Capitalism: Success, Crisis, and Reform

PLSC 270 - Lecture 20 - Policy Targets for Capitalist Development

Chapter 1. Introduction: Course Agenda and Washington Discussion [00:00:00]

Professor Douglas W. Rae: The dog ate my homework; you guys will understand what that means. We're going to have to postpone the Rapaczynski case. I got back from Washington late last night and got to the office this morning and the SOM server was down. I actually did some of the filming and visited their offices in Warsaw three years ago, and I would like to divert us a little bit today. I want to talk briefly about what I've been doing in Washington and how it relates to what we've been doing here. Then you'll remember, some weeks ago before the midterm, we had a soft schedule to do the Mory's Business Plan, and I brought with me today two distinguished colleagues who are going to help us to understand the Mory's business plan as a challenge. Chris Getman, immediately to my right is the president of the Mory's Board of Governors and an iconic figure at Yale. He has been the owner of how many Dapper Dan's?

Chris Getman: Handsome Dan's.

Professor Douglas W. Rae: Handsome Dan's, pardon me. Four, including the incumbent.

Chris Getman: Including the incumbent.

Professor Douglas W. Rae: Jonathan Ingham, now immediately to my right, is a former president of the Yale Club of New York, Yale College Class of 1964 —

Jonathan Ingham: 1965.

Professor Douglas W. Rae: 1965, and has been one of the instrumental players in the Mory's business plan. Before I get to that I want to talk a little about Washington. I've been down there working for a company, but it has brought me into contact with staff in the Senate and the House, and I thought I'd share a little of the texture of that with you because it relates to capitalism in — or at least to American capitalism, in an interesting way. As you know Saturday night at quarter to midnight the House of Representatives passed a version of the Healthcare Reform Bill by the margin of 220 yea, 215 nay. The first thing remarkable about that number is it adds up to 435; very few bills add up to 435. This one was one where being absent would be the sort of offense which could cost you your seat in Congress because the intensity is that high.

The other feature of it, and I read — I can't claim to have read more than about 20% of the bill, but the stunning feature of it is that the fingerprints of lobbyists are all over it in a degree that is just — it was to me pretty disturbing. I'm reasonably cynical about how the world works but the number of cases where the bill will be going along talking about one thing, and then there will be a paragraph, labeled Section 1753, and it will require the services of licensed podiatrists, or it will require a funding grant to a certain category of health providers in a region of several western states. It's just pockmarked with very intense lobbying. Then when you talk to the staffs of the two parties, you get two very different kinds of talk. Let's leave my politics out of this. Which side do you think would sound more coherent right now, the Republicans or the Democrats, talking about the healthcare bill? Have I got a microphone I can hand somebody? Who wants to take a shot at that one?

Student: I would guess the Republicans since they haven't had to have made concessions to numerous special interests to get the bill passed.

Professor Douglas W. Rae: Terrific, you nailed it. Are you a political science major?

Student: Yes.

Professor Douglas W. Rae: Good for you. In Washington this year $2.9 billion dollars — repeat that number: $2.9 billion dollars — was spent on lobbying the federal government. While compared to the cost of the healthcare bill, that doesn't sound like much, it's an awful lot of lobbying, and the majority party on a bill like this is — well how many — let's suppose they did it as follows: Obama brings in fifty wise men and women from Harvard, Yale, Berkeley, Michigan, Texas, and so on and they spend thirty days working on the best possible bill, to get the most bang for the buck for the general public in a new healthcare plan, and then he puts it in an envelope and sends it up to the cap — sends it over to Capitol Hill. About how many votes, if it were really well done, do you suppose it would get? Anyone want to take a guess at that? We have historical experience. This is what the Clintons did, right? Nearly two decades ago, and it got shot full of holes immediately, right? There was just — there was virtually no support for it because all the defensive interest groups staked out their ground, no concessions, or very few concessions were made, and it just sank. Does anybody remember how the Obama people handled this piece of legislation? What did they say to the Speaker of the House, Nancy Pelosi? Anybody — do you guys read newspapers? Tom, do you have any memory of this?

Student: I mean he more or less gave some broad outlines of principles for the bill and then said, "You do it," and handed the whole thing over to the legislature.

Professor Douglas W. Rae: Okay, so he handed the thing to The House of Representatives, and the lobbying process became very intense, and it is an incredibly intricate set of, not — most of it — an awful lot of it is like the earmarks for a bridge in Alaska, but it's usually not a bridge in Alaska, it is a podiatrist in an office spread all the way across the country. And I really do believe in markets, and there is so much in this bill that would not meet market tests, right? If you said we're going to require the service of podiatrists in a certain aspect of it, and you ask yourself, well would people sign up for that if it were not required by law? In an awful lot of cases the answer is yes of course, some would sign up for it, but the amount spent would be billions less than if you do it this way.

Now you all can — I voted for President Obama and I'm deeply supportive of his and other people's goals for the country, but this bill, I can't — I really can't stand up for it. Does anybody want to take the affirmative about why it is we've just got to get this done? I promise to be polite. Okay, well we'll go from something easy to something more difficult.

Chapter 2. Mory's: History, Challenges and Future Plans for Improvement [00:09:16]

Mory's is — okay let's first find out how many of you have ever set foot in Mory's? Wow, so we have a whole room full of experts. Would somebody like to recap what they think the last year or two of Mory's existence looked like? This could be fun, go for it.

Student: There was like a struggle to be much more inclusive, so there were all these promotions so you could get a Mory's membership for $10, you could come in and get $10 off your, like, meal and my friends and I totally made use of that because we like eating everywhere at Yale, around Yale. So we did go a few times, but we never got a — I don't think we ever really got a Mory's membership, things fell through, and then we never really heard about it again.

Professor Douglas W. Rae: It closed on the 19th of December. Do you want your money back?

Student: No, I'm fine.

Professor Douglas W. Rae: Okay. Anybody want to say anything about what they think the place was like from a member or customer point of view over the last couple of years? Any complaints? We have complaints — did I see a hand here? Here's one back here.

Student: The food.

Professor Douglas W. Rae: The food. How was the service?

Student: Well —

Professor Douglas W. Rae: Mes-a-mes?

Student: Yeah.

Professor Douglas W. Rae: Mory's lost a lot of money in the last two and a half years it operated; roughly speaking $1,000 a day. Chris Getman here became its president after the disaster was revealed, and has been working with a group of us to bring it back. I thought I would start with Chris and just get him to reflect for a minute on what the task looks like, and what we hope to accomplish, and then we'll talk to Jonathan, and then I'll come back with a summary of the business plan.

Chris Getman: Well, let me start by saying that the — how does this work? Hello?

Professor Douglas W. Rae: It works just like that.

Chris Getman: Okay. The first thing I — like a Whiffping. I'll just — can you all hear me if I talk like this? The first thing I did before I became president was to get Doug Rae to agree to join our board. The second thing I did after I was president was to close the place, terminate everybody in management but one person who's still with us, her name is Robin Soltas (sp?) and she's a terrific employee, and then we had to lay off all the staff. We were going to run out of money the middle of January, we closed on the 19th of December, and actually this is a good thing because as you said, Mory's was doomed given the quality of the food and the service basically. That's what makes restaurants succeed or fail and we were not succeeding in that regard at all.

I think that when we reopen it's going to be a place where you guys are really going to want to go. We are reaching out to the students, if you want your $10 your back, when we're profitable, we'll get it to you. The second thing I did after that was to get Jonathan to agree to work with us. In addition to being a great guy he's also a form of Whiff, and as I think most of you know, the Whiff's are a very important constituency of Mory's, along with a lot of others, the athletic teams, political affiliations, and faculty, etc., but the Whiffs were a big part of Mory's and the reason a lot of people go there on Monday nights. We have formed a committee to raise money to not only make capital improvements to the club, it was pretty run down for structural improvements, goes from the wiring all the way to getting working fireplaces in a couple of the rooms, and the cost to do what we hope to do is going to be something in the neighborhood of $2.9 million dollars.

We're well along the way to do that and I hope to have good news about the fact that we've reached our goal and can open — and we're not going to sign any long term contracts with electricians, or plumbers, or contractors until we know we'll be able to see the job all the way through. It's been fun. There's an awful lot of — Mory's is the largest private club in the world because in the old days there were — you were a lifetime member and it would cost $15 to join for life, and so we have 14,000 — or probably 13,000 members now; many of them we don't hear from but there's an awful lot of loyalty and a positive sentiment about the club, and we're very confident that this is going to happen.

Jonathan Ingham: Why Mory's and why Mory's as an association as opposed to an adjunct or some form of open house being run by Yale. Let me back up a little bit. Ten minutes ago, Doug asked me to come in and share some of my thoughts about Mory's with you, and so this is — I'm talking as I'm thinking and I'm going to try and relate it to the purpose of this class, which is capitalism. First of all, why Mory's? I came back to the Yale Bowl about five or so years ago and I was watching the Harvard game, and I was sitting with some of my Harvard friends, and about halfway through the game I wasn't having any fun, and so I said I'm going to go back to New Haven and just hang out and see what's going on. I couldn't find a door that was unlocked in the entire town of New Haven, and I'm thinking to myself, where do people like me go on a Harvard weekend, or any other kind of weekend, or when I want to show up in town there's no place.

I wasn't a member of Mory's before I got involved with this, because back when I was your age, plus two or three years, I didn't have the $25 to — or at least I didn't think it was a good expenditure $25 for a lifetime membership, so I kind of ignored it. Then I started going back with a Whiff alumni group, and we would sing on occasion at Mory's, on Monday's when the Whiffs were somewhere else, and it occurred to me that this was a place that deserves to be alive. But as I looked around and saw this place, it clearly didn't reflect the needs of the marketplace. It was basically a place where old guys go and have meals occasionally. I didn't see any students there, there was no vibrancy, no relevance to the place, and so then I got involved because of these guys, and the whole concept of what Mory's should be became crystallized in my thinking. It belongs because it represents 150 years of experience, all the pictures up there, all the traditions and cups. Everybody has their own particular memories about it, but collectively, it is an important part of, I think, the Yale experience. And, I think, sadly, it hasn't been an important part of your collective experience.

I think if you do a survey among the graduate students, 85% to 90% of them won't even — or never thought that they were eligible for membership to Mory's. I think what we're trying to do here is to preserve the memorable aspects of Mory's, the iconic nature of the place, but also to open it up and make it a welcoming institution for the student body, both graduates and undergraduates. And by that I mean having — expanding things like singing group nights, doing things which we found to be successful at the Yale Club in New York, which was to have poetry readings, discussions of novels, and any kind of thought. We want to be open to the student body to be able to say come on and let's discuss this here. Then of course we hope that that sort of activity will spill over and include some selling of drinks and food.

Professor Douglas W. Rae: Terrific.

Jonathan Ingham: But basically — let me just finish one thing. It belongs — run by market forces, not by Yale. The alumni — the Rose Alumni House is useless as far as most graduates go, and a Mory's which would be run by Yale, I think would similarly not be relevant. I believe an active, well-run restaurant, bar and lounge, which is responsive to the needs of the student body, is the way to go, and that's where I think we're trying to come out on this deal.

Chapter 3. Mory's Business Plan [00:20:11]

Professor Douglas W. Rae: Okay. Now let's talk business. Mory's, in its last year of operation, did about $900,000 of bar and restaurant business. When I say bar and restaurant you may be confused by the first word. Where's the bar at Mory's? There is none. Right? It's founded on drinking songs and it has no bar; kind of odd. It is all about Yale, and only 7% of Yale's enrolled students belong to it. It is a business with an absolutely natural market all its own. Steven Blumenfeld, who's a junior in the college, was in this course a year ago when I got started on this, and he said, "Why don't we do a survey?" So he did a survey monkey instrument, and got 600 student answers, and the most interesting thing about it was that something over 200 of the 600 thought that they were ineligible to join Mory's. They thought it was somehow — for all different reasons, but a third of our market just thought, "Can't go there," so that's kind of an issue. Well the — also in the background the university has done some focus groups over the last five years looking for what students and a larger Yale community want in the Broadway walk part of town. What do you think comes up number one?

Student: Bar.

Professor Douglas W. Rae: Bar, and a specific kind of bar; a sports bar. What we're going to do is in the back of the building, facing away from York Street toward Morrison Styles, toward the retail block, we're going to put a bar that we'll have a walkway, an indoor walkway into the main building, and it will be a kind of — it'll have characteristic Mory's memorabilia and a Yale atmosphere to it, but there will be plasmas and you can watch even such below-the-salt institutions as Michigan and The University of Southern California on a plasma screen. The — and that slots into the basic bottom line goal. Mory's did $900,000 in business, it had roughly $1.5 million in expenses last year, and you do the math. The average labor cost embodied in each meal served was $31.50; cogitate that for a second. I didn't say anything about the cost of the food, heat, electricity. Labor: $31.50 — yes.

Student: I remember you mentioned in a class earlier this year that it was because of the labor unions, and so is that still a problem?

Professor Douglas W. Rae: One of the reasons we didn't do this a few weeks ago is that I can't give a completely straight answer to every question, and that's one of the questions which is very much up in the air. If I said it was because of the union, I misspoke. The union is — my assessment is that the problems with the union were about a quarter to a third of what was wrong, and Chris — you know mostly when people say, "We've got a terrible labor problem," the first question you have to ask is, "Don't you maybe have a terrible management problem?" And Mory's had both. Often the trouble — the contract was onerous, there's no question. The tight work rules, benefits comparable to General Motors; it was a bad contract. But we have a very cooperative relationship with Unite here and Local 217, and we're working on a constructive agreement that will include all kinds of things you don't usually see in labor contracts. This is me speaking, not an official statement, but it is my hope that it will include an individual incentive story where if people work hard and help us produce profits, they'll share in it beyond their wages, and I actually think we might get to that, though nothing to announce but just an aspiration.

Okay so we eventually come up with a business plan, and Mory's has to go from $900,000 in business to a $1.9 million, and much under a $1.9 million it isn't going to work. Then you ask yourself how many restaurants in New Haven make a $1.9 million a year in gross revenue? Anybody got a guess? There are MBA's in the room; you guys are good at guessing. Igor what do you have?

Student: How many restaurants?

Professor Douglas W. Rae: How many restaurants make a $1.9 million a year gross in New Haven?

Student: Zero.

Professor Douglas W. Rae: Zero, you're not too far off. Richard, what do you have?

Student: A handful.

Professor Douglas W. Rae: A handful. You nailed it, two is the answer. There are exactly two such restaurants, and they're both on the edge of the campus, and therefore potentially competitors to Mory's. Can you name them?

Student: Union League.

Professor Douglas W. Rae: Union League.

Student: [Inaudible]

Professor Douglas W. Rae: Say again.

Student: Miya's.

Professor Douglas W. Rae: No. I think I heard the right answer.

Student: Zinc.

Professor Douglas W. Rae: Yeah, and those are guesses on my part. They're rather well educated guesses. It's not as if these restaurants gave me their books, but they're my guesses. That's the competitive standpoint. Mory's — what drives the business? What's the first driver you have to think about? Well the — we all know it has to do with food, drink, service, quality of experience in every way but why don't more people walk through the door? Well partly because all those things are not very good, but partly because they don't think they're invited. Because they don't think they're invited, it never occurs to them to come. Now what — if you were going to — let's name a demographic by how old they are, how much money they make, and where they live. Who should we think of as the people who can make Mory's into a $1.9 million dollar business? Yale alumni living in California? Okay, hands up for that; okay so that's not — so the fact that Yale has 160,000 living alumni, and that the vast majority of them have handsome incomes, does that solve our problem or not? Not; is there a subset that might help solve our problem? Yes.

Student: Well, those within driving distance.

Professor Douglas W. Rae: Okay, good, it's a thirty mile radius, and there are about 7,800. Yale alumni in a thirty mile radius, and we're not getting — almost nothing. Can you think of another market segment that you might want to pay attention to? It's already been mentioned.

Student: Current students?

Professor Douglas W. Rae: Yeah, I'm holding up a mirror, it's you. Now let's start — may I presume to start with you? This is a sales call; I'd like you to join the restaurant.

Student: What does that entail — or how much do I have to pay?

Professor Douglas W. Rae: How much do I have to pay? You have to pay $15 — what year are you?

Student: I'm a senior.

Professor Douglas W. Rae: You're a senior. Well you're not going to get the best deal, because the price is for the duration of your years at Yale as a student. The price is $15, and we're going to give you a $10 food and drink credit. Are you 21?

Student: Yeah.

Professor Douglas W. Rae: Okay, so a $10 drink and food credit, so the net cost to if you like to either drink or eat, and we have good stuff is $5.

Student: Do I pay $5 dollars flat?

Professor Douglas W. Rae: Yeah you're going to have to write a check for $15 for the rebate. Are you going to do it or not?

Student: I'd have to — it depends on if other people I know are going to do it also.

Professor Douglas W. Rae: That's a really good answer. It depends on if other people I know are going to do it. I think you're exactly right, but tell me how you got — what are you thinking?

Student: Well I've never been to Mory's before, and I don't want to just go in and sit by myself if none — no one else I know is going to be there.

Professor Douglas W. Rae: That's absolutely the right answer, right, because restaurants and clubs are a so-called network good, and the value of going by yourself and sitting in the corner is not very high. It's meant to be friendly, so there's a huge insight there. Let me try a couple more people. Jennifer how about you? This is a sales call. You already know the price.

Student: All right, well I would want to know what kind of food they serve, because if I have — if I'm a picky eater, maybe I wouldn't even enjoy going there because I'm not twenty-one.

Professor Douglas W. Rae: Okay, you're not twenty-one, and are you a picky eater?

Student: For these purposes yes, today I am.

Professor Douglas W. Rae: Okay, what are you — what are your criteria?

Student: Let's say I'm a vegan, would I even want to join?

Professor Douglas W. Rae: You're a vegan? The 3/4 pound hamburger that we plan to serve, that's not good.

Student: No.

Professor Douglas W. Rae: Okay so you're going to want to have — you don't insist I — you insist that we serve only vegan food?

Student: No, but I want to know that if I go there I will enjoy my experience, so if you have options that I would eat that would be great.

Professor Douglas W. Rae: So vegan options and we're going to be open a lot. It used to be we were open thirty-nine hours a week, we're going to be open 65.5 hours a week, and a lot of that extra time is pub time, where the restaurant will be closed but the pub will be open, and the idea is to come in and meet your friends for a drink and have a vegan burger.

Student: That sounds great.

Professor Douglas W. Rae: Am I getting anywhere with you on that? The vegan burger or that doesn't —

Student: Yeah, and you know most things served at a bar are vegan, so I think I would.

Professor Douglas W. Rae: So your — did you sign up or not?

Student: I haven't.

Professor Douglas W. Rae: Still in doubt, okay, all right. Let's go right here, so $15 minus $10?

Student: Yeah, I mean, I actually — I thoroughly enjoyed going even before the — before it shut down but I never — see I never went to eat, was the thing, though. We always went for cups with a group of friends or something along those lines, so I'm definitely attracted by the bar.

Professor Douglas W. Rae: Do you actually like cups?

Student: It was more just sort of the experience, which was what was being discussed.

Professor Douglas W. Rae: I actually think there's this peculiar thing about cups. I know lots of people who do cups and don't like them, and it's — what they're doing, and it's your point, it's the social thing, it's with your friends. Chris, do you claim to like cups?

Chris Getman: If you put a cup on the menu as a drink, and served it by the glass, probably not. It's the experience, quite frankly.

Professor Douglas W. Rae: Yeah, it is the experience. Jonathan, I think I remember that you don't much care for them.

Chris Getman: And I like to drink.

Professor Douglas W. Rae: We have that in common; all three of us have that in common. It's a pretty diverse student market, but it turns out that the students are the drivers, the biggest driver for the whole thing. The reason is that the ambience of the place is geriatric, and geriatric is boring. For example, I got my mother to move into an assisted living home a year ago, and she said, "Promise me you'll get me out of here after a year if I hate it," and after a year she said, "I hate being around these old people, get me out of here," and she's out. So we've got to get you involved to get other people involved. Now the faculty are also — it turns out the faculty are the biggest spenders on a per capita basis at Mory's but we're still way short of enough — what I've talked about now so far is about enough to do a million, $1.1 or $1.2 million. Where else are we going to go looking for customers? Anybody got a thought? In the back —

Student: Tourists and visitors to New Haven.

Professor Douglas W. Rae: Okay, tourists and visitors, what do you think guys? Jon do you think that'll work or not?

Chris Getman: Tough in the club model.

Professor Douglas W. Rae: Yeah, the trouble with that is that we're a club. Now it can be the people who have reciprocal agreements with the Mory's club, and there are how many clubs like that?

Jonathan Ingham: Right now there's only one but there are going to be several when we reopen.

Professor Douglas W. Rae: Okay.

Jonathan Ingham: That's one of the things we're going to focus on.

Professor Douglas W. Rae: Okay we, our — our business plans counts on no business from tourists. Anybody else got a thought?

Student: Making members or new members annually, so even if they're not actually coming into the restaurant they still pay the membership fee.

Professor Douglas W. Rae: Okay, turns out that the membership dues are — they're a nice little add on, but they're in the neighborhood of the last couple of hundred thousand dollars, and that's not chicken feed for us, but it's not foundational. In the back —

Student: One of the previous barriers for Mory's was the perception of exclusivity, and if you opened up membership to the larger Yale community, broadly defined, that would open new revenue streams, so not just the students but faculty and staff as well.

Professor Douglas W. Rae: Okay that's huge. First of all, the entire staff of the university becomes eligible for membership, whatever the rank or job description.

Chris Getman: That's already been voted on.

Professor Douglas W. Rae: Second, the subway alumni are a very important part of any university. Like Notre Dame has about six million subway alumni, people who identify with the school and do all the stuff and never set foot on it in the role of student, and Yale has some of that too, quite a lot of it. Where do we go looking for people who obviously love the institution but don't show up on our record of alumni and such like?

Student: Parents associations.

Professor Douglas W. Rae: Say again.

Student: Like the parents of the students.

Professor Douglas W. Rae: Parents? Yes, student parents are one segment of subway alumni, and we think we probably get 400 or 500 of them to join annually, and so that's not inconsequential.

Student: Donors to Yale University.

Professor Douglas W. Rae: Okay anybody who has ever given $100 to Yale, alumni or not, is clearly eligible. Anybody else you might think of?

Student: Yale sporting events.

Professor Douglas W. Rae: Yale sporting events, very good. How would we go about finding the right list there?

Student: A club.

Professor Douglas W. Rae: It's — first of a club — we're not Joe's Bar & Grill, so we can't sort of walk around at halftime at a football game with a sign come to Mory's.

Student: Doesn't it come down to the way you enter a sporting event? If you're affiliated with the university either just kind of take it or get it for free using your student card or whatever it us, you want to have a list of the people that are paying.

Professor Douglas W. Rae: Okay so we want actual paying customers, and the people we would aim at are season ticket holders. Season ticket holders for Yale athletics — are there any other groups like that you might think of? Let's talk about your parents and not about them being members of Mory's, but what would trigger them to be members of Mory's if they lived near Yale, and were not Yale alums? Want to take a shot at that? Not really, okay that's fine. These MBA's know it all.

Student: Well I guess as parents coming to visit your student — or your son or daughter as a student, you may not necessarily be able to spend all the time that you're on campus with them, and you want somewhere you can go and just kind of kill some time while you're waiting.

Professor Douglas W. Rae: Okay, so that's the parent niche again. How about people who have already shown a propensity to spend money in things like Mory's? How about the membership roster of the New Haven Lawn Club? How about the membership roster of the Quinnipiac Club or The Graduate's Club, or The New Haven Country Club, or any one of twenty other comparable clubs in the thirty mile circle? What do you think? Who's got an intuition one way or the other about that? Let me give you another hint about that. The dues at most of those clubs is measured in the low thousands per year. The dues at Mory's, no one will pay more than $100 a year for Mory's, and if you are a member of the Lawn Club — the Lawn Club has food that is better than Mory's but a hell of lot worse than Union League, and if I came to you and said, $100/$2,000 I might get you to switch clubs but more likely what I'd get you to do is to add Mory's. Yes, Jim.

Jim Alexander: Aren't you leaving out the all-important potential drinking business of the grad and professional students?

Professor Douglas W. Rae: We are, and I should point out to you that Jim Alexander, whom you all know well, not just from his Enron days, is, in eight days from now, assuming office as president of the Lawn Club, and I was talking about stealing his members sort of just to have fun with him. Do you think he can keep that membership list secret from me? I was president two years ago, plus there's a membership directory that is published. Now would I want to harm the Lawn Club? Not at all, but would I like to get in on a little of the action? Absolutely. Now —

Student: I have a question about your —

Professor Douglas W. Rae: Does it follow this line of —

Student: Yeah, it's on this line of talking. Just a criticism, I guess, are you a bit concerned that if you open the net too broadly to Quinnipiac institutions, Yale Lawn Club, etc., that you may be diluting what was the value of the institution in the first place, which is what we mentioned before, which was the history of being a Yale institution.

Professor Douglas W. Rae: Okay, that's a good question. Let me — let's turn — let's go back to Jonathan and Chris about that. If we let too many non-blues in the door, does the value of it for the blues begin to erode?

Jonathan Ingham: I don't think so. I don't think you can tell a Yale graduate from a non-Yale graduate quite frankly out in the general marketplace. I believe that the nature of Mory's is going to be self selecting and people who are interested in joining will naturally go there. Those who might not fit what you consider the mold, or even the diluted aspect probably would say, "Who needs it?"

Professor Douglas W. Rae: Okay, I actually think there is a little bit of a dilution problem, and there's a little bit of the kind of Groucho Marx thing, where you say, "I don't want to be a member of a club that'll take me." The — but the segment of students that we think we're going to get quite a great change from that is starting from zero are graduate and professional students. Leslie's a Ph.D candidate in the political science department, what are our prospects with you?

Student: I'd say they're fairly good, but you've already pitched it to me as an upscale version of GPSCY.

Chris Getman: Is she writing a dissertation?

Professor Douglas W. Rae: No. The — one of the things — well how about MBA's? I'm hoping we're going to get about an 80% response rate from MBA's, what do you think guys?

Student: Yeah.

Professor Douglas W. Rae: What is it — and other than trying to please me at the moment, what are you going to get out of it?

Student: I think that for an MBA, there's also a lot of benefit in the connections with other alumni that are willing to pay and come back, as far as networking and future job opportunities, and just getting to know people in specific areas.

Professor Douglas W. Rae: Yeah, and one more to the back.

Student: Also I don't know of another place aside from GPSCY that has a patio where we can just share a pitcher, and I think there's real value in just being able to have an anchor institution that's close to the center of the university campus.

Professor Douglas W. Rae: Absolutely.

Chapter 4. Mory's Pitch [00:45:51]

So Chris, we've got five minutes left, and I'll actually circle back to this later in the course, but let's hear your pitch. Chris is a born salesman; he is the best fundraiser I've ever been close to. We've raised — what was the number determined this morning?

Chris Getman: $1.7.

Professor Douglas W. Rae: $1.7 million dollars so far and Chris pitch this thing.

Chris Getman: Well I think — pitch it to the students or to —

Professor Douglas W. Rae: Pitch it to everyone.

Chris Getman: Well what — first of all as Doug said right now the food at Mory's is worse than the Lawn Club. I happen to be a longtime member of the Lawn Club, and I ate there yesterday, only because I couldn't go to Mory's, but I think that in the future the food at Mory's is going to — this is our hope anyway, the food and the service is going to be something that people will want to go back too. We had a lot of people who would go there for the first time and say, oh this is so cool, because it was a unique place. But their dining experience, both food wise and service wise was mediocre, so they didn't become regular customers.

So our first hope is that all — everybody — the bar in the back we think with the pub is going to be ideal for students and grownups for that matter and I just wanted to add to what Doug was saying. A couple of other groups that we're going to target are subscribers to The Yale Rep, subscribers to The New Haven Symphony Orchestra, subscribers to Longworth, The Schubert, who are people we feel won't really dilute the character of the place, and we're very optimistic that people are going to think that Mory's is a good value, it's fun, and they're going to want to go back there, and we're very optimistic about this $1.9 million in revenue. I just — I think that's a slam dunk.

Professor Douglas W. Rae: We'll be recruiting a marketing team in the spring term to help us hit the numbers we have to, with new student enrollments, and I hope one or two of you will take an interest in that task. It's actually a really interesting set of business problems. First let's thank my colleagues. On Monday next please read the Goldman Sachs IPO, which we'll take apart, and we'll have the help of a Goldman partner.

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