Subject: Re: ...and even for those _NOT_ interested...
From: Erik Naggum <>
Date: Fri, 18 May 2001 18:37:20 GMT
Newsgroups: comp.lang.lisp
Message-ID: <>

* Tim Bradshaw <>
> If a company acquires some asset, then they have to fund the cost of that
> asset.  If they borrow money to do so, then they need to service the
> debt, and that can influence what they charge for things.

  Whether you borrow from your own war chest or an external lender, you
  still have to ensure that the money is profitable.  Money is a perishable
  good and very quickly deteriorates in value if left alone.  (Thanks in
  part to the very strong drive by governments everywhere to keep the money
  in circulation and productive through money supply manipulation, interest
  rates from the central bank or other lender of last resort, and taxation
  alike.)  If you borrow from your other assets, you also limit your
  ability to do other things with the same money, and there is the risk of
  loss that is actually much more pronounced if you use your own money.
  This is why it is made profitable by our governments to be in debt, which
  ironically makes it more expensive to be in debt than if it were more
  profitable and a lot easier to build and keep a fortune, but I digress.

> However once the debt is paid they don't need to service it any more, so
> things are quite different - they need to fund the cost of maintaining
> and developing the asset, but not the acquisition cost.

  This is superficially true, but nobody ever has money enough to do all
  that they want, so in order to ensure that you can take risks and have
  some of your acquisitions fail, you need to ensure that you recover a lot
  more from the profitable acquisitions than just its own cost.  The whole
  system of limited liability means that failure is inexpensive and success
  needs to pay for far more than it would if failure was more expensive, in
  the hopes that a few huge successes actually can pay for several failures.

> This is a kind of inverse sunk-cost thing - in both cases the trick is to
> only look forward and not consider the history (so don't consider
> paid-off debts but do consider non-paid-off ones).

  This is a good way to look at it if you do not plan to make acquisitions
  later.  There is never _enough_ money to do all you want, and there is
  never enough available people to do it with.  The more money you can make
  circulate profitably, the more you can do.  In other words, you are
  making sure that you pay less for future acquisitions if you consider the
  need some time in the future to borrow from yourself.  The serviceability
  requirement does not change appreciably whether you have borrowed them
  from someone or own them yourself.

> There's a second related point which is how much you should pay to buy an
> asset from a bankrupt company, which influences what you then have to
> charge.  If you think the asset is worth having then you should expect to
> pay for it: if you get it for free, then the receiver isn't doing their
> job right, and is ripping off the creditors & shareholders of the
> bankrupt company.  So it should not be the case that a company which gets
> assets from a bankrupt company gets them for free, unless those assets
> are worthless.

  Not quite true.  Goods are worth only what others are willing and able to
  pay for them at the time of the offer.  If someone went bankrupt with a
  certain asset, few lenders will give you a lot of money to acquire it, so
  the assets of bankrupt companies are often acquired by entitites with
  available (spare) money.  There are also anti-trust regulations to take
  into account.  If the sole surviving competitor buys the remains of its
  competition, the government will be on your tail and will "encourage" the
  asset to be sold to a less able buyer, all in the interest of keeping the
  "competition" and "market" working, i.e., avoiding "monopoly".  As a
  result, you get a _lot_ less for the assets of a bankrupt company than
  you would have if it were sold off while the company had proved viable.
  Finance being much about trust and psychology, failures also tend to
  raise questions about future viability of all components, no matter how
  complex the relationships that caused the failure.  Not to mention the
  fact that the government is the most aggressive killer in the market, and
  that a company can go bankrupt for relatively minor tax transgressions
  that had nothing to do with the viability of its products or management.

  Travel is a meat thing.