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Well, Santa's finally done it. He's bankrupt, thanks to some rather dubious investments and some bad luck in the real estate market (a couple ice sheets he was renting out just melted away). Kris Kringle, therefore, has to appeal to us mere mortals, to find someone - preferably a private individual - who can finance his operations for one year while he tries to secure a better financial footing.

Santa has commissioned me to do a feasibility study - that is, to figure out if anyone would be willing to help him. I have to start by figuring out just how much it costs him to be Santa each year (and no, he hasn't told me, and probably won't - Santa's secretive), to within an order of magnitude.

I've identified some key places where Santa surely must be using money. They include:

  • Getting the raw materials to make toys.
  • Paying the elves to make toys.
  • Generating all of the energy he needs to run the North Pole.
  • Dealing with the reindeer.

Taking these - and anything I've missed - into account, how much does it cost to finance Santa's operations for one year?


Basic assumptions and clarifications:

  • Santa needs to deliver one toy to each of the roughly 2 billion children on his list.
  • He needs to do it in one night.
  • He has the entire year to make the toys, but he needs the elves to make them (and they need to get paid!) in his workshop. No subcontracting; having to get an investor is embarrassing enough.
  • Santa's workshop is at the North Pole, or thereabouts.
  • Santa still has his reindeer, workshop, etc. from last year. However, he'll still need to buy new raw materials, food, etc., as well as generate energy for this year. We're not starting from scratch.
  • The sled is reindeer-powered; when looking at the energies required for transportation, we'd have to look at what we need to feed the reindeer (I'm using a model like the one in How many calories must Santa's Reindeer consume?).
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  • $\begingroup$ Comments are not for extended discussion; this conversation has been moved to chat. $\endgroup$ – James Dec 23 '17 at 7:03
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    $\begingroup$ Actually Santa paying his elves could be a mistake, in much of European mythology paying creatures such as elves, brownies etc. for their help would cause them to revolt, they help for free not for payment. $\endgroup$ – Sarriesfan Dec 23 '17 at 8:39
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    $\begingroup$ And we better take into account the fact that not all children get Santa's gift. e.g. most of Muslim children don't believe in Santa and don't care about him. And as far as I can tell, none of them has received anything from Santa so far. Either Santa has a strong religious bias or there is something seriously wrong with his distribution system. $\endgroup$ – polfosol Dec 23 '17 at 9:57
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    $\begingroup$ Indeed this event already happened: Santa no longer delivers gifts, he left that duty to parents and only try to feed his reinders on his meager retiree pension. $\endgroup$ – mouviciel Dec 23 '17 at 10:18
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    $\begingroup$ The "north pole" part needs some double checking. According to several sources Santa lives and works in Lapland (Finland), thus he is under EU jurisdiction and all expenses are subject to VAT. $\endgroup$ – Andrea Lazzarotto Dec 23 '17 at 19:59
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Pay for elves

Joe estimates that it would take 85,851 elves working 16 hours each day for 364 days to make roughly 2 billion toys. If Santa pays his elves about \$10.00 per hour (in US dollars), that costs $$85,851 \text{ elves}\times\$10.00\text{ per hour}\times5824\text{ hours per elf}=\$5\text{ billion}$$ Let's multiply that by 2 to take into account support staff and elves working in Santa's other departments (energy, farming, etc.). So paying the elves alone costs \$10 billion.

Nolo estimated an elf population 2-7 times that high. So we could actually be looking at \$20 billion to \$70 billion.

The cost of toy materials

Let's say each toy costs \$5.00 to make in terms of raw materials (if it takes an elf 15 minutes to make each toy, labor is \$2.50 per toy). The cost of the materials (and the cost of using tools for toy-making) then is $$\$2\text{ billion toys}\times\$5.00\text{ per toy}=\$10\text{ billion}$$ As expected, making toys is really, really expensive.

Energy

There has been quite a lot of dispute on the energy Santa needs to make his journey. I'm going to present several different results based on different calculations:

  1. Zoey Boles found that Santa's reindeer would need 1,324,819,748 pounds of oats to travel the world on Christmas. Walmart will sell me oats for \$3.42 for 42 ounces. I could then buy these oats for $$1,324,819,748\text{ lbs of oats}\times\frac{\$3.42}{42\text{ oz}}=\$1.7\text{ billion}$$ Santa could buy this much oats, or he could grow it himself, which might avoid suspicion (although he would need to annex Rhode Island to grow it all). computercarguy indicated that prices could actually be as low as \$3.00 per bushel, which would lower the price to \$100 million - one seventeenth my original estimate!
  2. A. C. A. C. used conservation of energy to get 12,000 times as much calories as Zoey did . . . just for the reindeer to propel themselves. This lands us in the range of tens of trillions of dollars. Taking gifts into account raises this by six orders of magnitude, meaning that Santa would be richer than many countries.

    The difference, I believe, is that A. C. A. C. took travel time into account; Santa must make his 200 million+ mile journey in 24 hours. For that question, though, reindeer can dilate time and can travel for what is, in their perspective, much more than 24 hours. For my question, A. C. A. C.'s method is, I think, correct; Zoey's is correct if the 24 hour limit is not in place.

The elves consume energy, too. The world average power consumption per capita in 2011 was 2,674 kilowatt hours per year. If we assume a cost of 12 cents per kilowatter hour, then the eleves consume $$(2\times85,851)\text{ elves}\times2,674\text{ kWh per elf}\times12\text{ cents per kWh}=\$55\text{ million}$$ I have no idea how much energy is needed to make all of these toys, or what the energy consumption for certain other parts of the infrastructure are.

The total so far.

At the moment, I've found that Santa must be spending tens of billions to many trillions of dollars each year. However, there are still some things I haven't been able to figure out:

  • How much energy does toy-making consume?
  • Can Santa recoup costs - for instance, through collecting cookies?
  • Does Santa have other costs - like, for instance, leasing his land? Is he a tenant toy manufacturer?

These are why I'm still looking for other answers.

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    $\begingroup$ As a former farm boy, you should be able to get the oats much cheaper directly from a local grain elevator (en.wikipedia.org/wiki/Grain_elevator) for probably 3 - 5 dollars a bushel, with a bushel roughly equal to 32 lbs of oats. Today's price per bushel of oats is $2.4575, plus some for the processing (drying, storage, etc.) the elevator does. $\endgroup$ – computercarguy Dec 21 '17 at 16:20
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    $\begingroup$ @computercarguy Thank you! I've revised my answer based on an estimate of \$3.00 per bushel. You just saved me about \$1.6 billion. $\endgroup$ – HDE 226868 Dec 21 '17 at 16:26
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    $\begingroup$ @HDE226868, you are welcome! What's my cut of the savings? $\endgroup$ – computercarguy Dec 21 '17 at 17:11
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    $\begingroup$ $10/hour? What? That's insane! You should be looking at third-world pay, not US minimum(ish) wage. Their cost of living should be close to nil anyway. $\endgroup$ – Roddy of the Frozen Peas Dec 21 '17 at 20:15
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    $\begingroup$ If you are paying your elves a full working wage, you don't need to pay for their food and lodging. The farming elves would be paid from the wages of the elves, not from Santa directly, so most of the support elf wages are double counted. $\endgroup$ – wedstrom Dec 22 '17 at 18:43
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Outsourcing delivery

The obvious solution is to use external fulfillment services instead of delivering himself, in the vein of dropshipping. In this model, Santa would produce all his toys at the North Pole, and deliver them somewhere else, say by November 25 for them to ship the products around the world.

Let's go through his base expenses in this model:

  • Elf wages stay the same: \$9 billion total for workers and support staff. Because he sends out toys a month early in this model, they only work 11/12 months, so a savings of about 1 billion.
  • Santa can make cheaper toys this year, let's say he only spends \$7.5 billion on his 2 billion toys.
  • Since the reindeer aren't flying, they don't need millions of bushels of oats. Allow them to graze in the tundra and take a year off. Cost: \$0.
  • I assume Santa is sovereign of his own land and doesn't owe rent or property taxes.

Now he has to get his toys from his base of operations (somewhere in the Arctic circle) to a distribution center, likely one in Europe or North America, as that's where most of the gift-giving Christmas celebrators are. Let's say he chooses Rotterdam and Los Angeles.

The standard shipping container is 1,280 cubic feet. Let's say Santa's small toys are about $1/8$ of a cubic foot. (A cubic foot is a big present!) The average container ship carries about 10,000 containers.

That means if he sends two ships, one to Rotterdam and one to LA, he can ship about 205 million gifts, so he needs 10 ships total to deliver 2 billion packages.

Now how much does it cost to ship two whole container ships?

According to this fellow, who says he works in maritime shipping, it costs \$3200 - \$4500 for a 40' container (twice what we've been basing our math on).

Let's go with the low end because of a massive bulk discount, so \$3,000 for a 40' container, \$1,500 for a 20' container. Now, Santa isn't shipping trans-Pacific, so reduce costs by 20% to account for this.

  • Beijing to LA: 6,261 mi
  • North Pole to LA: 3,875 mi
  • North Pole to Rotterdam: 2,639 mi.

$$ 20,000 * (1,500 * 0.8) * 10 = 24 * 10^7 $$

A surprisingly cheap $240 million to get all his presents from the North Pole to LA and Rotterdam.

However, 2 billion is an enormous amount of packages to ship in a month. Amazon ships an estimate 608 million packages a year so shipping 2 billion in a month is $40\times$ Amazon's monthly deliveries.

Obviously, Amazon doesn't account for every delivery, but there's no way they're only 2.5% of deliveries.

Now you have to deliver them. He can do this through intermediaries instead of under S. Claus, therefore saving him embarrassment.

USPS delivers 506.4 million packages a day. Santa needs to deliver about 66 million a day if they have a month to deliver them. Every day, the USPS goes through \$395.4 million, at a cost of \$0.78 per package. Round this to $1.5because of large and irregular gifts.

Santa needs to deliver 2 billion gifts. The average US family with kids has 1.86 kids. If he packages gifts for one household together, he might get as low as only delivering 1.08 billion gifts.

Therefore, delivery fees will cost about $1.62 billion worldwide.

I estimate, then, that it for someone to take over Santa's operation, but sill hiring his elves and delivering the toys they make, it will cost (in billions):

$$ 9 + 7.5 + .24 + 1.62 = 18.26 $$

So to summarize, for someone else to take over Santa's operation I estimate it would cost 20 billion US dollars (rounding up).

That's approximately the GDP of Cambodia, Afghanistan, and Cyprus, or about the net worth of Laurene Powell Jobs (Steve's widow) or Microsoft co-founder Paul Allen, who are about the 40th richest people in the world.

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    $\begingroup$ (If anyone is better with math formatting, please help me out) $\endgroup$ – Azor Ahai Dec 21 '17 at 19:55
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    $\begingroup$ I'm a little confused (and I apologize for my lack of knowledge in this area). Is Santa still manufacturing the toys (which was one of my requirements), or is someone else making them? $\endgroup$ – HDE 226868 Dec 21 '17 at 20:09
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    $\begingroup$ @HDE226868 In a dropshipping situation, Santa would not be producing the toys. $\endgroup$ – SPavel Dec 21 '17 at 20:14
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    $\begingroup$ @HDE226868 I edited to reflect your requirements $\endgroup$ – Azor Ahai Dec 21 '17 at 21:09
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    $\begingroup$ @HDE226868 Wait a minute... you said that temporarily enslaving the elves was a possibility (though only if absolutely necessary), but giving them all a vacation and still saving money anyway is not?? What kind of evil Santa is this? $\endgroup$ – Loduwijk Dec 21 '17 at 21:46
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If you were taking over Santa's role and had access to all his infrastructure and production, the cost will likely be 0.

Santa has been in business for hundreds of years. Either he had a very large sum of money at the start and loses a fraction each year (which highly unlikely). Or he is self sufficient in what he does and his budget is completely balanced each year. Santa likely balances his Christmas budget perfectly every year and if he is personally bankrupt and requires a new Santa, the toy making business can be assumed to be completely self sufficient in terms of capital and the new Santa would not need any investments.

Santa's actual job isn't to pay the bills, his job is to compile a list of all children and to check if they are naughty or nice. Twice. As well as deliver the presents on Christmas to all the children in the world. The actual accounting will likely be done by accounting elves.

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    $\begingroup$ He just went bankrupt. Clearly his accounting wasn't that great... (Note: I interpreted the question as saying that Santa Inc. is bankrupt, not Santa personally.) $\endgroup$ – Mario Carneiro Dec 22 '17 at 8:09
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its not technically feasible for Santa to deliver all the presents in 48hrs. but he has a year to do it. So he must have a time dilution device. if this is the case, he would never get a day off delivering presents(from his perspective) eternally! It does mean he has a time dilation device. Bet he uses it to bet on the stock market.

investing companies will pay millions to get a foot closer to the trading floor servers, just imagine how much they would pay for a time dilution device.*

production cant be solved by this as it take 365 days to make the toys. but means production could be spread around and the north pole is prob now a tax dodge HQ.(Santa inc. needs to pay the taxes on his income form those trading companies)

See CIA, SpaceX, etc as potental customers.

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  • $\begingroup$ Doe he really need to pay taxes? He represents religion and charity. Depends on the jurisdiction. $\endgroup$ – Sulthan Dec 26 '18 at 14:01

protected by Separatrix Dec 25 '17 at 8:30

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