Slate Money Podcast — "McDonald's Fast Food Price War"

Date: June 22, 2024
Host: Felix Salmon, with Elizabeth Spiers and Emily Peck

Episode Overview

This episode unpacks the recent "price war" in fast food, particularly McDonald's $5 meal and its industry-wide ripple effects. The team debates whether this signals a meaningful shift in food pricing, explores the psychological and business implications, and expands on the unique cultural position of McDonald's versus competitors. Other major segments include the "quiet vacationing" trend and the return of "bond vigilantes" amid global political uncertainty. The episode maintains a conversational, witty, and insightful tone throughout.

Key Discussion Points

1. McDonald’s $5 Meal and Fast Food Price Wars

(00:25–15:22)

• What’s Happening:

  • McDonald’s launches a $5 meal (burger, nuggets, fries, drink), with Burger King and Wendy’s quickly following suit. Even Starbucks joins with its own $6 deal.
  • The panel discusses the rationale: to attract customers who perceive fast food as no longer cheap due to significant post-pandemic price hikes.
  • Notable stat: Prices at McDonald’s are up around 40% since 2019 (Emily Peck [02:31]).

• Press and Cultural Reaction:

  • Viral meme of an $18 McDonald’s meal receipt sparks outrage, highlighting franchisee price variation.
  • McDonald’s receives outsized media attention and “earned media” from these promotions, reinforcing its brand dominance.
  • Quote:

    “It gets you... The media is just so interested and, I mean, this is our lead podcast item for the week. Is so interested in McDonald's. It's like they get all this earned media just for doing this deal... It’s got to trigger something in the psyche.”
    — Emily Peck (05:25)

  • Children as a driver: McDonald's markets directly to kids—Happy Meal, in-store playgrounds—reinforcing generational customer loyalty (07:22).

• Business Implications:

  • Loss leader strategy: McDonald’s expecting to lose money on the meal to recapture customer habits.
  • Franchisees struggle since corporate may not fully reimburse for losses; Coca-Cola helps subsidize the soft drink component (04:21–04:39).
  • Is this sustainable? Doubt remains that habitual customers will return once the deal ends.

• Value Meals & Discounting Culture:

  • The panel contrasts McDonald’s large-scale discounting power with smaller or upscale chains—Sweetgreen’s targeted offers, Starbucks luring regulars with temporary price cuts.
  • Psychology of pricing:

    “Knowing something is really cheap at a place you like to go makes you want to go there.”
    — Emily Peck (09:08)

  • For upscale venues, deep discounts risk undermining the aura of exclusivity (11:43–12:07).

• Non-Sticky Pricing & Consumer Uncertainty:

  • The hosts discuss the trend toward dynamic pricing, where actual costs are increasingly opaque.
  • “The idea that there is a price for a Big Mac... has basically gone out the window... There is no one singular price anymore.”
    — Felix Salmon (13:20)

2. The Trend of “Quiet Vacationing”

(15:22–25:53)

• Trend Definition:

  • Quiet vacationing: employees taking time off without formally notifying their boss (15:23–15:37).
  • The Harris Poll claims millennials do this more; the panel questions the finding's statistical rigor.

• Work-Life Blend:

  • Stats from the poll:
    • 67% respond to work outside normal hours.
    • Majority take meetings during PTO.
  • Boundaries between work and life have eroded in the remote work era. Vacation is less a clear binary.

    “You don’t tell bosses you’re on vacation because you never are. You’re always working.”
    — Emily Peck (19:32)

• On Presenteeism and Gender:

  • Citing a 2015 paper, perception of “quiet vacationing” is gendered—men sneaking off are assumed to be out with clients, women assumed to be dealing with home matters (24:42–25:53).

• Wider Implications:

  • Post-pandemic shifts: many have never met their boss in person; formality increases.
  • Work culture expects near-constant availability, making classic “time off” harder to assert.

3. Bond Vigilantes and Politics' Impact on Markets

(25:53–39:51)

• Context:

  • Bond markets are reacting to political risks in France (far-right election uncertainty) and the UK (upcoming Labour victory), echoing fiscal discipline concerns of the past.
  • The term "bond vigilantes" is explained—markets punishing government fiscal recklessness, as with the Liz Truss mini-budget collapse (28:58–30:04).
  • American fiscal woes: recent CBO report projects $50 trillion national debt by 2034.

• How Much Do Politicians Matter to Markets?

  • Uncertainty (who's in charge, what surprise policies might emerge) can roil bond markets, as shown by the UK example.
  • In the 2024 US context:

    “We have a matchup where both people have been president before... so the risks are a little bit already priced in.”
    — Elizabeth Spiers (32:18)

  • Yet, neither party has a credible plan for long-term fiscal challenges.

• Kicking the Can Down the Road:

  • The Social Security trust fund is on track to be depleted by 2033; the US tends to address crises with last-minute legislation (37:01–38:34).

  • “That panic debt ceiling kind of knee jerk response is clearly the worst way to do fiscal policy.”
    — Felix Salmon (38:27)

• Comparing Policy Environments:

  • UK’s expected Labour landslide seen as stabilizing: “If you have a massive majority, you can do whatever you want and there’s no fights and there’s no obstruction.”
  • US faces more gridlock and potential last-minute chaos, which markets dislike.

Notable Quotes & Memorable Moments

• “McDonald's is the largest restaurant chain in the United States. So it just eclipses everyone else. And McDonald's targets... children. They literally have playgrounds in the restaurants.”
  — Emily Peck (07:22)

• “I don’t think this is a sign of disinflation... It’s more just a sign that the crazy times are over.”
  — Emily Peck (12:16)

• “Work is a little bit like traffic. You know, the law about how traffic expands to fill the amount of road space available. Like work expands to fill the amount of phone notifications and Internet bandwidth...”
  — Felix Salmon (19:32)

• “If you go to McDonald’s, Burger King, Wendy’s, you can get a meal for $5, it’s a real number... it’s comforting to see, like, $5 easy.”
  — Emily Peck (14:43)

• “The Big Mac index ... that concept of homogenous item having a single price, nationwide has basically gone out the window.”
  — Felix Salmon (13:20)

• (Re: hot-desking) “If you're going in even twice a week, you should have your own setup or something. It's just the right thing to do.”
  — Emily Peck (46:43)

Timestamps for Major Segments

• McDonald’s Fast Food Price War: 00:25–15:22
• Quiet Vacationing: 15:22–25:53
• The Bond Vigilantes & Political Risk: 25:53–39:51
• Numbers Round (Fun statistics & rabbit holes): 39:51–46:52

Episode Structure and Flow

• Opening & Lead Story (McDonald’s Price War):
  • Set the business and social context for new value meals, industry response, franchisee economics, and consumer psychology.
• Broader Discount Strategies in Dining:
  • Discusses parallels in other food and retail sectors.
• Work Culture Evolution (Quiet Vacationing):
  • Unpacks new trends in employee behavior, erosion of boundaries, and generational patterns.
• Global Political Risk and Market Response:
  • Explores recent and upcoming elections, government bond market anxieties, and fiscal policy implications.
• Fun Numbers Round:
  • Quirky stats on baby name trends, Sondheim memorabilia, and office seating culture.
• Closing:
  • Teases upcoming Slate Plus segment (not summarized here), wraps up show.

Summary Takeaways

• The fast food industry’s price war centers less on returning to “cheap eating” than on rekindling customer habits and project pricing certainty amid years of volatility.
• Price transparency and consistency have largely dissolved in much of the consumer economy, replaced by highly variable, dynamic offers.
• The “quiet vacationing” phenomenon isn’t new but highlights the challenges of work-life boundaries in a remote-first, always-available culture.
• Political developments are once again able to rattle bond markets (“bond vigilantes” return), especially where sudden or unexpected fiscal policy changes are possible.
• Across themes, the episode emphasizes the shifting, often unstable nature of price, value, time, and economic certainty in today’s world—with the occasional need for levity and a good story (or Sondheim anecdote) along the way.