Friday, February 27, 2009
The Felix Chronicles, #7
In which the class follows
a capitalist train of thought
“I have a proposition for you, Sam.”
“Oooooooh,” multiple voices say in unison.
“I’m not propositioning him,” I say with some irritation. “I said I have a proposition for him.”
“Go right ahead, Mr. Cullen. I’m game.”
“Well, Sam, I understand you’re in lumber business, and that you’re pretty good at it.”
Sam nods, picking up my drift like a drummer responding to a chord progression at a jam session. “That’s right. Lumber.” I love this kid.
“And I understand that you move lumber by barge,” I say, pointing to the map on the wall, “from your mills somewhere around here in Milwaukee, up Lake Michigan, down Lake Huron, and down into Lake Erie. And that you pay a rate of $6 a ton in shipping costs.”
“Well, son, I’m in the railroad business, and I’ve just finished building a line from Chicago to Sandusky.” I draw a line that runs due east from Chicago across Indiana and Ohio. This is clearly a shortcut. “It cost me $600,000. I reckon that if you were to give me 100,000 tons of lumber at $6 per ton, I’d amortize the cost in about a year. No great bargain for you. But it would be a lot faster than moving your goods by barge. And of course time is money. Moreover, should my venture succeed, I promise you significantly lower costs, which we can write into a contract if you like. What do you say?
“Absolutely,” Sam says. “Count me in.”
“Wonderful.” I turn to Susan. “And you, Susan? You want to be a part of this grand experiment at $6 a ton?”
“Sure,” she says, in the spirit of the moment.
“And you, Tom?”
“How about you, Joey?”
Joey wrinkles his nose. “You said this rail line is costing you $600,000, right?”
“Which means that Sam basically paid for it, right?”
“Well, yes. Though of course I do have maintenance costs.”
“Well, I’m not interested unless you give me $5 a ton.”
“Very well, then. Five dollars it is.”
I move on. “How about you, Ellen?”
“Can I get $4 too?” Joey asks.
“Nope. You’re locked in.”
Joey swats his hand in irritation. “You businessmen are all the same."
“You wish,” I reply. “You’re just mad because I’m so much better than you.”
“I want in for $2,” Alec says.
“I guess I’ll take it,” I say. “That’s not much money, but as Joey has pointed out, I’ve already earned back my costs. The real value of taking Alec aboard is that I’m beginning to reach that tipping point where more people will choose me than the barges. Now you all will pay a premium for speed.”
“I want a dollar a ton,” Becky says.
“Why not? You just said whatever you get is profit, didn’t you?”
“Well yes. But you’re a little late, Becky. I’ve got the upper hand now.” Everybody pays $7 a ton. Except Sam. He’s one of my peeps.” (Laughter at my use of slang.) Sam smiles broadly.
“What do you think, kids? Am I an honest businessman?”
“No way!” Susan says. “You took advantage of me!”
“That’s your own fault,” Erica says.
“You don’t have any problem with what I did, Erica?”
“I didn’t say that,” she says with a mischievous smile. “You’re probably a creep. But Susan wasn’t paying attention. She deserves what she got.”
Susan sticks her tongue out at Erica.
“Well, Erica, in the brave new world of industrial capitalism, you’re largely right,” I reply. “This kind of dealing has always been going on, but now it’s being practiced on a scale, and a level of sophistication, that’s never been seen before.”
“Of course, the deal-making isn’t simply a one-way street,” I continue. Take Mindy here.” I place gesture in her direction. “Mindy happens to be in the oil business.”
“Mindy wouldn’t happen to be John D. Rockefeller that we read about last night, would she?” Beth asks.
“Kinda looks like him,” Joey says.
“Yeah,” says Nate. “The long blonde hair is a giveaway.”
“As a matter of fact, Mindy does happen to represent Mr. Rockefeller’s interests. Some years ago, she used to be his competitor. But recognizing her talent, Mr. Rockefeller made her a very compelling offer.”
“An offer she couldn’t refuse?” Joey asks.
“Well, no, not if she wanted to remain in the oil business,” I reply. “Anyway, that’s all behind us now. Right, Mindy?”
“Riiiight,” she says, with an air of disdain, perhaps as much because she’s a hostage in this discussion as conveying her dismay at being steamrollered by Rockefeller. I think of this as a compromise solution to her silence of recent weeks: I draw her in without forcing her to do much in the way of heavy lifting. There are some chuckles at her evident distaste.
“Now as it turns out, Mindy has made me a very interesting offer. You see, I’m now charging about $8 a ton to move freight, a price that reflects the fact that I have to use my own equipment to pick up and load goods from warehouses and other facilities. But Mindy runs a real state-of-the-art operation. She has the equipment to deliver her oil directly to my rail yards. That’s a big saving in terms of time and aggravation, which was exactly my appeal to Sam, if you recall.”
“So I guess this means Mindy wants something in return,” Sam observes.
“Of course. She wants a discount. Actually, to be more precise, she wants a rebate. Mindy understands the importance of stable, public pricing of services like shipping. So the official price for her will be $8 ton, just like it is for all of you (except Sam, of course, until his business gets taken over by the n’er do well son of his). But we’ll have our accountants work it out so that she gets a dollar back for every ton she ships with me. Fair enough?”
I get blank looks. What’s to argue with, they seem to ask.
“One other thing. Mindy has asked that this be our little secret. You see, she doesn’t want anyone to know that she’s saving money this way. That way poor Mark here” – I point at Mark, who reacts as if he’s been jolted – “will be utterly mystified by how Mindy can always sell her oil for less than he can afford to sell his. Mark will gradually choke to death on his overpriced oil. Sorry, Mark.”
Mark raises his eyebrows, speechless. There’s laughter, both because it’s clear Mark has been somewhere else, but also because his reaction is kind of appropriate to the circumstances he’s just been dealt.
“So let me ask again: Is this fair?”
“Are there any rules against it?” Sam asks.
“Nope. Should there be?”
“Absolutely!” says Susan.
“Are you still bitter about overpaying for that freight back when I was starting out, Susan?”
“You’re damn right I am!” She’s having fun.
“I think Erica had the right idea, earlier,” Alec says. “What’s that saying? ‘Let the buyer beware?’”
Beth’s brow is wrinkled. I’m so pleased. Good things tend to follow.
“Something wrong, Beth? Is your friend Alec here being callous?”
“Well no, not exactly,” Beth replies. “What I’m wondering about are the buyers of all this stuff.”
“I mean the people who buy the actual lumber or oil for their houses. If Mindy can put Mark out of business, then she’ll be able raise the price to whatever she wants.”
“So let me get this straight: You don’t really care what becomes of Mark, or Susan, or Tom or the rest of them?”
“Well no, it’s not that I don’t care about them. I’m just wonder about what this all means for everybody else. You eliminate competition with your railroad, Mindy eliminates competition by putting Mark out of business, and where does that leave everyday people? We'll be at your mercy.”
“You know, Beth, I worry about you. I really do.” Samantha, who has been looking on with amusement through all of this, is laughing in that quietly hearty way of hers. “And I’m not sure about you, either,” I say to her. “But we’re out of time. I just hope you kids can get yourself some help. I really do.”