Every corporate rip-off is unfortunate in its own way but they can all teach us lessons
It’s perfectly okay to make a lot of money. Some of my best friends know people who have made a lot of money. It’s like winning a race — someone’s got to do it.
But there’s a difference between winning by running faster (whether that’s a result of natural talent or dedicated training) and coming first by cheating or breaking your opponent’s legs. Cheaters aren’t clever, they’re liars. But not everybody agrees with that.
Many incisive articles have been written about the recent collapse of Steinhoff. The quest has been to understand how it happened, to diagnose, to unravel, to explain, to provide some sort of solace, I suppose, for how everyone was swept along and off the cliff.
It may bring some closure, but it won’t bring the money back and it won ’ t prepare you for the next scheme — that ’ ll be a little different.
CAPITAL EXPORTING
There are, however, some common themes, mind-sets, root causes and lessons. The economic ones are easier to distil (with the benefit of hindsight, of course).
In Steinhoff’s case, one hypothesis might be that it was just a capital exporting scheme. The laws governing the export of capital from SA have been relaxed to the point that, for all but the top couple of percent of wealth in SA, they no longer matter. I don’t even know what the rules are anymore.
I’ve never been in favour of exchange control, but the law’s the law. Beyond the rules, though, there’s the exchange rate, which can be quite inconvenient, since it is influenced by so many factors beyond your control.
So, what could you do? Create your own exchange rate, create your own international currency. Shares are currency, shares are also a medium of exchange. Share certificates can buy real assets: factories and buildings, stuff like that.
Before you start buying you’d better get the value of your share currency up. You could just build earnings, but that takes time and everyone’s doing it. What about creating some value quickly, among a few friends? Buy and sell something to each other as often as you like, at everincreasing prices until some outsider is prepared to accept that the apparent value is real, then sell him a share.
Better still, sell shares to everyone, to the public. There are more of them and they don’t want to get left out of a good deal. A rising star attracts all egos. In a nutshell, create value privately and sell it publicly.
Now the game is on. Our local share price to foreign asset value ratio is far more appealing than the dollar-rand exchange rate, with all those pesky rules. Let’s go buy us some real assets with our homemade paper!
Once your reputation precedes you, you can precreate value in assets by simply being interested in them — useful advance knowledge. Eventually you’ll be able to “underwrite” the future success of a transaction by being on both sides of the deal, like buying a property that you are going to lease from yourself. Imagine that.
But why should everybody share in all of the spoils when you’re doing all the thinking (scheming) and putting in all the work and taking all those (selfunderwritten) risks? Surely you deserve a cut before the masses arrive to eat? You do, but you have to tell them — sharing is not the same as stealing.
At some point it’s no longer about the money, it’s just about winning, beating the game itself. The marginal utility of money is reached relatively early in the game.
The economic foundations of companies and countries are built, in the main, by hardworking, honest people, with good ideas, determination and tenacity. But there are, of course, swindlers.
Swindlers believe what they’re doing is right, absolutely and without reservation. As a result, they have no conscience, making them very difficult to catch out. There is no guilt, no weakness. What’s more, they know the rules. They need to, to get around them.
PREMATURE WEALTH
So many of these crooks are heroes in their communities, admired, if not adored and regarded as mysteriously powerful, and yet so many again are sycophants. We all know people like this, they walk freely among us. We think we’re too dumb to challenge them or we’re just too scared.
Premature, undeserved and over-obvious wealth is easy to spot, and yet we seldom question it. We’d rather just join in, even when we know it’s all just too good to be true. We’re greedy. Surely we can do better than that?
AT SOME POINT IT ’ S NO LONGER ABOUT THE MONEY, IT’S JUST ABOUT WINNING, BEATING THE GAME ITSELF