My 1st Million At 33

Unlimited number of fools? That’s not even political correct. This is indeed the ugly part of the business, unlike Part I which is all about delivering good values and services to customers. Unfortunately, it is somewhat true.

My father taught me about this to warn me about the existence of unscrupulous business. In his words, “you (the business) will not run out of fools for you to cheat or take advantage of. And do not become one of the fools.” One must wonder how such business continues to exist with its unscrupulous practices. But as my Dad has observed how some people do buisness, literally, they just don’t run out of fools.

One of the best examples is in mortgage business. Between CountryWide and Mortgage Capital, there is about $5000 difference in the amount that they charge customers (for fixed loan terms). However, CountryWide certainly is not running out of customers. What is the lesson here?

For businessman, it means that you do NOT need to be the most competitive in price in order to compete (although the best businessman should always try to deliver the best values to his/her customers according to my Dad’s other teaching). The market price of a certain product or service in the business world is really a myth. Rather, there is a price range for all kinds of transactions and all kinds of customers. At the different price points within the price range, the demand/supply curve has a delicate balance for every supplier and customer. The amount of potential customers may be determined by the price, location, reputation of the business, etc. Therefore, you actually do NOT need to be the most competitive in price.

Certainly, as soon as you go away from the lowest possible price point, you are essentially putting customer’s money into your pocket. And in the mortgage business, or any business where the suppliers attempt to confound the customers in the true price that they are charging either by direct lies or confusing charges (just look at the number of entries in your escrow closing statement), the room of additional profits tend to be quite big. Now, the only way for you not to become a big fool is to understand how they charge their service and understand each item that they charge you.

Another example of such business is jewelry stores, selling diamonds using 5 Cs: carat, color, clarity, cut, and certificate to give you the maximum amount of confusion. They certainly will talk about your budget for your diamond, and then move your price point on their 5 Cs multi-dimensional product terrain to give them maximum amount of gross profits, while apparently providing your a “value” buy.

The bottom line is when you find a business that is trying its best effort not to give you any possibility of doing apple-to-apple comparison, you should know what it is upto. If a business makes its charges and pricing exceedingly clear, you can be certain that it is trying to give you a quick apple-to-apple comparison because the business is very confident in its ability to provide you the best value.

My advices for the customers: be a smart shopper, and understand the product/service. Do not listen to the salespeople, but instead do your homework on a fair comparison.

My advices for the business owners: although you do not need to charge at the lowest price point, know that your customers are your lifeblood, not suckers. Treating them good in the long term always pay off. Business is based upon mutual trust.