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| Source: “Art-B. Made in Poland” by Canal+ https://www.youtube.com/watch?v=1af0onHGmxc |
What is Art-B?
It's a Polish limited company with its headquarters in Cieszyn founded by Bogusław Bagsik
(26 years old) and Andrzej Gąsiorowski (30 years old), operating in 1989–1991.
The company was founded in 1989 in Cieszyn with a share capital of 1000 PLN. In 1990, it increased
its share capital to PLN 437 million. The firm dealt in the trade of literally all goods - from coffee and
tea, through RTV equipment, cars, and works of art. In a short time, Art-B evolved into a holding of
3,000 companies employing approximately 140,000 people and trading trillions of zlotys at that time.
Let me introduce you just a few examples of their clever ways of using lack of procedures in
young Poland to do the big business in a really short time.
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| Source: “Art-B. Made in Poland” by Canal+ https://www.youtube.com/watch?v=1af0onHGmxc |
Perpetuum mobile
It’s 1989. Inflation in Poland is 585%, the interest rate on the annual deposit is 640%. Leszek
Balcerowicz has frozen exchange rate - 1 dollar is worth 9500 zlotys.
Let’s suppose that we have about 160,000 USD. By selling the dollars we can have 1.5 billion zlotys.
This amount is what we get for the annual deposit. In a year, we pay 9.5 billion zlotys from the deposit.
Then we exchange it back to the dollar. So after a year, our profit from this transaction is
the equivalent of one million dollars with no risk. Also by making the deposit bank is giving you a
guarantee for this sum which you will be able to withdraw. However you can exchange that
bank guarantee for the letter of credit - so you can use it to pay foreign companies for their goods and
import them right now. In that system, you can have instant shipping of goods, sell them for
half a price to gain cash quickly, and quickly reinvest that cash or have another deposit.
To sum up, you exchange future profits for cash in a really short time. The circle is closed now.
And by repeating this operation just 5 times we can have pure profit of 7.5 billion dollars in cash.
Oscillator case
In the 90s Polish banking segment wasn’t really modern as it is nowadays.
We were operating using payment checks. Bank operations that were taking seconds in Western
countries, were taking days or even weeks in Poland because of our offline system.
This is the core of the mechanism that Art-B founders used.
Customer A from Bank A issues a check to Customer B of PLN 10 from Bank B. Customer B pays
a payment check at Bank B. Customer B has already paid in cash 10 PLN, while customer A still has
the same 10 PLN in the bank account. The balance sheet of both banks must match, so Bank B creates
a debit. The National Bank of Poland grants Bank B a technical loan to cover the resulting debit.
It is this mechanism of trading checks, where the NBP covers the citizen's loan that the creators
of Art-B used on a huge scale.
Banks inform each other about trading in checks via Poczta Polska. The time required to settle the check,
depending on the bank lasts from several to even 50 days. This mechanism allows for obtaining
a "free" loan. If we repeat this procedure several times in several banks (70 banks operated in Poland
at that time) it allows us to accumulate huge amounts of money credited for free.
Sources: “Art-B. Made in Poland” by Canal+
Questions
1. What do you think about the morality of doing business this way? Do you agree that when the law
does not forbid something it is legal?
2. If you lived in that Poland with this knowledge would you go into business like this?
Comments
Dependency The lower the morality in business, the higher the profits. I think that profit is not everything. In business and in life the most important thing is to be honest with both partners and employees. Profit is important, but not at the expense of employees. It should be achieved, but without breaking the rules of social coexistence. The common good must not suffer from it. That is why words must be given proper meaning. There should be no such thing as business morality.
2. If you lived in that Poland with this knowledge would you go into business like this?
I have my own business. Unfortunately, there are really too many people who want to start a business without knowing what they want. Either they want to take advantage of an idea that is already working, or they ask others what kind of business idea they have. This is especially visible on facebook groups. Such businesses will never have a future.
- People can buy cheaper products
- Banks are also making profits by this operations
But of course it is really risky to allow such things to be commonly used by any private company.
2. I totally agree with you but my question was more about your own morallity to do business like this which is kind of on the knife edge of law in times that our country law and procedures weren't really strong
2. I’d probably not be so smart 😊 It’s hard to tell, because as I said, if some entrepreneurs did this, it could be difficult to compete with them, but on the other hand it wouldn’t be nice to build a thriving company based on a snatch and live knowing that.
2. Haha dont' be so modest. Well to me it sounds pretty catchy do this kind of tricky business but I see your point :)
I agree that all these described activities look like manipulations. But if all this stuff is legal, so it is not them problem. The main aim of any business is to get profit. And how to make this profit is just the decision of owners.
Answering the second question, yes, all that is not forbidden is legal. It is just the fact, here is no place for someone's agreement or disagreement.
2. If you lived in that Poland with this knowledge would you go into business like this?
To be honest, I have never wanted to have any businesses. I know that it is very cool and popular nowadays to strive to create your own business. But I know myself and I am a too worrying and anxious person for businesswomen lifestyle :)
2. Haha, from your answears I suppose that it's just matter of time and new life challanges to change your attiude. The hardest part is to begin and then I think that even if you are scared about yourself you would be great businesswoman :)
1. What do you think about the morality of doing business this way? Do you agree that when the law does not forbid something it is legal?
You can't talk about morality here. This is a fraud according to the penal code. Ignorance of the law is harmful. You must know the law. Al Capone hasn't been convicted of illegal business, but of taxes. There's always something for someone.
2. If you lived in that Poland with this knowledge would you go into business like this?
Never.
2. Yes, if such a solution was legal, why not? Art-B is an example of a company that has used the imperfections of the legal and banking system in Poland. Legally speaking, the company did not rob anyone. I watched this movie "Art-B. Made in Poland ”, as well as many other productions describing the operation of" Art-B ". In many interviews, the creators openly suggest that the government and the elite were well aware of their actions and how they are acting, despite that they did nothing, and the arrest sentences (in my opinion, completely unfair) were delayed as far as possible.
In my opinion if a method is invented before the law is even capable to consider is legal or illegal then there is nothing wrong with using such method to obtain resources. As long as nobody gets hurt then such methods should be considered legal. There are many practises which cause people to lose money or put their finances at risk by using for example manipulation but they are still considered legal.
2. If you lived in that Poland with this knowledge would you go into business like this?
If I knew what happened to the people who stood behind Art-B I wouldn't do business such way. Sure, they made a lot of money faster than anyone before but their luck lasted very short. At least for Bagsik who was arrested in 1994. Gąsiorowski however is still free but living for so many years under stress must be tough.
2. For a simple reason, I don't even need to think whether I would or would not do such thing, because to be honest we may never be sure how we would act. But I doubt I'd know people that could ensure my relatively safe landing after whole things bursts out into public. Not to mention I doubt, I'd be willing to co-operate with government from back then or even worse co-operate with hostile foreign nation. Also saying that they did nothing illegal is wrong, because it was nothing illegal only because whole operation was allowed. It wouldn't be hard to nip it in the bud.
2. If i had this possibility i would go back in time and definitely go into business like this. Next with money earned from that transactions and other scams i would invest all the money in apple, amazon and google. I would be the richest man on earth and could do anything i want.
In business, there should be no deception, dishonest behavior, non-compliance with the principles of human morality and ethics, since the activities of an entrepreneur are associated with risk.
I do not consider this statement to be true, since the idea of an illegal or non-jurisdictional act seems wrong to me.
2 / I would never use it, in any of the options.
2. No its not for me, money sound good but I would be too stressed that probably something will go wrong.
does not forbid something it is legal?
In the early 90’s, when Poland was going through transformation, the government at first wasn’t focused on the law itself and if such things should be allowed or not. These were very special times and given the fact that many things weren’t regulated and people were fed up with poverty, they were starting to see an opportunity. You can’t simply ask if such things, if not regulated, are allowed. Our country was at a complete different level of development. Ask anyone if today such thing wasn’t regulated, does the law allow you to do that? I think much more people would not do that either of morality or overall level of wealth. To give a better perspective, even in 1995 an average monthly income was around 700 zlotys. Overall I disagree that I’d take advantage of something but on the other hand, knowing a bit how overall things were looking, part of me accepts me what they did.
2. If you lived in that Poland with this knowledge would you go into business like this?
There were many shady businesses in Poland at that time but knowing that the gentlemen had to ran abroad and one of them came back to Poland after over 20 years, if I remember correctly, I don’t think that I would go into something like this. There were many other ways, more or less legal that could generate a big profit.
does not forbid something it is legal?
I think all the things are in the money. Making a huge amount of money, just because you managed to find a way, which anybody else couldn't is not so bad. To be honest, it amazing, how some people are so creative, that they will always find a way how to bypass the law and all those clever ways how to do it.
2. If you lived in that Poland with this knowledge would you go into business like this?
I haven't lived in that Poland, but I am not sure what would I do. Because it would be a totally different situation, etc. But I think, I wouldn't consider it as an option.
does not forbid something it is legal?
I know that many businesses in Poland that were set up during transformation time were not perfectly legal or moral because law wasn't very strict. Often people who were earlier involved in politics had bigger chance to grow a big company because they had money, contact etc. Art-B case was not moral and it was all based on defective system. On the other hand I agree that everything that is not forbidden is legal and I think that this is one of basic rules of law. If something is not described as forbidden in law than how can justice system tell you that it was wrong and illegal. It is just impossible.
2. If you lived in that Poland with this knowledge would you go into business like this?
I wouldn't because of it being immoral. It only caused harm to other people. I know there are many businesses that are not fair but I think that money shouldn't be the only value for a person. At least it is not for me.
I do agree that if something isn't forbidden it is legal, nulla poena sine lege. Is it moral though? I think it is in a grey area, it's not immoral if it isn't forbidden by law, but on the other system you know you are tricking the system.
2. If you lived in that Poland with this knowledge would you go into business like this?
Of course, I would. I'd try to make the most money I can.