Chicken Nuggets, Risk & Your Quality of Life

MacDonald’s had a really simple solution for their Chicken Nugget crisis. If you want to retire wealthy, you need these 3 simple lessons.

If you’re worried about inflation, and worried about losing money, then read on.  

Because in this short article, I will show you how even a giant like MacDonald’s was concerned about the same thing, how they overcame it, and how you can do exactly the same.

MacDonald’s & the Chicken Nugget

When MacDonald’s wanted to introduce the chicken nugget they were worried.

It was the 1970s.  A time of volatility.

The US had just gone off the gold standard, and currency could be freely printed.

There was the oil crisis of 1973.

Both of these are highly inflationary.

And MacDonald’s were concerned that if they launched the chicken nugget at a particular price, the price of chicken may go up, causing them to need to increase prices or risk losing money.

Fears that Prevent Growing Wealth

MacDonald’s 2 biggest concerns are the 2 biggest worries I’ve noticed in our students.

No matter where in the world they come from, these same 2 worries hold them back from creating true wealth.

• Fear of inflation, and 
• Fear of losing money

The good news is that there are financial tools that can protect us from these things.  

The problem is that most students don’t use them because they believe that…

“It’s too complicated.”

The truth is, it’s not.

It’s not easy, but it certainly can be simple.

Let me explain…

MacDonald’s Solution

Let’s examine how MacDonald’s overcame that challenge.

First, they considered the cost of chicken.  And they found that the bulk of the chicken’s cost was the cost of chicken feed.

If MacDonald’s could stabilize the cost of chicken feed, they could stabilize the cost of chicken and hence chicken nuggets.

So, they bought corn and soy forward in the futures market. 

That sounds complicated.  As with a lot of financial instruments, they sound complicated, but really aren’t.

All that means is that they are buying the chicken feed they need at an agreed price now.

Once they did that, the cost of the chicken became fixed, and they could go ahead and fix the price of their chicken nuggets.

This is what we can learn from MacDonald’s.

3 Lessons From MacDonald’s Chicken Nugget Crisis

1. MacDonald’s owned instead of rented

MacDonald’s needed chicken feed.  Instead of ‘renting’, so to speak, and being subject to increasing prices.  They bought and owned.

The moment you buy something, you’re no longer worried about inflation.  In fact, you want inflation, because that makes you wealthier. 

I’ll give you an example.  I collect guitars, guitar pedals, vinyl records, etc.  If I see a guitar I want that’s collectible, and I haven’t purchased it, I want the price to stay down.  But, once I’ve bought it I want prices to go up.

And that’s why we teach out students to own great assets, because once you own great assets, inflation is your friend.  If you don’t, inflation is your enemy.

2. MacDonald’s bought what they used

In a world where there are assets everywhere vying for your attention, where do you start?

MacDonald’s bought what they used. 

And that’s a great place to start.  I own Facebook and Google shares.  I advertise on Facebook and Google, and so it makes sense for me to own them.

There are 3 reasons for this.

First, it’s like me getting a discount when I pay them. As an owner, part of that money comes back to me.

Second, it means I understand their business.  As an investor or owner, you should never invest in something you don’t understand. 

Finally, if I’m still using them, there’s a good chance others are too, and if lots of people are, then they’re making money, and that makes it a great asset for me to own.

Which leads me to the third lesson.

3. Keep it simple

MacDonald’s bought chicken feed futures.  

It sounds complicated, but look at how I explained it in Lesson 1.  All they did was come to an agreement on price.  

Then look at lesson 2, they just bought something that they needed to use. 

You can do the same if you just keep things simple.

Do you brush your teeth?  Of course you do (or at least I hope you do).  Then look at the toothpaste.  Is it Colgate?  Then consider buying Colgate Palmolive. 

And perhaps you use an Oral B toothbrush.  Consider buying Proctor & Gamble.

If you buy great companies where you understand the business (like they sell toothbrushes, and everyone needs to brush their teeth) then those business will grow in value over time and will make great investments and grow your wealth over time. 

Treat them as investments, or owning a business.  Don’t treat them like a lottery ticket, and you massively reduce your chances of losing money.

NOTE: These are not recommendations.  Please do your own due diligence.

The Hardest Part – Ignore the News

Once students understand this, the hardest part is ignoring hype and media. 

Tesla and Zoom were hyped up a few years ago.  Nvidia is currently hyped up, leading to the dreaded FOMO and irrational buying.

Conversely the media will say things like, the markets are at all-time-highs and ready to crash, leading to irrational selling.

Guess what?  Since the great depression of 1928, markets have been at all time highs every 20 days!

That’s why you need to learn to ignore the media.

Instead, use these lessons from MacDonald’s and grow you wealth.

I’d love to hear from you, so leave me a comment, and let me know what you think!