Market Value and Dirty Underwear

$3 solution to a $50 problem

$3 solution to a $50 problem

After the first week of my preliminary doctoral research in Shenzhen, I took two bags of dirty clothes to the laundromat across the street. It was about five days worth of clothing for my wife, daughter (3) and I. The woman (probably the owner) was very meticulous about counting each piece and ensuring that the lights were separated out. She wrote me two separate bills. The darks were 245RMB and the lights came to 80RMB. She showed me the total of 325RMB on her calculator. It seemed high at first glance, but I’d never had laundry done in China (I usually just wash it in a plastic tub), so I assumed it was fair. On my walk back to meet my ladies, I did a rough conversion in my head. At $16 to every 100RMB, I’d just paid over 50 bucks to do a couple loads of laundry.

The “hey wait a second” thought had crept into my head even before rendezvousing with the ladies. I didn’t even have to tell my wife what had happened to know her reaction. She laughed at me as expected, but was also very understanding. She actually told me to forget about it – to chalk it up to a learning experience. But we were on a tight budget, and so I decided to go back, eat a piece of humble pie, and ask for my money back. On my way, I looked up the word for “refund money”(退钱)– which I had learned before but now won’t ever forget. I told the owner that I was a poor college student, and that 325RMB was just too expensive for me. She said no problem, and was all set to return my money. But then, just at the last second, she asked me how much I wanted to pay. At first I thought she was trying to charge me some sort of return fee, but then she said, “How about 285?” And then it hit me. As a foreigner I didn’t know the value of anything in China, not even getting my dirty underwear cleaned. 325RMB is ridiculous for a couple loads of laundry. “150,” I said. She laughed, and countered, “Okay, 200.” I shook my head in agreement, “Okay, and it’ll still be ready tomorrow after 5:00?”

So, I wound up knocking about $20 off the original price. I learned a lesson about the value of getting your laundry done and the value of just walking away in a negotiation (and about just doing laundry in a plastic tub). An accidental technique has now become purposeful. I also learned an important lesson about learning the value of things. In China, value is determined in a very interpersonal way. It’s not something you can look up in a book, or even on a price tag. Understanding value is particularly experiential in the Chinese context.

Most anecdotal business stories are not very useful to foreigners running their own small businesses in China. They make great bar-talk, but mostly involve large companies, with enough money and large enough margins not to worry a whole lot about the difference between a few hundred, thousand or even ten thousand dollars. One such case involves a large American outdoor company which, as luck would have it, was told to me at a bar in Shenzhen by the American businessman it happened to. During a large order, the factory insisted on a large fee to release the merchandise. They asked for half-a-million dollars. This was negotiated down to a quarter-million. When the order was about to be released, the factory all of sudden demanded a million bucks. After a whole lot of negotiating and empty threats, the order was released for some amount slightly higher than a quarter-million dollars.

The lesson recounted by the American businessman was that the Chinese can’t be counted on to honor contracts, and may even rescind deals they themselves have initiated. That may be true. (What they don’t realize is that even at a million dollars, the mark-up at which the American company is selling the products makes such a sum inconsequential.) However, to individual businessmen, these sums of money are very consequential, and thus such a story, while entertaining, does very little to instruct one on how to start and run a business in the Chinese context. My assumption here is that the amount of money involved drastically changes the circumstances of business negotiations. And walking away may hold very different consequences for a small business owner whose entire business rests on a single negotiation. Thus, the strategy for handling any number of business related situations must be considered in relation to the scale of the business within the cultural context. In order to contribute to our understanding of Chinese economic practices beyond anecdotal evidence, I focus on expatriate entrepreneurs (“expatrapreneurs”) who own and operate small businesses in China. For them, financial profitably relies on practical cultural knowledge, and comes without the “free pass” extended to most foreigners for casual faux pas, or the financial leverage imbued to Americans representing multi-national corporations in China.

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One Response to Market Value and Dirty Underwear

  1. Drew Dorfman says:

    Son: First of all, mom and I are relieved to learn that you are wearing clean underwear. I also note that your wash basin is pink. Small lessons can have big payoffs. From your very proud Dad Ps Happy Passover

    Drew S. Dorfman

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