The Five Pillars of the Business

In the eighties a young Italian sociologist, Diego Gambetta, came to Palermo. He wanted to understand the Mafia the way an economist would: what it produces, whom it sells to and why people pay it. He went round the shops, sat in furniture stores, listened. One cattle breeder explained the whole thing to him in three sentences. The gist was this. The butcher comes to me for a bull, and he knows I want to cheat him. I know he wants to cheat me. So we need a third man, say Peppe, to get us to agree. And we both pay Peppe a percentage of the deal.

Gambetta later wrote a whole book about it. I read it when I was already an old man and laughed out loud: a learned professor was explaining my own job to me. And for the first time in my life somebody explained something to me without asking for a percentage. But he explained it right. Take a good look at this Peppe. He shows you what any business is made of.

Five Questions for Peppe

One. What does he give people? Not the bull, not the meat. He gives them confidence that the deal won’t end in a swindle. Neither the breeder nor the butcher can produce that by himself, and without it trade either stalls or turns into war. That’s what Peppe creates. Value is whatever people are worse off without and will hand over part of what’s theirs to get.

Two. How do people know he exists? Peppe doesn’t hang out a sign. But everyone in the market knows whom to go to if you’re unsure of the other party. His name travels along the street, he gets invited to weddings, people ask his advice. If nobody knows about you, nobody will call you, however good you are.

Three. How does he settle his fee? A percentage of the deal, from both sides, agreed in advance. Not “we’ll sort it out later”, not “whatever you can spare”. The deal is the moment when a man hands over money and gets a promise. Peppe knows how to do that.

Four. How does he keep his promise? This is the heart of it. To guarantee honesty, Peppe has to know who’s who, who owes whom, whose cattle are sick, who has cheated whom before. He needs eyes, a memory, and the ability to make sure a cheat ends up worse off than an honest man. If all he does is take his percentage and the guarantee doesn’t work, in a year nobody will come to him.

Five. Do his sums add up? The percentage has to cover his time, the risk, the people who work for him, and still leave something over. If Peppe guarantees every deal in the market but spends more on it than he takes in, he’s a philanthropist. The market loves philanthropists, buries them with honours and forgets them fast.

That’s all there is to it. Create value, make people hear about it, agree a price, keep the promise, take in more than you spent. Five pillars. Pull out any one and the Business falls down. There are wonderful craftsmen nobody has heard of. There are loud men who can’t deliver what they promised. And there are those who do everything well but sell at a loss and go broke honestly.

The Warden Who Was No Peppe

So you don’t think I’m painting the Mafia as a kindly middleman, here’s another story from the same island, only a hundred years earlier. Historians pieced it together in detail from the victim’s own statements.

In 1872 a Palermo doctor, Gaspare Galati, inherited a lemon and mandarin grove on the edge of the city, a fine property with a steam pump for irrigation. The warden of the grove, Benedetto Carollo, behaved as if he owned it: he took a fifth, sometimes a quarter, of the harvest for himself, stole coal for the pump, and fruit began vanishing straight off the trees until the estate had no reputation left. The previous owner, the doctor’s brother-in-law, had received threatening letters and died of a heart attack. When Galati sacked Carollo and hired a new warden, the man was shot in the back among the trees. Letters were slipped to the doctor: he had, it seemed, driven out a man of honour.

Carollo could do much of what Peppe could. He knew the land, knew the people, knew how to get his way. But look at the first pillar. What did he give the owner? Nothing. He took. His “service” consisted of not making things worse than he was making them himself. That’s no Business. That’s a toll gate. A barrier doesn’t produce anything either, but it collects the toll without fail.

The test is simple, and I advise you to apply it to everything you start. Would they pay you if they could get away with not paying? Peppe gets paid because without him the deal won’t happen. Carollo got paid because otherwise there was shooting. The first can work for forty years; they keep calling him back. The second works until the victim runs out of patience or the police turn up. In the end Dr Galati wrote a memorandum to the Minister of the Interior, and the police took up the case.

What to Learn from It

Don Vincenzo didn’t know the word “marketing”, but nobody could come to him with an idea and not hear five questions. What are you giving? Who will hear about it, and how? How will you take the money? How will you deliver if twenty people say yes at once? How much of it will be ours? He asked them in any order, but always all five. If all a man had for one of the questions was enthusiasm, the Don would say: go away, think, come back in a week. Half of them never came back. That was an answer too, and the cheapest kind: a week of waiting instead of a year of losses.

Which tells you what skills are worth learning. Money pays for whatever holds up one of the five pillars: knowing how to make a thing better, how to tell people about it, how to strike a deal, how to deliver without a hitch, how to count. Everything else is pleasant, but it doesn’t add to the Family’s funds. If you’re strong in one, find people for the other four. If you mean to be a capo, know all five at least well enough that your own people can’t cheat you.

At the office it’s all exactly the same, only Peppe goes by the name of broker, lawyer, bank or marketplace. Take any venture you’re looking at right now and run it through the five questions. If there are answers to all five, you can start talking money. If not, you know what to fix. Better to hear it from me than from the market: at least I’m polite about it.