A friend asks you for some money to invest10 Sep 2024 19:12
A friend asks you for some money to invest.
So far you have given him £100, which is returning a gross amount of £0.000016 per day.
He has made four major investments, three of which have been complete failures. The fourth is now barely breaking even, as recent performance shows it’s getting worse and the price for the product produced has dropped considerably.
Several other investments have never even materialised, despite his many promises.
He pays himself a salary which takes up almost all the Net profit from the one investment that is nominally making some money.
In fact, because he is also paying several of his friends too, he is actually loosing money every year and has never made a profit.
He says he is debt free, but you know that he has several substantial liabilities coming up, which he cannot pay for.
He excitedly explains he has a new project, which will transform his fortunes, waving four bits of paper as proof that he will succeed this time.
When you look at the four bits of paper, you realise that none of them is a contract, or a binding agreement, or a promise of financial support - so they are worthless.
When you look at the project he is proposing to invest in, it’s clear that he does not have two key requirements to even begin to make an application to the bank.
Even if he does manage to get those two key requirements sorted out, he has to persuade the bank that the project is worthwhile. The bank have said that they’ll come up with a decision in Q4 2025, by which time he will long have run out of money.
You realise that the support he wants from the bank actually won’t be forthcoming until he completes the project, which won’t be for at least a decade. Even then, the bank will only pay out over many years.
In the meantime, to complete the project means that he will need 10 times the amount he has already borrowed from you, which is some 230 times what he is worth.
You realise that several other projects competing for the same bank funding are more advanced than his project and are in geographically much better places.
What is more, when you look at the Geology of where he is proposing to site the project, what he wants to do has never been done before in the area, and the Geology shows that it is dubious the project can be completed in the manner that he claims.
So.
Do you give him the money?
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