Recently, a socialist told me she was skeptical that Hertz really needed to declare bankruptcy. She thought it was all a ploy of some sort and that they really did have enough cash to make payments on their bonds. This is of course ridiculous. To declare bankruptcy is to relinquish control to others, and no CEO wants to do that. Recently, Hertz having noticed that a lot of people were buying its stock despite having declared bankruptcy, they asked the bankruptcy judge if they could sell some stock and make money so that either they wouldn’t be in bankruptcy anymore or so that at least they wouldn’t be as deeply into it as before. The judge agreed, but then the Securities and Exchange Commission jumped in and said no. None of this is enjoyable if you’re part of the company.
Another socialist told me today that he knew plenty of socialist professors who went over to the corporate dark side when they became administrators. That isn’t how I would characterize it. I would say that when they were mere professors, they thought that institutions, whether corporations or colleges, had unlimited funds, but once they became administrators, they realized that that just wasn’t true. This is why Margaret Thatcher has said that sooner or later socialists run out of other people’s money. It’s because they thought there were unlimited funds available, and of course there were not.
Young professors are making this same mistake. They think that colleges should close down for the year but continue to pay them their salaries. A Harvard could get away with this because their endowment is so large, but most places would run out of money rather quickly.
Every professor should be required to take a course on how college finance works.
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