Slate's Bizbox
the breakfast table: An e-mail conversation about the news of the day.

David and Tom Gardner

the breakfast table
entries
123456789101112131415
from: David Gardner

Three Flies Wanting Ointment

Posted Monday, May 7, 2001, at 12:28 PM ET

Dear Tom,

I hope all's well in Hawaii. Geez, you gave three speeches in Los Angeles last week, so you now feel it's acceptable to take the second star to the right and straight on till morning in Maui and blow off our business for a whole week? The economy is BAD, my man; we can't afford to have Mr. 20K sittin' silent out in the Pacific sipping nectar and looking for his first wife. (Yeah, I know what you're up to.) But anyway, I guess I'll thank you since even in your vacation time you've graciously consented still to work, answering your older brother's e-mails on Slate's penny ... um, dime!

As I don't know what, if anything, is on your vacationing mind, I'll throw a few different flies out over the river and see which you find most alluring.

Fly No. 1: I'm wondering whether you're as aware as I am of how little violent crime we have in our country today. And even if you are, how many others are as well? The Washington Post reported a few months back that violent crime in the United States dropped for its 10th consecutive year, last year by double digits, and is now the lowest it has been since the Department of Justice began collecting these numbers in 1973. So the Truth gets a few inches of ink on one particular page of one day's paper ... and the other 364 days of the year traps us in a multimedia montage of shootings, beatings, rapes--you name it. High-school kids apparently all blowing each other away these days. Etc. The Truth is that our day-to-day life is the safest it's been in 30 years, driven mostly (I assert) by our economic prosperity. But the impression you get from the headlines and "Action News at 5" is that it's all going to pot.

Fly No. 2: Speaking of pot, I know you and I mostly agree on the contradictions of the "War Against Drugs" that would really better be titled, as Harper's had it a few years ago, "The War Against (Some) Drugs." The proverbial green alien-- the "Brother From Another Planet"--who lands on our own terrain and clear-eyedly notes the contradictions in our society would no doubt look with amusement or confusion at this "War On Drugs," as if alcohol were not a drug and marijuana were. (The results of intoxification with either look rather similar.) Countless dollars and lives have been wasted "fighting" marijuana and other "drugs" while alcohol goes undefeated and unscored upon. I drink alcohol, and as you know I haven't ever used nor will ever even try marijuana, cocaine, ecstasy, etc., etc., and yet I believe all of these substances should either be, together, legal or illegal. And given my basic belief in human freedom, and given a cursory glance at the years 1919-1933 in which Prohibition mandated by a constitutional amendment tried and failed, I am of the mind that these things should all be legal. Take this further, if you like.

Fly No. 3: I'll be quick with this one since I must get back to reading about why the stock market did what it did on Friday! Aren't these explanations engrossing? Wall Street likes the higher unemployment numbers, we find out, sending stocks higher. Why would stocks go higher when we learn more people are out of work? Why, because higher unemployment suggests a need for lower interest rates! Which sends stocks higher. OK, I understand that one, up to a point--perhaps we all do. What's then funny is to recall past months in which "a strong unemployment report" (i.e., low unemployment) was used to explain why the market went higher on a given day, noting "observers are growing increasingly bullish about a strong and stable economy." Tidy, oversimple, contradictory explanations of market movements are perhaps only slightly worse than the need to explain daily market moves in the first place!

Check back with you later in the day, after you've woken up three hours from now. ...

the breakfast table
entries
123456789101112131415
from: David Gardner

Three Flies Wanting Ointment

Posted Monday, May 7, 2001, at 12:28 PM ET
Print This ArticlePRINTDiscuss this in The FrayDISCUSSEmail to a FriendE-MAIL
Share on FacebookPost to MySpace!Share with MixxDigg ThisShare with RedditShare with del.icio.usShare with FurlShare with Ma.gnolia.comShare with SphereShare with Stumble Upon
David and Tom Gardner are co-founders of The Motley Fool, a personal finance company. They are dedicated to educating, amusing, and enriching people through their Web site, books, newspaper column, and radio and television shows.
Join the Fray: our reader discussion forum
What did you think of this article?
POST A MESSAGE | READ MESSAGES

Reader Comments From The Fray:



[Notes from the Fray Editor: We're running Arthur Stock, because of his starring role in this week's "Breakfast Table" (this was his featured post), but Kate persuasively argues the opposite about Krispy Kreme here ("Hot sugar and fat beat microchips..."). Some good ruminations about the quality of life of the have-nots: try LT here (the lifeguard was a woman in fact--LT knows why that would be ironic...), or this post: "Short sightedness does not magically transform the HaveNots into Haves, it just keeps them from griping about the inequities." RonK has a comprehensive flame post for anyone looking for an argument here. There are Questions for Sowell here from Tom R, and two points of view on what The Fray has to offer in this thread.]


Krispy Kreme is a pure momentum play, and its momentum is played out. It's a product that appeals to the stock-buying class, and was new to many in that class (since it went national very recently) when they bought the stock. These stocks do well at first because people buy the stock after enjoying the product, without looking at balance sheets. Then the stocks collapse to sane levels--P/E closer to 20 than 90. Think of Calloway Golf Clubs some years back, mircobreweries, cigar sellers, Yahoo, and in the food world Snapple and Boston Chicken. Starbucks is almost an exception that proves the rule, but even it had several 50% falls along the way.

Krispy Kreme has limitations that can't be fixed: food is a competitive industry; Dunkin' Donuts demonstrates that there is competition even in the sub-category; franchise operations are subject to all kinds of accounting gimmicks for the first year. Boston Chicken, now in bankruptcy, was notorious--I don't know if Krispy Kreme is playing accounting games, but it would be difficult to determine that it isn't.

Foods with holes in them are especially poor investments, as Manhattan Bagel, Einstein Bagel, and several other bagel purveyors proved.

--Arthur Stock

(To reply, click here.)


 Whenever I hear someone start talking about finding for-profit solutions to social problems [Monday's entry] I think of a quote by Bill Speidel about Seattle's city fathers. "If they could have made more money by not building a city, they would have."

And there, in a sentence, you have the promise--and the problem--of for-profit ventures. What looks from outside like a remarkable feat of a healthy social conscience, in truth, relies on nothing more than a healthy respect for the bottom line.

The trouble is there in that "if" clause: when that bottom line comes into conflict with the social goals and one or the other has to give, which way are the venture philanthropists going to jump? Especially with any philanthropy that ventures into the tricky area of public goods, the good accomplished is only rarely monetizable.

--James Grimmelmann

(To reply, click here.)


 As far as I know, no society has yet come up with an incentive structure which rewards leaders by how well they are able to make impartial policy decisions, though it would be a great discovery. It's a nice try, but I don't think hiring economists to run the country would be the perfect solution.

The problem with economists is that they study only certain social relations, those that can be converted into cash. There are indeed harsh economic realities that we must face in making policy decisions. However, there are also harsh social, diplomatic, and environmental realities which economists do not take into account in their analyses. Of course economic growth is important, and policy makers should know exactly what they are doing to the economy and to individual businesses, but they should not assume that commerce trumps all other interests. (Stop waving those copies of Atlas Shrugged at me! Ayn Rand isn't even an economist!)

--Jane Grey

(To reply, click here.)

 (5/10)

Washington Post
The Washington Post
OPINIONS
What's Fair Game?
Anne E. Kornblut | What questions would Hillary Clinton have to answer if she were in Sarah Palin's shoes?
Editorial: Disappointment '08
PLUS » Stumped: More Nonsense From McCain