| The Final Word by Jim Thompson |
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Spending one's depreciation.
I saw yet another article recently touting the idea of reinvesting less than one's depreciation. I find this to be extremely dangerous thinking. The only time it works is if the new item, for some reason, has declined significantly in price from the one it is replacing. Funny, it does not appear that even on a worldwide basis, we are experiencing the rampant depreciation necessary for this to come true.
Drive through the countryside. If you see farms with falling down buildings, fencing in poor condition, and a general unkempt appearance, you are seeing the results of not reinvesting at one's level of depreciation.
Continuing with the agricultural allegory, sometimes this is called eating one's seed corn. However, whatever you call it, I can not think of a faster way of going out of business or giving up on the business in which you are engaged.
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