Bill Smith has a nice Main Street business. He is the third generation of his family to run the company. The government is his biggest customer. He’s a member of the community and his employees are too. His employees pay taxes but Bill doesn’t because he made a sweet deal with the city fathers to keep his business in town. Bill hates the government.
Bill decides to sell his business to his good friend Dick. He needs the money to pay for his third divorce. Dick, who doesn’t know anything about Bill’s business hires Bill back at more than his existing pay package. Dick doesn’t use his own money to buy Bill’s business, he borrows all of it from from Bob.
Servicing all that debt, paying that big salary, and generating a return for Dick puts a strain on the business Bill’s grandfather built. Bill announces that he can no longer afford to offer health care and that people will need to take a pay cut. He blames the government (the one he got the tax break from; the one that buys half his product) and foreign competition. He blames his employees.
Meanwhile Bob has bundled Dick’s loan with a bunch of other loans and sold them to George. This allows Bob to lock in his return while completely eliminating his downside. George pays Bob to service the loans.
Bill becomes less and less interested in doing things that made his grandfather’s business great, like developing new products, thinking of new ways to delight customers, and keeping his employees motivated. He has too much to do courting his soon to be fourth wife. He moves out of town to a big house. He plays golf with Dick, Bob and their Senator. They discuss things that they shouldn’t, but there’s nobody around to listen or to enforce the law anyway.
Dick needs more money to fund his other financial adventures so he pressures Bill to increase his margins and generate more cash. Because Bill hasn’t been taking care of business, most of his customers have moved on. In fact, the only customer he has any more is the government. He blames his employees. He makes a contribution to his Senator’s PAC. Soon another contract shows up. He also cuts benefits further, cuts pay, and fires his older workers. He travels to China and negotiates a contract to have some of his manufacturing done there. Margins improve. Bill and Dick pays themselves a bonus.
Meanwhile Dick buys three more businesses with money he borrows from Bob. He’s now his own conglomerate. Bob is celebrated as a hot shot at his bank. It’s a great American Success Story. Dick pays himself a bonus. Bob gets paid a bonus. George buys more loans from Dick which he packages and resells. He also buys a credit default swap that will pay off big if Bill’s business goes in the tank and shorts the stock of the bank where Bob works.
It turns out that the orignal loan to Dick had a variable rate and reindexed after three years. Payments are now going up. Dick, Bob, and George all want more money from Bill. Productivity at Bill’s company has gone down, perhaps having to do with the fact that the employees have taken repeated pay cuts, have no more benefits, and have watched as their brothers and neighbors have been fired over the past several years. Bill blames them for the financial pressure he’s feeling . . . when he’s not blaming the government, the same one that buys his product and to whom he doesn’t pay taxes, and the Chinese competition that he buys from.
Bill makes across the board cuts. He also borrows more money to buy some equipment that will allow him to replace even more employees. He buys a new car with tinted windows so he doesn’t have to look at all those sullen homeless people that keep popping up. He gives himself a raise.
Oh no, suddenly the economy turns sour. Who could see it coming? Nobody. These things just don’t happen. It’s not supposed to be this way! It’s a plot!
Bob is in a panic because his whole world has just collapsed: He may have to close up the summer place early this year! He pressures Dick to collect his loan even though it’s not due.
Now Dick is in a panic. All of his loans are coming due, he doesn’t actually have any equity, and his investors want their money back . . . and there isn’t any. It turns out he used it to buy art, boats, jewelry . . .
Now Bill is in a panic. He fires even more people, becoming nothing more than sales agent for the Chinese. He blames rapacious lenders. He blames short-sighted shareholders. He blames his employees for not doing more.
Bill goes to town hall meetings and rails at the blight of all those homeless people in the town he used to live in. He becomes apoplectic at the idea of the government stepping in to help his former employees, even though he doesn’t actually pay any taxes himself. Taking money from the government is socialism. It’s nothing but income redistribution from productive people like Bill, Bob, and George to people who should do more to help themselves. He and Dick pay themselves a bonus.
In the end, the company that Bill’s grandfather built and his father turned into a success is closed. George makes a killing on the credit default swap and even more on shorting Bob’s bank.
Dick goes to jail where he finds religion.
Bob now specializes in troubled debt and is making a fortune. Again.
Bill rediscovers his grandfather’s entrepreneurial fervor. He is now seeking stimulus money from the government he loathes and didn’t pay taxes to in order to start a new business building wind mills. He will buy parts and assemblies from the Chinese and Fins and use equipment bought from the Germans, Japanese and Chinese to do final assembly. He will get a tax credit for hiring back some of his old employees at 60% of what he used to pay them. He offers no benefits figuring that the socialist government he hates will take care of that.
The first thing he does upon receiving his stimulus money is pay himself a bonus.
The second thing he does is make a contribution to the local Tea Party. He’s mad as hell and he’s not going to take it anymore.
And so it goes.
{ 7 comments… read them below or add one }
I suffered through the Health Care debate this morning on TV. SOS. This parable may anger some but there is more truth to how many American business leaders are acting and losing respect from many of us. Actions like this do impact health care insurance. Good job Kevin. Even though parts made me cringe, I cannot argue or provide a pithy reply.
Thanks John.
Kevin, this is a fantastic parable for the problems this country is in today and the popularity of a dolt like Sarah Palin and the idiotically-named T(axed) E(nough) A(lready) party. Reminds me of the oxymoron (that’s an eight-sided idiot) someone shouted out at those infamous town hall meetings last summer, “Keep your stinking Government hands off my Medicare!”
Hey Kevin,
Just checked in on your blog and thoroughly enjoyed your parable here. I think I have not seen it said better than this
Thanks Larisa!
Your parable was funny alright. Almost as funny as watching your home state work on a budget.
Now now!