Wed
Sep 17 2008
08:55 am

I had this odd experience the other day. A gentleman sets an appointment to meet with me in my small business and make a presentation about his company can provide a no-obligation evaluation and present proposals for reducing taxes, streamlining the sales process, helping with business development and acquisitions, etc. Sounds good, right?

After he left, I googled his company and found dozens of "this is a scam" related sites. It appears their method is to get in the door, get you to sign a contract, and then bill a small business for tens or hundreds of thousands of dollars of worthless services provided by inexperienced / unqualified "project managers."

Now, this morning, I think, here was a guy, well-dressed, professional, and a great salesman. Very good. Handled every question (obviously well-trained). The rest of the operation (the boiler-room-sounding main office call center) raised the red flags for me. But why is this guy working for a company like THIS, when he could be selling something productive?

OK, we're in an economic collapse. Good jobs are hard to find. So what's happening? Are we all just turning on ourselves to scratch out a living by taking from others? Have we become a nation of economic cannibals?

Case 1: Gas price gougers. If we accept the premise that the cost of the wholesale gas did NOT go up to $4.70 (since gas in Nashville, Lake City, etc stayed at $4 even), then $4.99 gas at Pilot/Weigels was nothing more than an opportunity to make more money by taking advantage of a bad situation (although possibly legal, I dunno if we have any laws in TN covering this). Fallout? Small businesses and independent contractors shut down operations, causing a larger economic ripple, larger than the possible extra profit the gougers might have made.

Case 2: Mortgage brokers. Not in every case, but I'm sure in hundreds of cases in Knoxville, the mortgage broker knew perfectly well that they were underwriting loans that the lendee couldn't pay, but doing a great sales job to convince them that they could. Maybe the broker didn't think about the long term implications on that family (including, possibly, domestic violence, divorce, and suicide), because they didn't want to. They wanted their commission check too badly.

There are more cases of this- where the economic damage reaped by Party X far exceeds the economic gain of Party Y. I suppose it's just another extension of the "Tragedy of the Commons," a glaringly huge hole in Free Market theory.

But it seems to be permeating everyday life. Again, have we become a nation of economic cannibals, destined to consume (and destroy) this country from within?

And, to make a last minute political tie-in: isn't this a moral issue? Isn't the self-acclaimed 'moral police' party standing with the economic cannibals through their laissez-faire economic theories, and taking a stance that is not only immoral, but supporting an immorality that can more directly lead to the downfall of this country, far more so than R-rated movies?

MDB's picture

Dear Sir! I must protest in

Dear Sir!

I must protest in the strongest possible terms the implication the United States economy is an 'aven for cannibalism. It is well known that we have the problem almost under control, and that it is know the Canadians who suffer the largest casualties in that regard...

No, wait....

Scam artists are, of course, nothing new, though I'd daresay their numbers grow as the economy weakens.

But I don't think its so much we've become a nation of economic cannibals as it is that we've become a nation where the gov't tells the cannibals "eat all you want, we'll look the other way as long as you don't snack on our kids", it bails them out once they run out of food! And we let the chiefs of the cannibal tribes walk away with a "golden cauldron" full of heads they've stocked up. (Yeah, I know, I'm really stretching the analogy here.)

I'm really starting to understand why the only time socialism had any real foothold in the US was during the Great Depression. When a completely unrestrained free market fu screws up this badly, is it any wonder people look at alternatives?

reform4's picture

First Princess Bride, Now Monty Python?

"I'd rather eat Johnson, Sir."

MDB's picture

Just don't get me started

Just don't get me started with Simpsons quotes.

"President Bush, I've got someone here to help with banking crisis."
"Batman?"
"He's an economist."
"Batman's an economist?"
"It's not Batman!"

EconGal's picture

Due Dilgence, and timing

Just out of curiosity...why would you agree to take time out of what I assume if a busy day to see this guy without doing even the most minimal amount of "pre-search" on the company?

reform4's picture

Paranoid Much?

I didn't get much information before the first meeting. The first meeting raised the red flags. I get 10-20 calls/emails a day from people wanting to provide some kind of product or service. I can't be paranoid about every single one of them and spend 20 minutes researching each one BEFORE hearing what they have to say. It's more efficient to hear their pitch and THEN, if I want to do business, do the due diligence. Which I did.

R. Neal's picture

Great post. Most small

Great post. Most small business people are just trying to make an honest buck. Large corporations are predators, and small businesses are frequently their prey. Ask any small Walmart supplier.

MDB's picture

In all honesty, my knowledge

In all honesty, my knowledge of economics comes from Mrs. Bressler's Economics class at Powell High, and Doctor Spiva's Intro to Microeconomics at UT.

In other words, I'm no economist. (And I know squat about macroeconomics.)

But isn't one of the basic ideas of a true free market economy that you have a large number of small suppliers of a scarce resource, each competing on a roughly equal basis?

Yeah, I know, that's a very simplified view of economics. But on that basis, does the United States have anything even resembling a free market for most goods and services?

RayCapps's picture

Eww, I feel all icky...

but depending on your definition of "small supplier," I gotta stick up for Wal*Mart on the upstream (supplier) predator issue.

Ask any small Walmart supplier.

Walmart is one of our very best customers, probably the very best, to deal with. They're also among the top 5 most profitable on a per unit basis, so we're getting a fair selling price. They're very good at working with us on economical order sizes and predictable order patterns. When we offer them a Marketing Display Fund allowance, they actually follow through and put up the displays in their stores. They don't engage in "forward buying" to try to skirt a looming price increase. They pay their bills on time and don't try to nickle and dime us with phony damaged goods deductions. They actually make an effort to understand our business operation and the value we bring to their customers, our consumers.

Since Sam passed on, they have started to develop a case of the "Thou Shalt" disease, but that's a fairly minor issue compared to what we deal with from some other major customers. And by and large, the Walmart "Thou Shalt's" are ultimately good for both our businesses as a rule. They just require us to move a little faster than we might otherwise prefer to into those technologies and capabilities.

That's an *extremely* focused and narrow defense of Walmart. It ain't got beans to do with what they do to competitors, municipalities, or their own employees. But as a customer of ours, they're not so bad.

WhitesCreek's picture

My experience with Mal-Wart

My experience with Mal-Wart was rather nasty. We refused to sell to them as a result. They brought in a gray market distributer who said he was distributing to the Carribean and placed a large order. We had a check run and found out he was a shill for Mal-Wart. They intended to undercut our small dealer network.

I can tell you stories that are much nastier, with regard to their methods.

MDB's picture

Ethics

I commend you on your ethics, and your willingness to give up business because of them.

circlemoon's picture

Re: Ethics

To help complete the ethics loop I refuse to spend a single penny in their stores.

MDB's picture

I can't claim to be 100%

I can't claim to be 100% pure in avoiding Wal-Mart, but I come close.

(For instance, I did my "Toys for Tots" shopping there last Christmas. I figure the cheaper the price, the more unfortunate kids I help.)

But its not just my own smug sense of liberal self-righteousness that keeps me from shopping there. I think Wal-Marts are poorly laid out and not the cleanest store in town. I may pay a little more by going to Target, but at least I can find what I'm looking for.

Plus, and I'll confess this is snobbish of me... I still have the perspective that Wal-Mart isn't "America's Largest Retailer", its "Where rednecks shop." And I've devoted much of my life to not being a redneck.

bizgrrl's picture

I can say I am proud not to

I can say I am proud not to have stepped foot in a Wal-Mart store going on four years now. If it wasn't for a single birthday card that was needed at the last minute it would be five years. Their stock has held pretty steady for the past five years. They obviously don't need my money.

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