The Economics of the Chelsea Bun
MARCH 29, 2002
When The Mole was about nine years old he was a great fan of the Chelsea Bun. They were more agreeable than Rock Cakes and slightly less messy (but not much) than Bath Buns, Custard Tarts, Sticky Buns and Cream Puffs.
The other day, while perusing the file marked "Top Secret - Ecclestone. B" The Mole was amused to read a story in which the boss of Formula 1 was credited with having started his career as an entrepreneur at the age of nine by selling Chelsea Buns to his classmates at school.
Obviously one can learn a lot from a Chelsea Bun.
After growing out of Chelsea Buns, The Mole thought that race car driving was something to aspire to and, having acquired an old Austin on leaving school, spent many freezing hours one winter in what we used to call a lock-up garage twiddling with bits of this conveyance when really he should have been studying something of more value. His contemporaries at the time seemed to think that twiddling with the female form was a lot more fun but The Mole found that girls did not much enjoy sitting around in garages discussing gear ratios or being speckled with Castrol R. Nor did they much enjoy sitting on a pile of tyres with a stopwatch, having their eardrums blasted out by noisy automobiles.
If The Mole had been successful there might have been champagne with which to ply the ladies but alas the adventure ended badly and The Mole went back to the real world and spent some time paying off his debts from his meagre Foreign Office stipend.
It was, however, a valuable lesson for it taught The Mole that anyone who looks at the prices on a menu in a restaurant is not rich enough to be involved in serious motor racing. There is a very good reason why all the early racing drivers were Baron This or Count That and why lists of famous drivers include the names Vanderbilt, Guinness, Courage and so on.
It did not take long for cunning folk with mechanical minds to work out that they could fleece the wealthy amateurs and eventually businesses were built up and people began to make profits from the sport. But this was never the raison d'etre. The aim was to spend money and have a good time. It is all much more elaborate today with sponsorship and so on but the basic facts are the same: motor racing costs money and in order to make money there must be a sensible business plan able to withstand the stresses and strains of recessions and depressions. If one is trying to treat the sport as a business, it has to operate along normal business lines. Costs can never be cut because there are always companies wealthy enough not to care.
Let us return, therefore, to the Chelsea Bun for it taught Mr Ecclestone the fundamental principles of business and thus must be a good schooling.
If one sets up shop selling Chelsea Buns in the building next to the best bakery in town, your Chelsea Buns have to better than those which they produce. Otherwise you will go out of business. And when you are top of the Chelsea Bun trade you then have to compete against French tartes and Gateaux Basques to increase your profits. And you must always be looking at innovation lest your market be swept away by nasty new things like the Donut or the American Muffin.
It is no good weeping that the price of flour is too high and trying to form a union to force the flour mill to drop its prices. It is no good saying that flour is so expensive that soon there will be no bakeries left because as long as people have to eat there will always be the demand for a good Chelsea Bun.
The Mole feels that if one cannot take the heat in the bakery, one should not be in the Chelsea Bun industry and one should look for a niche market like drop scones or crumpets where competition is less intense.
The problem is the Formula 1 industry at the moment is (if we continue to use the Chelsea Bun illustration) is that all the money is being concentrated in the hands of a man who is not actually in the business of manufacturing Chelsea Buns. He has taken the rights to sell them and, some say, that he is making more than his fair share of the dough -without getting his hands dirty.
Those who whine and whinge now have forgotten that a few years ago they signed the current agreements. It is their fault that the deal was a bad one.
There is plenty of money in Formula 1. The Mole's operatives in Barcelona report that there was a constant stream of potential promoters running in and out of Bernie Ecclestone's old grey bus. They were there to try to convince the great man to take their money from them. Mr E has merely to decide which pile of dollars is going to be the biggest in the long term. As the folk from Bahrain, Beirut, China, Dubai, Turkey and Russia bid against one another so the price (and the pressure to do a good job) goes up. Bernard is happy to accept higher standards in both areas.
As we have seen with Malaysia, there are opportunities for money to be made from all these people. Sauber and Minardi are happily spending money which is linked to the Malaysian Grand Prix.
Why do the whingers not rush off to the Turkish Development Corporation and offer their services to promote the country. Admittedly, this would be difficult for Jordan Grand Prix as the Turks are unlikely to promote a team named after a nearby country which is competing for the tourist dollar.
The Mole feels this could easily be solved if Jordan was to change its name to Team Turkey.
Perhaps, given the current levels of performance, this would be more apt.
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