Connect with Point of View   to get exclusive commentary and updates

A Lesson from Free Enterprise

Print Friendly, PDF & Email

In a recent column, Kevin Williamson explains that McDonald’s has become Microsoft. If that doesn’t make any sense to you, let me explain. It provides an object lesson from the free enterprise system.

First, let’s start with Microsoft. Back in 1998 Microsoft was at the height of its power. On the Charlie Rose Show, Bill Gates said he wasn’t worried about competition from IBM or Apple or Netscape. He explained, “I worry about someone in a garage inventing something I haven’t thought of.”

His concern was justified. That same year, two guys in a garage in Menlo Park incorporated a company known as Google. It turns out that Microsoft was not only surprised by Google but also lost ground to Apple (a company many thought was on its last legs).

Kevin Williamson argues that the same dynamic is having an impact on McDonald’s. You can travel just about anywhere in the world and be guaranteed to find two things: Coca Cola and McDonald’s. While it is still dominant in the fast food market, it has certainly been challenged by start-up upstarts.

One that he mentions is Shake Shack. People stand in long lines at these fast food restaurants just to get a hamburger that is only a little different from one they could get down the street at McDonald’s. Back in 2000, Shake Shack was a food cart. Ten years ago it was one kiosk in a park. This year it will have an initial public offering. Their success is due in large part to their ability to provide a product at a reasonable price that many people want. They didn’t have the advertising budget or corporate muscle of McDonald’s but they succeeded because they provided something consumers wanted.

Shake Shack went from cart to corporation in record time while McDonald’s has been struggling to maintain market share. It will have some trouble turning around a company with 35,000 restaurants worldwide. Meanwhile the guys who started in a garage or a food cart are doing quite well.

Viewpoints sign-up