**Other People's Money Discussion Paper**
“Other People’s Money” is a film that goes deep into a near obsolete publicly traded company, the New England Wire and Cable Company, it begins to show the interwoven with romance and community spirit. Throughout the film many prominent issues arise because the original wire and cable division had become an obsolete parent firm of an otherwise profitable group of subsidiaries, though it was responsible for the employment of the majority of the town's population. While exploring the world of antagonistic corporate takeovers and the large market for complete corporate control,“Other People’s Money” shows the human impact of shareholder decisions. Good and efficient capitalism and greed clash in this fight to keep shareholders satisfied and save the factory from a dying industry affecting society as a whole.
Other people’s money is a slang term that refers to financial leverage, whereas using the initial borrowed capital it’s possible to increase the potential returns, but there is a strong chance that there will be a risk of investment. In the film, the NEWC had an insufficient capital structure along with little to no debt to leverage the company. Fortunately the company had a lump sum of cash and liquid assets, they also had a hefty funded pension plan for its employees, but had a debt to equity ratio of zero. There are pros and cons or trade-offs to having a higher debt-to-equity ratio, but in this case throughout the film, leveraging OPM would have allowed the NEWC to remain in business by transitioning into a more profitable industry. “Other People’s Money” , presented many important financial concepts throughout the film that shape entrepreneurs and entrepreneurs in society. The first being corporate restructuring. Corporate restructuring is defined as a process where the structure or operation of a company is significantly modified, usually in periods of significant distress and financial jeopardy. To put it in a point this could involve mergers, takeovers, or divestiture. In the film, Garfield persuades many of the shareholders to divest of the failing division to prevent the loss of their remaining assets. Kate Jorgensen offered them a better solution, she found a Japanese automobile company that would hire NEWC to produce stainless steel wire cloth. When the company pivoted. This allowed the company’s assets to be repurposed instead of liquidated. Corporate reconstructing begins to affect entrepreneurship. Although restructuring can produce positive productivity in some ways, it at times denigrates it in others. If there were a business that downsized during restructuring, there would be a loss of highly skilled workers and the end result would be a loss of productivity. When a company can reassign the duties of these workers to remaining employees it will more often than not add training expenses. It as well affects society, when looking at a positive restructuring effort it can aid and eliminate the inefficiencies that may develop into major issues. Simply rebuilding them from the ground up using a more stable and effective framework, will increase overall performance and production. These interactions between entrepreneurship and society coincide.
Corporate takeovers are as well mentioned and shown in the film. The film shows that corporate takeover roughly refers to when one company makes a bid to acquire or take capture of another, without obtaining the actual title. A takeover often occurs by purchasing a majority stake in the shares of the target company. Within the film the NEWC is debt-free, making it attractive to corporate raiders or ‘takeover artists’, who aim to provide shareholders with the promise of a better return on their investment. Attractiveness within a business breeds profit with a product or service and this gives entrepreneurs in society a plethora of options to create value for their consumer.
The market for corporate control plays the role of equity markets in facilitating corporate takeovers, referring to the market for acquisitions and mergers where competition for control rights is present. The film shows this concept concretely. Takeover artist Garfinkle was blocked, rather denied from purchasing more shares inside the NEWC by a judge’s command. He decided to fight this as he was a firm believer that a free market for corporate control is needed to ensure the restructuring of the company to retain their competitive edge. As he showed his value-focused character, Garfinkle viewed market dynamism as an effective tool for poor management, and this would force the market to put pressure on managers to provide results. That as well affects entrepreneurs in ways that we see everyday. Markets discipline producers by rewarding them with profits when they create value and solve problems for consumers while on the flip side punishing them with losses when they fall short of creating value for the consumer. Entrepreneurs operate within these parameters in their companies. The market for corporate control has no delineation in principle. It disciplines the managers of corporations with publicly traded stock to function and decide in the best interests of its shareholders. Here the disciplinarians are shareholders and this begins to motivate entrepreneurs to pivot and begin to scale to become greater.
Creative destruction was the last of the financial concepts presented throughout the film. Creative destruction within the film was shown as a union of evolutionary natural selection and economics. Resources are necessarily and often scarce, so the world advances only when these industries become and are encouraged to go die off. When this occurs it begins to allow capital to be reallocated to more efficient and innovative industries. With the spread of adoption and fibre optics within the film cable and wire are a dying industry, so Garfield encourages shareholders to reallocate their money towards a more promising venture. The underlying assumption taken from this point in the film is that though a transitioning industry will cause disruption, there will be a greater win loss ratio when capital is put to best use and assets are used in an economically responsible and rational manner.
It is evident that there is a balance that is required to create good and effective capitalism where all present parties within entrepreneurs and in society are treated fairly and humanely and this was presented accurately throughout the film.