Making Pocket Change in the Gaps Between Things
December 1991, the Harvard clubhouse building.
At the pay phone booth at the end of the hallway, someone was arguing with a lover, and on the shelf sat a few lonely quarters that had lost their owner.
Inside the club room, the heat from an old radiator made the air stifling.
Tick—clang! Drdrdrdr······
An irregular metallic rattle was coming from inside the radiator.
On one side of the round table, a mountain of dot-matrix printer paper sat with serrated edges on both sides, and beside it a handful of 3.5-inch floppy disks lay scattered about.
···Tap!
A girl with blond hair, blue eyes, a straight nose, and freckles lightly dusted across the bridge of her nose and her cheeks braced a hand against the table.
“All right, let’s share our progress.”
Grace took the lead in the meeting.
Victor and I sat across from her and laid out the reports we’d compiled so far.
Grace was the first to speak.
She wrestled two thick bundles of lottery tickets, bound with heavy rubber bands, out of a document envelope and dropped them onto the table with a thud.
One bundle was small, the other enormous.
They were all scratched lottery tickets.
The smaller bundle had the winning tickets separated out, while the larger one contained the losers.
“Based on the Massachusetts issues, I’ve collected about 30 percent of the pool I set as my target. We still haven’t pulled a single first or second prize ticket, but we’ve secured twelve third-prize tickets and seventy-two fourth-prize tickets. Fifth prize is at 480 tickets, and sixth prize has gone past 6,800. So far, total winnings have recovered about 9 percent of the purchase cost.”
I quickly ran the numbers through my head.
Twelve third-prize tickets meant $12,000. Seventy-two fourth-prize tickets meant $7,200. Four hundred eighty fifth-prize tickets came to $4,800, and 6,800 sixth-prize tickets came to $27,200.
Altogether, that was roughly $51,200.
The target pool was 2 million tickets, so 30 percent meant 600,000 tickets, or $600,000 worth of scratching.
We were still in the red, but there wasn’t a trace of impatience on Grace’s face.
Victor peered down at the tally sheet.
“It still doesn’t look like much of a result. Do you think you can recover your principal?”
“Of course it doesn’t look that way right now. We’ve only collected 30 percent. My model assumes we’ll sweep up all the remaining 2 million tickets. The fact that the first prize still hasn’t appeared, combined with the fact that the thirty-seventh issue has already been released, means the odds are extremely high that the first prize is sitting somewhere in the remaining thirty-six issues’ worth of stock. If we gather all 2 million tickets, we’ll recover the full $8 million first prize plus the lower-tier winnings, for a total of $9.2 million. This 9 percent figure is just an interim count. The real fight only begins once the rest is filled in.”
Grace looked at me.
“Sanha. What about your project? That abandoned warehouse site in Wishville you talked about last time.”
“Right here.”
I pulled a thin sheet of paper from my bag and unfolded it.
The top of the page listed typewritten line items.
///////
<Final Settlement Summary for the Wishville Warehouse Site Project>
- Land and structure acquisition cost: $1,950,000
- Legal and title transfer costs: $850,000
- Appraisal, transportation, insurance, and miscellaneous costs: $520,000
- Total sale price: $12,730,621
------------------------------
- Net profit before tax: $9,410,621
///////
I pointed to the last line with my finger.
“Total input cost was about $3.32 million. That includes the land purchase, the legal fees we paid Vito, and the cleanup costs for the waste. As you can see, the total sale price was $12.73 million. And the final net profit came to about $9.41 million. That’s after deducting transportation, insurance, and every other incidental expense.”
“······!”
Grace’s pen stopped moving.
She sat there blankly for a while before asking me, “Is that kind of return even possible? Did this actually happen in real life?”
“Of course it did! I saw it with my own eyes right beside him!”
Victor chimed in.
I nodded.
“That’s right. And with that money, I bought a few more abandoned warehouse sites out in the suburbs.”
“Yes, our Sanha bought more warehouses······ what!?”
Victor’s previously smug head snapped around again.
“You, you, you, you bought more!? Warehouses!?”
“Yeah. This project made a lot more money than I expected, so I decided to buy more of the abandoned warehouse sites around Wishville.”
“Are you insane!? Sure, luck stacked up this time, but what makes you think it’ll happen again next time?”
At Victor’s outburst, Grace nodded as well.
“Exactly. You got tremendously lucky this time, but there’s no guarantee it’ll happen again. If it isn’t sustainable, it isn’t a business—it’s gambling. What kind of criterion are you using to collect warehouses in Wishville?”
“I do have my own standards.”
In truth, I wasn’t buying up abandoned warehouses because of what was inside them, but I laid out some plausible reasons anyway.
“First, I only picked places where the odds of finding treasure were high. Towns where people who had once been wealthy, but who were hit especially hard by a recession, used to live. In particular, warehouse-heavy districts near towns where mine owners, oil tycoons, or businessmen who had monopolized a certain industry had lived. Among those, I focused on places with easy access to rail lines or major highways, where freight movement had been frequent. Most important of all were places with a clear pattern of long-term delinquency on warehouse fees. Properties where the owner had likely fled in the middle of the night, or where inheritance had tangled up the title and left the place abandoned for decades.”
“Hmm. Hearing it like that, I can kind of see how it might be theorized.”
“The second condition is important too. I only bought places where rising real estate values made the downside completely secure. Even if the warehouse itself was empty, the land had to have enough support from rezoning potential or nearby infrastructure development plans. And of course, I was buying tax-delinquent sales, so the price was already at the bottom.”
“That’s a hypothesis and a conclusion that fit the Oddball Entrepreneur Competition perfectly. As expected, you really do have a plan, Sanha.”
Grace nodded.
This time Victor asked, “Did you find anything worthwhile inside the new warehouses you bought?”
“Quite a bit, actually. My uncle, Rick, and Vito are still investigating. They’re probably still at it this very second. Just from what I know, there were two vintage 1950s electric guitars, a 1950s jukebox that played songs when you dropped in coins, a vintage Coca-Cola vending machine, a rookie card of the legendary baseball player Mickey Mantle, and a set of 1950s tin robot toys······.”
“Oh? You’re going to sell those too, right?”
“That’s the plan, but it looks like Rick’s network is finally running dry. We’re past the point where we can just call up private collectors and move them.”
“Then you’ll have to put them up for auction, won’t you?”
“Right. But waiting for the auction means it takes longer to turn them into cash, which is a problem. Storage costs and insurance costs keep climbing too. So in the meantime, I’m thinking of creating additional cash flow through an exhibition-and-rental business······.”
I took a folder out of my bag.
On top was a certificate of incorporation issued by the state of Massachusetts.
///////
Business name: Sanha’s Antiques
Business purpose: “Display, rental, and management of historical artifacts and vintage collectibles”
///////
Under that was a federal employer identification number notice from the IRS, the United States Internal Revenue Service.
It stated that the company had been granted the authority to file taxes and hire employees under its own corporate name.
Flap—
The next page was a quote sheet from an insurance broker.
It covered comprehensive exhibition insurance against theft, fire, and damage during display, along with short-term rental loss insurance for items lost or damaged during the rental period.
Both policies guaranteed coverage up to 110 percent of the item’s appraised value.
Flap—
Finally, the draft of the standard rental contract clearly stated, in bold print, the clause: “In the event of damage or loss, full compensation equal to the deposit and appraised value shall be paid.”
I shrugged.
“I’m aiming for film prop departments, magazine editorial teams, restaurant interior firms, that sort of clientele. I placed a promotional article in the local paper, and I listed the clubroom phone number as the contact, so we should be getting calls soon······”
At that moment.
···Riiing, riiing, riiing!
The phone rang violently.
Victor sprang up and grabbed the receiver.
“Hello, Harvard investment club, Blood & Guts. Yes? Ah, yes······ yes, yes! This is Sanha’s Antiques. Oh, you saw the newspaper ad?”
Victor’s eyes went wide as he looked at me.
“It’s Paramount from Hollywood. They say they’re a prop team?”
I got up from my seat and walked over to the phone.
“Hello, this is Lee Sanha.”
The call ended.
As I set the receiver down, Victor and Grace both stared at me at once.
“What’d they say?”
“They’re making a film set in the 1950s. The location scout is coming tomorrow to look at the exhibition space.”
“You’re kidding! It’s only been a few days since you ran that newspaper ad, and Hollywood’s already calling?”
I nodded.
“Looks like I should clean up the exhibition room before long.”
Then Grace shot a hand into the air.
“Can I come too? I’m curious about what you’ve got on display. And I’m curious about how you handle selling or renting those things out.”
“Suit yourself. But will you have time? Don’t you have more than twenty credits this semester?”
“A few classes have already ended. The rest just need final papers, no exams. So I’m fine.”
“All right. Then let’s meet at five tomorrow afternoon. That’s when my class ends.”
“Got it. I’ll come to where you are.”
Grace nodded.
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