Season 3, Episode 7: Are private property rights right? The sharks and TEC owner Scott Jordan get into a heated debate over Scott’s patent of a very simple clothing design. This is a fantastic discussion starter for your students! Ask them who they side with and why. What incentives do intellectual property rights provide for entrepreneurs? How might things change in the absence of IP rights? Are there limits to what can be patented?
“Off the Cob” and On the Market
Season 6, Episode 10: Complementary and substitute goods in production can sometimes be tricky to teach, since there are subtle differences from complements and substitutes in consumption. This clip provides an excellent example of both. Cameron Sheldrake finds that the quantity of corn he supplies on the market often exceeds the quantity demanded. In the past, this surplus corn would be discarded, but Cameron has discovered he can use it to make sweet corn tortilla chips. This is a classic example of complementary goods in production. Cameron produces his regular crop, and with the byproduct (in this case, the leftover corn), he is able to produce another good. However, if demand for his tortilla chips increases, it may become more profitable to use more than just the surplus corn to make chips. In that case, he will decrease his supply of corn for his traditional market and increase his supply for the chips. At this point, they become substitute goods in production. Another determinant of supply is the cost of inputs. Cameron mentions that the cost of sweet corn used in his chips is twenty times more than the cost of conventional corn flour used in regular chips. Perhaps this is why we don’t see others supplying this product. This price gets passed on to the consumer. Many consumers will consider this product to be a substitute for regular tortilla chips. With a price of $3.49 per single serving bag vs. $0.99 for regular chips, demand won’t be increasing for this product unless they can differentiate it substantially. Take the discussion to the next level, and ask students for a plausible explanation for why Cameron doesn’t lower the price of his corn to eliminate the surplus. (Hint: think about total revenue and price elasticity of demand.)
“PolarPro” Flies Ahead of the Competition
Season 7, Episode 8: Your students will find this pitch by a fellow millennial especially motivating. Jeff Overall’s business, PolarPro, is in a very competitive space. After he delivers his intro speech, stop the video (time 1:49) and ask students what type of market structure he is operating in and why. What profit maximizing strategies can he employ in this type of market? Constant innovation and/or economies of scale are critical for success. Why? Innovations in this market are easily copied and accompanying profits quickly competed away. Economies of scale provide a variable cost advantage that will price smaller competitors out of the market. Jeff chose constant innovation as his strategy since he currently lacks the capital investment to lower production costs.
An interesting comment by Jeff at 4:25 is sure to spark students’ attention. In Jeff’s case, what would have been the opportunity cost of using his student loan toward books? Immediately following that, a discussion of opportunity costs continues with Jeff’s decision to make higher profits or invest in R & D.
Copa Di-sintegration?
Season 2, Episode 1: Copa Di Vino, owned by James Martin, is the first premium wine sold by the glass. James, currently controls the vertical chain of production: he has a winery, packages his own wine by the glass, and distributes the wine. However the sharks believe that company’s value will be higher if it vertically disintegrates. The sharks are only interested in the intellectual property (patent) that James holds, since he is the sole producer that can package wine in this form. They believe his monopoly power over the packaging will reap the highest profit by licensing it to others. James does not want to split the company and believes it is more profitable as one firm because of the high subjective value he places on his brand. He leaves the tank without a deal.
Savings, Salaries, and Slawsa
Season 5, Episode 9: In this clip, Julie Busha explains how she and her husband saved a large sum of money so they could successfully launch Slawsa, a new condiment that is a cross between coleslaw and salsa. Mark Cuban commends her on this and discusses how it’s nice to see someone giving up a little bit now to have more in the future. This is a classic PPF example of future vs. current consumption. The entrepreneur also discusses how she is not taking a salary at this time because she wants to focus her time, energy, and resources into the business. This nicely illustrates the idea of opportunity costs, which are classified as implicit costs in business production decisions. Ask students if this means that she is really working for free and engage them in a discussion of other potential implicit costs.
Rational Proposal
Season 5, Episode 8: James Ambler, owner of Paparazzi Proposals, values Lori Greiner’s help over Robert Herjavec’s and ultimately chooses to take less money for the same amount of equity in his company. Like any rational economic actor, he had to weigh the perceived costs and benefits of his decision, but it was not simply about dollars — he valued Lori’s input very highly. Even though he accepted less money, the entrepreneur still made a rational decision. Try pausing the clip before the entrepreneur makes his decision and ask students what they would do in this situation. Would they take the deal with Robert? Or would they reject him to have Lori on their team? Why would they make this choice? This provides an excellent basis for discussing subjective value, marginal thinking, and rational choices.