じてんしゃそうぎょう (jitensha sogyou)

* “J-WOTD” = “Japanese Word of the Day”

I’m surprised that there hasn’t been more focus by the media on what Nova really was. Nothing more than a long lived Ponzi Scheme.

I guess for the foreign press it is easier to win over readers with a sob story about how many gaijin will be fired/evicted due to the mess that Nova is today. What is most amazing about this scandal is how quickly it has snuck upon us. Only three years ago Nova’s share price was trading above 600 yen (this week it is closer to 16 yen!). Why did the proverbial $hit hit the fan so quickly? Because Nova was a house of cards.

But not just any old house of cards, the cunningness of Nova’s ability to finance its future from its cash flow of today would have even surprised Baldrick. The beauty of the pre-payment system meant that Nova would receive an entire year (and sometimes more) of cash before the student had even begun her lessons. While any respectable company would use the cash carefully, a Ponzi scheme is all about growing that cash. Spending it today (ads, new schools openings, new teacher hires, celebrity bunnies, you name it) so that you will hopefully sign up more students (read “free cash”) in the future.

It’s alright while you are growing. The faster you are growing, the more students sign up, the more cash they pay you in advance, the more you can finance the growth of your empire. But this can get really dangerous if you don’t realise that you are borrowing from tomorrow to finance today. The moment the growth stops, the cash stops coming in and you have no way of paying your bills. You start to realise that you can’t even afford to pay your teacher’s salaries. The momentum disappears almost immediately and you come to a grinding – and ugly – halt.

Clearly the Japanese (except for the poor OLs who signed up for Nova) have seen a few of these scams in the past. So many in fact that they have a word for it. 自転車操業 (jitensha sogyo, running your company like you would a bike).

The example of a bicycle is perfect. Think about it for a moment, the faster you pedal, the faster you move, the more momentum you pick up. Things are great – they’re fun even. And then you run our of steam (not even Lance Armstrong can ride a bike forever). The moment you stop pedalling, your momentum disappears and you start to slow down. Eventually your wheels stop spinning and your bike falls over. Not only a halt but potentially a painful one. Nova was the best example of a jitensha sogyo Japan has seen in a long time.

Example of usage is found in real life HERE:

英会話学校の経営は前払いの受講料を教室数の拡大に充てる自転車操業が大半
“The vast majority of English Conversation Schools run their business like a bicycle by funding their expansion with the prepaid lesson fees from their students”