Mike, the manager at the Dirtlease park in northern New York, recently told the Founder that Mike’s Amish neighbor had asked him if he wanted to have sex with his wife.
‘The feck you say’, the Founder said. ‘Why?’
‘He said that they were so inbred that they needed new DNA, and he wanted me to contribute.’
‘What does this woman look like’, the Founder asked. ‘Is this something you would want to do, you know, unprompted?’
‘Haha, hah, no thanks. I couldn’t even.’
‘There’s a simple work-around, you know.’
‘What’s that?’
‘Don’t marry your cousin.’
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While America’s backsides have been getting fatter, toilet paper has been getting skimpier. A regular Charmin Ultra Soft roll now has 56 sheets. A Charmin Double roll has 154 sheets. In 1992, a regular Charmin Ultra Soft roll had 170 sheets. In 1970, Charmin’s regular roll had 650 sheets of (admittedly single-ply) toilet paper. By 1975, the roll had shrunk to 500. By 1979, it had shrunk to 400. By 1986, the sheet count was 380. By 1988, it was 280. In 1992, Procter & Gamble offered an improved double-layered two-ply roll with 170 sheets. And the sheets have become smaller, as well as less numerous. Between 1970 and now, the size of Charmin’s sheets has gone from 4.5 x 4.5 inches to 3.92 x 4 inches.
Holy crap.
The shrinkage has been caused by an increase in the cost of materials. Toilet paper is made from wood pulp. The cost of wood pulp has increased, due both to climate change-related supply issues and increased demand from developing countries. When the Founder traveled to China in 1989, he found a country where toilet paper was the consistency of eighty-grit sandpaper and was sold in rolls that looked like landscaping cloth. Public bathrooms didn’t stock it. You had to carry it with you. When women excused themselves to powder their noses, they took a wad of coarse brown paper from their bag before heading off to the restroom. Shortly thereafter, the Communist Party embarked on a program of economic development that resulted in 1.4b people demanding Western-style soft toilet paper. These days, when Chinese firms buy up wood pulp on the spot or futures market, they are the elephant in the bathtub. They buy, prices rise.
Shrinkflation has not been limited to the personal tissue space. A small box of Kleenex now has 60 tissues, while it had 65 a month ago. Coffee tins have shrunk. Costco artisan bread has shrunk. Snack food containers have gotten smaller. Gatorade replaced 32-ounce bottles with 28-ounce bottles, but kept the price the same.
Most products subject to shrinkflation share one feature. That is that the cost of supplies is inelastic but the demand for the product is elastic. You don’t need potato chips, but you do need potatoes and oil to make potato chips. You don’t need toilet paper – you can use old copies of The Plain Truth or Awake!, and the Indians and the Japanese get along fine without it – but you need wood pulp to make it. Ditto Gatorade, coffee and yogurt. If manufacturers were to raise the price of these items, consumers would stop using them. To mask that, manufacturers increase the per-unit price but reduce the number of units sold.
The story with respect to products for which demand is inelastic is quite different. When the price of producing insulin goes up, producers increase the price, because they know that people who need it will pay. Same with heroin, heating oil, fentanyl, and gasoline. You can’t mask inflation by shrinking the size of, say, a gallon of gas or a two-by-four. You just jack up the price.
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The Founder recently batted this around with the Chief Economist of the Dirtlease Group. Readers will recall that Economics had been a backwater until the Chief Economist gave a presentation about a bill in the Delaware legislature. The Founder now finds it hard to get on Economics’ calendar. Economics is usually too busy saving the world and dating supermodels to do honest work. The Founder managed to track him down to ask him about something that had been bothering him.
‘Isn’t demand for housing inelastic’, the Founder asked.
The Economist narrowed his eyes to see if the Founder was taking the piss. He told the redhead sitting on his lap, ‘Go buy some candy’.
The redhead pouted. ‘I just bought some’, she said.
‘So, buy some more’.
‘Yes, housing is inelastic’, Economics said, after the redhead left the room. ‘Everyone needs a roof over their head.’
‘Where did you find her’, the Founder asked.
‘A seminar on behavioral economics’, Economics said. ‘She did her PhD on microfinance in Bangladesh.’
‘And the need for inputs to housing are inelastic, I think’, the Founder said. ‘We can’t provide what we provide unless we borrow money, pay taxes, buy supplies and materials, fix the tires on the skid steer and pay our contractors. Correct?’
‘That is right.’
‘So, why can’t we increase prices like a pharma company, or Netflix?’
The Economist gave the Founder a pitying look. ‘Because our parks are located in New York State’, he said. ‘We are subject to rent control.’
‘How does that change the equation?’
‘It makes it impossible to raise revenue to match increases in expenditures.’
‘So – it makes us like a maker of Twinkies. They can’t raise per-package prices because their customers are skittish. We can’t raise ours because of government regulations.’
‘Correct.’
‘We used to provide clean, safe and affordable housing. Now we make junk food.’
Economics pinched the skin on the top of his nose. The Founder couldn’t tell whether he was thinking or suppressing a smirk. ‘You could put it that way’, he said.
The Founder reached for his phone and texted the Head of Strategy. I understand we make Twinkies now, he texted. How can we shrinkflate?
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A week later, the Founder sat in the Head of Strategy’s office. Strategy reclined on a yoga mat. She shifted from cat to cow to up-dog to down-dog and finally to the Founder’s favorite, happy baby. Her leggings distracted the Founder, but he reminded himself that she always had her best ideas mid-asana.
‘What do you suggest’, he asked.
‘First, get rid of club-houses, pools and playgrounds’, she said. ‘They cost money to maintain, but they don’t generate revenue and they are a liability magnet.’
‘Frank and Dave say that’, the Founder said.
‘Cancel the subscription for individual trash collection. Make people pay for their own trash removal.’
‘Would that be a good idea’, the Founder asked. ‘People are used to having us pick up their trash. They might not pick it up themselves when the rules change.’
‘It is worth trying in one park. Like anything else, there would be a learning curve.’
‘What else?’
‘Under the current rent control guidelines, can we bill for septic usage?’
‘If it is a consumption-based fee, the answer is probably ‘yes’. It is impossible to say that a fee of, say, $3 per gallon of water consumed is affected by the six percent rent cap, because you can’t predict usage. I can have Legal look at that.’
‘So, charge for septic.’
‘Anything else?’
‘Stop providing water.’
Strategy was in a cobra pose when she said that. Her weight rested on her elbows and the palms of her hands lay flat on the floor. ‘You’re pulling my leg’, the Founder said.
‘I don’t mean cut off residents’ water supply’, Strategy said. ‘I mean spin that function off’.
‘How so’, the Founder said.
‘Transfer the provision of water to another legal entity. Have the legal entity function as a utility. It would be regulated as a utility, rather than as a mobile home park.’
‘Who would own the legal entity’, the Founder asked. Strategy swung up from cobra into an elbow headstand and looked at him from upside down. ‘Dirtlease, Inc’, she said.
‘What else’, the Founder asked.
‘We could spin off everything – plowing, mowing, trash pickup of common areas – every service provided incident to owning land other than the ownership of the land itself – into another entity that would provide management services that residents would have to pay for.’
‘Too smart by half’, the Founder said. ‘And anyhow, there is a simpler answer’.
‘What’s that’, Strategy asked. The blood had run to her face and made it red as a tomato.
‘Repeal rent control. Don’t marry your cousin.’
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When he left Strategy’s office, the Founder saw Mike waiting outside. That surprised him, because Mike worked at the park in northern New York, far from corporate headquarters. Was there something between Mike and Strategy, the Founder thought. If so, mazel tov. They are both capable, decent, youngish people.
‘What are you doing here’, the Founder asked.
‘Annual cyber-security training and team building’, Mike said. ‘A lot of trust falls and introduce-your-neighbor.’
‘Any more news from your Amish friend?’
‘He wants me to get with his daughter now. She is married to her cousin.’
‘Any interest on your part?’
“God, no. Just – no.’