An email from my compliance support team last week put a slight damper on my holiday spirit with its reminder that all PA Registered Investment Advisors are required to submit their year-end balance sheets to the state at the year’s end. I’m happy to reveal that Evenkiehl’s 2021 balance sheet is healthy, thanks to a tremendously loyal group of clients, and strong client growth over the past several months. I remain extremely grateful to all my clients for this. Still, the drudgery of the task didn’t illicit any joy. As I continued to read the compliance reminder, it brought to mind an article I wrote around this time last year discussing the finances surrounding Santa Claus’ Christmas-time operations. In light of my balance sheet deadline, I thought it would be fun to revisit the topic again. I hope you’ll indulge me as I take a moment and “audit” the North Pole.
Costs
The difficulty in quantifying Santa’s operation results from its inherent secrecy. If we estimate roughly 2 billion children in the world, however, coupled with the hypothetical amount spent for a child’s Christmas gifts, we easily approach an enterprise with $300-$500 billion in annual expenditures. Producing toys “in house”, and factoring in any naughty list savings, certainly reduces the overall cost, but those savings are undoubtedly offset by labor and storage costs.
When we consider labor costs, Santa no doubt pays the Elves a fair wage given his generous nature and no evident need for a labor union. Working in Santa’s workshop is a dream job compared to the alternatives of making shoes at night or baking cookies in a tree, so few costly perks seem necessary to make this work arrangement a success. Fueled by a strict diet of candy canes, candy corn, and syrup, the elves’ frenetic work ethic and dexterous-sized hands outpace even the most efficient human production. While we collectively brace for supply chain shortages this year, the elves have managed to maintain supply and demand equilibrium year after year.
Perhaps the most efficient and cost-effective part of Santa’s operation though, is his distribution process. Even after maximizing time zone changes to create a 42-hour delivery window, single handedly distributing almost a trillion toys on Christmas Eve alone is a delivery achievement Jeff Bezos can only dream of. And all this is accomplished with an inexpensive and clean, renewable energy mix of reindeer magic and simple Christmas cheer.
Revenue
Despite the tremendous efficiencies, there is still an undeniable cost that milk and cookies left by appreciative recipients simply cannot repay. To answer the question of where Santa Claus comes by his funding, we need to look past Santa the toy distributor and instead look at Santa the master marketer. As it turns out, for someone who prefers to work under the cover of darkness, Santa Claus has no problem with self-promotion. From Mercedes to Coca Cola to more movies than you can count, his endorsements deals have made his image synonymous with the month of December and guaranteed him revenue far into the future.
Santa Claus’ toy giving venture is certainly a remarkable business model with its cost-effective efficiency. The wild market swings in the past month can make it difficult to determine which companies will make the best investments, but when it comes to Santa Claus, as in years past, I remain a strong “buy.”
