Tuesday, July 26, 2016

The story of 2 bulls standing on a hill.

There's two bulls standing on top of a grassy knoll. The younger one says to the older one: "Hey pop, let's say we run down there and f*ck one of them cows". The older one says: "No son. Lets walk down and f*ck 'em all".


The young bull asks how that would work,
The old bull starts to explain and a third bull joins them,
This new bull has his own ideas and the 3 start to discuss.
5 years later the bulls are still on the top of the hill,
They are still talking and knee deep in bullsh*t,
the cows have wandered off to the other side of the field,
where a single young bull is having his way with them."


Warren Buffett's, partner Charlie Munger, explains it like this: "On the subject of economies of scale, I find chain stores quite interesting. Just think about it. The concept of a chain store was a fascinating invention. You get this huge purchasing power - which means you have lower merchandise costs. You get a whole bunch of little laboratories out there in which you can conduct experiments. And you get specialization.
If one little guy is trying to buy across 27 different merchandise categories influenced by traveling salesmen, he's going to make a lot of dumb decisions. But if your buying is done in headquarters for a bunch of stores, you can get very bright people that know a lot about refrigerators and so forth to do the buying.
The reverse is demonstrated by the little store where one guy is doing all the buying, It's like the old  story about the little store with salt all over its walls. And a stranger comes in and says to the store owner, "You must sell a lot of salt." And he replies, "No, I don't. But you should see the guy who sells me salt."

Comments, questions or E-mails welcome: ajbrenninkmeijer@gmail.com

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