Finding Economics in a Waffle House Adventure 🧇

Sometimes when I’m considering a topic to cover in the newsletter, I need to double-check that it follows this newsletter’s profile. Earlier this year, I found myself frustrated that nearly every post was about a shortage caused by the pandemic. In the beginning, it was Grape Nuts, roses, and chicken wings, but then it just kept going! I tried to balance it with a personal story once per month, but the topics kept coming back to the pandemic. This week I can promise you that this post is not related to the pandemic, however, I do have a small pandemic note at the end.

Last week, Lee Sanderlin shared his experience of spending the night in a Waffle House after losing a fantasy football bet. For Southerners (and I consider myself a Southerner), Waffle House is a cherished dining establishment, even though it can sometimes be… an experience. If you’ve never been to a Waffle House before, you can read a thorough review on Eater, watch a funny outtake on Tik Tok, or watch this stand-up bit from Steve Harvey.

Let’s get started on the economic concepts in Lee Sanderlin’s experience! We have a couple of different economic concepts to cover today, so I’ll interweave his tweets with the analysis. Hopefully, he doesn’t delete this Twitter thread! Journalist Lee Sanderlin finished in last place for his fantasy football league last year, and his punishment was to sit in a Waffle House for 24 hours. The reason we can pluck some economics out of the experience is because of an interesting design in the punishment. For every waffle he ate, the total punishment decreased by 1 hour:

The elaborate nature of punishments for the last place in fantasy sports has grown over the years thanks in part to a cult-classic tv show known as The League. The threat of punishment serves as an incentive for participants to continue playing throughout the season even if they realize partway through that they won’t win it all. This punishment is absent in US professional leagues, and teams may “tank” in an attempt to get a higher draft position the following year. While it may benefit that team, purposely losing isn’t good for the league overall. The punishment in Lee’s fantasy group was a good one since Lee is motivated not to spend the entire 24 hours inside the restaurant.

Five minutes into his journey, he starts by ordering two waffles in an effort to get his total punishment down from 24 hours to 22 hours. Most reasonable humans could not eat 24 waffles in one sitting, so Lee knows he’ll need to spend some time in his booth. He just has to figure out how much time he’ll be there. On the other hand, if Joey Chestnut was in the booth, it may have been a different story. Chestnut set the record for Waffle House waffles in 2006 by eating 23 waffles in 12 minutes. Lee, however, isn’t feeling so great after only his first two:

And here’s where we can start talking about one of my favorite concepts: diminishing marginal utility. Lee doesn’t explicitly say it, but the first waffle likely tasted pretty good. The second waffle is probably what caused his stomach to rumble. Diminishing marginal utility occurs when the first item consumed provides more satisfaction than the next item consumed. The second waffle probably tasted good, but not as good as the first one. Each waffle comes with benefits (taste and time reduction) as well as costs (nausea and a few dollars). Since Lee is consuming one waffle at a time, he has to make a decision about whether the benefits of eating the next waffle outweigh the cost of that next waffle.

This type of decision making is known as marginal analysis. It’s not the only type of decision people make, but it’s fairly a fairly common one. If Lee didn’t want to spend money on waffles or was worried about his caloric intake, those costs may be greater than the benefits of reducing his total punishment. If Lee sees the benefits of going home earlier as worth more than nausea and $3 then he’ll continue to consume waffles. And continued he did…

A closely related concept to diminishing marginal utility is diminishing marginal returns. Diminishing utility is based on the consumption of items (like eating waffles) while diminishing returns is based on the production of items (like producing waffles). The two are very similar, but they focus on different sides of the market: consumers vs. producers. We can reimagine Lee as a producer rather than a consumer to see how diminishing returns work in this story.

Diminishing marginal returns implies that the cost of producing the “next unit of output” is more than the cost of producing the one before. For Lee, each waffle he consumes is equivalent to producing an hour of time off his total punishment. Based on his earliest tweets, he eats each waffle fairly quickly. The second round is consumed a little bit more slowly, which means he needs to use more resources (his current time) to produce an hour of future time saved. Once he gets to his fifth waffle, he has slowed down A LOT:

By the 6th waffle, it almost seems like Lee isn’t going to be able to produce any more time savings for himself. This reinforces the concept of diminishing marginal returns; it takes more and more energy/effort to finish the waffle and produce those time savings:

By Waffle #7, Lee reports that it has taken hours to finish that single waffle:

I’ve plucked enough economics out of his timeline to get my point across, and I’ll save the ending for you to review on your own. You can see the whole journey by viewing his tweet thread or by reading his official write-up for the Clarion Ledger. Multiple national outlets, including Washington Post and The New York Times, covered his experience as well.

Waffle House actually plays a slightly more interesting role in the southern economy that many may not be aware of. The Federal Emergency Management Agency (FEMA) unofficially uses Waffle House as a gauge for how badly a storm has hit the gulf region. This measure helps determine the amount of aid that needs to be sent to the region. You can learn more about the Waffle House Index on this NPR podcast or this article from Accuweather. The index was also used as a gauge of how bad the pandemic hit the south.

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Week 24 is over and the book total stands at 30 books. This past week I finished Hide in Place, which is a fiction novel about a former NYPD detective whose son has been kidnapped by the Russian mob. I read fiction sporadically and I likely was enticed by the cover at Barnes & Noble. One of my goals this year was to mostly read books rated 3.8+ on Goodreads so that I didn’t get stuck reading books that weren’t well received. So far, I think it’s worked well.