A Hidden Cost Called Rented Suit Liability (Safal Niveshak)
Warren Buffett explained the idea of long-tail hidden costs in his 1985 annual letter
A man was traveling abroad when he received a call from his sister informing him that their father had died unexpectedly. It was physically impossible for the brother to get back home for the funeral, but he told his sister to take care of the funeral arrangements and to send the bill to him. After returning home he received a bill for several thousand dollars, which he promptly paid. The following month another bill came along for $ 15, and he paid that too. Another month followed, with a similar bill. When, in the next month, a third bill for $15 was presented, he called his sister to ask what was going on. “Oh”, she said. “I forgot to tell you. We buried Dad in a rented suit.
Every business has three main stakeholders: Investors, employees, and customers.
Investors are easy to please, Mackey said. They just want to stock to go up.
Customers want good products at good prices with good service. Hard but simple.
Employees are another story. Their needs are endlessly complicated.
“If you don’t pay them enough they’re unhappy. If you pay them more, they’re still unhappy if they lack opportunities to advance. If you pay them a lot and give them opportunities, they still may hate their boss,” he said. Or their coworkers. Or their commute. Or they get tired of doing the same thing. Glimpses of satisfaction followed by a gravitational pull towards wanting something else.“