In one of Gladwell’s latest articles entitled “The Crooked Ladder” he puts that old mafias were simply an attempt to be accepted by the society. Moreover, one of the biggest misconceptions in movies and also by us is that the really dangerous guys are those street drug dealers. Actually, those are not. As Gladwell puts it,
That’s why the crooked ladder worked as well as it did. The granddaughter could end up riding horses because the law—whether from indifference, incompetence, or corruption—left her gangster grandfather alone. The idea that, in the course of a few generations, the gangster can give way to an equestrian is perhaps the hardest part of the innovation argument to accept. We have become convinced of the opposite trajectory: the benign low-level drug dealer becomes the malignant distributor and then the brutal drug lord. The blanket policing imposed on 6th Street is justified by the idea that, left unchecked, Mike and Chuck will get worse. Their delinquency will metastasize. The crooked-ladder theorists looked at the Mafia’s evolution during the course of the twentieth century, however, and reached the opposite conclusion: that, over time, the criminal vocation was inevitably domesticated.
At the same time, one of the most insightful takeaways for me is that the real ‘bad guys’ were the ones who made illicit things at the society’s face. On top of that, they focused on niches and represented a really tiny slice of the cost structure of the entire value chain. With that, they had pricing power, outstanding returns on capital and no one bothered about them.
“James Jacobs, a New York University law professor who was involved in anti-Mafia efforts in New York during the nineteen-eighties, points out that the Mafia had every opportunity to take over the entire carting industry in the New York region—just as they could easily have monopolized any of the other industries in which they played a role. Instead, they stayed in the background, content to be the middlemen. At New York’s Fulton Fish Market, one of the largest such markets in the country, the Mob policed the cartel and controlled parking—a crucial amenity in a business where time is of the essence and prompt delivery of fresh fish translates to higher profits. What did they charge for a full day’s parking? Twelve dollars. And when the Mob-controlled cartel was finally rooted out, how much did fish prices decline at the Fulton Fish Market? Two per cent.“
“This is one of the most interesting things about the Mafia,” Jacobs went on. “They did business and cooperated. They weren’t trying to smash everybody. They created these alliances and maintained these equilibriums. . . . You’d think that they would keep expanding their reach.”
At the end of the day, isn’t that kind of business we are looking for? Companies that aren’t bothered by either suppliers or clients, that are really focused on a niche and don’t need to put a lot of capital to work while reap a disproportionate part of the profit pool?