It’s the “Producers” method of private equity investing. Gather a bunch of equity, invest “most” of it into something that is growing, and the drive it into failure. That way, you don’t have to pay your investors any dividends.
- Leo Bloom: Let’s assume, just for the moment, that you are a dishonest man.
- Max Bialystock: Assume away.
- Leo Bloom: It’s very easy. You raise more money than you need.
- Max Bialystock: What do you mean?
- Leo Bloom: Well, you did it yourself, only you did it on a very small scale.
- Max Bialystock: What did I do?
- Leo Bloom: You raised $2,000 more than you needed to produce your last play.
- Max Bialystock: So? What did it get me? I’m wearing a CARDBOARD BELT!
- Leo Bloom: Well, that’s where you made your mistake: you didn’t go all the way. You see, if you were a truly bold criminal, you could’ve raised a million.
- Max Bialystock: But the play cost me only $60,000 to produce!
- Leo Bloom: And how long did it run?
- Max Bialystock: One night.
- Leo Bloom: You see? You see what I’m trying to tell you? You could’ve raised a million dollars, put on your $60,000 flop, and kept the rest.
- Max Bialystock: But what if the play was a hit?
- Leo Bloom: Well, then you’d go to jail. See, once the play’s a hit, you have to pay off all the backers, and with so many backers, there could never be enough profits to go around. Get it?
- Max Bialystock: Uh-huh. A-ha! So, in order for this scheme to work, we’d have to find a sure-fire flop!
- Leo Bloom: What scheme?
- Max Bialystock: What scheme! YOUR scheme, you bloody little genius!
- Leo Bloom: I meant no scheme. I merely posed a little academic accounting theory; it was just a thought.
- Max Bialystock: Bloom, worlds are turned on such thoughts!
