What small change for a company resulted in the most money saved?
Answered by: Aled Jenkins,B.Sc Mathematics, Operational Research, Statistics and Economics, University of Warwick (2022)
This one change saved the McDonalds’ Chicken McNugget
In the early 1980s, McDonalds came up with a new and exciting idea called the Chicken McNugget. There was just one problem…
The cost of chicken was highly volatile at the time and that would make pricing the McNugget very difficult. On this note McDonalds sought advice from a famous stock and commodity trader named Ray Dalio.
Ray Dalio’s (founder of Bridgewater Associates which is the biggest hedge fund in the world managing $160 billion worth in assets) two biggest clients at that time were McDonalds and a chicken producer.
雷·戴利奥(Bridgewater Associates)(Bridgewater Associates是世界上最大的对冲基金，管理着价值1600亿美元的资产)当时最大的两个客户是麦当劳和一家鸡肉生产商。
If Dalio could make the chicken price stable McDonalds could launch the McNugget, however if he couldn’t they would throw the idea away.
Of course, Dalio pulled it off. Instead of thinking about buying chicken, Dalio thought of buying a chick and its food (corn and soymeal). The price of a chicken was fairly constant but its food was variable. But…
There is a futures market for corn and soymeal.
A future market allows the buying and selling of futures. A future is a legal agreement to buy or sell something at a guaranteed price at a specified time in the future.
Dalio showed the chicken producer how to buy and sell futures on corn and soymeal to guarantee the cost of the food for the chickens. This made the cost of chicken stable.
It is unclear how much money this saved McDonalds, however, the Chicken McNugget would never have existed if it wasn’t for Ray Dalio. This saved the Chicken McNugget.
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