Friday, October 31, 2014

Economic Intreigue IN SPACE! : The bad guys plan to pull a Flanagan

[Note that when people say, "on the moon", or something like that, they really mean "on this moon" in the same way people on this planet mean "on earth" when they say, "on the planet".]


"So where is Natasha, anyway?" Vasilisa asked Anatole.

"Right here," Natasha said.

"You have trouble at FarmLTD?" Anatole asked.

"No," Natasha said.  "Dmitri is definitely pulling a Flanagan."

"You're sure?"

"You will be too when you see the numbers."

"What's a Flanagan?" Vasilisa asked.

"Sorry, I forget that you don't know the same terms," Anatole said.  "It must sound like inside baseball to you."

"Sure," Vasilisa said.  "Baseball."

"A Flanagan is when someone destroys something under the guise of saving it," Natasha explained.

"So like if someone knew moving an accident victim would kill the victim," Vasilisa said, "and then convinced everyone that the only way to save the victim was to move them--"

"Thus killing the victim," Natasha said.

"And was never suspected of murder because they looked like they were trying to help."

"Yes," Anatole said slowly.  "But it tends to be mildly less morbid and done to institutions rather than people."

"Institutions?" Vasilisa asked.

"You know: governments, agencies, businesses, non profits, charities, universities, museums, libraries, book clubs, that sort of thing," Anatole said.

"So how does it work there?" Vasilisa asked.

"Well... let's illustrate with the present example," Anatole said.  "Natasha, you've got the data?"

Natasha turned on a monitor, plugged a small portable drive into the main computer, and said, "Yes."

Anatole and Vasilisa turned to the monitor while Natasha punched commands into the computer.  Anatole briefly considered pointing out that the lightest touch would be just as effective as Natasha's banging style, but he knew it was an argument he'd never win.  Instead he decided to talk to Vasilisa:

"Dmitri is saying that the only way to save FLTD is with certain cuts.  If he is pulling a Flanagan then those cuts will actually--"

"Destroy the company," Vasilisa said.

"Exactly," Anatole said.

Five columns appeared on the screen.  The first listed various departments and programs at FarmLTD, the next three listed numbers, and the last seemed to be a smattering of random information.

"From right to left," Natasha said, "we have costs, revenue, and net profit or loss."

"And the last column?" Anatole asked.

"Other useful figures," Natasha said.  "But they're less important and we can get to them later."

Anatole looked at various things until he found a date: the fiscal year that had just ended.

"This says FLTD is profitable," Vasilisa said.

"It's not uncommon for someone to manufacture a crisis in order to pull a Flanagan," Anatole said.

"Because you can't convince people to amputate if they know there's nothing wrong," Vasilisa said.

"What is it with you and medical analogies?" Natasha asked.

"I go with what I know."

Anatole said, "The fact that the financial crisis isn't real doesn't mean he's pulling a Flanagan.  People make up crises to push through action for all kinds of reasons."

 "I agree," Natasha said.  "Now look at this."  New columns appeared on the screen.  "These are the programs Dmitri intends to cut."

"Definitely a Flanagan," Anatole said.

"I don't get it," Vasilisa said.  "You learn a profitable company is cutting programs and you're unconvinced.  You learn that the programs also happen to be profitable, which doesn't seem surprising since the company as a whole is profitable, and you're suddenly convinced."

"A better visual aid, perhaps," Natasha said to Anatole.

"Yup," Anatole said as he switched on two more monitors.

The first reverted to the original data.  "This," Anatole said as he gestured to the first monitor, "is the company as it exists today."  The second data set appeared on the second monitor.  "This, is what he's cutting."

"I've already seen this," Vasilisa said, "you know."

"Yeah," Anatole and Natasha said at once.

A new data-set appeared on the third monitor.  "This is the present company without the programs Dmitri plans to dispose of," Anatole said.

"Compare that to the original data," Natasha said.

"It does cut costs," Anatole said as he gestured to the costs column on the third monitor.

"but since the programs are profitable..." Natasha continued.

"it cuts revenue more," Anatole said gesturing to the revenue column.

"And the end result is that now the company really is in a financial crisis," Vasilisa said as she looked at the column that showed the net profit or loss, which had switched from profit to loss.

"Exactly," Natasha said.

"And that's assuming FLTD does as well next year as it did this year," Anatole said. "Customer loyalty is a thing, but a lot of people don't want to put their lives in the hands of a company that can't even manage its own checkbook."

"So," Vasilisa said, "they fake a financial crisis to create a real financial crisis."

"That's just the start," Natasha said.  "Remember the figures I said we'd get back to?"

Vasilisa and Anatole nodded.

"Third from the top is FLTD's reserves," Natasha said.

Vasilisa's eyes went wide.  "They're smaller than the shortfall."

"Which means that the company will have to borrow or sell assets to close the hole," Anatole said.

"And combined with the expected drop in their credit rating as a result of all this," Natasha said, loudly punching in a command that caused a figure in the fifth column to change, "They won't be able to reasonably borrow enough to undo Dmitri's cuts."

"Which means that even if they fire Dmitri and get someone at the helm who really does want to save the company--" Anatole said.

"FLTD gets locked in a death spiral and will be gone in three to five years even under the best possible conditions," Natasha said.

"Which would leave Xenosites the only manufacturer in the industry on the whole moon," Vasilisa said, finally catching up.

"And that," Anatole said, "is how you pull a Flanagan."

"I might be sick," Vasilisa said.

"That's a pretty common reaction to your first Flanagan," Anatole said, "but take some stomach meds or something because it gets worse."

"How could it possibly get worse?" Vasilisa asked.

Anatole turned to the main computer himself.  After a few quick commands a map of the system appeared on the center monitor.

"In theory," Anatole said, "anti-monopoly laws should prevent Xenosites from being the only supplier on our moon, but with FLTD out of the way these are the only other suppliers in the system."  Green dots lit up on the map.

"They're nowhere near us," Vasilisa said.

"Worse they're nowhere near the trade routes that lead to us," Anatole tapped in another command and lines appeared on the map connecting various planets and moons.  "Even the most efficient shipping routes," a few more tapped commands made some of the lines become highlighted in yellow, "would be indirect and make off-moon alternatives prohibitively expensive.

For a time the only sound was the quick quiet tapping of Anatole entering commands into the computer.  Then projected prices appeared on the right monitor.  "Xenosites could raise their prices six times over before it would be economical to buy from another company.

"The whole moon would be their captive consumers, with no choice but to buy from them."

"It gets better," Natasha said.

"And by 'better' I assume you mean 'worse'," Anatole said.

Natasha punched in a few commands and all three screens were taken up with information on Xenosites "exciting new venture".

"Xenosites Financing?" Anatole asked.

"If you can't afford their product then worry not, because Xenosites Financing, the latest addition to the Xenosites corporate family, will allow you to pay for it in just twelve easy installments.  For a modest interest, of course," Natasha said.

Natasha punched in another command and one screen showed a standard payment plan.  "It looks all nice and cozy now," she said, "but if you factor in how much they'll be able to raise their prices once they're the only supplier on the moon... all of a sudden,.." she punched in a command and the numbers changed.

"The average resident could barely make the minimum payment!" Vasilisa shouted.

Anatole agreed, and had a sinking feeling.  "How long would it take to pay off the loan, with those numbers, if you only made the minimum payment?" he asked even though he was quite sure he didn't want to know the answer.

Natasha punched in a few more commands and Vasilisa said, "That's longer than most people live," so quietly it seemed the life had fled from her.

Natasha nodded.

"That's their endgame," Anatole said.  "They get Dmitri to take out FLTD with a Flanagan, which leaves their hands clean.  They hike up prices once this entire moon is their captive market.  People have no choice but to go to their new financing division for help.  And--pretty soon--everyone on the moon owes them.  They get financial leverage over the whole population of this moon ... for generations."

Anatole found a chair and collapsed into it.

"So," Vasilisa asked, "what do we do about it?"

"I'm gonna need some time to think," Natasha said.

Anatole nodded.


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