(Courtesy GTSPACE, under the Creative Commons Attribution-Share Alike 4.0 International license.)

I doubt that I have ever participated in a business transaction that profited me, so my friend Larry, a business owner, is fascinated when I repeat something to him from the world of business.

I had been reading about factories in Shaodong, China, the world’s “lighter capital,” which makes 100 billion disposable lighters each year, or 70 percent of the world’s total, the CCP says. In the way that AriZona Iced Tea has stayed the same price even through inflation, “Despite rising production costs, the city’s basic lighter remains priced at 1 yuan (14 cents). Behind the unchanged cost is the local resolution to embrace changes that have characterized many industrial towns and cities in China: a supply-side structural reform that leads to cost-cutting automation and greater focus on value addition.”

Automation was the start, but further factors keeping the price down, as labor costs have risen, include creating some 100 subcomponent firms within a seven-mile radius, precision engineering that continues to shave fractions of a cent off the cost of each unit—making the plastic walls of the fluid reservoir infinitesimally thinner, e. g., to save on injection molding costs—and selling in great bulk, since the wholesale profit per unit is only 3/10 to 6/10 of a cent. One supply-chain expert calls the Chinese lighter, with its “economics of micro-margins,” “one of the most incredible industrial miracles on Earth.”

Larry was interested because he hates that business model, so persnickety and state-driven. His plan for the future is the opposite: to sell fewer but more expensive items at greater profit margins. Ideally, he says, he would sell one item per year and make a real killing, a triumph of the Western entrepreneurial spirit. Nobody should want to run a business like the lighter factory, with its puny, per-unit profit scheme. No American company would even try to do what the Chinese do, by hyper-control of their people.

He was distracted, though. “There’s a new business complex going in next to me, across the street from the failed complex that’s just like it. Hedge funds will skim money off the top of the new project, and everyone else will suffer.”

He wished he could be made emperor, he says, to prevent the redundancy or at least another eyesore-failure. He says he would require a bond or trust for any new development/business, to be used to make things “at least as okay as they were in the past if their new slop project fails. I would also criminally prosecute everybody for the failure, from the contractors to the shareholders.”

I said capitalists would complain about his heavy-handedness, though the scenario was exactly what has happened in places such as Louisiana, where oil companies left brownfields, salt-polluted canals, and abandoned equipment in the wake of failed projects, then cried bankruptcy or that their companies no longer existed, so they couldn’t possibly be expected to clean up. They would say Emperor Larry made it too dear to even initiate projects, that he was a hindrance to the free market and America.

Larry ignored me imperiously. “Since tearing down all the trees, they’ve done nothing,” he groused. “It’s been a few months now; did it go bankrupt already? After just tearing down the trees? If the project doesn’t complete, they should go straight to jail.”

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Different Styles in Business Management