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What’s an olive or two?

Category: Uncategorised

Published on Saturday, 19 December 2009 05:00

Written by Thom Ring

Economics professors like to talk about economies of scale. It’s a popular notion for those who want to grow a financial empire (and to an MBA candidate why else would anyone want to be in business?).

Economies of scale means that the more of anything you buy the better a per-​unit price you can negotiate because the more a seller stands to add to their bottom line with each sale. It also means that’s many per-​purchase expenses, such as the ones associated with documentation, shipping, etc., can be reduced simply by making fewer purchases. Figure it takes as long to retrieve and package ten widgets as it does to do so with one widget.

This is a big factor in why a Wal-​Mart can come into town and undercut every local merchant until it drives most of them down the tubes. Unfair labor practices and selling at a loss until the damage has been done also are factors, but let’s just stick to the subject of the day for now.

I don’t have a business. Don’t have an MBA, either. I’m on the other side of the counter, handing over the cash, not taking it in. And I’ve begun to realize how economies of scale is the enemy of the customer.

Wal-​Mart and its brethren claim exactly the opposite, as you are aware. They “pass those savings on to you!” they loudly and proudly trumpet. More likely, however, they’re passing their efforts to maximize profits “on to you!”

This was brought home to me many years ago with a surprising bit of news. The subject was the salads a major airline was serving to its passengers, which gives you an idea of how long ago I heard this news. Reportedly the airline had determined it could save $10,000 per year simply by eliminating one olive from each salad it served!

Think about that. Evidently they were serving a lot of olives.

I started thinking about it once as I tucked into a salad at a favorite local restaurant. The salad had a lot of olives. They probably could have eliminated an olive — maybe even two! — and I wouldn’t even have noticed. But how how many olives would that have added up to, a few ounces every night? Would the few bucks they saved been worth the risk of even a few olive-​loving customers no longer savoring their salads?

My wife Jan and I enjoy going to a restaurant located in an old inn in the heart of Chepachet, Rhode Island. The Tavern on Main does a nice job with almost everything it touches. When we first started patronizing the place shortly after it opened, my wife mentioned to the waitress that she wasn’t a big fan of the iceberg lettuce that comprised most of the salads they served. The next time we ate there — the very next time — the salads were teeming with mixed greens.

Hey, I’m no big salad lover, olives or no. And we can assume that a few other patrons made the same observation as my wife. But the place carries Magic Hat Number-​9 ale for one reason, and one reason only, because it’s my favorite. On my scale of things, that’s pretty big.

Hey, that airline is saving even more money. They don’t serve salads at all. You can bet if they could figure out how to sell tickets while avoiding flying anyone anywhere they’d do it in a heartbeat — in mid-​flight if they had to.