Not too long ago I read a crazy book, Medici Money, written by Tim Parks. The book says almost nothing about the art and role of the Medici family in the Renaissance, but it does examine the Medici business in detail. All legal and semi-legal schemes are described in detail, with figures and analysis of the economy of that time. One half of the book is devoted to the rise of the Medici bank, the second to its slow and inevitable decline. The reasons that led the bank to close in 1494 (in total the bank operated for less than 3 years for 100 years) are quite applicable to our market.
I decided to collect these reasons into convenient 5 points.
1. The Medici stopped being involved in finance
At some point, doing financial transactions, tabulating tables, adding and subtracting became simply boring. The company's economic and political position was strong, so trivial banking operations ceased to be the focus. Whether it’s the image – paintings, parties, a new office, in the sense of a palazzo.
Conclusion: if you want to get rid of a business, stop immersing yourself in its key production processes, rise above the fray and start talking about long-term planning.
2. Lent to kings and other respected people without any guarantee of repayment
The principles for selecting projects are no longer aligned with operational business goals. Making a profit was replaced by other forms of motivation, for example, increasing political influence and personal ambitions.
Conclusion: if you want to get rid of business, agree to unprofitable projects that will strengthen ties with Igor Ivanovich or Francesco Sforza.
3. Relatives began to occupy key positions
Firstly, the level of competence of the relatives was not very high, as was their experience. Secondly, professionals who have been working in different departments for many years have faded into the background and lost motivation. Thirdly, the level of decision-making has sharply decreased - it’s scary to criticize the decisions of the boss’s relatives.
Conclusion: if you want to get rid of your business, put relatives in key positions.
4. Fascinated by palaces
Palaces are wonderful, but expensive. When each branch manager (a relative, of course) began to build a palace for himself, it was not easy for the bank. In addition to the palace itself, you had to buy expensive fashionable furniture, order a painting from the best artist depicting yourself as a saint, and, of course, throw a series of parties to maintain your status in society so that people would continue to talk about you.
Conclusion: a palace (read “office”) is good, but it doesn’t make a company a company.
5. Changed the rules of the game and eliminated competition
Competing is troublesome; it is more convenient to obtain an administrative resource (for example, a contract with the Church), or to monopolize some areas. As a result, competitiveness drops sharply and, when administrative resources disappear, access to the free market becomes a problem. What is also important: when market conditions change, such a structure is not ready to change quickly.
Conclusion: if you want to get rid of your business, negotiate an “exclusive” deal with several key Clients and make sure that they account for more than 50% of the turnover.
I recommend the book.
