Akatsuki Translations

“I’m scheming to make money with a new snack called French toast. French toast can be made with bread, eggs, milk, sugar, and honey. These will be the raw materials. Let’s say the raw materials cost 10 copper coins per French toast. I’ll buy the ingredients for 10 copper coins, make the French toast, and sell it for 20 copper coins. What is the basic form of this business?” -Ricardo

I put away the silver coins and placed 10 copper coins on the right side of the frying pan and 20 copper coins on the left. One French toast for 2,000 yen is a reasonable price. If the honey isn’t up to our standards, it might require a silver coin.

By the way, in this world, even city dwellers can do addition and subtraction. Many people can handle multiplication as well. The multiplication table is considered a skill for experts, though.

“10 silver coins… I mean, earning 20 copper coins with 10 copper coins…? But you can’t make it with just the ingredients, right?” -Alfina

Alfina’s expression turned into a question mark. She did well, except for momentarily not recognizing the copper coin unit. The results of Mia teaching her the prices of things necessary for business over the past three days are showing. The explanation was how much profit would be lost if you broke a honey jar. I still remember her being surprised by the price of paper and cloth.

“That’s right. In reality, there are costs such as rent, firewood, and frying pans. Of course, there’s also the cost of keeping me alive to make the French toast. If we roughly estimate this to be 5 copper coins, the essence of this business is earning 20 copper coins with 15 copper coins. What we’re selling is French toast, but in reality, it’s about the relationship between money and money.” -Ricardo

Alfina compared the French toast remaining in the frying pan with the copper coins.

“I can grasp it a little bit now. But it’s a bit of a scary situation.” -Alfina

That’s true. It’s converting all values into money. I need to make her understand the possibilities and limitations of measuring things with money, starting with the former. It’s not about reality or anything; the former is much simpler.

“However, the costs vary greatly depending on the number of products sold. The easiest to understand is rent. Let’s say the rent for one store is 3 silver coins per month. If you only sell one French toast per day, the rent portion per French toast would be 10 copper coins.” -Ricardo

I added 10 copper coins to the right side of the frying pan.

“If the ingredient cost is 10 copper coins and the rent is 10 copper coins, that’s 20 copper coins. With other costs involved, you’ll end up taking a loss.” -Alfina

“Yes. But if you sell 10 French toasts a day, the rent per piece drops to 1 copper coin. Then it’s 11 copper coins. The cost of firewood also decreases as you make more because there’s less waste. In business, the larger the scale, the lower the cost per product.” -Ricardo

I remove 9 out of the 10 copper coins.

“Let’s say the ingredient cost is 10 copper coins per piece. The rent and other expenses, plus the 3 silver coins I need to live on, total 9 silver coins per month. If we assume we can sell out 10 pieces a day, the costs would be 3,000 copper coins for the ingredients (10 copper coins x 10 pieces x 30 days), and 900 copper coins for expenses (converting silver coins to copper coins). Before starting the business, 3,900 copper coins are needed. This is equivalent to a year’s living expenses for an average citizen in the royal capital.” -Ricardo

“I desperately work and save up 3,900 copper coins to start the business. The profit is 6,000 copper coins since 10 French toasts are sold for 20 copper coins each for 30 days. In other words, I turned 3,900 copper coins into 6,000 copper coins. I made a profit of 2,100 copper coins. This is an amount that an average citizen could live on for more than half a year.” -Ricardo

“Business is amazing.” -Alfina

Alfina looked at me with an impressed expression. Well, what do you think? The golden snack you happily ate earlier might start looking like a silver coin, if not a gold coin. However, it’s going to get even less sweet from here on.

“However, as I’m feeling overjoyed with my huge profits, an enemy appears to stand in my way.” -Ricardo

It’s a story of battle in the name of business. I looked at Mia.

“Let’s say Mia is a rival merchant. What do you do?” -Ricardo

“I just need to crush Senpai’s shop.” -Mia

“That’s right.” -Ricardo

“Huh!?” -Alfina

Alfina was surprised by the exchange between Mia and me. It’s hard to understand when you’re suddenly told something like this. Rather, it’s scary that Mia can understand it. It’s not some kind of latent desire, right?

“Ahem. So, I’m the son of a big merchant. I hear about an annoying… I mean, impudent merchant who’s been making a lot of money selling a rare snack in the royal capital lately. I spy on them disguised as a customer and smirk, thinking French toast seems like an easy way to make money. Coincidentally, I have 39 silver coins, or 3,900 copper coins, in my pocket as an allowance. I decide to crush the impudent small merchant and monopolize the profits. Now, what should I do?” -Mia

Mia enthusiastically threw the question at Alfina.

“U-Um… You’ll do something bad, right? Like buying up all the ingredients…” -Alfina

Wow, buying up ingredients, that’s a good one. Come to think of it, Drefano did that to us. Well, it wasn’t the ingredients but the jars, and it wasn’t directly but through a merchant company under their umbrella’s umbrella’s umbrella.

“No, I’ll compete using only legitimate methods. That is… debt.” -Mia

“D-Debt?” -Alfina

Alfina tilted her head. It must be hard for her to understand why a rich person would go into debt. However, the biggest advantage of being rich is the ability to take on debt. In the modern world, the capitalist economic system, business was a game of competing for the ability to take on debt.

“I apply for a loan using the 39 silver coins and my family’s credibility as collateral. Then, I prepare 390 silver coins, ten times the funds of Senpai’s shop. However, since the interest rate is 10% per month, the 39 coins I had will be gone in a month.” -Mia

Mia gleefully talks about the plan to crush Ricardo’s shop. Alfina listens as if mesmerized.

“Now, using ten times the funds, I set up a store three times larger than Senpai’s, hire three times the number of people, and purchase a large amount of ingredients. Then, I sell ten times the number of French toasts at 15 copper coins each.” -Mia

“Ricardo-kun’s shop sells them at 20 copper coins each, right? I understand that Ricardo-kun will be in trouble, but will that be okay?” -Alfina

“Please recall what we talked about earlier. The larger the business, the lower the cost per product, or the cost price. Even with a store three times the size, the rent won’t even double. Moreover, this principle also applies to those who sell me the ingredients. I can lower the ingredient cost per French toast to a much lower amount than Senpai’s, 5 copper coins.” -Mia

“T-That much?” -Alfina

It’s not a particularly absurd assumption. For those who sell the ingredients, the labor cost per transaction doesn’t change even if it’s ten times the amount.

“Now, let’s compare the two businesses. Senpai’s shop has a cost of 13 copper coins per French toast. My shop, including all costs, is 6 copper coins. In other words, the profit per French toast is 7 copper coins for Senpai and 9 copper coins for me.” -Mia

“Even though you’re selling at a lower price, you’re making more money, Mia-san. But you have to pay interest on the debt, right? Ricardo-kun doesn’t have interest because it’s his own money.” -Alfina

Alfina is keeping up well. Of course, that’s what you’d think. Debt is a loss and bad. That’s the normal sense.

“Yes, but my profit is 9 copper coins multiplied by 3,000 pieces, so it’s 27,000 copper coins per month, or 2,700 silver coins. I can easily pay the monthly interest of 39 silver coins. Now, what will you do, Senpai?” -Mia

“I have no choice. I’ll lower the price of French toast to 15 copper coins. Then the price will be the same.” -Ricardo

“I’ll lower it to 14 copper coins.” -Mia

“Ugh, 13 copper coins.” -Ricardo

I continue the battle I know I’ll lose. Alfina’s eyes looking at me are filled with sympathy.

“Mia-san can lower the price even further, right?” -Alfina

“That’s right. When the price war reaches 13 copper coins, my profit becomes zero. Of course, the costs include living expenses, so I can still make a living. But Mia will mercilessly lower it to 12 copper coins. Even though the interest on the debt is 39 silver coins, it’s only a cost of 1.3 copper coins per French toast. Mia can secure a profit even if she sells French toast at 8 copper coins each. There’s nothing I can do. No, not only that, since French toast won’t sell at my shop, the cost per piece will increase from 13 copper coins. If they don’t sell, that becomes a loss.” -Ricardo

Saying that, I raised both hands. I couldn’t beat the rich.

“B-But wait a minute. Then if Ricardo-kun also borrows money…” -Alfina

“There’s no one who will lend money to a small merchant like me. Even if I miraculously find someone, I can’t borrow at a 10% interest rate with my credit. Of course, an amount like 390 silver coins is also impossible.” -Ricardo

The bad end is complete. Well, it’s oversimplified, but it’s not too far off. If anything, it’s still too optimistic.

“That’s terrible. Even though it was Ricardo-kun’s idea.” -Alfina

Alfina puffed out her cheeks. She gives Mia a complicated look. No, don’t empathize with her, it’s troubling.

“This is another meaning of making money with money.” -Ricardo

I bring the conversation back to theory.

“Procuring money is considered a cost, just like procuring ingredients. The interest on debt is that cost. In other words, Mia’s business is…” -Ricardo

I rearrange the copper coins in front of the frying pan.

“It’s about obtaining 390 silver coins, paying 39 silver coins in interest, and turning that into 600 silver coins. In other words, earning more than a 50% profit with money obtained by paying a 10% interest rate. So if you can earn more than the interest rate, debt is power.” -Ricardo

In this case, no matter how much profit is made, the principal is never returned. This is because the funds borrowed at a 10% interest rate continue to generate profits of more than 10%. Returning it would result in a loss. It’s the same as not killing a bird that lays eggs worth more than its feed cost.

“By the way, if Senpai’s shop goes out of business, I’ll raise the prices and make even more money.” -Mia

“Y-You’d go that far?” -Alfina

Mia reveals an even harsher reality. Alfina is completely frightened by the unscrupulous merchant Mia. Well, anyway, thanks to Mia’s convincing performance, the message seems to have gotten across. I was a bit scared too.

“W-Well, anyway, as long as business is about making money with money, do you understand that the one who can prepare more money has the advantage? In business, money isn’t just something that’s nice to have. Without it, you’ll be destroyed.” -Ricardo

“Yes. …It sounds like we’re talking about war funds.” -Alfina

“It does indeed. I’m glad you understand quickly.” -Ricardo

No matter how easygoing she is, as expected of someone on the ruling side.

I mean, both Mia and Alfina are probably smarter than me. So, let’s return to the reason why I gave such an inauspicious talk to such excellent students.