<story><title>Texas electric firm files for bankruptcy citing $1.8B in claims</title><url>http://reuters.com/article/idUSKCN2AT1FE</url></story><parent_chain><item><author>jonplackett</author><text>This is the side of privatisation that gets ignored. When private companies screw up, who gets left with the bill? Private companies have no incentive to be ready for really big problems because they know they’ll get bailed out, or just not have to pay.&lt;p&gt;Privatise the profit, socialise the losses.</text></item></parent_chain><comment><author>snidane</author><text>It&amp;#x27;s actually well understood that privatisation for platform industries is bad, privatisation for businesses running on top of platforms is good.&lt;p&gt;Networks and infrastructure = little to no competition. Eg. networks naturally settle in a optimal geographical location and utilize economy of scale then. Can&amp;#x27;t compete with that. So don&amp;#x27;t privatise platforms. Rather - make them monopolistic and make them share the revenue with public using a monopoly tax. AT&amp;amp;T model.&lt;p&gt;Translated to programmer speak: society&amp;#x27;s OS (law,defence,policing,roads,energy,networks,sewers,etc.) should be uniform and near monopolistic to maximize economy of scale.&lt;p&gt;Society&amp;#x27;s Apps (businesses) running in the ecosystem of the OS should be private, numerous and competitive as much as possible.&lt;p&gt;Occassionally you stumble upon a private business which develops a new network model and after some time it should be refactored from being an App to be part of the OS (eg. twitter).</text></comment>
<story><title>Texas electric firm files for bankruptcy citing $1.8B in claims</title><url>http://reuters.com/article/idUSKCN2AT1FE</url></story><parent_chain><item><author>jonplackett</author><text>This is the side of privatisation that gets ignored. When private companies screw up, who gets left with the bill? Private companies have no incentive to be ready for really big problems because they know they’ll get bailed out, or just not have to pay.&lt;p&gt;Privatise the profit, socialise the losses.</text></item></parent_chain><comment><author>phire</author><text>&amp;gt; . When private companies screw up, who gets left with the bill?&lt;p&gt;In theory, the company is meant to declare bankruptcy (or seek more investment from shareholders) as soon as their books say they are insolvent. A company is Insolvent when it&amp;#x27;s liabilities are higher than it&amp;#x27;s assets, even by a single dollar.&lt;p&gt;The theory is that because the company is required to declare bankruptcy as soon as possible, it should only be slightly insolvent and should be able to repay creditors 80-95 cents on the dollar after liquidation.&lt;p&gt;Owners or shareholders might even put a company into bankruptcy while it&amp;#x27;s still solvent (if they predict a future insolvency, or just want to wrap the company up). Creditors might get the full 100 cents on the dollar. Any money beyond that is paid as dividends to the owners&amp;#x2F;shareholders.&lt;p&gt;In theory, if a company had incompetent or fraudulent accounting practices and didn&amp;#x27;t know it was insolvent, or it deliberately traded while insolvent, then the liability of the company is pierced and the owner can find themselves on the hook to the creditors.&lt;p&gt;Companies are only meant to be liability shields if they are run correctly.&lt;p&gt;In reality, sometimes events cause a company to lose a whole lot of value overnight. A company could be 100% solvent one month and 20% solvent the next. But as long as the company was following best accounting practices, it&amp;#x27;s legal. Sometimes the assets of a company can lose value after bankruptcy, or due to the bankruptcy. Especially when the company has put a lot of &amp;quot;good will&amp;quot; or &amp;quot;brand recognition&amp;quot; as assets on their books.&lt;p&gt;In reality, liquidators (who are also private companies) often don&amp;#x27;t go after owners responsible for fraudulent accounting or mismanagement. They let it slide.&lt;p&gt;Perhaps because they didn&amp;#x27;t detect it, or it was too minor to worry about. Perhaps they didn&amp;#x27;t want to waste their time trying to prosecute. Perhaps they decided their creditors would get more cents on the dollar by not prosecuting, especially if the owner has very little of their own assets.&lt;p&gt;I also suspect there is a reputation factor. Owners get to select which liquidator handles their bankruptcy (unless it was court ordered) and if one liquidator gets a reputation for going after the owners for every mistake, then they might get less business.</text></comment>