The Value of Investing in Research

There was an old saying: ideals were full and rosy, but reality was all skin and bones.

Xu Yi had thought that his knowledge of industrialization in his original world would let him get ahead and secure resources early. If he bought ten or more Magic Crystal Mines, the price of Magic Crystals would inevitably soar, and those mines alone would leave him set for life.

But cruel reality soon struck.

The problem was... he had no money!

"Chairman, the guild has only 361 Gold Coins left in available funds. According to my investigation, even the cheapest Magic Crystal Mine in Bunta City would cost at least 3,000 Gold Coins," Sebas reported without expression, paying no heed to Xu Yi's grim face.

"At least 3,000 Gold Coins?" Xu Yi calculated with a frown. "So we can't even consider it for another month?"

"Chairman, it still wouldn't be possible." Sebas shook his head. "If all the guild's operations go smoothly, we could indeed bring in more than 5,000 Gold Coins in net income. But a responsible guild must keep enough funds in reserve. Otherwise, an unexpected problem could put us in serious trouble. And forgive my bluntness, Chairman, but you're investing in too many directions. Research alone takes up more than a third of the guild's income. That isn't a sound way to manage its finances."

"Oh?" Xu Yi glanced at Sebas and smiled. "Is that your opinion or Viscount Leslie's?"

Sebas had been recommended by Viscount Leslie.

As Leslie had put it, their agreement gave him no power to make decisions for the guild, but he did have the right to offer advice and be kept informed. So he had sent someone to serve as his representative.

Heinz had been deeply worried. He saw Sebas as Leslie's pawn inside the guild. Whatever Leslie said now, Heinz was sure he would eventually use Sebas to influence its decisions, perhaps even take control of it.

Xu Yi had reacted quite differently.

Since Viscount Leslie owned thirty percent of the Xinfei Merchant Guild, sending a representative was a perfectly reasonable request. Xu Yi had no grounds to refuse.

Besides, they still needed Leslie's help in many areas. Rejecting a reasonable request right at the start might undo the agreement they had just reached.

As for Heinz's fear that Leslie would use Sebas to control the Xinfei Merchant Guild, Xu Yi dismissed it.

Leslie was a viscount of the kingdom, a noble of legitimate standing. In a small city like Bunta City, only the city lord outranked him. Given the family behind him, his standing might not be much lower than the city lord's at all.

By comparison, the Xinfei Merchant Guild had made good money from Magic Fans, but it was hardly a powerful guild even within Bunta City. In other respects, it had even less to boast about.

If a noble as powerful as Viscount Leslie truly wanted to take the Xinfei Merchant Guild, he had a hundred simpler, more direct ways to swallow it whole. There was no need for such trouble.

So Xu Yi gladly accepted Sebas. When he learned that Sebas had previously served as the chief financial officer of another guild, he even put him in charge of all the Xinfei Merchant Guild's finances.

Sebas soon proved his worth. In just two days, he compiled and organized all the guild's financial records, bringing order to accounts that had been a mess when Xu Yi and Heinz handled them alone.

Heinz remained anxious about Sebas controlling the finances. Xu Yi, though, was privately delighted. Leslie had done him a great favor by sending over such a rare talent.

Of course, Xu Yi still had to keep Leslie in mind at times. That was why he had asked the question.

Sebas bowed. "That is my personal opinion, Chairman. It has nothing to do with the viscount."

Xu Yi nodded. "Fair enough. It doesn't matter whose opinion it is. Sebas, you think spending more than a third of our income on research is too much? I think it's too little. The guild's income isn't very high yet, so that 'more than a third' comes to only a little over a thousand Gold Coins. To me, that's a very small research budget. As our income grows, I'll invest even more in research—perhaps far more than you imagine."

Sebas considered this, then frowned. "Chairman, I don't understand why you would make that decision. Magic Fans are selling extremely well, and their prospects are excellent. You don't need to pour so much money into research. I agree that developing a new generation of Magic Fans is necessary to hold our market, but surely there's no need to rush? And another thing: much of the research you're funding... has nothing to do with Magic Fans, does it?"

Xu Yi smiled faintly. That last question is probably what Sebas really wants to ask. Leslie too, most likely.

It was not an easy question to answer. In truth, more than half his research investment had gone into work unrelated to Magic Fans.

For instance, he had put five hundred Gold Coins into Master Ranu's Dwarf tribe in a single month. When the Dwarf Craftsmen they had agreed upon arrived, Xu Yi spent another two hundred Gold Coins on them, with that expense set to rise.

On top of that, although Stille was currently the only proper researcher at the Magic Research Institute he had founded, he had already invested more than a hundred Gold Coins in it.

Together, those expenditures came close to a thousand Gold Coins, and on the surface they really had nothing to do with Magic Fans.

None of that research would produce results overnight, either. Even if Xu Yi explained how closely it related to building an industrial system in the future, probably no one on this continent would understand.

"Sebas, let me ask you something. Why do you think our Magic Fans sell so well?" Xu Yi asked after a moment's thought.

"They're aimed at the right customers," Sebas answered at once, clearly having studied the matter. "A Large Frost Array is expensive. A Magic Fan costs only two Gold Coins, making it far more accessible to families who need relief from the summer heat but can't afford such an array. It also costs very little to run—less than ten silver coins a month, an amount any family buying one can afford. So although a Magic Fan isn't as effective as a Large Frost Array, it meets those families' needs. As soon as it appeared, they bought it without hesitation. That's why it became such a success."

"Well said." Xu Yi nodded approvingly. "Now tell me: are Magic Fans difficult to make?"

"I wouldn't say so." Sebas shook his head. "Imitations appeared soon after the Magic Fan came out. They were lower quality than ours, though, so they didn't do much harm. And your response at the time was excellent, Chairman. It helped the guild get through that crisis."

As he spoke, a trace of admiration passed through Sebas's eyes.

The idea of a "brand" that Xu Yi had introduced in response to the imitations had genuinely impressed him.

Before Leslie sent him over, Sebas had studied the Xinfei Merchant Guild. To his surprise, Magic Fan sales had risen rather than fallen after the imitation scare. Many customers even began by asking whether a fan was a Xinfei product. If it wasn't, they simply wouldn't buy it. That had made the small workshops hoping to copy the fans abandon the idea entirely.

Some had wanted to stamp the Xinfei mark on their imitations, but Xu Yi had then introduced a system of exclusive retail: Xinfei Magic Fans were sold only at one shop in Bunta City. Any sold elsewhere were counterfeits.

That had all but wiped out the imitations. Xinfei Magic Fans now held a complete monopoly in and around Bunta City.

"If they aren't difficult to make, we can hardly stop other people from making them too."

Xu Yi's face showed a hint of helplessness. This world had no patent law. He had invented the Magic Fan, but had no legal protection. Anyone who wanted to copy it could do so with ease.

"We have things under control here in Bunta City, but outside it, no one knows the Xinfei name. We have no advantage elsewhere. You should already know that a factory making Magic Fans has appeared in Sartan City, just over a hundred kilometers away, and its fans are selling well there too."