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English: A McDonald's McRib sandwich, as bough...
McDonald’s McRib sandwich, as bought in America. (Photo credit: Wikipedia)

I love the slow food movement.  I get quite a bit of joy from choosing local produce.  I prefer to eat at restaurants that source their meat and dairy locally.  I receive great joy when I try rare or unusual dishes, especially those that never make it into groceries.  I do quite a bit to support the Farmers’ Market and the few local businesses who focus on slow food.

Today, I read a few stories about the reintroduction of McDonald’s McRib sandwich

Now, this is where you probably expect the rant about eating organic and hating commodity food production, but you aren’t going to get it.  Yes, I read several articles decrying the McRib as unhealthy and disgusting.  Most of them went on and on about how it is ‘vaguely anatomically shaped’ and ‘slathered’ in this and that.  All of them went to great lengths to portray McDonald’s customers as impulsive and moronic.  Most spent a good deal of time speculating on the various ways McDonalds takes advantage of these intellectually inferior people.

Basically every article I read was full of pretentious, conspiratorial blather insulting anybody who isn’t a member of some sort of mysterious hippie elite.  Since, despite my love of good food, I eat at McDonalds when I am poor or rushed, I am excluded from being part of this organic chard eating master race.  Not that I wanted to join in the first place, but being excluded pisses me off.  Therefore, I am turning my critical eye on these folks.

I’ll use one of the better written pieces as a target- Willy Staley’s article at The Awl.  This article, titled A Conspiracy of Hogs: The McRib as Arbitrage, offers a variety of points to argue.  Staley is trying to support the idea that McDonald’s uses the McRib solely as the ednpoint of an arbitrage to the general price of pork in the US, suggesting that were this true it is somehow wrong and consumers are somehow victimized by it.  It’s a bit long, but well researched, coherent if not powerful, and overall an interesting read.  Let’s take a look at a few of the points he makes, starting with this quote:

Arbitrage is a risk-free way of making money by exploiting the difference between the price of a given good on two different markets—it’s the proverbial free lunch you were told doesn’t exist.

The use of the term ‘arbitrage’ to describe the relationship between the sale of a finished sandwich and the purchase of one ingredient that goes in that sandwich is simply inaccurate in the first place.  Arbitrage describes the purchase and sale of substantially similar products on different markets.  Staley is using a chart of a generic price per pound for pork, which I can’t source, but it doesn’t seem to be the price of finished pork sandwiches.  That is simply not an arbitrage.  Staley states that the comparison is “perhaps a bit of a reach” but and later outright admits that it is “by definition, not arbitrage” but that doesn’t stop him from using it as the title of the work.  Additionally, the quote above indicates that he believes arbitrage is somehow “risk-free” or a “proverbial free lunch”.  That is absolutely not the case, there is significant risk in real arbitrage strategies.  They are an important part of price discovery and liquidity in every marketplace.  Anybody can participate in these strategies at any level, they are not some sort of evil ploy that only certain organizations can take advantage of.  His statement otherwise is dangerously misleading.

Fast food involves both hideously violent economies of scale and sad, sad end users who volunteer to be taken advantage of. What makes the McRib different from this everyday horror is that a) McDonald’s is huge to the point that it’s more useful to think of it as a company trading in commodities than it is to think of it as a chain of restaurants b) it is made of pork, which makes it a unique product in the QSR world and c) it is only available sometimes, but refuses to go away entirely.

How about this one?  What exactly are “hideously violent economies of scale”?  McDonald’s undoubtedly is able to employ a lot of efficiency through the size of its operations, but it’s odd to call that violent.  What about those “sad, sad end users”?  Does he expect readers to believe that people simply don’t recognize that  McRibs are processed meat?  Perhaps he believes that McDonald’s customers thought the business was a public service and was selling high quality sandwiches at a loss for the greater good?  Ridiculous.

As for the rest, I’m sure McDonalds actually IS a company trading in commodities.  They have to at their scale.  So does every major food chain with every major ingredient in every one of their products.  That is not a differentiator.  Neither is the nature of the sandwich – other fast food chains periodically offer pork sandwiches.  In fact, Burger King had one this summer.  The McRib is far from the only food product with periodic availability.  The ability of a fast food chain to maintain continual availability of the same product at the same price in every location is the aberration, not the norm.  The McRib is merely following a longer cycle than we see with other products.

McDonalds, at least in recent years, has only introduced the sandwich right during this fall price decline (indeed, there is even a phenomenon called the Pork Cycle, which economists have used to explain the regular dips in the price of livestock, especially pigs. In fact, in a 1991 paper on the topic by Jean-Paul Chavas and Matthew Holt, the economists fret that “if a predictable price cycle exists, then producers responding in a countercyclical fashion could earn larger than ‘normal’ profits over time… because predictable price movements would… influence production decisions.” At the same time, they note that this behavior would eventually stabilize the price, wiping out the pork cycle in the process).

Continuing with the main topic, that the author has discovered a great secret about the pattern behind McDonald’s supposed crimes against a gullible public, the article’s tone suggests that McDonalds is doing something improper by timing their reintroduction of the McRib based on pork prices.  Tying his speculation about their decisions to research regarding the fluctuation of pork prices is useful, because it is surely a factor behind McDonald’s decision, but it doesn’t support the tone of the article in any way.  The researchers quoted above are not describing anything unique.  The same process occurs for every commodity and every security- predictable price movements are the result of inefficiencies in businesses producing the economy, utilizing the commodity, or in the markets where the commodity and its derivatives are is traded.  Action by market participants, which may be mega-corporations like McDonalds or individual investors, take larger than “normal” profits as part of a process which reduces the inefficiency.  The action of businesses to leverage a particular product because its price has dropped is both an intelligent business decision and a method of further reducing the inefficiency by propping up the price.  If someone can predict a price they are encouraged to do so and rewarded for taking the risk in trying it.

This proves nothing. It is just correlation—and the sandwich doesn’t always appear when pork prices are low. In fact, the recent data could prove that McDonald’s actually drives pork prices artificially high in the summersbefore introducing the sandwich—look at 2009’s flat summer prices. Could that be, in part, because there was no McRib? On the other hand, food prices were flat across the board in 2009 so probably not. So, no, this correlation proves nothing, but it is noteworthy.)

This part comes after Staley describes repeated instances of McDonald’s introducing the McRib a bit before the bottom of a significant, based on a chart of prices versus the sandwich’s availability.  He is correct, the fact that McDonald’s always chooses to sell the product when it’s precursor commodities are inexpensive does not prove that they are somehow manipulating the price.  It definitely doesn’t prove, or even slightly indicate, that the corporation somehow manipulated prices higher just before introducing it.  That doesn’t even make any sense and it gets worse from here.  I’d blame poor logic on the author’s part for this, but he is actually  agreeing with a variety of authors.

But when dealing with conspiracy theories, especially ones you aren’t quite qualified to prove, one must always consider other possibilities, if only to allow them to reinforce your nutty beliefs.

Until this point, hundreds of words into the work, I had no idea we were even dealing with conspiracy theories.  I thought the article was merely a frank discussion of the cold, hard logic behind McDonald’s decisions.  I suppose I should have guessed we were off the deep end when I saw the bit about McDonald’s manipulating the price of pork.  Counter-conspiracy theory number two is my favorite.

Counter Theory 2: Another counter-theory comes from an online forum, where all good and totally reliable information comes from on the Internet. Here, an alleged graduate from Hamburger University claims that the McRib’s impermanence has nothing to do with pork prices, but rather that it’s a loss leader for McDonald’s—the excitement of a limited-time-only product gets people in the door, as we have noted, and they’ll probably buy the big drinks and fries with the Monopoly pieces on them because they’re, on average, impulsive and easy to fool.

I’m confused at how this is a counter theory.  Is it somehow not possible, or even outright probable, that both the pricing of the product’s input and the excitement of their consumers are considered when timing the product’s reintroduction?  Hell, if I was in charge of McDonalds I’d expect to see some sort of McRib Algorithm modeling the process with hundreds of inputs.  Timing for decisions like this is a serious matter, with mistakes in either direction earning or losing more for McDonalds than either Mr. Staley or I have probably earned in our lifetimes.  

Ultimately what the McRib says about us as a society is perhaps worse than any conspiracy theory about pork prices. The McRib, born at the end of the Volcker Recession, a child of Reagan’s Morning in America, has been with us on and off over the last three decades of underregulated corporate growth, erosion of organized labor, the shift to an “ideas” economy and skyrocketing obesity rates.

True… it’s been with us through three decades.  So have hundreds of other products.  The author never tells us exactly what the McRib ‘says’ about us though.  That’s common with articles like this.  The tone indicates it must be bad, like allowing the McRib to exist probably darkens our souls and eating one surely snuffs out the lives of orphans… but never clarifies the exact crime that a processed pork sandwich reveals.

The fake rib bones, those porky railroad ties that give the McRib its name, are a big middle finger to American labor and ingenuity—and worse, they’re the logical result of all that hard work. They don’t need a pitmaster to make the meat tender, and they don’t need bones for the meat to fall off—they can make their tender meat slurry into the bones they didn’t need in the first place.

How can they be an insult to AND a logical result of the process.  That’s like saying chickens are an insult to the T-rex.  (Wait… maybe I’ll give him that one.)  The point is that everything McDonald’s does is the result of massive labor and ingenuity.  They have a massive supply chain supporting huge numbers of workers.  They’ve had to solve problems on an unprecedented scale, leading the way for similar firms.  They aren’t a slap in the face to American labor and ingenuity- they ARE American labor and ingenuity.  While it may not be the industry Americans are most proud of, fast food is one of the few we are successfully exporting.  Today there are McDonalds locations in more than 100 countries.  Far from destroying local business owners, McDonald’s gives smaller organizations an opportunity to participate in its success.  The majority of McDonald’s locations are owned by franchisees.

And unlike a Low Country barbecue shack, McDonalds has the means to circumvent—or disregard—supply and demand problems. Indeed, they behave much more like a risk-averse day trader, waiting to see a spread between an Exchange Traded Fund and its underlying assets—waiting for the ticker to offer up a quick risk-free dollar.

Again, this is the same sort of faulty logic regarding supply and demand I see displayed across the majority of articles criticizing McDonalds place in American business.  Nobody has the ability to circumvent or disregard supply and demand issues.  Yes – McDonald’s is large enough to make a major impact on the national market for certain commodities, which introduces more problems than it solves.  They can’t even decide to buy a new type of oil without affecting the price of the end product and all its inputs.  In all likelihood, their fondest wish is to avoid affecting markets as much as possible. No action taken by McDonalds executives, or day traders for that matter, is free of risk.  It’s ludicrous to indicate otherwise.

The point of this article, like so many others, seems to be more to keep you reading while the author drops negative comments about the sort of people his readers don’t want to be or don’t want to associate with.  These articles often don’t actually say much of anything, they let the reader gather their own conclusions through emotional reinforcement, without really educating them on anything.  In this case we start off with an informative discussion on a probably (and somewhat obvious) aspect of McDonald’s business strategy, are subtly exposed to negative statements about their customers, encouraged to think that McDonald’s is acting unfairly in the market, and then learn that we’re rationally examining a full on conspiracy theory.  It leaves the idea that something dark and mysterious has been pulled into the light, but there never was a monster in the first place.

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