Remember hearing about that guy who traded up from a paper clip all the way to a house? Well, this is how a true American entrepreneur would do it:
1. Begin with a paper clip.
2. Create a shell corporation called “Paper Clip Holdings” and fill the board with loyal cronies.
3. Issue corporate junk bonds in order to borrow $20 million. Tell investors that you’ll use the money for a capital campaign to increase the firm’s paper clip holdings.
4. Follow through—once you’ve got the $20 million, spend it all on paper clips.
5. Immediately declare bankruptcy.
6. In the ensuing arbitration, settle all existing debts for $0.95 on the dollar—leaving you with $1 million worth of paper clips.
7. Loan out your entire stock of paper clips (except your original) to vagabonds and street urchins. Demand nothing in exchange until 12 months later, when they must return the original paper clip plus 10,000% interest.
8. Create a second corporation called “Paper Clip Investments” and fill the board with sycophantic yes men.
9. Use “Paper Clip Investments” to create magnificently complex derivative assets backed by the loan contracts from “Paper Clip Holdings.” Smother each asset with a thousand pages of unreadable legalese and technical details, so no one realizes what exactly they’re buying.
10. At both firms, increase executive compensation until it approaches the GDP of a small industrializing nation.
11. Create a third corporation called “Paper Clip Ratings Agency,” devoted to evaluating investments opportunities in the burgeoning paper clips futures and derivatives market. Fill the board with cardboard cutouts and recent corpses.
12. Have your ratings agency assign a “100% AAA Guaranteed Awesome” rating to the derivatives. Assure market-watchers that “Paper Clip Holdings” has emerged “strong and lean” from its bankruptcy proceedings, and that “Paper Clip Investments” is run by sorcerers, prophets, and wild men of unspeakable genius.
13. Sell billions of dollars’ worth of these derivatives to elite Wall Street banks.
14. At all three firms, increase executive compensation until even large industrializing nations look upon you with envy and fear.
15. Wait until the vagabonds and street urchins return, sobbing, to confess that they’ve misplaced all the paper clips and can’t give them back.
16. Watch the entire paper clip derivatives market collapse in a fiery ball of debts, recriminations, and defaulted loans.
17. Reap massive rewards via a fourth corporation, which you’ve created for the sole purpose of short-selling the risky paper clip derivatives. Its board consists of sock monkeys and finger puppets.
18. As your first three corporations crumble, ride a $50 million golden parachute to safety.
19. A nationwide recession should follow. This will depress the real estate market, bringing home prices down to their lowest level in decades. A three-bedroom home will sell for as cheap as a single paper clip.
20. Take your original paper clip. Buy a house.
My apologies to Kyle MacDonald, who so far as I know is NOT the orange embodiment of all that is wrong with our system. If you enjoyed this, you might also like A Math Professor Consults on a Hollywood Movie, Student Engagement Method #47, and Math Experts Split the Check.