It wents as follows:
"It is raining, and the little town looks totally deserted. It is tough times, everybody is in debt, and everybody lives on credit. Suddenly, a rich tourist comes to town. He enters the only hotel, lays a 100 Euro note on the reception counter, and goes to inspect the rooms upstairs in order to choose one. The hotel proprietor takes the 100 Euro note and runs to pay his debt to the butcher. The butcher takes the 100 Euro note, and runs to pay his debt to the pig grower. The pig grower takes the 100 Euro note, and runs to pay his debt to the supplier of his feed and fuel. The supplier of feed and fuel takes the 100 Euro note and runs to pay his debt to the town's prostitute that in these hard times, gave her "services" on credit. The hooker runs to the hotel, and pays off her debt with the 100 Euro note to the hotel proprietor to pay for the rooms that she rented when she brought her clients there. The hotel proprietor then lays the 100 Euro note back on the counter so that the rich tourist will not suspect anything. At that moment, the tourist comes down after inspecting the rooms, and takes his 100 Euro note, after saying that he did not like any of the rooms, and leaves town. No one earned anything. However, the whole town is now without debt, and looks to the future with a lot of optimism. And that, ladies and gentlemen, is how the
I had an internal meeting at 13h00 and decided to share this story with my meeting and as I was reading, I appreciated its profound message even more so.
It is a reminder of how financial markets actually work. It reminded me of the sub-prime property bond models that spiralled into a financial markets disaster, a drying up of liquidity, an unprecedented credit crunch and, along with other factors, it all snowballed into what we experienced (and some may argue, still experience) as the Global Economic Crisis.
It is a timely reminder that in all the business models we hang our hats on, no matter how clever and 'cutting edge' it may seem, there are business fundamentals that remain a constant. If these business fundamentals are absent, it eventually shows.
You cannot argue that everyone in the story RECEIVED cash. You can even argue that everyone EARNED their 100 Euro note based on the services they provided prior to receiving payment and best of all, everyone used the cash to settle debt!
In 20 transactions that we come accross, we generally pursue 1. Very often we are on the receiving end of criticisim that we walk away from "great opportunities" because we are "far too commercial". It is somewhat ironic that some expect an investment firm NOT to be commercial in its investment decisions. You see, whether its time or money both are capital and one must be 'always commercial, seldom emotional' about deploying their capital.
If it doesnt make sense, its probably not worth pursuing.....not matter WHO is selling it.
Stay with the fundamentals.