McDonald’s Transparency Offers Financial Industry Food for Thought
“Would you like 500 calories, er, fries with that?”
Global fast food juggernaut McDonald’s will list the calorie values on its menus across the U.S. next week, giving customers the chance to evaluate their choices. The parallel between this fast food initiative and the financial services industry may seem unclear, but I’ll try to make it more transparent.
That’s it, actually. Transparency.
Transparency is a virtue valuable not only to fast food, but finance as well. What party doesn’t want to see its counterparty’s kitchen?
“This would allow ‘special groups’ to aggregate, review, judge and summarize the real quality of products and institutions relative to specific consumer profiles,” wrote one commenter on an SAP Banking View discussion I started about my previous blog post. “We need to create a situation where consumers are on equal footing with financial institutions.”
It’s got me thinking a lot about transparency. Market participants appear to be ready for regulations mandating more open grills, rather than regulations tell them how to flip their burgers.
Regulators aren’t telling McDonald’s how to make their food.
Transparency in finance seems to be gaining a lot of traction, anecdotally at least. I’ve heard about it in conversations, as well as the last two webcasts I’ve attended in as many days.
“[McDonald’s] push is part of an effort to get out ahead of federal menu-labeling requirements,” according to The Wall Street Journal Thursday. “There is a market need to it too — McDonald’s want to convey to customers that it’s not just selling junk food.”
Transparency doesn’t require McDonald’s to reveal its Secret Sauce recipe, or any electronic trading firm to disclose its beefiest algorithm. But more information in everyone’s hands will help the best products succeed.
Related Articles:
“Highest-Calorie Menu Item at McDonald’s? Not a Burger” by Julie Jargon and Bill Tomson
“Restoring Profits and Confidence with Big Data” by Derek Klobucher
“Banking View” by Michael Mischker
Interesting analogy... If McDonalds is aware of the upcoming regulations then why not do the same thing voluntarily and come out as "good guys" - smart marketing move indeed.
In reality though the issue of food quality, obesity and health is so much more than number of calories that this would hardly make any difference. Perhaps this is another thing that food industry has in common with finances. 😈
Another good trend in food industry and retail is simplicity. E.g. my favorite store chain Trader Joe's - they have limited selection of good quality products, stable prices, "no artificial anything" policy, etc. I can even send my husband grocery shopping there without worrying if he would get the right brand at the right price. 🙂 I wish finance industry would join in on this too.
Thanks for the comment, Jelena. You’re right about the calorie count being one of many factors that a consumer should consider when selecting from the menu.
“Some regional studies suggest that having nutritional information available when ordering a meal prompts people to buy healthier items,” according The Wall Street Journal article I cited. “Other studies have found no such change in consumer behavior. But considering how prominent restaurants have become in the American diet, any change could have an effect on obesity rates.”
And I agree with you that the market could certainly do with less complicated instruments. The allure of complex instruments for many market participants, I suspect, is that they are tough for regulators to understand and difficult for competitors to imitate.
This is fraught with danger for all of us, of course. But that’s just me.
What do you think?
Derek, your blog actually touches many subjects, which are important, I believe, for our society and I could go on forever on the subject of food alone. But I'll try my best to keep it short.
You're correct that the more complex something is the more difficult it is to understand, regulate, replicate, etc. But if government regulations in the food industry are not always perceived well by an average voter (as much as I support better nutrition, I'm also against "food police"), the financial industry (and many others) can and should be more regulated.
In the past few years there have been some progress (e.g. simplified credit card term pages), but more remains to be done. E.g. right now I'm in a middle of the mortgage refinance. I have a degree in Economics, but even for me comparing products by different lenders is sometimes tough because the fees have different names, different calculations are used, etc.
Yes, there are resources available to educate yourself (in both finance and nutrition) but this brings me to the final point - reality of this economy that most of population is working 10 or more hours a day just to support their families and is simply exhausted. So no wonder we swing by McDonalds drive-through to get a burger for 1$ or a 3$ happy meal for a kid or can't spend hours pouring over every term and condition on a financial document. People have neither time nor money.
If there was another survey - would you rather government spend time on improving economy than on adding calorie count to the restaurant menus, I wonder what a response would be...
I would like to see those survey results too, Jelena. Actually, I’d prefer both the food and financial services industries regulate themselves, enforcing transparency measures so the government does not have to.
But I’m not holding my breath. 😉