There’s been a spate of bankruptcies around the world in recent years, New Zealand’s have mainly involved finance companies. However, the most most recent was a property developer who fronted New Zealand’s version of The Apprentice and was the force behind a national football team… He also liked his Ferraris. I suspect that there’s many people who now wish he’d forgotten about enjoying his money, banked a little more and invested a little less in a garage full of high-speed depreciating assets (Thanks JD for this description) and a football team he couldn’t afford.
Anyhoo. As with any bankruptcy, there’s a whole bunch of people who invested in the guy, or one of his many companies, and now they are out of pocket. Potentially to the tune of $200 million.
I had sort of a turnaround on this particular bloke. I never used to be a fan. In a town like Wellington the rumors stick, and I bought into them. However, as things started to turn to custard, I started to wonder if I was a perpetrator of a wonderful local custom A.K.A Tall Poppy Syndrome. Who am I to judge a someone, who, for all intents and purposes has contributed a whole heck of a lot more to our community than most of the rest of us ever will?
There is inherent risk in business and as businesses grow, the dollar figures involved in that risk grow alongside them. I think that quite possibly in this case, there was a freak combination of bad decisions and bad circumstances, that combined to form a situation that even the best wheeler and dealer would struggle with.
But where does that leave the investors?
I don’t know about the rest of the world, but we take it personally when someone loses other people’s money. After a couple of years, and a climb back to wealth, we often turn around and give them a Knighthood (despite them never quite getting around to fulfilling their commitment to paying everyone back)… But at the exact time of bankruptcy, a LOT of people are crying foul.
I’m not so sure they should.
We live in a big world, and as this exceptional piece of writing pointed out the other day, in most parts of the world, there is no backup plan. Most people have to live with the consequences of their mistakes or misfortune, to an extent that would sicken most kiwis.
In New Zealand, we strive to look after the little guy. But I wonder if, when it comes to investing, we are shooting ourselves in the foot by doing so.
When you invest money, it’s not a sure thing. When you have money, you can always lose it. When you invest it in property development, or mortgages or anything else, you have a chance of losing it all. It’s tragic, but that’s the risk YOU take on. That’s why you have GOT to do your research.
I feel gutted for everyone who’s out of pocket. I generally feel disgusted at the way those who are bankrupt somehow have the cash to live in luxury anywhere-but-here, while those left behind face the reality of having lost everything… But I don’t think we should necessarily act like investors have no responsibility at all, if only because it creates a culture of people who are easy pickings for experts at ripping people off.
In an all-round disastrous situation, one takeaway is that we need to educate ourselves a little more financially. Freak accidents will always happen, but hopefully not with us blindly following.