If you’ve ever heard of the “20 negro law” then this post should be right up your alley. As the name suggests, it’s about exactly that: a 20% rule that was first created by slave traders in 1701 to calculate their profit margins.
The rule states that if traders sold twenty negroes for £1,000 apiece at a profit of £40 per person, they could invest an additional £600 on average to purchase more slaves and make even more money.
It was regarded as very sound business practice, which is really disturbing once you think about it.
The answer is discussed here for, why did the “twenty-negro law” enrage many white southerners during the civil war?
The concept of a “20 negro law” became incredibly popular over the years, being applied to many different industries. In 18th-century England, it was used to calculate how much money a person should pay for art.
In the 19th century, it was also used in calculating how much money a labor broker should charge to hire workers from ethnic minorities.
Here are some points discussed about The twenty negro law-
1. The 20% Rule
The 20% rule was originally developed in 1701 by slave traders in London to calculate their margins.
The profit margin was calculated by taking the average profit for all twenty merchandise items combined, and then dividing that number by the total amount of slaves sold. This became known as The Twenty Negro Law.
When applied to business it led to the development of “The 20%” Rule, which became popular after the 1950s.
It states that if traders sell 20 units (in other words units of labor) for £1,000 (in other words labor costs), they can invest an extra £600 on average to purchase more units of labor and make even more money.
The concept of “The 20%” Rule has been popular with many different groups of people over the years; those who make financial investments, those involved in scientific research, those who write books and those who sell financial products.
2. The Rule in Action
While there are no official records of the net income generated by the 20% rule it is thought to have been used by many different industries including slave trade, hiring labor brokers, selling art, publishing books and selling financial products.
The 20% rule has also been applied to other business activities including finding oil reserves, mining for gold and developing new medicines.
Below are some examples. The first example describes how it was applied to hiring workers from ethnic minorities: “If you wish to hire a laborer for a year then employ him for that length of time; if you wish to employ him for a shorter period then pay him in proportion. The 20% rule applies to business practice, not to the employee.
If you hire a laborer for a year and pay him £15 then you should earn just under £1,000 and be able to hire another laborer for £15. If you decide to hire him for less than a year then you will just have paid him £3 and earned less than £500, which is not good business practice at all.”
3. “The 15%” Rule
A modification of the 20% rule applied to selling financial products was developed in the 1980s. It is called “the Fifteen Percent Rule” and states that if traders sell 15 units for £1,000 each, they can invest an extra £150 on average to purchase more units of product and make even more money.
The Fifteen Percent Rule is still applied today by financial product sellers, insurance companies and real estate brokers to find out how much extra money they can make without risking paying back the initial investment.
4. Applying the Rule Today
Today it has been widely used by publishers to calculate the price of books- “If you wish to sell this book at £30, then offer it for sale at £32.” This is despite the fact that publishers can’t actually increase their prices beyond this point. It’s still considered good business practice by most publishers, who are usually unapologetic about it.
The 20% rule is a very troubling business practice that was developed for the sale of human beings.
It ended up being used by many different industries over the years, creating more profits while also exploiting their workers.
The 20% rule has been applied to hiring labor brokers, selling art, publishing books, selling financial products and developing new medicines.
As it stands today it is often used by publishers to set their prices for new books.