Suppose you own a substantial number of shares – say, $500,000 worth – in Acme Corp, a manufacturer of home furnishings. And being a shareholder, you decide to attend the corporation’s annual meeting. You arrive early for a good seat, eager to hear what Acme’s president and CEO, Mr Jones, has to say.
Taking the podium after a warm introduction by the chairman of Acme’s board, Jones looks out earnestly at the shareholders assembled before him. He begins by assuring everyone that, while Acme is confronting many real challenges, he and his executive team have matters firmly in hand.
Jones then goes into some detail. He mentions the unexpectedly high and rising costs of Acme’s factory operations. “This problem is real, but we’ve diagnosed it. The problem in part is caused by our suppliers’ greed. Over the past year or so, I’ve noticed that the greed of these scoundrels has intensified. My team and I will lecture these anti-Acme people in hopes of diminishing their greed. As I’m sure everyone in this room knows, a major source of high and rising costs is greed. We will combat it!
“But we won’t stop there! In addition, we’ll dramatically reduce the amount of supplies that we purchase from other firms. I mean, why buy stuff from others when we can make these things in-house, right?! Although Acme is a furniture maker, we’ll stop buying our tools, delivery vehicles, electricity and insurance from other companies. We’ll produce, in addition to furniture, these goods and services in-house. We’ll make our own lathes and other tools, manufacture our own delivery vehicles, build and operate an electricity-generating facility to generate our own electricity and we’ll self-insure. In fact, I’m happy to announce that just yesterday we completed the purchase of a humongous ranch so that we can raise our own cattle to make the leather that we use to upholster many of our sofas and chairs. We’ll save beaucoup bucks and better secure our supply lines by doing these things in-house!”