"I am a decent man who exports flowers.", said Escobar when Ms. Mora (Columbian Journalist) asked what he did for a living. Pablo Escobar, one of the most notorious drug lords in history, built an empire that not only redefined the global cocaine trade but also showcased a darkly fascinating story of business and economics. Here's a compelling narrative of how Escobar's drug empire worked.
In the 1970s, Colombia was already a hub for marijuana production, but Pablo Escobar saw an untapped opportunity in a different illicit substance: cocaine. Understanding the potential profitability of this drug, Escobar began smuggling small quantities into the United States, where demand was rapidly growing. His business acumen and raw ruthlessness quickly set him apart, and he formed the Medellín Cartel, which would soon dominate the global cocaine market.
Cartel-o-nomics is what I choose to call it.
Escobar's empire was built on the principles of vertical integration—owning and controlling every aspect of the cocaine supply chain. From the coca fields in Colombia to the laboratories where the leaves were processed into cocaine which in the beginning were located deep in the Amazon rain forest, a place where no one would have thought to look, and an area so big that even if they wanted to, no one could look. Finally, to the distribution networks in the United States and Europe, Escobar ensured that every link in the chain was under his control.
By owning the entire process, he maximized profits and minimized risk. Farmers in the Andean mountains cultivated the coca plants, which were then processed in jungle labs. The finished product was transported using a network of pilots, boat captains, and even submarines at one point, all of whom were loyal to Escobar through a combination of fear and financial reward, and a financial reward, only in the scale of millions, per pilot that is.
“Escobar was the syndicate’s charismatic CEO, his cousin Gustavo Gaviria Rivero was its chief operating officer and the brains of the cartel,” Peña says. Gaviria Rivero developed and controlled the cartel’s key smuggling routes—what would be called logistics in the legitimate world of moving goods around the world.” - NY Times
One of Escobar's most effective business strategies was his use of bribery and corruption, summarized in his infamous phrase "plata o plomo" (silver or lead). Officials, police officers, and politicians were offered a choice: accept a bribe (plata) or face the threat of violence (plomo), and the refusal of any offer made by Pablo was as good as a death sentence.
This allowed him to operate with near impunity, as he could buy the loyalty of those in power or eliminate those who stood in his way, with the help of his “sicarios” - the Columbian term for the local hitmen used by Escobar.
This extensive network of corruption extended to law enforcement, the judiciary, and even the media, ensuring that Escobar could continue his operations with minimal interference. He has essentially shown us the true power of what money could do in a 1980s Columbia. In fact, the network of corruption ran so deep that Pablo actually tried to be a part of the Columbian House of Congress. His career as a politician was indeed an interesting one too, he often gave back to his community in Medellin by building several houses for the poor, as well as, I kid you not, distributing money, and for this, the media dubbed him as “The Robin Hood” of Columbia
From a Business perspective, overlooking the moral wrongdoings and illegal nature of Escobar’s business, let's take a look at what he did right.
High Risk, High Reward
Initially, Escobar’s foray into the contraband world involved the smuggling of cigarettes and liquor. Although the profit margins were quite good, it certainly did not justify the risks involved. Armed with this realization, Escobar made his entry into the narcotics business where his return on investment was close to 20,000%. The money he made with one truck of cocaine was still more than what he could possibly make by selling 40 truckloads of alcohol and cigarettes.
Keeping Your Enemies Closer
Pablo Escobar united his competitors with a promise to ensure the prosperity of the Colombian drug cartels as a collective whole. He also leveraged their common hatred for the Colombian government to bring his competitors closer.
He even negotiated a deal with the Cali Cartel, his closest rival as per which they could use his trade routes in exchange for a share of their profits. In addition, he also imposed a tax on the Cali cartel for his role in changing the Government’s stand on extradition.
Identifying a New Market
Escobar was quick to latch on to the fact that in his possession was a quality product that was second to none. He sold a gram of cocaine for 10$ in Columbia, but he knew that what he had was worth so much more.
He took his product across the sea, to the United States where he started selling them for $500 a gram in the beaches of Miami. His plan was set into motion as he slowly sunk his teeth into the American market that was waiting to be tapped. This marked the beginning of the Columbian domination of the American drug world.
Execution, execution, execution…
Escobar knew he was destined for greatness. His insatiable thirst for power and money saw him rise from the ghettos of Bogota to becoming the mastermind behind the world’s greatest drug empire, amassing a fortune in the process. Never did he mind the fact that the DEA and the Colombian army were out there to get him. Never did he mind his rivals who were ready to pull the trigger if an opportunity presented itself. Never did he mind the fact that death was lurking around every corner. He had set a plan in motion and he firmly believed that nobody was going to stop him from getting there.
Dare you replicate the work of Escobar, but nevertheless, Escobar's business genius and entrepreneurial spirit is undoubtedly one that shows how a dream can turn into a reality and one can make boatloads of money while doing it.
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