Buffet (not Buffett) Economics
Behavioral New World
October 1, 2024
Buffet (not Buffett) Economics
At the end of August I flew to Spain to take a cruise around the Mediterranean. I thought I was boarding a luxury sea-going vessel, with a variety of useful amenities including several restaurants. But it turned out that I was actually boarding a giant food court, with a hull bolted on below to keep it all afloat. And viewed through the lens of behavioral economics, this maritime design flip led to some interesting activity. Let me explain.
On board, food was available at 16 (!) different restaurants and cafes and was available somewhere on board almost 24/7. Some of the higher-end restaurants required additional payment but I’d like to focus this discussion on the main food court, where the food was included in cruise fee. That is, one could eat as much as one wanted without paying more.
It wasn’t self-serve, but the crew members would serve you as much as you wanted. You could have them load up a plate, polish that off, and then go back for seconds (and thirds and desserts). And there were at least 10 stations in the food court—Mexican, international, healthy, vegan, Chinese, pastries, and so forth.
What consumption decisions do people make in this situation? Well, not surprisingly, many people (not all, to be fair) consume enormous quantities of food. And why not? It doesn’t cost more to have a second or third serving, right? It is all built into the price of the cruise. An economist would describe this thinking as “The marginal cost is zero.” So if there is some benefit (enjoyment) to continuing to eat and no additional (marginal) cost, go ahead. Sounds like rational decision-making.
But is the marginal cost truly zero? I would argue that there are marginal costs, although they are not financial. The marginal costs have to do with one’s future health. Overeating is not healthy. The toll on your future health is a true cost of overindulgence, albeit not a financial one.
Unfortunately, these costs are hard to estimate – “How much can an extra dessert really hurt?” That is hard, if not impossible, to measure with any precision. Another challenge is that the benefits are in the present and the costs are in the future. “Present bias” (link) plays an important role. As the name suggests, present bias reflects the overvaluation of immediate rewards.
“Affiliation bias” (link) might play a role as well. As mentioned in last month’s newsletter (link), your friends can affect your eating and smoking behaviors. If everyone around you on the ship is eating lots of food, it is easier for you to do so as well.
What differentiates those who overindulge from those who do not? I have not found any research on cruise buffets per se (not a surprise). I’m also not aware of any research on the characteristics of people who treat themselves to all-you-can-eat buffets. Those would be interesting studies.[1]
What can we do to avoid overeating? Let’s start with awareness of the causes of overeating. Per the Cleveland Clinic (link) they include emotional eating, preferred foods, highly processed foods, time of day, social situations, large portions, certain medications, and some medical conditions.
Awareness of present bias and affiliation bias will help us as well (one of the many benefits of reading this newsletter 😊). To help reduce present bias, consciously consider the impact of today’s decisions on your future self. My experience: the more I practice this thought experiment, the easier and more effective it becomes. To help reduce affiliation bias, look around—with whom are you spending (eating) time? You need not take their behavior as a guide for you.
Warren Buffett, the famous investor, has said that discipline is more important than intelligence in investing. And it requires discipline to avoid overeating. I guess Buffett Economics is also Buffet Economics!
Will I sign up for another cruise next summer? Maybe. But I’ll be looking for a ship with “glutton-free” options.
[1] Some people seem to be especially unaware of the marginal costs of buffets. Consider the title of this article: “7 foolproof ways to outeat everyone at a buffet, courtesy of a pro eater” (link). I didn’t know that buffets were competitive (?!).
This was such an interesting article! When a decision or action does not have a financial value directly attached to it, it is often very easy to dismiss the cost. Yet, I have found that those are the things that have very costly consequences.
Happiness=right amount of wealth+greed+time🙂