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One angle that this article missed: anti-price gouging sentiment has a lot to do with why the factory isn’t running 24/7. Imagine if he could charge 10x his nor

One angle that this article missed: anti-price gouging sentiment has a lot to do with why the factory isn’t running 24/7. Imagine if he could charge 10x his normal price (ie $1/mask, which is much less than the value a mask provides.) I suspect plenty of employees would happily work 100 hour weeks for the duration of the crisis if they were getting paid $150/hr. Instead, he’s forced to take a slower, more conservative approach to ramping up to avoid risking bankruptcy.

gpm 7y ago
From one perspective this is true. From another perspective, he's having trouble getting long time contracts. Hospitals could give him that extra 90c per mask (10c per mask per the article, 1$ suggested price in your comment) by signing a contract to buy x masks every year for 10 years instead of just signing a contract to buy x masks. It seems that the actual problem might just be hospitals being stingy.
- mapgrep 7y ago
  Not an extra 90 cents per mask, an extra 8 cents per mask. “His masks may cost a dime each, but a made-in-China mask might go for two cents.” A hospital charged my friend $5k for three stitches. They could pay 8 cents more per mask. But they care more about $$$ than the long term health of the country. And I’m not even making a moral statement with that. It’s the natural consequence of making health care a capitalist endeavor. There are other approaches.
  - gpm 7y ago
    > Not an extra 90 cents per mask, an extra 8 cents per mask. We're suggesting the hospital giving him 1 dollar per mask instead of 10 cents during the crisis, that's an extra 90. 98 cents compared to the Chinese prices. I guess my proposal makes it a bit less. With the 10 year contract, assuming that the demand spike only exists in the first year, it would be an extra 90 cents - savings of (9 years * 2 cents / year) = 72 cents per mask. This could be "fixed" by extending that contract for a few more years.
    - droithomme 7y ago
      I paid $4 per N95 mask in January. $1 is an absolute bargain. $0.10 is vastly below the cost of manufacture and only being promoted by people who mean harm.
      - gpm 7y ago
        The $0.10 figure comes from the article... I think these might just be surgical masks not N95 masks.
      - deleted 7y ago
        [deleted]
      - PeterStuer 7y ago
        Did you buy them at quantity (lot of 50k masks), or in a small box of 10 at the DIY store?
  - jmckib 7y ago
    If healthcare was really a capitalist endeavor then it wouldn't cost $5k for three stitches. Prices would be transparent, there would be a free market with competition, and healthcare wouldn't be linked to employment. You can thank regulations for all of those problems.
    - giantrobot 7y ago
      What regulations are those exactly?
      - gpm 7y ago
        The ones that let them not tell you how much they will charge you for a service until after they provide it, and then still demand payment (and have the government enforce that demand)? (I'm pretty sure that's not what the person you were replying to is going for - but it is a very problematic piece of the regulatory environment which is unique to hospitals)
      - BurningFrog 7y ago
        Healthcare is probably the most regulated industry in the country. Nobody knows all the regulations, and asking for a list seems a bit clueless.
        giantrobot 7y ago
        If you're going to claim specific problems are caused by regulations is not too much to ask which specific regulations cause specific problems. What's clueless is to use the word "regulations" like it's some incantation. Healthcare is heavily regulated because medical care is not usually something you can restitute after the fact. If you sell me a defective widget my life doesn't depend on I can get my money back or sue you to get it back. If a doctor sticks a defective medical widget in my body and I die, I can't really do much about it afterwards. I'd prefer that doctor's certifications have some sort of regulatory oversight. I'd also like medical widgets to be regulated so there's stringent QA and manufacturing process qualifications.
      - 7y ago
  - jlebar 7y ago
    > A hospital charged my friend $5k for three stitches. They could pay 8 cents more per mask. But they care more about $$$ than the long term health of the country. Couldn't we say the same thing about the owner of this factory? He could gear up and then pay unemployment for laid-off workers after the crisis ends; he did it once. I am also not a fan of our health-care system, but...it's complicated.
    - hedora 7y ago
      Last time, ramping up almost bankrupted the business, and left it with an extra $1M in debt.
      - moftz 7y ago
        Seems like the government should just remove the risk of being the business of critical supplies. Obviously we didn't have enough supplies in stockpile it would benefit the US to have a dedicated factory to produce a constant stream of PPE for the next 10 years. This stuff is so cheap to make that not stockpiling it is just stupid. These kind of supplies are used by everyone everywhere that it's a waste of time and money trying to negotiate critical supply stockpiles on the local or state level. This needs to be at the national level to be able to leverage the power of the US govt. Using the DPA, the govt can come into 3M or any of the other manufacturers and say "you are going to sell us 50M masks per year for the next 10 years". After a couple years, you have a healthy stockpile that can either be used in a pandemic or changed out for fresh supplies over time. It's a shame to throw out expired medical supplies but having a consistent supply chain going for years is good to make sure that there is a standard product out there that you don't need to worry about changing.
        vl 7y ago
        FYI, 50M masks in pandemic is 1/7th of what country needs in a day.
  - readme 7y ago
    >A hospital charged my friend $5k for three stitches https://www.youtube.com/watch?v=VGDUqBLtyNM https://www.youtube.com/watch?v=VGDUqBLtyNM DIY can save money. I've used superglue for this in the past.
    - godelski 7y ago
      Please don't do this at home.
      - godelski 7y ago
        For the downvoters: SERIOUSLY DO NOT DO THIS AT HOME! Let the medical professionals put in your stitches. I seriously can't believe I have to say this.
        jschwartzi 7y ago
        This is America. It’s much cheaper here to risk our lives than to risk bankruptcy from visiting a hospital.
        readme 6y ago
        I have to assume the guy who says not to do this is from a country with universal healthcare.
        dgoodell 7y ago
        I cut my index finger pretty bad, it must have been all the way through the skin as there was a big flap. It definitely needed stitches. I used superglue to hold it together until it stayed stuck on its own. I couldn’t use the finger for like a week because it was all bandaged up. Probably not as a good job as if I went to the doctor, but my finger didn’t fall off. HDHP turns you into a do-it-yourselfer. My mother had a much more serious gash when she dropped a piece of glass on her foot. This was on Croatia. We went to the ER in the city, and she got stitches fairly quickly for like $20 cash. If I would have cut my finger in Croatia, I would have gone to ER to get stitches.
  - arkades 7y ago
    Not to undermine your dramatic point[1], but: Most hospitals run at profit margins well below 10%. Median operating margins are in the vicinity of 2% (https://www.modernhealthcare.com/providers/operating-margins-stabilize-not-profit-hospitals-still-vulnerable https://www.modernhealthcare.com/providers/operating-margins...) And for the last few years, expenses have been growing faster than revenues (though the rate of growth of expenses has slowed.) Whatever you imagine they're bringing in, they're not. Nor is their job to maintain the long-term health of the country. That's literally the government's job. [1] Those numbers have a historical reason behind them, which people are either ignorant of or choose to ignore. The short version is: hospital prices are set as a part of the negotiations with insurers. Insurers account for the vast, vast majority of dollars going into hospitals, so their business operations are built completely and entirely around insurance dollars. Uninsured patients register as barely more than a rounding error. So while, yes, being uninsured in this context sucks, hospitals aren't gleefully rubbing their hands and going "muahaha, $5K for stitches!" They don't expect to see that 5K, they don't rely on that 5K, and they're not trying to gouge that uninsured person who's almost certainly not good for that 5K. That person has just fallen into the crack(s) in our healthcare system, which are more complicated than "evil greedy hospital", or "evil greedy insurer."
    - pdonis 7y ago
      > Nor is their job to maintain the long-term health of the country. That's literally the government's job. No, it isn't. It's everybody's job. The government is a tool we use to delegate certain aspects of that job--and often it's a very bad tool to use and we should be relying on it less, not more. The idea that "it's the government's job" to do things causes all kinds of problems, because people think they can just let the government take care of it and not have to worry about it any more. You can't do that. Ultimately it is we, the people, who are responsible.
      - chimprich 7y ago
        > Ultimately it is we, the people, who are responsible. What a bizarre position. This distributed approach to the emergency health of nations hasn't worked out well in the current situation. I can't see how it would suddenly start working better in the future under our current economic system either. Everything is set up under economic pressures such that inefficiencies are ruthlessly exposed and eliminated. This maybe works out OK for creating new generations of electronic gizmos but it is catastrophically fragile for things like PPE as described in the article. To avoid something like this in the future, the only options I can see are more government control or rethink how economic systems work.
- mrosett 7y ago
  Note that getting hospitals to agree to long term contracts at prices that are higher than they'd normally pay is basically a backdoor form of raising prices. From a financial perspective, there's not a huge difference between a) a hospital paying $0.80/mask for the next year and $0.02/mask for the following decade or b) $0.10/mask with a decade long contract.
  - lugged 7y ago
    If you can make masks for 10c its not price gouging to sell it at a normal markup from those costs. Its not even "basically a backdoor form of raising prices" It's literally just what it costs. Also, I highly doubt this guy is using 10 year contracts. If I was him I would only be selling to those hospitals that sign 100 year contracts with strict non compete clauses and defined rules around sourcing / pricing and failures to comply.
    - djyaz1200 7y ago
      Totally agree, he should accept orders from any org willing to sign a long term deal at his usual prices and run the factory 24/7.
    - londons_explore 7y ago
      Most companies go bankrupt in a lot less than 100 years... In most cases, the full value of the contract would never be paid.
      - Sabinus 7y ago
        It would still solve the problem of companies not purchasing while they're solvent but not urgently needing masks.
    - rch 7y ago
      > 100 year contracts with strict non compete clauses and defined rules around sourcing / pricing and failures to comply. Exactly. IIRC Sysco negotiates 50-99 year contracts with e.g. universities to supply on campus dining. It seems that firms in the healthcare supply chain would do the same.
- arkades 7y ago
  > It seems that the actual problem might just be hospitals being stingy. Hospitals have to stay afloat just like everyone else. If they go bankrupt, they close, just like everyone else. If the government agrees it's a national security matter for us to have our own PPE production pipeline, then it needs to stop in. It can't expect private facilities, that have to make their own budget targets, to take on the cost of keeping up national priorities. That's literally what the government is for.
  - fermienrico 7y ago
    The Republican party's narrative is that the private market will "figure itself out". Furthermore, the party does not condone excessive government intervention. That's a double whammy.
    - saber6 7y ago
      > Furthermore, the party does not condone excessive government intervention. This sentiment is dated and suspect. Reference: The stimulus/relief bill just passed. Remember the bottom line that everyone in power likes to be in power. Gotta keep the music going.
    - mikemotherwell 7y ago
      So you think this policy was in place starting with Trump? Or was it with a Bush, but Obama chose NOT to repeal it? Or has it all started with Republican governors very recently? This partisanship seems crazy to me, especially given that the bureaucratic system seems plain broken. Not broken based on Republican or Democratic ideology, just plain broken. I'm not American, and it doesn't seem like in my country Australia these supply issues have been as bad, despite almost all of our supply coming from China.
      - presumably 7y ago
        Clinton: https://en.wikipedia.org/wiki/Strategic_National_Stockpile https://en.wikipedia.org/wiki/Strategic_National_Stockpile Republican ideology is abhorrent; one doesn’t have to be part of the Democratic Party to recognize that. https://www.theatlantic.com/ideas/archive/2020/03/conservative-campaign-security/608986/ https://www.theatlantic.com/ideas/archive/2020/03/conservati...
- richajak 7y ago
  not sure about giving him $1 per surgical mask is a right thing to do. The big component is the material, which need to be refined and coated. The material needs to be processed with expensive machine. According to article from NPR, even manufacturers in China depends on this German machinary supplier. It looks like the difference between 2c masks and 10c masks from his company is due to either business efficiency or labor cost. To pay 10c or 20c per mask to his company looks reasonable if he bought machine from Germany and made end-to-end production from raw material. However it does not seem reasonable to pay $1 if he simply buys ready-to-use materials, cut, and package. As for long term contract, the argument is ok up to certain extend. The cost of machine is quite high, several $m, it is a fixed cost, but negligible with high production volume - not that high to justify 10y contract. https://www.npr.org/sections/goatsandsoda/2020/03/16/814929294/covid-19-has-caused-a-shortage-of-face-masks-but-theyre-surprisingly-hard-to-mak https://www.npr.org/sections/goatsandsoda/2020/03/16/8149292...
gumby 7y ago
He could make two SKUs, one at the regular price made by the normal shift and one made on the other two shifts with different cost structure and pricing.
- whatshisface 7y ago
  That's exactly the type of loophole abuse that a judge would be likely to strike down.
  - gumby 7y ago
    I didn't mean it at all as a loophole -- I said different cost structure. I read his article: he claims can't get the volume to justify adding more shifts. Well, right now he could, even though the additional shifts would presumably cost more (more expensive labor costs, more inputs (e.g. energy), and likely a higher cost for the new raw materials wheich he'd have to get on the spot market as opposed to the long term agreements he already has. There's really nothing stopping him from doing this, except he's busy appearing on Bannon's podcast. And he says "well it would just be a drop in the bucket" -- likely it would be meaningful for Texas though, and then Texas's external demand would drop a little, allowing someone else to get access. This is how the economy is supposed to work. But instead he says the government should give him a long term contract. Well boo hoo. He describes the capabilities he has but complains instead of taking advantage of them. And the newspaper doesn't call him on it.
    - im3w1l 7y ago
      It's easy to sit on the sidelines and say "nothing is stopping him". Even if his fears and concerns are unfounded, I don't doubt they are sincere.
    - mixmastamyk 7y ago
      And when you abandon them next month, then what?
      - gumby 7y ago
fiblye 7y ago
Even if companies were legally and easily selling masks for 100x normal price, I doubt any employees on the factory line would ever make more than a small double digit percentage in overtime payments.
gruez 7y ago
IANAL, and also too lazy to research the relevant laws for the jurisdiction he's in, but wikipedia[1] says there are usually exceptions for price increases that can be justified. >Laws often include exceptions for price increases that can be justified in terms of increased cost of supply, transportation, demand or storage [1] https://en.wikipedia.org/wiki/Price_gouging#What_the_law_protects_against https://en.wikipedia.org/wiki/Price_gouging#What_the_law_pro...
- mrosett 7y ago
  Those exceptions are somewhat useful, but they're not enough. First, he may be in the clear legally, but that doesn't mean he has no legal risk. Some enterprising DA could try to dispute that that his price increases could be justified. Second, I tried to be precise when I said "anti-price gouging sentiment." Even if it's legal to raise prices, the risk of a public backlash makes it safer to just keep the factory working normal hours. That's a harder problem to fix than bad laws, though.
kevingadd 7y ago
I get that this is a hypothetical but the idea of his factory workers getting paid anything more than a couple extra bucks an hour for overtime is ridiculous. That simply doesn't happen unless owners are forced to do it. Is it supposed to be a good thing that people would work 100hr weeks during a pandemic and compromise their immune systems? Why not just hire more staff and have them work healthy 40 hour weeks? It's not as if unemployment is low right now.
- mrosett 7y ago
  The article makes it clear that he's looking to hire more people, but a) finding people and training them takes time and b) if he hires too many, he has to fire them later (and incur substantial costs related to that.) Let me reframe is this way: There is some emergency wage where his employees would enthusiastically work substantially more than they are right now. There's some price-per-mask where the owner would enthusiastically pay them that wage to get extra masks out of the factory. That price-per-mask would still count as a steal compared to the cost of a healthcare worker developing COVID-19. Everyone would be better off if hospitals were paying that price. So why aren't they?
  - lonelappde 7y ago
    Why can't he hire people on a fixed term contract to avoid unemployment?
    - austhrow743 7y ago
      Likely such a contract would be unattractive to potential desirable candidates unless he could pay a rate that would require higher mask prices.
      - kevingadd 7y ago
        There are plenty of unemployed people who need to pay rent. If such a short term contract - getting paid to do relatively safe work and help fight the pandemic by making masks - isn't appealing that's probably because he's not paying enough. Everyone's already charging more for masks, he should be able to manage a decent market rate. To begin with, unemployed people in a pinch are probably willing to accept slightly lower pay.
droithomme 7y ago
> normal price (ie $1/mask) I paid $4 per mask on a 2-pack at Walgreens back in mid-January. That's the normal price. All this $1 talk and anything about is gouging is communist propaganda. For shame, communists. $4 is the non-communist, non-capitalist normal price, based on empirical pre-crisis FACTS. EVERYTHING else is propaganda.
- Zenbit_UX 7y ago
  N95s? The articles about surgical masks and they cost, $0.02ea from China.
godelski 7y ago
I suspect that there would be major outcry about people paying $1/mask. People are going after just about everything right now. Unfortunately I'm seeing a lot of mob mentality. But that could be selection bias.
bsder 7y ago
Someone like Bill Gates or Warren Buffet could have this man up and running 24/7 by simply providing a guaranteed contract valid for 5 years. Given that a million dollars was a big deal to this guy, it seems like a contract for $10 million would be way more than sufficient. NOT A SINGLE WEALTHY PERSON has done this. None. Zero. Nada. There's your answer as to the priorities of capitalism.
- gruez 7y ago
  Can't this argument be applied to literally any project that benefits society? eg. "Bezos should be funding roads/schools/healthcare, but he isn't because he's a greedy fatcat!" This is a role for the government, not philanthropic patrons.
  - Finnucane 7y ago
    Indeed, this is basically correct. The premise should be rephrased as ‘corporations and the wealthy should pay their fucking taxes so the government can provide services.’
    - deleted 7y ago
      [deleted]
    - PaulDavisThe1st 7y ago
      Which could be rephrased as "governments should write tax law such that corporations pay taxes, to help governments provide services". Granted, companies work hard to be devious. But when we allow them to spend their profits on a whole slew of stuff that reduces their tax rates to zero percent, it seems churlish to blame the companies. Government specifically waived taxes in order to encourage e.g. R&D and now we, the people, are paying the price of the details of a large raft of this sort of law making.
      - Finnucane 7y ago
        No, government waived taxes because wealthy donor as and corporate lobbyists pay politicians to give them good tax breaks.
bsder 7y ago
You are asking the business owner to arbitrage his business (place a bet that he can carry expenses until some crisis allows him to gouge). Why do you want the business owner to arbitrage his business when the people who do arbitrage for a living won't do it for him? If the experts at arbitrage declare it a bad idea, then he probably shouldn't do it either. And he's not. That's sensible.
- keanzu 7y ago
  Arbitrage is a transaction that involves no negative cash flow at any probabilistic or temporal state and a positive cash flow in at least one state; in simple terms, it is the possibility of a risk-free profit after transaction costs. https://en.wikipedia.org/wiki/Arbitrage https://en.wikipedia.org/wiki/Arbitrage There's no arbitrage for the factory taking a loan, it is just a business risk.
WalterBright 7y ago
Shortages are the inevitable result of anti-gouging laws.
- jayd16 7y ago
  The article is about not being able to get long term contracts to actually make ramping up production worthwhile. Being able to gouge for a few months doesn't seem like it would help that.
  - icelancer 7y ago
    Sure it would. If he could increase his margin by 500% he wouldn't need the long term contracts as much due to the massive surplus of profit he'd be able to bank while also paying his employees double time.
    - jayd16 7y ago
      As the article lays out, it doesn't make sense to ramp up for a month when the demand will die down. The company can't compete in normal circumstances. It would make way more sense to simply gouge the 500x prices at the current capacity and wait it out.
  - WalterBright 7y ago
    If gouging were legal, a mask maker could easily go to three shifts a day instead of one, and would do everything he could to make more. But with it illegal, you'd be relying on self-sacrifice and altruism, which isn't very reliable. Greed is a much more effective motivator.
symplee 7y ago
Quick four and a half minute video going into a little more depth about the above concept: https://www.youtube.com/watch?v=_2STbdWkgyg https://www.youtube.com/watch?v=_2STbdWkgyg
juiyout 7y ago
Same in Taiwan, mask making has not been very profitable. Taiwan imports 93% of masks from China. Govt stepped in quickly on the brink of this outbreak though. Govt called 34 companies together each responsible for different parts of mask manufacturing from material, machine parts, installation, assembly, etc and govt up front paid 6 million USD for 62 production lines to be installed and assigned military personnel to help man the lines 24/7. Daily mask production ramped up from 3 million to 10 million in 3 weeks. This is only barely covering Taiwan's domestic needs. Taiwan is now aiming for daily production of 20 million. For distribution, govt rations out all manufactured masks. Currently each citizen gets 9-10 masks every 2 week and I believe each doctor receives 40 per week. The price of the masks for regular folks is fixed at around 1 USD for 6 masks. It is free for med staff. As for the installed production line, once the mask maker reached the production quota of 5 million masks for a particular production line, the mask maker gets to keep that production line for free. Note that the mask makers, once involved in this project, pretty much gave their business as usual. I would think it is tax dollar well spent. EDIT: Try and include some English references: - [https://focustaiwan.tw/business/202003090013 https://focustaiwan.tw/business/202003090013] - [https://www.taipeitimes.com/News/taiwan/archives/2020/03/10/2003732422 https://www.taipeitimes.com/News/taiwan/archives/2020/03/10/...] - [https://www.taipeitimes.com/News/editorials/archives/2020/03/02/2003731896 https://www.taipeitimes.com/News/editorials/archives/2020/03...] - [https://www.straitstimes.com/asia/east-asia/coronavirus-how-taiwan-is-cranking-up-mask-production-to-meet-shortfall https://www.straitstimes.com/asia/east-asia/coronavirus-how-...] - [http://www.taipeitimes.com/News/front/archives/2020/02/15/2003731015 http://www.taipeitimes.com/News/front/archives/2020/02/15/20...]
- MrsPeaches 7y ago
  This is pretty impressive. Do you have any sources?
- tedk-42 7y ago
  Great post! Very informative. Crazy to think these masks are basically an essential item for many now
- eaenki 7y ago
  My Taiwanese friend living there that I met at Stanford says 3 masks per person per week.
edge17 7y ago
There seems to be a lot of misconceptions about N95 style masks. N95/KN95 are made from melt-blown nanofiber fabric which 20x'd in price due to sudden demand and constrained supply, through early March from its price 6 months prior. When your inputs 20x in price the actual cost of the product is naturally going to increase.
swiley 7y ago
But then he would be “profiting off a crisis” and that makes him a horrible person.
piokoch 7y ago
That's the way free market works. If masks were more expensive, it would make sense to invest and produce more of them. Instead governments and institutions all over the World are trying to keep prices low and the only result they get is shortage of masks (and similar equipment).
- darkerside 7y ago
  Free market solutions break down when demand is inelastic. Governments are trying to prevent price gouging due to inelasticity. The root of the problem is supply, so stop the government intervention and you pay more money for the same problems.
  - DuskStar 7y ago
    Free market solutions break down when demand AND SUPPLY are BOTH inelastic, and that's only if you count 'price goes up' as market failure. Think of it this way - the demand for food is inelastic. Does this mean free market solutions for food have broken down? Governments preventing price increases just means that supply doesn't increase nearly as quickly as it would otherwise.
    - darkerside 7y ago
      Letting masks sell for $25 a pop so that companies are incentivized to build infrastructure to churn them out at an optimal rate 6 months from now just doesn't seem like a realistic solution
      - DuskStar 7y ago
        Letting masks sell for $25/ct now so that companies can afford to go to 24/7 production NOW and not have to worry about paying unemployment in 2 months might be, though.
  - bretthoerner 7y ago
    > The root of the problem is supply, so stop the government intervention and you pay more money for the same problems. The company in the article is closed on nights and weekends. Don't you think there's a price at which they'd stay open, thus increasing supply?

gpm 7y ago

From one perspective this is true. From another perspective, he's having trouble getting long time contracts. Hospitals could give him that extra 90c per mask (10c per mask per the article, 1$ suggested price in your comment) by signing a contract to buy x masks every year for 10 years instead of just signing a contract to buy x masks. It seems that the actual problem might just be hospitals being stingy.

mapgrep 7y ago
Not an extra 90 cents per mask, an extra 8 cents per mask. “His masks may cost a dime each, but a made-in-China mask might go for two cents.” A hospital charged my friend $5k for three stitches. They could pay 8 cents more per mask. But they care more about $$$ than the long term health of the country. And I’m not even making a moral statement with that. It’s the natural consequence of making health care a capitalist endeavor. There are other approaches.
- gpm 7y ago
  > Not an extra 90 cents per mask, an extra 8 cents per mask. We're suggesting the hospital giving him 1 dollar per mask instead of 10 cents during the crisis, that's an extra 90. 98 cents compared to the Chinese prices. I guess my proposal makes it a bit less. With the 10 year contract, assuming that the demand spike only exists in the first year, it would be an extra 90 cents - savings of (9 years * 2 cents / year) = 72 cents per mask. This could be "fixed" by extending that contract for a few more years.
  - droithomme 7y ago
    I paid $4 per N95 mask in January. $1 is an absolute bargain. $0.10 is vastly below the cost of manufacture and only being promoted by people who mean harm.
    - gpm 7y ago
      The $0.10 figure comes from the article... I think these might just be surgical masks not N95 masks.
    - deleted 7y ago
      [deleted]
    - PeterStuer 7y ago
      Did you buy them at quantity (lot of 50k masks), or in a small box of 10 at the DIY store?
- jmckib 7y ago
  If healthcare was really a capitalist endeavor then it wouldn't cost $5k for three stitches. Prices would be transparent, there would be a free market with competition, and healthcare wouldn't be linked to employment. You can thank regulations for all of those problems.
  - giantrobot 7y ago
    What regulations are those exactly?
    - gpm 7y ago
      The ones that let them not tell you how much they will charge you for a service until after they provide it, and then still demand payment (and have the government enforce that demand)? (I'm pretty sure that's not what the person you were replying to is going for - but it is a very problematic piece of the regulatory environment which is unique to hospitals)
    - BurningFrog 7y ago
      Healthcare is probably the most regulated industry in the country. Nobody knows all the regulations, and asking for a list seems a bit clueless.
      - giantrobot 7y ago
        If you're going to claim specific problems are caused by regulations is not too much to ask which specific regulations cause specific problems. What's clueless is to use the word "regulations" like it's some incantation. Healthcare is heavily regulated because medical care is not usually something you can restitute after the fact. If you sell me a defective widget my life doesn't depend on I can get my money back or sue you to get it back. If a doctor sticks a defective medical widget in my body and I die, I can't really do much about it afterwards. I'd prefer that doctor's certifications have some sort of regulatory oversight. I'd also like medical widgets to be regulated so there's stringent QA and manufacturing process qualifications.
    - 7y ago
- jlebar 7y ago
  > A hospital charged my friend $5k for three stitches. They could pay 8 cents more per mask. But they care more about $$$ than the long term health of the country. Couldn't we say the same thing about the owner of this factory? He could gear up and then pay unemployment for laid-off workers after the crisis ends; he did it once. I am also not a fan of our health-care system, but...it's complicated.
  - hedora 7y ago
    Last time, ramping up almost bankrupted the business, and left it with an extra $1M in debt.
    - moftz 7y ago
      Seems like the government should just remove the risk of being the business of critical supplies. Obviously we didn't have enough supplies in stockpile it would benefit the US to have a dedicated factory to produce a constant stream of PPE for the next 10 years. This stuff is so cheap to make that not stockpiling it is just stupid. These kind of supplies are used by everyone everywhere that it's a waste of time and money trying to negotiate critical supply stockpiles on the local or state level. This needs to be at the national level to be able to leverage the power of the US govt. Using the DPA, the govt can come into 3M or any of the other manufacturers and say "you are going to sell us 50M masks per year for the next 10 years". After a couple years, you have a healthy stockpile that can either be used in a pandemic or changed out for fresh supplies over time. It's a shame to throw out expired medical supplies but having a consistent supply chain going for years is good to make sure that there is a standard product out there that you don't need to worry about changing.
      - vl 7y ago
        FYI, 50M masks in pandemic is 1/7th of what country needs in a day.
- readme 7y ago
  >A hospital charged my friend $5k for three stitches https://www.youtube.com/watch?v=VGDUqBLtyNM https://www.youtube.com/watch?v=VGDUqBLtyNM DIY can save money. I've used superglue for this in the past.
  - godelski 7y ago
    Please don't do this at home.
    - godelski 7y ago
      For the downvoters: SERIOUSLY DO NOT DO THIS AT HOME! Let the medical professionals put in your stitches. I seriously can't believe I have to say this.
      - jschwartzi 7y ago
        This is America. It’s much cheaper here to risk our lives than to risk bankruptcy from visiting a hospital.
        readme 6y ago
        I have to assume the guy who says not to do this is from a country with universal healthcare.
      - dgoodell 7y ago
        I cut my index finger pretty bad, it must have been all the way through the skin as there was a big flap. It definitely needed stitches. I used superglue to hold it together until it stayed stuck on its own. I couldn’t use the finger for like a week because it was all bandaged up. Probably not as a good job as if I went to the doctor, but my finger didn’t fall off. HDHP turns you into a do-it-yourselfer. My mother had a much more serious gash when she dropped a piece of glass on her foot. This was on Croatia. We went to the ER in the city, and she got stitches fairly quickly for like $20 cash. If I would have cut my finger in Croatia, I would have gone to ER to get stitches.
- arkades 7y ago
  Not to undermine your dramatic point[1], but: Most hospitals run at profit margins well below 10%. Median operating margins are in the vicinity of 2% (https://www.modernhealthcare.com/providers/operating-margins-stabilize-not-profit-hospitals-still-vulnerable https://www.modernhealthcare.com/providers/operating-margins...) And for the last few years, expenses have been growing faster than revenues (though the rate of growth of expenses has slowed.) Whatever you imagine they're bringing in, they're not. Nor is their job to maintain the long-term health of the country. That's literally the government's job. [1] Those numbers have a historical reason behind them, which people are either ignorant of or choose to ignore. The short version is: hospital prices are set as a part of the negotiations with insurers. Insurers account for the vast, vast majority of dollars going into hospitals, so their business operations are built completely and entirely around insurance dollars. Uninsured patients register as barely more than a rounding error. So while, yes, being uninsured in this context sucks, hospitals aren't gleefully rubbing their hands and going "muahaha, $5K for stitches!" They don't expect to see that 5K, they don't rely on that 5K, and they're not trying to gouge that uninsured person who's almost certainly not good for that 5K. That person has just fallen into the crack(s) in our healthcare system, which are more complicated than "evil greedy hospital", or "evil greedy insurer."
  - pdonis 7y ago
    > Nor is their job to maintain the long-term health of the country. That's literally the government's job. No, it isn't. It's everybody's job. The government is a tool we use to delegate certain aspects of that job--and often it's a very bad tool to use and we should be relying on it less, not more. The idea that "it's the government's job" to do things causes all kinds of problems, because people think they can just let the government take care of it and not have to worry about it any more. You can't do that. Ultimately it is we, the people, who are responsible.
    - chimprich 7y ago
      > Ultimately it is we, the people, who are responsible. What a bizarre position. This distributed approach to the emergency health of nations hasn't worked out well in the current situation. I can't see how it would suddenly start working better in the future under our current economic system either. Everything is set up under economic pressures such that inefficiencies are ruthlessly exposed and eliminated. This maybe works out OK for creating new generations of electronic gizmos but it is catastrophically fragile for things like PPE as described in the article. To avoid something like this in the future, the only options I can see are more government control or rethink how economic systems work.
mrosett 7y ago
Note that getting hospitals to agree to long term contracts at prices that are higher than they'd normally pay is basically a backdoor form of raising prices. From a financial perspective, there's not a huge difference between a) a hospital paying $0.80/mask for the next year and $0.02/mask for the following decade or b) $0.10/mask with a decade long contract.
- lugged 7y ago
  If you can make masks for 10c its not price gouging to sell it at a normal markup from those costs. Its not even "basically a backdoor form of raising prices" It's literally just what it costs. Also, I highly doubt this guy is using 10 year contracts. If I was him I would only be selling to those hospitals that sign 100 year contracts with strict non compete clauses and defined rules around sourcing / pricing and failures to comply.
  - djyaz1200 7y ago
    Totally agree, he should accept orders from any org willing to sign a long term deal at his usual prices and run the factory 24/7.
  - londons_explore 7y ago
    Most companies go bankrupt in a lot less than 100 years... In most cases, the full value of the contract would never be paid.
    - Sabinus 7y ago
      It would still solve the problem of companies not purchasing while they're solvent but not urgently needing masks.
  - rch 7y ago
    > 100 year contracts with strict non compete clauses and defined rules around sourcing / pricing and failures to comply. Exactly. IIRC Sysco negotiates 50-99 year contracts with e.g. universities to supply on campus dining. It seems that firms in the healthcare supply chain would do the same.
arkades 7y ago
> It seems that the actual problem might just be hospitals being stingy. Hospitals have to stay afloat just like everyone else. If they go bankrupt, they close, just like everyone else. If the government agrees it's a national security matter for us to have our own PPE production pipeline, then it needs to stop in. It can't expect private facilities, that have to make their own budget targets, to take on the cost of keeping up national priorities. That's literally what the government is for.
- fermienrico 7y ago
  The Republican party's narrative is that the private market will "figure itself out". Furthermore, the party does not condone excessive government intervention. That's a double whammy.
  - saber6 7y ago
    > Furthermore, the party does not condone excessive government intervention. This sentiment is dated and suspect. Reference: The stimulus/relief bill just passed. Remember the bottom line that everyone in power likes to be in power. Gotta keep the music going.
  - mikemotherwell 7y ago
    So you think this policy was in place starting with Trump? Or was it with a Bush, but Obama chose NOT to repeal it? Or has it all started with Republican governors very recently? This partisanship seems crazy to me, especially given that the bureaucratic system seems plain broken. Not broken based on Republican or Democratic ideology, just plain broken. I'm not American, and it doesn't seem like in my country Australia these supply issues have been as bad, despite almost all of our supply coming from China.
    - presumably 7y ago
      Clinton: https://en.wikipedia.org/wiki/Strategic_National_Stockpile https://en.wikipedia.org/wiki/Strategic_National_Stockpile Republican ideology is abhorrent; one doesn’t have to be part of the Democratic Party to recognize that. https://www.theatlantic.com/ideas/archive/2020/03/conservative-campaign-security/608986/ https://www.theatlantic.com/ideas/archive/2020/03/conservati...
richajak 7y ago
not sure about giving him $1 per surgical mask is a right thing to do. The big component is the material, which need to be refined and coated. The material needs to be processed with expensive machine. According to article from NPR, even manufacturers in China depends on this German machinary supplier. It looks like the difference between 2c masks and 10c masks from his company is due to either business efficiency or labor cost. To pay 10c or 20c per mask to his company looks reasonable if he bought machine from Germany and made end-to-end production from raw material. However it does not seem reasonable to pay $1 if he simply buys ready-to-use materials, cut, and package. As for long term contract, the argument is ok up to certain extend. The cost of machine is quite high, several $m, it is a fixed cost, but negligible with high production volume - not that high to justify 10y contract. https://www.npr.org/sections/goatsandsoda/2020/03/16/814929294/covid-19-has-caused-a-shortage-of-face-masks-but-theyre-surprisingly-hard-to-mak https://www.npr.org/sections/goatsandsoda/2020/03/16/8149292...

gumby 7y ago

He could make two SKUs, one at the regular price made by the normal shift and one made on the other two shifts with different cost structure and pricing.

whatshisface 7y ago
That's exactly the type of loophole abuse that a judge would be likely to strike down.
- gumby 7y ago
  I didn't mean it at all as a loophole -- I said different cost structure. I read his article: he claims can't get the volume to justify adding more shifts. Well, right now he could, even though the additional shifts would presumably cost more (more expensive labor costs, more inputs (e.g. energy), and likely a higher cost for the new raw materials wheich he'd have to get on the spot market as opposed to the long term agreements he already has. There's really nothing stopping him from doing this, except he's busy appearing on Bannon's podcast. And he says "well it would just be a drop in the bucket" -- likely it would be meaningful for Texas though, and then Texas's external demand would drop a little, allowing someone else to get access. This is how the economy is supposed to work. But instead he says the government should give him a long term contract. Well boo hoo. He describes the capabilities he has but complains instead of taking advantage of them. And the newspaper doesn't call him on it.
  - im3w1l 7y ago
    It's easy to sit on the sidelines and say "nothing is stopping him". Even if his fears and concerns are unfounded, I don't doubt they are sincere.
  - mixmastamyk 7y ago
    And when you abandon them next month, then what?
    - gumby 7y ago

fiblye 7y ago

Even if companies were legally and easily selling masks for 100x normal price, I doubt any employees on the factory line would ever make more than a small double digit percentage in overtime payments.

gruez 7y ago

IANAL, and also too lazy to research the relevant laws for the jurisdiction he's in, but wikipedia[1] says there are usually exceptions for price increases that can be justified. >Laws often include exceptions for price increases that can be justified in terms of increased cost of supply, transportation, demand or storage [1] https://en.wikipedia.org/wiki/Price_gouging#What_the_law_protects_against https://en.wikipedia.org/wiki/Price_gouging#What_the_law_pro...

mrosett 7y ago
Those exceptions are somewhat useful, but they're not enough. First, he may be in the clear legally, but that doesn't mean he has no legal risk. Some enterprising DA could try to dispute that that his price increases could be justified. Second, I tried to be precise when I said "anti-price gouging sentiment." Even if it's legal to raise prices, the risk of a public backlash makes it safer to just keep the factory working normal hours. That's a harder problem to fix than bad laws, though.

kevingadd 7y ago

I get that this is a hypothetical but the idea of his factory workers getting paid anything more than a couple extra bucks an hour for overtime is ridiculous. That simply doesn't happen unless owners are forced to do it. Is it supposed to be a good thing that people would work 100hr weeks during a pandemic and compromise their immune systems? Why not just hire more staff and have them work healthy 40 hour weeks? It's not as if unemployment is low right now.

mrosett 7y ago
The article makes it clear that he's looking to hire more people, but a) finding people and training them takes time and b) if he hires too many, he has to fire them later (and incur substantial costs related to that.) Let me reframe is this way: There is some emergency wage where his employees would enthusiastically work substantially more than they are right now. There's some price-per-mask where the owner would enthusiastically pay them that wage to get extra masks out of the factory. That price-per-mask would still count as a steal compared to the cost of a healthcare worker developing COVID-19. Everyone would be better off if hospitals were paying that price. So why aren't they?
- lonelappde 7y ago
  Why can't he hire people on a fixed term contract to avoid unemployment?
  - austhrow743 7y ago
    Likely such a contract would be unattractive to potential desirable candidates unless he could pay a rate that would require higher mask prices.
    - kevingadd 7y ago
      There are plenty of unemployed people who need to pay rent. If such a short term contract - getting paid to do relatively safe work and help fight the pandemic by making masks - isn't appealing that's probably because he's not paying enough. Everyone's already charging more for masks, he should be able to manage a decent market rate. To begin with, unemployed people in a pinch are probably willing to accept slightly lower pay.

droithomme 7y ago

> normal price (ie $1/mask) I paid $4 per mask on a 2-pack at Walgreens back in mid-January. That's the normal price. All this $1 talk and anything about is gouging is communist propaganda. For shame, communists. $4 is the non-communist, non-capitalist normal price, based on empirical pre-crisis FACTS. EVERYTHING else is propaganda.

Zenbit_UX 7y ago
N95s? The articles about surgical masks and they cost, $0.02ea from China.

godelski 7y ago

I suspect that there would be major outcry about people paying $1/mask. People are going after just about everything right now. Unfortunately I'm seeing a lot of mob mentality. But that could be selection bias.

bsder 7y ago

Someone like Bill Gates or Warren Buffet could have this man up and running 24/7 by simply providing a guaranteed contract valid for 5 years. Given that a million dollars was a big deal to this guy, it seems like a contract for $10 million would be way more than sufficient. NOT A SINGLE WEALTHY PERSON has done this. None. Zero. Nada. There's your answer as to the priorities of capitalism.

gruez 7y ago
Can't this argument be applied to literally any project that benefits society? eg. "Bezos should be funding roads/schools/healthcare, but he isn't because he's a greedy fatcat!" This is a role for the government, not philanthropic patrons.
- Finnucane 7y ago
  Indeed, this is basically correct. The premise should be rephrased as ‘corporations and the wealthy should pay their fucking taxes so the government can provide services.’
  - deleted 7y ago
    [deleted]
  - PaulDavisThe1st 7y ago
    Which could be rephrased as "governments should write tax law such that corporations pay taxes, to help governments provide services". Granted, companies work hard to be devious. But when we allow them to spend their profits on a whole slew of stuff that reduces their tax rates to zero percent, it seems churlish to blame the companies. Government specifically waived taxes in order to encourage e.g. R&D and now we, the people, are paying the price of the details of a large raft of this sort of law making.
    - Finnucane 7y ago
      No, government waived taxes because wealthy donor as and corporate lobbyists pay politicians to give them good tax breaks.

bsder 7y ago

You are asking the business owner to arbitrage his business (place a bet that he can carry expenses until some crisis allows him to gouge). Why do you want the business owner to arbitrage his business when the people who do arbitrage for a living won't do it for him? If the experts at arbitrage declare it a bad idea, then he probably shouldn't do it either. And he's not. That's sensible.

keanzu 7y ago
Arbitrage is a transaction that involves no negative cash flow at any probabilistic or temporal state and a positive cash flow in at least one state; in simple terms, it is the possibility of a risk-free profit after transaction costs. https://en.wikipedia.org/wiki/Arbitrage https://en.wikipedia.org/wiki/Arbitrage There's no arbitrage for the factory taking a loan, it is just a business risk.

WalterBright 7y ago

Shortages are the inevitable result of anti-gouging laws.

jayd16 7y ago
The article is about not being able to get long term contracts to actually make ramping up production worthwhile. Being able to gouge for a few months doesn't seem like it would help that.
- icelancer 7y ago
  Sure it would. If he could increase his margin by 500% he wouldn't need the long term contracts as much due to the massive surplus of profit he'd be able to bank while also paying his employees double time.
  - jayd16 7y ago
    As the article lays out, it doesn't make sense to ramp up for a month when the demand will die down. The company can't compete in normal circumstances. It would make way more sense to simply gouge the 500x prices at the current capacity and wait it out.
- WalterBright 7y ago
  If gouging were legal, a mask maker could easily go to three shifts a day instead of one, and would do everything he could to make more. But with it illegal, you'd be relying on self-sacrifice and altruism, which isn't very reliable. Greed is a much more effective motivator.

symplee 7y ago

Quick four and a half minute video going into a little more depth about the above concept: https://www.youtube.com/watch?v=_2STbdWkgyg https://www.youtube.com/watch?v=_2STbdWkgyg

juiyout 7y ago

Same in Taiwan, mask making has not been very profitable. Taiwan imports 93% of masks from China. Govt stepped in quickly on the brink of this outbreak though. Govt called 34 companies together each responsible for different parts of mask manufacturing from material, machine parts, installation, assembly, etc and govt up front paid 6 million USD for 62 production lines to be installed and assigned military personnel to help man the lines 24/7. Daily mask production ramped up from 3 million to 10 million in 3 weeks. This is only barely covering Taiwan's domestic needs. Taiwan is now aiming for daily production of 20 million. For distribution, govt rations out all manufactured masks. Currently each citizen gets 9-10 masks every 2 week and I believe each doctor receives 40 per week. The price of the masks for regular folks is fixed at around 1 USD for 6 masks. It is free for med staff. As for the installed production line, once the mask maker reached the production quota of 5 million masks for a particular production line, the mask maker gets to keep that production line for free. Note that the mask makers, once involved in this project, pretty much gave their business as usual. I would think it is tax dollar well spent. EDIT: Try and include some English references: - [https://focustaiwan.tw/business/202003090013 https://focustaiwan.tw/business/202003090013] - [https://www.taipeitimes.com/News/taiwan/archives/2020/03/10/2003732422 https://www.taipeitimes.com/News/taiwan/archives/2020/03/10/...] - [https://www.taipeitimes.com/News/editorials/archives/2020/03/02/2003731896 https://www.taipeitimes.com/News/editorials/archives/2020/03...] - [https://www.straitstimes.com/asia/east-asia/coronavirus-how-taiwan-is-cranking-up-mask-production-to-meet-shortfall https://www.straitstimes.com/asia/east-asia/coronavirus-how-...] - [http://www.taipeitimes.com/News/front/archives/2020/02/15/2003731015 http://www.taipeitimes.com/News/front/archives/2020/02/15/20...]

MrsPeaches 7y ago
This is pretty impressive. Do you have any sources?
tedk-42 7y ago
Great post! Very informative. Crazy to think these masks are basically an essential item for many now
eaenki 7y ago
My Taiwanese friend living there that I met at Stanford says 3 masks per person per week.

edge17 7y ago

There seems to be a lot of misconceptions about N95 style masks. N95/KN95 are made from melt-blown nanofiber fabric which 20x'd in price due to sudden demand and constrained supply, through early March from its price 6 months prior. When your inputs 20x in price the actual cost of the product is naturally going to increase.

swiley 7y ago

But then he would be “profiting off a crisis” and that makes him a horrible person.

piokoch 7y ago

That's the way free market works. If masks were more expensive, it would make sense to invest and produce more of them. Instead governments and institutions all over the World are trying to keep prices low and the only result they get is shortage of masks (and similar equipment).

darkerside 7y ago
Free market solutions break down when demand is inelastic. Governments are trying to prevent price gouging due to inelasticity. The root of the problem is supply, so stop the government intervention and you pay more money for the same problems.
- DuskStar 7y ago
  Free market solutions break down when demand AND SUPPLY are BOTH inelastic, and that's only if you count 'price goes up' as market failure. Think of it this way - the demand for food is inelastic. Does this mean free market solutions for food have broken down? Governments preventing price increases just means that supply doesn't increase nearly as quickly as it would otherwise.
  - darkerside 7y ago
    Letting masks sell for $25 a pop so that companies are incentivized to build infrastructure to churn them out at an optimal rate 6 months from now just doesn't seem like a realistic solution
    - DuskStar 7y ago
      Letting masks sell for $25/ct now so that companies can afford to go to 24/7 production NOW and not have to worry about paying unemployment in 2 months might be, though.
- bretthoerner 7y ago
  > The root of the problem is supply, so stop the government intervention and you pay more money for the same problems. The company in the article is closed on nights and weekends. Don't you think there's a price at which they'd stay open, thus increasing supply?