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Everybody Has a Story: Turning a profit from scarcity

A lesson in capitalism at U of O business school

By Jerry Peyton, Felida
Published: October 4, 2020, 6:02am

A funny story that turned into a productive experience happened in an undergrad Marketing Systems and Analysis course I had to take at the University of Oregon back in 1979.

The professor had us break into teams of five students each for a business simulation game. I happened to get on a team that included Alberto Salazar, the two-time Boston Marathon winner who later joined the Young Americans for Freedom chapter that I formed on campus. Alberto told me his dad, who had emigrated from Cuba, had been a member of that organization.

The first thing the professor had us do was vote on management positions for each of us in the simulated company we were going to run: president, vice president, sales manager, engineering and design manager and so forth. The team appointed me to be our president.

Then the professor showed us a vast assortment of Tinkertoys he had for us to buy, with the limited amount of funds that each team was provided with. He demonstrated five different models we could build with these Tinkertoys, such as a tower and a bridge, and the price we would get for each model when we sold it back to him. He also provided us with a price list for each Tinkertoy component we would need to purchase in order to build the models. The prices of these components could change along with business conditions and marketing changes, just as in the real world.

In essence, each team was a simulated manufacturing facility that would conduct its own purchasing, design, production and sales with the idea to make the most profit possible, just like with a real business.

My team got together and started discussing strategy. One member of the team said, “Look, every one of those models uses the little yellow sticks. Instead of building something, why don’t we start with buying up all of the yellow sticks? That way we can corner the market and force the other teams to buy from us in order to build any of the models.”

We discussed this and came to a swift decision that it was a good plan. Being president, I was tasked with going up and using our limited funds to buy all of the yellow sticks from the supplier, our professor.

When I did so, I discovered we did not have enough to buy all of the yellow sticks; there were a few left over for other teams.

I brought our team’s yellow sticks back and laid them out in the middle of the table where we all just stared at them, trying to decide what to do next. We had no more money and we could not build anything with nothing but yellow sticks in our inventory, so we were in a quandary as to our next step.

I remember Alberto looking at me and saying, “Now what are we going to do? We have no more money to build anything!”

Suddenly the professor/supplier announced that, due to a shortage of yellow sticks, the price had increased to about double the original price. Immediately I took all of our yellow sticks up and sold them back to the professor/supplier, then returned to the team with our vast increase in capital.

Since this plan worked so well, we next looked at the price of the wooden spools, and again decided to use all of our funds to buy up as many of the spools as possible. This continued on for most of the class time, with our funds growing as each time we bought up all of the supplies, the prices increased due to supply and demand.

With time winding down, the professor/supplier announced mammoth price increases on completed models due to a shortage, since the other teams were restricted in what they could build with the limited raw materials available. We started buying what we needed for the highest-priced models and built them, right up until the simulation ended with a whistle from the professor.

He announced the results. He told us that he had been running this game in classes for over 10 years, and no team had ever made more than $5,000 in profit. Our team ended with a profit of over $50,000!

My final grade for this class was an A.


Everybody Has a Story welcomes nonfiction contributions, 1,000 words maximum, and relevant photographs. Send to: neighbors@columbian.com or P.O. Box 180, Vancouver WA, 98666. Call “Everybody Has an Editor” Scott Hewitt, 360-735-4525, with questions.

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