Wednesday, June 23, 2010

Creating value

Story 1:
How to sell off a dead donkey
A city boy, Kenny, moved to the country and bought a donkey from an old farmer for $100.00. The farmer agreed to deliver the donkey the next day. The next day the farmer drove up and said, "Sorry son, but I have some bad news, the donkey died last night."
Kenny replied: "Well then, just give me my money back."
The farmer said: "Can't do that. I went and spent it already."
Kenny said: "OK then, just unload the donkey.."
The farmer asked: "What ya gonna do with him?"
Kenny: "I'm going to raffle him off." (Note: To raffle is to sell a thing by lottery - draw lot - to a group of people each paying the same amount for a ticket)
Farmer: "You can't raffle off a dead donkey!"
Kenny: "Sure I can. Watch me. I just won't tell anybody he's dead."
A month later the farmer met up with Kenny and asked, "What happened with that dead donkey?" Kenny: "I raffled him off. I sold 500 tickets at two dollars apiece and made a profit of $898.00."
Farmer: "Didn't anyone complain?"
Kenny: "Just the guy who won. So I gave him back his two dollars."

Story 2:
A company has a debt of say 100 units and equity of 100. It splits up the company into 5 companies: 4 are debtless and the other takes all the debt. The one with excess debt shuts down and the other 4 companies take on more debt, do an IPO and prosper. Result: Tremendous value created for shareholders!

Moral: How many of you guys participated in things (eg:smsed to tv serials) thinking things are straight forward and were ignorant?
How come fooling people seems to be a very sustainable source of value creation?
I leave it to you to think it over...

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