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OK, Everybody; Let’s Play: Find The Bank!

June 12, 2023 11 Comments
One of these descriptions is how a bank is run. The other one is how a pawn shop is run. See if you can identify which is which.

Situation 1: People need to borrow money. They put up collateral against the sum they need, after a gimlet-eyed appraisal by the lender. The borrower pays a non-adjustable rate of interest on the money. There is usually a balloon payment due at the end of the term to repatriate the collateral. If the borrower defaults, the lender keeps the collateral and sells it to others more able to afford it.

The deals are essentially made between the two parties with a handshake. The lender uses his expertise, hard-won in the marketplace, and subject to the immediate loss of capital should he mis-appraise more than a handful of items in a hundred. If the lender dips into the funds he keeps on hand that allow him to supply the liquidity his customers demand, to squander on his own amusement or speculations, or if he tries to capture business that he is not prepared to handle for a short-term bump in his notoriety, or to monkey around with the short-term look of his balance sheet, he will immediately go out of business. Since his business is predicated on good relations with his customers and his neighbors in his local community, the lender strives to keep on genial terms with the public.

The lender relies on other experts from time to time, but generally relies on his own good sense. The borrower is in an equal, or superior, position to the lender in determining the value of the property he uses for collateral, as he is in possession of it already and knows its provenance. In any case, the terms of the loan are entirely straightforward and immutable and agreed upon by both parties with no proxies. The lender does not employ any strong-arm tactics to make the loan, and certainly does not need any when the borrower is in default. He simply takes over possession of the asset in a perfectly straightforward and legal process and sells the asset  if he can.

Situation 2: People need to borrow money, so they put up capriciously appraised collateral, sometimes that they don’t even fully own, and/or submit to a byzantine, arbitrary, personal appraisal of their financial affairs made by a slew of shady and disreputable third parties. Both the lender and the borrower know that the third party appraisals are akin to a farce, but neither really cares about the long-term viability of their transactions. The borrower generally has no intention of following through on the terms of the loan all the way to its end, and will try to foist his obligations or the original collateral off on another party in the interim. The lender likewise has no intention or expectation of the loan being paid off on the terms on which it was made, and may secretly desire the borrower to default on the deliberately convoluted and intricate terms so that the borrower’s obligations can be increased. Sometimes the lenders repatriate collateral from defaulted loans that they don’t even really want, by force, and then just destroy it to appease some kind of lust for destruction or as a warning to others, or more generally as part of a Minotaur-worthy tax evasion scheme.

The lender generally slips the loan into a weird, giant package of other loans, which is then sold to other, unwitting lenders under the guise of a business opportunity. These lenders who would be left with little or no recourse if (and more generally, when) the borrower defaults on his loan.

Other types of loans are made without collateral by these same lenders. They employ a capricious and sometimes draconian sliding scale of interest rates, penalties and fees, deliberately obscured from the borrower to entice them to borrow money at one rate while allowing the lender to collect the loans at a much higher, often usurious rate. If the borrower doesn’t pay, the lender begins a non-stop campaign of threats and harassment against the borrower, often hiring vicious and unscrupulous third parties to collect the debts for them, regularly using a campaign of terror that involves the destruction of the borrower’s reputation in his home, neighborhood, place of business and among a multitude of government agencies, where many unscrupulous bureaucrats are willing participants in the swindle, and often receive payments from both parties in the disputes.

The lenders are not well educated or experienced in the forces of the marketplace, and simply join breeder gangs of like-minded persons, many with bizarre initiation rituals among members of a self-selecting and homogenous elite. They are bullheaded, extravagant, and greedy, often dipping into their funds to speculate wildly in all sorts of shady enterprises, mostly using inside information, and regularly secretly betting against their public positions in the market and against their own customers. They are not afraid of a loss of capital because they are adept at skimming money from insurance scams, looting retirement funds, tax evasion, and other government swindles, counterfeiting, and when all else fails, they terrorize entire communities with the threat of taking everyone with them when they go down.

OK, take a crack at it in the comments. Which is the bank, and which is the pawn shop? But remember, no wagering! I’m not running a casino here, which is like the stock market, but with fewer gangsters.

[Note: This post was edited and updated, but legacy comments were preserved]

The 3-6-3 Rule Rules. Well, It Used To

March 13, 2023 8 Comments
[Editor’s Note: A hardy perennial. Originally offered in 2009. Still seems fairly trenchant, I’d say, if I knew what trenchant meant] 

Why did the nascent United States produce so many great thinkers? Where are they now?

Great thinkers come to the fore when they are required. The founding of any great enterprise requires inspiration coupled to intellect. If the intellect is wanting, the inspiration is usually enough, but makes it harder to carry out the fruits of your inspiration except by dogged determination. Intellect alone is not useless — it’s worse than useless. On a good day it’s counterproductive; the other 364 days it’s destructive. You cannot come up with a worthwhile concept based solely on intellect. It qualifies you only to be a clerk or a sophist. Clerking is hard work, so everybody goes full sophist right away.

Now the world is run by sophists. They think that because they read a few books about people who were great that they are great in their turn. There are two problems with this idea. One, the people they think were great probably weren’t. Secondly, most people are incapable of much more than misremembering and misunderstanding the twaddle they read anyway, because education isn’t very rigorous anymore. If you think the world’s business is decided by simply choosing wisely between John Galt and Noam Chomsky, I don’t know what to say to you. Mozart is never going to show up on American Idol.

I’ll answer the question I posed in the opening myself. The reason Hamilton and Madison et. al. sat at the same table once is that it was required just then. There was an enormous market for ideas in the rough, right away. A few years later, the time for thinking like that was over. Old Muttonhead rightly sat at the head of the table and told Jefferson and Hamilton to put a sock in it, and see if they could manage to keep the spittoons emptied in their assigned offices before they got any more bright ideas. We could use some of the Old Muttonhead approach right now.

I read the news in the most desultory fashion because it’s so useless to read twaddle filtered through incoherence and basted with a faction reduction. I hear, literally, gibberish. There is no such thing as a “toxic asset,” for instance. An asset is pass/fail. It either is, or it’s not. A banker prone to adjectives isn’t much of a banker. There’s that sophistry again. To hear a person with their hand on the levers of vital things utter such bosh indicates to me that the people that formerly put stupid back-seat-driver bright ideas in the suggestion box at their crummy jobs thrice daily are in charge of important things now.

Smart managers know the suggestion box is 99.9% for humoring cranks. The Internet is the world’s suggestion box now, with much the same role.

What possible good could it do to read a paper that refers to a capital injection into the money supply and a transfer payment to non-productive sectors referred to interchangeably as “a bailout.” It used to be only the journalist that was that ignorant. When the people the journalists are interviewing start talking like that, why listen at all?

My father was a banker. He told me the old saw about the only rule in the bank is the “3-6-3 Rule.” Borrow at 3%, lend at 6%, and play golf at three.

It was a joke and pop never played golf and he never left at three and people were always coming in to the bank to rob it and shoot the guard. You see, you don’t understand the joke. You think it means that bankers were effete and lazy and thick-headed. It really meant that the wisest of them knew that after you borrowed (judiciously) at 3% and lent (wisely) at 6% there was nothing left to do. If you kept coming up with bright ideas after that, it was all bad, brother.

Everybody’s been working overtime in banking and government coming up with new and bright ideas to torture the language and the arithmetic so they could pat themselves on the back about how much smarter they are than everybody else. Can I have my bonus billion now? I’m going to invest it with Bernie Madoff because I’m so smahhht.

You’re not captains of industry. You’re not visionaries. You’re not statesmen. You’re supposed to be clerks. I’m sorry, but clerks don’t get paid all that much — and never get a piece of the action. They don’t get statues in the park in their honor. I can read well enough to know that real clerks, honorable, hardworking clerks, are going to be taxed into the hereafter, never mind the foreseeable future, to make sure the fake clerks with delusions of grandeur don’t have to go back to the real world they fled.

It’s an honorable profession, being a clerk. I spend part of my day being one. You intellectual swells should try dabbling in it. To paraphrase Randle Patrick McMurphy: Sell big ideas someplace else; we’re all stocked up here.

I Looked Down, And There It Was (Again)

April 16, 2020 10 Comments
[Editor’s note: This was originally offered in 2007. I’m pleased that these things make a certain amount of sense even though they are not new. Authors who are famously wrong need new material all the time, I guess.]
{Author’s note: Being lazy, I tell the truth. Saves effort. Also, there is no editor.}

It’s a hoary old joke my friend tells: There’s a man of few words, in a restaurant slightly more elegant than he’s used to. The waiter brings the check, and asks, “How did you find your meal?” He answers: “I looked down, and there it was.”

Everything appears like that now, through a process so complex that no one can fully understand even a small portion of it. Persons that say they understand the machinations necessary to place the most mundane thing in front of a great many people well enough to regulate the whole affair, with an eye towards improving everything, are spouting nonsense. If a man walked up to you and confessed he didn’t know your name, but claimed he could list all the atoms in your body, would you hand him your wallet? How about your skin? All day long, I hear the groundskeepers telling me they should be the quarterback. And I can’t help noticing the grass has gone to seed, and the hash marks are crooked.

You look down, and there it is, all day long. There is a large chance that if you’re reading this, you have never participated in the actual making of anything in any meaningful way. And as the world gets more complex, we all get further and further removed from the ultimate source of all of our prosperity. How far removed? To the point where it gets obscure enough that it can be blithely strangled in its crib, on the supposition that it can be improved by infantile wishing, followed by fiat.

See the man on the sleigh, bringing the sap back to the shed to boil? He knows the tree like a brother. He knows the woods like a mother. He knows fire like a caveman. He knows commerce like a loanshark. He knows cold like a wintertime gravedigger. He knows sap like you know the alphabet. But he doesn’t have the slightest idea what you’re about, because you labor in a vineyard far removed from his. A place where the meaning of your efforts is likely always obscure, as all intellectual pursuits must be.

Remember always what you don’t know about the man on the sleigh, lest one day, you look down, and there it ain’t.

Why I Never Hire Brilliant Men

March 21, 2014 2 Comments

I have only infrequently been an employee. When I was an employee, I would always be hired as the lowest of peons, then immediately be promoted to just short of the top of the greasy pole. In the past, I’ve been the employer of a good number of people, and as a manager acting for others I have supervised many hundreds. I now work alone.

When I had a handful of men working directly for me, I was in a business that absolutely demanded that the world be altered in a concrete, demonstrable, measurable, and productive way, every day, all the time, and without exception. I employed a rather bright fellow I recall now with fondness. I didn’t employ him because he was bright, because that was mostly superfluous to the topic at hand. He was pleasant, and cooperative. He was not a lifer in the manual trades. 
One day, I gave a raft of instructions to him and all my other employees, and then left on an important business errand. When I returned, everything was either not done, or not done correctly, or an admixture of those two. I was rather heated in my reaction. In a quiet moment later, he said something to me that I found interesting, and useful. He told me that no one that worked for me was as smart as I was, and they couldn’t understand things that I took for granted, and that there was no way the work would ever come out like I wanted it to unless I did it myself, and I was wasting my time trying to make it happen.
Since I did not make this assessment myself,  I guess I can tell you about it without feeling like it’s simply rotomontade on my part. I had made a very bad mistake, and had hired a brilliant person to run my affairs, which is a very big mistake indeed. To hire a brilliant person to run your affairs marks a man as none too bright, if you ask me. It makes no nevermind that the brilliant person was me. 
I do not employ a brilliant person in this capacity any longer. If he gets up to anything brilliant-sounding, I tell him to put a sock in it, and sand another tabletop, because that’s what needs doing.

But that’s old advice, of course. Here it is, from 1924:

 Why I Never Hire Brilliant Men
by: Unknown

SITTING in my office last week, facing the man whom I had just fired,
I thought of the contrast between that interview and our first one,
nearly two years ago! Then he did almost all the talking, while I
listened with eager interest. Last week it was I who talked, while he
sulked like a petulant child.

“Your contract has sixteen months to run,” I said. “My proposition is
that we cancel it at once, and that I hand you this check for ten
thousand dollars.”
With a show of bravado he waved the check aside. He would hold me to
the letter of the contract if it were the last thing he ever did.
I told him he had that privilege, but I was sure he would see the futility of exercising it.
“Let me review the situation for a moment,” I continued: “You came to
us as general sales manager on January 1st, 1922, at a salary of
twenty-five thousand dollars. It was by far the largest salary we had
ever paid in any executive position; but your record seemed to justify
it.
“The letters you brought spoke in the highest terms of your sales
genius. The only question which they did not answer to my satisfaction
was why companies which had valued you so highly should ever have
allowed you to get away! When I voiced this, you stated that they merely
had been outbid by their competitors — and I accepted your statement.
It wasn’t until you had been here a year that I learned the truth. You
are a quick starter, but a poor finisher — no finisher at all, in
fact.”

(more…)

Welcome To The New Admixture Economy

January 31, 2014 7 Comments

Do you work in the new Admixture Economy?

If you don’t, but feel you’re missing out on something, don’t worry; you’ll be laid off or fired or downsized or rightsized or smartsized or bought out or furloughed or spun off or phased out or involuntarily attritted fairly soon. You’ll be Bangalored, good and hard, and end up out here with the rest of us trying to cut and paste a living out of the remains of the day. The day after the severance runs out, I mean. 

I don’t think anyone’s inventing anything much lately. Not in any meaningful way. I see everyone fumbling around with the most misnamed thing in the history of the universe, the smartphone, and they’re busy as beavers with a loose tooth, apping this and texting that, and they’re looking at me with my flip phone thinking I’m L7, man. They think I’m L7, man, just for using the term L7, I imagine, or the term, “man” too, so their opinion of me is going way downhill, and fast. But I had a Palm Pilot fifteen years ago. I’ve seen it all before, kids. You’re not doing anything I wasn’t, except paying by the minute instead of all at once at the beginning.

In my heart I knew my Palm Pilot couldn’t do anything a geezer’s battered daytimer and a pencil couldn’t do — except run out of batteries. A variation on a theme isn’t an invention. But variation is all that matters now. Google’s just the Yellow Pages, with those nasty ads from the back page of the indie newspaper thrown in. Craigslist is just the classifieds.  Facebook is just a dry-erase clipboard on some college girl’s dorm room door, writ large, and with about as many emoticons. Come on, if you don’t remember hearts over the “i”s and little kitties in the margins on the ” I’ve gone to the mixer” message on her door, you haven’t lived.

Look at that video. Some nameless guys with pocket protectors and slide rules made everything in that video possible. And not the geeks pictured on TV in The IT Crowd, either. No, it was IBM types in the seventies, and NASA dorks from the sixties. People that look like Milton on Office Space, not cool kids like Peter Gibbons. Of course they had to understand real world engineering with profit and loss thrown in along with the slide rule stuff. They had frumpy wives and 2.3 kids and a dog to kick at home, too. They didn’t have time to dress their dog like Boba Fett. They had to shovel the walk before they went out on Rt. 128 and made it to the office park early anyway. They made all this stuff so that avaricious punks in hoodies could pick it up off the desk and Rubik it into a fortune.

Some people come along, and they see these disparate things, and think they can cobble them into a working whole. So your phone has maps in it, because there’s this satellite made by who knows who, circling the earth, doing not much, and they can glom onto it and mash things up and make some money for doing nothing but seeing possibilities in joining things Then they crank up the cognitive dissonance and use their phone to get online and slag Henry Ford in some off-topic Guardian comment section because he didn’t invent the assembly line, you know. And Bill Gates? Don’t get me started.

Everyone hates the circus all of a sudden, so people start skateboarding and biking and just plain running and tumbling, and a little digital camera makes YouTube into the circus. It’s still the circus, even if the only animals you tease are hominids with tatts. And a tiny digital camera, slung on a remote control drone, and mashed up with music and posted on the Internet to cadge advertising without paying in order to sell the whole mess, is an Admixture Deluxe, my friends.

I make furniture. People think my occupation is making furniture, but it isn’t. I’m not sure what I’m doing, exactly, but making furniture isn’t a quarter of it. The most interesting part of what I’m doing might be packaging, or selling what I have without ever advertising, or something else I’m doing that doesn’t even register with me right now. I mashed all sorts of possibilities together, and I’m trying to make a go of it in the new Admixture Economy. A wise man said he could see so far because he stood on the shoulders of giants. I’m looking into the navel of prosperity right now, because I stand on the shoulders of midgets, but maybe I’ll be able to add the admixture of  human growth hormone into my midget’s affairs and fix that someday soon. You never know.  But I do know that there’s very few places to hide from the Admixture Economy anymore anyway. I’m glad I’m in on the bottom floor, even if it is flooded and moldy a bit, and the light over the stairs went out five minutes after I went down there.

I hope I do half as well as whoever thought to put that turquoise bathing suit on that very tanned woman at the beginning of the video, because that is some admixture, I’ll tell you what.

Tag: business

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sippicancottage

A Man Who Has Nothing In Particular To Recommend Him Discusses All Sorts of Subjects at Random as Though He Knew Everything.

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