By David Tulis
The marketplace is a marvel of the masses. For virtually every legitimate need and for many whimsical desires, a product or service has been created. If a thing doesn’t exist, that’s often because it cannot be produced and sold profitably.
It may not be worth creating.
Market skepticism and indifference are the hurdles every inventor and entrepreneur faces. Millions of ideas are conceived, toiled upon and eventually abandoned as impractical. My own idea for a Chattanooga-centric investment co-op as a vehicle to solidify local economy may be just such a pipe dream.
It’s a business idea. Companies already exist to lend money. What’s new, David, with your notion? My idea is not JUST a business concept. It contains elements of cultural, local and conceptual interest that touch on the poetical and the personal. It may be created from a charitable or provincialist impulse.
Chattanooga investment hub in nutshell
The idea of a Noogacentric local investment hub is this. An entity comes into being — by some miracle, perhaps. It is a hub connecting local small investors like you with local free market players — entrepreneurs, factory operators, retailers and wide-eyed startup people. It would provide business counsel, as CoLab does downtown. But it would do more. The hub that I conceive of is structured as a cooperative, where members own the entity, that has a staff to look out for the interests of the owners by increasing the capital base. The co-op gives loans, and gives investment capital. It would be geographically limited as to whom could invest, and recipients of capital would meet lococentric criteria. It would appeal to small investors such as me (less than F$100,000), who are willing to put out their money as “patient capital.” Why start the co-op now? Hard times are coming. If Chattanoogans and Hamilton Counties repatriate at least part of their assets from Wall Street and the national economy and invest here, there is greater chance of capital preservation, even profit for us as individuals, and us as residents of a single American city.
Apart from the Noogacentric co-op notion, I recommed that you invest in yourself in a home-based business in an area of God’s giftedness. Secondarily, that you obtain liquidity — cash. The cash I refer to is outside the Federal Reserve System’s inflationary banknote scheme. You get it by buying money by the bag or fractional bag. (A bag of $1,000 circulated silver coins, 90 percent fine, quarters, dimes, trades for about F$22,000 in paper money.)
A drubbing for my theory
Tom Tomisek is a Chattanooga businessman of long standing. He runs two TNT coin-operated laundries in the city, one on Highway 58 and the other in the rough part of town, East Lake, by the housing projects. In prior years he ran an auto parts store, but couldn’t compete against Auto Zone; he indicated he couldn’t find a way to shift his store into a niche supplier or operator. He also makes a living as a landlord, and was a candidate for city council in District 4.
In a wide-ranging interview, he offers to diagnose a problem: Cronyism. Favoritism. “The problem is, how are you going to legitimize the people asking for money? You’re going to have to pay somebody to investigate them. So now you’ve got a business. That’s what banks do. That’s what credit unions do.”
A Noogacentric fund as I propose would merely be duplicative, Mr. Tomisek suggests. I decry inflationary lending markets at banks and credit unions (moral problem with fiat money), and insist on an alternate scheme. Mr. Tomisek relates an experience decades ago.
“What you’re talking about is personal investment in another person. You can do that. I did that with the car store, with Dick Downey. I sold municipal bonds, and be bought them. Downey was the one promoting all the parts store. He wanted parts stores. So, in order to buy my building, he said go down the bond board and get bonds, I’ll buy them. So I got a better rate, he got tax-free bonds. So he got better than the bank and I got lower than the bank.”
What’s more in the same direction of personal investment, Mr. Tomisek also borrowed from his father, James. “I would have paid 9 [percent], he would have got 3 [percent from a bank]. I paid him 6.”
Cronyism is the catch. “You’re going to have the buddy thing. My buddy wants to get some money out, let’s help him out. Somebody has got to pay for that risk. There’s going to be risk involved. You know, ‘So-and-so needs money. He wants to go into business.’ ‘I don’t think that such a good business.’ ‘Well, he’s a good guy, a good guy. Let’s help him out.’”
So discretion is out the window, and a pal gets F$300,000 for a shop that will fail.
Mr. Tomisek suggests a bank or credit union is the way to go. “How do you monitor where the money is going to go? Keep out the favoritism. You have to do some research. And he [the investee] has to have some collateral. If not, someone is going to take advantage of this.” He says people sometimes didn’t pay on charge accounts in his parts store. “This [fund] is really a business. You have got to have safeguards. You’re going to have to start employing people. there’s going to have to be some overhead. And you’re back in the banking business.”
Co-op not really needed
Where can someone who is not a professional investor or business person invest? I ask. “That exists in Chattanooga. There are people who invest in people.*** That is a common thing.” But Mr. Tomisek says he doesn’t know who these people are. I point out the existence of Chattanooga Renaissance Fund, whose investors are larger scale.
An entrepreneur might get a home equity loan or run up debt on a credit card, he suggests. “By hook or by crook, you find ways to borrow money, and you get it to multiply, and if you’re good, it’ll work.”
Mr. Tomisek seems to make no distinction between investing and lending. I insist on the distinction. An investor shares the risk, and is willing to be patient with the business in which he is investing, knowing he may lose everything. But he is investing in a person, and willing to wait on the chance of earning a bigger return than he would if he were simply lending the funds at 6% per annum. A lender, in contrast, lends under contract, often demanding collateral.
“People think they’re shrewd if they take advantage of somebody. That happens quite a lot.”
I am a naif in the view of my experienced businessman interviewee. “You are a good guy,” Mr. Tomisek says. “You are trusting guy. People are not that trustworthy. You haven’t been burned enough to know there are some shysters out there. Your idea is great. Your theory is great. But I’ve been burned. I’ve been around too much to know — there are people who are going to take the ball and run. *** I think you’ve got a good theory. But I’m telling you it’s already out there. But it’s small. It just not public.”
Indeed, a co-op, like a bank, is vulnerable to would-be borrowers or entrepreneurs telling unrealistic fables just to get the money. The co-op, like a bank, would write off a bad move as a loss. The Chattanooga Capital Co-op would work if more people show more good character, rather than less. Even at the last, Mr. Tomisek has a warning about the sin problem and other signs of the fall.
“When it comes to money, people lose a lot of character.”