Whether or not the Summit 1031 Exchange debacle will turn into a criminal case (and my reading of it, is that it will....) it was hugely unethical from the beginning.
Several times during the boom, I had conversations with 'high rollers' that just had me shaking my head. Two things --
1.) That the money was easy.
2.) Nobody was going to get caught.
(Implied, was that some shady things were going on, minimally with taxes, but other things as well.)
These were very superficial conversations, based on the other's misunderstanding of my financial situation (I own a business, therefore I must have money) and never went anywhere.
But I knew in my gut that, whether or not illegal things were going on, there were some things that would make me squeamish over the risk, and uncomfortable with the lack of ethical standards.
One thing I've learned to mistrust over the years: Easy Money.
It's almost always based on one of three things.
1.) A temporary competitive advantage.
Say you start selling a product and nobody else is. This never lasts for long, or as I always say, "Supply always catches up to Demand."
2.) A bubble.
Well, we all know how those end. I'm actually uncomfortable with growth rates of more than 10% a year, because they are rarely sustainable, and you often give more back at the end than you made at the beginning.
3.) Cutting corners.
Doing things that maximize profits at the expense of ethics.
And of course, in real life, it's usually some combination of all three.
There are always temptations in business, and in my opinion you must always try to resist. Always try to take the high road. I've often said, burnout is as much a danger in business as lack of money. Burnout happens when you no longer like what you're doing, and you probably won't like what you're doing if you're making too many ethical concessions.
Besides, I think making less money in the short run by being ethical, is a long-term business survival.
Don't jump all in on a bubble -- like CACB, you'll look like a genius at first, but in the end you'll be the goat.
UNLESS -- and unfortunately in this highly movable and short memory society, it's very common -- you don't care what happens in the long run, and can run away with the short term profits. You see this in the big guys, who guide their companies into long-term ruin, but have already moved on.
And you see this in the little guys, hence the term "Fly by Night": businesses who have no intention but to take advantage of short-term 'Easy Money' and don't worry about long-term consequences.
Finally, a word about what I mean by ethics. I realized early on that small business was full of gray areas; where you had to make a decision based on limited information, and you had to decide what was the proper ethical choice.
It isn't always clear.
You have to have a good internal foundation, I believe, and an awareness of consequences. I guess, in the end, you have to ask yourself if it's the right thing to do. You'll know it -- feel it in your gut and when you go to sleep at night -- if it isn't.
And I can tell you, no matter how this Summit thing turns out, you can be sure that if any of the owners had a conscience, they knew they were doing wrong very early on.
And did it anyway.
POSTSCRIPT: After reading the full article, my last two paragraphs are just silly.
These guys were out and out looting the funds, and a 'ponzi scheme' barely covers it...
Several times during the boom, I had conversations with 'high rollers' that just had me shaking my head. Two things --
1.) That the money was easy.
2.) Nobody was going to get caught.
(Implied, was that some shady things were going on, minimally with taxes, but other things as well.)
These were very superficial conversations, based on the other's misunderstanding of my financial situation (I own a business, therefore I must have money) and never went anywhere.
But I knew in my gut that, whether or not illegal things were going on, there were some things that would make me squeamish over the risk, and uncomfortable with the lack of ethical standards.
One thing I've learned to mistrust over the years: Easy Money.
It's almost always based on one of three things.
1.) A temporary competitive advantage.
Say you start selling a product and nobody else is. This never lasts for long, or as I always say, "Supply always catches up to Demand."
2.) A bubble.
Well, we all know how those end. I'm actually uncomfortable with growth rates of more than 10% a year, because they are rarely sustainable, and you often give more back at the end than you made at the beginning.
3.) Cutting corners.
Doing things that maximize profits at the expense of ethics.
And of course, in real life, it's usually some combination of all three.
There are always temptations in business, and in my opinion you must always try to resist. Always try to take the high road. I've often said, burnout is as much a danger in business as lack of money. Burnout happens when you no longer like what you're doing, and you probably won't like what you're doing if you're making too many ethical concessions.
Besides, I think making less money in the short run by being ethical, is a long-term business survival.
Don't jump all in on a bubble -- like CACB, you'll look like a genius at first, but in the end you'll be the goat.
UNLESS -- and unfortunately in this highly movable and short memory society, it's very common -- you don't care what happens in the long run, and can run away with the short term profits. You see this in the big guys, who guide their companies into long-term ruin, but have already moved on.
And you see this in the little guys, hence the term "Fly by Night": businesses who have no intention but to take advantage of short-term 'Easy Money' and don't worry about long-term consequences.
Finally, a word about what I mean by ethics. I realized early on that small business was full of gray areas; where you had to make a decision based on limited information, and you had to decide what was the proper ethical choice.
It isn't always clear.
You have to have a good internal foundation, I believe, and an awareness of consequences. I guess, in the end, you have to ask yourself if it's the right thing to do. You'll know it -- feel it in your gut and when you go to sleep at night -- if it isn't.
And I can tell you, no matter how this Summit thing turns out, you can be sure that if any of the owners had a conscience, they knew they were doing wrong very early on.
And did it anyway.
POSTSCRIPT: After reading the full article, my last two paragraphs are just silly.
These guys were out and out looting the funds, and a 'ponzi scheme' barely covers it...