Economies of scale

This blog will deal with the idea of economies of scale so let’s make sure the definition of that is clear. Economies of scale are when it costs an enormous amount of capital to build something but then as that item operates it becomes cheaper and cheaper. A classic example is a power plant. Let’s say that it costs 1.2 billion to build a power plant. The first kilowatt generated cost 1.2 billion dollars to make. However, as the years pass it becomes cheaper and cheaper with each unit produced. Usually with items such as power there is little marketplace competition because of the massive amounts of capital needed to get the first unit produced.

Economies of scale impact us everyday and not just when we flick on the light switch every morning. Some economists may disagree with me but most of our lives are made easier by this idea. Walmart sells millions of items each year at lower prices than their competitors because they allow the factory producing it to work on the economies of scale principle. The factory that supplies Walmart’s hair ties for them can actually lose money on the first million if they can make money on the second million and the third million and so on.

This impact has given us better lives. We have more income to spend on other things because we can get cheap items at the local Walmart. Even the smart rich people shop there for their daily necessities.

What is the unmeasurable cost of all of this? I believe it is the standardization of our lives. As economies of scale caught on they swept across America. You can see the proof of this in franshises. I’m sure McDonald’s did something right back in the day, maybe even made edible burgers. Today they are just cheap, quick and for children.

Americans, well, everyone in general, love this standardization. We love the fact we can drive 500 miles and stop at our favorite restaurant and order our favorite item and it will taste just like it did in our hometown. I see it all the time in Malaysia as Americans like to hit TGI Fridays and Chili’s. We know what we are getting. Gone is all the guesswork.

Actually, I was shocked by it last year when I moved back to Oklahoma. Ask any person in Oklahoma or Texas what their favorite restaurant is and they will tell you a chain restaurant. Olive Garden, Texas Roadhouse or On the Border. (Ok, may be not EVERYONE) In Bellingham there were many, many more local restaurants. Skylark’s Hidden Café, Grace Café, The Bagelry, La Fiamma, Bob’s Burgers and Brew (now a franchise) are all my favorites. New Orleans is much the same, with many restaurants being one of a kind. In fact, it may be a way to mark the quality of life in a city, by the uniqueness of the restaurants found there. This is a new thought as I write this blog. Oklahoma City definitely has seen the number of restaurants explode with the growth of Bricktown.

This whole idea came about because the other night I was sitting in a Malay food stall and I ordered roti canai. Roti is a staple here, a kind of tortilla that is fried on a griddle and served up with some sort of gravy. That night it was dhal, a lentil based curry that is flavorful but without spice. On the side was sambal, best described as Malaysian salsa without vegetables. I mixed the dhal and sambal and proceeded to devour the roti in a couple of minutes. I sat back and thought about how good it was. I wanted another. So I summoned the waitress and ordered up a second roti canai. Then I started thinking, “Why do I never order a second of anything in the USA?” Then I realized it is mostly due to the economies of scale. It tastes the same every time, everywhere. I have never eaten something and then said, “Wow, that was perfect, give me one more please!” Because everything is standardized, everything tastes more or less the same. Maybe you have been to a bake sale or food fair and had this experience but they are increasingly disappearing from the landscape of the American experience.

Roti canai with dhal and sambal. When done right it is the best thing in the world.

Malaysia still has this unstandardized life. The roti guy at the bottom of the hill makes wonderful roti, crisp the way I like it, and the dhal and sambal blend together into a delectable, savory slurry of perfection. The guy down the road a bit may be selling roti having the consistency of wet socks and gravy that is bland and dull. You never know. And when the cook gets it just right, well, order up another round.

Standardization means the loss of creativity and ingenuity. Take chocolate chip cookies. The recipe is everywhere, most notably on the back of every package of Toll House Morsels sold. So why is that some people can make amazing cookies and others can’t? Well, we decided to get rid of that and now you can buy cookie dough at our local grocery or with your pizza.

We need economies of scale to give us a higher quality of life. But we need to keep them in check so that the uniqueness is maintained and our lives are a bright tapestry rather than a dull, drab coat of gray. If you’ll excuse me, I think I’ll go see the roti guy. There was no teh tarik in the post but in real life there was. Nothing beats a good roti and teh tarik breakfast.