Dave Berkus, in a recent Berkonomics article, asks ”Can you just tell little business lies?”

Dave’s essay is reproduced with his permission following this response.


Of course, the theoretical response is that it is never ok to lie. However, we all do lie, either to ourselves or others. It can be as simple as answering the question “How are things?” with “Just fine”, when there are problems, or it can take the form of exaggeration when asked questions about future events.

I believe that royalties evolved in pre-biblical times, somewhat later than barter, as a means of transferring asset ownership benefits. In barter a unit of something, which could have been personal labor or crops or animals, were exchanged for something else, because there was no “money” as we know it today.

The next form of trade would have been the allowing of one party to use the asset of another party for some benefit. As there was no way the asset owning party could calculate in advance the “profit” of the asset using party, the benefit was a participation in whatever the using party received for the use of the asset. If the asset were land then sharecropping in some form evolved. If the asset was a vessel then the owner received a percentage of whatever benefit the operator of the vessel received. If it was permission to hunt on specific land then the land owner could require to receive a percentage of pelts or some other benefit the hunter received. As money became used, the provider of the money for a business activity made the money available to the business operator for a percentage of the revenue, not profit.

Profit is largely discretionary in that management decisions influence what is called profit, the difference between cost and revenue. Executive compensation, product pricing, personnel policies, investment decisions regarding equipment and possible acquisitions, etc., are all areas of management discretion impacting profit. Investors are aware of some of the decisions and of other decisions not so often.

Therefore, it makes sense for investors to buy a percentage of the verifiable revenue of businesses whose revenues they believe will increase, and not an ownership of the company. Royalties, by concept and design allow non-trusting parties to successfully participate in the development and operation of a business.

The royalties we recommend have sufficient investor protections to justify fair and reasonable royalty rates, providing growth capital to business owners, without lessening their ownership of the business. We also recommend there be an issuer royalty redemption right, permitting the termination of the royalty on agreed terms.

Investors in companies cannot prevent managers and owners from telling “little” lies but they can still benefit from the energy, skills and timing of the operators of the business by sharing in revenues and not ownership.

See arthurlipper.com and review REX-Basic.com for information about royalties.

Arthur Lipper, Chairman
British Far East Holdings Ltd.
+1 858 793 7100

© Copyright 2019 British Far East Holdings Ltd. All rights reserved.


Dave Berkus’ article follows below:

Dave Berkus’ business insights

Can you just tell little business lies?

“He’s not in right now.” “I am going to the doctor at that time.” “I paid only two dollars a unit to your competitor.” Whether not true and used to avoid hurting someone’s feelings, or whether used to gain an advantage in a negotiation, these little business lies are acceptable because they achieve their intended result without actually hurting the other party. Right?

Wrong – in the long run, even if apparently harmless at the moment.  One problem, as demonstrated in so many movie scripts, is that you sometimes need to tell another lie to cover the first, and then another. And small lies turn into habits. And habits define the individual and often the culture of the individual’s direct world of influence.

“if a tree falls in the forest…”
What if you are never caught telling these little business lies? Is there any harm?  Sometimes you will never know that you were caught. Someone sees you at another event when you told them you were out of town.  Another asks his competitor if they really did sell to the company at such a low price. Someone you told was doing a superb job and was soon fired mentions the comment to his attorney or perhaps just as damning – to former peers still in the company.

Just one instance
It takes only one instance of being caught to cause an entire group of people to question the truthfulness of all of your statements. And that is a large consequence to come from a small business lie.

So, would you tell such white lies if you knew you’d never be caught?  Never?  That depends upon how you chose to live with yourself. It certainly is difficult to be truthful or silent but never slip into little lies.

The Scout Law and this issue
For much of my adult life, I have been affiliated as an adult volunteer with the Boy Scouts of America, happily serving youth and adopting the Scout Law as an important part of my ethical being.  Of the twelve points of that law, none state “A Scout is truthful” because there is a greater law in Scouting: “A Scout is TRUSTWORTHY.”   And that is the bottom line for all of us in business.  We should strive to be TRUSTWORTHY in our actions and deeds.  People can depend on us to be truthful and trusted.   A simple lie caught immediately or much later, belies that trust.

Can you tell little business lies?  Sure.  But should you?





Blog Management: Viktor Filiba


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