BAES 165: how Costco mastered capitalism

**SPEAKER_1** (0:01)
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**Ben Cahn** (0:30)
Costco. It's the only place in America where you can get a giant stuffed animal, a $3,400 bottle of cognac, a ficus for your living room, maybe a five dozen pack of eggs. The biggest dang tub of yogurt you've ever seen in your life. 1983, Jim Senegal and Jeffrey Brotman opened the first Costco in Seattle.
At the time, it was the fastest company ever to hit $3 billion in revenue. They merged into the very elegantly named Price Costco. Brutal.

**Emil DeRosa** (1:02)
Then Justin Timberlake came in and said, drop the price.

**SPEAKER_4** (1:05)
Yeah.

**Emil DeRosa** (1:08)
It's cleaner.

**Ben Cahn** (1:09)
It's very clean.

**Emil DeRosa** (1:10)
I think during Jim Senegal's reign, he was like, we're not going above 14, 15 percent on anything.

**Ben Cahn** (1:16)
That's because the customers aren't really customers, right?

**SPEAKER_4** (1:20)
They're family.

**Emil DeRosa** (1:21)
They're family. Instead of just being like, hmm, prices are going up, like, fuck it, I guess we'll just pass it off to the customers. They're always like, no, no.

**Ben Cahn** (1:29)
We love them.

**Emil DeRosa** (1:29)
We'll build a hot dog factory in Chicago. Yeah.

**Ben Cahn** (1:32)
We will slaughter our own chickens then. We must keep the price at $4.99. If you raise the effing hot dog, man, I will kill you. Figure it out.

**Emil DeRosa** (1:42)
Where are you going to beat that price?

**Ben Cahn** (1:43)
Lee truly is adult Disneyland, kind of.

**Emil DeRosa** (1:45)
I don't know if I go that far.

**Ben Cahn** (1:47)
Adult Asian Mom Disneyland. And you'll see why I said that later on in the episode.
What's going on, everybody? How's it going? Today, we've got a very special episode for you. We're talking all about Costco.

**Emil DeRosa** (2:25)
This one's very special.

**Ben Cahn** (2:26)
That's right. Costco, it's the only place in America where you can get a giant stuffed animal, a $3,400 bottle of cognac, a ficus for your living room, maybe a five dozen pack of eggs, a diamond ring, car tires, gas, prescription eyeglasses, gold bars.

**Emil DeRosa** (2:43)
The biggest dang tub of yogurt you've ever seen in your life.

**Ben Cahn** (2:45)
The biggest dang tub of yogurt you've ever seen in your god darn life.
All the energy drinks you can possibly think of, 36 pack of Diet Coke that I got, Levi's Jeans, K-Swiss Sneakers, Cheesecake, Tennis Balls, you name it, they've got it. Plus, an all beef hot dog in a soda for just $1.50, all under one roof. That's right.

**Emil DeRosa** (3:08)
One giant tin roof.

**Ben Cahn** (3:09)
But I've got a question for you.
How does the cheapest retailer in America also have the wealthiest customer base pay its workers 30% above the industry norm, all while absolutely printing money and sending its stock to steady all-time highs? That's right. By the end of this episode, you will learn why the profit from Costco is not where you think it is, why a store brand named after a Seattle suburb scares the heck out of Procter and Gamble, and why economists study what happens when a Costco moves into town. You might think you know Costco, but it's a lot bigger than you think.

**Emil DeRosa** (3:49)
We went into the field to find out too. We went on the ground. We went in that dang huge store. We're both card members.

**Ben Cahn** (3:57)
We are both card carrying members of Costco.

**Emil DeRosa** (3:59)
We talked to some employees. We sampled the merchandise. Oh boy.

**Ben Cahn** (4:02)
That was a cheese tortellini. Did you have one?

**Emil DeRosa** (4:04)
Of course.

**Ben Cahn** (4:05)
So delicious. Fergalicious.

**Emil DeRosa** (4:08)
I'll tell you, it was just, I didn't really want a cheese tortellini at 10 in the morning.

**Ben Cahn** (4:12)
Sure.

**Emil DeRosa** (4:14)
But it was decent.

**Ben Cahn** (4:15)
You know, I was so surprised by the hot dog. I'd never had the hot dog before.

**Emil DeRosa** (4:20)
You liked it.

**Ben Cahn** (4:21)
I've had the pizza before. When I've been at like parties and stuff where they picked up a bunch of Costco pieces. Pizza is okay.
But the hot dog, good God. Also, all beef, all beef, all beef and girthy.