I was fascinated by how many of you defended the $35 cheeseburger yesterday. Supporters seemed to break up into two camps.
The first were people who simply said, hey, that’s what the market will bear and more power to the burgermeisters. That argument is fine as far as it goes, but actually proves my point. The market is careening down in a plume of black smoke. Price will perforce have to follow.
The second were more interesting to me. These were the economist types who tried to do the math and came up with the idea that a more profitable niche product, one that destroys circulation and cuts down on ancillary revenue also used to pay overhead, was preferable.
What I liked about these latter types was the sureness with which they offered their arguments. They were wrong on two counts: 1) the math itself failed to recognize that there are many fixed costs attached to the restaurant and simply tried to pour all operating costs – from rent to electricity – into that poor little cheeseburger; and 2) there is never any excuse, no matter how many numbers and charts you deploy against it, that makes an empty restaurant, plane seat or hotel room better than a full one.
When you can fill the room by demanding outrageous prices, more power to you. But the relationship between price, value and ability to pay is going to have to be evaluated. In my lifetime alone, I’ve seen things go absolutely crazy, with the cost of things sometimes escalating to a point where it feels like 1980 was 1880. I look at what a diner breakfast would have set you back 25 years ago and it reads like one of those menus from the Old West, where a meal of steak, potatoes and coffee was a nickel.
What’s going to come down?
Cars? Many of my pals in the corporation – not all of them super-players – are driving around in mid-range foreign jobs that cost more than my mom and dad paid for our house in the suburbs back when I was a kid. I looked at a little tin can the other day that cost nearly $30,000.
Hotels? You can’t stay in any major city for less than $300 unless you find a fire sale price online. Some teeny rooms in Manhattan go for $800 and up. When I was in Rome a while back I went to have a drink at one of the finest hotels in the world, The Hassler. We had martinis and some nuts. Came to about $100. That’s not the intriguing part. The lobby was utterly and totally deserted. The shops were empty. That whole hotel was all dressed up with no place to go. Think they can go on that way?
And then there’s food. More people will be eating at home for quite some time, that’s for sure, when they’re not at McDonald’s or Denny’s. Recently, Whole Foods designed a Recession Menu for people who want to shop there without losing their life savings. That’s smart. I didn’t look at it yet. I’ve been too busy going to Safeway.
We don’t have to worry about gasoline, of course. Those prices are already carefully set by the masters of oil, who carefully judge what we can pay, making sure never to freak us out so entirely that we consider doing anything immediate and serious to break our dependence on their product.
What do you think is out of whack? Postage? Cheese logs? College? The price of your company’s stock? No, wait! That should be higher, right?