Collateral Benefit on the “A” Train

‘You must take the A train,’ is the opening lyric to Billy Strayhorn’s signature Duke Ellington song.

Last night I did just that, enjoying the company of the very wise Peter Firestein.

We were returning from a delightful book party to celebrate the publication of LJ Rittenhouse’s  new book Buffet’s Bites.  I was telling Peter that he really needed to read Chris Brogan, who was the subject of last week’s Trust Quotes interview. (And yes, this is a lot of self-referential links, but it’s all true).

“What’s Brogan’s message in a nutshell?” asked Peter.

I pondered that. “I guess it’s that great marketing and customer relations in the new media age is same as it ever was: the best of it comes from unsolicited testimonials from customers.  And the best way to get that is to focus on the customers and on serving their needs. If you do that, they’ll then market you.”

“And,” I said, warming to the subject, “the paradox is that your own success cannot be a goal—it is a byproduct, a secondary result, an outcome–but not a goal.”

“Sure,” said Peter, “I get it. Like collateral damage—but collateral benefit.”

“Yes!” I said, “Collateral benefit.  It’s what you and I and LJ and (Warren) Buffet believe too. Buffet’s best stock picks are great companies. And great companies are built on relationships—with stockholders, customers, employees. If you serve them, everything works—including your own results. But only as collateral benefit.”

I thought “collateral benefit” was a pretty cool phrase. I still do, hours later. I warned Peter I might blog about it.

So here’s to you, Peter; thanks for the world’s next mega-catch-phrase: collateral benefit.

The rest is up to the rest of you.

Soul Trust

From Reuters, a most curious story.
Would you pledge your soul as loan collateral?

RIGA (Reuters) – Ready to give your soul for a loan in these difficult economic times? In Latvia, where the crisis has raged more than in the rest of the European Union, you can.  Such a deal is being offered by the Kontora loan company, whose public face is Viktor Mirosiichenko, 34.

Clients have to sign a contract, with the words "Agreement" in bold letters at the top. The client agrees to the collateral, "that is, my immortal soul."

Mirosiichenko said his company would not employ debt collectors to get its money back if people refused to repay, and promised no physical violence. Signatories only have to give their first name and do not show any documents.

"If they don’t give it back, what can you do? They won’t have a soul, that’s all," he told Reuters in a basement office, with one desk, a computer and three chairs.

Think of all the literary touchstones this story elicits.  Gogol’s Dead Souls?  No, these souls are living.

How about the Robert Johnson Mississippi Delta myth of selling one’s soul at the crossroads; which led to Clapton’s Cream mega-hit Crossroad (and the comically serious Hollywood version, with Ralph (Karate Kid) Macchia doing the Robert Johnson role, with Ry Cooder standing in for Johnson/Macchia, and monster guitarist Steve Vai frankly blowing them all away as the devil).

Apparently, Mirosiichenko is not kidding. 

Mirosiichenko said his company was basically trusting people to repay the small amounts they borrowed, which has so far been up to 250 lats ($500) for between 1 and 90 days at a hefty interest rate.

He said about 200 people had taken out loans over the two months the business was in operation.

What does this say about trust?  The lender isn’t accepting collateral in the traditional sense (unless a rebuyer of souls, a la Gogol’s plotline, shows up).  Rather, he’s betting on the meaning of the oath to those who take it. 

Soul-pledging: the antithesis of asset-based lending.

Does this amount to a fear-based manipulation of primitives?  Or is it a sophisticated form of appeal to a character-based sense of honor?

Somewhat less seriously, what would Wall Street add to the question?

•    Are some souls more bankable than others?  Can a fair virginal maiden of 18 pull down a bigger loan than an aging prostitute?  
•    Are soul contracts assignable?
•    What’s the value of a tranche of securitized soul contracts?
•    Can you short soul contracts?  (Unfortunately, as of yesterday, naked shorts are now illegal).  
•    Is the soul sufficient consideration for a loan?
•    How do you foreclose on a soul?
•    What happens if the market value of a soul drops to the point where you’re underwater vis a vis the loan?  Can you go soul-bankrupt?
•    What if you commit a mortal sin after you sign the contract, thereby reducing the value of the collateral?

(co-author credits on this blogpost go to Susan Kleiner and Stewart Hirsch, specialists in soul law).