Chapter Eight: The Rise and Fall of Rice and Millet
In the autumn of the nineteenth year of the Zhenguan era, Chang'an should have been bathed in clear skies and crisp air, but this year it was unusually hot and humid, like a giant steamer. The water level of the Wei River continued to drop, and the fertile land of the Guanzhong Plain cracked open with thirsty fissures.
Liu Bao'er sat beside the deep well in the backyard of the Dou family. The cool air seeping from the well walls couldn't dispel the heat in her heart. In her hand was a scroll she had compiled from memory and drawn with charcoal, titled "A Brief Record of Rainfall and Disasters in the Guanzhong Region over the Past Thirty Years." On the chart, a curve representing the frequency of drought showed a steep upward trend. The data sources were diverse—there were news heard from caravans in various places by Hu Liu and others, scattered records of river water levels from old archives leaked from the Imperial Workshop, and even occasional leaks from the Imperial Astronomical Bureau about vague connections between celestial phenomena and climate.
"Data doesn't lie; it's more reliable than human words," she thought to herself. Through cross-referencing and simple probability calculations, she constructed a rudimentary "disaster early warning model." The conclusion pointed to a possibility that chilled her to the bone: a severe drought was highly likely to be followed by a locust plague.
Her gaze fell upon the rice shops in the east and west markets of Chang'an. Capital must flow towards a future with certainty.
At this time, the new grain had not yet entered the market, and the inventory of old rice was plentiful. Rice prices were stable, and even slightly lower due to anticipation of the new grain. All rice merchants were hoping for a bumper harvest so they could quickly sell off their stockpiled old rice and recoup their investment. Market sentiment was optimistic, even languid, immersed in the expectation of a "bumper harvest."
“Cognitive bias is the biggest arbitrage opportunity.” A predatory glint flashed in Liu Bao’er’s eyes. She alone was sober while everyone else was drunk.
She began her clandestine and swift operation. Through Hu Liu's network of "brothers" scattered throughout the city, she quietly and discreetly absorbed the stale rice on the market. She specifically targeted well-stored millet from the previous year that was considered a burden by rice merchants because it was "outdated." The price was carefully driven down to an extremely low level.
The funds came from the hidden profits she received from the salt monopoly, profits that had never been deposited into the Dou family's public accounts. This was her independent "seed fund," a crucial step in her journey from being a "child bride" to achieving financial freedom.
However, news of such a large-scale acquisition could not be kept secret forever. Soon, Dou Dehai, the clan uncle in charge of general affairs within the Dou family who had always looked down on Liu Bao'er, this "outsider," stormed up to the old grandmother.
"Mother! You can't tolerate that girl anymore!" Dou Dehai's voice boomed, filled with undisguised anger. "She dares to hoard old rice outside! The new grain is about to be stored away, and her perverse actions are making our Dou family a laughingstock in both the East and West markets! Others will only laugh at us for being out of our minds, not even understanding the basics of farming!"
The old grandmother, without even lifting her eyelids, simply said, "The money she spent wasn't from the Dou family."
"But it's the Dou family that's losing face!" Dou Dehai was even angrier. "She's an outsider... her background is unclear, how can she act so recklessly! If we gamble wrong, all this old rice will rot in the warehouse, and losing everything is the least of our worries. Our Dou family's reputation of decades will be damaged!"
Just then, Liu Bao'er was summoned in. She walked steadily and bowed to her grandmother at the head of the table and to the furious Dou Dehai. Her posture was respectful, but her eyes showed no fear.
"Bao'er, do you have an explanation for what your uncle said?" The old grandmother's voice was unreadable, as if she were simply stating a fact.
Liu Bao'er raised her head, her gaze calmly meeting Dou Dehai's questioning eyes. She knew that this was the first time she had demonstrated a macro-level judgment and risk-taking ability that went beyond "accounting skills" in front of the core figures of the Dou family.
“Grandmother, Uncle,” she said clearly, neither humble nor arrogant, “I’m not buying rice now, I’m buying rice forty days from now.”
She spread the mulberry paper covered with curves and symbols on the table, and pointed precisely at the peak area representing the probability of a locust plague.
"Based on sporadic records from the past thirty years, cross-validation shows that there is a greater than 70% probability of a locust plague following a severe drought. Once a plague breaks out, there will be no new grain supply, a shortage of food, and widespread panic... Grandmother, Uncle, what do you think the price of rice will be like then?"
Dou Dehai sneered from the side, pointing at the drawing: "With just these few scribbles? What if there's no locust plague? All this old rice will rot in the warehouse, and you'll lose everything! What will you use to fill this hole then! Do you expect the Dou family to cover for you?"
“If heaven does not send down disasters and the weather is favorable,” Liu Bao’er said indifferently, throwing out the only way out she had already thought of, “then let it be a way to accumulate blessings for my deceased husband, and give it away at half price or even three times the price to the poor and starving people in the city.” A hint of “piety” appeared on her face at the right time.
What she was calculating in her mind was this: a cold, probabilistic model automatically generated: a 71.3% probability of a locust plague. A steep expected return curve, with a maximum loss of -12.5% in the failure scenario. An extremely high risk-reward ratio, recommended for execution. She translated this model into the language of this era to convince herself.
The old grandmother stared silently at the diagram, which, though containing fragmented information, pointed to a clear conclusion. For the first time, her cloudy yet shrewd eyes revealed a profound scrutiny of Liu Bao'er that went beyond simply being an "accounting tool." This young woman wasn't looking at the gains and losses of a single city or battle, but at the national economy and people's livelihood amidst the ever-changing political landscape. This insight and courage astonished her.
“Dehai,” the old grandmother finally spoke, her voice low but decisive, “let her be.”
Things progressed faster and more rapidly than Liu Bao'er had anticipated.
In less than a month, urgent reports came from various prefectures and counties in Guanzhong: locust nymphs were starting to appear and had become an overwhelming force!
Panic, like a plague, swept through Chang'an even before locusts. Rice prices jumped, rising three times a day, with demand exceeding supply. The rice merchants who had previously secretly mocked Liu Bao'er were dumbfounded, then plunged into even greater panic and regret—their anticipated new grain reserves had vanished, and most of the old rice circulating in the market, meant for emergencies, had mysteriously ended up in the hands of the "Dou family" (they naturally attributed the credit or blame to the Dou family).
Within the Dou family, the tide had turned. When Dou Dehai saw Liu Bao'er again, his face was filled with an awkward yet eager smile, as if the previous reprimand had never happened.
However, Liu Bao'er did not rush to sell off her stock for huge profits. She made a second decision that surprised everyone: to open warehouses and sell off stock under the name of Dou's store to stabilize market prices!
However, within this stable rice market, she added a small but far-reaching "innovation." She had Hu Liu's men spread the word throughout the city: "Dou Family Rice Shop is selling rice to stabilize the people! Anyone who buys one shi (a unit of dry measure) of rice will receive a 'price stabilization coupon.' If the price of rice in Chang'an falls below this purchase price within a month, you can use this coupon to claim compensation for the price difference at the shop!"
"What are you doing?" Dou Dehai found her, anxious and puzzled. "This is the perfect time to take profits! These 'price stabilization bonds' are just needlessly increasing the risk and tying our own hands!"
Standing in front of the Dou family's makeshift granary, Liu Bao'er looked at the orderly line of commoners outside, their faces filled with worry yet slightly relieved by a glimmer of hope, and slowly said:
“Uncle, we earn money in two ways. One is rice. If we were to raise prices and sell at a loss now, the profits would be substantial, but it would also cause public resentment and even legal trouble. It would be like ‘blood on the blade,’ so it’s best not to drink it. I’m selling it at a fair price through the pawn shop now, and the profits are already substantial. I’ve also gained a reputation for ‘benevolence and righteousness.’”
“The other kind is heart money.” She pointed to the people who received the “price stabilization coupons” and carefully put them away. “What they are buying is not just rice, but also a sense of security that they are not afraid of losing out, and a trust in Dou Family Shop. The cost of this piece of paper is almost zero, but it locks in their future loyalty and can even be passed on by word of mouth, building the reputation of my Dou family. This is the long-term plan, an intangible asset.”
She paused, then uttered a sentence that Dou Dehai seemed to understand but which made the old grandmother behind the scenes, who overheard it, gleam with a sharp light in her eyes:
"The essence of wealth is the solidification of trust. Destroying trust is easy, building trust is difficult. What I do is the business of building trust."
This "rice and millet saga" ultimately ended in a resounding victory for Liu Bao'er. She not only amassed enormous profits, but also made the names "Dou Family Shop" and "Dou Liu Shi" known throughout Chang'an for the first time as complex figures embodying both "benevolence" and "wisdom." Furthermore, her casually designed "price stabilization coupon" became the primitive prototype for later financial products such as insurance and options, imitated and studied by numerous merchants.
After this incident, no one in the Dou family dared to openly underestimate this reclusive young lady. The old grandmother's "investment" in her yielded an extraordinary return, and Liu Bao'er also took this opportunity to formally extend her influence from the secluded inner quarters to the core of the Dou family's counter business.
She returned to her small house and looked out the window at the myriad lights of Chang'an.
“See? I can influence more than just salt permits and rice prices,” she murmured to herself, her eyes firm and bright. “People’s hearts can be quantified and managed.”
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