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.

Technology Stocks : Intel Corporation (INTC) -- Ignore unavailable to you. Want to Upgrade?

To: Don Lloyd who wrote (174576)	5/14/2003 1:40:12 PM
From: Stock Farmer	Read Replies (1) \| Respond to of 186894

If a one man company in the tax free underground economy makes widgets and pays a secretary $25K per year, wouldn't he be able to increase his company's profits (revenues minus expenses) by $25K by marrying his secretary and eliminating the salary expense? Clearly you aren't married :o) My guess is she'd demand to be paid $35K Seriously though, yours is an example of false economy. Assuming the secretary enjoys a $25K/y lifestyle, either her hubby pays the bill or she earns it. It doesn't materialize out of thin air. Whether he pays it from his bank account or he deducts it from the company that's topping up his bank account is irrelevant as far as the wealth of the owner is concerned. The owner in this case has no more competitive advantage from a capital utility perspective than the owner of a competing company which pays her husband-secretary directly. Your owner can chortle all he wants through the day about how his company is more effective than that of his competitors, but he's just fooling himself. And if he was to ever draw on this phantom competitive advantage, e.g. to fritter away $15K on odds and sods, at the end of the year he'd find himself personally able to enjoy 15K fewer spendoles than the owners of his competitive firms, instead of $10K to the good. You and many others are fond of drawing an economic line in the sand between the account of the company and that of the owners, which is the root of this particular fallacy. John