Saturday, August 15, 2009

Free Markets: Supply & Demand-A Park Slope Story

And to Ralph Kramden, I leave my fortune.
Get the bag Norton!-Honeymooners dialogue

As the Federal Government continues its assault on the free markets, by among other things, buying banks & car companies, disregarding the rights of secured creditors, and the biggest intrusion of all, the health care fiasco, its refreshing to look back on how the natural laws of supply and demand work without the interference of government.

All we have to do is remember a story from our common past. Its the Summer of 1987. U2 is the biggest band in the world, schedules a concert for Giants Stadium, and is the hottest ticket in town. But even hot tickets at some point lose their temperature. Why? The natural laws of supply & demand.

Now, as soon as the concert is announced, one of our friend's (the legal code of ethics does not allow me to reveal his name) has a brain storm: he will buy a s**t load of tickets, the concert will sell out, and he will be able to command top dollar for the tickets he bought.

So our friend (lets call him "Tom Foolery") buys a ton of tickets. I mean, he had more tickets than Ron Delsner. And there is a lot of lag time between the time the tickets went on sale and the actual concert.

During this time people were constantly coming up to Tom Foolery, offering him a modest premium in return for a couple of tickets.

Foolery would hear none of it. "I'm here to make money, not friends" was his reply to everyone who asked. And they asked. And continued to ask. Foolery did not budge. That phrase "I'm here to make money, not friends" still resonates 22 years later to those who heard it over and over again.

Foolery's Plan: Get to Giant's Stadium early, set up shop, and sell the tickets to those desperate enough to pay through the nose.

But the free markets worked against Foolery. Some people when hearing his price, decided to buy pot instead. Others would buy some U2 CD's. Others did..... whatever.

Some decided to seek out other ticket scalpers who had a better deal. And there were plenty of people who had extra U2 tickets that were willing to sell them for just a little over the ticket price.

One of them reads this blog.

Come the day of the concert, and Foolery was in the Giants Stadium parking lot like a carnival barker announcing to all that he had excellent seats for sale.

How did he do?

He might as well have been wearing a Sandwich Board stating "STAY BACK! I AM A LEPER & I NEED TO GET BACK TO MY COLONY."
The crowd walked thru him like he was the main character in the movie "Powder".

No runs. No hits. And NO TICKETS SALES.

Once Bono starting singing, and Foolery was left with enough tickets to fill KeySpan Park, Foolery entered the stadium. "Show me your Ticket" says the Usher. "HERE'S MY TICKET!" Foolery shoots back, showing the Usher the entire section that he turned into a party for one.

Foolery had a bunch of rows for himself. While looking over his vast holdings,he noticed a couple that had settled into two of his seats. Foolery immediately snapped to attention and summoned a security guard "GET THEM OUT OF THERE! THOSE ARE MY SEATS! Foolery showed the Guard the tickets and the couple had to move, wondering why they could not sit in a section that was completely empty.

Big Lesson: Free Markets punish & reward in their own unique way. Let the free markets deal with greed, keep the feds far way.

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