How a Second Grader Gave Me a Masterclass in Business, Without Even Trying
Is my seven-year-old daughter a better entrepreneur than me?! I recently had to ask myself that very question.
I’m always looking for ways to educate my kids about money and business. Of course, learning always seems more palatable when it’s gamified, so I tried to find a game that would teach them about entrepreneurship.
One of the best (free) options I found was a lemonade stand game. I gave it a try, assuming I would do pretty well considering I’m pretty business savvy and have expensive pieces of paper hanging on my wall attesting to my business education.
Some decisions were easy. Buy a $10 business permit or risk a $100 penalty? Let’s just go ahead and consider that $10 the cost of doing business. But when I got hit with a lemon shortage, and the price of lemons went up, I found it hard to remain profitable.
Sure, I raised my prices, but I also didn’t want to risk pricing too high and alienating customers. When my oldest daughter played, things turned out very differently. I saw her profits going up… and up… and up.
What did she do differently? She kept raising her prices. There’s a parade and tons of customers? That refreshing cup of lemonade got more expensive. Lemon crop gets a fungus, driving up the price of lemons? Guess what Mr. and Mrs. Customer, that cost is getting passed on to you.
I think at one point she was charging more than $14 per cup! You gotta respect that ruthless efficiency. So why was she so successful while I struggled? Perhaps my constant drilling on economic fundamentals like supply and demand had finally paid off?! (Just kidding...kinda).
The answer is actually far more straightforward. She wasn’t hindered by experience. While I hesitated to raise my prices past a certain point, thinking no one in their right mind would pay that much for lemonade, my daughter kept raising the price until people stopped buying (price equilibrium).
I let my own experience and perspectives limit my thinking (and profit). Just because I would never pay $14 for a glass of lemonade doesn’t mean someone else wouldn’t.
Here's my takeaway. While experience is often an asset in pursuing new endeavors, it can limit our thinking to only those things we’ve seen or done. It’s a delicate balance, but you have to apply what you know, learn what you can from research, and get the rest by doing.