Meaning and marginal effects

‘Is diet a form of counter signaling among wealth people?’ wonders Rory Sutherland. “If so it won’t really scale. It will be profitable. It will be large enough, there are enough wealthy people. But if it doesn’t scale beyond the highly educated and well paid then obviously the environmental benefits won’t be so great.”

Though I agree with Rory (a lot) here he’s surprisingly wrong.

Blockbuster Video and Southwest Airlines had the same business model, though they aren’t the only ones to operate this way. For Blockbuster the problem wasn’t everyone having Netflix but some people having it. If they lost 5% of their customers, sometimes their most profitable ones, in any given area that changed the unit economics. The same fixed costs spread over fewer customers meant the non-fixed costs had to change too. The same with Southwest. In the early days of the airline, founder Herb Kelleher told employees they only made money on the last two passengers.

These marginal customers are the reason Rory is wrong here. Much like the first pounds lost on a diet being the most impactful, the first ‘meat consumers’ lost will also have an outsized gain (or is it loss?). But that’s not all! Because the environment is a complex adaptive system, the effects are almost certainly non-linear.

Most of the podcast between Sutherland and Live Kindly’s Jodi Monelle is about delivering value through meaning. Value through meaning is kosher, it’s vegan, it’s carbon free too! Value, Rory says, is ‘Beyond Meat’. It’s like meat, but better. It’s beyond meat. That’s good value.

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