How It Works: “Nick,” a top crystal-meth dealer for a decade before getting arrested in 2004, explains the system. Every other month, he’d purchase a pound of meth ($32,000 to $36,000) from producers in the Midwest or the Filipino mob in California, and have it shipped via regular mail or FedEx inside teddy bears, candles, or coffee. In the next 36 hours, he’d sell it in bulk to three or four associates, pocketing a 500 percent profit. The associates in turn would sell to dozens of small-time dealers who’d take to the streets, clubs, and doorsteps of addicts. “If you stay small, there’s not room for profit,” says Nick. “But at the top, I would buy a quarter gram for $5 and sell it for $50. It’s around $65 today.” There are 1,792 quarter-grams in a pound of powder (that’s $89,600 for Nick).
Nick ascended to the top organically. He began dealing just enough to cover his own addiction. “You outgrow the little guys you buy from,” says Nick. “You want more than they have. So you go to their supplier. Then their supplier.”
Annual Revenue: $1.02 million ($813,600 is profit) with fifteen-hour workweeks and no taxes.
Annual Overhead Costs: Six pounds crystal meth: $192,000 to $216,000; Cell phone: $2,400.
Best Way to Make Money: Sell to many users in small quantities. “It’s like taking a pound of coffee and selling one grain at a time,” says Nick. “If you sell by scoops, you’ll make a couple thousand dollars, but if you break it down into quarter grams and work for a few days, you’ll make tens of thousands.” Most top dealers don’t actually do this, and lazily sell in bulk, as Nick did.
Most-Profitable Customers: Wealthy professionals who are hard-core addicts. They’re discreet and always pay.
Least-Profitable Customers: Friends. “Nightmare customers are your closest friends. They don’t have a problem calling at 6 a.m., and they expect low prices.”
Profit Catastrophes: Prison. “One day you open your door and there are five cops, and they take you to prison for two and a half years, where you spend all your money on lawyers and make 10 cents an hour in the prison shop, like I did. It’s almost inevitable, which is the downside of the business.” Dealers avoid police by using only a small, trusted group of associates, which eliminates selling to undercover cops. Nick went to jail when an associate ratted on him.
New Yorkonomics: With data on petty drug dealers, the economist Steven Levitt has taught us that there is an abundant supply of people willing to work in the drug industry at near the minimum wage, so why does this guy make so much? His high earnings flow from a type of social capital that is in short supply on the streets of Harlem: This dealer has the connections to cater to a well-heeled clientele that is willing to pay extra for a discreet and reliable dealer. Of course, since someone with his social skills could also earn a living without breaking the law, his high earnings from meth dealing also provide compensation for the risks of going to jail.