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Editorial: Follow the money

January 1, 2005

4 Min Read
Editorial: Follow the money

MSnyder.jpgUnder an important U.S. Constitutional doctrine, we are all presumed innocent until proven guilty if charged with a crime. Hence the notorious gangster Al Capone remained innocent, in the eyes of the law, for his entire lifetime (1899-1947), of all kinds of murder, mayhem, and racketeering. He was found guilty of contempt of court, and of a weapons-possession charge, but neither sentence amounted to much.

There was no question of his involvement in criminal escapades, but Capone was a clever man, and the government could never get the evidence together to convict him of those in a court of law. Until, that is, they went after the money. Capone became rich but slipped up when it came to paying taxes. Prosecutors put together enough of a paper trail to convict Capone of tax evasion. That put him away for an 11-year sentence, some of which was served in the notorious Alcatraz.

In one of the ironies of our criminal justice system, Capone walked out, a free man, with time off for good behavior, after he served little more than half of his jail sentence. He couldn?t escape, however, the sentence of syphilis, which ruined the latter part of his life. So much for Al Capone. The principle remains: Follow the money.

There are plenty of money stories in the plastics industry. The following tales are true, to the best of my recollection. The stories are not about crimes?not that I know of, anyway?just stories in which money is pivotal.

Early in my career in plastics publishing a company president told me that he had a surefire way of getting paid for his equipment. He claimed to have surreptitiously installed a remote-control switch in his equipment. If payment was not forthcoming in the agreed upon period of time, he would drive up in front of the buyer?s facility, flip a switch, and Voila! The equipment would quit working. I have never figured out to this day whether he was telling the truth or just feeding me a line. In either case he was focusing on the money, which I suppose amounted to a few thousand dollars.

In another tale, a company president fumed that a patent on his equipment gave away the technology he was trying to protect, and gave him the dubious privilege of spending a quarter million dollars to defend the patent.

We?re starting to talk serious money here.

The third story occurred at an industry event where I was having a congenial conversion with yet another company president. (Company presidents apparently maintain a strong focus on money.) He was approached by a potential customer about building an equipment system that would cost something on the order of a half million dollars or more. No specific figure was named. Ordinarily I would have cleared out and let him deal with his customer without a member of the press listening in, but he indicated I should stay.

The conversation was a lot shorter than I expected. The builder told the erstwhile customer that the last time he dealt with them he lost $400,000. Believe me, I didn?t know what was going to happen next. The would-be customer tried explaining, ?That was a complicated situation. . .? Not to the builder it wasn?t. He repeated the statement about losing $400,000, and the proposed customer left. The builder then resumed his conversation with me.

I was stunned, but he wasn?t. He knew how to follow the money. A track record of failure to pay, and you don?t build the system. Seems simple enough. I just hadn?t witnessed it close-up before. But those are stories of other people following the money, each in their own setting. What should the rest of us be doing to follow the money these days? A few recommendations follow.

Things to Monitor

  • The U.S. dollar. The dollar has caved in as of this writing with respect to the Euro and other world currencies. This does more for or against the plastics industry, depending on your role, than any potential legislation will do. No U.S. president can go about overtly supporting a ?weak? dollar, but the current president has made it clear by his behavior that he intends to support a weak dollar by default.

  • The Chinese yuan. The yuan is also sometimes referred to as the renminbi, meaning the currency of the people. The Chinese are indicating that they might be ready to let the yuan float, or at least to modify its exchange value, which for years has been pegged to the dollar at a figure many believe to be unrealistic.

  • Interest rates. In the twinkling of an eye, the ubiquitous Alan Greenspan and his Federal Reserve Board can change the context that our economy operates in by changing interest rates.

  • World Trade Organization threats and actions. In addition to its direct effects, the distribution of fine money according to the ?Byrd Amendment? can make a dent here and there.

  • Commodity prices. The price of oil, natural gas, coal, steel, jet fuel, auto fuel, and even water and other commodities all affect the plastics industry.Whichever specifics are most important to your business, remember this principle: To understand a situation, follow the money.

    Snyder-Signature.jpgMerle R. SnyderEditor

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