From legendary short seller to god of American capital

Chapter 402: Sparks Fly Through a Clash of Ideas; Larry McMillan and Kennedy Both Seem to Have Gained Some Insight

After the coordination meeting, Gage specifically sought out Larry to express his "admiration for Mr. Livingston tonight."

Larry declined.

Mr. Gage is too shrewd! Larry always had a feeling that this guy was after much more than just the seemingly "win-win" outcome of "liquidating the syndicate." Just like when Larry learned about his "temporary transaction certificate" plan, he naturally sensed that Gage's purpose was far more than that.

Therefore, Larry is rejecting all of Gage's offers. He needs to go back and do his homework—at least find out what Gage wants—before he can adapt to the situation.

As a "well-known" trader, Larry must "review" his performance in order to move forward.

That evening, Larry sent a long telegram to Mr. Porter, reporting in detail what had happened and the strange actions of banker Gage, and requesting Mr. Porter's guidance. The telegram was so long that Larry paid a full $12.5 in telegram fees.

After he finished, he returned to the Palmerhouse Hotel, a luxury hotel Larry had stayed at when he came to Chicago. However, he had moved out of the hotel earlier because he was worried that Taylor in St. Louis would do something desperate, and had been hiding in a small cubicle at Cargill.

Now, the risk has been averted, because according to the newspapers, Mr. Taylor was arrested while crossing the Illinois border, and several of his key henchmen have also been captured.

Illinois has accused them of plotting to attack workers, based on allegations made by the vice president and vice-presidential candidate of the People's Party.

The government intends to round up Taylor and his cronies.

The editorial concluded by stating that Taylor and his entourage would be taken back to Chicago for trial, and the police department would thoroughly investigate the worker assault case.

The mastermind behind it all.

After seeing the newspaper, Larry immediately decided to move back to the luxury hotel.

Matthew was puzzled—why didn't Larry move back to the hotel before, but after learning that Taylor had been arrested, he was in a hurry to move back to the previous hotel?

Larry laughed and said, "Because this is over! I'm not saying Mr. Taylor's capture makes us safer—I'm saying it's completely over! No one will be investigating this anymore. Our involvement will be erased, and we won't need to hide anymore!"

Matthew couldn't fully understand Larry's meaning. After all, the police department had vowed to investigate thoroughly, so how could it be completely over?

But the two of them still moved back to the hotel.

Meanwhile, Mr. Dunbar and others have gradually returned to Chicago.

Early Sunday morning, Cargill's McMillan visited Larry, and Larry took the opportunity to inform him of the results of the negotiation.

When he learned that the wheat would be guaranteed by the syndicate, McMillan clapped his hands and laughed, "Great! Thank God, this is what my father-in-law and I were most worried about. Now that the bank is guaranteeing it, we can manage."

Larry nodded and smiled. "Yes—on Monday or Tuesday, I will go to the old Cargill company to take stock of the initial 500 million bushels of wheat transactions. At that time, all of Cargill's books can be completely cleared up."

"That's great!" McMillan then asked, "By the way, where's Mr. Eastman?"

"He has returned to Rochester and begun preliminary work such as purchasing land."

"So, you've already officially started the preliminary preparations for this project?"

"Yes, the wheat is currently held as collateral and cannot be transferred. But that's alright, once the electric mill is completed in two months, the wheat will likely be released from collateral, and then we can start milling flour."

McMillan nodded in agreement. "Mr. Livingston, if I may be so bold, your wheels are rolling forward, and several projects are progressing in multiple directions. I'm almost struggling to keep up with your pace. Take, for example, your idea of ​​temporary credit notes. It's absolutely brilliant. We can use these notes for endorsement and transfer. Since the banks accept them, we can even use these notes to offset our liabilities—"

Endorsement and transfer? Offsetting liabilities?

Upon hearing McMillan's casual remark, Larry paused, thought for a couple of seconds, and nodded, saying, "That's right—these credit certificates are quite useful! The syndicate will have one more business line and many more clients this time!"

"That's not all!" McMillan said with a smile. "The syndicate is essentially securitizing the credit you've accumulated among the farmers." Syndicated loan transactions are just an additional business line, and while they can generate more profit, they're insignificant compared to the new notes created using your credit. We've encountered this before in acquisitions; if a bank acts as an intermediary to guarantee the payment, they can create notes out of thin air using the transaction between the buyer and seller, and these notes can then be used as collateral. That's called—"

"—Monetizing future profits in advance?!" Larry suddenly interrupted him.

McMillan paused, then nodded and said, "I think that's what you mean—I don't understand the deeper financial concepts. But banks always used to take our grain merchants' money out of the bank and put it into circulation ahead of time—I know that these kinds of businesses are really profitable for them."

So that's how it is!

Larry had always suspected that Gage had ulterior motives, but he didn't know much about banking and couldn't truly understand his intentions.

In particular, the fact that the other party kept "eagerly" contacting him clearly indicated that he wanted to "determine some things as soon as possible." Larry was unaware of his demands beforehand, but it was obvious that having a Republican donor and banker like Gage "eagerly" contacting him was definitely more in his best interest.

Now, after McMillan's words, Larry vaguely found his direction—it turns out his nearly $2000 million credit was actually quite valuable!

We need to think this through carefully; we absolutely cannot agree to his conditions so easily.

Just as the two were talking, there was a knock on the door. Matthew clicked the doorknob and said to Larry, "Senator Kennedy is here!"

"Oh? Senator is here? Now? Let me greet him personally—" Larry hurriedly stood up.

Before he could even say anything, Kennedy's hearty laughter rang out from behind Matthew, "Larry! My friend, long time no see!"

As they were speaking, Kennedy appeared behind Matthew.

Larry hurriedly stepped forward to welcome Kennedy, and the two exchanged a few pleasantries before sitting down.

"And who is this?" Kennedy asked McMillan.

"Senator, it's an honor to meet you. I'm McMillan, the general manager of Cargill." McMillan quickly stood up and introduced himself.

"Oh! You've really made a name for yourselves this time. Everyone in the Midwest knows about Cargill helping farmers through tough times." Kennedy smiled and glanced at Larry. This remark seemed to be a compliment to Cargill, but it was actually a dig at Larry.

"We're talking about how to pay the farmers for their wheat, haha, it's a very complicated job," Larry said with a laugh.

"Oh, tell me the details, I'd like to hear them too—" Kennedy smiled.

"Have a cigar—enjoy it while we chat!" Larry quickly took cigars from the humidor in the cupboard and handed them out.

While the cigars were being lit, McMillan gave a brief account of the wheat purchase. When Kennedy heard that Larry had predicted the short sellers' moves on Monday night, a look of astonishment crossed his face. He turned to Larry and said, "—My brother, you guys could predict they'd send the grain ships back to Chicago? That's incredible!"

"To be precise, I don't know!" Larry replied with a laugh. "But sir, faced with such an urgent situation, the short sellers won't just give up. They'll definitely do something—I'm just making a reasonable guess."

McMillan chuckled and chimed in, "Yes, just as Larry said, gatherings of people from the same industry, even for fun and entertainment, inevitably end in conspiracy against the public. That's the inevitability of their circle."

"You said that?!" Kennedy was even more surprised, turning to look at Larry. "Although I can't fully grasp the meaning of your words, I can tell that there's a deeper meaning behind them!"

Larry chuckled and shook his head. "It wasn't me, it was Adam Smith. In fact, the critic of the Guilds was *The Wealth of Nations*."

One of the core issues.

"Oh? Then tell me, I'm genuinely seeking your advice!" Kennedy stared at Larry.

At this point, Macmillan also became interested, as they had only discussed half of *The Wealth of Nations* last time, and he was also keen to learn more about it.

In the text, what exactly did Adam Smith mean by this statement?

"The essence of trade associations is complicity—" Larry thought for a few seconds and laid out his thoughts. "Although Adam Smith advocated free trade, he was not naive enough to think that free competition could solve all problems." Mr. Smith saw a problem clearly—human nature's desire for security and profit will always try to override abstract freedom.

The free trade he advocated meant that a farmer was free to choose who to sell his grain to, and an artisan was free to price his products. However, this "free competition" is very fragile; once the profits are attractive enough, they will band together to maximize collective profits.

McMillan pondered, "—This sounds a bit like the railroad company we deal with all the time?"

“Yes!” Larry nodded approvingly, continuing his analysis, “Initially, the various rail lines operated independently, competing with each other, and freight rates appeared to be the result of a free market.” But what happened next? Soon, those presidents and shareholders started meeting in clubs in New York. Ostensibly, they were discussing timetables and technical standards, but what was the final result? It was the division of spheres of influence and the establishment of common freight rates far exceeding costs.

The price of wheat from the Midwest to the East Coast no longer depended on distance or cost, but on the tacit agreement reached at that club dinner table. This is what Smith called "conspiracy," cloaked in the guise of "industry cooperation" and "market stability," but in reality, it's about exploiting producers and consumers.

Kennedy frowned slightly. "Isn't this the inevitable result of competition? Survival of the fittest, with the most efficient one or a few remaining in the end—it's natural selection."

"Senator, here's the problem—" Larry leaned forward slightly, "When the purpose of 'competition' is no longer to provide better service or lower prices, but to eliminate competition itself, it betrays Smith's vision of a free market that brings universal well-being. What remains is not the most efficient," but the ones best at building barriers, controlling channels, and influencing legislators."

Kennedy paused, lost in thought.

"Look at Standard Oil. It may have been very efficient at first, but was its empire built on lower costs than its competitors, or on secret discounts with railroads, manipulation of pipelines, and even influencing state legislation with political donations?" Larry continued his analysis.

"You mean—the winner who takes all will be a trust or a cartel?"

Larry nodded and said, "Mr. Smith warned of the dangers of guilds precisely because he foresaw the alienation of this kind of freedom. Completely unrestrained free competition, without strong rules to prevent collusion and stifling, often ends not in a flourishing of diverse talents, but in a winner-takes-all situation of utter silence."

Those who take all the spoils become new guilds, new trusts, new cartels. There may still be internal struggles, but those are merely games of distributing profits, not genuine competition open to the public. This kind of competition is nothing more than a performance for outsiders, to convince the public that the market is still free.

McMillan frowned and continued to think; while Kennedy frowned and spoke with the cautiousness typical of politicians.

"Wait, are you saying that spontaneous order is bad? But I believe that the market should be the unconscious result of countless individual actions, and this kind of order is superior to any artificially designed order. Protecting the competitive process is more important than worrying about whether the competitive outcome is 'fair'!"

Larry nodded, thought for a few seconds, and then smiled, saying, "Senator, Mr. McMillan, please allow me to make a hypothesis—a hypothesis about the future. Hypothesis..."

A century from now, there will be a miraculous drug, which we'll call the "cleaner." It can precisely kill pathogenic bacteria in the human body, eradicate infections that are now deadly, such as pneumonia and wound infections, allowing patients to fully recover and return to work.

However, it has one drawback: the treatment course is short, and once cured, the patient no longer needs it.

"At the same time, there's another medication, which we call a sedative." It doesn't cure the infection; it only masks the symptoms of fever and pain, making the patient feel better, but the bacteria are still raging in the body. Patients need to take it long-term, even for life.

Larry paused here to make sure the two of them followed this harsh hypothetical scenario.

"Now, suppose that a hundred years from now, the healthcare system is profoundly influenced by a vast health guild comprised of pharmaceutical companies, insurance companies, and a select group of doctors." This guild meets regularly to discuss industry standards and best treatment options.

Kennedy seemed to sense something was amiss, his brow furrowed. McMillan, on the other hand, was completely focused.

"So, gentlemen, according to Adam Smith's Law, where will the natural tendency of this guild conspiracy lead?" Larry asked himself, answering, "They will spare no effort to promote appeasement, while marginalizing or even suppressing the scavengers," and even demonizing the "scavengers."

The reason is simple: long-term, even lifelong, soothing medications bring stable and predictable huge profits; while "cleaners," which offer a one-time solution, are a one-off transaction.

"Could this really happen?" McMillan asked in surprise.

"If one day Cargill could control the food supply in the United States, and even the world, and even utilize reserves and information..."

"They make exorbitant profits from hoarding and speculation—would the company allow anyone to starve to death because they couldn't get cheap food?" Larry looked coldly at McMillan.

McMillan thought for a full 20 seconds before muttering, "—Probably not?"

Larry laughed. "You actually know the real answer, otherwise you wouldn't have thought about it for so long."

McMillan was speechless.

"Tell me again about that—'soothing agent' and 'cleaner' thing!" Kennedy urged.

Larry nodded, his face serious as he summarized, "This conspiracy between healthcare, insurance, and doctors doesn't need any explicit agreement. It can be accomplished by designing insurance reimbursement lists, funding academic research," to demonstrate that long-term symptom management is superior to radical eradication, and even by cultivating a medical culture that views prescribing sedatives as care and prescribing scavengers as overtreatment.

Ultimately, the entire system will reach an unbreakable consensus: it is far more beneficial to the industry to keep patients feeling "alright" and continuing to pay than to let them "fully recover" and leave. Public health is cleverly sacrificed in the face of the guild's profit curve.

Kennedy gasped. "This—this is an absolutely devilish scheme!"

"No! Your Excellency, this is simply the inevitable result of human nature and capitalism in the absence of truly balanced rules," Larry said with a smile.

He continued, "Or let's put it this way, Mr. Kennedy. For politicians, controlling this complex of interests can only be done in its initial stages, and that's most beneficial for the country because they'll be dependent on politicians. But once they grow powerful—politicians, and even the country, will become puppets in their hands."

Kennedy's eyes widened in shock. After a moment of thought, he slowly but firmly nodded, agreeing with Larry's idea.

But at this moment, McMillan, who had been convinced by Larry's theories, looked at Larry with suspicion—because not long ago, Larry had also explained his plan to monopolize sales from wheat to the food industry to retail outlets—according to Larry's vision and arrangements, he did not oppose this kind of "monopoly" at all; he even pursued the benefits and results that were far greater than a monopoly.

Could it be that Larry's subtext is—

McMillan thought for a few seconds, organized his thoughts and wording, and cautiously asked, "So, are all monopolies bad?"

Larry looked at McMillan and said casually, "Monopoly or dominance is not inherently sinful. The key is who, how, and for what purpose it is controlled. Bad monopoly is about conspiring to deprive the public of their right to choose; while good dominance may be about establishing a new order that is less susceptible to guild conspiracy through fair competition and undisputed efficiency and resources."

Long after this conversation, McMillan maintained that Larry's words were in line with Adam Smith's ideas.

The critique of American monopolies, relayed by Larry Livingston, persisted for over a decade until Livingston became America's richest man. Only then did McMillan realize that Larry's true meaning was, "Monopolies are bad, unless I monopolize them!"