David and Tom Gardner

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

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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

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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

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(5/10)

• Telnaes Animation: Bush Ponders His Legacy
• Editorial: The World's Expectations for Obama
• Dionne: The Rebirth of American Capitalism
• Samuelson: The Real Engine of Mayhem