I finally got around to moving my Clipper Card onto my iPhone Wallet.

I used to have a problem losing my keys, wallet and/or iPhone until I read in a biography that Richard Feynman used to keep his wallet in the same pocket to prevent the same thing. That, and because they say that you should wear through your denim jeans the same way to give it “character,” meant ten years ago I adopted this system, and got rid of the FAIL of tagging all my shit with the then-very-unreliable bluetooth tracking stuff.

This is a circumlocutious way of saying that for the last decade, my cell phone is always conveniently in my right pocket while my wallet (with Clipper Card) is in my left pocket. As I’m right handed and the sensor of the BART is on the right side of the turnstile, I would have to do this weird cross-body yoga anti-pattern in order to get my bicycle onto the commute trains. I resolved to go into the office more often recently, so this was low-key bumming me out.

After jealously admiring how easily regular commuters used their mobile phone to zip through in front of me, I decided to sunset the physical card which apparently I’ve used for the last 12 years.

Also, about half the time, the reader would say that I need to see the operator because of some weird RFID interference shit with all the other crap I have stuffed in my supposedly "minimalist" wallet. WTF? Why should I tolerate this first world problem when we have the technology?

A quick google search and some weird phone-on-card jingo and now I can just put my phone on the sensor and magic shit happens. I can also recharge my card from my Apple Wallet instead of using the machine every so often, depending on how many times I had the patience to hit the “add $1 to your card” button last time I loaded it.

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But this massive quality-of-life improvement somehow made me think about McDonald’s this morning, maybe because I didn’t have time to eat breakfast…

Context to think about contactless payment

I noticed that dishonest people have been complaining about inflation, and some of them are using the price at McDonald’s as an indicator of this. This is probably related to the popularity of the Big Mac Index: a freakonomics-circle-jerk-bullshit idea that the price of a Big Mac is the best way to compute the cost-of-living adjustment between countries.

I’m sure the price of the Big Mac has skyrocketed post-pandemic — I, if anyone, should know this, I’m like an idiot savant of McDonald’s: so much so that a former franchise owner innundated me with McDonald’s T-shirts, sweaters, and stuff which are in my clothing rotation.

But here’s the thing, I’m 100% sure a significant factor in the price of the sandwich is the introduction of the McDonald’s App. According to conventional wisdom, I usually get ~30% "discount" in "savings" by ordering through the app either via some promotion or using points to buy something outright.

In economics, there is a distinction between "nominal" and "actual." Nominally, I’ve "saved" 30%, but I’ve probably got a 5% actual discount.

The reason is that if everyone uses the app to purchase our Big Macs — which we sometimes get for "free" when we accumulate 6000 points — McDonald’s would cover this by raising the nominal price of the Big Mac to compensate by the same amount. Fast food is pretty fucking competitive — as loyal as I’m to McDonald’s, I’m totally cool with swapping it out for a Big King at Burger King or an In-N-Out double-double — depending on my access to those and my mood. So the net price is fixed by the demand curve vs. their costs and profit margin.

Why 5%? Well not everyone is using the App every time. Some people are rushed, or casual walk-in/can’t-be-bothered-to-download it, or simply don’t have access to a smartphone and/or credit card. Those people won’t/can’t use an app. So, I’d guess that McDonald’s has inflated the nominal price of the Big Mac by 25%. Those of us using the app are getting a 5% discount; The non-app people are paying 20% more vs. the null hypothesis.

The null hypothesis is a world where the McDonald’s App either didn’t exist at all, or never got so high an adoption which basically happened because a global pandemic trained everyone to build a habit of contactless ordering and payment.

So, when seen another way, my 5% discount is subsidized by everyone who isn’t using the app paying 25% more than they should. Since most of those people don’t because they don’t have access to credit to use an app or the income to afford a smartphone — either because they are a school kid or poor — then basically the poor are subsiding the rich at McDonald’s. This is known as an effective regressive tax.

Regressive taxation is shit for our social order. But I guess it is okay since it means my burger and fries cost me an average four bits less than it would if they weren’t taxing walk-ins and the poor.

Of course, at a certain point people wise up and stop eating at McDonald’s or they will have to introduce menu items they can discount that only they would order and I wouldn’t (which would be difficult since the only thing I don’t eat on the menu is diet soda). Oh wait, they did that shit! Well now you know why they had to.

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Why did I order just a burger and fries in the screenshot above? Look at the deal: the discount was free fries with a Big Mac order which netted me a 30% nominal savings. I was at the office and soda was free so this is how I maximized my discount. Oh, and after I picked up that order. I hit 6000 points so my next Big Mac is free.