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Unusual
Ways Newsletter
(Subscriber Access Only)
(Subscriber Access Only)
This week I have some thoughts about money. First, I have have a new idea presented below, a business I hadn't heard of until recently. Following that I get a bit philosophical, and look at some ideas about business and what it means.
A New Kind Of Carpet
Business
I recently read about a man who buys and sells carpet remnants, and then buys them right back and sells them all over again. How does this work? It started with his identifying a need. In this case, it was a warm carpeted floor instead of the cold linoleum college students usually get in their dorm rooms.
This entrepreneur noticed that dorm rooms at the colleges near him were all the same size, generally ten by twelve feet. He contacted carpet manufacturers and found that he could buy the remnants cheap. Then all he had to do was cut them to the right size.
He sells these to the college students for four or five times what he pays. This is still cheap enough for them, and the pre-cut carpet can be quickly loose-laid wall-to-wall in the room. At the end of their school year they often sell the carpet back to this man, and cheap. He cleans them up, stores them over the summer, and sells them again in the fall.
What Is Business About?
Lets look at what business and making money is about, using the example above to demonstrate some basic concepts. I have several important thoughts on this.
1. Business Is About Service To Others
Notice that this man isn't trying to convince people they have to have something. The customers already know they want carpet, and the entrepreneur finds a way to meet that need. Creating a way to give people what they want and need is the "service" part of how every "product" business starts. Business serves people, and profit is the reward for that service.
I bring this up because making money is often seen as somehow "dirty" or as a matter of taking advantage of people. Individuals in business do treat customers unfairly at times, but that is a recipe for failure, not success. Consider the salesman who is "so good he could sell ice in the arctic." No matter how persuasive he is, he will probably convince people to buy ice in the arctic only once. Soon after he will suffer the consequences of not properly serving others.
2. Free Trade IS Fair Trade
Notice that the carpet entrepreneur is selling a product for five times what it costs him. Is that fair? It is often suggested that there is some ethical relevance to how much a product is marked up from the providers cost. Nonsense!
Whatever the price of a product or service, if it is sold without any force or fraud, it is sold fairly. We all tend to complain about the prices of things at times. Of course, the truth is that if we didn't value what we bought more than the money we paid for it, we would have taken our money elsewhere.
Consider a gas station in the middle of the desert that charges an "outrageous" price. You might not like paying the price, but you pay it because the owner has provided a real and valuable service and product to you: the gas that keeps you from being stranded in the desert. His high price is worth it to you at the time or you wouldn't pay it, and it is certainly better than if there was no gas station there at all.
If you really thought it wasn't fair, you could open your own station out there to provide "fair priced gas." You might prove that there is enough demand for such a thing, and so force the other station to lower its price. On the other hand, you might discover that a high price is required to survive as a low-volume station in the middle of nowhere.
So what is a fair price? Whatever a customer is willing to pay without being forced or lied to.
To get back to the carpet example, let's suppose that a room-sized piece is sold for $150. The student decides this is fair by buying it, right? Otherwise he would buy a small rug or something (or nothing). Now, what if he later discovers that the carpet cost the seller just $1. Would the price become less fair?
No. Consumers decide what is a fair price by buying things. In a free economy every business provides a real and valuable service at a fair price, as determined by the consumers who otherwise wouldn't hand over their money.
3. Business Is A Noble Activity
Business is about giving people what they need and want. When it doesn't properly serve us, it fails (unless governments exclude competition, as they often do). In other words, business people are looking out for our interests as we define them with our dollars spent. Of course it can be said that they only serve us to make a profit - but that is the point. A free market forces them to think of how to best serve us.
All the products and services you value, from medicine to wonderful music to paper and food - it all comes to us by way of business. Someone had to use their mind, money and resources to figure a way to provide everything you need, and all he or she asks for this service is a price you are willing to pay. So when you think of business, remember these thoughts about money, and try to see making it as the noble pursuit it is and can be.
Note: This is part of the "Unusual Ways"
Newsletter.
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