Lydia presents Walter with the opportunity of expanding into a new market (the Czech Republic). Lydia goes further and points out that entry should not be difficult given Walter’s high-purity “blue” methamphetamine and the inferior alternatives available there. Also, it is worth noting that such overseas expansion would not have been possible without Lydia’s expertise regarding global supply chains.
Jesse brings in the revenue from the first batch of meth, and Walter is less than impressed with the amount of money that has come in. Walter had made a pound of meth (16 ounces), but Jesse has only sold 1 ounce because he’s selling it directly to users. Walter isn’t happy with the payoff because he feels the risk he is taking by breaking the law should result in a lot more profit. The two brainstorm ways to sell in larger quantities, but it turns out they had earlier killed the one person they knew who would be buy in bulk. By selling in larger quantities, the two can lower their average fixed costs (economies of scale), but it also means that they’re going to have to find a partner to do that because Jesse doesn’t have a big enough footprint to sell that much dope.