Phajja is the proprietor of a Siri-Paya and Nehari Shop in Lahore . Sales are low and, in order to increase them, he comes up with a plan to allow his customers to eat now and pay later. He keeps track of the meals consumed on a ledger.
Word gets around and as a result increasing numbers of customers flock to Phajja’s shop. Phajja’s suppliers are delighted and are very willing to sell more and more raw materials for the meals he prepares. Phajja shows them his ledger of receivables and they extend him credit.
A young and dynamic customer service consultant at the local bank recognizes these customer debts as valuable future assets and gives Phajja a credit line and then increases Pajja’s borrowing limit.
Taking advantage of his customers’ freedom from immediate payment constraints, Pajja jacks up the prices of his Nehari and Siri-Paye. Customers don’t mind as they are not required to pay on the spot. Sales volume increases massively; Banks and suppliers lend more; Phajja opens more outlets. He sees no reason for undue concern since he has the debts of the customers as collateral.
At the bank’s corporate headquarters, expert bankers recognize Pajja’s customer loans as assets and transform these customer assets into BONDS. These negotiable instruments are given exotic names such as SIRIBOND, PAYABOND, MAGHAZBOND AND BONGBOND. These securities are then listed on the Stock Exchange and traded on markets worldwide. No one really understands what the names mean and how the securities are guaranteed but, nevertheless, as their prices continuously climb, the securities become top-selling items.
One day, although the prices are still climbing, a credit risk manager of the bank decides that the time has come to demand payment of one of the debts incurred by Phajja. Phajja in turn asks his clients to pay up. One by one they refuse; the clients cannot pay back the debts. Phajja refuses to serve them any more. The clients stop coming.
Phajja is really screwed now. He cannot fulfill his loan obligations and therefore claims bankruptcy. All Bonds drop in price by between 80 to 95%.
The suppliers of Phajja, having granted generous payment due dates and having invested in the securities are faced with similar problems. The meat supplier defaults on payment to the sheep and cattle supplier and claims bankruptcy. The atta supplier is taken over by a competitor; Phajja lays off the cook and staff. Bankruptcies soar, unemployment mushrooms.
The bank that lent the money in the first place is set to collapse. It is saved by the Government following dramatic round-the-clock consultations by leaders from the governing political parties with Phajja commuting back and forth in his Executive jet and Mercedes 500SEL, brokering the deal.
The funds required to save the economic collapse are obtained by a tax levied on the citizens, most of whom do not eat Nehari or Siri-paye.
UNDERSTAND?
I do not know who to credit for this story, got this as a forwarded email. So whoever’s written this piece a great one.
An article in the NY times made me think. Why did so many business leaders fail? What was the reason for a systemic failure?
Most wall streeters are b schoolers, that’s what research says, 40% of BA’s go to wall street. Now did their foundation got set wrong that they all made the same kinda decisions which brought the economy down or was it plain greed?
Its your call, you decide.
The mother of all inventions is not first time ideas, part of it is also reinvention.
Do you think the iPod was invented, wrong – mp3 players existed. Apple took the idea created something everyone fell in love with. Do you think touch screen phones did not exist, wrong – the first touchscreens were PocketPC by Microsoft and the Palm Treo. So here we go, these were ideas which existed and then got redone and repackaged.
So for all those who are thinking of an idea, then figure out it already exists – don’t lose hope, improve upon the existing product/service and your idea would be the next goto thing.
The big banks have gone bust. They borrow money from the FEDS(our money) and are running their business.
Situation arrives we need money, we go to the bank for a loan, bank denies loan? Hello our money and you have the #@*$ to dictate.
This sounds weird, but after getting so much bail out money to help people like us, the banks have made getting loans tougher. The minimum criteria for loans are outrageous. So how is this stimulus and all others going to help us? I am looking for the answer, so are millions of other people like us.
Wait and watch. The shocker to me today is Sears closing down stores!!!! What is going on?
A wall street journal article today, “money managers lived large on fraud”, is this news, the world knows who is to be blamed, wake up…
For all those futureman’s – great job guys, we will always have the nuts in the mix. I do not know who to give credit for this picture, was pulled from a tinypic url.
Always start with one investor, make an impression. Try out all that you have up your sleeve in your pitch. Any defects you have on this pitch will immediately be seen and reflected by the investor. From here on, improve your pitch defects and start your presentations to other investors.
Going a startup all alone, get ready for an uphill task. Investors stay away from one man team shows. So a good team wins, that’s what it is
You invest all your hard earned savings money, all you home’s equity and you put it into your startup. Sounds perfectly sane, well risky too, but why not…. Are you not trying to do what you want to do.
Here’s another sign, you like to multiply rather than add. More to come
Tags: Entrepreneur, ideas, investment, pitch
