding to the question of whether this specific behaviour is illegal. Your take touches on whether the entire industry—with or without a few leasebacks and trademark deals—is morally repugnant.
- jakelazaroff 7y agoFair enough. I also think there’s some pattern matching going on, since shuffling money around like this is often indicative of something illegal. But you’re right, this particular case seems to be in the clear.
- patthebunny 7y ago> Finance serves an important purpose. Does it?
- prepend 7y ago> If Adam provides an opportunity for his investors to make their “ten billion,” why would anyone object to his self-dealing? Why do we, for that matter? There’s one aspect of some sort of ethical wrongness because I suspect there’s an eventual chump who will lose out not having full perspective when this thing falls apart. But, for me, I have a tendency to feel uncomfortable when things are “obviously” wrong. I find it curious about me, and I’ve met others, who just don’t like it when things are off. The simple act of making the world more correct is pleasing. I’ve found it pretty helpful in debugging and system design. I find it really annoying in domains where there isn’t really an objective right and wrong, or it’s not clear to me what’s right, or where they aren’t fixable. And it’s pretty common in politics or religion where people point out wrongs. So I don’t think money or technology is neutral. I think they both as information have certain innate needs to grow in the most efficient way possible. Money is like a river trying to flow to the ocean and actions like We took and is taking are the equivalent of trying to build a harbor in shallow water or some other illogical act.
- moomin 7y agoI don't think this is so much about Alice's billion dollars as Bob coming up with a way of coining it before Alice... ...but it's hard to care. (i.e. the 'great' thing about this is that it makes being the founder completely risk-free, you make millions even if your firm craters)
- deleted 7y ago[deleted]
- CPLX 7y agoSure, but it makes a difference whether that billion comes from returns on productive investment, or from the actual investor money itself. One of those makes you Warren Buffet, the other makes you Bernie Madoff.
- deleted 7y ago[deleted]
- patthebunny 7y agoMaybe you should tell Alice to work for her billion instead of running scams and treating the company like a piggy bank. Maybe we should just not have anyone worth a billion dollars.
- perl4ever 7y agoYou don't have to be "worth" a billion dollars to destroy a billion dollars worth of stuff. So eliminating billionaires doesn't solve the problem of people screwing up large things. You'd have to eliminate those large things, but that would mean a vastly poorer society.