Frugality Creep and Cutting the Right Corners

I had dinner with Scott Faber tonight at Godzila Sushi in San Francisco. Scott’s a great guy, and no, I don’t say that just because he’s 6′ 6". He’s CEO of Ether, part of Ingenio. Ether allows people to provide paid services over the phone (via the web) such as advice hotlines.  I met Scott last week at Auren Hoffman‘s labor day bash where we played celebrity charades.

Our nearly two hour conversation spanned a range of topics — just the way I like it — including but limited to: Writing, feminism and women in the workplace / gender roles, happiness, philanthropy, business and start-up life, steroids in sports, product development, evolutionary psychology, how to use chopsticks (Scott taught me — my first time ever), poverty in America vs. overseas.

Somewhere along the way, Scott relayed a story about cutting little corners. He used the McDonald’s example. He posited that one day the McDonald’s CFO (it’s usually the CFO) said, "You know, if we make the size of our burger patty just a tiny bit smaller, the customer won’t notice, and we’ll save $10 M a year."

When American Airlines removed a single olive from each salad served on a plane, they saved $40,00 a year.

What’s the problem? The problem is when you cut 10 corners in a row. Sure, a single olive gone or a slightly smaller patty doesn’t make a big difference. But take out an olive, a tomato, and the dressing, and suddenly the salad falls apart…and you end up with American Airlines and McDonald’s, and not Southwest Airlines and In n’ Out Burger.

So perhaps the issue is, be frugal and cut costs, but just like software companies must avoid scope creep, any business must avoid "frugality creep".

But the bigger question may be: What are the best corners to cut? In the Google cafeteria, the food is awesome, and the chairs and tables are pieces of shit. That’s a great example of cutting the right corners.

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