Try the new FT.com

June 24, 2011 7:23 pm

Smashing plates can’t rescue this taverna

  • Share
  • Print
  • Clip
  • Gift Article
  • Comments

“With all due respect, doctor, I don’t think it’s me who needs to see a shrink.”

“Don’t worry. A lot of people feel a bit awkward when they first lie on this couch. This is a safe, non-judgmental space.”

“I wish the Essex Community Business association was as relaxed.”

“But you’re the chairman of the ECB association. Tell me why you feel that way.”

“Look, I always felt that the ECB association was supposed to be an informal talking shop, a way for people with shared interests to make new friends and perhaps even launch joint projects. Everyone was really happy when Georgios, the new owner of the Plaka Taverna, wanted to join – the more the merrier.”

“That all sounds very reasonable.”

“Well, sure. But then it turned out that the Plaka had some pretty serious problems when Georgios took over. It had been running up debts that none of us knew about. Georgios blamed the previous owner of the Plaka. Whatever – suddenly Georgios is knocking on the door of Mr Saville, the bank manager, asking for a bigger overdraft.”

“I see. But why did that cause a problem for you?”

“Because Mr Saville didn’t want to lend any more money to Georgios. He said that Georgios’s business wasn’t growing fast enough. Mr Saville didn’t think Georgios could repay his debts.”

“Isn’t that between Georgios and Mr Saville?”

”Well then Georgios came to us, and for some reason the ECB association decided to have a whip round so that we could tide Georgios over until business picked up.”

“I see. And is there any reason to believe that business will pick up?”

“Not really. Business is slow – to be honest, he’s overcharging for mediocre souvlaki. And his own costs are high: Georgios’s staff are overpaid and underemployed.”

“It sounds like Georgios needs to reduce his prices, sack some waiters and cut the wages of the rest.”

“We told him that, but his staff are complaining that suddenly the Essex Community Business association thinks it’s running the taverna. They’ve been protesting, stealing stock and frightening away the customers. It’s crazy.”

“It does seem unhelpful – but perhaps they’re hoping that somebody else will take the pain.”

“Look, there’s no way that Mr Saville the bank manager is going to lend another penny to Georgios. Georgios himself is still borrowing money just to pay his staff – leave aside the money he owes to Mr Saville and to the ECBA.”

“But what I can’t understand is why the ECBA got involved at all.”

“It think it’s partly that we felt it would look bad for a fully paid-up member of the ECBA to go bankrupt.”

“It’s looking bad already: Georgios’s staff are burning boxes of ECBA ties in the street.”

“It’s not just that. We’re worried about Mr Saville. If Georgios doesn’t pay his debts then Mr Saville will lose money. That’s going to make trouble for him. He may be less willing to lend money to other ECBA members. I know José is likely to want an overdraft extension too.”

“But does José have a viable business?”

“Are you joking? He has a chain of tapas bars all over south Essex. It’s been tough but he’ll pull through for sure, if he gets the money.”

“So if I understand the situation, you’re lending money to Georgios that you know he can never pay back, and demanding that his staff make sacrifices they are transparently unwilling to make, in order to protect Mr Saville’s bank, in order to protect José, who in some unspecified way is connected to Georgios’s fate.”

“It does sound a bit strange when you put it like that. I think the theory is that if we don’t throw money and yell impractical and unwelcome management advice at a transparently bankrupt business, then maybe a perfectly viable business will be damaged. Especially since there won’t be any money left, because we’ll have given it all to Georgios, who will have given it all to his waiters. Does that make sense?”

“You tell me.”

“You’re right. It makes no sense whatsoever.”

“Please don’t be defensive – I didn’t say that. However, I do think we need to continue this conversation twice a week on an indefinite basis. We’ve got a lot of progress to make.”

Tim Harford’s new book is ‘Adapt: Why success always starts with failure’

tim.harford@ft.com

Related Topics

Copyright The Financial Times Limited 2017. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.

  • Share
  • Print
  • Clip
  • Gift Article
  • Comments
SHARE THIS QUOTE