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Wednesday, March 21, 2018

What My Childhood Lemonade Stand Taught Me about Economics and Government

A 9-year-old's crash course in business from supply costs to state incursion.

The most crucial lessons that one learns in life are often the most rapid and crushing. They are not long-winded anecdotes drawn out over time but quick blows to the gut which impart the immediate wisdom necessary to avoid that same strike in the future. I learned my most important lessons on marketing and business, capitalism, and state incursion in one brief morning on the Ocean City boardwalk in New Jersey.

In the summer of 1999, Pokémon cards were at their peak with every child in America demanding their parents purchase deck after deck, often only looking for a specific single card out of the bunch. My brother and I were no exception, using every penny of allowance each week, asking for advances, and trading furiously with our friends at school. While we were spending our vacation in Ocean City, our father finally put his foot down and told us that if we wanted to purchase something so frivolous, we would have to find the money on our own.

Learning the Basics

This began the first of two lessons. If we wanted to acquire something that was, to a child, a luxury good, we would have to earn extra money through labor. And if a nine- and eleven-year-old were to find a way to earn that extra income, we would have to be creative. At the height of summer only a few days before Independence Day, the answer became clear: a lemonade stand on the famous Ocean City boardwalk.

Now, our father is not an unreasonable man; he was willing to help us along the way to our million-dollar idea, but wanted us to learn while we were at it. This began the third lesson: supplies, labor, and marketing. This lesson would return at the end to distress my brother and I. We set out to the local market for supplies.

The key to a profitable lemonade stand is, like any other business, location.

For those who are unfamiliar with an East Coast shore market, they contain quite literally everything; if you can imagine it, it is most likely on a shelf somewhere in New Jersey. We collected Country Time lemonade, two pitchers, a large spoon, and two boxes of small Dixie cups, as well as a large yellow poster board, markers, and tape. Our father purchased all of it for us, breaking down the cost, pointing out which supplies were cheaper, but also having us compare brands from our personal experience. Satisfied, we returned home.

Given that Pokémon was the only thing on our minds and most of the children in America, we quickly learned one of the secrets of sales: win the children, win the money. We called ourselves “Pokémon Lemonade,” which was certainly an infringement, and made a large sign with our own attempt at the artwork. Our father prepared the lemonade, we agreed on a price of fifty cents per cup, and made our way to the boardwalk, with our supplies and table in a red Berlin Flyer wagon being pulled behind us.

The key to a profitable lemonade stand is, like any other business, location. Knowing that most patrons would enter the boardwalk at St. James Place and then walk down to Oves to rent bicycles, we set up shop just a few hundred feet down, just across from the lifeguard station. If we stayed through the early afternoon, we would attract customers who were just entering the boardwalk, as well as those leaving after walking the full two-and-a-half mile length and back. We also knew that some beachgoers may stop for a drink as they left for the day.

State Incursions

Our business ran smoothly for the first hour, attracting children, who were disappointed that we were not selling Pokémon cards, and parents, who were ecstatic for the same reason. The quarters piled up quickly, and Pokémon Lemonade was quickly becoming a hit. My brother and I were ready to buy our yachts and move down to the Lagoon. Thus, we came to the fourth lesson: state incursion.

As the morning went on, our father noticed a young police officer across the way from our stand, speaking with guests near the lifeguard stand and removing his helmet to wipe his brow. He tapped my brother, the older of the two of us, and handed him a cup of cold lemonade, instructing him to run over and offer it to the officer. My brother nodded and ran over quickly, handing the drink to the officer, who nodded and drank it in a single gulp.

He offered not to fine us or confiscate our wagon and supplies, so long as we left immediately.

From afar, the scene seemed quite odd, even to my nine-year-old self; the officer did not smile and seemed to be glaring menacingly at my father and me from behind his dark sunglasses. He said something quick to my brother, who ran back over as the officer followed slowly behind.

Speaking to my father, the officer asked if we had a permit to be selling lemonade on the boardwalk. Given that my brother and I did not have enough money to purchase Pokémon cards, it was safe to assume that we could not pay the requisite amount for a business permit for Ocean City, as well as the state of New Jersey. Our father argued briefly, and I give him credit for restraining himself; his argument was simple, stating that we were simply learning the value of a dollar as well as simple lessons in business and economics. He also mentioned that we just wanted to purchase Pokémon cards and that most, if not all, of our money earned would go back to the boardwalk.

The officer’s response, other than “it’s the law,” was that we were stealing business away from permitted and licensed businesses. The officer also made brief mention of a lack of inspection and proper liability insurance. He offered not to fine us or confiscate our wagon and supplies, so long as we left immediately. Sulking, we gathered everything together and complied.

Our fifth lesson was short and brutal. Having counted our money, we realized that we had made over ninety dollars in just over an hour. It was then that our father took the receipt for our supplies out of his wallet and then explained the cost of raw materials and labor, as he had pulled the wagon and prepared the supplies. He took his share and allowed my brother and me with just over thirty dollars apiece. Our pockets were empty by that afternoon.

The Hard Truth

A final lesson that was learned on that day, but one that did not occur to this author until he began this tale: bribes may be accepted, but laws may still be enforced. The lemonade offered to that officer was a bribe by my father. Whether it was to buy us more time or to get him to ignore us completely, I do not know. What I do know now is that when you make the attempt to circumvent the law within reasonable means, the agents involved may still enforce it, while still accepting the benefits of such efforts.

What licenses keep business owners and employees away?

At nine years old, I learned the true difficulties in starting a business with the hopes of earning a living in this country. While a lemonade stand seems to be both a comical and tired example, the extent to which this young officer went to enforce laws that were clearly designed to stifle competition against businesses that had long stood on the boardwalk, has made me ponder for some time what a true, brick-and-mortar business would face. What licenses keep business owners and employees away? What regulations, inspections, training, all with their own fees, keep true competitors out? Who is truly benefitting from such laws?

Browns Restaurant at St. Charles Place certainly need not fear two young children, nor is it reasonable to believe they do, and they certainly do not need the city’s police force to protect them from such anarchy. If consumer goods are to progress and an economy is to truly thrive, the standing barriers must be removed and common sense reform must take place.