Bubble Bursting

The end of the last blog reminded me of another experience (surprise!). It had to do with protection but, in this case, a patent. To protect the innocent, I’ll change some of the details.

It was about ten years ago that I received a call from a former client to a consulting business I had. Things had gone very well with that and he referred me to someone else who was experiencing problems. While I was no longer in that field, I agreed to help out. He arranged the meeting.

I recognized the names associated with this. There had been a newspaper article about this guy’s booming start-up, how successful it was and how additional investors were lining up. According to the friend who referred me, it wasn’t doing well and the owner was struggling to find new money to pump into it. Yeah, the newspaper bit on the hype and was unwittingly abetting him in attracting new investment dollars. Hate to burst your bubble, but that happens. A few companies that were listed on the Fortune and Inc. 500 lists never even existed.

I showed up at the opulent offices (so that’s where some of the investor money went) a little early, spruced up in a dark blue suit, as was still the custom of the time. About 40 minutes later, a disheveled looking guy in a leather jacket walked in, picked up the mail from the front desk, cast a disinterested glance in my direction and sauntered down a hall. About ten minutes later, the receptionist’s phone buzzed and I was escorted to his office.

He slouched in his lavish chair and eyed me with something approaching irritation. This was the idea of one of his investors (my former client) and he really didn’t need any help. But, he was willing to listen. Yeah, I can see that.

I asked him to give me a summary of his business model. He sighed in bored resignation and talked to me in a manner you might use to describe nuclear fission to a beagle.

The basic idea was that his target market was car dealers. He’d video a “tour” through selected products on their lots and post it on his site so their potential customers could shop without leaving their homes. The easier it was to shop that dealer, the more likely it would be for business to gravitate that way.

The fundamental hurdle I saw in his plan was that his service would be somewhat easy to replicate in one variant or another, and that he was charging a premium price, providing more incentive for the prospect to find a do-it-yourself alternative. He was emphasizing the video service when I thought he should stress that his one-stop shop would pull in more prospects than individual dealers could do on their own.

That was the quick and dirty analysis. If he wanted me to go further and solve his problems, he’d have to pay me. He had all the earmarks of someone who would pump you for free advice and then bail.

He asked what made me think I could pull off what he (the genius) had not, clearly seeing no remote possibility of that. I gave him my reasons and track record, being careful not to bruise his ego. He dismissed the probability of that and me with a flick of his hand, which was fine with me. It obviously wouldn’t have worked out.

A few months down the road, I noticed an article that he had pulled in a new round of investment. Shortly thereafter, the company went down, taking the investors with it. But, that isn’t the end of the story.

At some point, whether before or after our meeting is unclear, he patented “his method” of marketing cars on the web. He apparently wrote the application in broad and nebulous terms, but still managed to obtain the patent.

Now, he re-emerged with a new business. He was going after every dealer on the web, seeking a royalty because he “invented” marketing cars on the internet. Shades of Al Gore.

As you might imagine, he was told to shove his patent up his tailpipe. But, someone who sucks in investors to a cruise on a sinking ship is not going to be deterred by that.

He made up stationery to look like it came from a federal enforcement agency (non-existent) and sent it via registered mail to dealers, ordering them to pay the royalty or suffer severe sanctions. The money began to roll in.

But, car dealers are a canny breed and some tough customers. It didn’t take long for some to pull aside the curtain and report his shenanigans.

I know what you’re thinking. Mail fraud. Extortion. Impersonating a law enforcement agent. Some kind of federal offense. He’d do hard time. Again, prepare to have your bubble burst.

Some time back, I wrote about how people imagine that there are dozens of government agencies poised to spring into action whenever a ne’er-do-well surfaces to hoodwink them and smite the offender. Blame television and government propaganda. What we finance is well-paid bureaucracies with limited efficacy. The fact that any action was taken in this case approaches miracle status and is attributable only to the significant collective influence of the auto industry.

All that happened was that he was issued a cease & desist order. No jail time. No huge fine. Just a don’t-do-that-anymore. That’s it.

I lost track of him after that, which is just as well. I don’t like to think about the people like that who are out there in significant numbers, much less that they operate with relative immunity.