2002-02-11 - 10:30 a.m.

When did I lose faith in the financial experts? Granted, I didn’t always understand everything that was going on in the stock market, but I never thought that crooks could get away with wholesale dishonesty. Until now.

In addition to my work experience, I’ve taken background courses on finance in relation to my business education. But a large part of my understanding of business and management comes from a little novel published in the mid-80’s, called The Goal.

According to that book, the goal of any for-profit company, large or small, is to make money and to continue to do so. Any other objective of the company always comes down to that, whether it is for the benefit of the employees, the customers, or the shareholders.

There will always be people who don’t see the overall picture, people who perceive their own personal agendas as more important than the company as a whole. I’ve worked in organizations where people gave only lip service to the goal. Nevertheless, selling products or services remains the ultimate purpose of the company.

That is, until you start trading on the stock market. That’s where the doctrines of The Goal start to disintegrate. In that setting, what’s most important is not being profitable, but the appearance of being profitable. You can play with the numbers – ask any accountant – and make the company look good. Sell off the assets until it looks as if the company made huge profits during the year. Dismiss employees and your costs go down; by the time your customers leave in disgust, it will be a different quarter. With a little luck you will have sold your shares by then – at a huge profit.

Meanwhile, novices and experienced financiers were trading on the market like there’s no tomorrow. The Dow-Jones average climbed until the numbers were absolutely meaningless. When one company failed to meet its projections, everyone was trying to sell off the shares, and the market started its descent. Why is everyone selling? The company is still making a profit; it’s just not as big as was anticipated.

Who made the projections? And why? Was it someone who wanted to sell his shares? Oh, no, you say, I’d never put all my confidence in someone within the company itself. The analysts said…

The analysts? Who are they? Who pays them? Every time those stocks changed hands, someone somewhere made a commission. Can you make a better commission if you help the company look more profitable than it really is? You tell me; I don’t know.

I’ve dealt with enough liars in the past few years to know better than to trust anyone completely. Would I have been smart enough not to believe that Enron was okay, that it was perfectly all right to have shares you couldn’t sell? I don’t know; I always tended to have a lot of loyalty to whomever employed me. But I certainly wouldn't have it any more.

Sometimes I’m glad I don’t know anything about all this.

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Pretty Clever, Huh? - 2008-12-08
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