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The Chairman
Victor Niederhoffer

In Letters from a Self-Made Merchant to His Son, by Lorimer, the great best-seller about the wisdom of an 1890s businessman in the Chicago meat-packing industry, the merchant writes that they’re using the hide, the chemicals and the soap now – everything but the sawdust and the oink. And that’s the whole difference between profit today and what would be loss if they hadn’t changed.

I came across a good example of the universal truth of this principle today (and, by implications, what Charlie should have told the Sage about the flaw in his basic idea of buying companies that never need to change because of a redoubtable product or brand) at a Citgo gasoline station on Route 1 outside of Newport, R.I.

“You know, 25 years ago I was selling gas at 36 cents a gallon and making 5 cents on it,” the station owner said as he pumped my gas on a Sunday at 6 p.m. after a 10-second wait. “And right now I sell it for $2.10. And you know how much I make? The same 5 cents. And if they pay by credit card I lose 6 cents, so I end up paying 1 cent a gallon to the customer.”

He makes up the difference on the 25% of his business that’s new, including coffee and snacks, and on his towing service. (He said  his business is down 30% this year because of the price of gas.) “Now, if the wheel falls off they come in, but not before.” Some good lessons here about business and life.