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Sir Isaac Newton was Right

By June 18, 2024No Comments

Sir Isaac Newton’s Third Law of Motion is, “Every action has an equal and opposite reaction.” Ignoring physics and looking at business we see this is true.

Econ 101 teaches supply and demand and price elasticity. Flood the market with money like in 2021, demand skyrockets, supply can’t keep up, and prices go up.

What got me thinking of this is what California did on April 1, and it wasn’t a joke. They raised the minimum wage for fast food workers 25%, from $16 to $20 per hour. According to the Wall Street Journal, the reaction was swift. Franchise owners:

  • Went to more automation and robotics.
  • Raised prices.
  • Used fewer employees.
  • Fired drivers and outsourced delivery.
  • Changed menus to make the food prep less labor intensive.

Hiring good salespeople leads to increased sales. Then hope production can react and produce enough product.

What about in dealmaking? A client was looking at a bolt-on acquisition. Let’s assume the asking price was 100 with 70 in cash at closing. He offered 90 with 80 at closing. First reaction, the seller said, I now want 125 with 100 at closing. Second reaction, the buyer said, I can’t deal with someone like that and walked away.

Always try to put yourself in the other person’s situation and think about how you’d react.

“People will forget what your said, people will forget what you did, but people will never forget how you made them feel.” Maya Angelou