The Corner

Re: Branch Closures, Cont’d

Jonah,

A couple of quick points:

1.  A Dollar General store is usually full of people because the margin per sale is so low that the store has to move a huge amount of absolute volume to generate sufficient absolute profit dollars per day to cover costs.  A very high-end jewelry store has to buzz you in, and normally has zero people in it, because the margin on one sale is so high.  The present value of a new banking customer or account is pretty large.  Calculating the increase in total system economics caused by adding one more branch is a very tricky analytical process, but in my experience, major bank chains do not purposely add many branches that they expect to have negative economics.

2.  I’m sure the irony of your argument that consolidation is good because it will remove needless waste from the system created by market competition (of, for example, two nearly empty bank branches across the street from each other) is not lost on you.  This is essentially the historical socialist argument for government-run insurance, among many other things.

All that said, I get that the original comment was made in a fairly light-hearted manner, and I would also probably prefer one more bookshop and one less bank branch in my neighborhood.

Jim Manzi is CEO of Applied Predictive Technologies (APT), an applied artificial intelligence software company.
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