February 9, 2015
Black Swan event(s) can happen simultaneously, be compounded, and quickly result in a negative (less than $0 value) to your personal net worth.
Franchising is unique in that the rational small business person will continue to throw good money after bad (sunk costs).
The Risk profile has changed.
3G Capital takeover x threatened/actual CCAA x gross margin erosion x organized labour x Fightfor15.org x equity appropriation x personal guaranteed = degradation to a negative gross margin business?
Nassim Taleb‘s Thanksgiving Day Turkey analogy:
Consider a turkey that is fed every day,” Taleb writes. “Every single feeding will firm up the bird’s belief that it is the general rule of life to be fed every day by friendly members of the human race ‘looking out for its best interests,’ as a politician would say.
“On the afternoon of the Wednesday before Thanksgiving, something unexpected will happen to the turkey. It will incur a revision of belief.”
Consider that the turkey’s experience may have, rather than no value, a negative value. It learned from observation, as we are all advised to do (hey, after all, this is what is believed to be the scientific method). Its confidence increased as the number of friendly feedings grew, and it felt increasingly safe even though the slaughter was more and more imminent. Consider that the feeling of safety reached its maximum when the risk was at the highest!
February 3, 2009
Interesting post from James Saft’s Reuters blog.
Saft interviewed Nissam Nicholas Taleb, author of the Black Swan at the World Economic Forum in Davos, Switzerland.
Taleb wants banks nationalized and forced to become a zero risk utility. He argues that they should never be allowed again to take the risks they took that resulted in the current economic crisis:
“They rigged the game. We pay them for their profits, there is no clawback so their incentive is to hide the risk they are taking.”
“Which is why eventually as someone who loves free markets, a total nationalisation of the part of the business that requires insurance and does clearing and payments needs to happen.”
“I am angry with U.S. policy. What we had is exactly the opposite of socialism, they got TARP to pay their bonuses and to take more risk.”
And he goes further. He wants banking executives [see Robert Rubin above] to give the bonuses back that they stripped out just as their banks tanked.
…he wants Bob Rubin, who trousered millions while chairman of Citigroup, to cough up.
“I want Bob Rubin to return his $110 million dollars to the American taxpayer.”
Taleb insists (Facebook: Make Bankers Accountable- A “J’accuse”) that capitalism must produce pain but the powerful should not be exempt from the outcomes of their behaviours.
December 8, 2008
That is a legitimate concern of all within the franchise bar.
- It carries with it some troublesome class and cash flow implications.
A franchisor normally requires only two things from a franchisee:
- fog a mirror and
- sign a cheque.
The franchise bar has a higher standard for the half-baked franchise shlemiel – (Yiddish: a dolt who is a habitual bungler) must have the minimum cognitive ability and requisite cultural background to recognize a superior human being when they are in his presence.
- …ahh. That would be the guy with the most letters after his name is smarter.
- And that by being smarter, they are interested in you independently of ability to fund their services.
A few observations:
1. Could it be that our whole society is becoming dumber? The way I quote Wikipedia may tip the balance on that.
2. Or maybe it’s only that only the less intelligent are becoming franchises these days (watering down the soup). That would suggest a mean intelligence drop. This seems to be confirmed by franchisors whining about not getting high-quality franchise candidates.
- Correct me if I’m wrong but that would make for smarter non -franchised business owners and employees, wouldn’t it? Not a terrible idea.
3. Or it could be that only the stupidest franchisees are self-selecting NOT to even bother to show up to a franchise lawyer’s office. Once made wise to the scam they drop out entirely or hook up with a savvy, experienced regional commercial lawyers.
This would be reflected in a sampling error on the part of the, “Let’s-impress-by-insulting the class of investors I-appear-to-defend” type of Wolf-in-Sheep’s Clothing franchise lawyer.
- the word-on-the-street is that the franchise law game is fixed and
- by definition, only the most moronic and pathetically delusional even grace a franchise lawyer’s office these days.
4. Could it that franchise lawyers and franchisors are being viewed as two heads on the same body? Franchisors have long behaved as if the maxim There’s a sucker born every minute as an industry maxim.
- Could rapid and cheap digital information sharing allow any loser Black Swan to pee into franchising’s international pool?
Could a Big Idea such as All franchises are toast travel from obscurity to franchisee conventional wisdom in the blink of an eye because we were 90% of the way to The Tipping Point?
- Naw…this internet, the tireless The Great Copier of Information in the Sky thing is just a fad.
Corn can’t expect justice from a court composed of chickens. African proverb