The plastics business seems to attract more than its share of fly-by-night entrepreneurs, plus many more who dance on the edge between respectability and fraud. They´re encouraged, perhaps, by the relative technological ease and low cost of entering the industry, plus the promise of better-than-average growth.
Anyone who has hung around the industry has met these characters. Armed with a patent, an original idea or a bit of slick market research, they spend a lot of time fishing for investors and trying to convince suppliers to sell them machinery, tooling or raw materials on credit.
Investors´ cash may be in short supply right now. But when the economy is soft, entrepreneurs have a bit more success finding suppliers willing to take a chance on the dream. After all, what does it hurt to sell a few machines if the alternative is letting them sit in a warehouse? If the deal doesn´t work out, you can always repossess the equipment and sell them again.
Most of us seem to think we´re pretty good at spotting the bad apples. Usually something doesn´t quite ring true about their previous career experience, or they volunteer wildly unrealistic predictions about the company´s future. Another tipoff is when they get antsy and secretive about answering run-of-the-mill questions.
Still, every once in a while we´ll come across a story about a company that we thought was legitimate but ends up out of business, in bankruptcy or in legal trouble.
When a company does fail, we look back at our earlier stories checking for hints about what might have gone wrong. If our previous coverage had a properly skeptical tone, we feel a bit better about our efforts.
The industry has both informal and formal ways of dealing with would-be cheats: Reporting deadbeats to your circle of contacts and to credit-reporting companies. Both methods are imperfect. Not everyone is eager to disclose when they´ve been bamboozled, and some would-be tycoons are really adept at fooling others. Still, the formal way probably works best.