How the Family Grows

Paolo Di Lauro, head of one of the richest clans in Naples, ran the drug trade in the Secondigliano district on a principle any economics professor would have liked. Saviano calls it by its name: laissez faire, laissez passer. Complete freedom. The clan asked for no references, didn’t ask who you were or where you came from. Buy a batch, sell it, pay up. And the district, as Saviano writes, very quickly filled up with groups of friends who wanted to buy at fifteen and sell at a hundred, and paid that way for holidays, studies and loan instalments. Prices fell. The trade boomed.

The best-known pitch, by the so-called Blue Houses in Secondigliano, Di Lauro handed to his lieutenant Gennaro Marino, known as McKay, as a franchise. That’s the word Saviano uses, and he writes it on the strength of the investigation files. McKay was independent and ran everything himself, and in return paid a fee into the clan’s coffers every month. Saviano compares the whole system to a fractal: a bunch of bananas in which every banana is itself a bunch of bananas.

That’s how businesses grow: not outwards as one body, but in copies of themselves. Let’s look at how it works and where it breaks. Because the Di Lauro story has a second part.

Copying the Thing, Copying the Business

There are three ways to grow, and they come one after another.

The first is to copy the thing. Do it well once, then repeat it without inventing it all over again. A printing press instead of a scribe, a casting mould instead of a carver. The cheaper and more reliably you can repeat your thing, the more people you can feed with it.

The second is to copy the whole business. Not the shirt, but the laundry. Not the tin of oil, but the whole road from the mill to the kitchen. That’s how chains of restaurants and shops grow: they’ve learned to repeat not the product but the system that makes it. Di Lauro repeated the sales pitch, and each new pitch worked like the last, without him having to be there.

The third is scale: the ability to repeat the system as demand grows without letting quality slide. A business that scales answers double the demand with double the output. One that doesn’t answers it with queues, delays and spoiled orders.

Don Vincenzo opened the third laundry twelve years after the first. For all twelve years he wrote down how the first one worked: what time the presser comes in, how the linen is marked, what to say to a client who has lost his ticket. When the third one opened, new people came in, were given that notebook, and within a month you couldn’t tell that laundry from the first. The second he had opened without a notebook, and for six months it ran worse, until he stood behind its counter himself. You can only repeat what’s written down. Everything else you have to repeat on your own two feet, and the Don only had two.

Part Two: The Copy That Grew Up

Back to Secondigliano. Paolo Di Lauro’s son, Cosimo, noticed that the lieutenants were handing less and less over to the clan. The sums were still astronomical, but they were falling. Saviano explains what worried Cosimo. If this went on long enough, one of the lieutenants would gather money and men, find allies and one day strike at Di Lauro himself. Not with competition, but with lead.

And Cosimo did what any corporation does when it takes fright at its own franchisees: he put them all on a salary. Fifty thousand euros, people said. An impressive sum, but a salary is a salary: it means subordination. No more independent entrepreneurs deciding for themselves how much to invest and what goods to trade. Saviano sums up the point of the reform this way: no autonomous levels, only dependent ones. While he was at it, Cosimo carried out an age reform too: lieutenants were to be no older than thirty.

How it ended, you may be able to guess. Some of the lieutenants broke away, they were nicknamed the secessionists, and a war began in Secondigliano to which Saviano devoted a whole chapter of his book.

I’m not taking the side of the father or the son. I’m showing you the fork in the road that every growing business comes to. A copy that runs itself grows fast, but one day starts to think it doesn’t need you any more. A copy that depends on you completely is obedient, but grows only as far as your eyes can reach. Franchise or branch, partners or hired men: it’s not a question of fashion, it’s a question of what you’re willing to give up for speed. Decide in advance. Changing the structure on the move, as Cosimo did, costs most of all, though in your case, I hope, it’ll be done without the machine guns.

One Plate, Three Mouths

Growth has another limit too, one that dreamers don’t think about.

A Palermo tyre dealer told Gambetta something I’d write on the wall of every sales department: that it’s easier to eat from a plate shared by three who cover the whole market than from a plate shared by thirty-three who cover the same market. And another businessman explained why a mafioso who looked after the building firms at a Palermo cemetery wouldn’t let new firms into his cartel, although he could have taken an extra “tax” from each. He’d have lost control: it would have been hard to allot the turns, there wouldn’t have been enough work for everyone, someone would have felt unprotected, and his prestige would have suffered.

Strip away the graveyard colour, and you’re left with an honest management idea. Every new client, new outlet, new person doesn’t just add takings, it takes away some of your attention. There’s a size beyond which you stop keeping your word, because you physically can’t keep an eye on everyone. Grow to that size, then first learn to hold more, and only then take on more. A Don with thirty-three clients and nobody to watch them eats a poorer lunch than a Don with three.

Small Things That Add Up

Now for two quiet forces of growth that don’t show up in the reports.

The first is things piling up. Small improvements are worth nothing on their own. We saved a minute on the front counter. Moved a shelf closer to the press. Changed a tag so people wouldn’t mix it up. But they add up. Don Vincenzo had one more notebook, a very thin one: once a week anyone in the laundry could suggest one small thing, and we tried one of the suggestions. Forty years of one small thing a week makes two thousand small things. By the end of our working lives the laundry ran so well that a newcomer couldn’t see what there was to improve. We remembered: all of it.

The second is magnification. A small change, multiplied by a big business, becomes a big one. When we switched from five-litre tins of oil to ten-litre ones, the saving on a single tin was laughable: a bit of tinplate and one label. But thousands of tins a year passed through our hands, and over a year it came to enough for a new lorry. The bigger your business, the more every small thing in it is worth, in both directions. A bad small thing gets magnified too.

The Bottom Line

Grow by copies, not by heroics, and know the size beyond which you’ll stop keeping your word. Cosimo Di Lauro understood all this, by the way. He just understood it too late and too abruptly. It’s cheaper to understand it early and calmly.