Re: [FE] ITTT was Re: Texaco Free Trade Zone

The below is not nagging.  Well, okay, it is, but the intent is
to ask questions you might not have asked yourself, so as to get
the imagination working to provide more explanation.  (And feel
free to ask me the same kind of questions about the Alarishi
Empire, btw).

>In my estimation, it would take about 45 years for the run to
become
>profitable. This leave 54 years of profit. ITTT takes the LONG
term view of
>profits. It is this long term investment that scares off the
compitition. As
>you stated not many stockholders would be willing to invest for
45 years at
>a loss or near loss to make profits eventually. ITTT's owner
did this
>because
>a) He had a dream of interstellar trade.

That's good, although not a lot of equity in it.

>b) He had the money and investors.

Investors from where?  If we could find such investors right
now, we'd have an orbital city operating.

>c) The time was right to set the precedent for a monopoly
(first
>interstellar colonies and the nations that would be hard
pressed to truely
>support them due to wars and such).

(grin) it's easy to establish a monopoly on an expensive,
unprofitable business, all right.

>d) spin-off technologies and subsidiaries were predicted to
provide profits
>in the short run.

No competition is interested in this?

>e) In gaining contracts for the first colonies, they would be
the most
>heavily invested in by the founding governments and thus become
profitable
>before later ones; This made getting the first ones essential
for the scheme
>to work.

Also the ones with a higher failure rate and highest per capita
expense.

>f) ITTT has the resources to field a large number of Q-Ships
and escorts
>which cuts down on piracy against its ships.

Again, resources from where?  I know people who are very, very
successful--eg are making $10M + per year personal income--and
they can afford houses, cars (Bill lost a Rolls Royce
once--couldn't remember which house he left it at), helicopters,
private planes etc.  I can see, possibly, a couple of (small,
old) freighters.   But warships, even small ones, take a whole
other level of cash flow to buy.  Either he's got to be an
incredible salesman to get investors, or he's got to have
absolutely stunning personal income.

My research books on the stock market aren't conveniently to
hand at the moment, but let's say we have a (conservative) 10%
return annually from a mutual fund (my 401K fund had 2 years of
36% annual growth but that's much better than average--however,
strategies are available which should provide 18-20% annual
growth long term).  Put $1000 into ITTT in one portfolio, and
another $1000 into a S&P500 index mutual fund or something
similar.  Let's check it at 45 years (when ITTT first starts
being profitable).

At 45 years, your mutual fund stands at $72,890.  ITTT has to
somehow make that much--not in gross sales, not in gross profit,
but in net profit--to be even.	ITTT can't gouge the colonies
all that badly to make a high rate of return, because if they
do, someone is going to offer a competing service at much lower
rates and the colony will either deal with smugglers or decide
your contract is no longer valid for one pretext or another.
Not every colony, perhaps, but enough to hit your margin even
worse than it was before.  If you invest in  patrol ships to
intercept smugglers, remember to deduct the cost (plus interest
and operating expenses) from your profits.

Now, I can see it happening if you get a tax _credit_ for your
investment--if on April 15 I'd had a choice of sending $926 to
the IRS or to ITTT, you'd have cashed the check by now.  But a
tax deduction wouldn't be sufficient to make up for the
opportunity cost.

>Again, the whole purpose of ITTT was to provide a generic
shipping fleet for
>use in FT games. This way all the freighters could be painted
the same paint
>scheme without some wise-cracker asking why 2 nation's cargo
ships had the
>same paint scheme.

Now _that_ is a good reason.