Bloomberg vs Waffle House / a great example of a company that has learned from the past - GoFuckYourself.com

u-Bob · 09-06-2011, 05:31 PM

interesting read for those interested in economics, entrepreneurship and politics.

by Doug French:

Quote:

Mayor Mike Bloomberg's plan for New York City with hurricane Irene bearing down on the Big Apple was to evacuate residents and force businesses to close in low-lying areas. Move in with friends and relatives living on higher ground, stay out of the way, so government's first responders can handle real emergencies was the message.

The result, as one of my friends who lives in Manhattan wondered, "They closed down the city, and all we get is a rainstorm?"

Meanwhile, as Irene ravaged other parts of the eastern seaboard, causing millions to be without power, the eatery of last resort, Waffle House, kept its doors open in many locations, using generators and serving a limited menu designed specifically for emergency situations.

"Hurricane Irene knocked out power in Weldon, N.C., on Saturday evening," writes Valerie Bauerlein for the Wall Street Journal, "but as the sun rose on this tobacco-farming town at 6:30 the next morning, the local Waffle House, still without electricity, was cooking up scrambled eggs and sausage biscuits."

The venerable Waffle House has learned a thing or two about responding to crisis, given their locations up and down the eastern seaboard. Panos Kouvelis, PhD, the Emerson Distinguished Professor of Operations and Manufacturing Management and director of the Olin's Boeing Center for Technology, Information, and Manufacturing explains, "The companies that are most frequently exposed to supply-chain disruption are the ones that have the best risk management plans."

Kouvelis instructs his students about the "Waffle House Index" first coined by Federal Emergency Management Agency Director W. Craig Fugate in the wake of the Joplin, Missouri, tornado in May this year.

If the index is green, Waffle House is open with a full menu. If Waffle House is only serving a limited menu, the index is yellow; and if Waffle House is closed, the index is red.

A red index is rare. Waffle House management will do anything not to close.

"They know immediately which stores are going to be affected and they call their employees to know who can show up and who cannot," Kouvelis says.

They have temporary warehouses where they can store food and most importantly, they know they can operate without a full menu. This is a great example of a company that has learned from the past and developed an excellent emergency plan.

The company even has a mobile command center that looks to be a rolling Waffle House restaurant. The RV is known as EM-50, named after Bill Murray's urban-assault vehicle in the 1981 movie Stripes. When bad weather looms, EM-50 is mobilized. Sales volumes can double after a storm, when cooking a hot meal at home is often impossible. So company managers have every incentive to be staffed up, supplied up, and open for business. At the corporate level, items such as eggs and ice will be shipped to warehouse staging locations outside of harm's way, ready when stores need them most.

Bauerlein explains that the Waffle House

hurricane playbook explains how to reopen a restaurant and what to serve if there is gas but no electricity, or a generator but no ice. An important element is limiting the menu so the company's supply chain can focus on keeping certain items stocked and chilled or frozen.

Because of this planning, district manager Chris Barnes had the only restaurant along I-95 in North Carolina that was open after the storm.

What professor Kouvelis leaves out is the Hayekian insight that Waffle House gains its knowledge through market mechanisms for discovery, communication, and use of knowledge in the allocation of productive resources.Download PDF Waffle House can only serve customers and make money if they are open. The company does little advertising and doesn't hold press conferences. The secret to its success is serving good food and always being available. This may involve being open but only serving a few items. By narrowing their focus, the company can more effectively ensure that it can push a limited number of ingredients through a disrupted supply chain. The company would only breed dissatisfied customers if it remained open only to run out of eggs or hash browns.

According to Pat Warner, a member of the Waffle House crisis-management team, in the short-run, the profit motive is secondary to building customer good will.

If you factor in all the resources we deploy, the equipment we lease, the extra supplies trucked in, the extra manpower we bring in, a place for them to stay, you can see we aren't doing it for the sales those restaurants generate.

Customers appreciate it and depend upon it.

"I hadn't had a hot meal in two days, and I knew they'd be open," Nicole Gainey told the WSJ.

Meanwhile, Mayor Bloomberg has no market mechanism to punish him or his city government if he overreacts. While private citizens were inconvenienced and local businesses lost revenue, the mayor frequently mugged for cameras during the storm, issuing warnings in English and Spanish. City hall didn't lose a thing and now pats itself on the back for being prepared.

Two kayakers who were rescued after their boats capsized off Staten Island during the storm were issued summonses by the city. The mayor told reporters that being in the water was "reckless" and their needed rescue had "diverted badly-needed N.Y.P.D. resources." City government was only interested in herding people and stopping commerce prior to and during the storm, not "protecting and serving."

And while Irene did much less damage than expected to Manhattan on Sunday, subway service did not resume until 5:40 a.m. the following Monday. Evidently, that's close enough for government work.

"Today government worked," Governor Andrew M. Cuomo is quoted in a press release from the governor's office.

Days of preparation and coordination prevented much injury and loss. The MTA will begin resumption of subway service Monday morning. I applaud the good work of the thousands of MTA professionals, National Guard and first responders for their advanced planning.

Ludwig von Mises held the view, as summarized by Murray Rothbard, that even if Mayor Bloomberg had the knowledge that Waffle House has gained over the years, "they still would not be able to calculate, for lack of a price system of the means of production. The problem is not knowledge, then, but calculability."

Either way, with no market to compete in, New York City government doesn't worry about developing good will. Waffle House, on the other hand, "has built a marketing strategy around the goodwill gained from being open when customers are most desperate," writes Bauerlein.

Government monopolies have the incentive to provide the least amount of service for the highest cost. So, the government brass suspends services and tells their constituents to go away and come back when it's more convenient. Meanwhile, Waffle House fires up the generators, eager to serve their faithful customers in the worst of conditions.

Joshua G · 09-06-2011, 07:07 PM

so the article is comparing keeping a restaurant chain open with keeping open the largest city in the world. Hmmm which one is easier to manage in a hurricane.

& the business is innovative for preparing, but the government messed up by preparing because the storm wasnt big.

this trash was written by a bafoon.

Sly · 09-06-2011, 07:44 PM

That article is written horribly. What is the comparison? They are completely different ballparks. And is the author championing or bashing Bloomberg? He is upset that the subways were not running earlier?

The Heron · 09-06-2011, 10:14 PM

Actually I did find it odd that the subway wasn't running quicker, seems it is a critical system and should have enough manpower and resources to resume service much faster.

L-Pink · 09-06-2011, 10:24 PM

Quote:

Originally Posted by The Heron

Actually I did find it odd that the subway wasn't running quicker, seems it is a critical system and should have enough manpower and resources to resume service much faster.

Maybe the subway workers and their families evacuated too.

.

media · 09-06-2011, 10:29 PM

I'd rather see over reaction and a minor storm with minimal casualties.. Rather than underestimating the situation and having thousands of dead and injured.. Good for Wafflehouse though I guess????

raymor · 09-06-2011, 11:43 PM

The author would rather have a Blanco, who refused to federal assistance until the city had been under water for two days, or a Nagin, who refused to allow Amtrak to evacuate people, sending the trains away empty?

BSleazy · 09-07-2011, 12:04 AM

Where's UBOB when I need him

My Pimp · 09-07-2011, 01:00 AM

Very interesting article .

V_RocKs · 09-07-2011, 01:00 AM

cliff notes?

kane · 09-07-2011, 01:27 AM

I guess I don't see the comparison. If Waffle House has prepared itself to stay open at all costs they do so because they choose to and are willing to take the risk Vs the reward of that extra business.

With a city full of people you can't take that risk. If you think things are going to get ugly you have to tell people to get out and do whatever you can to help them do so. Had Bloomberg not done this and had things gone ugly and 1000's died he would have been crucified by the media.

Joshua G · 09-07-2011, 08:14 AM

author sounds like a fox news analyst got in a tizzy 'cause the trains didnt get running the moment the storm turned out flaccid.

Relentless · 09-07-2011, 08:22 AM

If the waffle house stays open and is wrong they lose a few grand.
If the government doesnt evacuate and is wrong people die.

It's a comparison of apples and hand grenades.

u-Bob · 09-07-2011, 09:44 AM

Ok, I'll explain what I got from the article

* Economic incentives. Heavily subsidized companies or government agencies get paid no matter what happens. A private company like Waffle House has to be open and serve its customers to get paid.

* Dealing with Black Swans: In his book "The Black Swan", Nassim Nicholas Taleb talks about rare events that have a high impact on people's lives.

People often respond to these kinds of events by constructing massive structures they believe will be robust enough to withstand future "Black Swan events". This is however usually not very effective and comes at a great cost.

If you look at military history for example, you'll see that armies are often prepared to fight the previous war. At the eve of World War II, the French and British armies were prepared for a First World War type of trench warfare. The French had their massive concrete fortresses (that the Germans just ignored), the British had their heavily armored Mathilda tanks (that could be outrun by a German soldier on a bicycle).

While a hurricane in a country that is regularly struck by hurricanes is not a Black swan event per se, this Waffle House scenario does illustrate the different ways one can respond to "high impact events".

What we have here is essentially a centrally structured organization (focus on top-down) vs an organization that is structured to support local initiatives (focus on bottom-up).

Bloomberg applied the classic let's-hide-inside-the-castle-at-the-first-sign-of-danger approach while Waffle House's risk management plans focus on flexibility. Each one of the Waffle House stores is (or was) in a different situation. Waffle House focuses on maximizing the output (services) of each Waffle House store based on each store's potential and situation (and had a flexible network in place to do so), Bloomberg focused on reducing exposure everywhere at the cost of providing services.

On the comments in this thread:
- I have no idea what party Bloomberg belongs to. OP was not political or whatever.
- Waffle House managers are just as responsible for the lives of their employees while they're at work as the mayor of New York is for its citizens. One could even argue that Waffle House's image would suffer even more than the mayor's if anything happened to a Waffle House employee while serving waffles.
Besides... A life lost is always a tragedy.
- The size of the organization doesn't matter. Whether it's one of the biggest cities in the world or a chain of waffle stores. If anything, that large city probably has a lot more resources than a chain of waffle stores.

Joshua G · 09-07-2011, 11:03 AM

Quote:

Originally Posted by u-Bob

Ok, I'll explain what I got from the article

* Economic incentives. Heavily subsidized companies or government agencies get paid no matter what happens. A private company like Waffle House has to be open and serve its customers to get paid.

government agencies are not for-profit entities & have responsibility over public safety without a profit motive. Would the public be safer if the govt tried to profit by underpreparing for a hurricane?

Quote:

Bloomberg applied the classic let's-hide-inside-the-castle-at-the-first-sign-of-danger approach while Waffle House's risk management plans focus on flexibility. Each one of the Waffle House stores is (or was) in a different situation. Waffle House focuses on maximizing the output (services) of each Waffle House store based on each store's potential and situation (and had a flexible network in place to do so), Bloomberg focused on reducing exposure everywhere at the cost of providing services.

again, comparing responsibility for public safety with keeping a restaurant chain open is folly. waffle house does not worry about cars driving over bridges with 75 mph wind gusts. does not worry about flooding subway cars. does not worry about people living in flood zones. Waffle house worries about eggs & power being at a store. absurd to compare these things like waffle house is doing something right & the govt is doing something wrong by exercising abundant caution over a forecasted category 2 hurricane.

Quote:

One could even argue that Waffle House's image would suffer even more than the mayor's if anything happened to a Waffle House employee while serving waffles.

Waffle house was not keeping stores open throughout the hurricane & was not putting their employees lives at risk. I would suggest the mayor of NY would get a lot more flack for being unprepared vs a waffle house not having eggs.

Quote:

- The size of the organization doesn't matter. Whether it's one of the biggest cities in the world or a chain of waffle stores. If anything, that large city probably has a lot more resources than a chain of waffle stores.

yes, the city of manhattan has more resources then a waffle chain. Nobody died because the mayor neglected to do his job. He gets an A. Waffle house was able to function when other restaurants could not. They get an A as well.

so the subways opened at 5AM monday instead of noontime sunday. What a fucking failure...

u-Bob · 09-07-2011, 01:42 PM

Quote:

Originally Posted by joshgirls

government agencies are not for-profit entities & have responsibility over public safety without a profit motive. Would the public be safer if the govt tried to profit by underpreparing for a hurricane?

The government is an organization like any other. An organization that has a certain objective (providing service X or service Y, making money by doing Z, helping A or B by doing C...) and has certain resources available. These resources didn't come falling from the sky like manna, they have a cost. The Laws of economics apply to every organization, regardless of its objectives.

Quote:

again, comparing responsibility for public safety with keeping a restaurant chain open is folly.

The objectives of the organization are not the point here. The point is that there are different ways to run an organization. The flexible approach used by Waffle House allowed for a higher output of services (based on the resources available and taking into account the risks involved) than the city of New York's approach.

Quote:

waffle house does not worry about cars driving over bridges with 75 mph wind gusts. does not worry about flooding subway cars. does not worry about people living in flood zones.

Waffle House is not running an emergency service or a security firm. Like I said, it's not about the objective of the organization, it's about effectively and efficiently dealing with a problem. One could tell everyone to stay inside for 2 more days after the hurricane passed.. just to be safe. The question is; what are the opportunity costs associated with that decision and are they justified?

The writer referred to 'economic calculation' and how it was not available to Bloomberg. What the writer did was give a possible explanation of why 2 different organizations moved into 2 different directions in regards to their risk management plans. Waffle House went the flexible way. The City of New York went the hide-in-the-castle way. The absence of economic incentives (as in a direct responsibility for the costs involved) could explain that.

Quote:

Waffle house was not keeping stores open throughout the hurricane & was not putting their employees lives at risk. I would suggest the mayor of NY would get a lot more flack for being unprepared vs a waffle house not having eggs.

I never said anything about Waffle House not having eggs.

Quote:

yes, the city of manhattan has more resources then a waffle chain. Nobody died because the mayor neglected to do his job. He gets an A. Waffle house was able to function when other restaurants could not. They get an A as well.

so the subways opened at 5AM monday instead of noontime sunday. What a fucking failure...

I sense a certain hostility in your post *insert pic of Sheldon Cooper*

bronco67 · 09-07-2011, 01:53 PM

Because the waffle house chain and NYC are like the same kind of thing????

If anything this article shows what you'd expect from a place called "Waffle House". The owners are at the same mental level as the mouth-breathing patrons.

ManPuppy · 09-07-2011, 02:01 PM

Comparing apples and waffles.
HAAAAAAAAAAAAAAAAAAAAA.

JamesGw · 09-07-2011, 02:37 PM

Article makes no sense.

Also, Bloomberg is an incredibly successful businessman. I don't think he needs tips from Wafflehouse. Dude could buy the company with the change in his pocket.

u-Bob · 09-07-2011, 02:54 PM

Quote:

Originally Posted by JamesGw

Also, Bloomberg is an incredibly successful businessman. I don't think he needs tips from Wafflehouse. Dude could buy the company with the change in his pocket.

Having made a lot of money doesn't mean one has no longer anything to learn. You can learn new things until the day you die.

What made Waffle House what it is today: hard work. No financial alchemy from the Wall Street wizards. Just plain old serving the customer what they will trade their dollars for, watching costs, growing with retained earnings and a risk management plan that focuses on flexibility.

09-06-2011, 07:44 PM	#3
Sly Let's do some business! Industry Role: Join Date: Sep 2004 Location: Austin, TX Posts: 31,319	That article is written horribly. What is the comparison? They are completely different ballparks. And is the author championing or bashing Bloomberg? He is upset that the subways were not running earlier? __________________ Vacares - Web Hosting, Domains, O365, Security & More - Paxum and BTC Accepted Windows VPS now available - 3 months free for GFY members - 3 slots available Great for TSS, Nifty Stats, remote work, virtual assistants, etc. Click here for more details.

09-06-2011, 10:29 PM	#6
media Confirmed Moneymaker Industry Role: Join Date: Apr 2002 Location: Eugene, OR It's Like Jail, Only with Trees! Posts: 9,852	I'd rather see over reaction and a minor storm with minimal casualties.. Rather than underestimating the situation and having thousands of dead and injured.. Good for Wafflehouse though I guess???? __________________ I'm here for the violence!

09-06-2011, 11:43 PM	#7
raymor Confirmed User Join Date: Oct 2002 Posts: 3,745	The author would rather have a Blanco, who refused to federal assistance until the city had been under water for two days, or a Nagin, who refused to allow Amtrak to evacuate people, sending the trains away empty? __________________ For historical display only. This information is not current: support@bettercgi.com ICQ 7208627 Strongbox - The next generation in site security Throttlebox - The next generation in bandwidth control Clonebox - Backup and disaster recovery on steroids

09-07-2011, 12:04 AM	#8
BSleazy Confirmed User Industry Role: Join Date: Aug 2002 Location: USA Posts: 6,721	Where's UBOB when I need him __________________ icq 156131086

09-07-2011, 08:22 AM	#13
Relentless www.EngineFood.com Industry Role: Join Date: Aug 2006 Posts: 5,697	If the waffle house stays open and is wrong they lose a few grand. If the government doesnt evacuate and is wrong people die. It's a comparison of apples and hand grenades. __________________ Website Secure \| Engine Food ICQ# 266-942-896

09-06-2011, 07:07 PM	#2
Joshua G dumb libs love censorship Industry Role: Join Date: Jul 2008 Posts: 8,198	so the article is comparing keeping a restaurant chain open with keeping open the largest city in the world. Hmmm which one is easier to manage in a hurricane. & the business is innovative for preparing, but the government messed up by preparing because the storm wasnt big. this trash was written by a bafoon.

09-06-2011, 10:14 PM	#4
The Heron Confirmed User Industry Role: Join Date: Apr 2001 Location: Michigan Posts: 4,487	Actually I did find it odd that the subway wasn't running quicker, seems it is a critical system and should have enough manpower and resources to resume service much faster.

09-07-2011, 01:00 AM	#9
My Pimp Confirmed User Join Date: May 2003 Posts: 1,201	Very interesting article .

09-07-2011, 01:00 AM	#10
V_RocKs Damn Right I Kiss Ass! Industry Role: Join Date: Dec 2003 Location: Cowtown, USA Posts: 32,406	cliff notes?

09-07-2011, 01:27 AM	#11
kane Too lazy to set a custom title Join Date: Aug 2001 Location: portland, OR Posts: 20,684	I guess I don't see the comparison. If Waffle House has prepared itself to stay open at all costs they do so because they choose to and are willing to take the risk Vs the reward of that extra business. With a city full of people you can't take that risk. If you think things are going to get ugly you have to tell people to get out and do whatever you can to help them do so. Had Bloomberg not done this and had things gone ugly and 1000's died he would have been crucified by the media.

09-07-2011, 08:14 AM	#12
Joshua G dumb libs love censorship Industry Role: Join Date: Jul 2008 Posts: 8,198	author sounds like a fox news analyst got in a tizzy 'cause the trains didnt get running the moment the storm turned out flaccid.

09-07-2011, 09:44 AM	#14
u-Bob there's no $$$ in porn Industry Role: Join Date: Jul 2005 Location: icq: 195./568.-230 (btw: not getting offline msgs) Posts: 33,063	Ok, I'll explain what I got from the article * Economic incentives. Heavily subsidized companies or government agencies get paid no matter what happens. A private company like Waffle House has to be open and serve its customers to get paid. * Dealing with Black Swans: In his book "The Black Swan", Nassim Nicholas Taleb talks about rare events that have a high impact on people's lives. People often respond to these kinds of events by constructing massive structures they believe will be robust enough to withstand future "Black Swan events". This is however usually not very effective and comes at a great cost. If you look at military history for example, you'll see that armies are often prepared to fight the previous war. At the eve of World War II, the French and British armies were prepared for a First World War type of trench warfare. The French had their massive concrete fortresses (that the Germans just ignored), the British had their heavily armored Mathilda tanks (that could be outrun by a German soldier on a bicycle). While a hurricane in a country that is regularly struck by hurricanes is not a Black swan event per se, this Waffle House scenario does illustrate the different ways one can respond to "high impact events". What we have here is essentially a centrally structured organization (focus on top-down) vs an organization that is structured to support local initiatives (focus on bottom-up). Bloomberg applied the classic let's-hide-inside-the-castle-at-the-first-sign-of-danger approach while Waffle House's risk management plans focus on flexibility. Each one of the Waffle House stores is (or was) in a different situation. Waffle House focuses on maximizing the output (services) of each Waffle House store based on each store's potential and situation (and had a flexible network in place to do so), Bloomberg focused on reducing exposure everywhere at the cost of providing services. On the comments in this thread: - I have no idea what party Bloomberg belongs to. OP was not political or whatever. - Waffle House managers are just as responsible for the lives of their employees while they're at work as the mayor of New York is for its citizens. One could even argue that Waffle House's image would suffer even more than the mayor's if anything happened to a Waffle House employee while serving waffles. Besides... A life lost is always a tragedy. - The size of the organization doesn't matter. Whether it's one of the biggest cities in the world or a chain of waffle stores. If anything, that large city probably has a lot more resources than a chain of waffle stores. Last edited by u-Bob; 09-07-2011 at 09:48 AM..

09-07-2011, 01:53 PM	#17
bronco67 Too lazy to set a custom title Join Date: Dec 2006 Posts: 29,032	Because the waffle house chain and NYC are like the same kind of thing???? If anything this article shows what you'd expect from a place called "Waffle House". The owners are at the same mental level as the mouth-breathing patrons. __________________ Last edited by bronco67; 09-07-2011 at 01:55 PM..

09-07-2011, 02:01 PM	#18
ManPuppy Confirmed User Industry Role: Join Date: Aug 2011 Location: Tampa Bay, Florida, USA Posts: 407	Comparing apples and waffles. HAAAAAAAAAAAAAAAAAAAAA. __________________ Manpuppy.com - Gay Dad & Son and Light Fetish Affiliates: http://www.manpuppy.com/affiliates

09-07-2011, 02:37 PM	#19
JamesGw Confirmed User Industry Role: Join Date: Apr 2011 Posts: 1,237	Article makes no sense. Also, Bloomberg is an incredibly successful businessman. I don't think he needs tips from Wafflehouse. Dude could buy the company with the change in his pocket. __________________ Giggles.com has a huge selection of sex toys. Need backlinks? Ask to guest post on our adult blog.