Monday, May 05, 2008


WalMart just keeps on "doing it". Four dollar generic drug prescriptions have been a blessing to millions of people, including the shareholders of WalMart. Today, WalMart announced 90 day supply generic drug prescriptions for $10. Politicians continue to argue over lowering health care costs while WalMart keeps on delivering.

Huge savings are being realized daily when runny nosed kids are checked by nurse practitioners. Many of these practitioners work at clinics located at WalMart stores. Here again, while the politicians talk about lower cost care, WalMart delivers.

WalMart is a big target (no pun intended). Quite a number of urban legends have been distributed by those who would destroy WalMart. Other urban legends say that Google is in cahoots with the CIA to become the "big brother" of all time. WalMart and Google must be evil!

When an economist draws a set of supply-demand curves, the final price is set at the point where there is zero profit available for even one more unit. Perhaps what is not understood well is that for all the other items sold, there is both a consumer surplus and a producer surplus. In other words, of the consumers who buy an item for $1, almost all of them would have been willing to pay a little more. On the producer side, the seller could have sold for a little less and still made a profit.

Companies such as Google and WalMart make their money by bringing buyers and sellers together at a price acceptable to both. By cutting down the cost of bringing these folks together, they save customers billions of dollars. Google and WalMart are private profit making companies. They have each built up capacities that are unmatched by competitors. In the physical world, no other company brings together so many buyers and sellers in exchange for such a tiny "middle man's cut". In the virtual world, Google does not even bill the users for the service!

WalMart is more mature than Google but it continues to find growth opportunities, particularly in international markets. Google does likewise.

Google is generally loved by the political left and WalMart is generally despised by the political left. This is ironic because Google is the more likely candidate for eventual antitrust problems. Google has cornered something like 56% of the search business. WalMart has no where near that amount of the retail business. Both companies are growing international businesses rapidly because to avoid over concentration in domestic markets.