Russ Miller

8/14/2019 Russ Miller

http://slidepdf.com/reader/full/russ-miller 1/21



Chow Hall Economics

• I have been fascinated with military chow halls for decades

• Competing explanations for this fascination:1. I worked at a chow hall for one week in boot camp (everyone has todo a week of slave labor somewhere; the chow hall has the mostbillets)

2. More misspelled signs occur in chow halls than anywhere else (e.g.,

the word ‘consummerate’ comes from a chow hall sign)3. Chow halls offer excellent demonstrations of fundamental laws of

economics

4. I’m fascinated with chow, period

• For purposes of this exercise, let’s assume 3) is correct

• The next page shows some of my work on chow halls from2002.

R u s s M i l l e r

N o t I n t e l C o n f i d e n t i a l 1 4 J a n 2 0 1 0

2



R u s s M i l l e r


3



R u s s M i l l e r

N o t I n t e l C o n f i d

e n t i a l 1 8 D e c 2 0 0 9

4

Half a world away, chow halls are still good for badspelling and punctuation…

4

R u s s M i l l e r




Dark Calories

R u s s M i l l e r


5

…and bad math. Let’s see,

protein and carbohydrateshave 4 cal/gram, and fatshave 9 cal/gram…



R u s s M i l l e r


6

My favorite kind of pork roast

Frozen Chili Mac?

Chow halls also continue tooffer interesting menu items.My interest today, though, isin how they demonstrate the

following concept: Given enough time, people will eventually do what is in their economic interest, even if they don’t understand why.



R u s s M i l l e r

N o t I n t e l C o n f i d e n t i a l 1 8 D e c 2 0 0 9

7

Whose economic interest?

Not the taxpayers, certainly.Here we are washing our handswith mineral water that probablycosts several dollars per bottle(mostly transportation) becausethe plumbing has turned off forthe umpteenth time this week.

In my years as a Marine, chowhalls have converted from fullymilitary run (when I joined), topartially privatized (CampPendleton, 2002), to fully run by

contractors (today). Yet at alltimes, the halls seem to be runin the financial interest of themanagers. This is remarkablewhen you consider who the

managers are.

7

R u s s M i l l e r




R u s s M i l l e r

N o t I n t e l C o n f i d e n t i a l 1 8 D e c 2 0 0 9

8

Who works in chow halls?The text below was written ~20 years ago (in WordPerfectfor DOS), a reflection on my time at Parris Island. And yes,

the story had a happy ending: Fletcher was permanentlyassigned to chow hall duty upon graduation.

8

R u s s M i l l e r


‘Talk about ugly.’ The platoon was in shock. Private Fletcher, had just muttered,

loud enough for everyone to hear, the undeniable truth about Drill Instructor Sgt

Maloney. Any other DI would have had Fletcher doing pushups until his heartexploded. Maloney, cool as always, merely asked the recruit sitting next toFletcher to confirm what he had said.‘Sir, the private said, ‘Talk about ugly,’ sir.’

‘That’s right Fletcher, I am ugly. Everyone says so, except my wife, and she has

piss-poor taste. The Marine Corps is the one place where nobody cares that I’mugly – where they even like it. Fletcher, I used to work in Legal, and I have lotsof friends there who will do favors for me. Do you want to work in a chow hall,Fletcher? Sixteen hour days of scraping shit off plates in a room that smells likea sewer – and I can make sure you’re a private the whole 4 years. So yes, I’m

ugly, but you, Fletcher, you will wake up every day for 4 years thinking abouthow much you hate me.’



How did Fletcher figure this out?

R u s s M i l l

e r


9

Historically, chow halls were populated with the dregs of the Marine Corps, Fletcherincluded (now the dregs are distributed across the Corps in multiple specialties, and wethink this makes them smarter, but that’s another story). This bevy of Fletchers, suitably

promoted, still figured out how to maximize their profit. Basically, the chow hall wascompensated a flat $3 per meal for every Marine who came through the door.



Incentive Structure, Old Corps• Fletcher got $3 for each Marine he could lure through the door.

• It was pointless to try to get EVERY Marine through the door, because that would

have taken an extremely expensive meal, like lobster or crab legs. Also, thesupply of Marines was limited (although sometimes Marines could come fromother nearby camps, so there wasn’t a hard limit).

• Therefore, the game was to find the cheapest possible meal to lure lots of theMarines through the door (nobody cared how the others fed themselves).

• For example, it was better to get 60% of the Marines through the door with a

$1.50 meal than to get 80% with a $2.50 meal. Fletcher may not have understoodthis, but economics drove him to practice it.

• The ‘profit’ in this case was used to pay fixed operating costs (charitable

interpretation), build reserved covered parking spaces for chow hall employees(balanced interpretation), or for straight embezzlement (cynical interpretation).

• The sad thing: it doesn’t take much to lure 60% of Marines through the door. For example, this menu suffices: hot dogs, French fries, hot liquid cheese, fake Kool-Aid, and chocolate cake. Fruits and vegetables are never worth the cost. If theyare, ones in poor condition a) cost less, and b) are hardly taken, meaning thechow hall can pretend to offer healthy foods without having to dispense any.

• Note the incentive for collusion: two nearby chow halls both have the incentive to

serve crappy food, lest they get into a bidding war for customers.

R u s s M i l l e r


1 0



Incentive Structure, 2010

R u s s M i l l e r


1 1

I honestly don’t know how these contractor -run chow halls are compensated. I do know, a) therewere some chow-related contracting scandals in Iraq, b) it costs $3000/day to keep a Marine inAfghanistan so there should be plenty of money to go around, c) They definitely serve moreexpensive chow than required, d) I am not currently paying federal taxes, e) you are.

A good DOE. Here aretwo mirror image chowhalls that compete for ourbusiness, sometimesposting little men in theentryways to entice usinto one hall or the other.

Clearly, they are still paid by the meal served. Beyond that, I don’t

have any idea if it is a fixed price contract, a cost-plus contract, orwhat. By the way, these are two of the first real buildings here(where plywood + Tyvek = real building)



Quiz – why does this make sense?

R u s s M i l l e r


1 2

On grape day, they mix crisp, seedless,green grapes with highly seeded purple

grapes (4 large, widely separated seedsper grape). You can probably guesswhat I do with the all-purple bowl atlower left (it costs $3001/day to keepme alive here). Anyway, I am entirelyconvinced that a) as their contract iswritten, this makes economic sense, butb) I have no idea why. Any ideas?



Mixed nuts in the private sector

1 3

R u s s M i l l e r


Now consider the simple case of a company (not a government) that sells mixed nuts (not grapes). Assume:•They already sell pure peanuts and pure almonds•They add a mixed nut product to their line consisting of almonds and peanuts in some ratio•They can determine the optimal price point for each nut ratio

Over the years, they have probably determined an empirical curve of their incremental profit from the mixed nutproduct. It probably looks something like the curve below, with maximum profit at ~80% peanuts. Note that this isprobably not the optimal point for consumer preference. Consumers probably prefer a richer mix of almonds, justas they prefer 2x6 construction to 2x4 construction; they just aren’t willing to pay for it.

Some things that make this case easy:•It is simple to test different mixtures and see how customers respond•We can assume that customers rarely pick through the nuts and throw out the inferior ones, since they paid forthem



A harder case: mixed nuts in a chow hall

R u s s M i l l e r


1 4

Now consider a Marine chow hall that sets out a tray of mixed peanuts and almonds ateach meal. Assume they want to bilk the government out of every possible nickel. What

ratio should they use? Complicating factors:•Pure almonds or pure peanuts are NOT available•Some customers will throw out large numbers of one type of nut in order to get theother type. In fact, all of you know at least one such person.•For every nut someone eats, there is probably some other food item in the same chowhall that they don’t eat that also affects profits.

•We know the relative cost of almonds to peanuts (here assumed to be 3:1), but wedon’t know the inherent demand for each. For example, if they gave out pure almonds,

and used $900 worth each week, we have no way to determine how much they wouldhave given out in pure peanuts, had that been the only choice. In general, the answerwould NOT be $300, since the demand would probably be different. For example,lobsters might cost 10X as much as beets. We would not assume that a chow hall with

unlimited lobster and unlimited beets would spend 10X as much on lobster as on beets.•We know little about customer preference of mixtures. With some foods, demandprobably goes up as two components are mixed (consider the raisin/bran system). Withother combinations, demand probably goes down (consider the lobster/beet system).•As previously noted, I don’t even know what the incentive structure is. Are they trying to

get rid of as many nuts as possible, or as few? Stuff us full of high energy density food?



Assume all non-peanuts are almonds

R u s s M i l l e r


1 5

Some days, there are other nuts besidespeanuts and almonds. I will simplify the true

situation by assuming all non-peanut nuts costthe same as almonds.The chow hall sometimes offers little bags oftrail mix. These are always divided as shownbelow. (This mix also claims to includecashews, but the median number is 0 per bag).



Different types of customers

1 6

•Indifferent – someone who takes the same amount irrespective of peanutpercentage•Mix Lover – someone who takes more as the distribution approaches 50/50•Moral Almond Lover – someone who takes less as %almonds decreases, but

eats everything•Moral Peanut Lover – someone who takes less as %peanuts decreases, buteats everything•Almond Allergy – someone who only takes a pure peanut mix (leadingsymptom of almond allergies is death)

•Peanut Allergy – someone who only takes a pure almond mix (leadingsymptom of peanut allergies is death)•Russ – someone who takes a fixed number of almonds, but throws awaypeanuts up to a very rich mix (this curve will probably shift even further to theright as time continues)

•Anti-Russ – someone who takes a fixed number of peanuts, but throws outalmonds (clinically insane)

Each type of customer described below will have a different costfunction based on the peanut/almond mix. Functions are plotted

on the next page.



Cost vs. Peanut Percentage, by customer type

1 7

R u s s M i l l e r


Cost = 1 is what Iwould eat if pure

almonds wereavailable



Same graph, for combined population

1 8

R u s s M i l l e r


One can generate weighted combinations of thecurves from the last page. Three attempts aregiven here. Obvious questions:1. Is there any mix that will result in higher cost

than pure almonds?2. Is there any mix that will result in lower cost

than pure peanuts?3. What ratio should a contractor-run chow hall in

Afghanistan offer to maximize profit?



Why none of this matters• As I was enjoying my second lobster tail last night, while seated right by

the chow hall’s corn dog kiosk, it occurred to me that all of the preceding

is meaningless, because in Afghanistan, the total cost of food isapproximately equal to the transportation cost of the food. In other words,peanuts and almonds, which differ in cost by a factor of 3 at Costco, differby a few percent once they are airplaned and helicoptered halfwayaround the world. As long as people don’t, ahem, throw out lots of the

nuts, the exact mixture isn’t very important.

• I don’t know the exact transportation cost, but gasoline (which comes by

truck) is said to cost $50/gallon. My ticket to Kuwait cost $10/lb (the returnticket will be cheaper per pound due to too many lobster tails), and thingsget much more expensive from there. Something is adding up to$3000/day.

• Conclusions: I am not squandering your tax dollars by throwing out a fewpeanuts; I’m squandering them by eating 2-3 heads of lettuce a day.

R u s s M i l l e r


1 9



R u s s M i l l e r


2 0

C o

s t c o

H a

w a i i

C r u

i s e S h i p

I r a q

A f g

h a n i s t a n

P o l a r B e a r H u n t i n g

C a m p

A n t a r c t i c a

S p a c e S t a t i o n

The only graph that matters.If transportation costs arehigh enough, all foods costthe same (per unit weight).



Tonight on Deadliest Catch …

R u s s M i l l e r


2 1

225 miles NNE of DutchHarbor, Sig asks, ‘How the

%#$& did my $#@%ing crablegs end up on a &^#$ingshipping container in%@*%ing Afghanistan?’

Meanwhile, 5000 miles

WSW of Dutch Harbor,Russ wonders, ‘How much

does it cost to ship a 2 footlong crab leg toAfghanistan, and whopays for it?’

Date post:	30-May-2018
Category:	Documents
Upload:	geoffreyschroeder
View:	227 times
Download:	0 times

Russ Miller

Documents