Stupid Expensive Goldfish
I heard a funny story recently from a mom who went into Petco to buy two goldfish for her kids after agreeing to do so. She found them (the goldfish, not the kids) in a tank near the back of the store selling for 29 cents each and asked a salesperson to bag them up.
But hold on, the salesperson said, do you have a tank for them at home?
No, the mom said. I was just going to grab a bowl on the way out and fill it up when I got there.
You can’t do that, the salesperson said. You have to get a tank and then set it up, treat the water, and let it run for three days. After that, if you bring us a water sample and it passes muster, then you can buy the goldfish.
$125 later the mom had a tank and a filter, a collection of chemicals, a fake plant, a small castle and some gravel. Then, three days after that, after her water had passed muster, her kids had 58 cents worth of “stupid expensive goldfish.”
What is going on here?
Observation one is about the power of commitment to influence our behavior (shoutout Cialdini). The mom agreed to get goldfish thinking the cost was de minimis, but still did so even after the cost of doing so rose exponentially. So be aware of what you commit to and under what circumstances, because most of us have a hard time walking those commitments back.
Observation two is that rules make things more expensive. If Petco didn’t care about the well-being of their fish, this was a 58-cent transaction, but since they apparently do, it was a $125.58 three day slog. Is this a brilliant upsell (Petco is private equity owned)? Or do they truly care?
This is relevant because I’ve been thinking about the cost of rules a lot of late. See, Permanent Equity plans to begin experimenting heading into next year with something we never thought we would: boards of directors. The goal here is to regularly convene people with both inside and outside views of a business to discuss long-term objectives, report on progress towards achieving those objectives, and, to the extent that that business is or is not making progress, identify strategies that it might implement to improve performance. This sounds like basic blocking and tackling, and it’s not to say that we weren’t doing this, but absent rules around how and when to do it, we were probably doing it too irregularly and without all of the right people in the room as we’ve grown.
But board meetings are also really expensive. Not only does it take time to implement structure and abide by it, but the constraints imposed by objectives in and of themselves limit open-endedness. So we also don’t want our boards to be like other boards. Our intention is to keep them small, highly accountable, and responsible for making sure each business has a clear plan, but for the cadence of collaborations underlying the process for achieving that not to be regularly, but rather when necessary.
Because if you do things because they have to be done and not when they should be done, you end up with too onerous of a regulatory regime…and stupid expensive goldfish.
-Tim