Lion of the Blogosphere

Companies would profit from getting rid of their unprofitable customers

SJW-type op-ed writer in NY Times is outraged that companies treat poor customers differently.

The real story is that a lot of businesses have a bunch of barely-profitable customers. That’s certainly true for airlines who have a very large number of price-tiers for the same seats. When less profitable customers are problem customers, they almost always become unprofitable customers that cost the company money, and the company would be better off without them.

There’s an 80/20 principle here. It’s likely that something like 80% of profits come from 20% of customers. The bottom 80% customers aren’t that useful.

The real question is why don’t more companies tell their unprofitable customers to take a hike?

The answer is that they don’t trust their low-level employees to make decisions like that. They figure the low-level employees are not competent to have that kind of authority, and they’d wind up giving the boot to profitable customers. Or maybe they want to avoid bad publicity.

Written by Lion of the Blogosphere

April 11, 2017 at 5:08 pm

Posted in Business

69 Responses

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  1. You still need the 80% of customers to provide your base revenue load. You make your profit on the 20%, but that really just depends on how you want to slice the numbers. You could equally say that airlines make 100% of their profits on their cheapest fares, if you just looked at it from that direction.


    April 11, 2017 at 5:16 pm

    • Agree with this. Almost have to look on per flight basis rather than per seat as the marginal cost of a single passenger (as opposed to. an empty seat) is de minimis.

      Thus, the pricing of each seat needs to be viewed in terms of opportunity cost of lost revenue that comes in two flavors– zero revenue from completely empty seat vs. a sold ticket that’s not priced high enough.

      But really, can’t even look at per flight in isolation. A flight might be unprofitable on its own, but it serves the purpose of getting the plane from Point A to Point B at which there will be a lucrative run from Point B->C.


      April 11, 2017 at 6:33 pm

    • Coach passengers aren’t “barely profitable” in the sense Lion uses the term, because the product they buy was going to be produced whether they bought it or not, and it’s perishable. Any revenue from those passengers is almost pure profit.


      April 12, 2017 at 7:33 pm

  2. One of the secret reasons people shop at whole foods is that, while SWPLs are forced to acknowledge their material existence when grocery shopping, they damn well aren’t going to have it rubbed in their faces that the white proles shopping at Walmart are humans too, just like them.

    The big reason to fly first class is so you don’t have to be exposed to proles and their uncouth behaviors.


    April 11, 2017 at 5:26 pm

    • Flying first class, when not a go-hog-wild-with-the-expense-account thing, is a spendthrift nouveau riche thing, definitely not a SWPL thing, at least here in New England. My social milieu is all-SWPL, including plenty of multimillionaires, but I’m pretty sure I don’t know anyone who flies first-class at their own expense.


      April 11, 2017 at 5:54 pm

      • If you’re a multi-millionaire and you still fly coach, then you are absurd.


        April 11, 2017 at 8:33 pm

      • As a single-millionaire, I will upgrade to first if I can do it easily with miles or for cash when it is only a bit extra. Sometimes it might just be an extra $250-300 on a cross country trip. Then it is easily worth it.

        Paying full price for first class is far beyond my means and I agree a “spendthrift nouveau riche thing.” It is also pretty uncreative of you if the best way you have to spend a few thousand dollars is on a stupid fatter seat up front for a few hours.


        April 12, 2017 at 1:45 am

      • If you want to stay a multi-millionaire you don’t squander money on frivolities like “first class”. First class is for spendthrift musicians, real estate agents and lottey winners.

        Peter Akuleyev

        April 12, 2017 at 4:54 am

      • SWPL doesn’t mean rich. Most SWPLs can’t afford to fly first class, but I imagine they would if they could.


        April 12, 2017 at 6:47 am

      • “The big reason to fly first class is so you don’t have to be exposed to proles and their uncouth behaviors.”

        Its not couth to even notice other people. Its like thanking your maid.

        Lion o' the Turambar

        April 12, 2017 at 11:43 am

      • Once I got bumped up to first class because, although I had the cheapest ticket, there were no seats left in coach. So even in first class, there’s no guarantee that you won’t be sitting next to the riff-raff.

        Lion of the Blogosphere

        April 12, 2017 at 4:51 pm

      • You need to save the big spending for situations where you really need it. $2K for BC between LA and NYC is wasteful; $4K for BC between LA and Tokyo is worth every penny.


        April 12, 2017 at 7:55 pm

      • @Ringo

        Yeah, as soon as I posted that I remembered that I ought to have clarified that plenty of SWPLs will spring for the upgrade if it’s not too expensive. But I believe inexpensive upgrade offers are becoming less and less common.


        April 12, 2017 at 10:27 pm

      • Flying within America = Prole


        April 12, 2017 at 10:52 pm

      • No, driving within America is prole. Flying is never prole. Unless maybe you’re flying to Orlando or Las Vegas. And I have to admit I’ve flown to both of those cities.

        Lion of the Blogosphere

        April 12, 2017 at 10:54 pm

    • Whole Foods is prole in New York City.


      April 11, 2017 at 9:26 pm

    • If you fly first class, you’re still exposed to the rabble at the gate and elsewhere in the airport.

      If you want to fly with a fancy crowd, you’ve got to fly private.

      Dave Pinsen

      April 12, 2017 at 1:18 am

      • I wonder why they let the 1st class passengers on the plane FIRST. They should board last and depart first so they don’t have to rub shoulders with the (shudder) economy passengers.

        Brian Regan on flying first class:


        April 12, 2017 at 6:50 am

    • As opposed to the gay, effeminate upper class sissy boys? You make it sound like coach is nothing but a bunch of adults, acting like a bunch rowdy 4th graders on a school bus throwing spitballs and sandwiches at the attendants and pilots. Better run along. You’re late for your pedicure and hair perm appointment at the male salon.

      Male sure Fifi, your French poodle, gets its beauty rest.

      Ronald McDonald

      April 12, 2017 at 10:40 am

    • The big reason to fly first class is so you don’t have to be exposed to proles and their uncouth behaviors.

      In other words, one must get on a well-paying “career track” early enough in life so one doesn’t have to sit near poor people (or proles or NAMs) on airplanes (or live near them)!

      E. Rekshun

      April 13, 2017 at 5:33 am

  3. On NeoGaf they are very upset about the Syria situation. Most are still saying that the investigation will lead to Trump’s impeachment but you can tell they are having their doubts and some are saying that the Russia stuff is dead now and the only way to get rid of Trump is through the ballot box or an armed uprising.

    Otis the Sweaty

    April 11, 2017 at 5:55 pm

    • That’s because the left is too stupid to understand what the Russia scandal is really all about. Trump is not and has never been a “Russian agent”. But he did work closely and voluntarily with people like Manafort and Carter Page who are almost certainly in the pay of the FSB. The problem with Trump’s Russia connections is not that he is a Manchurian candidate or will do Russia’s bidding, it is simply that he is willing to work with criminal elements. The Russia connections, like Trump’s ties to the Mafia, show that he has fairly poor business judgement, admires strong, hard men, and that overt corruption and nepotism don’t bother him. But most people who voted for Trump already knew that.

      Peter Akuleyev

      April 12, 2017 at 5:00 am

  4. Finally the Lion has come around to Otis’ position that soylent green was the answer to societal strife all along.

    The Undiscovered Jew

    April 11, 2017 at 6:04 pm

  5. The airlines have complicated seat pricing and sales algorithms intended to maximize their revenue. Business travelers are the most profitable customers, but the airlines cannot fill all their seats with business travelers. If they have empty seats on the flight, then getting some revenue for the seat is better then leaving the seat empty, provided the revenue exceeds the actual cost (fuel, snacks, ..) of carrying the extra passenger.

    United seems to be just going from one public relations disaster to another. Not letting children on a flight because were were wearing leggings. Now dragging a passenger off a plane and hitting his head on an arm rest in the process so that he bleeds because they wanted the seat for a United employee. This is the kind of public relations disaster it will take a long time to recover from.

    I remember flying on Pan Am from SFO to NY LaGuardia for a connection to North Carolina many years ago I never saw an airline that was such a mess. In SFO none of the checkin counter people seem to know what they were doing or how to operate their computer terminals. There was one older woman running back and forth between the checkin stations trying to help the clerks get people checked in. For some reasons they were only able to issue me a boarding pass to LaGuardia, so when I got to LaGuardia I had to go to the gate counter to get a boarding pass for the connecting flight. There was a huge crowd of people trying to get to the gate counter. There were 4 people working at the counter, but obviously only one guy knew what he was doing. He was going around to the the other 3 telling what to type. The line was moving very slowly. Apparently there were a large number of people trying to fly standby on this flight too. The one guy who knew what he was doing started going down the line of people waiting asking to see their tickets and yelling at the people trying to fly standby to get out of line because there was no chance of them getting on the flight. I had never seen airline service employees acting so rude to customers. I was not at all surprised when Pan Am declared bankruptcy 5-6 months later.


    April 11, 2017 at 6:19 pm

    • “Not letting children on a flight because were were wearing leggings. ”

      Leggings should not be worn in public. They are nothing but long underwear. They are not proper or tasteful clothing.

      The girls were relatives of United employees and they have a dress code for them when they fly from what I have read.


      April 11, 2017 at 11:13 pm

      • “The girls were relatives of United employees and they have a dress code for them when they fly from what I have read.”

        This is what I read also, but it really doesn’t matter. The information had been posted all over social media and there were MSM stories about it before United gave this explanation. The damage was already done.


        April 12, 2017 at 9:28 am

  6. Its no mystery Lion. You live in a Whitebread World if you don’t know this one. To blacks paying bills is waciss. Having to pay bills is just one of many things blacks do not understand. They believe America owes the $777 Trillion and minor things like bills seem to completely not matter until the lights go off. That Damn “Man” and his waciss policy of charging people for things that are Rights like electricity, sail foams, water, gas, big screen TVs, cars, and just about everything else White people get through the “White Privilege” of working hard.

    Joshua Sinistar

    April 11, 2017 at 6:24 pm

    • Right. I was once walking behind two young black guys near the Berkeley campus. They were coming from a big track meet. In a mocking tone of voice one says to the other, “did you pay?”

      Explainer 21

      April 12, 2017 at 11:35 am

  7. I’m a terrible customer because I am a supremely logical person. I am the Supreme Gentleman… I understand cost margins and I rarely ever buy anything that businesses will make a high profit margin on, like stupid Louis Vuitton bags and crap.

    But I am def not a freeloader. I’m part of the customer base that pays their maintenance. For example if I go and order a modest lunch by myself and work on my laptop, I’m not as profitable as a party of four who’s ordering all unnecessary things and drinks and stuff. But, I came there when there was no one there and waitstaff was just sitting around and all the rent for the month and building utilities were already paid. So at least they’ll make a little bit off of me.

    Fact Checker

    April 11, 2017 at 6:24 pm

  8. The answer is that they don’t trust their low-level employees to make decisions like that. They figure the low-level employees are not competent to have that kind of authority, and they’d wind up giving the boot to profitable customers. Or maybe they want to avoid bad publicity.

    Sounds reasonable. Also, maybe these companies are treating these loser-customers like retailers treat “loss-leader” items and believe that the “loss-leader” will lead to a subsequent more profitable sale. Or that a “loser-customer” will bring in profitable customer or, over time, become a profitable customer himself. Or maybe the firm plans to slowly squeeze the loser by slowly, almost imperceptibly, raising the price (like what my low-cost ISP has done to me).

    E. Rekshun

    April 11, 2017 at 6:45 pm

  9. If this rule was true, businesses would make 50% of their actual profit serving less than 1% of their customers. Then, some would say, i’ve got half of the market and 99.2 customers. They would apply the rule and serve 0.5% of the customer for 25% of the profit. Another company would come, and serve 0.25% of the customer for 12.5% of the profit. And let’s say another one with 0.125 for 6.25% of the profit. At this point, the loss of profit would be only 6.25%, but 98% of the customers would be unserverd. Does that make sense ?
    Absolutely not, for sure. The rule is consultant bullshit merchandise.

    Bruno from Paris

    April 11, 2017 at 7:20 pm

    • You’re making unwarranted assumptions about the shape of the curve.


      April 12, 2017 at 10:40 am

  10. Why didn’t Dao just get off the damned plane when he was asked to? Sure it would be annoying, but surly better than making a spectacle of yourself.

    I think the reason he behaved as he did was to set himself up to sue the bejesus out of UA. He has a rather shady past, and I think he knew exactly what he was doing.


    April 11, 2017 at 7:55 pm

    • Would people have sympathy for him if he had been a middle-aged white male? People would just say he thinks he has white privilege and is entitled.

      I don’t know why someone didn’t take the 800 dollars or offer to take the guy’s place when the saw he was really distressed..

      He doesn’t deserve millions of dollars.


      April 11, 2017 at 11:19 pm

    • I doubt he was that cunning. The simpler explanation is that 1) he is a doctor, so considers himself deserving of special treatment and 2) Asian man, so probably treated like a passive doormat most of his life, certainly sexually undesirable (he had to pay for gay sex). That is a toxic combination, especially in an individual who probably isn’t that psychologically stable. I suspect a combination of resentment and arrogance in him just snapped.

      Peter Akuleyev

      April 12, 2017 at 5:11 am

      • What about the fact that he is a professional poker player? Wouldn’t that require cuning?


        April 12, 2017 at 8:43 pm

    • I may be nearly alone, but I have no sympathy for Dao. He was instructed to get off the plane, and he refused. It’s no different if you are instructed to leave any private area by the owner or representative. If someone refuses you call the cops..simple.

      Mike Street Station

      April 12, 2017 at 7:40 am

      • Think about that though. That allows SJW’s who happen to be employees of any business to unilaterally repeal the First Amendment (i.e. place themselves in the position of a government with no FA limits) whenever they learn that you hold an opinion or position they find offensive. I actually fol!ow your advice, but I usually wish I’d knocked the employee down. Details on request.


        April 12, 2017 at 4:41 pm

      • “That allows SJW’s who happen to be employees of any business to unilaterally repeal the First Amendment …”

        They pretty much can do that anyway. Where can’t you be refused service if a SJW discovers you think gays shouldn’t be married or that trans something is really just a mental illness? You can be fired for expressing such thoughts.

        Mike Street Station

        April 15, 2017 at 10:36 pm

  11. Somewhat O/T, but I remember reading some years ago that if one were to add up all the profits made by every US airline since the beginning of commercial aviation back in the 1920s, and then deduct all the losses suffered during times of recession and/or high fuel costs, the losses would cancel out every dime of profit. The former CEO of American Airlines, Robert Crandall, even remarked once that the airline business is fun and exciting and a great career, but it’s no place to be if you want to make money.

    The fact is that no form of public transportation makes money taking people from one place to another, at least not without some form of government participation, whether by operating public airports and the air traffic control system, building and maintaining highways, or even subsidizing Amtrak.

    Sgt. Joe Friday

    April 11, 2017 at 8:14 pm

    • The pilots make a lot of money. So it’s absolutely not true that no one is making money.

      Lion of the Blogosphere

      April 11, 2017 at 9:16 pm

      • CEOs are always the rapists, when it comes to the shareholders and the company’s customer base.


        April 11, 2017 at 9:53 pm

      • I think Crandall’s point was that investing in airline stocks wasn’t a good idea.

        As for the pilots, I had a friend – now deceased – who flew for Delta Airlines. He joined Delta as a flight engineer (back when they still had those) after he left the Air Force in 1991. He was making OK money at that, but when the early 90s recession hit, he was furloughed for quite a while until he got called back. He finally earned his fourth stripe, and at the time he passed away in 2011 he was probably pretty close to the top of the food chain, $150K a year or thereabouts. But if you take into consideration all that he had to do to get there, i.e. 7 years in the USAF, which doesn’t pay much, a 2 year or longer furlough (and possibly having to pay out of pocket for flight hours to keep the skills sharp), and the concessions the pilots’ union made when the airline hit tough times, it’s at best a middle to upper middle class occupation. To be fair, those dollars go a lot further in the southeast than they do in So Cal.

        Sgt. Joe Friday

        April 11, 2017 at 10:44 pm

  12. Every time you hear someone saying 80% something doing 20% something, someone is trying to mislead you.

    My Two Cents

    April 11, 2017 at 8:26 pm

  13. C’mon Lion, your one job in life is to provide us with “Girls” reviews, so get crackin!


    April 11, 2017 at 8:36 pm

    • I keep forgetting to watch it. Sorry.

      Lion of the Blogosphere

      April 11, 2017 at 9:17 pm

      • Watch something good like Rick and Morty instead. Also Nathan for You


        April 11, 2017 at 9:38 pm

  14. Plenty of corporate retail are profitable simply because proles are their main customer base. These businesses profit from proles, because they are gullible and unhealthy with a lower impulse control. These businesses also attract NAMs.

    Think Walmart, McDonalds, Dunkin Donuts, Best Buy and Jared Fogle.


    April 11, 2017 at 9:51 pm

  15. The 80/20 rule doesn’t apply to all businesses. It probably doesn’t apply to most commercial airlines. They need nearly every seat filled to be profitable. There’ve been attempts at all business class airlines, but I think that’s been more of a niche thing.

    For that matter, 80/20 probably doesn’t apply to mass retail either.

    Dave Pinsen

    April 12, 2017 at 1:21 am

  16. America is broken. This is quintessential evidence.

    Oh well. At least its corporations are doing just fine.

    Paul Ryan's Sickly Old Lap Dog

    April 12, 2017 at 1:47 am

    • The Anglo Prole Sphere is broken – The Protestant Work Ethic has been exploited and abused by its crony capitalists.


      April 12, 2017 at 11:01 pm

  17. I’m not an entirely unprofitable customer, but I’m no longer a customer of any kind at Carrabbas Italian Grill after the waiter and chef did not know how to make the white pizza I ordered the other day.

    E. Rekshun

    April 12, 2017 at 3:57 am

  18. Seemingly unprofitable customers can turn into highly profitable ones at any time. As an example, let’s use the Major Home Improvement Retailer where I have my second job. There’s a sale on mulch almost every weekend this time of year, when one of the two brands we carry will be $2 each, down from the normal $3.50. One weekend one brand’s on sale and the next weekend the other one is.

    Customers typically buy a few thousand bags per weekend. While that may be a huge amount in physical terms, at just two bucks per bag mulch amounts to only a very low single digits percentage of the store’s total revenues. With several employees assigned to mulch duty* it’s likely a net loss. So why offer these sales? The reason is that people brought into the store to buy cheap, likely unprofitable mulch usually end up buying other things, either in the same or subsequent visits. Fertilizer and grass seed displays aren’t far from the mulch area, and those are way more expensive and profitable. If it weren’t for the mulch sales some of these customers might not have shown up at all.

    * = one thing about mulch you learn quickly when selling it, which can entail lifting and carrying countless bags per shift, is that because it absorbs water a bag can weight anywhere from 15 to 40 pounds, and you don’t know how much until you actually lift it.



    April 12, 2017 at 8:20 am

    • The Mulch is a retail loss leader. Although one of the known problems of sales is that they train cheap customers not to buy anything unless there’s a sale.

      Lion of the Blogosphere

      April 12, 2017 at 9:45 am

    • Yes. I can’t get out of Home Depot or Lowes w/o spending well over $100. I just ordered a stackable washer/dryer unit on sale at $400 off from Lowes for my rental unit, with “free” delivery and installation. I’m finding that these two stores seem to be carrying more and more items on-line and fewer in the store. Their on-line shopping experience and delivery are excellent. I’m thinking a few hours a week at one of these stores might be an almost enjoyable part-time gig in retirement.

      E. Rekshun

      April 12, 2017 at 10:47 am

      • The number of items in the stores hasn’t declined, but it seems that way given the vast numbers available online. For example, the store where I work carries eight models of pressure washers in stock, this hasn’t changed in the 3+ years I’ve worked there, but there are 150+ available online.



        April 13, 2017 at 8:19 am

  19. article on Legal Insurrection about the special election in KS-4:

    Things to keep in mind:

    1. Approval ratings mean less for Trump than they do for typical politicians. Trump is disliked by a large number of cucks who will ultimately support him at the ballot box.

    2. In the public’s mind, there is a difference between Trump and the Republican party. They may dislike Trump but still have no problem voting for their Republican rep and vice versa.

    3. I won’t say that special elections are meaningless, but they are weird and it can be hard to interpret them correctly. I see the narrow margin in KS-4 not as a repudiation of Trump but as a repudiation of the KS Republican party.

    4. The GA-6 special election is much more meaningful. It is a blood red Never Trump district where the Dems have recruited a great candidate and both national parties are fully committed. I think the Republicans will pull off GA-6 but there is no question that even a close Ossoff loss would be a victory for The Resistance. On the other hand, a Republican victory by 5 or more points would be somewhat of a victory for Trump and the GOP.

    Otis the Sweaty

    April 12, 2017 at 8:38 am

    • 538 has another sensible take on these, and that is that individual special elections are meaningless because each one has particular local factors, but you can learn something by looking at all of them over the course of two years. Wait until the results are in for the other three this year.


      April 12, 2017 at 10:59 am

  20. Sprint closed the accounts of their most neediest customers. Customers who were costing them money by calling in all the time and also asking for bogus credits on their monthly bills. I’m surprised more wireless companies don’t do this.

    Ronald McDonald

    April 12, 2017 at 9:21 am

    • That’s a great example of how you can increase profits by dumping some customers.

      Lion of the Blogosphere

      April 12, 2017 at 9:49 am

      • Exactly. All AT&T and Verizon care about is how many subscribers they have. Even though a sizable chunk (probably 5 million or so) of them actually cost them money. Customer service reps don’t want to spend a lot of time on the phone with them and are under a lot of pressure to resolve their issue in the least amount of time. The easiest way to win them over is to just give them adjustments on their bill. The simple act of just calling your provider’s customer care costs them money.

        Now the providers are smartening up by offering unlimited plans at decent prices. You can eliminate probably 80% of the calls right there by offering nothing but unlimited plans.

        Ronald McDonald

        April 12, 2017 at 11:04 pm

  21. in healthcare 50% of costs are because of 5% of the population. these 5% should be put on the va system to get direct care (no insurance expenses). that way everyone else gets lower healthcare/insurance costs.

  22. Sailer commenters kick ass:

    The irony here is that this was not a United flight at all. This was a “United Express” flight that is run under contract with Republic Airline. United saves $ by having its shorter /lower capacity “commuter” flights operated under contract by Republic who pays its pilots bubkes. The pilot business is operated like the acting business where pilots hope to land a gig at a major and earn a decent living but few ever do and those that don’t barely make a living. Regional carrier pilots sleep in the airline terminal or their cars because they can’t afford a motel room. But for United, live by the sword, die by the sword – they lent their name out to Republic so now they have to live with the PR blowback from what Republic did with it.

    Republic as a low rent operation refused to offer more than $800 to get a volunteer although they could have gone much higher. $800 is close to what they pay a pilot in a month. Cheaper to call the cops.

    And the people who dragged the guy off the plane were not employees of either, but Chicago cops. So double irony – why is United getting the grief instead of the Chicago PD? I’m sure that the cops were not under instructions from either United or Republic to beat the crap out of the guy – that was their idea and/or lack of training in how to handle people. Chicago PD is used to handling dindus who are in no position to complain most of the time.

    Speaking of being in no position, David Dao, the victim, has a “troubled past” as a pill doctor.

    In China, the good doctor’s removal is being spun as anti-Chinese racism. Sort of ironic that the Chinaman is now getting whites addicted to opium instead of vice versa – cosmic revenge I guess.

    So there are no heroes here, just a sordid rogue’s gallery of marginal players trying to scratch out a living in the sad twilight of the American empire, but streamed live and in color on your Korean cell phone.

    Mel Belli

    April 12, 2017 at 11:42 am

  23. The answer is Libertarianism at work.

    Any businessperson knows–or should–that you’re very, very nice to marginal customers because if nothing else they have actual bigger or potential customers, suppliers, and investors who love them. As United just found out when some low-level person trying to save $100 by not making a better offer to go give up a seat has now cost the company some $1 BB and created an international PR nightmare.

    “On Tuesday, as the controversy surrounding the video failed to die down, shares dropped as much as 4.3%, or $3.10 per share, taking upwards of $950 million in market cap value away from the company based on 314 million shares outstanding.”


    April 13, 2017 at 1:07 am

  24. Today as I saw yet another an expose on the United fiasco advertised on the TV, all dark dramatic lighting and serious music interspersed with clips of serious-faced reporters and fumbling United spokespeople, I had a slight epiphany.
    The night before I saw a picture of a Swedish girl who had been cut in half by a Muslim terrorist driving a truck.
    One Asian man, mistreated and manhandled, becomes a national outcry for weeks.
    The other, a young woman brutally murdered in part of an ongoing war against White Christianity, disappears, never to be seen or heard from on the airwaves.

    Panther of the Blogocube

    April 14, 2017 at 3:18 am

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