• About
  • Credit Card Basics
  • Mortgage Basics
  • $40K Challenge
  • Aunt Doris
  • Grandfather Says
  • Privacy
  • Archives
  • Insiders

Len Penzo dot Com

The offbeat personal finance blog for responsible people.

How A Lemonade Stand Taught My Daughter To Love Monopolies

By Len Penzo

DSC_0643Each Father’s Day, I love to reminisce about the joys of fatherhood and the days when my teenage kids were younger. This year, I caught myself looking back upon the time several summers ago when my business-savvy daughter, Nina, set up a wildly successful corner lemonade stand. Well, that is, as successful as you might expect a 10-year-old girl’s lemonade stand to be.

In the first hour after she opened for business, she had earned a little over ten dollars selling lemonade — for the bargain price of fifty cents a glass — to neighbors walking and driving by her stand.

By the time the second hour rolled around, business was booming. In fact, it was going so well that Nina suddenly found herself competing with a second lemonade stand another kid had set up on the opposite corner, much to her chagrin.

Kids and the Fundamentals of Capitalism

I can still remember the amusing sight of the competing stands like it was yesterday. Not only did Nina have to work harder when the second lemonade stand opened up across the street, but she was also forced to lower her price too. And although she continued making money, the new competition kept her earnings much lower than what she had experienced in that first glorious hour of business.

Later that evening during dinner, Nina complained to us about how the competition had kept her from earning more money — proving that even younger children are wise enough to understand the market power of a monopoly.

Of course, every grown-up businessman dreams of having a virtual monopoly in the marketplace too, but there are only a very few companies that actually have the good fortune to be in such a position.

Lemonade Stands Aren’t the Only Monopolies Out There

Awhile back, I read an article that discussed three companies with virtual monopolies. That is, although they don’t control 100% of the market, they dominate their market niche to such a degree that they actually have little or no competition. The highlighted companies were: ESPN, Google, and Monsanto.

While I disagree with the article’s first example — most folks can watch various sports on plenty of other television channels without having ESPN — I thought the other two were spot-on.

Still I can think of a few other virtual monopolies out there that really frustrate me because of the lack of competition.

1. Satellite radio. In the United States, it used to be that if you wanted to subscribe to satellite radio you had two companies to choose from: Sirius and XM. In 2008, those companies merged. Now, if you want satellite radio you’re going to subscribe to Sirius XM, dammit, or you aren’t going to subscribe at all. Siriusly.

2. Ticketmaster. I hate Ticketmaster. After all, these guys are typically the only game in town, handling upwards of 80% of all ticketing for live events in the United States. After its merger with Live Nation, the new Ticketmaster became even more powerful, with managing interests in approximately 350 artists, and exclusive booking deals with more than 125 venues around the country.

3. My local cable company. Between 1995 and 2013, cable television prices increased at a compounded growth rate of 6.1% annually — that’s more than double the official rate of inflation over the same period. I think a lot of that has to do with cities like mine that award exclusive cable franchises within their boundaries. Don’t like your cable company or their customer service? Boo hoo — and no soup for you!

It’s late so I’m going to stop here; but I’m sure you can think of a few others that I probably missed.

While us consumers rightfully tend to hate monopolies, most business owners wish they could be so lucky. I know Nina still laments the demise of hers.

Photo Credit: eren (sea+prairie)

Related Posts:
  • 7 Money Skills My Immigrant Parents Taught Me7 Money Skills My Immigrant Parents Taught Me
  • 100 Words On: The Most Valuable Subject Taught In Grade School100 Words On: The Most Valuable Subject Taught In Grade School
  • Why I Love Christmas: A Guest Post from My Daughter, NinaWhy I Love Christmas: A Guest Post from My Daughter, Nina

25 Comments June 16, 2014

Comments

  1. 1

    Chris says

    While I don’t like it, I do understand why cities provide one cable company operating rights within their boundaries. There is a HUGE capital investment in running cable lines to every house within an area. If there were 4 cable companies each having to run lines and not being guaranteed a certain amount of business, then it wouldn’t be financially feasible for them to run the lines.

    Reply
    • 2

      Dan T. says

      That’s just the cable companies’ argument. Why can Verizon and AT&T install new fiber throughout various neighborhoods without having a city-sanctioned monopoly? They are willing to spend the money (investment) in the expectation that they have a better product (fiber optic internet/television/phone service) and that people will be willing to pay for said product.

      Reply
      • 3

        Len Penzo says

        @Chris: The cable companies like to argue that cable television is a natural monopoly – that is, operating and infrastructure costs make it such that there is no way for more than one company to be profitable, much like the electric company. But that is simply not true, as there are many cities out there with multiple cable companies successfully operating within their city limits. The cost of stringing an extra cable on existing utility poles is not onerous for the cable companies.

        Reply
        • 4

          Yoda says

          Let me point out that the concept of cable as a “natural monopoly” dates to the era when cable TV was just that, and considered a luxury. With cable one of the best ways to deliver broadband internet access which is rapidly moving into the realm of being a necessity (for homes, that is. For businesses it has been for years, and the smaller the business the more crucial the access becomes), it’s time for a rethink.

  2. 5

    Ron says

    Time to branch out and get some pink lemonade or Kool Aid or even Crystal Light (no calories!).

    Reply
    • 6

      jeb says

      That’s similar to what I was thinking. Or adding homemade baked goods like brownies and cookies. This make you thirsty so you have to buy the drinks.

      I love kid’s lemonade stands. Living in a large city, you don’t see them much. Perhaps fear of strangers or theft?

      Reply
  3. 7

    Kendra says

    Don’t forget the electric company too!

    Reply
  4. 8

    FB @ FabulouslyBroke.com says

    Start selling cookies and flowers along with the lemonade, and then move into cheap furniture ๐Ÿ˜›

    Reply
  5. 9

    everyday tips says

    Poor Nina! Had those other kids been smart, they would have set up around the block or something, as they hurt their own profit too.

    I hate monopolies myself, but sure wouldn’t mind owning one. Next year, Nina needs to take it to the next level and find a competitive advantage!

    Reply
  6. 10

    Khaleef @ KNS Financial says

    I definitely don’t get why the cable companies are allowed to have monopolies! Competition is usually a good thing in our society, and we would definitely see a benefit in both prices and products!

    Reply
  7. 11

    Jenna says

    Lemonade stands on Len’s street are like Starbuck coffee stands at my work.

    Reply
  8. 12

    Briana @ GBR says

    Your daughter is smart! It’s good that she learned early; we didn’t learn about what monopolies really were until senior year in AP Econ

    Reply
  9. 13

    Mark says

    I’m glad you liked the post. It’s true. Monopolies are a bad deal for consumers but they are great for businesses. That sucks…only two hours and competition popped up.

    Reply
  10. 14

    Mr Credit Card says

    On another note, my son just sold his lollipop to someone in school who offered him $5. “Done” he says!. Goes to show some folks will “pay up”! After he sold it, he got a $6 bid!

    Wait till the other son’s mom find out!

    Learning about capitalism the hard way!

    Reply
  11. 15

    Len Penzo says

    @Ron: Branch out at WHOSE expense? LOL What’s really great when you have a kid business like a lemonade stand is there are ZERO start-up costs because Mom and Dad subsidize operating expenses!
    @Kendra: As I mentioned to Chris, I subscribe to the opinion that the electric company is a natural monopoly that makes it too difficult for more than one company to operate profitably.
    @FB: Yes! They’ve actually done that in past years.
    @Everyday: Oh she’ll live. But you’re right, she probably needs to go back to the cookies.
    @Khaleef: There really is no good reason for cable companies to have monopolies. People need to complain to their city councils.
    @Jenna: I know, they’re everywhere aren’t they? It’s a wonder how they all stay in business.
    @Briana: Nina definitely has a pretty good business sense for her age.
    @Mark: That’s okay. The free market works at all levels – even kids’ lemonade stands! Besides, it was a great teaching moment for Nina that showed her that capitalism is all about competition.
    @Mr. CC: Uh-oh… Good luck with that! LOL

    Reply
  12. 16

    Darwin's Money says

    My kids are more entrepreneurial than most adults I know. They’re trying to sell veggies out of our garden, sell pictures, sell anything. They love the idea of making money. And I barely talk about money with them – they’re too young to turn them into little Trumps. I guess as people age, apathy sets in and they lose that fire.

    Reply
  13. 17

    Budgeting in the Fun Stuff says

    Oh, I hate TicketMaster! Our Transiberian Orchestra tickets are $80-90 but with all the extra fees, it more than $120! Grrrr…

    Reply
  14. 18

    Invest It Wisely says

    This is why businessmen who become politicians are to be no more trusted than any other politicians; in fact, they are even less to be trusted because they KNOW how their position of advantage can help their friends make more money. If your daughter had the power to, she could have legislated that only one lemonade stand per block be allowed, for traffic safety reasons or something like that. ๐Ÿ˜› Nice post! I enjoyed it.

    Reply
  15. 19

    Len Penzo says

    @Darwin: A lot of kids really have a nose for business. Nina is one of them. My son, not so much. He is just happy to be a mass consumer.
    @BIFS: Yep. I know exactly what you mean. It is a rip off.
    @InvestIt: LOL Ah yes, more intervention from our wise government! Glad you enjoyed the post. ๐Ÿ™‚

    Reply
  16. 20

    Aldo @ MDN says

    I know somebody that knows somebody that knows somebody that for a small fee, he would destroy that other lemonade stand. haha

    I think cable companies are the worst. I don’t have TV but I do have to get internet from them and I only have two options because… I really don’t know why. If all cable companies really competed with each other, then their prices wouldn’t be so abusive.

    Reply
  17. 21

    Kurt @ Money Counselor says

    Maybe you should have educated your daughter in about another great capitalist tradition: collusion! Why compete on price when we can secretly agree to the same, higher price and both make more money! ๐Ÿ™‚

    Reply

Trackbacks

  1. A Child's Wise Advice to Adults on How to Earn and Save Money - Len Penzo dot Com says:
    August 23, 2017 at 5:48 am

    […] earn extra money I used to have a lemonade stand, but now I wash cars. My best friend, Ashley, and I have a car washing business that we began in […]

    Reply
  2. The Top 5 Technology Considerations for Businesses – Len Penzo dot Com says:
    June 23, 2018 at 12:53 pm

    […] Returning to the matter of an online presence, it’s important for companies to recognize the power of digital marketing. Businesses not only need to create exciting and compelling content but they need to promote it. Search engine optimization is an important part of building a powerful web presence that sets your business apart from its competitors. […]

    Reply
  3. My Kids’ Loan Interview with the Bank of Dad – Len Penzo dot Com says:
    May 31, 2019 at 10:27 pm

    […] Lenina: I promise to work extra hard and make lots of lemonade and sell it. […]

    Reply

Leave a Reply to jeb Cancel reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Question of the Week:

How old were you when you bought your first home?

View Results

Loading ... Loading ...

Recent Posts

  • 14 Kitchen Hacks for People Who Can’t Cook
  • How Much Gold and Silver Should People Own?
  • Black Coffee: Smiling Faces and Reassuring Voices
  • Expecting the Unexpected: Managing Finances When You Become Disabled
  • 100 Words On: Why Buying in Bulk Is Not Always a Smart Idea
  • The Importance of Creating Professional Invoices for Your Business
  • 7 Basic Financial Goals Everyone Should Strive For
  • 10 Key Characteristics of Debt-Free People
  • Black Coffee: Egg Nog and Seed Corn
  • 8 Clever Low-Cost Homemade Gifts Everyone Will Enjoy

Disclaimer

This site is for informational and entertainment purposes only, and the content herein should not be mistaken for professional financial advice. This website accepts advertising in the form of monetary and other compensation; as such, topics of discussion are occasionally influenced by these advertisers. Occasionally, some articles may also include affiliate links, meaning, at no additional cost to you, this blog earns a commission if you click through and make a purchase (for example, as an Amazon Associate I earn from qualifying purchases). Remember, you and you alone are responsible for the decisions you make in life, so please contact an independent financial professional for advice regarding your unique personal situation.

Popular Now:

  1. 1. Sneaky Pizza Delivery Fees Are Here to Stay (and Why It’s Your Fault)
  2. 2. Debt Elimination: The Pros and Cons of Dave Ramsey’s Baby Steps
  3. 3. Drop the Guilt: How to Splurge Without Beaking the Bank
  4. 4. How to Find a Low-Priced Plumber Who Won’t Rip You Off
  5. 5. 11 Retirement Saving Tips for Twentysomethings (& Older Folks Too!)
  6. 6. 16 Extreme Ways to Increase Your Monthly Savings
  7. 7. Why I Prefer a Spreadsheet to Track Expenses and Manage My Finances
  8. 8. The 13 Most Important Items to Keep In a Fireproof Safe
  9. 9. Be Careful, Priceline Users: Name a Wrong Price and You May End Up in Jail
  10. 10. Len Penzo dot Com: Celebrating 10 Years and 10 Million Page Views!

All-Time Most Popular:

  1. 1. 19 Things Your Suburban Millionaire Neighbor Won’t Tell You
  2. 2. Dear Friend: Here Are 41 Reasons Why I’m NOT Lending You the Money
  3. 3. Why Your Expensive Luxury Car Doesn’t Impress Smart People
  4. 4. If You Can’t Live on $40,000 Annually It’s Your Own Fault
  5. 5. 21 Reasons Why Corner Lots Are for Suckers
  6. 6. 4 Smart Reasons Why College Isn’t for Everyone
  7. 7. 18 Fast Facts About Social Security Numbers
  8. 8. My Ketchup Taste Test: Upset! Guess Which Brand Topped Heinz
  9. 9. Why I Prefer a Spreadsheet to Track Expenses and Manage My Finances
  10. 10. Here’s a Simple Trick for Getting Credit Card Interest Charges Waived

Copyright © 2019 Len Penzo dot Com · All Rights Reserved · Designed by Nuts and Bolts Media

Copyright © 2019 ยท Penzo on Genesis Framework ยท WordPress ยท Log in