A Fish Story – A Baseball Story

A Fish Story – A Baseball Story

Ted Folkert – September 28, 2020

You know how fish stories go. In the sequence of the fish economy the tiny fish is eaten by the small fish, the small fish is eaten by the big fish, the big fish is eaten by the shark, the shark is eaten by the whale and we kill the whale and scavenge the parts we can use. And, as fish stories go, the fish-story teller usually has an exaggerated memory of the size of the one which got away.

A fish story could help to describe the predicament we are in as a struggling economy. The same pattern of consumption is apparent in the economy of a would-be democracy such as ours. The smaller ones get eaten by the bigger ones and so on up the line, certainly not a democratic process, but one which prevails.

Most of us realize that many small businesses are experiencing an unanticipated slowdown due to the corona virus and the sagging economy. This is a problem with limited solutions for struggling small entrepreneurs. It is also a problem for the real estate industry throughout the country. Some entrepreneurs and realtors have not experienced this but it is almost certain that they will. Unforced closings of small businesses due to lack of business, or forced closings due to municipal government actions or financial failure, obviously cause substantial financial hardships for the business owners and consequentially for the real estate owners who lease the facilities. As a third victim, the lenders for much of this real estate are, or will be, adversely affected due to some property owners being unable to service their loans in a timely manner due to the default of timely rental payments.

Of course, the normal course of action on such defaults for a property owner would be legal steps for collection of delinquent rents or eviction of the delinquent tenants. And the normal course of action for the lender upon default by the property owner would be collection of delinquent loan payments or foreclosure of the property. It is easy to understand such actions in normal times. However, in times like this there are other considerations perhaps should be considered in many cases.

A lender who forecloses on a loan for commercial space will ultimately end up with the property with which the loan is secured. This would be a normal process. But in a time such as this, when everyone in the industry is experiencing cash flow difficulties, what are the chances of the lender re-selling the property or the chances of the real estate owner re-leasing the property in a timely manner and at a rental amount commensurate with the property value and adequate to support the mortgage payment?

Well, the answer to both questions is that the chances in many cases are “not very good.” Who would want to jump into the market when it is collapsing or declining significantly? There are always bargain shoppers or bottom-feeders for troubled real estate in such times as this but such a resolution may not be the most prudent outcome for any of the parties.

If the tenant defaults and the property owner forecloses who will be ready, willing, and able to lease the property at a comparable rental amount?

If the property owner defaults and the lender forecloses who will be ready, willing, and able to buy the property at a comparable valuation?

Perhaps everyone should understand the position of the other party, sometimes referred to as walking in someone else’s shoes. Establishment of a “workout” plan could minimize the financial impact for all parties. Just the cost of litigation, foreclosure, eviction, and re-occupancy would be substantial or perhaps not recoverable for any or all parties – the business operator, the property owner, and the lender. Taking the legal expenses and future occupancy of the property into consideration, perhaps the only prudent decision would be to work it out. Perhaps all must share in the unfortunate condition of the economy. All of us will probably be better off by willingly sharing the pain – pain which will probably be shared whether or not any of the parties are unwilling. Sometimes it is necessary to share the downside when times are difficult just as we are able to share the upside when times are favorable – taking the bad with the good.

Consider baseball as an example. Times at bat are not always successful. They vary according to skill of the batter, the skill of the pitcher, luck, and unexpected consequences. A long fly ball can be a home run or just a big out, but the redeemable part in any case is that the batter will probably get another time at bat. Perhaps unfortunate business owners should get another one too. A batter who hits the ball safely one time out of four, a 250 batting average, is often considered a superstar. Maybe a business owner should get another time at bat. For many small business owners a batting average of 1000 is required, allowing for no do-overs, no second chances, no more times at bat. The question in a foreclosure is “who wins.” And the answer is often “no one wins.”

It seems that it would be more promising to consider a struggling business like a baseball game and give the entrepreneur another time at bat. With the right swing and the right pitch it could be a home run the next time at bat. It happens quite often in baseball. And it could happen often in business during difficult economic times.

The debacle for the consumer as this fish story evolves in the business world is the elimination of competition. Competition is perhaps the most effective element of price control, thereby serving as a check on monopolization. Eliminating competition drives prices higher invariably, much to the obvious advantage to the behemoth business and to the obvious disadvantage to the consumer who has no leverage in an non-competitive market.

This process is easily confirmed by acknowledging the enormous increases in the share values of the behemoth corporations and the enormous increase in executive salaries based on corporate income and growth in recent years, both of which have increased substantially while worker income has declined.

The owners of the behemoth corporations don’t have to talk about the one which got away. They fish they hook, the American consumer, is captured game, only partially protected by the fleeting laws of free enterprise which are legislated and frequently re-legislated in favor of those who provide a substantial portion of campaign funding, sometimes referred as “pay to play.” In baseball, “pay to play” would require paying the umpire to make a call of a dropped fly ball or a tag on a runner in favor of the higher bidder. Our system doesn’t seem to provide a redress of grievances affordable by the American consumer that is commensurate with the financial ability of the corporations who finance the campaigns of our fearless leaders who legislate according to their principles or perhaps their instructions.

Our system of free enterprise certainly follows the principles of a fish story, a process which flies in the face of democracy, that term we cherish and strive for, and it certainly flies in the face of a baseball story, about a game we all cherish as the great American pastime, which is administered on democratic principles. We acknowledge and tolerate “pay to play” in the business world but we certainly wouldn’t tolerate in the baseball world.

A dishonest politician seems to prevail unchallenged. A dishonest umpire would probably be hung from the nearest flagpole.

Go figure!

Leave a Reply

Your email address will not be published.