billion/million & YAWAES

Dave Long dl@silcom.com
Mon, 06 May 2002 12:07:57 -0700


> Even a successful company these days is just enroning massive debt
> into the pockets of the investors.

Massive debt into the pockets of the
original investors may not be fatal,
if assets can be acquired cheaply by
different investors.  As an example,
take the case of Watt:

In the 1760's, Newcomen engines were
so inefficient only coal mines could
afford to use them.

Watt figured out and patented a more
efficient design, and entered into a
partnership with Roebuck to make and
market it.  A few years later, they
hadn't worked out the bugs, Roebuck
went bankrupt (with his 2/3rds share
going at a farthing) and Watt's wife
died.

At last, with the clock ticking on
the patent, Boulton partnered with
Watt, and not only was he able to
manufacture the engines, but they
were then licensed under terms to
pay W&B 1/3 of their fuel savings
over the next 25 years.

One can imagine Boulton saying "No
one makes money by selling engines
anymore, James -- we should charge
for the service".  Regardless, the
terms not only provided them with
income, but also hushed innovation
over the next quarter century.

-Dave