Twelve years ago, my uncle starts his first car wash company which has ten branches and worth 30 million RMB now. However, back to that time, he was just a ordinary worker at his mid-thirties. Without enough money to invest on this car wash company , he started selling his idea to all relatives, my father included. Although having many positive responses, my father was the only one who said ‘OK, I am in’. Not knowing too much about the business, he invested 10 thousand RMB and asked 30% of the total profit every year for return. The business was not quite good at the beginning because not many people could afford a car. Things started to change in two years. With the development of economy, the number of car owners started to propping up and all of a sudden, my uncle’s car wash company became a bank-note printer. In the next two years, the profit my father got exceeds the amount he invested. Then, just like other stories, problems occurred at the acme.
In 2009, on the second day of Chinese New Year, my uncle came to visit us and gave the 30% profit of last year to my father. For me, it seems a yearly routine between them but the sound of arguing I heard in the study room made it a little bit different. My uncle thought it was his effort that made the business successful and he wanted to buy my father’s shares back at current price. Knowing the growth rate of the business and believing it will worth a lot more in the future, we would support him if he decided not to give up the opportunity. After thinking it the whole holiday, my father finally sold his shares back to my uncle. He told my uncle that he always put his family at the first place and he believed the car wash company would be even more successful in days to come.
I think it is a good example of not acting opportunistically around me. My father actually consulted his lawyer about the ownership and indeed he could insist on keeping his shares. If he did so, he could have the 30% of the 30 million RMB today. However, instead, he gave up because he treated family as his priority in his life. For him, earning more money can not compensate the breakup of brotherhood. With the view of economics, it is easy to analyze my dad’s decision. Based on his joint utility function which consist of family and money, the marginal utility function of money shows low marginal utility while that of family has a steep upward slope. And this slope is decided by the education he took as well as his personal experience. However, the slope is not that stable and is somehow related to some psychology variables. This may explains why he needs thinking about this decision for the whole holiday time. On the other hand, the reason why the marginal utility of money is comparatively small is because he has his own company as well. Without taking advantage of that opportunity, he also did not need to worry about money. But it really depends as well, many people do enjoy keeping adding zeros before the dollar sign.
In addition, the expectation also plays an important role when he struggled. My father treated it as kindness and support from family rather than the serious investment. So at the beginning, the expected value of the business is quite low or approximately equal to zero and what happened next is more like lottery winnings for him. Low expectation; not desperate for money and values on family explain why my father did not act opportunistically when he got the chance. I can not judge his decision, but as his son, I am proud to have a father who always put his family at first.