Living in the age of countless corporate scandals and skyrocketing CEO salaries, it's no coincidence that we've become a cynical bunch when it comes to corporate America. We've almost come to expect companies to screw everybody over so that their top executives can spend their time buying solid cocaine statues of Gordon Gekko and betting on hooker boxing matches hosted on yachts in international waters.
However, sometimes when you see the scheming that goes on behind the scenes, you do have to kind of admire it. Not approve of it, mind you -- just appreciate the kind of balls it takes to ...
#6. Convince the World That a Common Substance Is Rare
So, why do you think diamonds are valuable?
Most people will probably tell you the same reasons: they're very strong and visually striking, but most importantly, they're rare.
"We only have enough for the first several millions of you."
There's only one problem with that: that last one isn't true. To explain why you think diamonds are scarce, let's rewind about a hundred years.
Via Wikimedia Commons
That's one diamond mine. That thing to the left is a town.
For much of human history, diamonds were valuable because they could only be found in a select few places in the world. In the 19th century, however, that actually changed as people started to find massive deposits, most notably in Africa. Those deposits were large enough that the rarity of diamonds was quickly becoming a thing of the past.
"Sir, if you continue dropping these on the ground, I'll have to give you a ticket for littering."
Faced with stockpiles that were on the verge of being significantly devalued, the owners of those deposits had three options:
A) Compete against each other and watch the value of their diamonds plummet as the law of supply and demand drove prices down;
B) Forget the diamond market and just use their land to invest in Six Flags Over Zimbabwe;
C) Band together to form an evil multinational monopoly that would inflate prices and earn them billions upon billions of dollars.
We know. Stupid morals.
Go figure, they chose the third option, forming the cartel we know as De Beers. To maintain the perception that diamonds were rare, De Beers not only significantly limited how many diamonds they mined each year, but also literally started buying up all the other diamonds and just stockpiling them (along with their own excess supply). Combined with a decades-long advertising campaign, they created a perception out of thin air that diamonds were rare and valuable, and that you had to drop thousands of dollars on one to prove you loved your spouse.
So, if all that's true, how in the hell do they get away with it? Shouldn't it be illegal?
And if so, what time does the riot start?
Actually, it totally is. The monopoly De Beers holds is so blatantly illegal by U.S. antitrust laws that they've been banned from selling in the U.S. (they're forced to sell to intermediaries on the international market). Until they pleaded guilty to price fixing charges in 2004, their executives wouldn't even set foot on American soil because they feared they'd be arrested on sight.
While there are indications that the cartel might finally be slowly losing its grip on the market, it's been a pretty damn impressive run.
#5. Fix an Auction Via Secret Code
Let's say you're on eBay, shopping for some Pokemon cards, but somehow you know all of the other bidders -- like they're people you play against all the time. Rather than get into a bidding war that would leave one of you spending $1,000 on a foil collectible Charizard, it would make more sense for all of you to get on the phone and negotiate out who needs what. If they let you win the Charizard, they can have the prism foil Squirtle. You designate who is going to "win" each auction, and everybody else submits artificially low bids to keep up the charade.
What, you thought we were kidding?
Everyone gets what they want, but you all wind up paying the seller way less than you would have under a real, competitive auction. And while it makes sense, in the business world it is illegal as shit. When large companies do this, they have to get clever, which brings us to one of the biggest auctions of all time: when the FCC decided to auction off spectrum resources to major phone companies in 1994. These bits of the spectrum have to be reserved by particular companies to keep different signals from interfering with each other, and all of this is enforced by the FCC. Prior to 1994, the FCC simply gave those rights away for free. Then, realizing that they were missing a prime opportunity to make money, they decided to start auctioning them off by region.
So, the companies all submitted their bids for the various regions, all of which were made public.
But some experts noticed an odd trend with a few of the major companies involved. Not only were these companies winning markets for much less than anticipated, but also they did so while submitting oddly specific bids. For example, instead of simply bidding $313,000 for a market, they'd bid $313,378. So why tack on $378 to the end of a bid?
"Sold, to the guys who gave us coke money."
According to analysts, it was code. Remember when we said the bids were made public? Those three digits at the end of the bid were area codes of markets that they wanted other companies to stop bidding on. In other words, the major telecoms were divvying up markets by telling each other, "We'll stop bidding on this one if you stop bidding on that one." The result? According to the aforementioned study, the companies involved "won more than 40 percent of the spectrum for sale and paid significantly less for their overall winnings."
It appears that the telecom industry had just made out like bandits, and they did it in broad daylight.
It wasn't the first time, either.
#4. Invent a Disease, Then Cure It
When Listerine first hit the market in 1879 as a surgical antiseptic, its creators weren't entirely satisfied. While there was certainly money in the surgical antiseptic market, there wasn't the "use your profits to buy a small island in the Pacific and staff it with monkeys dressed like little maitre d's because fuck you" kind of money they were looking for. So, in an attempt to expand their business, they sought out new ways to sell their product.
But how do you rebrand a surgical antiseptic? Well, if you're Listerine, you just start making up random illnesses your product cures and hope people believe you. After all, the stuff does kill germs -- they're not exactly lying. They scoured medical textbooks, found the words "chronic halitosis" (which was at the time nothing more than an obscure medical term for a condition that didn't really exist) and decided that their product would be the be-all end-all cure to it. See, your breath doesn't just smell bad, you have a medical problem.
Hope you have health insurance, asshole.
Naturally, when you tell people that they're sick and you hold the only known cure, they're probably going to listen to your pitch. People who lived their entire lives without mouthwash suddenly felt the need to cure their newly discovered ailment, and within a few years Listerine's sales increased to around 70 times what they were before.
Oh, and did we mention that they're still doing it today?
Listerine tried to ride the "make up random applications for your product" train for as long as they could, marketing their product as a cure for dandruff, and later trying to market their own brand of cigarettes. None of those ideas ever really caught on, but the mouthwash business seems to be working out just fine for them.
It was a good try, though.