Chapter 24: Accepting the Challenge

He Zhongan had already investigated the background of the North Gate Coal Yard, which was operated by a son-in-law of the late Emperor Xuanzong, surnamed Wang. Although the princess had long since passed away, and while this imperial son-in-law was still technically related to the royal family, he remained far removed from the true center of power.

"He didn't say. Master He, it isn't easy for managers like us to get an audience with the son-in-law."

"Do you know who is behind Fengyu Firm?"

"I'm not sure, but everyone says they have powerful backing. I would appreciate your guidance, Third Master He," the coal yard manager replied.

He Zhongan said leisurely, "I don't know either, which is precisely the problem. How can you take hearsay at face value?"

"When you serve others, you must understand one thing: whose orders you are truly following."

"To those in high positions, face is more important than the heavens."

"No matter how powerful the people behind Fengyu Firm may be, they are not as important to you as the imperial son-in-law."

"If you bow to Fengyu Firm the moment they speak, where does that leave the son-in-law?"

"Isn't it because I'm afraid of offending people on his behalf?" the manager asked hurriedly.

"How do you know you would be offending them for the son-in-law? Suppose the person behind Fengyu Firm holds an old grudge against him. If you, as the son-in-law's man, immediately kneel the moment they speak, how would the son-in-law feel?"

"Furthermore, to put it in extreme terms, what if the person behind Fengyu Firm is just a minor lackey? Your master's face would be trampled into the mud. What would you do then?"

He Zhongan’s voice was not loud, but to the manager, it sounded like a thunderclap. Beads of sweat immediately broke out on his forehead.

"Even if the person behind Fengyu Firm is someone the son-in-law cannot afford to offend, he still deserves a measure of respect. But favors are mutual. If the son-in-law gives him face, he must also give the son-in-law some in return. By acting this way, you win bargaining chips for your master."

The manager was overjoyed, though he soon hesitated. "If I stubbornly refuse to comply and they convince the son-in-law, won't I be..."

"First, you must report today's situation to the son-in-law and explain your reasoning."

"No matter how arrogant someone is, they will not bypass the son-in-law to deal with you."

"As long as he knows you are a loyal servant, even if you suffer a temporary setback, he will remember your loyalty in the future. This is the safest strategy."

"Besides, coal balls are now sold all over the city. Can your coal even be sold otherwise?"

"Your duty is to make money for the son-in-law. If you sacrifice the substance for the sake of face, would he truly be pleased?"

This was the very reason for the manager's hesitation. The emergence of coal-ball stoves had turned coal from a finished product supplied directly to the public into a raw material. This shift had made He Zhongan the largest client of the North Gate Coal Yard. Fengyu Firm had its own coal supplies, and if the North Gate coal were cut off from the He family, it would likely become unsellable. The manager had only been worried about the political pressure.

Once enlightened by He Zhongan, he immediately made his decision. "Third Master is wise. I know what to do. I will report this to the son-in-law at once. As long as he does not command otherwise, the coal yard will stand with you."

After seeing the manager off, He Zhongan thought to himself, "With this, the coal supply is secure."

Although the son-in-law was on the periphery of power, he was still an imperial relative. To make him concede, the master of Fengyu Firm would have to step forward personally, which would elevate the conflict to a different level. Furthermore, He Zhongan was curious. In the capital, the backers of many businesses were an open secret. To those at a certain level, it took only a little inquiry to uncover the truth. Yet, some businesses remained deeply shrouded in mystery, their backers impossible to identify. Fengyu Firm was one of them.

This was intriguing. Why was the power behind Fengyu Firm afraid to reveal its identity? He Zhongan did not know the secret, but he knew that whatever an enemy tries to hide is usually where their vulnerability lies. To know oneself and one's enemy is the only way to prescribe the right remedy.

He Zhongan also made a series of preparations, such as finding alternative suppliers and opening new markets. Previously, his coal balls were sold only in Beijing, which was an excellent, high-quality market. But as competition in the city intensified, he began to expand into the nearby counties. At the same time, he made a major strategic decision: a price cut. Eight coal balls for one copper coin.

In this price war, both Fengyu Firm and He Zhongan had their strengths. Fengyu Firm’s advantage lay in its control of raw materials and its deep pockets as a large firm; it could afford to lose money. As the largest client of the North Gate Coal Yard, He Zhongan had tied up almost all the coal dust, but the yard still needed to make a profit. Consequently, his costs were inevitably higher than theirs. Furthermore, He Zhongan’s capital chain was tight; he had little surplus and could not afford to lose money.

However, He Zhongan possessed an advantage that Fengyu Firm could never match: the cost-efficiency brought by mechanical production. His production efficiency was ten times that of Fengyu Firm, if not more. The savings gained from this allowed his cost to drop to twelve coal balls per copper coin, and as production volume increased, the unit cost would continue to fall.

This was the moat He Zhongan had brought from the future, an obstacle Fengyu Firm could not shake. Once the price war began, within a few days, the price had already dropped to ten coal balls for one copper coin. This was the critical moment. At this price, Fengyu Firm was no longer making money. Internally, voices began to suggest that since everyone was in business to make money, the city was surely large enough for two or more factories; why fight to the death?

But Hu Tu was already trapped on the back of a tiger. He silently calculated the numbers. With the He family’s first-mover advantage, they held the majority of the market. Even if the market share remained stagnant, Fengyu Firm would be losing money on coal rather than profiting. Only by capturing the He family’s share could they make a killing.

Hu Tu finally made his decision. "We aren't making money at this price, and neither are they. But Fengyu Firm is a massive establishment that can afford to bleed; how much capital does the He family really have?"

"So, I have decided: eleven coal balls for one copper coin."

"If he doesn't follow, I have the victory in my grasp. If he does, the advantage is still with me."

At this price, Fengyu Firm lost money on every coal ball sold. Hu Tu believed the He family was losing just as much, and they lacked Fengyu's deep financial reserves.

However, Hu Tu waited and waited. The first day, they lost three hundred taels. The second day, five hundred. The third day, a thousand. Even with the firm's vast resources, they could not withstand such slow bleeding. Hu Tu frantically inquired everywhere to see if anyone was helping the He family, but he found nothing. He only saw that the He family continued their relentless supply.

He could no longer bear it. He thought to himself, "The end of the year is approaching. My master will summon me. If I cannot provide a satisfactory answer..."

At that thought, a chill ran through Hu Tu's heart.