Wednesday, March 23, 2011

The Ghost of George Washington's Expense Account

     16 June 1775, George Washington accepted the Continental Congress's offer of commission to the post of commander of the Continental Army--which came with the rank of lieutenant general--with these words:
Sir, I beg leave to assure the Congress that as no pecuniary consideration could have tempted me to have accepted this arduous employment, I do not wish to make any profit from it. I will keep an exact account of my expenses. Those I doubt not they will discharge, and that is all I desire.
Congress readily agreed to these terms; that is, to reimburse Washington his expenses rather than pay him a salary.  Congress approved a schedule of salaries for the Army that began at six and two-thirds dollars a month for a private and topped out at one hundred sixty-six dollars a month for a major general.  There was no approved salary for a lieutenant general.  The Army had only one of those--Washington--and he was to be reimbursed for his expenses, vice salaried.
     Washington served about 8 years as commander of the Army.  If we suppose that his salary to have been twice that of a major general, then he would have earned just under $32,000 during that time.  For comparison, had someone served the entire war as a private, his salary for those 8 years would have been $576.67.
     When the war ended, Washington submitted his expense account.  The total?  $449,261.51
     I recall skimming a volume entitled George Washington's Expense Account some years ago.  Marvin Kitman annotated Washington's account with some humor.  The following entry--made just 6 days after Washington was commissioned--is instructive:

To cash paid for Sadlery, a Letter Case, Maps, Glasses, &c &c &c. for the use of my Command... $831.45*
     In his book, Mr Kitman noted that Washington made liberal use of the terms 'sundries' and 'ditto' and '&c' (et cetera).  So liberal in fact that they made up 40% of Washington's accounts.
     In his defense, Washington created the Continental Secret Service--that is, spies--and paid them from his own pocket.  He was keeping these accounts daily and had to provide against the chance that his books would be captured by the British.  Therefore, he hid payments to his spies under the term '&c'.
     But the notion that these payments amounted to $180,000 beggars the imagination.
     But Washington's expense account and his creative use of &c is background to my point.
     Nathan Bransford defended the TradPub ebook pricing in his blog.  His defense amounts to 'hey, paper doesn't cost that much, so the publisher doesn't save a lot with the ebook format.'
     These are his 'back-of-the-envelope' calculations:
$24.99 hardcover:
$12.50 to the bookstore (roughly 50% retail price)
$2.50 to $3.75 to the author (between 10-15% of the retail price)
$1.50 for paper, shipping, distribution (again, approximately. UPDATE this would be for a high-print-run book, HarperStudio cited
$2.00 as average)=Around $8.00 to the publisher, which is split between overhead (rent, paying editors, copyeditors, etc.), marketing, other costs, and hopefully some profit assuming enough copies are sold.

$9.99 e-book (
agency model):
$3.00 to the bookseller (30% of the retail price)
$1.75 to the author (25% of the publisher's share)**
Around $5.24 to the publisher, split between overhead, other costs, and hopefully some profit
[I found that 'hopefully some profit' so droll.]

     Let's look at these figures, bearing in mind that they are not definitive, because they come not from a publisher but rather from someone defending publishers.  For convenience, we will call this The Agency Model (Bransford is acting as the publishers' agent.  He acts with apparent authority, so absent a positive denial by the publishers, we can reasonably rely on his presentations.)
    The first thing I noticed was that Mr Bransford said only $1.50 of $24.99 goes to 'paper, shipping, and distribution'.  I object.  Mr Bransford has tendered facts not in evidence.  Worse, he has conflated three accounts that have no business being together.  Why should the cost of paper be included in the same ledger account as shipping and distribution?  But in the interest of moving things along, I will stipulate to this item.
     However, I raise second and third objections to Mr Bransford's use of 'etc.' and 'other costs' without account details.  I see an entry for paper.  Does 'etc.' cover the cost of ink?  The cost of typesetting?  The cost of printing?  What is it that 'other costs' covers that 'etc.' does not?
     I presume that, unlike Washington, Mr Bransford is not using 'etc.' to cover the cost of espionage, but I've been wrong before.
     Of course the costs of editors, copyeditors, typesetters, secretaries, marketeers, lawyers, rent, utilities, communications, and transportation are amortized.  This is the 'nut' the publisher has to crack before breaking into 'hopefully some profit'.
     So what has Mr Bransford not told us and what has he told us?
     What he has not told us is the details of 'etc.' and 'other costs'.  Nor has he given a line by line accounting of the cost so that each individual item can be analyzed.  The ghost of George Washington's expense account is haunting the halls of the New York publishing houses (and those in London and Toronto, too).
     What Mr Bransford has told us is the percentages.
     According to Mr Bransford, the retailer (the agent in the publisher's Agency Model) gets 30% of the gross; the writer gets 17.5%; the publisher gets 52.5%.  The publisher is taking the lion's share.
     What is wrong with this picture? 
     I shall examine that next time.
* That sum was more than the salary of a Continental Army major general over a period of 5 months.
** This is deceptive.  The publisher's share is 70%; 25% of 70% is 17.5% of the total.

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