The Musings Of An Opinionated Sod [Help Me Grow!]

What Business Has Learnt From The Mafia.
February 7, 2007, 9:51 am
Filed under: Comment

In the past, I’ve written quite abit about how certain ‘undesirable industries’ could teach the bluechip mob a thing or two about profitability, growth and consumers and so I thought I’d highlight [with huge thanks to Nick @ MSN Money] how the Mafia run their powerful and [whether we like it or not] successful business.

We may not like what they do … or what they stand for … but interms of how they run their major corporation, they sort-of have to be admired.


The Mafia isn’t just one of the most remarkably successful criminal organisations in the world, it is a remarkably successful business outfit too.

For a century, the authorities in Sicily, Italy and the U.S. have tried to stamp it out, with little success. While most of the trades it operates in are either totally illegal or a little shady, it has used some very effective conventional business practices to make them thrive.

For a start, the Mafia understands economics. It knows, as do all criminal gangs, that it is almost impossible for the law to get between a willing buyer and a willing seller. That is true from ten-year-olds trading half-smoked cigarette butts in the playground, right up to international drug smuggling and vice.

Arrests or seizures are an overhead, they merely put the price up. Illegality for crime gangs helps them by cutting down competition and keeping margins high.

Cash IKing

Free Cash

Whether you trade with Del Boy or the Godfather, cash is king. They’ll take anything, so long as it goes by the name of readies, greenbacks, mozuma, crinkle, or folding stuff. Try any cheque-and-guarantee card nonsense and that good as new Bulgarian VCR will not be yours. It’s partly about tax and money laundering, but it is also about cash flow.

Cash flow is one of the most neglected aspects of business. Poor cash flow sinks 20 firms for every one torpedoed by weak profitability, as companies like Jarvis and Minorplanet Systems have discovered. Tomorrow’s great biotech discovery is often delayed by today’s excessive cash burn.

Likewise the technology boom showed that however much the Internet was going to change our lives, to profit from it you need products that were going to generate returns soon, before those big loans fall due. The Mafia would never had fallen for the idea of technology jam tomorrow. For them a high tech investment is two East European computer hackers and a second-hand PC.

Basic Industries, Visible Profit

Mafia spaghetti with seafood and tomato sauce

In Italy, the Mafia controls an estimated third of the waste disposal business, and between 1994 and 2003 reaped £18.7bn of income from it, according to a recent conference of prosecutors in Rome.

The choice of industry isn’t a coincidence. Waste disposal was a key Mafia asset in the U.S. state of New Jersey for many years too. In both countries it has strong cash flow, easy enforcement (“You don’t pay today, we tip the rubbish on your garden”) and the chance to launder through its books some of the gains on totally illicit activities elsewhere.

Basic industries such as haulage, quarrying, construction and waste disposal are often Mafia targets for the same reasons that other investors are attracted to them. They are easy to understand, have a low level of capital consumption and generate lots of cash. When managed effectively, they churn out big dividends for investors.

Loan Sharking

Liberty Loans

One other consistently profitable industry enjoyed by the mob is loan sharking. With huge rates of interest and ‘imaginative’ enforcement methods, money just piles up. However, the Mafia doesn’t have that market to itself. A number of doorstep lenders in the U.K, owned by firms such as Cattles Plc and Provident Financial, also lend money to those whose income is so scanty and credit rating so low that they wouldn’t qualify for loans from other lenders.

They too charge enormous rates of interest, sometimes 75% or more a year, though they would undoubtedly be miffed if you called them loan sharks. The firms argue that they provide a service no-one else would, and that the charges are high to cover the many defaults.

That isn’t the whole truth, however.

So-called ‘sub-prime’ lending remains a highly profitable business. Many clients are encouraged to take on loans that they cannot afford to service, and end up much worse off than they were before. Unlike the Mafia these doorstep lenders don’t break the legs of defaulters, but they do sometimes take their cars or furniture.

Protection Money


Up and down Italy, shopkeepers, restaurateurs and other businessmen have to pay monthly protection money or face having their businesses damaged. If that sounds unique to criminal gangs, think again.

If your company supplies a supermarket, you will be expected to fund the special offers (buy one, get one free or 50% extra free) that supermarkets decide to make. Frequently, demands to fund promotions are not just couched in terms of free produce, but are for cash, sometimes thousands of pounds per product line.

Then there are ‘overriding discounts’, which are cuts in contract prices paid as soon as volumes reach certain thresholds.

In other words, the more you sell, the less you get paid. However, if sales fall short of expectations, supermarkets usually expect compensation too. Head they win, tails you lose. Refuse to pay, and you lose your contract. For most suppliers loss of such huge volume is too damaging a prospect to consider. They pay up.



Omerta, the Sicilian oath of silence is taken very seriously. Among the Mafiosi honour demanded that you never squeal or snitch to the authorities – whatever the reason. Those that do, like the late Tommaso Buscetta, the former Mafia boss who spilt the secrets of the Sicilian gangs, are marked out for death.

It might sound like a long way from any business practice. Yet the suppliers to supermarkets, despite seething about the terms of business extracted from them, are too terrified to complain. However one did. Yorkshire-based mushroom packer Greyfriars lost its contract with Tesco for refusing to pay listing fees allegedly demanded by the retailer for selling Greyfriars’s products.

Bravely, Greyfriars wrote to the Office of Fair Trading saying that Tesco practices were in breach of a voluntary code put in place a year to stop suppliers being squeezed. Tesco denies that its practices are in breach of the code, and accuses Greyfriars of sour grapes because it lost the contract. Certainly, the firm is unlikely to get big new supermarket contracts easily.

High Level Contacts

The Branches of Government

All businesses like to lobby politicians for changes to rules or regulations that they don’t like. Some just donate cash to political parties hoping that in government they will get the message and not do anything to upset their paymasters.

Businessmen like Lord Sainsbury and Lord Haskins of Northern Foods, have made successful attempts to marry business and political careers without creating any obvious conflict of interest. Perhaps most successful of all is Dick Cheney, U.S. vice president, who used to head oil services group Halliburton. That is the same company which won the lion’s share of U.S. government contracts in Iraq, much of it without going through competitive tendering processes.

The Mafia would have loved to be so brazen. However, its connections tend to be utterly secret. Former Italian prime minister Gulio Andreotti, 85, was last year acquitted of charges that he helped the mob. However, the ruling left untouched an appeal court ruling that the seven times PM had up until 1980 a genuine, lasting and friendly disposition towards Mafiosi”.


Enron, Houston Texas

Market-rigging, like bribery, is always illegal. When executives play at being the New York Gambino and Genovese clans and hold secret meetings to fix prices and divvy up markets, they are running high risks.

While there still seems to be price fixing in Europe in obscure chemicals, judging by EU raids on units of Shell, Bayer and Exxon Mobil in 2002, the really big stuff was in the U.S.

Animal feed supplier, Archer Daniels Midland, settled out of court for $400m in a civil case that alleged it rigged the market for high fructose corn syrup. This is an additive found as a cheap sweetener in everything from Coca-Cola to baked beans.

ADM has been here before. The company was fined $100m in an earlier Federal anti-trust action over price-fixing in the market for food additive citric acid and animal feed supplement lysine.

Though three executives suspended jail sentences in 1999, the company was given immunity from any other criminal charges. That is why the fructose law suit, which arose from the Federal case, was a civil action.

So there you have it … for all the evil that the Mafia may perform, their business practices are not so different from those [occasionally] used by some of biggest and most respectable companies in the World.

Given the plethora of management books out in the marketplace today, I am surprised some clever dick hasn’t launched one inspired by Mafia Methodologies … though in terms of ruthlessness, they still are probably softer than some of the top execs at blue chip companies, ha!

34 Comments so far
Leave a comment

Hey mate,

You can be the first to write the book, join the talk circuit, and become filthy rich!

Comment by Mark

I am too scared to comment on this post.

Comment by Marcus Brown

Marcus is a chicken … Marcus is a chicken …

Thanks Mark, given the meeting I’ve just had, I might need to do that to earn a living, ha!

Comment by Rob

better chicken than dead.

Comment by Marcus Brown

Think of my poor Mum’s family – they’re all lawyers AGAINST the mafia!!! And no, no one has been killed – a few threats though!

I finally got your VIAGRA ad and for comment, I sent it to Andy – lets just say you won’t be hired for ‘art direction’.

Comment by Robert

Robert, that was a beautiful layout. I’m properly upset now. “Risen from the dead” works for me. Did last night anyway.

Comment by Marcus Brown

So true.
I often suspect many big businesses are far worse than any organised crime gang!

Comment by Rob Mortimer

Well said Mr Mortimer …

Comment by Rob


Have you read Freakonomics?

Comment by Rob Mortimer

still sulking.

Comment by Marcus Brown

Yeah … I really liked it – far better than Tipping Point.

The only thing that bugged me was that it seemed so similar to many of the research techniques we use [and written about in our ‘will-it-ever-see-the-light-of-day-book] but then Steven is probably free from a creative lovey who keeps saying things aren’t “quite right”, haha!

Have you read ‘The Undercover Economist”? Similar and just as enjoyable … but you should also check out FUCKED Company … a business book by an IT Nerd who highlights how stupid big business were during the internet boom.

Gotta fly … VERY bad day and need to shout at someone! Ha.

Comment by Rob

Don’t sulk … the idea was nice even though it was obviously “inspired” by our James Hunt idea.

Hahahaha … how condecending can I be?

Comment by Rob

Nudge those creative loveys sharply with a stick of “Shift it!”

Comment by Rob Mortimer

I sense a strain on the anger bar.

Comment by Marcus Brown

Oh yeah … oh FUCKING yeah

Comment by Rob

Is this what I think it is?

Tried calling but you were engaged, buzz me when you can.

Comment by Pete

Sounds bad, we should find you a John Travolta punchbag…

Comment by Rob Mortimer

expect to see some serious blog-rage around here.

Comment by Marcus Brown

Im watching out for it…

Comment by Rob Mortimer

I think you are right Marcus and if I were you, I’d sell any WPP shares you might have.

Comment by Pete

And I think if anyone wants to move into a great pad in Singapore, there may be one available very soon.

Comment by Pete

it’s going to be a very long day in Singapore.

Comment by Marcus Brown


Comment by Rob Mortimer

there is some kind of irony to this post.

Comment by Marcus Brown

Yes, I thought that too.

Comment by Pete

Don Sorrell

Comment by Pete

you could hear a pin drop.

Comment by Marcus Brown

Its an eerie almost silence, waiting for the break in calm…

Comment by Rob Mortimer

it will be a crashing roar. when it comes.

Comment by Marcus Brown

Certainly will be.
I feel like im watching a plane thats about to be shot out of the sky…

Comment by Rob Mortimer

Mr Shit … will [in all liklihood] meet Mr Fan in the next 24-48 hours, until then, I have to go into radio silence. Sorry.

I know this all sounds rather dramatic – but it’s because of legal shite, not because I am trying to be melodramatic. Though I do think it adds a little something to the drama of my blog!!!

Hope you’re all well – and Pete, you are somewhat correct.

Comment by Rob

The drama is a nice touch. Makes you very interesting. Still look like woody allen though.

Comment by Marcus Brown

We await the update with interest..!

Comment by Rob Mortimer

Maybe I’m getting sued by Woody Allen for lowering his asthetic perception?

And you know what Rob … so do I/we!

Comment by Rob

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