

Too small to fail - qhoxie
http://sethgodin.typepad.com/seths_blog/2008/10/too-small-to-fa.html

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qhoxie
_If you act small and think big, you are too small to fail. You won't need a
bailout because your business makes sense each and every day._

Poetry. It's what all the intelligible commentary comes down to: work within
your means but also to the extent of them; don't let it slow you down any more
than it has to.

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mixmax
This is rahter simplified. What brings large companies down is always a mix of
things that go wrong. There are external factors that come into play, and will
affect your organisation no matter how well prepared you are.

As an example one of the largest banks in my country has always acted
responsibly, never done anything without careful consideration, and not been
involved in the whole subprime mess. Yet because of external factors (in this
case bad management of other banks) their stock went down 30% in three days
and they were probably on the brink of bankruptcy.

Whether you act small or not as a large company it will not insulate you from
external factors that you have no control over. The best you can do is to have
contingency plans, which large corporations are extremely good at.

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ajm
I'm sorry but I don't understand how a responsible bank, with no subprime
holdings, can be "on the brink of bankruptcy" because their stock dropped 30%.

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eru
Who said 'because'? I only see an 'and' in the original post.

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anamax
Fine - why are they on the brink of bankrupcy? A company's stock price does
not affect the value of its assets. If folks are cashing in stock and
depositing money, that's good for a bank. (However, taking out money and
putting it elsewhere is bad.) If their competitors are unable to make loans,
that's also good.

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mixmax
Banks make money lending money to you and me. This is not necessarily money
they have themselves, but borrow on the interbank market. How much they can
borrow depends on what kind of collateral they can put up, and whether other
banks trust them to pay it back. If their stock price goes down significantly
their collateral shrinks (they are "officially" worth less and thus have less
collateral) and it becomes harder for them to borrow from other banks. This
starts a vicious circle where other banks start questioning their ability to
pay back. When the bank runs out of money (liquidity) it goes bankrupt.

Simple.. :-)

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redorb
I have been drinking his kool-aid since I read bootstrappers bible

<http://www.changethis.com/8.BootstrappersBible>

