Tod’s Life Lessons For You to Hate On #1 & 2: Size Really Does Matter

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Note: I’ve decided to begin posting those life lessons I have crammed in my head that seem obvious to me, but which I know in advance others will push back hard against. More often than not, these posts will be very short. I am kicking off with two life lessons to begin with, partially because they are very much related and partially because Lesson #1 is likely going to get more traction on Jon’s post than here. 

 

Life Lesson #1: People will condemn either terrible, invasive, and/or Byzantine practices by Large Corporations, or they will condemn terrible, invasive, and/or Byzantine practices by Large Government — but they will not do both.

I honestly do not know why this is. I really don’t. It may be the most counter-intuitive example of people-acting-against-their-own-self-interest phenomenas that I have ever witnessed. But it’s damn near close to universal.

Indeed, I believe that this “government/corporation forgiveness” contributes to neither large government nor large corporations ever needing to get significantly better at serving those they are charged to serve.

 

Life Lesson #2: With very few exceptions, private corporations do everything better than public corporations — because part of what a public corporation does is make their goods and services suck to cut costs.

Or more simply: No one thinks the Olive Garden is better than their locally-owned Italian restaurant, but only a dreamy-dreamer would invest in the latter over the former.

One of the inevitable negative outcomes of capitalism that people don’t often discuss is that even as it encourages smaller companies to make better mousetraps, it likewise encourages bigger compose to buy out or co-opt those mousetraps and make them suckier, or, alternatively, use their size to regulate those better mousetraps out of business.

If they didn’t do these things, we wouldn’t invest our retirement money in them.

 

Feel free to hate on these life lessons in the comment section below.

 

 

[Pictures: Youtube screenshots of Abe Simpson and Veridian Dynamics corporate video.]

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105 thoughts on “Tod’s Life Lessons For You to Hate On #1 & 2: Size Really Does Matter

  1. Or more simply: No one thinks the Olive Garden is better than their locally-owned Italian restaurant, but only a dreamy-dreamer would invest in the latter over the former.

    Olive Garden is likely better than a lot of your locally-owned Italian Restaurants. Which you may not realize, because those aren’t the restaurants you go to. The thing about Olive Garden is that it is consistently decent. Never great, but not terrible either. Independent restaurants run a gamut. Some are great, some are pretty bad. That, more than anything, is the difference between Olive Garden and any given local restaurant.

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    • It’s also run according to a formula, one learned through trial and error over time, and intelligently administered by subject matter experts. It is therefore profitable, and therefore durable. It is further supported by a relatively massive and continuous campaign of advertising in multiple media venues. To the extent that the quality of the food and the manner of preparation matters at Olive Garden at all (the thought process is that 99% of consumers are unable to discern the difference between the quality of food once the quality rises above a certain and rather low threshold), that too has been structured, systematized, and industrialized, with the result that there is scalability and the standardization of which speaks.

      Your local mom-and-pop Italian place is likely run by a family that possesses subject matter expertise in making really good (to them) Italian meals to be served to families. It’s not likely to have the buying power to leverage a supplier. It’s not likely to have a professional manager who has attended classes on controlling cost of food, cost of labor, and cost of insurance. The advertising campaign, to the extent there is one at all, is a yellow pages ad, front-of-the-store signage, and occasionally some coupons in the local newspaper — word of mouth is the principal way you learn about such places. And without the expertise in management it’s easy for people who think that their ability to make tasty food is sufficient to run a business, which is a very serious trap for such a business to run into.

      This is, philosophically speaking, why the Olive Garden thrives while your local mom-and-pop Italian place struggles, notwithstanding that Olive Garden sells overboiled pasta-mush in goopy, flavorless salt sauce.

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          • Ahem. Red Lobster, the business, has nothing to do with Maine.

            It was founded by a dude from FL, purchased by General Mills, and features a lot of sea food that’s not lobster but poses as lobster. They may buy lobsters from Maine fishermen, but I’ve never heard that they’ve cornered the lobster market in any way, shape, or form.

            Instead of being of Maine, they poach the Maine brand, with their “Bar Harbor” themed storefronts. The company’s culturally appropriating Maine culture without a clue to Maine ethics and values.

            And normal Mainiacs would not take you out to Red Lobster for a lobster dinner; they’d take you out to the nearest lobster hut with a decent lobster roll or lobster dinner or they’d buy the lobsters and cook them at home.

            But I call foul on the association of Red Lobster and Maine; it’s not of Maine and it’s not the flavor of Maine and it’s total Mickey Rooney’s roll in Breakfast at Tiffany’s nutty. We’ll tolerate it while smirking at the silliness over a dinner of real lobster served right.

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    • The point of Olive Gatden and similar chain restaurants is to provide an average but consistent experience at every one. The food will never reach the level of exquisitely gourmet but it will not go down to greasy spoon levels either.

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    • Will’s got it exactly right: the big ones don’t make bad stuff, they just don’t make great stuff; they make consistently OK stuff. If they made really bad stuff, they’d fail. Like, say, Planet Hollywood or Hard Rock Cafe, both of which got by on their gimmicks, rather than their food, which was awful, but ultimately the shitty food meant they had a limited lifespan.

      I’ve been to Olive Garden and had a reasonably good meal. I’ve never been to Olive Garden and had an awful meal. I’ve been to a local place that’s usually wonderful and had an awful meal because they were slammed or it was late or the ingredients weren’t that fresh or whatever. That’s how Olive Garden wins in the long run: you always know what you’re going to get, so if you’re not feeling like taking a chance, which is most of us most of the time, you go to Olive Garden.

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      • If they made really bad stuff, they’d fail

        This isn’t true as stated. McD has had a long run and serves terrible food, with the exception of decent-good fries. Taco Bell? Yikes. Denny’s is pretty consistently bad diner food, too. These companies have all had success over long periods while serving really bad stuff.

        There is some hope, though, that after a few decades big chains have to compete on producing good product (not just by advertising gimmicks, undercutting costs, etc.) KFC has been terrible for long enough that it is in trouble.

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        • Good and bad are in the eye of the beholder, though. Taco Bell and McD’s serve crap, but it’s good crap, at least for my taste buds. Now, in Big City, there are so many tacquerias it’s hard to count, and almost all the ones I’ve been to are better (by my taste) than Taco Bell, but sometimes I still crave it. Hamburgers are a bit different–for my tastes at least, mom and pop hamburger stands are more expensive and a bit more of a gamble than mom and pop tacquerias, so I’ll often choose McD’s, or Wendy’s or BK, as a likelier better and cheaper choice. And a fresh sandwich from one of those places, in my opinion, tastes comparably good to a fresh one from a mom and pop.

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      • That’s how Olive Garden wins in the long run: you always know what you’re going to get, so if you’re not feeling like taking a chance, which is most of us most of the time, you go to Olive Garden.

        Like any chain, all the way down to McDonalds.

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    • “Olive Garden is likely better than a lot of your locally-owned Italian Restaurants.”

      this is mathematically impossible. also spiritually impossible.

      the olive garden is a circus of degradation posing as a restaurant. it is positively de sadean. i wouldn’t be surprised if its strategic plan folder contained only a rag of ether, some duct tape, and a bullwhip.

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  2. Disagree with 1. I certainly try to do both. And while sober conservatives are better at criticizing government than sober liberals, the latter still do so because you can’t make something better without understanding its flaws.

    Agree with 2.

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  3. Not sure about 1. I’m fine with criticizing both because, as i stated in the other thread, all human orgs are prone of screwing up. People screw up, its what we do.

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    • Likewise, I’ll happily criticize both. My (very marginal) preference for corporate vs. government is stated here & here.

      In short, I don’t get nervous when Republic Parking sends me a parking ticket, I do when the City of Bellevue sends me the same thing for the same amount.

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      • Anchorage sold or contracted out their parking ticket enforcement to private collection agencies. Given the choice between a gov functionary and collection agency i’d choose the gov employee. Doesn’t mean it wouldn’t be a pain but better then collection agency blood suckers.

        But my preferences depend on the situation and the service. I just can’t see any one size fits all solution. Sort of like unisex jumpsuits. They work great for some, but less well for others.

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        • Bellevue has a few red light cameras about. I ran afoul of one right after I moved. I hadn’t gotten my address changed everywhere yet, and the notice that I should not have turned right on red went to the wrong address. For some reason, the post office did not forward that particular bit of mail. Luckily by the time the second notice went out, I had changed my address & I got it. In that notice was instructions to pay, a clear message that I missed the window by which I could contest the ticket, and that if I failed to pay, a warrant would be issued for my arrest.

          All over a photo ticket that was worth $112, and would not even be reported to my insurance agent.

          This is something no private company can do (without specific permission from the government).

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  4. Life Lesson #1: People will condemn either terrible, invasive, and/or Byzantine practices by Large Corporations, or they will condemn terrible, invasive, and/or Byzantine practices by Large Government — but they will not do both.

    Not true, at least for me.

    The government is run by rich white people for other rich white people. Large corporations are run by rich white people for other rich white people. Often, they are the same white people.

    I know plenty of people who complain about both. Maybe you need better different friends.

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  5. I’m not sure you said what you meant in #2; private vs. public or profit vs. non-profit? I’m guessing the latter; and even there, I’d suggest it’s all over the map; Harvard and MIT are non-profits; and most government bodies are incorporated at some level — town/city, county, state, etc..

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      • So Hobby Lobby vs. JoAnne’s?

        If the Christian theme-park atmosphere of HL doesn’t bug you, they’ve got it all over JoAnne’s as a source for craft supplies. And the small, mom&pop shops typically are even better, though you’d seek out a shop catering to your particular interests, not general.

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            • The Mom & Pop’s that are viable businesses specialize, and mostly have high-end stuff; so the yarn shop, quilt shop, fabric shop, wood-working shop. We have all those around here that thrive. Up through the 1980’s, the mom & pops with crappy products did okay, but they generally didn’t survive the internet. It’s specialty knowledge and customer service that makes a private business like that thrive; and many thrive, in part, due to an internet presence bolstering shop sales.

              This is, in part, why I don’t understand the public/private distinction. Public companies generally seem to trade in mediocre denominators; not the worst, but not the best; as has been pointed out, they survive on general availability of consistency; and that consistency often grates on the dedicated customer with refined aesthetics; even if that person is just a granny making a quilt for her first great-grandchild.

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                • The weeds are why I questioned public/private.

                  It’s size, more than anything. Large corporations have efficiencies of scale but sacrifice some amount of quality in detail. Franchises seem to float between the two extremes. Cargill, Koch, Dell, Bechtel, Price Waterhouse Cooper, Mars (M&M’s), Enterprise, Cumberland Farms, Hobby Lobby, Fidelity are all privately-owned companies.

                  Tod’s post confuses because he’s sort-of suggesting large = publicly traded instead of closely held or even privately held and not listed on a public stock exchange; and then comparing this to small corporations.

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  6. As Tod predicted, everyone is hating on #1, but outside of our enlightened commentariat, I think there is some truth to it. It seems like a special case of arguments as soldiers. If you are on the team that fights against bad government, then saying something bad about corporations is an own-goal. And vice versa for the other team. Avoiding own-goals is worse than sometimes embracing falsehoods because the stakes are too important.

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    • I would add to what says that despite everyone’s objections, if I look at the last two posts here that noted really poor (for lack of a better phrase) “customer service” by government agencies — one by me, one by J’Rowe — there is considerable pushback from the quarters one would expect that these government agencies are in fact doing everything very well, and it is the “customers” with their flawed expectations that are the real problem.

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      • are in fact doing everything very well

        Since I assume I’m the “considerable pushback” on the latter, I’ll note my view as concisely as I can: no one was wrong to contact him, he’s not a victim of anything, it’s bad customer service to have failed to immediately correct the (proper) initial charge, but the cost was only a couple more phone calls and/or emails. I think PA should have more streamlined title transfer rules (compliance with which would obviate everything that came later) and that NJ should be more like CA in dealing with these issues by not setting a muni court date but instead just taking the car. I just disagree with him about what flows from the fact these changes aren’t currently in place.

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        • Would he have been as well off as he is if he weren’t as well off as he is?

          I mean, I can understand the argument “what are you manscomplaining about? You’re fine!” to him *PERSONALLY*, but if a poor black guy had the same encounter, said poor black guy would have been jacked by the system.

          And ignoring that part of the problem is racist (in the structural sense of the term, not the how you personally feel about minorities sense of the term).

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    • Meh. I think it’s mostly team signaling. If you listen to two liberals or two conservatives debate, the liberals will complain about crappy and intrusive government, the conservatives will complain about corporate cronyism. But when they talk together, they each have to defend a right to speak from their side of the fence and we forget the shades of gray in the middle.

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    • I think #1 depends on whether people are thinking they are inside the arena of political argument or not. Republicans bitch about Comcast with regularity. Democrats about the DMV. They only stop when political implications are in play.

      FTR, I’m with Jon Rowe today. I can point to something I wrote about Blockbuster on Hit Coffee last week wherein I am critical.

      So I think I’m on pretty solid ground here.

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  7. With very few exceptions, private corporations do everything better than public corporations — because part of what a public corporation does is make their goods and services suck to cut costs.

    This is imprecisely written. Are we defining “better” as up-market or high-quality?

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    • Yeah, it is imprecise — and perhaps necessarily so, as it depends on the product or service.

      Don’t know any car person that wouldn’t agree that a Picchio is a better can than, say, a Kia. Don’t know any foodies that wouldn’t agree that a Clyde Commons burger in PDX wasn’t a better hamburger than you would get at McDs. Don’t know any accountant that wouldn’t agree that you could get better tax work for your NYC business done by Deloitte than H&R Block — or if that tax return got you in hot water with the IRS. don’t know any attorneys that wouldn’t say you’d have better representation from Wachtell, Lipton, Rosen & Katz than you would from Slater & Gordon.

      All of these people are using the word “better” slightly differently, I think. Yet there’s still no question that no one who really knows about X won’t tell you that that a private corp known for doing/making X well isn’t world’s better than a public corp known for doing/making X. The only industry I can think of off the top of my head where this isn’t the case is the aerospace industry, and I think that’s just because there really aren’t any private aerospace companies out there. (And I will say I know so little about the industry that either my assumed exception to the rule or my presumed lack of private companies could each be wrong.)

      Despite this, is our capitalist model, we still think of those companies above as being “less successful” than the ones that do what they do “better.” And I think that is an inherent flaw in our system. Not a “we’re all doomed and will soon be living in a post-apcolytic world” flaw, but a flaw nonetheless.

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      • You’re comparing the best of private businesses to all public ones. Private entities don’t consist only of those that come t9 mind because they’re good. They also include that restaurant my wife ate at in Bellevue, Texas, that we still talk about seven years as the epitome of terrible.

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        • He’s also comparing businesses that aren’t in the same markets. Picchio vs Kia isn’t the right comparison, Picchio vs Ferrari is. Clyde Commons doesn’t compete with McDonalds, they compete with Applebee’s (to be fair, CC wins that comparison hands down). But as you say Will, you have to average the CCs of the world with the places which are prone to multiple health code violations.

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          • This is why Yelp is so great. If I’m on the road I’d be inclined to default to something I know won’t suck with low transaction costs.

            Before, that was chain name-recognition. Now, it’s wherever Yelp sends me. I eat much better on the road now.

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          • That said, I think that the general observation about the quality of goods/services offered by public vs private businesses may hold some water if you assume that the privately held businesses have lower profit margins (per Tod’s original point re: optimizing costs).

            Let’s take a hypothetical example where a unit of “burrito flavor” costs 5 cents. Chipotle charges me $7 for a 100BF burrito (cost to Chipotle: $5) and makes $2. My local burrito stand also charges me $7, but I get a burrito worth 120BF. Cost to local stand: $6; profit of $1. Clearly the private business is better for me as a consumer in this instance.

            However, I don’t think that this necessarily generalizes to all businesses. If a publicly held corporation decreases its costs while simultaneously maintaining a comparable profit margin to the private businesses, it may very well offer a better value. Think WalMart vs Mom & Pop’s grocery. If the same box of mac & cheese is priced lower at WM than it is at M&P’s, I’d say that WM is doing better if we assume equal levels of service, store cleanliness, etc.

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            • I’ve only been there once and it was more for the cocktails than the food. And I’m sure they don’t really “compete” with chain restaurantsin the sense that diners are thinking: “hmmm…should we go to Olive Garden or Clyde Commons tonight?” However, the pricing and fare is similar to mid-range chains like TGIFridays, Applebees, etc. ($12-$20 entrees like burgers, pasta, poultry, steaks, seafood, etc) In that sense it’s not in as cheap a class as a McD’s nor in as expensive a class as an Alinea.

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      • There are lots of private aerospace companies, but they are small, and either exist to supply parts to their larger brethren, or they do niche work.

        Usually, when an aerospace company grows to the point that they want to start producing major assemblies or whole vehicles, they almost have to do an IPO to raise the necessary capital.

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      • Back when I lived in Florida I did some contracting work for this little machine shop that made small runs of part for (among other customers) NASA. I think that counts.

        (Which, funny story, when I was assembling one of their servers I lost this little tiny screw. And so I told the guy, “Hey I lost this little tiny screw.” And he said, “Got any others just like it?”

        Turns out a machine shop that makes parts for spaceships can quickly whip up a tiny screw.)

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        • Old-school precision machine shops are so cool. Shortly after I started at Bell Labs I snapped off one of the nose pieces on my wire rim glasses. I was bitching about what it was going to cost to get new frames and/or glasses made when my mentor said, “First take it down to the machine shop and ask if they can do anything.” The old guy there said sure, and let me watch while he put on his 20-power surgical loupes, arranged the parts in a jig with seven or so hands, then soldered the break with some exotic alloy and what had to be the world’s tiniest torch.

          Somewhat at the other end of the scale, across the way they were building some large new enclosures for the “artificial ocean” the Labs used to simulate conditions on the ocean floor under a few thousand feet of water.

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  8. our enlightened commentariat

    Objection!

    Sustained!

    OG Exceptionalism has not been demonstrated sufficiently. These remarks shall be stricken from the record.

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  9. I am going to agree with #1, with the caveat that places above. That both sides will complain about anything, until it enters the realm of Politic discussion. At that point it is a matter of blood libel to even think about straying from your rule.

    As for #2, I would say that is trivially true.

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  10. I was going to push back on #1, but on reflection, and as others have pointed out, when it becomes a political argument, I do notice that I, for one, tend to observe #1 more than defy it. Back when I was a lefty Naderite, I used to complain a lot about “the corporations.” Now that I’m neo-liberal/libertarianish, I’m more likely to complain about the government or “the state.”

    For #2, as someone mentioned above, it partially depends on what you mean by better. I used to work a bank that was privately held and for a bank that was publicly traded. They both had their advantages and disadvantages. For the record, I think the privately held one was better for my needs, but its geographic scope was limited primarily to one state, and there were some things it had a hard time doing for customers (e.g., expediting a new debit card to customers who really needed one quickly, if for example they lost it a couple days before going on vacation), whereas the larger, publicly traded bank not only had more branches outside the state, but it could handle emergency requests better (though for a hefty fee, of course).

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  11. #1 has a bit of BSDI going on.

    The arguments of liberals are much more focused than conservative/ libertarians. The latter commonly make much more sweeping criticisms- its not THIS onerous regulation, or THAT intrusive agency, its regulations generally and bureaucracy generally, criticisms meant to support an argument for minarchism or wholesale privatization.

    So the response has to be a generalized defense of government agency and legitimacy, even as we acknowledge their limitation and weaknesses.

    I suppose the equivalent would be for me to complain about the Deepwater oil spill, then use that to prop up an argument for nationalizing the oil companies.
    An argument which no liberals are making.

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    • “An argument which no liberals are making.”

      To be fair, a commenter on an Alternet story probably did call for that. And as we all know, random left-wing commenters on leftie websites are directly analogous to actual conservative elected officials.

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    • I think this is another way of expressing my thought here; we spend so much time having to qualify our basic assumptions as liberals — that government is okay, and proof of bad over there doesn’t mean drown it — that we never get to actually discussing the nuance of any given thing, with the soul exception of cutting taxes. Conservatives are always willing to listen to tax-cut talk; and much of what does get accomplished gets done through tax code, hence it’s complexity.

      One of my big gripes is that many benefits have to be applied for — home mortgage deduction, earned-income credit, even Obamacare subsidies. One solution might be to make them automatic.

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