You Can’t Buy All the Biscuits
Our founder and CEO Brent can be a magnanimous guy and so he stopped into a local bakery the other morning (which will remain nameless, but any denizen of Columbia, Missouri, will know the one I am talking about) to buy breakfast sandwiches for everyone in the office. When he got his turn at the register, the following dialogue ensued:
Brent: 15 breakfast biscuits, please.
Fiercely Independent Bakery Employee: 15 biscuits?
Brent: Please.
F.I.B.E.: That’s all of them.
Brent: Is it?
F.I.B.E.: You can’t buy all the biscuits.
Brent: There are 15 people at my office.
F.I.B.E.: What if someone else wants a biscuit?
Brent: What if someone doesn’t?
F.I.B.E.: You can’t buy all the biscuits.
Brent: How many biscuits can I buy?
F.I.B.E.: Not all of them.
Brent: 14?
F.I.B.E.: Probably not.
Brent: 13?
F.I.B.E: Uh.
Brent: I can’t not bring biscuits for everyone.
F.I.B.E.: Sorry.
And I don’t think he has been back since. But why couldn’t Brent buy all the biscuits? Let’s apply stakeholder theory…
Brent here was a Customer, and while the Customer is not always right, he was right to try to buy 15 biscuits. The F.I.B.E. here needs to sell 15 biscuits, so it would seem like the interests of the Customer and Employee are aligned. It’s also obviously good for the Capital behind the bakery to sell all of its biscuits.
Ergo it seems like a no-brainer to let Brent buy all the biscuits.
Unless you think the world is losing out by the bakery not having any more biscuits to sell that day. Or perhaps the F.I.B.E. did some math in her head on behalf of the Capital and realized that the incremental increase in earnings would be negative to the equity value of the bakery due to an increase to its cost of capital given risks associated with customer concentration.
While I can’t say for certain exactly what reasoning took place, to me it is not good business to not sell your biscuits to a customer you’ve already acquired. We have a saying around the office that small businesses don’t stay small on purpose, but sometimes I guess they do.
– By Tim Hanson