When chemistry teacher Walter White was told he had cancer and only two years to live,
his first concern was to ensure a secure financial future for his family - a wife, and a teenage
son who had cerebral palsy.
Morality and values were not a concern for him anymore. Realizing he had nothing to lose,
Walter White, or as known as Walt, decided to pursue a highly lucrative business of selling
THIS stuff.
From being a regular guy, with a day job as a chemistry teacher and a second job at a
car wash, to becoming Heisenberg, a name he would later be known as in the underworld,
Walt exhibited a natural talent in how he manufactured, sold, and created a business
around his product.
We will be analyzing the show “Breaking Bad” from an economic point of view. But
a disclaimer first. We do not encourage the product in any way. Walter White never used
this product himself so you shouldn’t either!
If you have any thoughts on Breaking Bad or anything notable you have observed about the
show, we would love to hear your opinion in the comment section below.
There is a time in your life when you could experiment with things and a time when that's
not the case. Walt started with something he already understood and that was chemistry.
Doing one thing his entire life and being very good at it helped him. Later, not only
he was able to produce the product, but he did it with such expertise, that it was praised
for its purity. But Walt knew his knowledge in chemistry and skills didn’t mean anything
if he couldn’t sell and reach the consumers.
Walt’s brother-in-law happened to be a DEA officer which wasn’t an ideal situation,
and being a chemistry teacher all his life, Walt was not a salesperson, so that was not
good either. This is where Jesse Pinkman fits in.
Many newbies start things up by trying to do everything themselves and that's how many
businesses fail without even beginning. You can’t do everything yourself. Period! That's
where co-founders, partners, and later employees come in. Walt offered his former dropped-out
student Jesse to join him as a partner in the venture of making and selling the product,
as Jesse was already involved in such activities.
Walt couldn’t have started it without having a partner in the beginning. That's why it's
important to remember that “If you want to go fast, go alone; but if you want to go
far, go together.”
Jesse was not okay with cooking the product at his place and so was Walt. With their limited
resources, Walt and Jesse had to find a viable place where they could cook the product. They
considered renting a storage unit but end up getting a recreational vehicle. This was
important because the production needed safety and the RV could be moved to a far-off place.
This is also a great example of how startups make both ends meet to kick off the product
despite having limited capital.
Let’s say you purchased a product… you didn’t like its quality… you returned
it and asked for a refund. Well, not in this case. Walt was selling the sort of product
where you would be very very sorry for returning and asking for a refund from someone on the
corner of the street. In such a market, when someone introduces a premium quality product,
the demand goes up! Walt’s product was miles better than his
competitors. The high quality of the product made him different from all the wanna-be’s
out there. In the beginning, his plan was not to become a market leader. He just wanted
to cook enough so he could provide for his family. But it was the quality of the product
that later pushed him to expand the business.
The kind of product Walt was selling can’t be advertised on television or on social media
or on a billboard. And you can’t go door to door either to let everyone know how awesome
your product is. This is a perfect example of a great quality product that sells by itself
and creates its own demand.
Apart from the high quality being the key element to its success, Walter’s product
didn’t lack branding either. The product happened to have a blue color, which was linked
to its quality of being 99.1% chemically pure. Termed as ‘Blue Sky’, the color ultimately
became a trademark for his brand, offering uniqueness against all the other products
in the market.
The quality and blue color became a selling point. This frustrated Walt’s competitors
who didn’t shy away from using cheap tactics, like dyeing their products with color to make
it look like the Blue Sky.
If people are copying you, that means you must be doing something right!
The first time they cooked the product, Jesse went out to sell it and came back with revenue.
Walt flipped out that they cooked 16 ounces while Jesse was able to sell only 1 ounce.
Walt realized his partner Jesse had some limitations, like selling directly to the consumers. He
suggested finding a supplier so they could reach more consumers as well as avoid selling
them the product directly. This is a good lesson that you need alliances and distribution
to grow a business. That's where Tuco Salamanca came in.
At one point, Tuco suggested moving to Mexico to avoid government intervention. Walt declined
the idea and mentioned that he had a wife and a kid. Tuco replied: “so what you will
get another one”. But Walt emphasized he couldn’t give up on his family just like
that and move somewhere else for business, as he was literally doing everything to support
his family. This is a great example of recognizing what could be substituted and what should
be avoided. And also not to be involved in a business where your decisions directly affect
your family members.
At one point, Walt and Jesse were able to cover a specific market with no competition
left against their superior quality product. Walt instantly said that they were not charging
enough. He added that “once the market is cornered, the price should be raised; simple
economics”. A typical example of how businesses raise the price once the consumers are hooked!
In the beginning, when they get paid by Tuco, Walt did some math in his head calculating
roughly how much money he needed for the cost of higher education for his children, cost
of the mortgage, cost of living, etc. He adjusted all the figures for inflation. This is a great
example showcasing that any amount of money won’t be worth the same in the coming years,
so inflation should always be considered.
In one episode, after getting his car repaired at a mechanic shop, Walt, knowing his car
was easily recognizable, sold it to the shopkeeper for $50. While his son thought that was a
terrible idea, and he could have gotten better money through another dealer, Walt understood
that it was not worth the trouble. Getting rid of the RV was another example of how risks
should be dealt with as soon as possible.
In one of the episodes, Walter White and his associates were shown to have sold 50 pounds
of the product for over $1.3 million to street dealers. That's around $60 per gram which
was very affordable for a high-quality product. By keeping the quality high and offering an
affordable price, Walt was able to make it look something akin to a monopoly.
After the departure of Tuco, Walt worked for Gus Fring, who was apparently just a fried
chicken restaurant owner. But behind the scenes, he was one of the biggest distributors of
the product. Gus offered a salary that Walt couldn’t refuse despite the obvious dangers
of working with Gus. Walt simply saw it from the cost-to-benefit point of view. He had
to cook for 3 months for $3 million, in a state-of-the-art underground lab, and without
having to worry about getting caught. Although Jesse argued that Gus was earning way more,
somewhere near $96 million compared to what they were getting paid. But at that particular
point, Walt was happy to earn the money while staying safe.
Gus showed Walt his new lab, equipped with one of the highest quality equipment capable
of large-scale production. Gus wanted Walt to produce 200 pounds of the product per week.
An excellent example of the economies of scale. When production facilities grow, businesses
can start to produce large output, which brings down the production cost. A perfect example
of how a big company can produce the same product for much less compared to a small
business.
In one episode, Walt decided to not start cooking until they capture a fly that has
gotten in the facility. His partner Jesse argued that they shouldn’t worry about just
one fly because after all they were just cooking poison and they have the most un-picky consumers.
Walt did not buy any of his arguments as he never compromised on the quality and discipline.
The money Jesse and Walt were earning was not the kind of money they could just put
in the bank, or start purchasing assets with it, or buy stocks with it, etc. Because obviously,
the government would ask where the money came from. That is where the legal services come
in. One of the most liked characters in the series was the lawyer, as known as Saul Goodman.
It was amazing to watch how the lawyer exposed and explained all the tax avoidance and money
laundering tactics businesses use.
At one point in the series, Walt’s wife Skyler came to know about her husband’s
venture. And after initial criticism, she decided to help him with the money, as she
was an accountant herself. Skyler didn’t like the lawyer’s idea to use the laser
tag business as a front for laundering the money. She suggested that the government was
not ignorant, and laser tag business by a chemistry teacher would just sound fishy.
So they instead bought a car wash. Another example of how businesses fill the gaps to
avoid drawing suspicion.
In short, a clever lawyer is always worth the money. As the lawyer in the series said
himself: “Do you know why God made Satan before lawyers, well, He needed practice!”
In one episode, Walt met a Phoenix-based distributor named Declan, who was also involved in manufacturing
their own product. Knowing his product was the best in the market, Walt offered Declan
to close down their business and instead sell what he was cooking, which was obviously not
a very nice thing to propose.
Walt argued that he was producing 99.1 percent pure product compared to Declan’s product
that was only 70 percent pure if they get lucky. He mentioned how they have been dyeing
their product with color to make it look like the Blue Sky. He even demeans Declan’s product
by saying their product was just some off-brand generic cola while his product was classic
Coke. Declan in return, threatened Walt for his life because in that scenario there won’t
be any Classic coke. Walt, simply replied: “Who the hell wants to live in a world without
Coca Cola”. A perfect example of how big fish eats little fish in the business world.
Walt offered them 35% of the cut for the distribution and emphasized that Declan could earn more
money from this 35% than he could ever earn selling his own low-quality product. Declan
had to agree. You can always negotiate better if you have the power to walk away or have
an obvious upper hand.
Once the product was established as a force to be reckoned with, Walt expanded his territory
and moved into the global market. If the product is liked by the consumers in one market, it
could possibly be liked somewhere else too, ultimately bringing in more revenue. That's
when Walt met Lydia who offered an opportunity to expand the distribution to the international
market by targeting the Czech Republic. She told him how entering a new market with a
high-quality product was a big advantage against inferior competitors. She convinced him of
her competency in the global supply chain. Walt who appeared a bit skeptical understood
he had to rely on international distributors to grow bigger.
In the end, Walt, who was preparing for his
death, needed to figure out a plan to transfer the money he had earned to his family. Obviously,
he couldn’t give them this money directly because the government will ask where the
money came from. Also at this point, his cover of a regular guy was blown and everyone knew
he was the Heisenberg.
Walt took help from his former colleagues Elliot and Gretchen who were not on the best
terms with him. Elliot and Gretchen happened to be very wealthy and Walt decided to use
their business to launder the money as a charitable donation to his son. Although we are not trying
to discredit the whole sector, this is another thing to keep in mind how charity business
works sometimes.
But he had no assurance that his colleagues will follow the plan after his death. So he
threatened them that he had hired the best hitmen to make sure they would follow as they
were told. Walter’s people outside the house pointed lasers at them to make his colleagues
believe they were snipers. And Walt’s reputation at this point was convincing enough.
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