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Netflix

8/27/17       
cabmaker

I saw a couple of interesting videos on Netflix this last week.

The first one is called FOUNDER.
It romanticizes the story of how Ray Kroc developed the McDonald's restaurant chain into the behemoth that it is. The first part of the story was especially interesting as it showed how the McDonald brothers used lean manufacturing principles to deliver meals in a tenth of a time as it took their competitors. There is a scene that showed them using a chalk on a tennis court to work through their value stream.

This reminded me of one of my customers who worked at the BlueSky laboratory for Boeing. They have a facility that creates pretend machines out of styrofoam to test possible shop layouts for their manufacturing processes.

The second video is from a PBS series by Ken Burns called THE WAR. It talks about how America mobilized from a backwater country to the world's greatest manufacturing superpower in a period of about six months. It was amazing to see what we could accomplish with a shared vision. The movie contained Japanese aerial footage of the attack on Pearl Harbor that I have never seen before. My father was on the destroyer USS Jarvis during the attack. This ship was credited with being the first ship to open up with 5 inch guns during the attack.

The internet has brought us a lot of unfiltered footage of the carnage of World War Two. It boggles my mind how in this day and age we could still have White Nationalist-KKK-Nazi sympathizers in this country.

How did it become socially acceptable to show your face on TV and say you embrace these principles?

8/27/17       #2: Netflix ...
Pat Gilbert

I saw the Founder as well, good movie, I dug the part you are talking about. Then I was pissed that Kroc swindled the McDonald brothers out of their percentage of the gross.

Then I realized that Kroc brought the finance to the party. And that the McDonald brothers Never would have expanded McDonald's the way that Kroc did.

When you get down to it the reason that the US is the most advanced economy in the world is capital investment period.

You might say there are other reasons and you would be wrong.

As to the other I don't watch PBS, but it would be nice if somebody for once would show the real causes of the war.

8/28/17       #3: Netflix ...
Jerry Cunningham

If you haven't read it yet, everyone on here can benefit greatly by ready the E-Myth by Michael Gerber. The movie portrays the principles of this book perfectly. Ray Kroc was the entrepreneur, one of the MacDonald brothers was the manager, and the other the technician.

Yes The Founder was an amazing movie. If you think about it in a broad perspective, American's are the ones who invented lean manufacturing, and Taiachi Ohno (Toyota) admits he was inspired by American grocery stores just in time replenishment.

Another interesting tidbit I thought was that McDonald's besides being a franchisor was really much more of a real estate developer, that's where the money and long term recurring revenue comes form. Another perfect example of stepping back and realizing that hamburgers only make up a part of the business.

I've heard that Tom Hanks is working with HBO to do a mini series based on the book Factory Man. Anybody here anything else about that?

8/28/17       #4: Netflix ...
David R Sochar Member

The Founder is a great movie, with a story that needs to be told.

One of the interesting parts of the Founder was the struggle between the McDonald brothers and Kroc to keep the quality high. Dry milk shakes were used to solve refrigeration costs, but at what cost at the counter? Kroc would not consider it. He was working for the franchisees, ruthlessly reducing costs - almost art whatever cost. They eventually went back to conventional milk shakes.

I think another point of the movie is a question about the tangent of McDonalds - is it good? It created wealth out of nowhere, but at a cost to the real founders and others - the customers that bought progressively lower quality, but those products were heavily marketed to overcome that fact. Business has no conscience we are told, so carry on.

But McD's has played a pivotal role in the fattening of America. Does it bear any responsibility for that? How would Kroc have handled that?

I wish we could hear a dialogue between the younger Kroc and Morgan Spurlock of the movie Supersize Me!

Boom Like That

8/28/17       #5: Netflix ...
Pat Gilbert

Dave

I have a different take on that movie.

The McDonald brothers did Not create the franchise and had tried franchising and given up on the notion.

Ray Kroc created the franchise.

The wealth was created by hard work and capital investment. Was that domed wine room or the circular stair cases, you build, created out of nowhere?

Supersize me was a propaganda movie, which is an example of logic fallacy.

See the link below to see the real culprits of fattening up America.

How many jobs has McDonalds created? I would guess that the 99 cent menu has fed more indigent people than the government programs. How much wealth has been Created for and by the franchisees? McDonalds is a blue chip stock for a reason.

The real cause of fat America

8/28/17       #6: Netflix ...
Pat Gilbert

When I tell people that I work at the Foundation for Economic Education, they sometimes ask: “What economic ideas should people understand?”
We at FEE have thought about this quite a lot for our articles, courses, seminars, and videos. We have distilled “economic thinking” into 12 key concepts. The following list has guided us internally for a few years, and I figure it’s now time to share it with the world.

1. Gains from trade: In any economic exchange, freely chosen, both parties benefit–at least in their own minds.

2. Subjective value: The value of any good or service is determined by the individual human mind.

3. Opportunity cost: Nothing is free, and the cost of anything is what you give up to get it.

4. Spontaneous order: Society emerges not from top-down intention or planning but from individuals’ actions that result in unplanned outcomes for the whole.

5. Incentives: Individuals act to maximize their own reward.

6. Comparative advantage: Cooperation between individuals creates value when a seller can produce a given item or service at a lower cost than the buyer would spend to produce it himself.

7. Knowledge problem: No one person or group knows enough to plan (and force) social outcomes, because information necessary for social order is distributed among its members and revealed only in human choice.

8. Seen and Unseen: In addition to the tangible and quantifiable effects, there are quite often invisible costs and unmet opportunities to any action or policy.

9. Rules matter: Institutions influence the decisions individuals make. For example, property rights extend from the reality of scarcity which demands that ownership must be vested in individuals and not a collective.

10. Action is purposeful: Each person makes choices with the intention of improving his or her condition.

11. Civil society: Voluntary association permits people of all backgrounds to interact peaceably, create value, cultivate personal character, and build mutual trust.

12. Entrepreneurship: Acting on an opportunity to gather underused, misused, or undiscovered resources and ideas to create value for others.

You might think about all the ways and places these principles appear–as you shop, socialize, and plan your future. As we like to say, economics is everywhere!
Richard N. Lorenc

Link for the above

8/28/17       #7: Netflix ...
cabmaker

The primary problem with The Founder movie was about a half hour in.

There is a scene with Kroc & his wife in a kitchen that clearly has European hinges. I don't think that style of cabinet existed when Kroc was selling this idea to his wife.

8/28/17       #8: Netflix ...
Alan F. Member

cabmaker,
Siematic had the style in 1953, Europe reinvented the cabinetmaking system after WWII, whether Ray Kroc had them in his home is a whole other question.
A

SieMatic History

8/28/17       #9: Netflix ...
cabmaker

Alan,

That is new information to me.
Thank you for correcting my thinking.
(or as Pat would say: disabusing me)

8/28/17       #10: Netflix ...
Pat Gilbert

Disabusing you or Dave of anything is a fools errand.

8/28/17       #11: Netflix ...
cabmaker

Remember: Always better to be edified than merely educated.

8/28/17       #12: Netflix ...
Pat Gilbert

Are you calling me pedantic?

If so I call that projecting...

8/30/17       #13: Netflix ...
Economics 101

OK, boys, settle down.

You don't have to be a McDonald's brother or Ray Kroc or a McDonald's franchisee or even particularly smart to have capitalized greatly on MCD.

All you had to do was buy 100 shares of MCD at 50 bucks anytime between 1965 and 1970. There were literally about a thousand trading days when that could have been routinely done.

And sit on it until today.

What happened to your 5K? (Call it 40K in 2017 dollars.)

9 MCD stock splits over the years have turned your 100 shares into 12,150 shares. Worth 159.38 at today's close. Total value $1,936,467.

A compound rate of return of about 7.8% for 52 years, not counting dividends. 52 years, year after year on average, come Hell or high water.

Today's annual dividend on 12,150 shares at $3.76 each? $45,684.

And about 500K of dividends paid over the previous 40 years (they started paying dividends in 1976.) The dividends take the annual compound real rate of return up to something around 11%. Not bad for a bunch of hamburger slingers.

So what does some schlub who was smart enough to buy a little MCD back in '65 to '70 have for doing absolutely nothing but sitting on it?

An asset worth almost 2 million that's paid him another 1/2 million in dividends along the way and currently pays him more than his initial (real) investment annually in dividends.

I say this as someone who owns MCD (and a lot of other similar stocks) and has owned it for years and years (but unfortunately not since 1970.) The point is that there is a lot of money to be made without being any sort of genius at all.

Now, most guys here don't have an investment horizon of 40 or 50 years, but beyond building your own business and maybe owning the real estate you do it in, one can buy index funds of the Dow or S&P or whatever and do very well over time without having to spend a single minute picking stocks. Or worrying about them.

What I do works for me. Due your own due diligence and don't take this as any sort of investment advice. All I can observe is that there is a case to be made for buying quality public companies and forgetting about them. MCD is just one example of hundreds of similar.

8/30/17       #14: Netflix ...
Alan F. Member

Anybody with a business and employees should consider having a top heavy profit sharing plan (401k).

Let a professional (not a retail broker) invest the plan money and always contribute to the plan. It will cost you between .30 and .45 to give an employee a dollar (including yourself) instead of giving it to Uncle Sam.

8/31/17       #15: Netflix ...
Pat Gilbert

A key to investing is the power of compounding interest, if you are not familiar check it out.

Another key is low cost index funds.

The water analogy, works well for electricity and for money.

You can't hold on to money, you can only channel it. The key is to have reservoirs to channel it into. E.G. take a percentage of all checks and deposit them into a reservoir.

I sense that Tim will accuse me of being pedantic, which is Not the intent. Most probably already know this stuff anyway. If not check it out.

Investing in low cost index funds forum

8/31/17       #16: Netflix ...
Alan F. Member

Compound interest -use the rule of 72 for simple rule of thumb what it earns. Divide 72 by return and get years to double investment.

72/12 (12% return) will double every 6 years. I learned this pre internet.

10/25/17       #17: Netflix ...
Gareth Griffiths  Member

Website: https://synbyte.com

I sadly don't have a Netflix account at the moment to watch it either, but I've heard good things about The Founder. I'm tempted to renew my Netflix subscription just to see it.

Something else I'd recommend watching is The Minimalists documentary which went on Netflix a few months ago. It taught me how to cut the fat off my business. I realized that there was a lot of things that I was doing that was more complicated than it should be and found that when I simplified everything, it made my customers (and myself) understand my business much more. My sales have increased as a result of doing this. Definitely recommended watching.


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