4 ms·

There were a few pets.com along the way in SV. For every successful startup, there's a graveyard full of failed ones.

nostrademons 8y ago
Sure, but the same applies to factories. I'd seriously question the OP's numbers of a certain 60-70% capital recovery rate for factories. Maybe in Shenzhen where you have tax policy, exchange rates, and labor costs all in your favor. All you have to do is drive through the Midwest to see examples of factories that didn't survive either, though.
- civilitty 8y ago
  It's highly dependent on what kind of factory you're talking about. In medical/aerospace or other high tech manufacturing, even equipment that sees high utilization for 3-5 years can easily keep over 70% resale value if maintained properly. However, to suggest that 60-70% capital recovery is certain is silly. Maybe if you're manufacturing high precision parts for jet engines or missiles or something but then your capex is going to be in the tens of millions before you even get started and recovering the capital could take an indefinite amount of time.
- ddebernardy 8y ago
  True, but that's kind of comparing apples to oranges. It's not every day where people do capital intensive investments like those involved in factories, and they usually only do so when they're fairly certain they'll get a return. That contrasts with funding SV startups, which is probably comparable to throwing darts semi-blindfolded and hoping something sticks. Sometimes it does; it usually doesn't. Also, the factories in the midwest were doing fine until they didn't; but nothing lasts forever. The factories in Shenzhen will similarly go under sooner or later. 3d printing, for instance, might bring some manufacturing jobs back to the US and Europe and put Chinese factories under pressure.
- baybal2 8y ago
  >I'd seriously question the OP's numbers of a certain 60-70% capital recovery rate for factories. Well, first you have to buy a building properly fitted for a factory. Industrial plant property has never ever went down in price in South China. You can't legally run a factory business out of a garage anymore in China. A factory with a top notch equipment today, will just be switching product tiers as it ages, without going down much in value. A factory, is not just its manufacturing machinery. It is also a well fit assembly line team, cherry picked team leads, on-site engineering, and shop floor knowhow. And for everything else, a company being liquidated is usually sold as a whole to another entrepreneur. Who needs to pull apart a well oiled machine, which is an assembly line team, just to have to reassemble it later? Cases when the factory business being liquidated is sold above its book value, are not so infrequent. A no-name shoe factory going bust is either result of a market force action, or the owner being reckless/dumb. It does not mean that the whole idea of a shoe as a product is a failure. It just means that the next owner, must be more financially conservative or needs to switch to fancier kind of shoes to stay afloat. Value-wise - there is not much change in tangible and intangible assets.
  - nostrademons 8y ago
    Like ddebernardy said, the factories in the Midwest were doing fine until they weren't. The same will likely happen in China. Just because industrial plant property has never ever went down in price there doesn't mean it never will. I grew up in New England, birthplace of the industrial revolution in America, and we had our manufacturing crisis just as the Midwest was ascending. The factories in Boston, Waltham, and Malden aren't factories any more; they're tech companies. The ones in Lowell are museums. The owners went bankrupt and packed up and then left the mess behind for decades before it was cleaned up. I was just at the Boott Cotton Mills Museum the day before I posted the original comment. It still has machinery from c. 1910 in it. Nobody wanted to buy it; it sat, derelict and rotting, for 60 years until the factory was turned into a National Park and restored with federal money.

Sure, but the same applies to factories. I'd seriously question the OP's numbers of a certain 60-70% capital recovery rate for factories. Maybe in Shenzhen where you have tax policy, exchange rates, and labor costs all in your favor. All you have to do is drive through the Midwest to see examples of factories that didn't survive either, though.

civilitty 8y ago
It's highly dependent on what kind of factory you're talking about. In medical/aerospace or other high tech manufacturing, even equipment that sees high utilization for 3-5 years can easily keep over 70% resale value if maintained properly. However, to suggest that 60-70% capital recovery is certain is silly. Maybe if you're manufacturing high precision parts for jet engines or missiles or something but then your capex is going to be in the tens of millions before you even get started and recovering the capital could take an indefinite amount of time.
ddebernardy 8y ago
True, but that's kind of comparing apples to oranges. It's not every day where people do capital intensive investments like those involved in factories, and they usually only do so when they're fairly certain they'll get a return. That contrasts with funding SV startups, which is probably comparable to throwing darts semi-blindfolded and hoping something sticks. Sometimes it does; it usually doesn't. Also, the factories in the midwest were doing fine until they didn't; but nothing lasts forever. The factories in Shenzhen will similarly go under sooner or later. 3d printing, for instance, might bring some manufacturing jobs back to the US and Europe and put Chinese factories under pressure.
baybal2 8y ago
>I'd seriously question the OP's numbers of a certain 60-70% capital recovery rate for factories. Well, first you have to buy a building properly fitted for a factory. Industrial plant property has never ever went down in price in South China. You can't legally run a factory business out of a garage anymore in China. A factory with a top notch equipment today, will just be switching product tiers as it ages, without going down much in value. A factory, is not just its manufacturing machinery. It is also a well fit assembly line team, cherry picked team leads, on-site engineering, and shop floor knowhow. And for everything else, a company being liquidated is usually sold as a whole to another entrepreneur. Who needs to pull apart a well oiled machine, which is an assembly line team, just to have to reassemble it later? Cases when the factory business being liquidated is sold above its book value, are not so infrequent. A no-name shoe factory going bust is either result of a market force action, or the owner being reckless/dumb. It does not mean that the whole idea of a shoe as a product is a failure. It just means that the next owner, must be more financially conservative or needs to switch to fancier kind of shoes to stay afloat. Value-wise - there is not much change in tangible and intangible assets.
- nostrademons 8y ago
  Like ddebernardy said, the factories in the Midwest were doing fine until they weren't. The same will likely happen in China. Just because industrial plant property has never ever went down in price there doesn't mean it never will. I grew up in New England, birthplace of the industrial revolution in America, and we had our manufacturing crisis just as the Midwest was ascending. The factories in Boston, Waltham, and Malden aren't factories any more; they're tech companies. The ones in Lowell are museums. The owners went bankrupt and packed up and then left the mess behind for decades before it was cleaned up. I was just at the Boott Cotton Mills Museum the day before I posted the original comment. It still has machinery from c. 1910 in it. Nobody wanted to buy it; it sat, derelict and rotting, for 60 years until the factory was turned into a National Park and restored with federal money.