“People whom fate and their sin-mistakes have placed in a certain position, however false that position may be, form a view of life in general which makes their position seem good and admissible. . . . This surprises us when the persons concerned are thieves bragging about their dexterity, prostitutes vaunting their depravity, or murders boasting of their cruelty. But it surprises us only because the circle, the atmosphere, in which these people live, is limited, and chiefly because we are outside it. Can we not observe the same phenomenon when the rich boast of their wealth-robbery, when commanders of armies pride themselves on their victories-murder, and when those in high places vaunt their power-violence? That we do not see the perversion in the views of life held by these people, is only because the circle formed by them is larger and we ourselves belong to it.” (Resurrection, Leo Tolstoy, trans. Louise Maude)

New Readers:

Please start reading with my first post "A Cup of Coffee". Originally posted on March 19, the archival date changed when I made corrections on May 13, which is the date under which you can find it now.

I'll learn to manage this all more smoothly someday, but at present I have at most only an hour online each day (that thanks to the San Francisco Public Library system, without which I would be lost).

Tuesday, November 4, 2014

The Law and The Profits

Rules of Life #4 :  Willingness to Break the Law is both a Tactical and a Strategic Advantage

Anyone who has courted investors, whether raising capital to start a new venture or soliciting investment in an ongoing enterprise knows that one of the most fundamental considerations as to the value of a business is whether there are "Barriers to Entry" which will effectively prevent or at least limit competition.

The shibboleth of the law is such a barrier.  For example, no business could be easier than selling illegal drugs.  Buyers will seek out the seller, pay any price, and return  again and again no matter what the quality of the product.  No advertising, no promotional effort, and no quality control are necessary.  The only thing that allows the seller to command high mark-ups, often in excess of 100% to 150%, the only thing limiting competition, that is, is the law.  Most people are too afraid of the consequences of getting caught to follow such a career.  Those too timid to break the law can only sit on the sidelines and watch with envy as the courageous rake in fortunes without any serious effort or skill.

Similarly, anyone with a two-bit piece of software developed for a smart phone can take on an entire existing industry which is itself bound by laws and regulatory bodies, capture their business, ruin them, and condemn their workforce to unemployment:  governments, whether municipal, state, or federal, refuse to enforce the law against new companies that use mobile phones connected to the internet to effect transactions formerly effected in person, by correspondence, or by telephone.  Shortly after I began my career as a stockbroker in Manhattan, businesses began using a new technology, "fax machines" to send documents over telephone lines, rather than sending them physically through the mail.  For a while we were forbidden to accept a fax in lieu of a signed document; then we could accept a fax and act on it as long as we were assured that an original was to follow by mail immediately.  Finally laws were amended to allow us to accept a faxed document as if it were an original.

Such coy legalities are ancient history now.  New companies blithely violate all manner of laws and are allowed to proceed by acquiescence on the part of government.  Today I heard on the BBC an interview with a man who has started a business transferring funds among countries all over the world, completely circumventing existing financial institutions by charging money against one mobile phone and crediting it to another.  If you thought the "mortgage meltdown" of 2008 brought the international banking system close to catastrophic failure, wait until money moves freely around the world without paying any fees.

No business or industry is immune to this threat of outlaw internet raiders.  It began, so far as I know, a couple of decades ago when Napster destroyed the recording industry.  How quaint that its founder had to face trial and eventually punishment for violating copyright and other rights belonging to an artist.  Nowadays piracy, theft, corruption, and all manner of lawlessness are de rigueur for any young entrepreneur.

Don't be a sap:  if you want to succeed, turn to crime.   After all, why be a man when you can be a success?*

After all, with enough money, you can easily get away with murder -- just ask O.J.

*  I have seen this rhetorical question attributed to Bertold Brecht, but cannot cite a specific source.  Note that the word for man in German is "mensch" and that it denotes not just a gender but a noble sense of righteousness and honor as well.  That sense, though largely lost from the English word, survives in such phrases as "be a man about it" or more currently, "Man up!"