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I see this as an inevitable consequence of the fact that most small business owners assign a large value to the intangible of "being your own boss" not to menti

I see this as an inevitable consequence of the fact that most small business owners assign a large value to the intangible of "being your own boss" not to mention the potential for wealth, and this drives everyone to have no margin for downturns. I mean, think about restaurants. Who starts a restaurant because they think it's the easiest way to make a dollar? The very fact that many people want to do something for reasons other than sheer profit means that profit will be driven below normal which will cause pain over time. What can the rich do to prevent this? Unless they got together and eliminated the ability of the non-rich to seek wealth. Sometimes, that's the conclusion elites reach about things; they do it to some extent. Like the way in the US you have to be a "qualified investor" with a certain amount of assets to invest in unregulated securities.

Guvante 7y ago
> The very fact that many people want to do something for reasons other than sheer profit means that profit will be driven below normal which will cause pain over time. Cash on hand is a lot more nuanced that profit vs not profit. Airlines spend tons of money on stock buybacks due to the drive for "profit" which hurt their cash on hand significantly. Cash on hand is either: unclaimed profit, capital or loans (Accounts payable that isn't fulfilled). So while having more profit can make it easier to have cash on hand it isn't the only way. > What can the rich do to prevent this? I don't understand where this question came from. Are you talking about banks reducing the chance of bad debt due to insufficient liquidity? Are you talking about the rich trying to stop small businesses from increasing competition and reduce their profits? > Like the way in the US you have to be a "qualified investor" with a certain amount of assets to invest in unregulated securities. Unregulated securities are often a synonym for "scams" that is why you have to be a qualified investor.
- v64 7y ago
  > Unregulated securities are often a synonym for "scams" that is why you have to be a qualified investor. That's the point though, scams are scams whether they're run by a loan shark or Bernie Madoff. Anyone should be allowed to invest their capital in any legitimate venture they see fit, and anything that meets the legal definition of a scam should be shut down and barred from taking money from anyone. It's quite patronizing that the government takes the stance of "If you don't have X amount of money, you're not wise enough to tell the difference between a scam, a foolish business venture, and a legitimately risky business venture. Better leave that to the experts (and their commissions)."
  - perl4ever 7y ago
    When there's an endless supply of "marks", it means that you, as a hypothetical sensible and intelligent entrepreneur are faced with competing with them in good times, and then none of you can deal with the bad times. Free markets can't fix the effects of collective error or stupidity through some magical means. They can reinforce it.
    - v64 7y ago
      I agree with you, but I disagree that the solution for it is "You can only invest in these ventures if you have X net worth". Having more money does not necessarily imply one is less foolish, and it disqualifies those who are capable of properly evaluating an opportunity but are not high net worth individuals.
ttul 7y ago
If you don’t operate a restaurant on lean margins, you won’t have any customers because your prices will be too high. The competitive market forces low margins and thus low capital overhead.
- perl4ever 7y ago
  Yes, my point is the equilibrium gets lowered further if people are willing to accept lower profits or losses due to intangible reasons and/or commitment to sunk costs, self-image, etc. This is more characteristic of small businesses than large ones, of whom people always slam "bean counters". Saying "the competitive market forces" is not a proof or an argument that competition has to produce the outcomes we see. If people were different, less willing to take risks, then there would be less pain in a crisis.

Guvante 7y ago

> The very fact that many people want to do something for reasons other than sheer profit means that profit will be driven below normal which will cause pain over time. Cash on hand is a lot more nuanced that profit vs not profit. Airlines spend tons of money on stock buybacks due to the drive for "profit" which hurt their cash on hand significantly. Cash on hand is either: unclaimed profit, capital or loans (Accounts payable that isn't fulfilled). So while having more profit can make it easier to have cash on hand it isn't the only way. > What can the rich do to prevent this? I don't understand where this question came from. Are you talking about banks reducing the chance of bad debt due to insufficient liquidity? Are you talking about the rich trying to stop small businesses from increasing competition and reduce their profits? > Like the way in the US you have to be a "qualified investor" with a certain amount of assets to invest in unregulated securities. Unregulated securities are often a synonym for "scams" that is why you have to be a qualified investor.

v64 7y ago
> Unregulated securities are often a synonym for "scams" that is why you have to be a qualified investor. That's the point though, scams are scams whether they're run by a loan shark or Bernie Madoff. Anyone should be allowed to invest their capital in any legitimate venture they see fit, and anything that meets the legal definition of a scam should be shut down and barred from taking money from anyone. It's quite patronizing that the government takes the stance of "If you don't have X amount of money, you're not wise enough to tell the difference between a scam, a foolish business venture, and a legitimately risky business venture. Better leave that to the experts (and their commissions)."
- perl4ever 7y ago
  When there's an endless supply of "marks", it means that you, as a hypothetical sensible and intelligent entrepreneur are faced with competing with them in good times, and then none of you can deal with the bad times. Free markets can't fix the effects of collective error or stupidity through some magical means. They can reinforce it.
  - v64 7y ago
    I agree with you, but I disagree that the solution for it is "You can only invest in these ventures if you have X net worth". Having more money does not necessarily imply one is less foolish, and it disqualifies those who are capable of properly evaluating an opportunity but are not high net worth individuals.

ttul 7y ago

If you don’t operate a restaurant on lean margins, you won’t have any customers because your prices will be too high. The competitive market forces low margins and thus low capital overhead.

perl4ever 7y ago
Yes, my point is the equilibrium gets lowered further if people are willing to accept lower profits or losses due to intangible reasons and/or commitment to sunk costs, self-image, etc. This is more characteristic of small businesses than large ones, of whom people always slam "bean counters". Saying "the competitive market forces" is not a proof or an argument that competition has to produce the outcomes we see. If people were different, less willing to take risks, then there would be less pain in a crisis.