What to Tweak
In the autumn of 1933 Charles “Lucky” Luciano took charge of a syndicate that went after the brothels of New York. The idea was businesslike: take control of the whole trade and collect tribute from every house. It ended, Dickie writes, in commercial failure.
The madams started complaining that the tribute was too heavy: once it was shared out, they had nothing left. The complaints, as Dickie describes it, were met by Luciano’s wordless heavies. The hounding of “defaulters” began. But, Dickie adds, intimidating individuals couldn’t halt the steady fall in the syndicate’s income.
The harder they squeezed, the less they got. And in February 1936 Luciano and his men were arrested by the agents of the prosecutor Thomas Dewey. What decided the trial was the testimony of the women who worked in those houses. Luciano got fifty years, the harshest sentence ever handed down for that kind of crime.
Luciano squeezed his tax base dry, and the tax base testified against him.
This chapter is about fine-tuning: how to make a business that already works work better. And I’m starting with Luciano because the first thing to know about fine-tuning is that it has a limit. Past that limit, every turn of the nut doesn’t add. It takes away.
Diminishing Returns
Economists call this diminishing returns. The first helping of effort gives a lot. The second, less. The tenth, next to nothing. And the twentieth starts breaking what the first ones gave you.
The first money the syndicate took from the houses was a bearable price for order. Each extra increase brought the syndicate a little more, and brought the houses a lot more pain. There came a point when there was nothing left to pay with, and all the syndicate got from the last increase was angry witnesses.
We once tried to squeeze out a little extra too—not from madams, but from the press. It couldn’t keep up, and somebody suggested running it at night as well. The Don allowed it for a month. The night shift turned out more shirts, but three times as many scorched collars: at night people get tired, and the press doesn’t forgive tiredness. Over the month we paid clients more for ruined shirts than we made on the night pressing. There were no witnesses against us. The ruined shirts were enough. The Don shut down the night shift and bought a second press.
Wherever you’re tweaking—prices, opening hours, the load on your people, discounts—don’t watch how much you’re getting overall. Watch what the last turn gives you. As long as it gives more than it costs, keep turning. When the two are level, stop. When it starts taking away, turn back.
In Chalk on the Board
Saviano describes the auctions held by the middlemen of well-known Italian brands in the suburbs of Naples. They take place in an empty primary-school classroom, under the alphabet charts on the walls. The clients come in, and everyone stands up. One of the men draws three columns on the blackboard and, as a woman in a leather skirt dictates, writes: “800”. That’s how many garments need sewing.
A businessman from Sant’Antimo goes over to the window, turns his back on everyone, and names his price and his deadline: forty euros a garment and two months. They write “800/40/2” on the board. The clients aren’t satisfied. The bidding goes on. Someone offers twenty euros and twenty-five days.
And the rules of these auctions go like this. Everyone who agreed gets the cloth. Everyone sews. But only one gets paid: whoever is first to deliver the best work. The rest don’t have to give the cloth back, but they don’t get a cent either.
That’s optimisation taken all the way. The client squeezes two parameters, price and time, and squeezes them with other people’s hands. For the brand the system works beautifully: the price falls by half, the time by more than half, and cloth is cheaper than lateness. For everyone else at the table it’s a race where everybody loses but one.
I’m not telling you this as a model. I’m telling you as a warning. To optimise is to choose what you’re improving, and to understand what you’re paying for it. You can squeeze the price until your suppliers start going bust. You can squeeze the deadline until people start walking out. On the board it looks pretty: “20/25”. Behind the board are the ones who sewed for nothing.
Where to Hit
Now about where to put your effort.
Joe Pistone started out with the fences of Brooklyn. His bosses hoped they would lead him to the Mafia. By July 1977 there was enough evidence on hijackings and robberies to close down the whole gang. And Pistone thought: what if we forget about the fences and go straight into the Mafia?
He talked it over with his supervisor at dinner, and they rethought the aims of the operation. The more they thought about it, the clearer it became that the fences wouldn’t get them to the Mafia. But if he could get in with the right guys, then their strict hierarchy could take him all the way to the top. No federal agent had ever gone undercover inside the Mafia. The risk was new. They decided it was worth it.
That’s what looking for the few links that matter most means. In any business, most of the result depends on a small part of what you do. You can spend years catching fences and the Mafia won’t even notice. Or you can find the link the whole system runs through, and hit that.
Remember the second press after the night shift? We bought it because of the collars, but it taught us something else. While there was only one press, a fast front counter and a fast wash only made the queue of wet shirts waiting for it longer. Once there were two presses, the same fast front counter suddenly started getting shirts to the clients. Before you fine-tune anything, find your link. Speeding up everything else while the bottleneck stands still is good exercise, but it isn’t fine-tuning.
Move It, Don’t Replace It
Sometimes, to make the business work better, you don’t need to buy anything. You need to move things around.
When I came to the first laundry, the press stood in the far corner, and the door they carried the finished laundry out through was at the other end of the room. Every stack of shirts was carried across the whole room, past the washing machines, past the pressers, past the front counter. People bumped into each other, stacks fell, clean things got dirty. Nobody complained: it had always been that way.
One day Don Vincenzo stood in the room for a whole morning without saying a word. And on the Sunday, when the laundry was closed, the loaders and I shifted the press over to the exit. The same people, the same machines, the same press. Only the stacks no longer went travelling across the room. We started handing the laundry over an hour earlier.
That’s called refactoring. The word comes from programmers: rewriting how a thing is built without changing what it does. Not hiring new people and not buying anything new, but rearranging what you’ve got so that it gets in its own way less. The cheapest improvements usually lie here, because nobody looks for them: everybody’s used to things.
Friction
One last thing. Sometimes what slows the business down isn’t an opponent but your own rules.
The FBI’s accounts department demanded a receipt for every purchase and paid for only one hotel booking a day. Once, in the middle of an operation, Pistone had to change hotels and ended up with two bills for the same date. They refused to reimburse the second one: rules are rules. Pistone, by his own account, had had enough by then and refused to pay out of his own pocket. He explained that undercover, you can’t plan your expenses. It worked: they raised his weekly budget and let him spend money as the situation required. Over the whole operation he still spent about three thousand dollars of his own savings.
Seventy years before that, the Secret Service had the same problem, only bigger. In April 1903 they were preparing to arrest the Morello gang. Police Inspector McClusky was convinced that Morello had to be taken first, without fail, and that his arrest would be the signal for the other groups. Dash calls this demand impossible to meet with the communications of the day. A signal that has to cross the whole city instantly, when the agents have neither a radio nor a telephone in their pockets, isn’t a plan. It’s a wish.
That’s friction: everything that drains energy from the business and gives it nothing back. Extra signatures. Reports nobody reads. A rule that suits the accounts department and nobody else. A plan that suits the boss and can’t be carried out by the people doing the work. Each one on its own is a trifle. Together they eat up half your energy. Every so often, go through your rules and ask of each one: who does this help? If the answer is “nobody, but that’s how it’s done”, that’s friction.
The Bottom Line
Watch what the last turn of the nut gives you, and know what you’re paying for it somewhere else. For Luciano, the last turn gave testimony in court.