JBnomics

JBnomics Highschooler’s Wonderland of Economics, Business, and Finance

By Jangback Lee

“View the world through the lens of economics!”

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JBNOMICS Table of Contents Chapter 1: Starconomics:

3~19

A Microeconomic Analysis of the Game of StarCraft Chapter 2: Pride and Prejudice: Demand and Supply of Love

20~34

Chapter 3: Homeworkonomics:

35~40

International Economics behind the Art of Time Management and Homework Chapter 4: Relativity: 41~50 Behavioral Economics behind the Art of Marketing Chapter 5: Summer of 2010:

51~80

―Leadership in the Business World‖ Chapter 6: IB Extended Essay: 81~106 Demand and Supply of E-bike in WangJing Chapter 7- “Greed: A $exy Bea$t”:

107~169

Manuscript of an Original Financial Thriller

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Chapter 1: Starconomics A Microeconomic Analysis of the Game of StarCraft

Are these Protoss Archons fiercely annihilating the Zerg base? Or are they shutting down Zerg’ s capital, leading to an inward shift of the zerg’s production possibility frontier?

As a South Korean teenager, I enjoy playing StarCraft, one of the most successful inventions of the multinational game corporation Blizzard.

StarCraft is considered the most popular strategy game in Korea, retaining its reputation as the male teenagers‘ principal source of entertainment for more than 10 years.

Three years ago when I was in 8th grade middle school, I used to play this game with my friends at least once a week. One day, after our final exams, my friends and I came home and let ourselves be completely immersed into the exhilarating fantasy of this game. However, when my mother opened the door of my room and shouted, ―That‘s it boys! No more StarCraft! And, my son, I want to talk to you right now!‖, I knew my heyday had ended then.

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As a typical teenager would, I endeavored to justify why we chose to play StarCraft rather than play soccer or do anything healthier outside: ―Mom, StarCraft is actually very healthy for your brain if not for your body, because it helps you train your ability to manage many different things at the same time and plan things ahead for future and—‖ ―Son, that‘s enough!‖, shouted my angry mother.

Yet, in the summer of 2008, I was able to proudly validate this long-forgotten excuse I gave two years ago to my mother, as I first learned about economics in a course on ―Global Economics‖ at Education Program for Gifted Youth (EPGY). It was a summer program offered by Stanford University and I attended this program wishing to learn about the global financial crisis and its origins. But, learning about economics also made me also realize that my favorite game StarCraft is not just about killing units and destroying buildings to win the battle; rather, it is fundamentally intertwined with numerous economic principles and theories, which transform this seemingly simple and violent game into one that requires extensive intelligence and insight into economics and management!

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Some basic economic principles Before I introduce the game of StarCraft, let‘s go over some of the very basic economic concepts. Simply put, economics is the study of production and consumption of goods and services. In economics, everyone faces a fundamental problem of scarcity: while people‘s desire for goods and services is unlimited, the resources available in an economy to produce the desired amounts of goods and services are limited. Because of this problem of scarcity, people have to make choices to maximize their utility, or satisfaction. During this decision-making process, people come down to asking themselves the three economic questions: what to produce, how to produce, and who gets what. As people make their choices according to these questions, they have to consider the opportunity cost involved in their choice, which in other words means the cost of any activity measured in terms of the best alternative forgone. For example, from a consumer‘s point of view, the opportunity cost of spending $9 on Starbucks coffee would be a cheap can of coffee ($1) and a spare $8 that can be spent on other things—big mac, Legos, doughnuts, and a bunch of Chinese pirated DVD‘s, just to name a few.

Similarly, from a producer‘s point of view, my opportunity cost of spending 30 minutes on writing this paragraph would be the $15 I could have earned by tutoring English to an elementary Korean kid for 30 minutes. Thus, in economics, weighing the opportunity costs of each action is crucial.

Economics, after all, is all about ―constrained optimization‖ as Leng Lee, my professor of Global Economics class in 2008 summer camp, once said; you maximize your self-interest from whatever resources you are endowed with.

Not simple enough? I‘ll walk you through an example step-by-step from an economic perspective. Let‘s say you run a private firm that produces machine guns and pistols for your nation‘s military. To produce wealth, you have your three workers—Albert, Benny, and Cindy—the factory you run your business on, two machines, and your own brain to manage your resources. These four resources are the four factors of production in

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economics: labor, land, capital, and entrepreneurship. Labor, simply, is the manpower in both physical and mental sense. Land includes the available space for you to work on as well as the natural resources such as oil that come out of the land. Capital means manmade goods that help you produce other goods, and includes equipments such as machines. Lastly, entrepreneurship, is your ability as the CEO to make decisions about how these resources are going to be allocated. As the head of the firm, you are, in a sense, both a consumer and a producer: you pay salaries to Albert, Benny, and Cindy in exchange for your consumption of their labor, you pay rents to the owner of the land on which your office/factory stands in exchange for the space it allows you to produce your goods, you pay interests for the capital goods in exchange for the productivity of the machines in making your goods, and finally, you consume your brain cells each day desperately trying to produce marketing/management ideas for your firm.

Now, your goal is to utilize your four factors of production to its fullest potential to maximize your returns. How do you reach your goal? By answering the three basic economic questions! (1) What to produce: you may decide to produce either more of pistols and less of machine guns, or more of machine guns and less of pistols, depending on which good is more profitable. (2) How to produce: you decide if you wish to use more machineintensive production method, or labor-intensive production method, etc.

Your investment in different capital goods (or producer goods), and the different combinations of inputs you come up with, will lead to different output results. Your job is to find the most cost-efficient way to produce your desired level of output. (3) Who gets what: you have to make choices regarding the workload you assign to each worker and the salaries you give out to them.

So, it all comes down to the fundamental problem of scarcity and how well you can allocate your resources; because you have limited resources, you will have to make the best out of what you have by making good decisions.

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Introduction to Starcraft With these basic economic principles in mind, let‘s take a look at how come StarCraft is not just another violent video game.

The game contains three races: Terran, the near-future humans; Protoss, the intelligent aliens; and Zerg, the instinctive bugs. As a typical strategy game, it requires the player to build facilities that produce combat or defense units. Building each facility and producing each unit require a certain cost, measured in terms of amounts of minerals or vespene gas. Each unit takes up a portion of the total population, which is limited to 200 units, and whichever player first destroys all the structures of the enemy player wins.

As you play on, you become both a producer and a consumer. In the above-mentioned scenario, you, as the CEO, are the consumer of the factors of production and, at the same time, the producer of pistols and machine guns.

Similarly in StarCraft, you are the buyer of production facilities or capital goods such as Barracks, Factories, StarGates, or Hatcheries, and at the same time you are the producer of combat/ defense units.

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Scarcity The very first economic concept found in this game is the idea of ―scarcity‖.

Just like in the real world of economics, all resources in StarCraft are limited and insufficient to fulfill the unlimited desire of the player to produce as many units as possible to win a game. In this game, each of the four factors of production—land, labor, capital, and entrepreneurship—is designed so that it runs out at some point. As a result, the law of scarcity applies to this game: the scarcer a material, the more desirable.

For example, scarce ―land‖ is represented by the limited amount of natural resources (minerals and vespene gas) available on the map. Because these minerals and vespene gases are required for purchasing capitals and producing units, when the game approaches its long run, economic activities become increasingly difficult and these resources become ever-more valuable.

Scarce ―labor‖ is illustrated by the limited size of the population (upto 200 units), from which you can produce combat units and drillers (SCVs, Probes, or Drones) that mine the natural resources. Similarly, as the population approaches closer and closer to 200, because the player of that race has decreasing production capacity, the value of the available units becomes increasingly higher.

Additionally, scarce ―capital‖ is demonstrated by the limited space, meaning an equally limited number of possible production facilities. Thus, as you fill up space in your base with capital buildings, the value of your remaining land becomes increasingly higher.

This can be noticed from the players‘ struggles for scarce, rich lands near minerals in the long term in a game.

Finally, scarce ―entrepreneurship‖ is determined by the player‘s limited intelligence. You may wish you can work on gazillion different things at a time, utilizing all ten fingers of yours on the key board, while analyzing the population changes and mineral changes on the top right corner of the screen, and keeping a meticulous watch for enemy invasions. But unless you are a top player at Korean StarCraft professional gamers‘ league, such a thing is but a daydream. As a result, the longer the game, the scarcer your intelligence, and hence, the more valuable your brainpower becomes.

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Free good vs Economic good In economics, goods are categorized into two types: free good and economic good. When a buyer consumes a free good, there is no opportunity cost involved. A free good is a good of which the supply is unlimited. For example, air is a free good, because people consume air without any opportunity cost of resources, and because the supply of air is unlimited. An economic good is one that involves a certain opportunity cost and is scarce. For example, a chocolate bar is an economic good, because consuming a chocolate bar means the opportunity to consume other goods for the price of that chocolate bar is forgone, and also because there is a limited supply.

In StarCraft, anything you buy with your minerals and vespene gases are considered economic goods, as they not only are scarce, but also involve opportunity costs. It is quite true that there is no perfectly free good in StarCraft, as all materials are scarce, but there is one thing in the fantasy world very similar to a real-world free good, and that is each battle unit‘s energy. Most units in StarCraft have a certain amount of health and energy, as indicated by the two bars. Health indicates the lifeline of the unit; as soon as health reaches 0, the unit dies. Energy indicates the amount of skills a unit can use, and with 0 energy, the unit cannot function its particular skills The supply of health is limited or has to be recharged at the expense of costs involved with producing medics(a Terran unit that cures injuries), upgrading burrows (a Zerg skill that allows faster cellular reproduction) or building batteries (a Protoss facility that recharges shields). On the other hand, the supply of energy is unlimited, as it automatically recharges without any material cost. However, the only opportunity cost involved with recharging energies is the time taken for one to wait for recharges to complete. So in StarCraft, there is no perfectly free good after all.

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Consumer goods vs Capital goods; Production Possibility Frontiers In real life, economic goods can be classified into two categories: consumer goods and capital goods. Consumer goods are any and all goods produced for the sake of being consumed by its buyers, and capital goods are any and all goods produced for the sake of producing consumer goods. Similarly, in StarCraft, goods are categorized into the two similar types; consumer goods are equivalent to battle units in StarCraft (e.g. marines, tanks, zerglings, zealots, Dragoons, Carriers, Battle Cruisers and so on), and capital goods are equivalent to the production facilities in StarCraft (e.g. Barracks, Gateways, Factories, Hatcheries and so forth).

Now, let‘s say you have 3000 minerals and 2000 vespene gases. With the given resources, you can choose to do one of these two things: either buy a production facility (equivalent to investing in a capital good), or produce a unit from a particular building (equivalent to producing a consumer good). The cost of building a factory(capital good), for example, is 200 minerals and 100 vespene gases. So, with how much you have, you can build 15 factories in total.

Conversely, the cost of producing a tank (consumer good) from a factory, is 150 minerals and 100 vespene gases. So, you can produce maximum 20 tanks with what you have.

However, you may wish to use your resources to produce both tanks and factories. In that case, there is a trade-off relationship between building a factory and producing a tank. As you increase the amount of factories, you need to give up an increasing amount of tanks, and vise versa (shown in the table next page). This is according to the principle of scarcity; because resources are scarce, you can only produce up to a certain amount of each good in combination with each another.

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Combination of factories and tanks using 3000 minerals and 2000 gases # of factories (1 costs 200 minerals, 100 vespene gas)

# of tanks (1 costs 150 minerals, 100 vespene gas)

Left-over mineral from $3000

Left-over gases from $2000

0

20

0

0

1

18

100

100

2

17

50

100

3

16

0

100

4

14

100

200

5

13

50

200

6

12

0

200

7

11

100

200

8

9

50

300

9

8

0

300

10

7

100

300

11

5

50

400

12

4

0

400

13

3

100

400

14

1

50

500

15

0

0

500

This idea of opportunity costs involved with producing the two economic goods can be illustrated by the production possibility frontier.

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Consumer goods Eg) tanks

Production Possibility Frontier

B

1 6

8

B1

3

9

Capital goods Eg) factories

This frontier is determined using the assumption that all resources are used fully and efficiently. As we move from point B to B1, from producing 16 tanks and 3 factories to 8 tanks and 9 factories, we can notice that for both combinations, the costs add up approximately to our original amount of minerals(3000) and vespene gases(2000). However, we cannot say that all the data values on Table 1 indicate full and efficient employment of resources because there still remains some left-over resources after producing the goods. Hence, for most of the data points, the actual point lies inside the frontier because more can be done with the surplus minerals and gases. For your StarCraft economy to be operating anywhere along the production possibility curve—meaning operating at maximum productivity—you need to utilize all your resources fully and efficiently.

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Another significant point for explaining the shape of this curve is the idea that the curve is bow-shaped, or bounding outwards. This outwardbounding shape of the curve shows that as you increase an output for one good, you need to give up an increasingly greater amount of another good. In other words, there is an increasing opportunity cost for any increase in the output of one good. For example, from point B to point B1, we are increasing our output of factories by 6. At the same time, we give up our opportunity to produce tanks by 8, which is an induced change proportionately greater than what caused the change. This situation of increasing costs occurs because not all resources are equally transferrable: some resources are suitable more to producing certain goods than to producing other goods.

As the manager of your own StarCraft economy, you need to choose what strategy you want to use, because the allocation of your resources depends on which strategy you choose.

Simply put, there are two extreme types of overall strategies: shortrun ―quantity‖ mode, or long-run ―quality‖ mode.

If you choose the short-run strategy, what matters most is how fast you can produce a greater troop of combat units than your enemy‘s. This is the case where you need to be investing less in capital goods such as factories, and allocating your resources more into producing consumer goods.

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On the other hand, if you choose the long-run strategy, your objective is to allocate as much resources in the production of capital goods, because the function of capital goods is that they increase the productive capacity in the long run. In other words, contrary to producing 10 tanks with 1 factory in the short run, the long run strategy is to produce only 4 tanks with the factory in the short run, but allocate the remaining resources to building three more factories, so that in the long run, you can produce stronger tanks at a faster rate.

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Thus, the long-run effect of allocating resources to producing capital goods is an outward shift of the production possibility frontier near the consumer goods axis, shown below.

This occurs, because the more factories there are in the future, the more efficient it becomes to produce a given number of tanks in a given time frame.

Production possibility frontiers in StarCraft may shift inwardly or outwardly depending on different circumstances. When a new piece of land is discovered where buildings can be built upon, or new sources for minerals are found, or a new production facility is built, the production of units becomes much quicker and higher in quantity, leading to an outward shift of production frontier which is shown below.

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On the other hand, the curve may shift inward as shown below. Such a change may be due to an invasion of enemy forces leading to destruction, or shutting down, of production facilities, depletion of minerals and natural gases, and running out of population supply.

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Law of Diminishing Marginal Utility Basic economics states that as extra units of a variable factor are added to a given quantity of a fixed factor, the output from each additional unit of the variable factor will eventually diminish. This, in simpler words, means that the more you take of something, the smaller your satisfaction/utility out of it. For example, imagine eating 12 slices of pizza yourself. The first few slices are the most delicious thing in the world, because you are hungry! However, as you keep eating more and more, the satisfaction you get from each additional slice of pizza decreases.

So how is this law evident in the game of StarCraft? The most obvious case is that of the mineral-miners. In order to speed up the mining of minerals, you as the player will have to keep producing more mining units— SCVs, probes, or drones—and add them to the group of working units in the mineral region. However, what would happen if too many SCVs are clustered around one mineral zone trying to mine the resources from limited amount of space?

Hence, I conducted a set of experiments by varying the number of SCV workers in a given amount of space, time, and minerals, and recorded the average return of an additional unit of SCV, measured in extra minerals extracted. It became obvious that the marginal return of one additional unit of SCV becomes increasingly small with larger number of SCVs.

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SCV miners

Total Average Minerals Marginal Returns Minerals Mined per one per 5 additional Mined worker workers 5 264 52.8 264 10 584 58.4 320 15 832 55.5 248 20 1000 50.0 168 25 1124 44.9 114 30 1214 50.5 92 35 1310 37.4 94 40 1320 33.0 10 45 1312 29.2 -8 50 1303 26.1 -9 These data points are plotted as graphs in a Cartesian plane below.

At a point near 10 units of SCV, the marginal return is at maximum, and as you increase the number of your workers, you end up losing each SCV‘s efficiency. The same thing can be observed using the slopes of the curve of total minerals mined: it becomes less and less steep, as the number of SCVs increases.

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Are you thinking what I am thinking? ‗Wow, so much science behind just a simple game!‘ Indeed, without such well-established background in the science of economics, StarCraft would have been another mindlessly violent fantasy game for middle school kids with a lot of free time. It is through this economics that StarCraft has survived, for more than a decade in the competitive computer-game industry in South Korea and worldwide.

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Chapter II: Pride and Prejudice Demand and Supply of Love

“It is a truth universally acknowledged that a single man in possession of a good fortune, must be in want of a wife.�

Jane Austen, Pride and Prejudice.

It was in the spring of 2010 that I finished my microeconomics section of the IB Higher Level Economics course syllabus. Finally, we were to advance to a new and fascinating unit of Macroeconomics. During the Spring Break, as a reward for my hard work in the past quarter and as a momentary hiatus before quarter four, I started reading Pride and Prejudice, a novel by Jane Austen. While reading this novel, I was drawn 20

simply to the romantic tale of twisted love between Darcy and Elizabeth, and Jane and Bingley. Yet, no sooner had I finished the fourth chapter of the book, than I realized that Jane Austen is not only a dexterous connoisseur of creating love stories, but also an expert in the field of economics. As I became ever more captivated in the relationships between the numerous couples in the novel, I became aware of the underlying economic implications in the couples‘ exchange of affection, at the expense of financial or material costs.

I soon started to read this book from an economic perspective.

Near the end, I was able to come up with a supply and demand model for ―love‖, similar to a supply and demand model for any ―goods and services‖, intertwining the complex romantic human relationships with the economic principles regarding supply and demand.

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Lovers = Buyer & Seller ?!

Before making the connections between economics and Pride and Prejudice, let‘s take a look at the fundamental relationship between a buyer and a seller. We know that a seller supplies a good, and a buyer purchases a good. A seller wants to maximize his/her profit, and a buyer wants to maximize his/her utility, or also called satisfaction. In exchange for a good, the buyer has to pay the price, which then becomes the seller‘s income. This is best represented by the circular flow model between a consumer and a producer.

Now, if we look at the relationship between a single teenage boy desperate for a date, and an attractive teenage girl that the boy has a crush on, the teenage boy becomes the ―buyer‖ of love and the girl becomes the ―seller‖ of love. Though it‘s hard to accept, love becomes an ―economic good or service‖ in a sense, since a good or service in economics is the product of the combination of inputs from scarce resources, and love is the product of the mixture of our scarce human emotions for someone.

What can be as scarce and valuable, to us humans, than love?

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The boy pays the cost of $X buying fashionable clothes to look nice, while also getting the movie tickets, meals, gifts for the girl. The relationship fundamentally lies on the boy‘s act of ―purchasing‖ in return for a desired amount of love from the girl. Here, the point lies in the fact that this relationship between a boy and a girl, between a buyer and a supplier, can easily be reversed if the girl is more desperate than the boy is.

In other words, whoever is more desperate becomes the buyer, and the less desperate becomes the seller of love.

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Introduction to Pride and Prejudice Here is a general synopsis of the novel Pride and Prejudice.

The novel takes place in England, during the early 19 th century.

It is a tale of love, life, scandal, social classes, and values of the Bennet family. Mr. Bennet is a middleclass English gentleman living in Hertfordshire with his domineering wife, obsessed about getting her five daughters married off to rich gentlemen in town. The 5 daughters have their own distinctive characters—the beautiful Jane, the prudent Elizabeth, the studious Mary, the immature Kitty and the wild Lydia.

Unfortunately, because the Bennets are not from the upper class, if Mr. Bennet dies, their house will be inherited by a distant cousin named Mr. Collin. As a consequence, the family's future fortune, happiness, and security are dependent on the daughters making good marriages. When the wealthy bachelor Mr. Bingley and his best friend Mr. Darcy arrive in Hertfordshire to spend the summer in a mansion nearby their property, the shy and beautiful Jane falls in love with Mr. Bingley, and Elizabeth finds Mr. Darcy a snobbish and proud man, and she swears to loathe him forever. However, Elizabeth gradually discovers her misguided perception of Darcy; she was blinded and prejudiced by her own pride in herself as a prudent and self-conscious woman. The novel flows with events surrounding the romance between Charles Bingley and Jane Bennet, and between Fitzwilliam Darcy and Elizabeth Bennet.

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Demand Demand—let me make an educated guess—is the word that is stuck in the minds of 99.9% of economists, 95% of businessmen, and 90% of singles(implicitly, of course, for the latter). In economics, ―demand‖ is defined as ―the quantity of a good or service that consumers are willing and able to purchase at a given price in a given time‖. However, in the world in Pride and Prejudice, and in the minds of 90% of singles, the word ―demand‖ has a different connotation: ―the amount of love that singles are willing and able to acquire at a given cost in a given time from a single desired individual‖.

The law of demand, as a typical economist would say, states that ―as the price of a product falls, the quantity demanded of the product will usually increase‖. Say, for example, you are at in China town, eager for a plate of YangRouChuar(a Chinese street food similar to a lamb kebab). If the price of one chuanr(one stick) is 2$, you are willing and able to buy 25 sticks, but if the price of one chuanr is $1, you are willing to buy more (that is, only if your stomach has additional capacity after consuming 25 sticks of well-cooked and greasy lambs). It is important to note that you need to be both willing and able to purchase the quantity demanded. The inverse relationship between price and quantity demanded is represented by the diagram below.

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The reason that this law works is that as price of a good falls, assuming that your wallet thickness stays the same, the good becomes more available and thus less scarce for you to buy. You feel that you are wealthier, because now you can buy relatively greater amount of that good, and thus you decide to buy more of the good (this called the income effect). Also, if the price of the good goes down, that good looks much more attractive than other goods of its similar kind, and thus you decide to buy more of that good rather than other goods (this called the substitution effect). Now, let‘s turn this around and replace the YangRouChuanr with another good or service—love. Do you recall the opening of this chapter?

“It is a truth universally acknowledged that a single man in possession of a good fortune, must be in want of a wife.”

Jane Austen, Pride and Prejudice.

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Indeed, Jane Austen had seen in right. A single man, who is willing and able to pay the costs involved, is bound to ―demand‖ love from a desired woman, potentially as a wife. (We speak from a man‘s perspective because a man‘s demand for love can be seen equal to a woman‘s supply of love, and a woman‘s demand for love can be seen equal to a man‘s supply of love. Since this can work both ways, we simply speak from one side only.)

The intensity of a man‘s desire (or demand for love) is significantly dependent on the costs involved, whether it is financial or material. So, the law of demand for love states that as the cost or price of love increases, the amount of desired love decreases and vise versa. In simpler words, it shows that if a guy has to pay higher costs, his desire or willingness to maintain the relationship with his partner diminishes.

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In Pride and Prejudice, the law of demand is exemplified by the relationship between Wickham—a steward to Mr. Darcy‘s father—and Ms. Georgiana Darcy—the sister of Mr. Darcy. Since young, Wickham was brought up with Mr. Darcy by Old Mr. Darcy. While Old Mr. Darcy favored Wickham greatly, Mr. Darcy was aware of the true disposition of Wickham, who is in his nature extravagant, deceitful and fond of follies.

When Old Mr. Darcy passes away, he leaves the will that Wickham should be supported by the wealth of the Darcy family. Upon realizing this, Wickham demands a huge sum of money from Darcy, who accedes with bitterness. Wickham spends three years of profligacy and idleness with the ‗stolen‘ money, but, having wasted his money thus, he demands more from Darcy. When Darcy refuses, Wickham goes after Darcy‘s sister, Georgiana; his chief objective was the fortune entailed after Darcy‘s sister.

He succeeds in seducing Darcy‘s sister and convincing her for his love and they go on an elopement; Wickham‘s return for supplying his love was the thirty thousand pounds that Georgiana has. When Darcy finds out about Wickham‘s scheme he immediately calls off their marriage which would ruin the family‘s fortune and reputation. Upon realizing the fact that marrying Georgiana would only cost him more money, without any profitable return (i.e. the three thousand pounds to which Darcy refuses to allow Wickham access), Wickham runs away forgoing his ―love‖ for Georgiana.

This situation of Georgiana and Wickham‘s elopement resulting in a break-up after Wickham‘s discovery of his increased cost to maintain his relationship with Ms. Darcy, can easily be represented by the demand curve.

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Supply In economics, ―supply‖ is defined as ―the willingness and ability of producers to produce a quantity of a good or service at a given price in a given time period‖. But in

Pride and Prejudice and in the minds of

lovers who are less desperate than their dates are, ―supply‖ means ―the willingness and ability to love someone to a certain extent at a given price (or return) in a given time period‖.

The law of supply of goods and services states that “as the price of a product rises, the quantity supplied of the product will usually increase, all other things being equal.” For instance, say if you were a supplier of a YangRouChuanr in a China town, for the price of $1 per stick, you would be willing to provide 100 sticks in total. But for the price of $2 per stick, you would be willing to provide about twice as much—200 sticks—in order to maximize profits. Thus there is a positive relationship between price and quantity supplied, represented by the diagram below.

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The reason that the slop of the supply curve is upward is that as price gets higher, there is a greater chance of making more profit by increasing output. Thus, producers increase their quantity supplied to maximize their return, (we assume that all people in markets are perfectly rational and pursue their self-interests).

Again, if we look at the relationship between a desperate boy and an attractive girl, the one that pays for the relationship is the boy, and the one that supplies the ―love‖ is the girl. Now, noticeably, the law of supply applies in this case as well. The law of supply of love states that “as the price of love paid from the more desperate to the less desperate increases, the quantity supplied of love will increase.” In other words, assuming that you are the attractive girl, (sorry, reader, if you are male), if the return for supplying or ―selling‖ love to the boy is increasing, and more than enough 31

to cover your costs of staying in relationship with him, you are likely to become more willing to stay with the desperate boy, This psychology can be roughly explained by the basic assumption in economics that you, the attractive girl, act in perfect rationality: if you are perfectly rational, you won‘t dismiss the chance of making more ―profit‖ and maximizing your utility by increasing the supply of your scarce love to the desperate boy, as more attention from you will attract the boy even further and will get you more in return.

In Pride and Prejudice, this fundamental law of supply exists between the love exchanged by Darcy and Elizabeth. Elizabeth, the second daughter in the Bennet family, and the most intelligent and quickwitted, is lovely, clever, honest, and lively. Nevertheless, her tendency to make hasty judgments often leads her astray; Elizabeth has to 32

overcome a number of obstacles before she eventually finds her true love—Mr. Darcy. She must overcome not only the immature behaviors of her sisters, and her mother‘s obsession with her daughters‘ marriages, but also her own mistaken impressions of Darcy as an arrogant Englishman. Such misinterpretation of Darcy‘s character initially leads her to reject his proposal of marriage. However, as Darcy observes Elizabeth overcoming social and familial turmoil, Elizabeth has enough charm to keep Darcy‘s feelings for her unchanged. As Elizabeth gradually comes to recognize the nobility of Darcy‘s character, she realizes the error of her initial prejudice against him. In the end, when Darcy offers Elizabeth his hand for their marriage, Elizabeth happily accepts to marry him.

However, if we take a closer look at how Darcy was able to earn Elizabeth‘s love, we can notice that Darcy would not have moved Elizabeth‘s mind without his great fortune. For example, when Elizabeth and her uncle and aunt visit Pemberley, Darcy‘s magnificent estate, during their trip (which is after Elizabeth rejects Darcy‘s initial proposal), Elizabeth is moved by the gentility of Darcy as she hears numerous firsthand accounts regarding Darcy‘s true character in Pemberley. However, such accounts are not enough to move her closed mind, and when she fortuitously meets Darcy in Pemberley, she avoids talking to him out of shyness and her doubt about his true personality. Suddenly a letter arrives to Pemberley about an emergency regarding her sister Lydia, who Elizabeth discovers has run away with Wickham for an elopement (Wickham, as mentioned above, had once run away with Fitswilliam Darcy‘s sister Georgiana Darcy for her fortune but failed to do so).

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Distraught and despondent, Elizabeth returns home. Soon, Elizabeth discovers that all has been solved and that they were given aid by a wealthy man in town who has offered a great amount of money to Wickham to settle their affairs and return home for a proper marriage with Lydia. When she hears from her sister Lydia that their great benefactor was Mr. Darcy, she is moved by his nobility and starts to love him. But it is worth questioning ourselves at this point of the plot: what if Darcy had not enough fortune to pay for settling the affair between Wickham and Lydia?

Indeed, we now realize that without his fortune, Darcy would not have been able to win Elizabeth‘s love. Elizabeth ―supplied‖ her love when she realized that Darcy‘s fortune had directly benefited her and her family—in other words, when she realized that her ―return‖ for loving Darcy would be worthy.

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Chapter 3: Homeworkonomics International Economics behind the Art of Time Management and Homework “Should Jacob trade his math solutions with Amelia’s English paper?”

I often wonder how easy my life would be if I had the ability to stop time. I‘d always tell my friend, ―then, what I‘ll do first is finish all my homework while the clock isn‘t ticking, and then read all the books that I want and then start the time again and play soccer with friends or watch movies all day long.‖ Yes, it‘s a typical fantasy that any high-schooler would have dreamed of at least once.

But it‘s not an unreasonable fantasy. To me and to many of the struggling fighters out there dueling against one‘s own self, time is the 35

most valuable resource, the scarcity of which makes those wandering high school souls suffer.

Economics teaches us that ―it is of our human nature to desire unlimited amount of resources for production and consumption of goods and services‖. This famous, and most basic, economic principle applies as well to high schools—but in a slightly different fashion: ―in school, it is of students‘ nature to desire unlimited time for the production of bestquality homework and consumption of leisure activities.‖ Being able to stop time would certainly satisfy our unlimited desire for good grades and good social/leisure time, wouldn‘t it? But let‘s be more practical. We are grown-up high school students and we unfortunately can‘t be fantasizing about time travels or stopping time (at least many Asian moms would say so). Is there, then, an alternative, and more practical, solution that would ensure us efficiency, good grades, and time with our friends?

Yes there is: trade. It is quite an obvious answer. If one person is better and faster at writing English paper than writing Physics labs, and if another person is better and faster at writing Physics labs than English papers, then they should specialize in the area that they are good at, produce more than they need, and trade with each other: this ensures efficiency, quality, and most importantly extra free time for both of them to hang out. This can be best shown by an example.

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The time taken by Jacob and Amelia to finish their assignments Math homework

English paper

Jacob

1 hour

4 hours

Amelia

3 hours

2 hours

To finish 1 math homework, Jacob has to spend 1 hour and Amelia has to spend 3 hours. Jacob takes 4 hours to finish 1 English paper, and Amelia takes 2 hours to finish it. We are assuming in this chart, that their products are of equal quality.

Since Jacob is faster at doing math, and Amelia, at doing English, Jacob should only do math, and Amelia should only do English. Let‘s assume that Jacob spends 2 hours to produce 2 units of math homework, and Amelia spends 4 hours to produce 2 units of English paper. Since both Jacob and Amelia need 1 unit of math homework and 1 unit of English paper, they decide to keep one of their specialized products for themselves, and trade the other with one another. Now Jacob and Amelia have 1 math and 1 English assignments of good quality. In total, Jacob has only spend 2 hours to acquire both assignments, when he would have spent 1+4 =5 hours if he were to do both math and English on his own.

Amelia also spent only 4 hours to get both assignments done when she would have spent 5 hours if she were to work alone. So, with specialization and trade, both were able to work efficiently and get 1 or 2 hours of extra time.

But what if, unlike the situation above, Jacob is more efficient in 37

doing both math and English than Amelia?

The time taken by Jacob and Amelia to finish their assignments Math homework

English paper

Jacob

1 hour

1.5 hour

Amelia

3 hours

2 hours

In this case, Jacob can finish English in one hour, or math in 1 hour. So his opportunity cost (the cost of the best alternative forgone) of 1 math homework is 2/3 English paper and his opportunity cost of 1 English homework is 1.5 math homework.

Amelia on the other hand produces 1 math homework in 3 hours and 1 English paper in 2 hours. Her opportunity cost of finishing one math homework is the time she would have spent on doing English paper. So for Amelia, finishing one math homework in 3 hours means that she gives up 3 hours to work on English: the opportunity cost of 1 math homework is 1.5 English paper. Similarly, her opportunity cost of finishing English homework in 2 hours is 2/3 of math homework.

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Opportunity cost of producing 1 unit of math homework

Opportunity cost of producing 1 unit of English paper

Jacob

2/3 English paper

1.5 math homework

Amelia

1.5 English paper

2/3 math homework

With these given numbers, the economic theory of ―Comparative Advantage‖ tells us that Jacob should specialize in Math and Amelia should specialize in English. A party is said to have a comparative advantage in the production of one good if it can produce the good at a lower opportunity cost than another country. In other words, Jacob has a comparative advantage in producing math homework because he has to give up fewer units of English paper to produce one unit of math homework than Amelia. Amelia has a comparative advantage in producing English paper than Jacob because she gives up less units of math homework than Jacob in producing one unit of English paper.

Let‘s now assume that Jacob and Amelia specialize, respectively, in math and English. Jacob produces two units of math homework in two hours and Amelia produces two units of English papers in four hours. If they trade one English paper for one math homework with each other, Jacob only has to give up 1 unit of math paper for 1 unit of English paper, whereas before, his opportunity cost was 1.5 math homework for 1 unit of English paper. Jacob therefore experiences a cut down in opportunity 39

cost (1.5 to 1) and is left with a producer surplus of 0.5 math homework.

Thus, Jacob benefits from this trade.

From Amelia‘s perspective, after the trade, she only has to give up 1 unit of her English paper for 1 unit of math. Before, her opportunity cost of 1 unit of math was 1.5 unit of English paper; we can thus say that she experiences a decrease in her opportunity cost from 1.5 to 1 and now has a producer surplus of 0.5 English paper. Hence, Amelia benefits from this trade as well.

It is therefore apparent that even though Jacob can produce both Math and English papers more efficiently than Amelia, he shouldn‘t resort to producing both Math and English by himself, and instead specialize and trade, since both of them can cut down their time spent on homework, and use their extra time to play games, watch movies, or even go on a date .

However, there is a serious barrier called school policy that blocks this trading activity. High schools don‘t allow students to specialize and trade homework between friends, calling it ―plagiarism‖. In the context of international trades this resembles the governments‘ protectionist policies to restrict imports from other countries and boost exports. Such a barrier allows one to question if trading homework is the right thing for a student to do in the long term. It is self-contradictory as a student and a learner to say, ―I will rely on my math skills and another person‘s English skills and get the assignments done by trading with him/her‖, because the entire point of doing homework is to learn! Ain‘t I right, high-schoolers?

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Chapter 4: Relativity Behavioral Economics behind the Art of Marketing I was introduced to the marvelous world of marketing—some people call it the con man’s art—during the summer of 2009, when my Global Economics professor at Stanford‘s summer program asked us to read an economics book called ―Predictably Irrational‖.

This book by Dan Ariely is about how our minds work when we make daily economic decisions. From the title itself, this book makes a bold statement: no one is perfectly rational in the real world.

When I first came in contact with this book, I had just finished learning some of the fundamental economic theories and I had to scoff at this outright claim that challenged what had essentially been for the past two weeks my doctrine to learning all economic models: the principal economic assumption that everyone acts perfectly rationally to their selfadvantage and, accordingly, the market‘s invisible hand guides us to social 41

optimality. From this book, I learned numerous ideas in behavioral economics that challenged this basic assumption, giving examples from our daily behaviors that show we are ―predictably irrational‖. And as if I was hit by a lightning, I discovered a new passageway that connected my brain with another wondrous world of knowledge.

As I continued reading this book, I found marketing very interesting, and in this chapter, I will illustrate one (and my favorite) consumer psychology—our proclivity to make relative judgments rather than absolute—and how I used this consumer psychology to sell shaved ice when I was marketing for a school fundraiser event.

The book Predictably Irrational starts its chapter by throwing an interesting advertisement to the reader: Imagine you are about to subscribe to The Economist magazine On The Economist webpage, you find three options.

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‗But wait a second! Isn‘t it odd? The print subscription costs $125.00 and the print-and-web subscription costs the same. Who would want to buy the print subscription alone? Are the marketers of The Economist stupid enough to offer web subscription for free if we purchase option C?‘ If this is what just went through your brain, then you‘ve been tricked, and tricked pretty badly, by the genius marketing wizards sitting behind the economist.com screen.

So what was happening there? Option B was intentionally placed there—it was a decoy—to make you choose option C, which is obviously superior to option B. What can we learn from this? I quote Professor Dan Ariely: ―Let me start with a fundamental observation: most people don‘t know what they want unless they see it in context… the decision between the Internet-only and the print-only options would take a bit of thinking.

Thinking is difficult and sometimes unpleasant. So, the Economist‘s marketers offered us a no-brainer: relative to the print-only option, the print-and-Internet option looks clearly superior.‖ At first I found that the economist was being ―relatively‖ smarter than other marketers, but as I looked around myself with a bit more insight into this field of marketing, I knew in a few moments that these guys are not the only ―geniuses‖ that saw through consumers‘ minds.

When I came back to Korea to spend half a month with my family (my mom and my little sister live in Korea because of my mom‘s work), my mom finally gave me a 10,000KRW (~$8.2 US) to go buy Vienna sausages so she can cook me a dish I‘ve been yearning to devour 43

for months (it‘s called BudaeJigae: a Korean hotpot with kimchi, spam, Vienna sausages, toufu, pork, and etc). When I arrived at a sausage store that sells different kinds of sausages, I looked at what kinds of Vienna sausages they sell, and noticed three different prices.

I looked at the label attached to the extra pack of MogWooChon sausage for the third option and saw that it weighed 200 grams. At first I was confused, because I didn‘t know which option was the right one to choose. So I tried calculating the price of 1 gram of each sausage type. For the first option, 1 gram costs 10 KRW. For the second, 1 gram costs 10 KRW as well! And surprisingly for the third, 1 gram costs around 8.5 KRW. And I knew immediately without thinking much, that option 3 is better than option 2, because if I choose option 3, I am paying only 1000KRW more than the second option to get 200g of extra sausages, when on average 200g would cost me about 2000KRW. And as option 3 has both handmade and MogWooChon sausages included, and has a lower average cost per gram than option 1, I thought, I‘m definitely better off 44

choosing the third option. I thought I was being smart and all with the calculator. However, I soon realized that I wasn‘t being smart enough to read the shopkeeper‘s mischievous marketing strategy!

I eventually ended up almost getting scolded by my mother for spending too much on Vienna sausages and getting 700 grams of sausages when we only needed 300 grams.

Then, an image that Professor Dan Ariely used in his book came rushing into my brain which was still figuring out how right I was for that choice.

―As you can see, the middle circle can‘t seem to stay the same size. When placed among the larger circles, it gets smaller. When placed among the smaller circles, it grows bigger. The middle circle is the same size in both positions, of course, but it appears to change depending on what we place next to it.‖, says Professor Dan Ariely in his chapter, Truth about Relativity.

With this in mind, I came back to the store in my imagination and thought, ‗the sausage seller intentionally put option 2 to make it seem 45

inferior to option 3!‘ The shopkeeper wanted me to buy option 3, which is engineered to bring him the greatest profit among the three options!

If I had only option 1 and 3 available (as choice A and B), then I would have had a hard time deciding.

Even if I did go through the calculation process and figured out that eventually the option with both hand-made and MogWooChon is better than the option with only MogWooChon, I still knew that I only needed 300 grams of sausages and wouldn‘t have ―irrationally‖ purchased more. The decoy (option 2 of the three choices), I came to realize, was what convinced me to spend more and buy the third choice.

Once I figured out that we humans like to compare things when we make choices, I noticed that such a human nature is shown not just through the economics of our lives but through almost every aspect in reality—choosing dates, getting dressed, grading papers, etc…

Speaking of grading papers and relativity, I have an interesting story to tell about how relativity brought down my English semester grade.

In 2010 May, the final chapter of our junior year was approaching. It had been a year of extreme ups and downs; we endured 46

through tons of tests, and essay deadlines that arrived unbelievably fast.

With a week remaining until the final exams, I turned to the English binder after studying for Economics. I immediately knew I was stuck.

How can I study for an English exam? Our English exam was the equivalent of IB Paper 1 exam which gave us 1 hour 30 minutes to choose either a given poem or a prose and write a literary analysis essay. I read through my past commentaries on poems and prose pieces, and did my best to prepare for it.

During the actual English exam, I felt as if I was gambling. I was analyzing the poem in such a unique way that it may never actually appeal to my English teacher. (I learned from my experience that English is a subjective subject and if the ideas that I develop in my essay doesn‘t resonate with my teacher, my score comes out quite badly.)

A few days after the exam, I saw my score through our online grade-book. And I realized with an utter awe in my jaw, ‗this is why people gamble‘. I had a score of 97, which is something I have never seen before from my English teacher who gave only scores around 90-93 to the most well-written commentaries in class! So even before I got my exams back from other classes, I was exhilarated and the final chapter of my junior year seemed to have ended with a happy ending.

Yet, when I got my actual English exam back, I saw on the top of my paper a 94 instead of a 97! How come? I asked my teacher. He told me that he was being ―biased‖ when he looked at our exams. The first grade that he posted up on the online grade-book was the initial score, and he had to moderate them in the end because he was initially making relative judgments, not absolute judgments. He told me, (these are his exact 47

words), ―when I grade a crap paper and then look at a paper like yours and Kassy‘s (she‘s also got a 97) then I immediately think that yours and Kassy‘s are much better than the crap ones, and I end up giving the crap ones even crapper grades and giving you guys even better grades!‖ So there it is again. Relativity. Even though my final semester grade for English went down from an A to an A-, I‘m glad to have learned how much we base our judgments on comparisons, rather than absolute standards.

Did I succumb to my loss so powerlessly? No. I had to make the school pay back for this loss I had to endure.

So, let‘s fast-forward to year 10-11. I have now become a senior and I still haven‘t forgotten about the lesson I learned from last year about ―relativity‖. I‘ve decided to apply this concept to a fundraiser event I am in charge of organizing as the treasurer of my school‘s Roots and Shoots charity club.

Every year, in Roots and Shoots, we sell shaved ice—sweet chunks of soft ice topped with delicious fruit syrups or with condensed milk and red beans—during huge events such as the Spring Festival, Sports tournaments, and Model United Nations (MUN) conferences. For two years, I have been the sales manager of fundraiser activities for Roots and Shoots, and last year, during the Spring Festival, we sold them at a price of 5RMB per a cup, and 10RMB per a bowl, and 15RMB for an extra-special fruit toppings. Even though we made reasonable profits, I detected a problem: most people bought the 5RMB one. The reason seemed to be that most people were unsure if they would spend extra 5RMB to get a bowl that has not much difference from a cup-size in terms 48

of volume. The problem was, however, that the marginal profit is the greatest for a bowl of shaved ice, among the three choices, because our input was the least in proportion to the amount we earn.

So, this year, for our school‘s mini-MUN conference, in which over a hundred people attend as a tryout for a more competitive MUN trips abroad, I suggested that we sell our shaved ice at 8 RMB per a cup, and 10 RMB per a bowl, to maximize our profits and raise more funds for our cause, which was to provide a winter insulators/heaters for the ―Love and Hope Center‖, a community home for migrant kids.

Before, the consumer psychology worked like this: ‗Ooooh, delicious shaved ice! Hmm, which one should I get? 5RMB one? Or 10RMB one? The 15RMB one seems too expensive… Now which one is better between the cup and the bowl? I‘m confused!!!‘ Now, because of this difficult thinking process they have to go through, consumers chose the more easily justified option of ―cheaper one‖, so that, even if they realize that shaved ice doesn‘t taste so good after all, they feel less guilty since they spent less. This kind of consumer psychology, in which consumers choose a more easily justified product when confused, was in fact proven by professors at Wharton School of University of Pennsylvania, in an article published at the ―Knowledge @Wharton‖ website.

However, now, I turned this around by raising the price of the cup-size from 5 to 8RMB, so that it is much clear for consumers to see which one is more worth it between the cup-size and the bowl-size. Even if they only want a cup-size, they are bound to fall for the trap: making relative comparisons to a superior choice. So, more people bought the 49

bowl-sizes than before, and we were able to maximize our profits (I predicted higher demand for the bowls so we prepared greater supply of bowls).

Finally, I was able to use this concept of relativity to have the school community to voluntarily(?!) commit more to our fundraiser activity, and we increased our average revenue by more than twice this time. Yes, I admit, there was something immoral about this. But, seriously, marketing is about how one can ―control‖ consumers‘ minds, and marketing is seen just about everywhere in the world. So, I will relish at the fact that I was able to raise more funds to help the children at Love and Hope migrant community home. In the end, if the ethics of the results outweighs that of process, an immoral act is justifiable. I guess.

Or…not?

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Chapter 5: Summer of 2010 “Leadership in the Business World” Introduction At school, whenever there‘s a new kid in our grade, I would be the first one to shake hands with that kid. People would then stare at me with a hint of derision, and whisper amongst themselves, ‗why does he shake hands with people? It‘s not like we‘re in a formal business meeting‘ With such fettering perceptions from around myself, I continued to develop my self-confidence, but not arrogance, and stage-presence, but not show-offs.

On July 4th of 2010, I came to the San Francisco State University campus to attend Leadership in the Business World, a summer program run by Wharton School of University of Pennsylvania. Because the Wharton School‘s western division had no dormitories, we all stayed in the San Francisco State University. On my way there, I was half excited and half fearful. I spoke to myself that I will try my best to get the most out of this program, to learn about leadership, to learn about business, and to learn about the world.

Upon my arrival, I acquainted myself with all the other juniors (rising seniors) attending the program. They looked confident yet appreciative, as I listened to their talks about their future plans to become the next Bill Gates, Warren Buffet, or Steve Jobs. I felt that everyone that arrived less than a few hours ago was talking to one another as though they‘ve been together for months already; I saw fireballs of passion from 51

their eyes; and I saw our world‘s bright future.

Despite my initial excitement, my original self-esteem seemingly diminished and turned into an ever-growing adrenaline of worry, as I observed the confident, convincing gestures of other participants, and heard their eloquent introductions about themselves and their amazing life stories. Some already had their own businesses, some had gotten over 2350 in the SAT‘s, some were involved in more than 11 extra-curriculars, and some were just amazing at telling jokes and socializing. ‗What a talented group of kids!‘, thought I as I introduced my humble self to them, ‗How am I to stand out from them?‘.

Thus I began my four-week journey of self-development and network-building, with my ever-growing interest in the world of leadership and business. Even from the start, I knew one thing for sure: that the four weeks ahead of me will be one of the most valuable and fun experiences of my lifetime.

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Week 1: July 6th Highlight I. Attitude in Learning The second day at Wharton‘s summer camp passed really quickly; we were all introduced to our head RTAs (Residential Teaching Advisors) and our teaching professor Rob. We had a basic introduction to our summer program, and learned about various types of, and stakeholders in, businesses. During class, Rob made sure that none of us got bored from his long lecturing, by letting us talk more than he did. We asked questions to Rob and to other classmates, and we were given chances to answer some of the questions on our own as well. I tried my best to squeeze out everything I knew about business, trying to form questions from what I already knew; I was learning new knowledge from old knowledge stacked in my brain. I personally enjoyed the way he taught us, but it seemed that some of my classmates didn‘t like how our class was dominated by a few of the students who knew about business more than others. After the class, I heard a couple of complaints from some of the quieter classmates saying that the more active participants in our class discussion are showing off what they know, and that they aren‘t learning much professional knowledge. This made me realize that learning is really up to the learner‘s perspective.

Say for example, actors A and B were watching a famous actor make a critical mistake onstage by falling off the stage. From watching that mistake, actor A thinks, ‗I should make sure that I have a better grasp of my positions on stage when I act so I don‘t fall off the stage‘ and actor B thinks, ‗that actor is an idiot. I shouldn‘t have even paid to watch this 53

show.‘ Both actor A and B paid the same amount to watch a famous actor act and to learn from the performance, but actor A‘s positive thinking let him learn more lessons than actor B. I felt just like actor A, among the many actor B‘s that complained and saw the negative sides of our ―LBW‖ performance. However domineering some of our classmates were, I knew that if I had the right attitude, paid attention to discussions, and continued to try my best to contribute to them, I can and will be able to make my experience in this program worthy.

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Week 1: July 6th Highlight II. “Our First Business Plans”

Team OffBeat: on the terrace of theWharton School Building, SF. Today was a big surprise to everyone. With our business plan group, (we were put into a group of ten people to work on our business plan for our final project), we were assigned a specific area in the San Francisco financial district. Within the given two hours, we had to explore the area and come up with an original business idea, which was to be presented in front of our entire LBWees. It was a mini-version of our final business plan competition. In our group, everybody was very eager to win the competition—such a drive for success became one of the many reasons that I loved the program.

In order to win, we needed an idea that was both innovative and feasible. To make our business plan stand out, we started looking for things that are not in the region, rather than things that are already there, 55

so as to correctly identify the missing supply to fulfill an existing demand.

Having explored our assigned area, we found out that people in the financial district were either too busy to visit any shop or were already wealthy to have everything they needed. The only thing that came to my mind at that point was that there was enough demand for entertainment and relaxation, but not enough supply of time from consumers. As a result, I led our group to think about relaxation/stress-relievers/ entertainment sectors. We immediately came up with ideas such as massage places for tired office-workers, gym/sauna where people can work out and relax, and even day-care centers for children. When everybody else in our group agreed that our massage idea was good, I had a different view. It seemed to me that everyone in the other groups would be thinking exactly the same way we were thinking, and as a result, doing anything related to entertainment and relaxation may involve the risk of making our business look less unique and original. I encouraged my group to keep thinking about different ideas because the massage idea didn‘t sound original enough.

After spending another hour squeezing ideas out of our heads, Dennis whom I became very close friends with, came up with a truly original business idea: a green interior design company that consults and contracts environmentally friendly interior designs with start-up businesses. When this idea was heard by everyone, as though our light bulbs suddenly came on, we unanimously shouted ―Ooh I like that!‖. We worked for another half an hour on organizing our presentation, for which I volunteered to be one of the speakers introducing our marketing strategy.

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Finally, our hard work paid off: we ended up winning the competition! All of the other groups, as I predicted, had ideas that we had all thought of: hotel for businessmen, entertainment parks for sports and drinks, shops that sell business attires, and so on. I think we won not only because we had the most original and feasible idea, but also because our group worked very efficiently as a group. One thing I noticed from other groups‘ presentations was that most of the time only two people were talking and answering questions, while all the other members stood silently, as if they didn‘t know much about their own business plan. On the other hand, we had everyone fully involved with every detail about our plan. Our unity and cohesion allowed us to maintain our efficiency steadily.

One important lesson I learned today was the significance of knowing how to not be a leader. At school, I‘m usually the one to lead our group projects, take notes and represent the group. However, it was different in this summer camp, in which future global leaders came to attend: all of our group members were effective leaders, and were willing to voice their thoughts and promote their ideas. In our group, I had difficulty discussing ideas with some people who expressed their own ideas with such authority that they almost ignored other people‘s opinions.

So I realized that instead of trying to overtake the role of a leader in front of everyone, I will be the one behind the group who takes care of everyone and makes sure that everyone‘s voice is heard by the whole group. I was successful in that I had two of our relatively shy group members speak up their ideas by helping them break the ice of shyness and propose their thoughts to the group. Even though I wasn‘t practically 57

the leader that guides a group in the front, I was the momentum from behind, encouraging my group to reach its maximum efficiency to take steps forward.

Overall, I am glad that I was able to gain a new perspective on a completely fresh dimension of leadership and to learn about how to work with a diverse group of people.

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Week 1: July 7th Hightlight III. Corporate Structure, Secondary Markets, Derivatives, and Texas Hold’em.

In the morning class with our professor Rob, we learned about the structure of a corporation. We went in details about the role of the board of directors, shareholders, and managers. I learned that the chairman of the board has to represent the interests of all shareholders and maximize shareholder value, whereas the manager operates the business and distributes incomes to his employees. It was fascinating to discover that being a chairman of the board and the manager (CEO) at the same time is a conflict of interest; the manager-and-chairman will tend to maximize his own interests by paying himself the highest without considering the shareholder interests. This discussion in class solved the cluster of mystery I had in my head about how co-founder/CEO make so much money.

We then discussed about how companies raise money to run their business. Among the many ways we discussed, talking about bonds made my head hurt the most. Rob mentioned original and secondary markets to bond trading. In the initial stage, a corporate bond is issued by a company to an investor in exchange for $X paid by the investor, and that bond represents $X + $R interest the company has to pay back in a given time. The secondary market was a ―derived‖ market where investors traded the issued bonds amongst themselves with lesser interest rates, as the pay-back time period decreased. As we continued our discussion about secondary markets, we digressed to the derivatives behind the 59

mortgage market, such as Mortgage-Backed Securities (MBS), which investment banks created to minimize risks of subprime defaults and turn junk mortgages into profitable and accessible financial commodities. It was very interesting to see how the global financial crisis originated from the creation of such derivatives.

That day, after we had dinner, I organized a Texas Hold‘em poker game with a group of friends. To make the game more interesting, we decided to bet real money ($5 buy-in, no re-buy-ins). Though it was a small sum, everyone played as if they were high-rolleres in Vegas casinos.

Without any luck, my friend Jacob and I lost our chips early in the game.

We really wished to somehow get our five bucks back, but since we couldn‘t buy back in, we had to think of another way. Suddenly, I remembered what we learned today about the derivatives in financial markets, and whispered to Jacob, ―hey why don‘t we bet on people that are playing by making derivatives?‖ Upon hearing this, his eyes shining, Jacob suddenly shouted out to the players, who got out and were still willing to make their money back: ―who wants to invest in Ross for 2 to 1 return on investment?‖ I didn‘t first realize, but Jacob explained that this meant that if Ross wins, the investor who bet money on him will get 1 dollar from Jacob for every 2 dollars he invests. But if Ross loses, the investor loses all the money and Jacob gets to take that money for himself.

With this method, Jacob and I managed to lower the risk of losing our own money in playing a poker game and became a middle institution through which investors (spectators) put money in the good players they valued instead of playing the game themselves. So for both the investors and for us, the betting institution, we relied on the poker skills of the 60

players who were still part of the game.

However, our ―business‖ was unfortunately a total disaster. Had poker been a game based purely on the players‘ skills, our business would have been a huge success. But because poker was so reliant on luck, we couldn‘t set an optimal interest rate for different players and ended up losing our money. If I could go back in time and start our business again, I would probably have added another feature to it: the insurance. I would create an insurance that minimizes the risks of the betted players ―defaulting‖

and

then

causing

financial

damage

to

its

―investors‖(=spectators with money on players) and the ―investment banks‖(Jacob and me) by letting the investors buy insurance on their investments. The sum of money paid by investors for insurance would exceed the money paid out to the investors because of defaults, and both the investment bank and the insurance company will profit.

In a way this whole imaginary financial structure of our poker bets and side-bets resembled the real financial world involving, for example, Goldman Saches and AIG. Goldman Saches sold derivatives that were in nature junk but were covered with ―A‖ ratings from crediting companies, and, knowing that those derivatives are risky for them, they invested in insurance packages from AIG called Credit Default Swaps (CDS).

Having said enough of digression, I think it was a valuable experience to learn about the financial world through a new (and somewhat random) perspective of Texas Hold‘em. Today, I was able to become best friends with another intelligent boy Jacob Edelson. Our collaborative chemistry, I feel, will benefit me in my future career.

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Week 1: July 9th Highlight IV. Google vs WallStreet; People vs $$$$$ Inhaling the July air, I felt the invigorating freshness stir every cell of my body. As I sat by the window I looked up and saw the clear blue sky welcome our yellow LBW bus arriving to the beautiful collegelike campus of… Google!

Today was a site-visit day that everyone had been waiting for. We didn‘t even feel it coming until we saw the interior. The volleyball courts, the Google-colored bikes all around the campus, the free food and kitchen every twenty steps, and the casually dressed smiley people on campus… it was something more sensational than any college life we were expected to experience during the camp. I fell in love with every single piece of ‗Google‘ and I could easily smile back at every single 62

person I met there.

Our speaker was Jason Toff, a former LBW and Wharton alumni and now a marketing director at Google. He spoke about his lessons learned while at Google, and Google‘s marketing strategies and principles.

What I remember most distinctly from his presentation, however, was neither the fact that Google uses targeted advertisements to generate most of its revenue, nor its principle of always focusing on users and letting everything else follow after. The most fruitful thing that Jason Toff allowed me to think about was the contributions that a company like Google makes for the society.

During the Q&A session of our Google visit, I asked Jason Toff, ―How would you compare the achievements of companies like Google and of investment banks on the Wall Street?‖ and Jason said without hesitation ―we create and innovate; while they

work in the cubicles，chasing

after money rather than people‘s well-being‖. Even though this certainly was a biased statement, it moved me, and reminded me of a scene from the movie ―Wall Street‖—the multi-billionaire Wall Street investment banker Gordon Gecko once says in the movie, ―it‘s a zero sum game.

Somebody wins, somebody loses. Money itself isn‘t lost or made—its simply transferred from one perception to another. Like magic.‖

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If what Gordon says above is the viewpoint of a Wall Street investment banker, then what Jason Toff said was that of a philanthropic businessman. Instead of buying and selling of companies, businesses like Google created its own, revolutionized the Information Technology industry, created tons of jobs, and opened up business opportunities for tens of thousands of small start-up companies. Gradually, to me, working for a company like Google started to become something more than just a quixotic dream.

Working for a large investment bank on the Wall Street and becoming a finance expert used to be my dream. However, with this newly acquired perspective on business, and the significance of people, I‘ve decided that I will learn finance, not just because I want to become wealthy, but because I want to bring a change to the current structure of finance industries, in which money is more important than well-being of others, especially in Korea. I want to be at the frontline of this reformation, because I believe that life is not about money after all. It‘s about people and love.

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Week 2: July 11th Highlight V: Seeing the Spectrum of Leadership Through a Soccer Match

A week has past since the camp started and we all started to get used to the normal routine here. We‘ve all become friends with each other already, and now begun that part in friendship called ―trial and error‖. We started observing the true characteristics of one another and made sure that whom we hang out with were right for us. And it seemed so far that the most common way to find out about people‘s characters was through sports. Playing sports allowed us to recognize the hidden— and the more real—personalities of the ―friends‖ that we thought were all so smart, kind, and respectful of others.

On a daily basis, most of us would go outside during our free time and play sports with our newly-acquired friends. Oddly, it turned out that soccer, not American football, was the most popular sport in the camp. But of course this didn‘t mean that people were very good at it.

With my experience of playing for my school soccer team for more than 65

two years, I was able to assume a position of leadership among the group of LBWees playing soccer.

We divided into two groups of about seven people. And it was obvious within the first half of the game that the two teams, one led by me, and the other led by a very strong and domineering leader, were polar opposites in terms of leadership structure.

My team was more of a ―flat‖ structure: where everyone had an equal say, an equal role in the game. I acted as the social catalyst for that state of communal well-being of the team. Even if we let a goal in, I would always encourage everyone, telling my teammates that we can still do it, that we can still score more. Even though I knew that if I gave the ball to the girls, the boys from the opposing team will take the ball away from us more easily, I still passed to the girls. And I ran towards them to help them continue the pass-play. Even if I knew that we were going to lose, I was smiling and cheering for everyone, so as to not ruin the fun of the game. Because we were here to have fun, not to win using any method.

On the other hand, our opposing team was of a fierce hierarchal structure; the boy with the strong sense of leadership (I refuse to mention the name) assigned everyone their roles in the field—some as defenders, some as midfielders and some as attackers. They charged at us with intense slide tackles, with continued fowl-plays, and without passing the ball to the girls a single time. The passes were invariably made to the few good players all the time, and they were able to score many goals.

The obvious result was that we lost; because we tried to give everyone in the team equal chances of having fun, and because not everyone had the good skills in soccer, we lost balance as a team.

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However, by choosing the flat structure where everyone equally gets to enjoy the game, I was able to distribute ―happiness‖ and ―satisfaction‖ to everyone, despite our loss. On the other hand, the other team‘s hierarchal structure led to their nominal ―victory‖ but this didn‘t mean that their game was ―fun‖ for everyone; by the end, they were all hurt and exhausted due to constant fowls, tackles, and shouts, and no one enjoyed the game as much as our team members have.

It was the question of Equity vs Efficiency—whether we want everyone to have fun together, or whether we want the few individuals to efficiently win the game. This soccer game was reflective of the many modern day capitalist economies, in which the top 5% of the hierarchy gains more material than the majority.

In our case, I, as the most experience and skillful soccer-player of our team, could have just worked with the best players of our team and achieved victory. But I gave up such elitist ideal and instead achieved the main objective for playing soccer which is to have fun together, not to win by destroying the other team. Even if this was a real-world situation where the loser gets eliminated from the society, I would probably have done the same: to give up just a little bit of my gains and share with those below me, to work for the well-being of the community, not for myself.

Why? Because, for me, working for the community is how I would pursue my self-interest!

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Week 2: July 11th Highlight VII: A Ground-breaking business idea born with the spirit of C.O.P.: Cohesion, Originality, and Passion.

Having tasted the sweetness of victory in our mini-business competition, our group was eager (but not quite ready) to win the final business plan competition against the four other groups. In our group recitation with our RTA, we had to come up with a creative business idea that would surpass any other groups‘ in both quality and originality.

Our group discussion was held with respect to the three values we set initially as a group: Cohesion, Originality, and Passion (COP)— that is, on the first day we met as a group, we decided to become a group that works cohesively for original ideas with passion for victory.

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However, when we set those values, it became obvious soon that our values became our very obstacles(at least in the short term). Because we always aimed for unanimity (cohesion), our discussions took longer than any other groups. We often ended up being unproductive after three, four hours of intense debates and discussions to come up with one solid idea upon which everyone agreed. We aimed for unprecedented originality, even though not a single one of us have had proper experience at coming up with feasible and innovative business ideas. At the end of everyday‘s discussion, our head hurt so much that we all had to get a StarBucks even when it was 9 PM just so we can function properly and get to our dorms without falling over. We had so much passion (almost too much) that we used up all our energy during each recitation period, and ended up not being able to do our daily research homework for the business plan (most of the time, I managed to stay awake until 2 a.m. doing research for the whole group and sending them updates on our statuses, but I couldn‘t keep going after more than five days).

While we struggled to find the perfect idea together, many other groups had either come up with decent ideas in a day or two, led by a few individuals, or were suffering from the aftermath of a World War Three between two obstinate leaders, who both had different ideas in mind that they thought were good.

Having thus been left behind all other groups, we came up with a deadline that we had to have decided on one idea by. By the time the deadline approached, we had three ideas that not everyone fully agreed upon. The first one was a smart desk—an electronic desk that transfers information between the smart-board, teacher‘s computers, and the 69

student‘s folders. This idea seemed creative but was unfeasible because the cost was too high and was an unnecessary luxury good for schools.

The second idea was one that I proposed—an electronic scientific magazine that allows interaction between the reader and the text through features allowed by platforms like the i-pad. When I pitched this idea, everyone didn‘t understand the concept. However, when I showed them the video made for ―Alice in Wonderland‖ for the i-pad, which shows animated pages with pictures that move and interact with the readers, everyone‘s eyes suddenly sparked widely! We left this as a good option, and moved on to the third idea, which was about a business that spreads composting amongst households and restaurants and which makes money by selling the soil produced from compost materials. We discussed this idea for more than an hour and came to a conclusion that the starting cost is too much. We need to be able to fund for not only the delivery of composting cans to individual houses but also for the converting of compost materials into soil. Also, we couldn‘t figure out a way to monetize the value that restaurants or other types of business put on to ―composting‖ and ―going green‖. As a result, our group decided to stick with my idea: interactive magazines. But we were still missing one final piece of the puzzle.

We kept on discussing. At one point, someone in our group pointed out that instead of being a software-based firm providing contents and technology, we could even expand onto making a hardware device, a new Kindle for magazines in future. We thought that this might be a good idea, but considering the fact that in future, most consumers will want a single device with integrated features and functions all available in it, such 70

a hardware business will not be successful. I asked everyone to go back to the basics. Looking at the trend, the publications are going beyond digital: they are going interactive. And yet, the costs of making a publication ―interactive‖ in devices like the i-pad are huge for a single firm to convert their materials. So, we came to the conclusion that a business that provides the service of transforming online/paper non-interactive copies of media into interactive digital copies will be successful in future. Our idea was clear-cut, innovative and feasible all at the same time. We seemed to now have the best idea than everyone else‘s group.

To show our ingenuity and creativity, we named our group as ―Team OffBeat‖. I really liked this name for it figuratively implied our originality UNTIL….

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Week 3: July 18th-July 23th Highlight VIIl – An Unforeseen Obstacle: Originality of an idea vs Execution of an idea Having conducted some spy/intelligence operations on other groups, we managed to figure out other groups‘ business ideas and compared ours to theirs. And we were now two thousand percent sure of our chance of winning against everyone. The only job left for us to complete for our final project was to write a final business plan of approximately 30 pages length. With our confidence, such a task seemed like a piece of cake.

However, it wasn‘t an easy task indeed and the group name OffBeat named after our ―originality‖ and ―innovativeness‖ seemed to make sense literally, rather than figuratively—we literally started going off beats. I had never thought that having an idea that is too original can be so detrimental to our group performance. Now that our group thought that we had a good chance of winning due to our original idea, our productivity and efficiency fell as a group. During the evening meetings after lectures, I tried my best to maintain a high level of productivity by delegating tasks to the right people so that they can specialize in particular areas, but most of the group—except for one or two very dedicated members—were too relaxed to finish their tasks by our tentative deadlines.

To make matters even worse, because of our three values— cohesion, originality, and passion—we always moved conhesively: this meant that whenever the majority of the group members weren‘t working, 72

all other members stopped working in order to be ―cohesive‖ with everyone else. I saw this as a possible cause for a future failure, and started encouraging everyone to work harder, but it seemed that my suggestion only encouraged the truly dedicated members of our group and left the rest of them relaxed and inefficient.

Dealing with such types of people in our group was one of the most difficult challenges that I and my peers had to overcome in the course of the four weeks. And such an experience as the one I went through during the third week allowed me to understand the importance of ―execution of idea‖ rather than the ―originality of idea‖, because if an idea is original and not executed with dexterity, it is worse than a mediocre idea that is executed well. This case of our group led me to revisit what a venture-capitalist guest speaker told us one day about convincing investors to invest in your business: ―in order to get a decent amount of dollars out of your investor‘s wallet, you need to show that: 1) there is a huge market OPPORTUNITY 2) you have the SOLUTION that meets the market needs 3) you are well-POSITIONed to seize the opportunity 4) you have a solid PLAN 5) when you EXECUTE the plan you can make a lot of money.‖ In our group‘s case, we effectively met the first three criteria, but were unable to come up with a solid business plan due to our inefficiency, and thus failed to show that we can execute our idea wisely and feasibly.

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Pride and arrogance played a huge role in such a downfall of our group‘s productivity; one significant life lesson that I learned during this week was that I shouldn‘t be sure about something just because of the idea or thought, until I can back my optimism with in-depth plans to execute what I thought of.

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Week 4: July 24th-July 31st Highlight IX– Democracy vs. Dictatorship: Which is Better?

The first three weeks of the camp thus passed by. So far, it had been such an exhilarating life experience, but I also had to endure many sleepless nights researching and editing our business plan. Why did I have to pull those all-nighters while my teammates slept in their warm beds? It was simply because I couldn‘t let my group fall apart because of the ingenuity of my idea and our team values (C.O.P.). I kept myself awake and wrote industry reports and summaries to my group members using a group g-mail address, and edited our draft of the business plan.

My active involvement in our business project brought about a slight structural shift to the group. From what used to be a flat structure where everyone had an equal stake at our project, Team OffBeat started to shift towards a hierarchal structure, led by myself and another highly motivated teammate, Stacey. During our team meetings, Stacey and I would assign our group members jobs that they seem to be most skillful at. We then split, and worked on our assigned sections. I went around from one group to another, checking on their progress, and informing the groups of some major changes to be made. This structure seemed to work very well at first. It made sense, because we were initially made equally motivated and interested in our topic, by the flat structure, and by changing it to a more hierarchal structure, we ensured efficiency through ―division of labor‖, so to say.

However, our structure didn‘t last so long. Many group members started complaining that our three values (Cohesion, Originality, 75

Passion) were being distorted by the hierarchal structure which limited what they could do. I really had nothing to say when my group members complained, because it was true that cohesion was what we promised from the beginning. It was troublesome, however, to return to our flat structure, because considering everyone‘s opinion on everything will certainly slow our process down (which was already the case). Pressured by the majority‘s opinion, I acquiesced to bringing a democratic structure to Team Offbeat.

Three days before our presentation, the first draft of oru business plan was finished and we named our product, ―ActiveReader‖.

Our next job was to edit the 30-pages-long draft. When we assembled to edit our draft, it took an incredible amount of time to finish going over just the first five pages; what was holding us back was the rather trivial, individual opinions that seemed unnecessary considering the enormous task left for us ahead. Because of our ―democratic‖ structure, we had to spend the next three days revising our business plan.

The day before the presentation, we voted for the three presenters that will represent the Team Offbeat and present for 10 minutes our business proposal. Stacey, Ross and I were chosen, as the representatives, and we started preparing for the presentation at 9PM the night before the judgment day. It was extremely tough, because now that we were ―elected‖ to represent the group, our group members fully trusted the three of us to do all the work, and bring victory to the group.

Consequently, Stacey, Evan (who was in charge of the power point slides) and I pulled an all-nighter working on our presentations, while the other members (including our third presenter, Ross) got some hours of sleep.

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On the day of our presentation, Team Offbeat rocked! Our presentations quite obviously stood out from the rest, in terms of both quality and style. After the presentation, there was a Q&A session, where the judges, including expert venture capitalists and Wharton professors, gave us feedback and asked us questions which any of the group members could attempt to answer. In most other groups, the three presenters answered the majority of questions, and the rest of the group members only stood there, nodding. On the contrary, the members of Team Offbeat all volunteered to answer each question, with no distinction between speakers and non-speakers. One judge negatively commented on us, saying that our business model ―ActiveReader‖ relied too much on Apple‘s i-pad platform, and contained too much risk and so on, and immediately ended our Q&A session. However, after the round of applause, we responded by clearly and formally answering his comments even when they weren‘t required. The judges seemed to have been impressed by our eagerness to promote our business. Thus, our presentation marked its end with a prospect for a favorable outcome.

Two days later, the East and West LBW counterparts gathered together in Rittenhouse Hotel. On this day, we were finally about to find out the true ―winner‖ of the business competition. Though our group knew that we were far less competitive in our written business plan, we were confident about the quality of our presentation and didn‘t let of our last stream of hope for winning.

When Dr. Anne Greenhalgh announced the winners of the competition from West and East, we were surprised to hear the name of the most dictatorial team mentioned: ―the winning group from LBW West 77

is…. Greenmarket!‖ Greenmarket was the group that was most known for its hierarchal structure. It was one of the rare groups in which all the questions except for one or two were answered by the presenters—who represented its dictatorial leadership structure—and had their tasks delegated to each individual. In fact, my room mate was part of the group, and whenever I tried to ask him about where they were with writing their business plan, he always told me to go ask Ben, their most dominant leader.

Was a flat structure, in which everyone had equal says in all decisions, less effective than a hierarchal one, led by one or two visionary leaders? It was clear from the result of our business competition that the pyramid stands on top of the flat. But why? In the beginning of the program, we were so sure that by working together till the end, by coming to group consensus on our decisions, we would be able to win.

And until it was towards the end, we worked efficiently and cooperatively.

What is the factor that made our ―ActiveReader‖ inferior to ―Greemarket.org‖? ―Time‖.

That was precisely the answer. Or… was it? If we had more time, we would have certainly be more prepared, but so would the other groups be! ―Efficiency‖ Though we initially managed to maintain a decent level of efficiency, we gave up our ―cohesive‖ efficiency towards the end due to lack of time and our own pride at our ingenious idea. Therefore, Team 78

Offbeat became more like a mechanical vehicle driven by three or four wheels: from the outer side, it seemed as if everything was working in cohesion, but, in truth, it all started and ended from a few individual motors‘ physics. Stacey, Evan, Dennis, and I stayed up late, making up for most of our other group members‘ absence, and worked towards our ―group‖ success overnights. Ironically, we were calling ourselves ―flat‖ but we were in truth a last-minute pyramid-builders that formed an ambiguous hierarchy. Perhaps this ambiguity in structure was the reason behind our loss. But surely if we had remained with our flat structure the whole time, our members would have nevertheless lost their incentives to work and some people would have emerged as shaded leaders of the group. On the other hand, it was also wrong to let our group become a completely hierarchal one. We‘d then become just another one of those groups in which the three presenters were chosen because they were leaders the whole time, instead of going though a democratic process of election.

So what does this mean in the short term and long term? In the short term, of course, we feel melancholy because we failed to achieve our communal goal. But in the long run, this thing called ―victory‖ is only a nominal title. In the long run, Team Offbeat is more successful than any other groups, because our group members have learned more than any other people from other teams. The true purpose of this month-long program was so that we can learn about business, leadership, and the world, and we‘ve perfectly achieved this objective. Even though our ―failure‖ to win may be depressing in th short run, it becomes a great lesson for the future. In summary, here is the catalogue of things we 79

learned as a group.

1) General ideas about business modeling and start-ups.

2) ―Great ideas can fail without great way of execution.‖ 3) ―Sometimes, cohesion and unanimity won‘t bring you efficiency.‖ 4) ―A balance between a hierarchal and a flat structure can ensure maximum efficiency.‖ 5) ―Failure now can be a long-term investment for a better future.‖ Team Offbeat was the only group, I am sure, that was able to gain those priceless lessons mentioned above. If we had won the competition while maximizing our ―group‖ efficiency through a dictatorial leadership structure, we‘d be better-off in the short run, but we‘d still remain blind in the long run.

Last day of LBW: Go,Team Offbeat!

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Chapter 6: IB Extended Essay Demand and Supply of E-bike Research Question: In the e-bike market in Wang Jing, Beijing, what demand and supply changes account for the phenomenon of increased sales and unchanged prices from year 09-10?

Abstract The aim of this extended essay is to investigate the supply and demand changes behind the market phenomenon of increased sales for, and constant prices of, e-bikes (electric bicycles) in the e-bike market in WangJing, Beijing, from year 2009 to 2010. This research question effectively sets limit for the scope of variations and uncertainty by establishing numerous control variables, such as time (09-10), location (WangJing, Beijing), and the product (e-bike).

The investigation was carried out with two primary sources and numerous secondary sources. The primary sources include interviews with two sales-persons of an e-bike retailer shop JiaLeFu which helpe me to identify the phenomenon of increased sales with unchanged price, and consumer surveys conducted with 65 JiaLeFu customers of e-bikes, which contributed to my research about the determinants of demand for e-bikes.

The secondary sources include news articles and industry reports on ebikes in China.

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The investigation process lasted for more than 6 months, because the JiaLeFu retailer refused to provide any corporate information regarding prices and sales statistics of e-bikes. However, in the August of 2010, I managed to obtain a simple price chart showing the variation in the prices of models sold in JiaLeFu retailer. The increase in e-bike sales was easily identified in general, but has not been specified with the given location—Wang Jing.

The hypothesis for this phenomenon of increased sales with unchanged price of e-bike was that both the demand for and supply of ebikes in Wang Jing increased over the last two years, leading to a constant equilibrium price and greater equilibrium quantity. This hypothesis was proven to be correct after the investigation. One major limitation of this paper is that there was a lack of primary source that justifies the increase in supply of e-bikes in the given situation.

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Introduction In light of the numerous technological developments and the global inclinations for going ―green‖, China has, for the past decade, experienced a significant growth in the market for e-bikes: electric, twowheeled, environmentally-friendly vehicles, which combine pedal power with battery-based propulsion (Guo).

The e-bike industry is vastly significant to China, as it fosters environmental improvement as well as economic growth. E-bikes provide a means of reducing carbon emissions through its electricpowered batteries: for each mile traveled, electric bikes cause fewer emissions of the gases associated with global warming than do cars(Goodman). Furthermore, the e-bike industry induces a vast number of employment opportunities for the Chinese workers, fueled by the growing domestic and global demand for e-bikes made by cost-efficient Chinese firms.

Beijing is an essential hub of e-bike consumption in China(Guo). As a resident in Beijing, I was drawn to the rising number of e-bikes on streets and decided to investigate the reasons for the growth of the e-bike market in Wang Jing, a town in Beijing where I live.

Large towns in Beijing such as Wang Jing have experienced a growing number of e-bikes on the roads. Approximately 120 million ebikes produced in China are being used on the country‘s roads and somewhere between 700,000 and 800,000 e-bikes are operating on the streets of Beijing alone (Patil). Moreover, since 1999, the domestic annual output of e-bikes grew from a few thousand to more than 22 million in 83

2009, reaching an annual sales revenue of 11 billion dollars (China's Electric-bicycle Boom).

Considering the steady increase in e-bikes output and sales in Beijing, I went to Wang Jing JiaLeFu Mall, the biggest e-bike retailer shop in the town, to investigate the sales and price changes of e-bikes.

Preserving the specifics of the research results for later purposes, these are the two major findings from the research: for the past two years, ebike sales increased steadily, while prices stayed the same.

Hence, in this paper, I will address the following research question: In the e-bike market in Wang Jing, Beijing, what demand and supply changes account for the phenomenon of increased sales and unchanged prices from year 09-10?

This research question will be examined through supply and demand analysis, including changes in the determinants thereof.

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Market Structure and Background The target market for this research is the e-bike market in Wang Jing, Beijing. A highly diverse and populated town, Wang Jing is developed as both a business and residential town. It has approximately 300,000 residents in total, a third of whom are South Koreans (WangJing‗s). Other ethnic groups in Wang Jing include Hans, Manchurians, Mongolians, Americans and Japanese (WangJing‘s). Such a diverse culture allows for a comprehensive sample analysis. The analysis of e-bike market in Wang Jing will be based on observations and data from a sample e-bike market, JiaLe-Fu Mall, which supplies the largest number of e-bikes in Wang Jing.

A market is a medium through which buyers and sellers interact to exchange goods and services at an equilibrium price.

The Wang Jing e-bike market can be characterized as monopolistic competition. In monopolistic competition, there are numerous firms that are relatively small compared to the total industry size, and decisions of individual firms have minimal effects on the industry as a whole. This is true in Wang Jing, which is located in Beijing where major e-bike sellers such as Giant, Jiangsu Xinri Electric Vehicle Co., HaoHaiZi, Trek, Ta Lang Motorbikes, HuaTu and DushiFeng, Inc., operate (Goodman).

Another characteristic of a monopolistically competitive market is that firms can differentiate their products from those of other producers, which results in price variation and brand loyalty. In Wang Jing, the JiaLeFu e-bike retailer shop provides e-bike models from four major ebike suppliers: Giant, DuShiFeng, Ta Lang, HaoHaiZi, and offers up to 85

fifteen models that are different in battery quality, design, size, maximum speed, and prices. Thus, it can be seen that product differentiation is possible in the Wang Jing e-bike market.

Additionally, there are few, or low, barriers to entry in a monopolistically competitive market. In the case of WangJing, the government enforces no particular regulations other than the general size of maximum 40kg) and speed limit of maximum 12mph of the e-bike product, which apply to every licensed e-bike producer in China(Zhao).

Also, the e-bike industry in general requires simple technology, and has weak protection of intellectual property (Weinert). Thus, this shows that low barriers to entry exist in e-bike markets in China, including Wang Jing, and that the industry is open to entrance of any competitive firms.

Due to these characteristics, one can conclude that the e-bike market in WangJing is a monopolistic competition market.

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Market Status: Growing Sales, Steady Prices Having conducted my first primary research, I found from JiaLeFu E-bike market that sales have increased steadily during the chosen time span of two years.

I conducted interviews with two sales managers, one of whom has four years of sales experience in JiaLeFu e-bike market, and the other, two years. When asked to judge the performance of e-bikes for the past two years, the first salesperson noted, ―e-bikes have been doing remarkably well in Wang Jing‖. When further asked the question of ―how rapid is the sales increase?‖, he replied ―sales rise steadily; month-bymonth, more e-bikes are being sold gradually(appendix). But it isn‘t a sudden spike.‖ The answers were the same with the second salesperson.

Furthermore, in the display area consisting of e-bikes and pedal bikes, more than three quarters of the display were e-bike models: out of the sixty sample displays of e-bikes and pedal bikes, forty were e-bikes and twenty, pedal bikes. The salesperson notes that the display was like that ―not for long‖. According to him, in year 2007, it was mostly pedal bikes in their display, even though e-bikes were in stock. The proportion of e-bikes in display has increased steadily from 2008, till the beginning of 2010. The first sales manager added, ―it is definitely true that e-bikes are doing better month by month‖ (appendix).

However, no quantitative data were collected from JiaLeFu, for the sake of protection of private corporate information. Hence, I decided to look at production and sales statistics of e-bikes in China and Beijing, in order to further support the phenomenon of the steady increase in e-bike 87

sales in WangJing.

Figure 1 (Booming…)

Projected E-bike output (2007-2010)

Figure 1 shows the expected output of e-bikes in China. Experts predict that by the end of 2010, China alone is expected to reach 23 million units. In 2009, it was expected that output would rise to 19 million units. However, the actual figure exceeds the expectation, as 23.69 million e-bikes were produced in 2009, up by 8.2% from 2008(―China Produces…‖). Furthermore, since 1998, annual sales of ebikes have risen remarkably, from 56,000 units to 21,000,000 units in 2008, ―reaching an estimated fleet of 120 million e-bikes as of early 2010‖ (―Goodman, J. David.‖).

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Figure 2 (Booming‌)

In figure 2, it can be noticed that the increase in sales revenue between 2005 and 2010 for e-bike battery market is the greatest in China.

From the figure, it is expected that the global sales revenue of e-bikes battery will reach 2,539.8 million USD, and China alone would make 2,102.9 million USD in revenue, indicating a general increase in sales of e-bikes. In future, publications from National Bicycle Industry Information Center report that 20% of the pedal bikes in China will be replaced by e-bikes within the next 10 years (Booming).

These sets of evidence clearly reveal that sales of e-bike have been increasing for the past two years, in both China and in Wang Jing.

Now, with this phenomenon in mind, I obtained a price chart showing the prices of the top 8 e-bike models sold in JiaLeFu market, from 2008 to 2010.

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Figure 3 Price of E-bike Models in JiaLeFu Models of E-bikes DushiFeng Andy‘s Bike 16 DushiFeng Andy‘s Bike DushiFeng Savismotor HaoHaiZi Model A HaoHaiZi Model B HaoHaiZi Model C HuaTu JieAoBi Motor Bike TaLang MotorBike

Price in 2008 (December) 1699

Price in 2009 (December) 1699

Price in 2010 (September) 1699

1899

1899

1899

N/A

2188

2188

3088

3088

3088

2899

2899

2899

2688

2688

2688

N/A

2599

2599

1299

1299

1299

This price chart reveals that prices for all eight e-bike models were unchanged for the past two years. These results show a phenomenon of increased sales with unchanged prices over a long period of time.

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Hypothesis Demand is defined as the ability and willingness of a buyer to purchase a certain quantity of a good or service at a given price. Supply is defined as the ability and willingness of a seller to sell a certain quantity of a good or service at a given price.

In theory, considering a downward sloping demand curve, an increase in the total quantity sold of a good results from two possibilities.

Firstly, it can be due to a fall in price, leading to increased quantity demanded, as illustrated in figure 4.

Another possibility is that a change in a determinant of demand leads to a shift of the entire demand curve to the right, meaning the buyers are willing and able to buy more quantity at any given price, shown in figure 5; in this case, both equilibrium price and equilibrium quantity increase.

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Similarly, considering an upward sloping supply curve, an increase in total quantity may result, firstly, from an increase in price, leading to shift along the supply curve and an increase in quantity supplied, shown in figure 6.

Secondly an increase in total quantity may also result from a change in a determinant of supply, which leads to a shift of supply curve to the right, as shown in figure 7. This means that suppliers are willing and able to supply more quantity at every given price, consequently lowering the equilibrium price and increasing the equilibrium quantity.

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Considering the above-mentioned distinction between change in demand/supply, and change in quantity demanded/quantity supplied, one can logically state that it is not possible for an increase in quantity demanded and in quantity supplied to happen at the same time, because an increase in quantity demanded requires a fall in price, and an increase in quantity supplied requires a rise in price. These two situations are selfcontradictory, and moreover, the price chart of e-bikes proves that there were no price changes.

Therefore, it can be hypothesized that this phenomenon of increased sales and steady price of e-bikes in WangJing, is due to a shift of both the supply curve and the demand curve to the right, as shown in figure 8.

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Analysis: Changes in Determinants of Demand To prove the hypothesis, one should first determine whether the demand for e-bikes in WangJing has increased, which can be demonstrated by showing a change in any determinant of demand: consumer income, price of substitutes, price of complements, tastes and preferences, government intervention, size of population, and so on.

Market research in Wang Jing shows that there are three major changes in determinants of demand for e-bikes: widening tastes and preferences for e-bikes, rising price of substitutes, and rising consumer income.

Figure 9

Figure 9 illustrates a pie chart that shows the extent to which each determinant of demand in the e-bike market affects the consumer‘s decision to purchase an e-bike in WangJing JiaLeFu Mall. This pie chart was made from conducting surveys with 65 customers in the e-bike retailer shop of JiaLeFu Mall, asking them to determine the top three 95

reasons for their purchase from a list of reasons containing all the possible determinants of demand (appendix).

The figure shows that a great number of consumers‘ decisions are shaped by tastes and preferences. This shows that using e-bikes has become a trend: as more people ride e-bikes on streets and as its advantages become more known throughout the community, people demand e-bikes increasingly more (China Produces…). Furthermore, the e-bike sellers of JiaLeFu Mall, when interviewed, also agreed that the Wang Jing community seems to be gradually discovering the convenient features of e-bikes such as the speed. ―Not many think of the environment;‖ says a JiaLeFu salesmanager, ―the driving factors are how fast you can get to workplaces or subway stations, or how you don‘t have to get stuck in the traffic every morning, if you ride e-bikes.‖ A rise in income is another change in the determinant of demand for e-bikes. For normal goods, such as cars and e-bikes, a rise in consumer income will lead to greater demand, whereas for inferior goods, such as pedal bikes which are relatively cheaper than e-bikes, a rise in consumer income will lead to a fall in demand.

In Beijing, people‘s average income level rose from 2009 to 2010 in general. As the Chinese economy has been recovering from the recession of late 2007- early 2009, according to the Beijing Bureau of Statistics, Beijing‘s economy grew 10.1 per cent in 2009 from 8.6% in 2008, and the total income in Beijing reached 1.19 trillion yuan in 2009 (Beijing).

Additionally, for Wang Jing in particular, a rise in consumer wealth can be shown through the rising house prices. From early 2008 to 96

end of 2009, average WangJing real estate price rose more than 150% from 8000RMB to 20,000RMB (Juan). An increase in average housing prices represents an increase in consumer‘s average wealth, and thus raises consumers‘ purchasing power.

Consequently, with rises in people‘s income and wealth from 2009 to 2010, more normal goods are demanded at any given price, and e-bikes are no exception to this phenomenon.

Price and sales amount of substitutes was another large determinant of demand for e-bikes, according to the surveys. If goods are substitutes for each other, a change in the price of one good will lead to a change in the demand for the other product. Substitutes of e-bikes include: public transports, pedal bikes, scooters, motorcycles, and automobiles. Recently, the ―prices‖ for these substitutes, mainly scooters, motorcycles, and automobiles, or their cost of consumption, have risen, due to increase in price of gasoline.

Figure 10

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Figure 10 shows the recent hikes of Gasoline and Diesel prices that Chinese government is adopting. From the end of 2008, the oil prices have risen steadily(Trevethan).

Since most of these substitute goods are fueled by gasoline, while e-bikes are powered through electric batteries, rises in fuel prices lead to increase in consumer‘s costs of consumption, which is in effect equivalent to a rise in their prices. Thus, following to the inverse relationship between the price of a substitute of a good and the demand for that good, the demand for e-bikes increases at any given price, with rising fuel prices.

Considering these changes in determinants of demand, one can state that the demand curve for e-bikes in Wang Jing has shifted to the right, from 2008 to 2010. This is shown in figure 11.

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Analysis: Changes in Determinants of Supply In the above-mentioned hypothesis, the cause of this phenomenon was theorized to be an increase in both demand and supply.

Now that the increase in demand has been proven, the possibility of an increase in supply will be addressed.

Contrary to the demand curve which is dependent on local consumers, the supply curve for e-bikes in Wang Jing in fact doesn‘t necessarily pertain only to Wang Jing region. In other words, the local supply of e-bikes in Wang Jing follows the domestic supply of e-bikes. This is due to the fact that most e-bike producers that sell in Wang Jing are nation-wide firms operating in parts other than Wang Jing or Beijing. This means that production scale and prices adopted by these firms vary not by their sales results in Wang Jing, but by the entire domestic demographics.

A supply curve is shifted only when there is a change in one or more of the determinants of supply. An increase in a supply curve may result from changes in price of an alternative product, , a decrease in the cost of production, improvements in the state of technology, number of suppliers, and government interventions such as tax reduction or subsidy increase.

Firstly, it is possible that the cost of production for e-bike firms has decreased due to economies of scale. Economies of scale can be defined as the cost advantages gained from a large-scale production of a good or service. In the case of e-bikes, because of the continuous increase in the amount of e-bikes produced, many e-bike producers have been able to operate more efficiently and lower per-unit costs, from increased 99

specialization, division of labor, and bulk-buying of factors of production (Durning). This situation is represented in figure 12.

Thus, due to mass production, costs of factors of production have fallen over the past two years. Since this is a change in a determinant of supply, the industry supply of e-bikes increases.

Furthermore, another factor that causes the supply of e-bikes to move to the right is the entrance of new firms in the past two years. It was addressed earlier that the e-bike market is a monopolistic competition, and that there are low barriers to entry.

In this given circumstance, where the demand for e-bikes has increased over two years, the already existing firms experience shortterm abnormal profit, the excess of total revenue over total cost, accounting for opportunity costs, at profit-maximizing level of output.

This can be illustrated by figure 13.

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In a monopolistic competition, an individual firm‘s demand curve is downward-sloping, and the demand curve is equivalent to the firm‘s average revenue. In figure 13, at the profit maximizing level Qmax, where marginal revenue equals marginal cost of e-bike, this hypothetical e-bike firm makes a short-term abnormal profit of rectangle A. Attracted by the possibility of making such an abnormal profit, been a number of firms entered the e-bike industry during the past two years. For example, in Zhejiang Province, where many e-bikes sold in WangJing are produced, there are 300 e-bike and e-bike equipment manufacturers. Among them, 177 firms were founded in the year 2009 or 2010, showing a significant number of market entrances by new firms(Ebike). As a result, the industry supply curve shifts to the right, as shown in figure 14.

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In theory, such increase in the number of new producers will continue to rise—meaning a continuous increase in industry supply— until in the long run all firms are at break-even point and make only normal profit.

Thus, due to decrease in production cost and increased suppliers, the supply curve for e-bikes in Wang Jing shifts to the right. Considering the changes in both demand and supply, the market is at the same equilibrium price, with an increased equilibrium quantity of e-bikes sold in the market. This situation is shown in figure 15.

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Conclusion In conclusion, the market phenomenon of increasing sales with unchanging average price in the Wang Jing e-bike industry is due to an increase in both demand and supply for e-bikes in Wang Jing. The increase in demand is primarily triggered by changes in three determinants: rising consumer income in the area, growing public preferences for e-bikes, and rising cost of e-bike‘s substitutes such as motorcycles and cars. The increase in supply is due to changes in three determinants as well: economies of scale from mass production of e-bikes, technology improvements, and an increase in the number of suppliers attracted by potential supernormal profit from the e-bike market.

In evaluating this phenomenon, one can state that the fact that there has been little or no change in price despite a huge increase in sales reflects a competitive nature of the e-bike industry in Wang Jing and in other areas in China. The competition among the e-bike manufacturers currently, and in future will be, benefit consumers, because price competition will keep prices at a constant level, and increased research and development will allow wider range of high-quality product choices.

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Limitations The biggest limitation in this paper is the lack of sufficient quantitative data collected from individual firms to back my argument for the changes in determinants of

supply, such as economies of scale. Such

data could include specific sales growth over a certain period of time and changes in prices in a smaller scale. This limitation was caused by the fact that the JiaLeFu Mall, from which I collected most of my primary data, had no direct contact with each e-bike supplier available for my research, and consequently I was not able to find out about the sales statistics of each individual supplier. A possible improvement for this limitation could have been to find an expert that is directly involved with an e-bike manufacturing company rather than an e-bike retailing firm, to conduct further interviews asking for detailed pieces of evidence that support the changes in determinants of supply.

Another possible source of error is in the primary source obtained from surveying the customers about their determinants of demand. The pie chart that was obtained only shows the market status at the time being, which was mid 2010. Thus, it doesn‘t fully reflect the changes in the determinants of demand. Consequently, one way to improve this would be to conduct the same research twice, surveying a certain number of people at a certain period, and then surveying the same number of people after five or six months have passed, to measure the different changes in the determinants of demand.

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Chapter 7- “Greed: A $exy Bea$t” An Original Financial Thriller Act I. Imprisonment Stage Right: PRISON. Two jailers enter the stage. Gregor is in crutches, hobbling towards the stage right, pushed by the jailers. Jailer 1 and 2 lock Gregor alone in the cell.

Blackout.

Stage Center: CEO‘S OFFICE In a rectangular office with rectangular desks on which lies a regular size desktop, with a rectangular CCTV on surveillance, Ellie is holding a document and a phone in her hand.

Ellie: This is it… we did it…!

Excited, Ellie dials a number with her phone.

Ellie: Adam! It worked! I found the document! Yes! The document! We can save the global economy! We have the TRUTH in our hand!!

A dark figure enters silently from behind and aims a pistol at Ellie. Ellie turns around and, upon noticing the gun pointed at her, drops her cell phone. Ellie shifts her attention back and forth from the CCTV and man with the gun.

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Ellie: Who… are… you… ? What are you doing?

The dark figure glances at the CCTV security camera.

Dark figure: Hand me that document. Now! Ellie: No I won‘t!

Dark figure: Give it to me…(glancing at the CCTV) or I will shoot you…

Ellie holds on to the document firmly. There is a momentary blackout at stage center.The audience hears two gunshots.

Stage Right: PRISON. Gregor is crouching in the jail. The two jailers enter and throw into the cell a notebook.

Jailer 2: This is from your sister.

Gregor: Where is she now?

Jailer 1: She‘s gone.

Gregor: She‘s gone? Is she alive?

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Jailer 1: We‘re not supposed to tell you those kinds of details. Let‘s go.

The jailers leave, locking Gregor in the cell. He opens up the notebook and finds a note from his sister, Ellie.

Note: ―Gregor, these are my diary entries until now. I hope it will clear up your thoughts. Bye. Ellie.‖ Gregor stares at the journal for a while, and then opens it to the first page.

Diary: ―December 12th 2006. This morning I woke up from a terrible nightmare.

I was holding a document, a very important document, and someone with a gun wanted to take it away from me. I insisted, and then, he—or she, I don‘t quite remember—pulled the trigger.

Stage Right: ELLIE‘S HOUSE It’s a typical living room with couches and a table. Ellie is sleeping on the couch.

Diary: The knock on my door woke me up from that nightmare.

There is a sharp knock on the door that awakes Ellie. She gasps, waking up from a nightmare. Enter Postman 109

Postman: Ma‘am, there‘s a letter for you, from Mr. Gregor Sanderson.

Exit postman.

Diary: It was a letter from my brother. A letter that changed my life.

Ellie opens the letter and reads it.

Letter: ―Dear Ellie, I don‘t know how else I should begin this letter… Until now, I chose not to tell you what I specifically do for a living, because I felt you were far too young to understand. But in order for you to fully comprehend the circumstance that I have been forced into, you need to know the details about my work. For the past four, five years I worked as the assistant secretary to the CEO of GMS, a large investment bank. I was at first glad to be part of a global financial institution. But, one day, I received an email from a hacker who revealed to me that GMS had been involved with something illegal, something highly confidential. Confounded and alarmed, I decided to find out about the truth myself…(light dims out.)

Stage Left/Center: CEO‘s Office & Secretary‘s Office Cache Craver is leaning back on an armchair in his office while going over some documents. Gregor is in his secretary’s office, hastily flipping through some files and documents.

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Letter: One day, while I was searching for records of visits and meetings that my boss, Cache Craver, had attended, I got a mysterious phone call from two gentlemen….

Office phone rings. Gregor picks up the phone.

Gregor: GMS investments. How may I help you? Just one second please.

Office phone rings in Craver’s office. Craver picks up the phone.

Craver: Yes? Gregor: Sir, you have visitors that wish to see you. They say they are from Maggie‘s credit rating agency— Craver: Thank you Gregor, send them in.

Gregor: Right away, sir.

Letter: I suspected that the two gentlemen that came to see Cache Craver that day were involved with what I was looking for.

Led by Gregor who is in crutches, Finance Elite 1, 2 enter. Craver and the two men shake hands.

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Craver: Thank you for coming.

Finance Elite 1: Mr. Craver, it‘s our pleasure to be here.

Craver: Let‘s get straight to the point, shall we?

Finance Elite 2: (Glaring at Gregor) I‘m sorry to interrupt, but I believe that under our preestablished contract, we agreed upon not adding any new assets to our group. Am I not correct about this?

Craver: This lad is as trustworthy as a slave. He broke his leg while trying to save my painting that almost fell to the wall. You need not worry. (sitting down) Let‘s begin by— Finance Elite 1: We have made our positions clear. If you insist on breaking the rules, we are leaving this place immediately.

Craver: Mr. Sanderson.

Craver nods in the direction of Gregor. Gregor turns around towards the door, but falls in his crutches. Craver and Finance Elite 1,2 laugh at his fall.

Holding onto one of his crutches and leaving the other on the floor, Gregor exits.

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Craver: So (takes out a silver suitcase and opens it), hereâ&#x20AC;&#x2DC;s your promised reward. Our almost-final step nowâ&#x20AC;&#x201D;and this chiefly depends upon your ability to carry out this taskâ&#x20AC;&#x201D;is to write an objective report about our financial commodities. Without any bias, without any falsehood. So that the investors in the market can clearly see where their money should be headed towards. (pushes the silver suitcase towards the two gentlemen) Is that understood?

Finance Elites 1,2 look at the suitcase, and, noticing the 100 dollar bills inside, glance at each other.

Finance Elite 1: Yes we understand your point clearly.

Finance Elite 2: And it will be carried out according to your wants.

Craver: Good.

Finance Elite 2 closes the suitcase and stands up, but is interrupted by Finance Elite 1.

Finance Elite 1: But what about other credit rating agencies that will file reports on your commodities that sound different from our reports?

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Craver: File your report before anyone else does. Then use your connections. You are representing Maggie‘s credit rating agency. Nobody‘s going to doubt that.

Finance Elite 2: It‘s a ripple effect.

Finance Elite 1: But where‘s our incentive for the second task?

Craver smiles, and takes out another suitcase and opens it, full of money.

Craver: (Smiling again) Remember gentlemen, all I want is an ―honest‖ report of our products.

Finance Elite 2: Absolutely.

Finance Elite 1 & 2 exit. Craver calls someone with his phone.

Craver: It‘s me. All‘s been taken care of. Once the investors catch our bait, they‘ll fly away into the sky like a balloon, and then, it will burst with a pop, and they‘ll be digging their own way back to hell. Meanwhile, we will be on our yachts getting tanned with our A-class ladies. No, we won‘t be held liable for anything. When the bubble bursts, we take the government bailout fund—get our money from ALG‘s insurance—and pull out. Piece of 114

cake. How do we minimize our risk at getting caught by the SEC? Quit talking like an amateur salesman, buddy. The Securities Exchange Commission is not a problem, alright? Good. I‘ll see you there in about five minutes. (Hangs up and speaks to himself).

Craver calls Gregor from his office.

Craver: Clean up the room, Mr. Sanderson.

Gregor: Yes sir.

Gregor enters the room with his crutch. Craver exits. Seeing that Craver is gone, Gregor throws away the crutch he was holding onto and walks normally. He grabs the crutch which was lying on the ground and takes out a camera which was attached to it. Gregor presses play on his camera. Astonished, Gregor immediately makes a phone call.

Gregor: Is this the Securities and Exchange Commission? My name is Gregor Sanderson and I have an important piece of evidence that proves a conspiracy between the CEO of GMS and the managers of Maggie‘s credit rating agency. Starbucks in 5th Avenue in 20 minutes? I‘ll be right there.

Thank you.

Gregor takes the camera and exits. Blackout on Stage Left.

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Letter: They planned to manipulate the reviews of GMS‘ securities called the Mortgage-backed securities and Collateralized Debt Obligations. My boss bribed these individuals to transform the junk financial products to something godly, something lucrative. Once the investors have full trust in these counterfeit derivatives, they will start to invest their money in our products. Of course, these products did ensure them of high profits in the short run, but one thing the investors didn‘t know about was that the market was being inflated into a bubble. That there was to be a huge crash very soon. This crash could potentially impact the entire world, and destroy the lives of hundreds of thousands of people, while still benefiting the few giants at the top of the food chain… But with that evidence in my hand, I could stop this global financial crisis from happening.

Stage Left: STARBUCKS Gregor arrives at Starbucks and finds a seat. Craver is seated far behind, reading newspaper that blocks his face from view. Gregor keeps looking at his watch. Suddenly, two police-officers enter and approach Gregor. They seize him and put handcuffs on his wrists.

Gregor: What, what are you doing?!

Officer 1: We have a warrant from the Securities and Exchange Commission to arrest you for trading insider information.

Gregor: Wait, what? Insider information? Who gave you that call? I was the one to 116

contact the SEC that there‘s a conspiracy between— Officer 2: Shut up and move!

Gregor: (struggling while being carried away) But I‘m innocent! They set me up!

Officer 1 and 2, and Gregor exit. The figure behind the scene, who was reading a newspaper, lowers the newspaper and reveals himself as Craver. He smiles, gets up, takes Gregor’s camera and exits the coffee shop. Blackout Stage Left.

Stage Right: ELLIE‘S HOUSE Ellie is still reading the letter from her brother.

Letter: ―Ellie, from what I infer, the powerful elites that put me in prison have insiders in the Securities and Exchange Commission, where they keep a close watch of stock price manipulation and other financial crimes. This is a conspiracy among some of the most powerful and wealthy individuals in the world. They set me up, to protect their secret, and I am now headed to a prison in New York, where I‘ll be spending the rest of my life. The only way for you to be safe is to remain quiet. You can‘t attempt to uncover the truth; the closer you get to it, the more enigmas you will face and the more vulnerable you will become. I want you to just forget about me, and live a life of your own. Otherwise, great danger lies ahead of you.

I‘m so sorry Ellie. I love you.Your brother Gregor.‖ Ellie takes out other documents from the envelope that relate to Gregor’s imprisonment, and stares at it in disbelief. Blackout 117

Act II.Vengeance Stage Right: PRISON Gregor turns the journal to the next page.

Diary: December 17th, 2009. The world is now recovering from the deep trough we got ourselves into. Price of gold is soaring, and many banks that were about to go bankrupt were aided by the government‘s bail-out funds. It‘s been two years since my brother went to jail. Two years, since I started working with Adam for my brother‘s revenge…

Stage Right: ELLIE‘S HOUSE Adam is sitting on an armchair looking at the computer screen, speedily typing on the keyboard. Ellie is asleep on the couch but she moves her body little by little as if having a nightmare.

Diary: Adam is a talented and smart hacker that I met while I was in college. With him, I was able to get to where I am today. I‘ve already joined GMS, the investment bank involved with the conspiracy. With a false name, I‘ve hidden my real identity. Calling myself Joanna Bennet, I became a well-respected secretary to the CEO of GMS, Cache Craver, who is the main guy behind this conspiracy. Adam will help me break into their database network and steal important information about the illegal transactions between GMS and financial credit rating firms that was the root of the subprime financial crisis. My life so far has been exhausting. I 118

have never had enough sleep because of my job and my plan. At work, I get harassed by my boss a lot. But it‘s okay. I‘ll endure it. Till the day I put those corrupt and perverted elites into jail, I‘ll endure it….. These days, a lot of strangers come by my Boss‘ office. I suspect, they are somehow related to the conspiracy of these finance elites. I can almost feel it….

During the Christmas break, Adam and I have been working non-stop for days at home trying to figure out a way to overhear Craver‘s conversations with his visitors.‖ Ellie suddenly wakes up and gasps.

Adam: Ellie, are you alright?

Ellie: Yeah… just another nightmare…

Adam: Are you sure you‘re alright?

Ellie: Yeah. Don‘t worry about it Adam. What have you been working on?

Adam: I‘ve been trying to create a virus that can infiltrate into your boss‘s computer so we can get some data out of his PC database.

Ellie: You should take a break, Adam. You‘ve been working for the past twenty eight hours and you haven‘t even slept.

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Adam: Thanks Ellie but unless we find a way to hack into his database, we‘re never going to find out anything about what happened to your brother.

And the two years you‘ve spent to get the CEO‘s trust would be meaningless, if I fail at this.

Ellie: I would never have come so far without you.

Adam: (smiling) I promised you in college that I‘ll always be there for you.

Ellie: Yeah! That‘s what friends are for. Right?

Adam: (silence for a moment) yeah.

Ellie: Alright, you want something to eat? I‘m going to cook a delicious brunch for you. (winks) Adam stares at Ellie who cheerfully walks away to the kitchen. Blackout.

Stage Right: PRISON Gregor turns to the next page and reads what’s said in the next entry.

Diary: ―December 25th 2009. Christmas day. Today‘s the second Chirstmas I spend without my brother. And the first Christmas I spend with another guy— Adam. He has his quirks, but he‘s always a helpful friend. He came over early in the morning today to wish me merry Christmas, and gave me a Christmas gift. We had a really fun time together.

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Stage Right: ELLIE‘S HOUSE Ellie and Adam are sitting on the couch. Ellie is holding a big, old i-pod and a small, slim, i-pod 3rd generation. Ellie shows Adam a picture of Gregor in the old i-pod.

Adam: Wow, you guys really look like each other.

(Ellie smiles) Adam: So that‘s what Gregor got you for your Christmas present?

Ellie: Yeah, when I turned seventeen. It was so funny when you gave me this today; you almost reminded me of Gregor.

Adam: (laughs shyly) Well, I guess he‘s still there in your mind even though he‘s in jail. Have you tried sending him letters?

Ellie: I have written to him at least once a week, but I never got any replies.

Adam: Oh, I‘m sorry. I shouldn‘t have asked. I didn‘t realize he still means a lot to you.

Ellie: Well, he was the only one left for me in this world. It‘s just him and me…

Adam: Right…

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Ellie: Ever since my parents committed suicide together…

Adam: Oh… I‘m sorry.

Ellie: That‘s okay. I‘m fine now. Apparently, they did it because they were in debt.

Adam: So your brother took on the burden?

Ellie: I suppose so… He never told me much about it. And for that year‘s Christmas present, he gave me this i-pod, and told me that whenever he‘s at work and I miss him, I should listen to music with his i-pod.

Adam: (smiles) wow, he seems like a really nice brother.

Ellie: He was… but he‘s gone now. To prison. And I‘m alone.

Adam: What do you mean you are alone? I‘m always by your side.

Ellie: That‘s right! (smiles) You are just like my brother! But you don‘t have to comfort me, Adam. I‘ve been alone for almost two years, and I‘m used to it.

Adam: (Silence for a moment) Ellie. I‘m going to make our plan work and bring him back to your life. Do you trust me?

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Ellie: Yes. And that‘s very sweet of you Adam.

Adam: (Smiles. Awkward silence. Adam tries to close in on Ellie but Ellie breaks the silence.)

Ellie: Oh wow, it‘s already 10 pm. I got to go to bed soon.

Adam: (Standing up) Right.Yes. Alright. I‘ll—head back—home. I guess.

Ellie: Thanks for staying with me today, Adam.

Adam: (Bows gracefully) It was my pleasure, Ms. Ellie Sanderson. (They hug) have a good night and merry Christmas! (turns around).

Ellie: You too!

Adam slowly and hesitantly walks towards the door but his attention is fixed awkwardly at Ellie, who stands and waits for Adam to leave. Adam runs into the wall and falls.

Ellie: Adam! Are you retarded?!

Adam: Ouch… Sorry.

Ellie opens the door for Adam.

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Ellie: There, you can go now.

Adam: Bye. Ellie: No, Adam, come back! I forgot to give you something!

Adam comes back immediately, as if he’s been waiting for her to call him back.

Adam:Yes? What is it?

Ellie stares at Adam who closes his eyes and sticks out his lips.

Ellie: Umm, your USB.You forgot to take it.

Adam: (opening his eyes, embarrassed) Oh, right. Yes. Thanks. I—uh—am really on my way now—bye.

Ellie: Okay—bye!

Exits Adam. Ellie returns to the couches and contemplates for a while, looking at the old i-pod.

Ellie: Gregor, can you hear me? I‘m going to play the music you used to love…

Ellie starts to write on the journal. Tears drop from Ellie’s eyes on to the journal’s page. A gradual blackout.

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Act III. Into the Tiger’s Cave Stage Right: PRISON In the jail, Gregor hesitates to turn to the next page. He eventually goes on.

Diary: ―Friday. January 8th 2010. Today we made a lot of progress. Adam finally finished programming, and discovered a way to plant the virus in my boss‘s computer without being caught by his security walls. We could finally attempt to overhear my boss‘s conversation with others and find some evidence.‖ Stage Center: CEO‘S OFFICE & SECRETARY‘S OFFICE Craver is busy filing documents on his desk, and Ellie takes out her cell and makes a phone call. Light comes on in Ellie’s living room where Adam is working in front of his computer.

Ellie: Hey Adam, how‘s it going?

Adam: It‘s 99% complete. I should be able to send it to you in about 30 seconds.

Ellie: Great! What am I supposed to do once I get it?

Suddenly Craver walks out and sees Ellie on the phone.

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Ellie: (changing her tone) no, thank you, his retirement funds are already being managed by another firm. Have a good day. (hangs up) Craver: Is everything okay, Ms. Bennet?

Ellie: O, it‘s just another stockbroker desperate for your retirement funds.

Craver: Which brokerage company was he calling from?

Ellie: (stutters) umm, he said he was from Davidson.

Craver: That‘s the firm that manages my retirement funds.

Ellie: (freaking out)Really? I—I— Craver: (laughs) I‘m only joking, Ms. Bennet. Did you forget? My funds are being managed by experts at GMS! Ah—your sheer stupidity always delights me. (walks to Ellie’s back and inhales once, and walks towards the door). Well, now, I‘m heading out for lunch to get my lobster pasta, though I am much more tempted to… mmmh…(staring at Ellie’s body) Well, Ms. Bennet, make sure you clean up my room, because I‘m expecting company in the afternoon.

Ellie: Yes sir…

126

Craver exits. Ellie calls Adam.

Ellie: Sorry, but my boss almost caught me talking to you.

Adam: Is everything alright?

Ellie: Yeah.

Adam: Are you sure? You suddenly sound very…

Ellie: Adam, I don‘t want to talk about it. Craver just went out for lunch so now‘s the right time for me to plant it in his computer. Have you sent the virus yet?

Adam: I just sent it. It should be uploaded to your screen by now. Click the ―Save as‖ button and put it into your USB. (Ellie moves accordingly) And then go to his room, and plug it into his laptop.

Ellie: Wait, but what about the security camera?

Adam: Right. I devised a program that pauses the security camera for two minutes. You‘ve only got two minutes before it turns itself back on and if you don‘t finish by that time, they‘ll see you.

127

Ellie: Alright. Tell me when you want me to go in.

Adam: Okay. Once you go in and plug the USB in to his computer, the security wall should automatically turn itself off for the first 120 seconds. During that time, you need to enter his password.You know his password, right?

Ellie: Yeah, ―Don Corleone‖.

Adam: Okay. Good. Keep this line open, because I need to give you further instructions once you log in. Remember, you got 120 seconds. You‘re going in, in three—two—one—now!

Ellie enters the CEO room, and hastily finds the computer. Ellie plugs in the USB, and types the password.

Ellie: ADAM!!!

Adam: Hey, what‘s going on?!

Ellie: The password, it won‘t work!

Adam: Try it again!

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Ellie: No it still doesn‘t work! He must have changed it right before he went out!

Adam: Damn it! What was the password again?

Ellie: Don Corleone!

Adam: Is he a fan of Godfather or something?

Ellie: No, but he told me that he watched that movie last weekend and he loved it. That‘s how I figured out the password!

Adam: Okay then think of another thing that he really likes!

Ellie: Alright… umm… umm…

Adam: You got 80 seconds Ellie.

Ellie: Ummm—lobster pasta!

Adam: What?!

Ellie: Lobster pasta—he said he‘s going to have that for lunch today and he seemed really excited about it!

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Adam: Try it! Try Lobster Pasta— Ellie: It doesn‘t work…!

Adam: What‘s the Italian name for that dish?

Ellie: Umm—―Pasta All‘ Aragosta‖!!!—it works, it works!

Adam: Okay great! Now next, you need to drag the half-transparent icon into his desktop.

Ellie: Okay, and then?

Adam: Click on the icon, and press ―enable re-routing the security protocols‖.

Then you will see a red sign coming up from his PC security software.

Ellie: Yeah, done. What do I do next?

Adam: Then go back and drag another icon called ―ghost‖ and click ―enable security cloaking‖.

Ellie: Done.

Adam: Alright that‘s it. The virus is in. Ellie you have five seconds before the camera starts—Four! Three! TWO! 130

Ellie exits safely. Just at that moment,, Craver enters the secretary’s office.

Ellie: Shoot, Adam! I forgot to take out the USB, what should I— (notices Craver entering and hangs up the phone)—How—how was your lunch?

Craver: I didn‘t get to eat anything because apparently the Italian restaurant went bankrupt and shut down. So instead of my lobster pasta… let me…

Craver approaches Ellie slowly but Ellie avoids and passes by quickly.

Craver: (aside, smiling treacherously) Very… nice…

Ellie tries to walk out of the room.

Craver: Are you going somewhere, Ms. Bennet?

Ellie: No sir!

Craver: Why are you in such a hurry? You seem distressed.

Ellie: I—I just saw a huge cockroach in your room, near your computer!

Craver: (frowning) ehh, yuck. That just ruined my appetite. Go in and take care of 131

it! I have busy work to do in there.

Ellie: Yes sir.

Ellie goes back into the office and takes out the USB and comes back out. Craver enters his room. Office phone rings.

Ellie: This is GMS. How may I help you? Oh, there are no scheduled meetings on his calendar for today. But, if you insist, please hold on for one moment— Sir, you have visitors that wish to see you. They say they are from Maggie‘s credit rating agency— Craver: Please send them in, Ms. Bennet.

Ellie: Do you know who they are?

Craver: Just let them in, Ms. Bennet. And lock the office door once they come in.

And I‘ll tolerate no interruptions during our meeting. Is that understood?

Ellie: Right away, sir.

Ellie exits, and enters with the two Finance Elites. She leads them into Craver’s office. She comes out to her office and calls Adam.

Ellie: Hey, I think we have a lead now. Two suspicious men dressed in black suits just went into Craver‘s office. The meeting wasn‘t planned, but Craver 132

knew they were coming. I think they may be involved in the conspiracy.

Adam: Yeah, I have their visual. It seems like they are discussing something right now, and I can‘t hear anything, but—wait, this looks odd, they are looking into Craver‘ computer, and talking to it…

Ellie: That should be the one that I planted the virus in—What was the virus for??

Adam: It‘s a virus that lets me control his microphone connection and intercept their audio signals, so that I can hear what‘s going on in the room.

Ellie: Is that possible? Can we hear what they are saying in there now?

Adam: It‘s strange... Normally, the microphone isn‘t turned on when he‘s having meetings right? But right now, the microphone is on. It looks like…. they are talking to someone through the PC! Ellie: Is there a way to hear anything going on?

Adam: Hold on, I‘m trying.

Radio buzzs.

Adam: There! It works! Let me connect your phone to the network so you can hear what‘s going on.

Radio buzzs.

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Craver: The engineering of the scam has been taken care of. I have the document that includes specific details and directions regarding the formation and crash of the ‗bubble‘.

Finance Elite 2: So, when is our next move?

Fourth voice: I want to see the document.

Craver: I am the only that can access the document. That‘s what consolidates my role in this scheme.

Radio buzzs.

Ellie: So, there‘s a fourth person involved in this?

Adam: Yes, I believe so…

Radio buzzs.

Fourth voice: How much of the total US carbon credit derivatives do we possess as of now?

Craver: We hold as much as 66.6 million dollars worth of credit derivatives using a foreign account. My men are continuing to buy, and our aim is to increase our shares by 35% tomorrow.

Finance Elite 2: Are the investors hopping on the train?

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Craver: Yes. More and more are. Here, I‘ll send over the chart so you can examine it.

Fourth voice: Yes, I see it now.

Finance Elite 2: Average price is going up at a reasonable rate.

Craver: (smiling) Prices are going up, and our stakes are going up too.

Finance Elite 1: So approximately when are we dumping the carbon credits to the market?

Craver: The day after tomorrow. As soon as we reach our designated price range.

Finance Elite 2: Isn‘t that too early? We need to review the procedure after the crash.

What ensures that we won‘t be caught for this by the SEC? Fourth voice: The SEC has been dealt with.

Finance Elite 1: What‘s our targeted price range?

Craver: Everything‘s in the document.

Finance Elite 2: We need to overview it before we do anything with our holdings.

Fourth voice: Where is the document?

135

Craver: How many times do I have to tell you the document is in a secure location, buried underground! I will debrief you of the details tomorrow!

Fourth voice: No, listen. I am in command, not you. We won‘t sell our security holdings until I announce a new price range.

Craver: But that‘s not necessary!

Fourth voice: Calm down Craver. You can‘t let your emotions take control of you. The Bill has been passed, the carbon credit market is now set up perfectly for our billion-dollar scheme, and the last thing we want to do is screw up by making hasty moves. The government is going to keep decreasing the amount of carbon credits in the market, so that they reduce carbon emission. This means our securities on carbon credits will continue to rise in price. What we hold now will get more and more precious as time passes. The key is to wait.

Finance Elite 2: And while we wait, you should let us review the document.

Craver: NO! Finance Elite 1: Goddamn it! Where is it!

Craver: I told you. It‘s under cover.

Finance Elite 2: 136

What the heck is that supposed to mean?

Finance Elite 1: If you insist, we will operate on our own. Remember, all assets are in our commander‘s account!

Ellie: Ohhhhhhh, so that‘s how they hide GMS‘ involvement in the scam.

Adam: Yeah!

Craver: Wait a moment. Listen.

Adam: shhhh, Ellie! They can hear us!

Craver: Do you hear the sound from the desktop?

Finance Elite 1, 2: No, what is it?

Craver: I heard other voices from the speaker besides the commander‘s.

Silence from all three parts (Craver’s office, Ellie’s office, and Adam’s room) of the stage.

Craver: I think our security system has been compromised. (turning off the PC screen) It‘s in our best interest to continue this conversation somewhere else. (calling Ellie from inside using the phone) Ms. Bennet—clean up the room please.

137

Finance Elite 1,2 exit the office to the secretary’s. Ellie enters Craver’ office.

Blackout at Craver’ office. Light still on at Ellie’s secretary office.

Finance Elite 2: It‘s time to make a call.

Finance Elite 1: Agreed.

Finance Elite 1 takes out his cell phone and dials a number and waits. On the other side of the stage, Adam picks up his cell phone.

Adam: Hello?

Finance Elite 1: You almost entirely compromised our operation.

Adam: Sir, it was my mistake. I accidentally enabled mutual communication from the wiretap bug.

Finance Elite 1: No more mistakes shall be allowed from now on.

Adam: Yes sir.

Finance Elite 1: Has the virus been installed successfully?

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Adam: Yes sir. All‘s been taken care of.

Finance Elite 1: Would you care to explain to us how you did it?

Adam: I had to borrow help from Craver‘s secretary in the office. I tricked her into thinking that the installed virus only lets you hear through the microphone, but it actually has dual functions. The virus is now spreading in his PC and will notify me as soon as it finds the electronic copy of the document you requested.

Finance Elite 1: Good. We‘ll be expecting the document from you. Soon.

Adam: Now, can I confirm that my— Finance Elite 1: Don‘t worry about rewards. Just worry about getting the job done. We‘ll take care of your debts if everything is successful. Understood?

Adam: Yes sir.

Finance Elite 1: If you can‘t get the soft copy, get us a hard copy. That bastard says its ―buried underground‖ whatever the hell that means.

Adam: I‘ll do my very best, sir.

Finance Elite 1: And by the way, be sure to delete the recording of the conversation you 139

just overheard. Remember, we‘ve got our eyes on you…

Finance Elite 1 hangs up.

Finance Elite 2: I told you we shouldn‘t have left everything to Craver.

Finance Elite 1,2 exit Ellie’s office. Ellie comes out of Craver’ office and calls Adam.

Adam: Hello?

Ellie: I think they found out that someone was listening! We should release the recording to the public now!

Adam: Ellie, it‘s useless now. We don‘t know who the fourth person is. Until we expose him, the recording is meaningless.

Ellie: Right…So what do you suggest?

Adam: Well, we have a lead, we know who‘s involved and we know that there‘s an important document at stake. Now, the key is to find that document.

And the fourth man involved.

Blackout 140

Act IV. Discovery Stage Right: PRISON Gregor is in prison, staring the pages of the journal.

Gregor: Adam‘s betrayal… the document of the finance elites containing all the financial secrets… the document that is of harm to 99% of mankind, but will make the top 1% richer…. And all of this… behind the fourth man … the commander… of the elites… ?

Gregor turns to the next page.

Diary: Saturday. January 9th, 2010. Our initial plan was successful. We overheard the elites‘ conversation, and got an idea of who is involved in the conspiracy, and what the next financial scam is about. Actually, it was Adam that fully understood what they were going for. I needed more explanation.

Stage Right: ELLIE‘S HOUSE Adam: Still don‘t get it? Alright I‘ll explain again. Carbon credits are basically permits that designate an amount of carbon that a company can emit, and it is issued by the government and distributed to firms.

Ellie: Mmhmm,

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Adam: Now, the elites said that they made some kind of Bill pass in Congress, which approves of securitizing carbon credits into financial commodities, and then selling them in the market.

Ellie: What does that mean?

Adam: That means that investment banks like GMS will create securities, which is something like stock, so that people can bet on the prices of carbon credits. The rise and fall of the prices depend upon how popular the carbon credits are in the market, among the firms.

Ellie: So? Adam: General rule of thumb in economics?

Ellie and Adam The more scarce something is, the higher the value.

Adam Right. Our government wants less carbon emission to reduce global warming. So, they will decrease the amount of carbon credits in the market year by year. This means the market value of carbon credits will rise, driving up the price of the credit-backed securities. Investors are going to be attracted to this emerging market, and will spend loads of money to invest. Now thatâ&#x20AC;&#x2DC;s what the elites are going for.

142

Ellie: They are creating a whole new bubble…

Adam: Exactly. They are asking their investors to buy these products saying that it will rise in value tomorrow. But in truth, they are also buying the credits themselves, to drive the prices up more and more. Now once it reaches the designated price range, the elites will dump their holdings, and BOOM, the bubble crashes. Price will fall dramatically, and the investors, worried about losing their money, will sell their holdings even at a low price. Now, price falls even more, and this is repeated until the economy crashes. Just like— Ellie The subprime financial crisis… They are doing the exact same thing as in 2007, just with different financial commodities….

Adam That‘s right. Except this time, it‘s going to be a lot worse…

Ellie Wow… (Silence) So what document were they talking about?

Adam Their document has all the details about how the bubble is created, when they should buy, when they should sell—all those important things…

Ellie And only Craver knows where it is.

Adam That‘s right…

Ellie 143

And it‘s not in his computer?

Adam I doubt that it is, now that Craver knows his system was hacked from what happened yesterday, he wouldn‘t keep such an important document in his desktop, unless he‘s stupid.

Ellie So it must be hidden somewhere as a hard copy.

Adam: That‘s my guess…

Ellie Wait, do you remember what Craver said yesterday?

Adam What?

Ellie That the document is buried somewhere safe? He used the word ―buried‖.

That means it‘s underneath some floor— Adam It was a figure of speech… Ellie…

Ellie No trust me, Adam, I think I can find where it is. I‘m going to go and find out, right now!

Exits Ellie. Adam takes out his phone and calls Finance Elite 1.

Adam Sir, Ms. Bennet left to go to Craver‘s office, to find the hidden safe 144

containing the document… Yes, I have one in my pocket right now...

Absolutely. I am ready.

Adam hangs up and takes out a pistol from his pocket and stares at it. Blackout at Ellie’s house.

Diary: ―I got to the office, thinking of nothing but the word ‗buried‘.

Stage Center: CEO‘S OFFICE Ellie wanders around the room pensively. She lifts up the carpet.

Diary: Somehow, my instinct led me to lift up the carpet in the office. But there was nothing. I started thinking from Craver‘ perspective. Where would I have located my safe, if I were in his situation? Surely, it wouldn‘t be somewhere seen by the CCTV… Then I had an epiphany. I went right under the CCTV… and…

Ellie walks towards the CCTV and lifts up the carpet, and finds a tunnel. She walks in.

Diary: There it was. A door under the carpet that led to the safe underground. I sat there, in the darkness, contemplating. There were ten numbers and four-digit combination. I tried ten combinations or so and stopped. My head started to hurt. Whenever I get a headache, I think of the West Coast 145

beach my brother used to take me. I‘d play around with the sand, making sand castles, shapes of animals, sometimes alphabets and numbers…with sand. And then all of a sudden, everything became clear. Sand. Sand! That was the answer! I thanked Gregor for guiding me to the solution.

Up Stage Center: THE OFFICE AND THE UNDERGROUND Ellie walks out of the tunnel and grabs a handful of mild sand dust from one of the plants in the office, and carries it back to the tunnel, dropping some on the ground. Suddenly, there’s a sound from outside and Ellie quickly hides in the underground tunnel where the safe is located. Craver enters the room, to get his jacket he left. He notices the sand dusts dropped on the ground, aligned towards where Ellie is hiding. Craver walks towards the safe. Suddenly, his phone starts to ring (ringtone being “Billionaire”), and he picks up the call.

Craver: Hello? –ah, of course. 9 O‘clock at that conference room where we usually meet? I will be there on time.

Craver hangs up the call and exits the room. Ellie comes out, making sure no one is in the room, and calls Adam.

Ellie: Adam! I found a hidden tunnel right underneath Craver‘s office floor! Yes! I found a safe in there, and I found a way to open the safe too! How? I blew a handful of sand dust at the combination pad, and it revealed the finger prints on the number pad! So I get… (blows) 4,0,5,7. I‘ll call you back when I‘ve actually opened the safe.

146

Ellie tries the different combinations underground. After the a few trials, she opens the safe, and finds a document along with a USB. Ellie: This is it… we did it…

Ellie walks upstairs and comes out of the underground into the office, with the USB, the document, and her phone in her hand, calling Adam.

Ellie: Adam! It worked! I found the document! Yes, The document! We can save the global economy! We have the TRUTH in our hand!

Adam enters silently from behind and aims a pistol at Ellie. Ellie turns around and upon noticing the dark figure drops her cell phone. Ellie shifts her attention back and forth from the CCTV and man with the gun.

Ellie: Who… are… you… ? What… are you… doing?

Adam glances at the CCTV security camera. Light comes on, at stage left, revealing a round table, where Finance Elite 1, 2 are intensely looking at a computer screen.

Adam: Hand me that document. Now! 147

Ellie: No I won‘t!

Adam: Give it to me… (glancing at the CCTV) or I will shoot you…!

Momentary blackout in Stage Center.The audience hears two gunshots.

Finance Elite 1: We never told him to kill her, did we?

Finance Elite 2: No, but I think he‘s trying to scare her.

Light comes on at center stage. Adam is standing with his gun pointed towards the ceiling. Ellie is crouched into a ball-shape. Adam moves slowly towards Ellie.

Adam: It‘s me… Ellie…

Ellie: (glancing at the CCTV) Adam?! It was you? The whole time? You were the fourth man involved?!

Adam: (glancing at the CCTV) No. Just shut up and do as I say.

Ellie: But, why? we‘re almost done! We‘ve uncovered the conspiracy! Why do you have to do this?! I don‘t understand— Adam: 148

SHUT UP AND JUST GIVE ME THE DOCUMENT! Ellie slowly gives Adam the document.

Adam: (still aiming the gun at Ellie) Now turn around and kneel down facing the wall!

Adam takes out the cell phone and makes a phone call. Finance Elite 1 picks up the call.

Adam: Sir I have the document in my hand, as well as Ms. Bennet.

Finance Elite 1: Yes we can see that.

Adam: I will tie her down in this room, and bring over the document right now.

Finance Elite 1: No, bring her here along with the document.

Adam: Is that necessary?

Finance Elite 1: Just do as I say. Our men are waiting for you outside.

Adam: â&#x20AC;Ś Yes sir.

Adam hangs up. Adam approaches Ellie (who is right under the CCTV and thus 149

out-of-view from the Elites’ viewpoint) and ties her hands, while whispering something into her ear.

Adam: (softly) Ellie, sorry, our plan has changed… They asked me to take you there as well. So instead of staying here and waiting for me to tell you who the fourth man is, we have to go with our plan B … That‘s the only way we can make this work. Can you do it?

Ellie: (whispering) Yes. Adam: But— Ellie: It‘s okay Adam. Don‘t worry about me. But just in case anything happens to me, I wanted to tell you—thanks… for everything…

Adam: Don‘t worry. Nothing‘s going to happen.

Adam tapes her mouth.

Adam: (loudly) Now GET UP! Walk out slowly. Move!

Both exit the office. Blackout.

Stage Right: PRISON Diary: It was then that something called ―fear‖ started to creep into my mind and 150

take control of me. I knew not what was going to happen to me— whether I‘d be tortured, killed, or buried alive underground… I was uncertain of the outcome of our plan. But as we got closer and closer to the final moment of realization, I began to feel much lighter. I felt freedom—the mysterious, ineffable thing in your stomach that you feel when you‘re about to achieve your goal. I realized it was not death I feared. It was the possibility of failure. Reassuringly, I knew that, should our plan succeed, I‘d be happy, dead or alive.

151

ActV.The Fourth Man Involved Up Stage Center: CONFERENCE ROOM Ellie is pushed into the room with the round table, and Adam enters with the document.

Finance Elite 1: Well, well, here we are. A genius hacker— Finance Elite 2: And a cunning, yet charming secretary… (winks at Ellie).

Adam: I‘ve got the document you asked for.

Finance Elite 1: Bring it over to us so we can verify.

Adam: I need to confirm that all my debts have been paid off, and that I will be accepted as part of your team from now on.

Finance Elite 2: You are demanding too much, my friend.

Adam: But that‘s what we agreed upon: I bring you the document and let you get rid of this Craver guy, and in return you pay my debt and offer me a job under your elite team!

Finance Elite 1: That‘s what we told you. But our commander thinks differently.

152

Adam: What?

Finance Elite 2: Weâ&#x20AC;&#x2DC;ve already paid your debt.You are a free man from now on.

Finance Elite 1: But, becoming one of us, requires far more than just a document.

Adam: What do I need then?

Finance Elite 1: Diligence, Finance Elite 2: Loyalty, Finance Elite 1: Determination, Finance Elite 2: and Greed.

Finance Elite 1: Our commander is willing to offer you an option.

Finance Elite 2: You can either leave this room without the honor of becoming an elite, Finance Elite 1: Or become one of us, by killing her, with this gun. (takes out a pistol) Adam: What?!? Iâ&#x20AC;&#x2DC;m not here to kill anyone!

Finance Elite 2: 153

That‘s the only way you will become one of us.

Finance Elite 1: And once you become one of us, you will get to meet our commander.

Adam: …….. (takes the pistol) Adam takes Ellie to the front of the room and aims the gun at her head. They exchange a long moment of eye contact. Adam hesitates but Ellie nods her head slowly. Adam closes his eyes and, holding his breaths for a few seconds, pulls the trigger.

“Click. Click—Click”.

Befuddled, Adam looks at Finance Elite 1,2.

Adam: It‘s… out of bullets…

Ellie faints.

Finance Elite 2: (smiling) Welcome to the world of elites, Adam.

Adam: So it was just a test…!

Finance Elite 1: Which you passed. Now, lock her up in the room next door. Our commander is on his way.

Adam: Thank you!

154

Exit Adam with Ellie. Adam comes back alone immediately.

Finance Elite 2: It‘s about time that Craver should call us.

Finance Elite 1’s phone rings.The ring tone is “All I want is money honey.”

Finance Elite 1: Bing-go (picks up the phone) Hello? Alright—no—calm down, Craver. We are waiting for you in our conference room. (hangs up). Seems like things are going to happen faster than we thought.

Finance Elite 2: Adam?

Adam nods and exits. Finance Elite 1,2 sit around the table and wait.

In the prison, Gregor is still reading the journal.

Diary: I was tied around my wrists and taped around my mouth. I was left alone in a dark room. I could hear their voices next door. I looked back to the moment when Adam was pointing the gun at me. What was I thinking then? I was fearless. I wasn‘t afraid of death. It seemed my instinct of survival was exceeded by my determination to take revenge for my brother, to reveal the truth behind everything, to accomplish my goal— 155

my creation. When Adam pulled that trigger on my head, I saw bright whiteness everywhere. It felt…peaceful, for I knew my sacrifice would contribute to uncovering the conspiracy, and helping my brother. But when I woke up, and realized I wasn‘t actually dead, things started to go… wrong.

Blackout in the prison. Craver enters the conference room. Finance Elite 1,2 are seated around the round desk.

Finance Elite 2: Ah, welcome, Mr. Craver, we were waiting for you.

Craver: Where…is… my… document…!

Finance Elite 1: Come, have a seat.

Craver sits on a chair.

Craver: Now, where is it!! You have it, don‘t you, you bastard?

Finance Elite 2: Listen, the document was confiscated, by the order of our commander, to remind ourselves of hierarchal order, and to maintain our control over this operation, to ensure you don‘t mess anything up.

Finance Elite 1: Now that we have the document, we can sit and talk about our maneuvers.

Face to face.

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Craver takes out his gun, stands up and aimlessly points it at everyone.

Finance Elite 2: Wowowo, put that gun down, for Christ‘s sake!

Craver: You are going nowhere besides hell if you refuse to give me that— Finance Elite 1: We can talk this through. Calm yourself, and put that gun down.

Craver: What is there to talk about?

Finance Elite 2: Well—how about a 400% hike of your share of the profits?

Craver immediately lowers the gun and sits on his chair. Suddenly, Adam enters from behind, holding a string. He adeptly wraps the string around Craver’ neck, and strangles him. Craver falls on the ground. Finance Elite 1 picks up the phone and makes a phone call.

Fnance Elite 1: Cache Craver is dead, sir. (hanging up and addressing everyone) The commander‘s here.

A man enters, in a dark suit. Finance Elite 1,2 and Adam stand up to greet him. The man emerges from the shadow to the lighted room, and the face that is seen is… Gregor Sanderson. Adam recognizes his face and freezes. As soon as he is seated, all three of them take their seats around the table.

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Gregor: Greetings, gentlemen. (noticing Adam) Ah, and welcome to the elite world.

Adam: (still stunned) Thank you…

Gregor: I appreciate your work, Adam. I really do. (opening the document on the table and skimming it through) Hmm. Great. Great. Now we can finally talk business. (notices the body of Craver lying on the floor) Can you get rid of that, please?

Finance Elite 2 drags the body out of the room to where Ellie is lying down.

Ellie shrills sharply.

Gregor: Where is that scream coming from?

Finance Elite 1: From next door. It‘s the secretary from Craver‘s office. Joanna Bennet.

Gregor: I want to see her. Go fetch her.

Exits Finance Elite 1,2.

Adam: Have you met her before?

Gregor: No, but I‘ve quite often heard about her from Craver.

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Adam: Did you know, by any chance, what her real name is?

Gregor: Are you suggesting that Joanna Bennet isn‘t her real name?

Adam: Yes. Her real name is Ellie Sanderson.

Gregor: What??

Enters Ellie dragged by Finance Elite 1,2. As soon as Ellie sees Gregor’s face, she is flabbergasted.

Ellie: (astonished) Gregor…?

Gregor: Ellie?!

Ellie: I… I don‘t understand, I thought you were… in prison.

Gregor: Why are you here?

Ellie: No, answer me first. Aren‘t you supposed to be in prison right now? Your letter from two years ago, you told me… you were set up…!

Gregor: …. That letter… was a fake.

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Ellie: What???! … it was a lie?

Gregor: Yes. And now you know the truth.

Ellie: You were the fourth man involved…? You were the mastermind behind the conspiracy?! Gregor: Yes, Ellie… I was never imprisoned. I was always one of them, engineering the bubbles and planning the scams. I was the fourth man involved… I was their commander.

Ellie: You were the only reason I got to this place—to—to—rescue you—that was the only thing I thought about for the past two and a half years—why did you have to lie to me—why!

Gregor: I sent you that letter… because I needed to go anonymous, to disappear from this world, and remain hidden, while I worked with my group of— Ellie: Elites.

Gregor: Yes—No—Yes. Group of elites. I hid myself from this world. I won‘t deny that I wasn‘t behind every political lobby, every financial bubble... and…behind every dollar traded in the subprime market for the past two years. But as a result I made a lot of money. And, it was all for you…! For my sister…! I was going to become a multi-billionaire, and let you do whatever you want in this world. I didn‘t want to see you to suffer, like I 160

did! Because I loved you!

Ellie: Don‘t bring me into this! You call this love? You did it because of your obsession, your love for money, your greed! You gave up your life, and your family, just for money!

Gregor: Ellie you don‘t understand— Ellie: YES I PERFECTLY UNDERSTAND! Gregor: Ellie… you have to listen to me… My parents...No, our parents… committed suicide because they were in debt!

Ellie: Oh I know exactly what happened to them!

Gregor: But you have no idea how much trouble I had to go through, paying off the debt they left for me! (Silence) Did I mean anything to you? Was I anything more than just a money-making machine that would fund your school tuition—your life?

Ellie: YES! (breaks into tears) You were everything I had!!

Gregor: Then forgive me! I lied to you, because I knew, by sacrificing four years of my time with you, we will have a much brighter future! I did it, for our happiness!

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Ellie: Sacrifice? Happiness? It‘s all non-sense.You are only a slave of money!

Gregor: If you don‘t shut your goddamn mouth, I am going to pull this trigger! (aims the gun at Ellie) Ellie: (kneels down) Shoot me then. Just shoot me. (laughs hysterically) Isn‘t it ironic? I thought you created all this mess so you can live with me in the future. That just proved that I was right about you. I don‘t want to live in this hellhole any more. Shoot me.

Gregor: You… reckless whore…!

Ellie bursts out in tears, laughing hysterically.

Gregor: I DON‘T WANT TO HEAR YOUR CRIES ANY MORE!!!

Gregor raises his gun, pointing at Ellie’s head. There is a blackout, followed by two gunshots. Silence. Light comes on, and the audience sees that Adam is standing with his gun pointed at Gregor’s leg. Gregor is lying down, his pistol dropped. He is grabbing his leg and moans loudly and painfully.

Gregor: (coughs) Adam… You traitor … You betrayed us…

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Adam: No. I didn‘t betray you, because I never was part of your elite group in the first place… Everything was a carefully organized scheme against your conspiracy.

Gregor faints.

Finance Elite 2: Adam, you just signed your own death warrant.

Finance Elite 1,2 take out their pistol and aim at Adam.. Suddenly, a police siren starts to ring.

Adam: No.You did.

Adam embraces Ellie softly. Ellie is still sobbing. Finance Elite 1,2 point their pistols to their neck. There’s a blackout, followed by two gunshots. Light comes on, and Finance Elite 1,2 are seen lying on the ground, dead.

Ellie: Wait. Adam.You killed... Craver... The Police will arrest you too!

Adam: No. I didn't actually strangle him to death. I only knocked him out.

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Ellie: Thank goodness... I thought I almost lost you too.

Adam: Don't worry Ellie. That will never happen. The Police are here. (takes out a voice-recorder) We're going to give the police the evidence of their conspiracy, and we'll go home and rest. Okay?

Ellie: Yeah... Okay.

Diary: When I found out that Gregor was the fourth man behind the conspiracy, my world seemed to have come to a stop.

Blackout.

Stage Right: PRISON Gregor is still reading the journal.

Diary: The whole plan that Adam and I devised to see the fourth man involved, and all the acts we had to put on beneath the CCTVs, were meaningless.

Even though everyone involved with the conspiracy did end up either dying or being sent to prison, I still felt the greatest pain and sorrow. What am I to do now? I asked Adam at home. What he told me then, was the sweetest thing Iâ&#x20AC;&#x2DC;ve ever heard in my life.

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Stage Right: ELLIE‘S HOUSE Ellie and Adam are sitting on the couch. Ellie is sobbing.

Ellie: Adam… what am I to do now…?

Adam: Ellie. Look at me…

Ellie raises her eyes.

Adam: Do you know what the most valuable investment in the world is?

Ellie: No…?

Adam: An investment, an investment of everything you have, for someone that you love the most. You loved your brother, and put in all you had—money, time, energy—to rescue him. Even though… the outcome was… unexpected, you effort still counts… and so does mine.

Ellie: What do you mean?

Adam: My effort—my investment—for the one I love the most in this world— for you. Ellie.

Ellie: Adam…!

They tenderly embrace each other. Blackout.

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Stage Right: PRISON Gregor is about to close the journal, but notices some object at the back of the notebook. He finds an old i-pod, and realizes it is the one he gave Ellie for her seventeenth Christmas present.

Gregor: (staring at the i-pod) Ellie… I‘m sorry… I‘m so sorry… I made an unforgivable mistake… I shouldn‘t have lied… But I couldn‘t do anything about it… because I was… so blind… I‘m sorry for everything. And I love you so much…!

Blackout.

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ActVI. Epilogue: In Greed We Trust.

Stage Right: PRISON Gregor is crouching in the jail. Enter Jailer 1 and 2.

Jailer 2: 3708, you have a visitor.

Jailer 2 take Gregor out of the cell, to meet the Finance Elite 3.

The visitor is sitting on a stool, wearing a hat which blocks the audience from seeing his face. Gregor comes in with the Jailer and sits on a stool, facing the visitor.

Gregor: It‘s all over. Go away.

Visitor: No, it‘s not all over.

Gregor: What do you mean?

Visitor: We have a new target.

Gregor: It has nothing to do with me now. I‘m done with it.

Visitor: We can get you out of prison.

Gregor: How? Visitor: A few million bucks.

Gregor: I never asked you to do such a thing for me…! Why— Visitor: Because we need you. Because you are the best at what you do.

Because we need a leader. We‘ve got a new target, and we need your leadership. In a few months, you will be off in the Caribbean, enjoying the rest of your life on a yacht. Are you still not going to say yes?

Gregor: (hesitates) Fine.Yes. Let‘s do it.

Visitor: There we go, now that‘s the real Gregor Sanderson. (exits, laughing heartily) Gregor takes out his i-pod and presses a button.The song “Billionaire” is played.

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Billionaire: ―I wanna be a billionaire so fricking bad Buy all of the things I never had Uh, I wanna be on the cover of Forbes magazine Smiling next to Oprah and the Queen Oh every time I close my eyes I see my name in shining lights A different city every night oh I swear the world better prepare For when I‘m a billionaire…

Light fades out from Gregor’s perfidious smile.

-The End-

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―Despite our loss, by choosing the flat structure where everyone equally gets to enjoy the game, I was able to distribute ―happiness‖ and ―satisfaction‖ to our team. On the other hand, though the other team‘s hierarchal structure led to their nominal ―victory‖, their game wasn‘t necessarily ―fun‖ for everyone; by the end, they were all hurt and exhausted due to constant fowls, tackles, and shouts, and no one enjoyed the game as much as our team members have.

It was the question of Equity vs Efficiency—whether we want everyone to have fun together, or whether we want the few top-scorers to efficiently win the game and have fun themselves. This soccer game was reflective of the many modern day capitalist economies, in which the top 5% of the hierarchy become more and more well-off than the majority.

In our case, I, as the most experience and skillful soccer-player of our team, could have just worked with the best players of the team and achieved victory. But I gave up such an elitist ideal and instead achieved the main objective of playing soccer— not to win by destroying the other team, but to have fun together. Even if this was a real-world situation where the loser gets eliminated from the society, I would probably have done the same: to give up just a little bit of my gains and share with those around me, to work for the well-being of the community, not for my self-interest.‖ From: ―Seeing the Spectrum of Leadership169 through a Soccer Game‖ Chapter 5: Leadership in the Business World.