How Monopolies work

An acquaintance of mine a few years back voiced a stern opposition to school vouchers. I’m going to explain why and exactly how she’s wrong using the example of McDonald’s milkshakes.

A monopoly as defined by Merriam-Webster is,

“[an] exclusive ownership through legal privilege, command of supply, or concerted action; a commodity controlled by one party.”

It doesn’t matter if it’s a single person, a corporation or the government, it doesn’t matter what good or service it is (outside of national defense), when there is a monopoly, it’s almost never good for the little guy.

Here’s a video on why the milkshake machines are “always broken” at McDonald’s. I will summarize and explain below the video.

The franchise model requires that the small business owner who wants to operate as a franchise, must do things in accordance with the franchising company dictates, so the customer has the same products at the same quality no matter where you go. This includes the mandatory use of certain types of equipment or even specific equipment.

The equipment in question is the Taylor C602. You can’t call yourself a McDonald’s Restaurant if you don’t have a Taylor C602 in your store.
The monopolistic issues come into play at this point. Taylor made this machine extremely finicky by design. Like mentioned a couple times in the video, having something simple wrong like too much of the mix in the hopper during cleaning will cause an error and abort the cleaning and sterilization process.
Also, it is designed so no one other than the repair tech can understand what the machine is saying. Instead of saying “product hopper overfull” error, it just says “Z-3804-22” or something like that.

Then you have the service contract. As an ATM/safe repair technician, let me tell you about service contracts.

The simple overview is “a service tech will be on-site within X hours of you calling, during X time range to repair [range of problems].” The time to get on-site is called the SLA (Service Level Agreement) and some of my customers have an SLA of 12 hours 8am-5pm, some had 4 hours 8am-10pm. This meant the SLA clock was running only during those hours. A machine that reported a problem at 9pm had to have a tech in front of it by 11am the next day. One of my customers had a 4 hour SLA if the call came in any time between 8am and 10pm. Yes, I rack up a lot of overtime fixing this stuff.

The overall cost of the contract was based on the SLA level, the number of machines, and what was types of repairs were covered. If a part failed from wear-and-tear, that was covered and there was no charge (beyond the cost of the contract itself) for me to show up and fix it. If the armored car guys who refills ATM’s/pull cash from the drop safe screw up (like putting the cash in the wrong way so it wouldn’t dispense), that would be “not covered by the contract” and “billable.” This meant my visit cost a couple hundred dollars to the bank for me to show up and fix someone else’s mistake. The goal for a reputable business would do their best to sell a product that would work 99.9996+% of the time, and that the owner could correct any minor mistakes caused by their employees. I taught many a teller at the small banks with a “bare-bones” service contract how to fix the minor stuff so I wouldn’t have to be called. The ATMs I service are a quality product that keeps going and going, and any service contract was an insurance policy against the occasional “Bad Things,” like a failed component. All machines fail, the only question is how often and is the failure from normal wear-and-tear, bad/inadequate design, or end-user misuse of the equipment.

When there is competition (multiple companies selling a similar product/service), a company that sells a bad product won’t have anyone buying what they’re selling. This becomes an incentive to deliver the best and most reliable ATM machine at the best price that would not have a tech fixing it every other day.
And then you have the Taylor C602.

I just spent the past 500+ words explaining how reputable and non-monopolistic companies have to operate to stay in business. The next 530 words are going to be the exact opposite.

So here’s a machine that you are required to have. You don’t get a choice like you have between two or three different models of clamshell grills or fryers, you must have a Taylor C602. Taylor knows this and is (literally) making bank on it. Beyond daily use and user maintenance a Taylor C602 is a literal “black box.” Any error is uncorrectable by the staff and requires an authorized technician to fix. It is almost impossible to get a manual for the C602, and the parts are likewise rarer than hen’s teeth. So, a franchisee can’t fix it themselves and is dependent on the service contract like a drug addict is dependent on his dealer. And as explained in the video, 12% of the ice cream machines are down at any given moment. This means the C602 has an 88% overall “up time.” Compare that to an ATM that is supposed to be operational at least 99.96% of the time.

Then you have Taylor boasting that 25% of their revenues come from service contracts. Remember the Ferguson riots? The death of Michael Brown touched it off, but the underlying issue that caused a minor event to explode like it did was that the city government derived 22% of their revenues from fines and penalties, especially from low income people. The city of Ferguson did everything they could to maximize that 22%. I detailed this in an earlier article. In response to this issue, one franchisee (in the tradition of all tinkerers and the American Spirit in general) actually made a box that sat on top of this ice cream machine and translated the codes into something that the store staff could understand and try to correct the problem on their own. The result was the percentage of uptime for C602’s fitted with this device was significantly increased, and the costs of the store went down to having to pay for fewer service calls. Many franchisees, frustrated at the loss of revenue from no operational machine and having to pay Taylor on top of that bought the machines by the gobs.

Taylor responded with, “If one of our service technicians finds this device on our machine, your warranty and service contract is immediately null and void.”
Again, you are required to have and use this machine. If anything goes wrong, you are required to call and pay for a service technician to fix whatever’s wrong with it, even if it’s a minor thing that store personnel could have fixed.

This is a monopoly, plain and simple. And when one has a monopoly, that company has no incentive to improve the product at all. Quite the opposite if there’s a service contract. You end up paying exorbitant costs for a low-quality product. Any improvements or upgrades only raise the price even more. The only way to break a monopoly is to deliver a better product at a lower price AND defeat the powers that make decisions about it. In order to fix McDonald’s problem, they would have to first fire all of the executives getting kickbacks who signed off on this, and put out a RFP (Request for Proposal) for a new (and hopefully better) machine.

Now that I’ve explained all that, let me state that “Public schools are a monopoly.” They are a monopoly that is backed by the State.

Our public school system came about in the 1850’s, when several US educators and the governor of Massachusetts Edward Everett, traveled to Germany to study the Prussian System of Education. The Prussian system was mandatory schooling for all children until the 8th grade. The State collected taxes to fund this system. The next 4 years of schooling (what we call high school, the 9th through 12th grades) the parents had to pay for and were used as preparation for college. This part was likewise emulated here because at the time, once the boys graduated 8th grade, they would apprentice for a trade. Girls would work on getting married, usually to older men in their late 20’s of 30’s. This was because men of that age had developed the skills and income by that age to support a wife and family. That changed when the US schools decided to keep young people in school until they became adults at 18.

Please realize that the Prussian/German society was structured and built on obedience to the State (“The Fatherland”), long before Hitler came to power. This societal aspect of the German people is why Hitler was able to do what he did. But I digress. The philosophy of the Prussian schools, was basically, “The school must fashion the student in such a way that he simply cannot will otherwise than you wish him to will.” In other words, “Think, do and say what the State wants you to do, and nothing else.”

George Carlin said it wonderfully:

“Governments don't want a population capable of critical thinking, they want obedient workers, people just smart enough to run the machines and just dumb enough to passively accept their situation.”

The public school system is a monopoly. You must send your children to school, it’s the law and the parents can be jailed and lose custody of their children for not doing it. So your choices are to send your kids to the “free” school, or pay hundreds or thousands of dollars a month for a private school. Low income families really have no choice. And the public schools, especially in the high density inner-cities, are little more than warehouses for these children. I know, I used to have a service contract with the Memphis City Schools. I’ve dealt with the school bureaucracy fighting for my special needs son. The dropout rate for those schools was 30%. Police officers were assigned to schools, metal detectors were installed, and still fights and shootings were rampant.

And due to Leftist arrogance, most of the people who work at the public schools have the attitude that your children are actually theirs. Here’s an MSNBC commercial from 2013 that proves my point.

Now that you know this, if you’re okay with this kind of mindset, please send your kids to government indoctrination centers public schools.

Now, here’s a solution:
I’m sure you’ve heard of the term “school vouchers,” and almost always spoken of in a bad light. Let me explain what it is and how it works.
An individual school’s budget is determined by the number of students it has, according to a census taken a couple times a year. The local government who runs the schools collects property and other taxes meant for schools, then divides it by the number of students enrolled. This determines the amount each school receives, according to their latest census.

A school voucher is a virtual check that is earmarked to the parents for each of their children. The parents then can take this voucher to any accredited school in the area and use it to pay most or all of the tuition at that school.

In the end, with these vouchers are a lot like Food Stamps. The government gives you a card that you can use at any accredited business to purchase approved food items. So let’s start calling them “Education Stamps.” Parents have a card that they can use to pay for their child’s tuition. If the education costs more than the Education Stamps benefit, you have to pay the difference.

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