Why We're So Screwed: Santa's Magic Space Monkeys

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And

An-a-three!

Watch the until you're a little unmoored from reality, and who knows: you could be a great business mind like the crack minds at Frito-Lay that came up with the idea of competing with themselves in the lucrative jalapeno-and-cheese-flavoured-premium-potato-chip market. And I'm not kidding about the "competing with yourself" thing. There are supermarkets in my neighbourhood where those two products are shelved side by side.

Does that sound stupid? Walk into the back room of a supermarket this last Christmas season, and you would have seen many of these:

From here

  At many stores, you'd run into them in the front, too. That's because these are often "prebuilds," stacked at the warehouse according to a delivery plan instead of being ordered at store level. Marketing figures out what you need, and you get it.

"Figured out." Hah! I'm hilarious. I should have taken a picture of it, but all last Christmas, we routinely stripped excess 12-pack cases of Sprite off our Coke orders and sent them back to the warehouse. I assume that at the warehouse, they took the returns, put them on new rebuilds, and shipped them back to us. I don't know why, although my working theory is that the prebuilds were planned in the United States, where, unlike up here in the True North Strong and Free the bottler doesn't have the Canada Dry  contract. The software spits out a quantity of Sprite based on expected sales in an American store, and the Sprite sloshes back and forth between store and warehouse all over Canada.

I haven't been to business school, so this is only a theory, but, from what I've seen, it's a good theory. It is this: that on the first day of class, they share the Great Secret of Business Management: "If you ignore a problem long enough, Santa sends magic space monkeys to fix it." Like I say, it's only a theory, but it's strongly empirical.

But I've wandered off topic in talking about Coke. Let's get back to Frito-Lay so that I can illustrate an important point. In the middle of last year, Frito-Lay introduced another product:

Artisanal Tostito chips! Because if there's one thing that snobbish foodies love, it's mass market brands! Look, I'm not saying that it's a bad idea. What I'm saying is precisely this:

Pardoning the photo quality, that's a bag of Tostitos Recipe Black Bean and Salsa chips on the shelf. Yay for it. Only that's not where it goes. It's where this goes:

You see, that's one of the two top sellers in the Tostitos line. As you can eyeball from the picture, there's space for two facings of them, about 10 bags of chips, $35 retail, approximately. And they've sold out.

Well, of course they've sold out. This is a store that does north of half a million a week in sales, and Frito-Lay Brand Tostitos Hint of Lime tortilla chips are a very important part of those sales.

But the Recipe Black Bean and Salsa haven't sold out. That's why there's one on the shelf. Now, you business executives, try to stay with me, because this is where it gets complicated.

 Hint of Lime sells BETTER than Black Bean and Salsa. Therefore, 10 bags of Hint of Lime will sell out BEFORE 10 bags of Black Bean and Salsa. Then you will have bags of Black Bean and Salsa not selling (because no-one is buying them) and bags of Hint of Lime not selling (because there's none on the shelf.


You know what would stop this from happening? If you delisted the Black Bean and Salsa brand, and made it four facings of Hint of Lime. But you don't do that, because out of stocks aren't your problem. They're the supermarket's problem. If the supermarket would just make sure that the shelf was stocked, Frito-Lay would capture the large amount of money that people want to spend on Hint of Lime, and the much smaller amount that they want to spend on Black Bean and Salsa.

This looks like a business case problem, so we could use some magic space monkeys. Fortunately, they're on their way.

Let's imagine a universe in which there's no inflation, or, at least, very low inflation. In this nigh-unimaginable world, supermarket year-over-year same-store sales net of costs would climb very, very slowly by historic standards, because historic standards assume that sales are being carried aloft by inflation.

Now put yourself in the place of a supermarket executive. (No, not a store manager. You can't trust those guys to make these calls. They might make a mistake.) Imagine that you had to deliver increasing sales net of costs, and sales aren't likely to increase at the stores that you're responsible for. What do you do? Reduce costs! And how do you do that? By reducing labour costs!

And how do you do that? By reducing the amount of hours of labour available to the store. Here's your new target, Store manager dude!


So how does a store manager deal with this? the manager will drive sales down to meet hours. That sounds bad! How do you get away with something like that?

He doesn't need to, because we're doing it for him. Replace Hint of Lime shelf space with the Black Bean and Salsa, and, because people don't want them, fewer will sell. Santa has come through!

Oh, you're saying; but doesn't this mean that I won't be able to buy the groceries that I want, and that I'm prepared to pay for? Well, yeah, I guess that it does. Doesn't it mean that Frito-Lay is selling fewer chips? Yes, it does. On the other hand, this isn't exactly complicated, so it must be part of their plan. Doesn't it mean that the grocery store is selling less product? Again, yes, but they wouldn't be cutting labour hours if that weren't in their plan.

It does mean that there's spare money around, but fortunately you can always sock it away in a savings account.

We have a problem here, is what I'm saying, and there's all kinds of hysteresis in our culture and economy that is making it worse.

Also, whoever is paying the current Frito-Lay board needs to stop and think about what they're getting for their money. Because, seriously, dudes, this is just stupid.

Beginning With A Bi-Modal Distribution

Three things: One for the youth, born full of hope/One for the blogger, indiscreetly wise/One for the prof, at the end of his rope/One post to join them all, where the shadow lies.

First, the oldest nephew blew through Kitsilano on Sunday on his way to Point Grey and the heartstoppingly beautiful campus of the University of British Columbia.

From Alaska-in-Pictures.com. Why? Because this is one of  the  great things you see on an Alaskan cruise. Book yours today!

That's 29 years, give or take a day, after I did the same thing. I've every reason to hope that he'll do better than me (first year flunk-out become History PhD working at a grocery store), but if you have a somewhat underemployed failed-intellectual uncle living in a garret,* you better damn well know that he's going to be looking out for you as best he can. And while hitherto failed-intellectuals have been content to observe the world, the point, rather, is to change it. By posting on their blogs. Tremble, ye kings and potentates, for I wield Blogspot, and am over-caffeinated!

Second, Brad Delong, driven to distraction by the intractably high unemployment rate, chanced to utter the secret that we generally keep from nice young boys like my nephew: that getting a job depends far more on who you know than how hard you try. Third, there is Paul Campos on the "law school scam." I've linked to a short post at Lawyers, Guns and Money in my Tolkien pastiche above, but he goes on at much greater (and fully justified length) here. So I'm going to put it all together with an insight from an earlier round of the same discussion. Specifically, it is hard for most beginning lawyers to repay their student loans, because the claimed high average pay of beginning lawyers in fact masks a noncontinuous distribution of incomes. Something's going on here: just check out this attempt to defend these statistics, and the acid comments following.

 Some law students, generally the ones with the highest grades at the Top 20 law schools, get into prestigious legal firms that charge deep-pocket clients very high hourly rates to do their vital work for them. So where you went to school determines your salary. Or, in fact, whether you get any salary for legal work at all. And that's why you get this emergent bimodal distribution of legal incomes.

What I'm here to argue is that this isn't a peculiarity of law school, but rather a much more common phenomenon that plays a crucial role than is obvious in the state of things today. The bimodal distribution isn't a bug. It's a feature. Okay. It's a bug, too. It can be both!

*The self-pity party aside, I actually have a pretty sweet contract. It's just that it took thirteen years for the middle-class pay, benefits, paid time off and generous vacation provisions to vest. The garret's because Kitsilano is expensive. And it's expensive because it's such a nice play to live. You pays your money...