How to make a fortune by running your business into the ground
Bill Bonner

 

In today's Daily Reckoning we bring you not one, but two ways to make a lot of money. Of course, a lot of people are ready to tell you how to make money by running a successful business. Only we dare to tell you, dear reader, how to make a fortune by running an unsuccessful one.

Among the many sordid features of America's late, degenerate capitalism is a tendency to overpay corporate executives. Top business leaders have become like sports heroes without the talent. You need not have any real knowledge of the business you are getting into...or, as Bernie Ebbers demonstrated, any real knowledge about business of any sort. So immediately, you see, we are all perfectly qualified.

Human life - apart from the obvious physical parts - is largely about "impression management." A man with a good line of talk and a confident air about him can get almost anything he wants - including the CEO job at a major U.S. corporation. Psychologists have done studies. A man who is confident beyond his merits is much more likely to succeed than one with modesty as befits his ability. The modest man is, of course, the better choice - his modesty is usually based on reasonably accurate views of his skills and the challenges he faces. The immodest bluffer, on the other hand, is a fool and a menace. He misjudges the situation in front of him and imagines himself the master of it. But shareholders (as well as voters) have no real way of knowing who will make the best leader, so they actually tend to prefer the tall, confident, and incompetent. If you are not tall, dear reader, do not worry. Sometimes, they will take a short, confident, and incompetent manager, if they have to.

So you see, we practically have the CEO's post already. But then, you may worry, what if the company doesn't do well? Again, recent history shows us that you can fail miserably in corporate America and still make a lot of money.

Carly Simon got $42 million from Hewlett-Packard. Scott Livengood gets $46,000 per month consulting for Krispy Kreme, the company he glazed with losses. Franklin Raines got booted out of Fannie Mae but still gets $114,000 per month in pension benefits. Harry Stonecipher gets $600,000 a year after fooling around on the job. GM's Rick Wagoner got a pay hike, to $2.2 million, while guiding the company to its biggest loss in a decade.

No matter what you do, apparently, the money keeps coming. Loren Steffy in the Houston Chronicle reports:

" Executive bonuses at 100 big companies rose by more than 46 percent last year, to an average of more than $1 million, according to a study by Mercer Human Resource Consulting cited in the Washington Post.

" Or consider another study, by professors at Harvard and Cornell, that found executive pay at companies in the Standard & Poor's 500 Index almost tripled in a decade, to an average of $10.3 million in 2002. Between 1998 and 2002, it accounted for 10 percent of aggregate corporate profit, the Post reported."

There you have it, dear reader: get a good job, based on your good looks and sparkling personality. The money will come to you.

But we promised two ways to make a lot of money. The other is almost easier. Stock market players love a good scam. After they've lost a lot of money, they practically can't wait until the next one comes along. In the 1960's boom it was anything with "onics" in the title. We have no examples at our fingertips, but take our word for it. If you added "onics" to your company name, you were almost sure to be a rich man the next day.

Then, in the boom of the '90s the magic syllables were dot com. Here, so many examples come to mind -it is like trying to select the dumbest member of Congress, we wouldn't know where to start. So, we move on to the latest craze - "nano." These tiny, tiny things, whatever they are, can make you a lot of money. In fact, they are perfect for it. All you do is start a nano company and take it public. No one will ask to see your product - it would be far too small to see, anyway. No one will have any clue what you are talking about; but that is the beauty of it. You can talk as much nonsense as a corporate CEO; no one will know the difference.
The Street.com reports:

"On Tuesday, NVE issued a press release announcing the issuance of a patent titled 'Magnetic Field Sensor With Augmented Magnetoresistive Sensing Layer.' Rarely has such technical jargon inspired so much arousal. NVE's stock rocketed as much as 21% on the announcement, with 1.7 million shares traded during the day. Not bad for a company with an $80 million market cap.

"NVE makes sensors and couplers based on what it terms spintronics, which it defines as 'a nanotechnology which utilizes electron spin rather than electron charge' in managing digital information. Some of its $12 million in revenue last year came from licensing its technology, but the bulk came from research contracts. In the marketplace, the jury is still out on whether NVE's spintronics will start any revolutions. Yet each approved patent triggers a trading frenzy in the stock."

You can always tell when a market has entered a silly, bubble phase. Stock promoters abandon other hustles to get into it. That has already happened in the nano area. Altair used to be in the business of looking for gold, says TheStreet.com report. In 2002, it must have gotten tired of dirt. It added "nanotechnologies" to its name. Since then, the stock left the earth altogether. It has revenues of only $1 million...and losses of $7 million... but the rubes and lumps still buy the stock every time it makes another patent application. According to the stock market, the company is worth $214 million today.

Here, dear reader, you have the best get-rich-quick scheme in today's world, combining both of today's suggestions: Start a business with nano in the name. Make yourself the CEO and run it badly. How hard can that be?

Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter publishing companies, and the author of the free daily e-mail The Daily Reckoning.

Bill's passion for international travel and big ideas are reflected in the company he's successfully built. In 1979, he began publishing International Living and Hulbert's Financial Digest. Since then, Agora has grown to include dozens of newsletters focusing on finance, health and travel. Since the early '90s Bill has vigorously expanded from Agora's home base in Baltimore, opening offices in London, Paris, Bonn, Waterford, Ireland and Johannesburg, South Africa.

Agora's publication subsidiaries include Pickering & Chatto, a prestigious academic press in London and Les Belles Lettres in Paris, best known as a publisher of classical literature.
Mr. Bonner is the author, with Addison Wiggin, of the New York Times Business best seller Financial Reckoning Day: Surviving The Soft Depression of The 21st Century (John Wiley & Sons New York, London).