So here's how to build your empire.
As you recall, our little enterprise will crash and burn before achieving break-even, but due to accounting rules, is able to show respectable profits immediately.
A clever CEO would:
a) Go public. Why risk your own buck when you can risk someone else's? Make sure to reward yourself with a generous salary for this insight.
b) Get a loan. No problem, you got the proceeds from the IPO as collateral.
c) Using proceeds from stock and loan, buy more money printing machines.
Now, of course, you haven't fixed your problem, you've only magnified it. This is the key! Since you're bigger, it's easier to attract capital. Since you're leveraged, your return on equity is even higher.
d) Continue raising debt and/or equity capital.
e) Buy more money printing machines.
f) Occasionally write-off old machines that break. No big deal, as you have much more new machines than old.
g) repeat d-f.
As long as you can manage to keep growing, you won't have to stop to face the music.
Yeah, I know, this is a tad simplistic and no self-respecting Prince would engage in such Machiavellian tactics. But as you know, I am slightly paranoid and a bit cynical, and I see shadows (that god knows aren't really there) of this technique operating within certain industries, including subprime lenders, online access providers, credit card companies, and REITs, in addition to the disk drive foodchain. |
