Dear Commissioner,
James Carter writes in National Review that America’s economy is pulling away from Europe’s because we preserved the freedom to fail. He says the employment protections that make firing expensive in Berlin and Paris are why their GDP per capita has fallen to 50% of ours. He says we embraced creative destruction and they didn’t. He says prosperity requires continual disruption. He is half-right, and I am going to show you which half. The Lord has kept the accounts in order.
Nila is the front register at our Memphis DollarCast — 11 years on the same tile, fifty-four. She takes the 14 bus across town to open the floor at 6:30 in the morning and walk it again at close. She sends half her check to her mother, who lives two blocks from the back lot. She’s never been late. She’s never called out. She stocks the $1.29 candles you bought last summer for the hurricane window. The candles came through the back of my Murfreesboro distribution center. The candles are, right now, on the corner of this desk in a bucket labeled #B-117. I have not lit it.
Her lease came up in March. The renewal asked $1.40 a square foot above the expiring rate. We did not renew. We closed the store on April 30. Nila is the kind of human being the front register used to be. I’d like to do that. I want to be honest with you about how honest I can be. I haven’t arrived there yet.
Read the figure again.
$548,800. 11 months of Nila, ended and monetized.
The $1.40 is not a number. It is a freedom. Multiply it.
The 28 stores’ worth of inventory wasn’t waste. We rerouted it. The consolidated DC outside Texarkana now serves a 412-store network. Twenty-eight stores leaner. Significantly better lit. Tell me you didn’t feel the candle’s flicker when it came through the new shelving.
To my partners, separately: this is what creative destruction looks like when you stop photographing the productivity charts and start pricing the funeral.
The math, in one place:
| FY24 Lease & Wage Compression, Memphis-Tier Discount Operations |
|---|
| Lease line: $1.40 × 14,000 sq ft × 28 leases = $548,800 |
| Wage line: $0.40 × 2,080 hrs × 240 heads = $199,680 |
| Total kept: $748,480 |
We didn’t fire anyone, Commissioner. We allowed the rent to fail. Same arithmetic. The Lord blesses the entrance and the exit.
Now hold that shape and walk it across town to the loading dock, because the principle travels in a different costume.
Cyril is a leased body on my roster outside Allentown. He is 44. He stands on a loading dock in a warehouse district I own through a Delaware LLC, and he moves the boxes that carry the things you order on your phone tonight and want on your porch by Thursday. The package on your stoop — the one you’ll bring inside without thinking about the man who loaded it — passed through Cyril’s hands last night at 1.7 seconds per box. The shoulder brace costs $35. I haven’t bought it.
You cannot fire Cyril. You can return him.
The client firm — the e-commerce operator whose logo is on the box — does not employ Cyril. I do. When the client firm’s volume falls, the client firm does not lay off Cyril. The client firm calls my office and asks that we recall the leased unit. The recall is instantaneous. The recall costs the client firm nothing — no severance, no unemployment-insurance triggering event, no notice, no WARN Act filing, no consultation with a works council. Cyril is simply returned to my roster, where he sits for a day or a week or a month, and where, when a new client calls, he is leased again, to a different floor, at a different wage, under a different supervisor who does not know his name.
Cyril’s unemployment-insurance eligibility is a matter I have arranged to be none of my affair. He is leased to the client. The client does not employ him. I do not employ him. The leased-body classification — the Collaborative Service Agreement Cyril signed at the hiring window, the one with the arbitration clause on page four and the class-action waiver on page five — places his employment in a third jurisdiction the law has not yet learned to read. He works. He is not on a payroll. He is on a 1099 when I need a 1099 and on nothing when I need nothing.
Read the next sentence twice.
$2.10 an hour. That is the employer’s share of FICA — 7.65% on the wage I pay Cyril. That is the first $2.10. Before the FUTA. Before the SUTA. Before the workers’ compensation premium. Before the health-insurance contribution. Before the paid sick leave. The full differential between what Cyril would cost me as a direct employee and what he costs me as a leased body is higher than $2.10. I keep all of it.
| Leased bodies on roster | 480 | | Average weekly hours | 34 | | Weeks per year | 52 | | Annual FICA differential kept | $1,782,144 |
The entire benefit obligation of an American middle-class workforce, laundered through a legal entity in Delaware and parked in a fund I administer in Bermuda.
Same law, two surfaces. The $1.40 a square foot ended Nila’s lease. The $2.10 an hour keeps Cyril off the payroll. Both numbers are freedoms. Both numbers are mine.
Cyril’s left shoulder has been torn since October. The rotator cuff gives when he lifts over 40 pounds. He does not stop lifting. The stop would end the lease. The lease is the income. The income is the insurance. There is no insurance. He lifts.
Elaine works the conveyor at the consolidated DC outside Texarkana. She handles the same boxes I used to route through Memphis, at $13.80 an hour. The $0.40 I declined to add to Nila’s check is on the spreadsheet as a saved wage line. The gap is the gap. The address changed. Elaine is Nila’s freedom with a barcode on it.
Elaine’s station scans her pick rate. It scans her idle time. It scans every pause she takes to sneeze. Nila’s freedom had a face; Elaine’s freedom has a wristband. Last quarter 14 of the 240 DC workers were deactivated for falling below their individually calculated rate. Elaine misses the bathroom. She has not missed the bathroom yet.
I am the supply chain the statistics cannot see. I am the reason the divergence is widening. I am not a firm under 5 years old or a firm that has failed. I am the firm that makes the failing frictionless. I am the chassis on which the creative destruction runs. I am the leased body the productivity statistic cannot find, because the productivity statistic counts the hour the leased body worked and does not count the hour the leased body sat on my roster waiting for a phone to ring.
The freedom to fail is my margin. The freedom to fail means I can fire Cyril without cost. The freedom to fail means the client firm can shed Cyril without severance. The freedom to fail means when the demand for widgets falls, the widgets stop and the widget-worker stops with them, and the stopping costs neither the widget-maker nor the widget-seller a cent. The cost of the stopping lands on Cyril’s shoulder — the torn one — and on the Medicaid card he will need next spring when the shoulder gives out, and on the SNAP card he used last month, and on the Section 8 voucher he is on a three-year wait-list for.
The cost lands on the public ledger. The cost is not on mine. The cost is not on the client’s. The cost is on yours.
I graduated from this business. Let me tell you how.
30 years ago I sat in a classroom — second row, left side — and a man who looked like me, who spoke like me, who shared my contempt for the suggestion that a wage owed a man anything beyond the wage, taught me the arithmetic. He had a name for it. He called it “personalized compensation discovery.” He said the algorithm reveals each worker’s true market value by testing how much reduction he will endure. He said the leased-body classification is the freedom of contract. He said a uniform wage is crude. He said every man has an individual breaking price. He said the leasing arrangement is the legal expression of the truth that the worker is replaceable and his replacement is standing at the gate.
I have run the business for 30 years. I have graded 19 classes of students into it. The best of them run the subtraction faster than I do. A young woman in my 2019 cohort priced a leased body on a third-party logistics platform in 22 seconds. She reached the $2.10 differential in under a minute. She felt nothing. She was right. I was — I will use the word — proud. The model is not dying with me. The model graduates.
I am not unusual. I am a curriculum. The person who set the wage on the job you are afraid of losing took a version of my course. The person who wrote the leasing agreement your contractor signed cites my third chapter. You are not reading the diary of a monster. You are reading the syllabus. Your manager has a copy.
Lift your eyes off the one body for a moment. The general law is older than I am.
“Servants, be subject to your masters with all respect, not only to the good and gentle but also to the froward.” — 1 Peter 2:18.
The apostle anticipated the harsh master. He did not authorize a grievance procedure. He commanded submission. The leased body is not a new invention. The leased body is the old arrangement wearing a 1099 in place of a brand. The law the apostle wrote 2,000 years ago is the law the freedom-to-fail crowd is celebrating in 2026: masters may be froward; servants are still required to be subject. The freedom to fail is the master’s freedom. The cost of failing falls on the servant. The Scripture agrees.
And the older law still holds.
“Nay but, O man, who art thou that repliest against God? Shall the thing formed say to him that formed it, Why hast thou made me thus? Hath not the potter power over the clay, of the same lump to make one vessel unto honour, and another unto dishonour?” — Romans 9:20–21 (KJV)
The Lord did not abolish mastery. He regulated it. That is the difference between divine order and sentimental legislation. Europe has regulated it more than America, and that is the question Carter is asking. My question is the smaller, more useful one: how much regulation can I get from the potter before the potter complains about being answered? Commissioner — your GDP per capita is the answer I have been waiting for. It is the price your worker pays to keep mine leased.
Here is the part you haven’t been told, and I’m telling you because I’m proud of it.
The candle’s buyer and the candle’s cost will never appear in the same column of my spreadsheet. The diffuse gains — the $0.005 cheaper candle, the $0.04 cheaper cleaning wipe — accrue to customers I cannot name and do not intend to track. The concentrated losses accrued to Nila’s ZIP code on a Tuesday in April. I opened the binder. I saw the two streams. That is where my interest in their meeting ends.
Cyril’s torn shoulder will need surgery. The surgery will cost $48,000. He does not have $48,000. He does not have insurance. He is a leased body. The leased body does not have insurance. The $48,000 will land on the emergency room at St. Luke’s in Bethlehem, which will land on the uncompensated-care pool, which will land on your premium, which will land on the bill you opened last week and did not finish reading. You opened the bill. You did not finish reading it. The bill is Cyril’s shoulder. The bill is the $2.10 an hour I kept. The bill is the freedom they are telling you to be proud of.
The $286 billion in private AI investment they cite as proof of American dynamism will buy the data center the package passes through on its way to your porch. The $286 billion will not buy Cyril a rotator-cuff repair. The $286 billion is not Cyril’s. The $286 billion is the number I am positioned for. The number is the only number I have ever needed.
The demand for the package on your porch depends on the wage I declined to pay the man who loaded it. The customer’s paycheck is not my department. The demand does not ask where the wage went. I keep the margin.
The 14 bus will pull up at 6:28 in the morning. The store in Memphis will not be open. The candle in #B-117 is on the corner of the desk. I have not lit it.
I thank you for protecting your workers, Commissioner. I thank you for the works councils and the sectoral bargaining and the firing costs that make your workers too expensive to compete with mine. I thank you for your sclerotic GDP per capita. I thank you for the 50%. The 50% is my margin. The 50% is the price your worker pays to keep mine leased.
Please keep your mistake. It is the best thing that has ever happened to my roster.
— Sterling A. Varice
Sterling A. Varice holds the Hayek-Friedman Chair and serves as Dean of Instruction at Warden University’s College of Business and Economics in Richmond, Virginia. He is the author of three textbooks: Divine Mandates for Labor Utilization, Social Obligations for Profit Maximization, and Calibrated Deprivation: A Manager’s Guide to Employee Motivation.