Derivatives: a tradable financial product whose value depends on the value of some other asset or combination of assets).
Heidi is the proprietor of a bar in Detroit. She realizes that virtually all of her customers are unemployed alcoholics and, as such, can no longer afford to patronize her bar. To solve this problem, she comes up with a new marketing plan that allows her customers to drink now, but pay later.
Heidi keeps track of the drinks consumed on a ledger (thereby granting the customers’ loans).
Word gets around about Heidi’s “drink now, pay later” marketing strategy and, as a result, increasing numbers of customers flood into Heidi’s bar. Soon she has the largest sales volume for any bar in Detroit.
By providing her customers freedom from immediate payment demands, Heidi gets no resistance when, at regular intervals, she substantially increases her prices for wine and beer, the most consumed beverages. Consequently, Heidi’s gross sales volume increases massively.
A young and dynamic vice-president at the local bank recognizes that these customer debts constitute valuable future assets and increases Heidi’s borrowing limit. He sees no reason for any undue concern, since he has the debts of the unemployed alcoholics as collateral.
At the bank’s corporate headquarters, expert traders figure a way to make huge commissions, and transform these customer loans into DRINKBONDS. These securities then are bundled and traded on international securities markets.
Naive investors don’t really understand that the securities being sold to them as AAA secured bonds really are debts of unemployed alcoholics. Nevertheless, the bond prices continuously climb, and the securities soon become the hottest-selling items for some of the nation’s leading brokerage houses.
One day, even though the bond prices still are climbing, a risk manager at the original local bank decides that the time has come to demand payment on the debts incurred by the drinkers at Heidi’s bar. He so informs Heidi.
Heidi then demands payment from her alcoholic patrons, but being unemployed alcoholics they cannot pay back their drinking debts. Since Heidi cannot fulfill her loan obligations she is forced into bankruptcy. The bar closes and Heidi’s 11 employees lose their jobs.
Overnight, DRINKBOND prices drop by 90%. The collapsed bond asset value destroys the bank’s liquidity and prevents it from issuing new loans, thus freezing credit and economic activity in the community. The suppliers of Heidi’s bar had granted her generous payment extensions and had invested their firms’ pension funds in the BOND securities. They find they are now faced with having to write off her bad debt and with losing over 90% of the presumed value of the bonds. Her wine supplier also claims bankruptcy, closing the doors on a family business that had endured for three generations, her beer supplier is taken over by a competitor, who immediately closes the local plant and lays off 150 workers. Fortunately though, the bank, the brokerage houses and their respective executives are saved and bailed out by a multibillion dollar no-strings attached cash infusion from their cronies in government. The funds required for this bailout are obtained by new taxes levied on employed, middle-class, non-drinkers who have never been in Heidi’s bar.
Now do you understand?
According to Maslow’s hierarchy, we need food and shelter to survive. Love and self-actualisation are nice to have, but not essential. A new laptop or a motorbike for going on weekend brunches are not on the essentials list. So why do we need to buy so much unnecessary stuff? Is it a conspiracy dreamed up by world powers, in collusion with the capitalism machine? Whatever the reason, you probably don’t need as much as you do. You’ve already got three pairs of jeans that you never wear, why are you checking out another pair? Because they’re on sale? Because your favourite celeb wore the brand on Instagram? And do you need another novelty appliance that never gets used? When last did you juice something? There’s a chance that retail therapy may lead to actual therapy.
An entrepreneur is someone who makes a contribution to the world as we know it. And for this they get rewarded. Sometimes in kind, sometimes in love, and of course, sometimes in money. I know that many people in the world think that it is all about money, but I would like to challenge this view. Making a contribution to the world does not always have a number or prize attached to it. Sometimes the rewards are not things we can see.
Entrepreneurs always display the following 3 qualities: they are positive, they are curious and they are decisive. Entrepreneurs always see the glass as being half full. They want to learn, continuously. About the industry they are in. About the law. About technology. About life, people, relationships, spirituality and religion. And entrepreneurs always move ahead; even if they take 3 steps forwards and 2 steps backwards, they make decisions and they grow from them.
True entrepreneurs continually dream of doing something different. Of giving something back to society in some way. Many people miss the point in business though. The real challenge is to make a difference in the world. And if you make money doing so it simply means that your contribution was valued. Think of that old saying that the best way to receive is to give. Entrepreneurs are very giving. Of their time, their ideas, their energy, and their enthusiasm.
A woman finds Aladdin’s magic lamp.
She starts rubbing it and a Genie comes out as usual.
The woman looks at the Genie and asks him to grant her the following wishes:
– I want my husband to have eyes only for me.
– I want to be the only one in his life.
– I want that when he gets up in the morning I’m the first thing he grabs and takes me everywhere he goes.
The Genie turned the lady into an iPhone 6.