Money Lending

I recently met an old friend who used to run a successful business many years ago. About fifteen years ago, finding himself with more money than he could employ in his own business, he started lending it to other businessmen at commercial rates. About ten years ago he was making far more money from the money lending business than from his original activities, and naturally he moved completely to money lending. Then the financial crisis happened and it served him a double whammy. A number of his debtors defaulted and more important, there was a dearth of credible borrowers.

Over the last few years, interest rates in India have been dropping and the days of money lenders charging 2% per month are gone for good. Money lending might not be the best business to be in anymore.

But here's the thing. Moving from value-generating activities to rent-seeking activities is a one-way street. More like a non-return-valve. Once we get used to something for nothing, no other activity seems to be worth the effort.

With the bankruptcy filing of General Motors, we know what happens to union leaders who see their job as extracting more benefits from management without providing any incremental value. Look up UAW Jobs Bank to find out more.

I wonder what employees of Private Equity Firms do after PE opportunities dry up.