Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : ahhaha's ahs -- Ignore unavailable to you. Want to Upgrade?

To: Lizzie Tudor who wrote (4684)	7/3/2002 12:46:25 AM
From: ahhaha	Respond to of 24758

How many corporations would be willing to expense a 100mm supply chain project in one year? Not enough of them. They're risk averse. It cost Mike Dell about 90mm to put in the Dell supply chain at a time when his margins were around 4%. In hindsight, it was a pretty good investment. But ask him to take a 90mm hit then, would he have done it, not fully knowing the outcome... I doubt it. You're saying Dell didn't have to write a check for $90M, but paid the money gradually over time. This enabled Dell to save cash which was needed for other more pressing considerations. This presumably means that managers will take risks if the risk is minimized by distributing the cost over time. The idea being that with lots of time one has better chance to make adjustments to make up for an error in initial judgement. This implies that the more risk averse a manager is, the more successful the manager will be over time. The problem is, it's false. It's an economic law that to get more return one must take more risk. That's what Dell and leveraged balance sheet corporations are failing to do. They're avoiding risk. Thus, they're avoiding return and that's all the problem in the stock market. If government cuts taxes, the willingness to take risk rises. Quod erat demonstrandum.