6 ms·

It's an issue in market information where regulation can't really work [1]. Vendors have a brand. They establish the value of the brand such that purchasers hav

by harry8 5y ago

It's an issue in market information where regulation can't really work [1]. Vendors have a brand. They establish the value of the brand such that purchasers have a signal that they aren't going to be ripped off. For example you can be pretty sure coca-cola isn't going to cut costs to the point where they don't care about putting poison in the bottle - and you don't need regulation to know they won't do it. Zeus-Cola? Brand means nothing. On holiday in an unregulated land when it's only just launched do you advise your family it will be completely safe to drink? An entrepreneurial team comes along and puts their hearts and souls into setting up a business and establishing the brand with some high quality product. That brand becomes worth something. The easiest way to monetize that brand is to use it for a con job. It sucks. You thought you were getting quality, it's what you paid for, well you're getting cheap and nasty and we're taking excess profit for as long as the brand lasts. You took the bait and got the switch. Usually (but not always) the original entrepreneurial team is unwilling to do this, because they believed what they were doing was something more than just making money. Private equity is just making money and are extremely willing to do this. [1] I prefer unregulated markets as far as the alternative is usually worse. There are obvious exceptions at the extreme ends (monopoly, health and safety, fraud, adverse externality etc.) How far away from the extreme you think regulation stops working is a lot of interesting case-by-case discussion where intelligent, reasonable and informed people can disagree in good faith improving their understanding and the quality of suggested policy in the process. It would be nice to see a bit more of it in the media!

lmm 5y ago
I keep redrafting a blog post in my head about this cycle and how it means that even though the world is getting better, every specific brand is getting worse. (There was a wonderful post about Starbucks specifically that I now can't find, talking about how they grew their reputation by having hand-made coffee that people loved before switching to machine brewing that required less skill and people wouldn't hate). I suspect we're politically rather opposed, as I see this as a consequence of capitalism putting a price tag on everything, and something that regulation is appropriate for (some way of forcing brands to publicise when they've changed something, so that customers can know whether a review they read still applies, although the details of how to do that would be difficult). Indeed I'd argue that the only reason customers can trust a brand like Coca-Cola is strong regulation in the form of trademark law.
- harry8 5y ago
  Yeah it's a reasonable point of view. The other way to go on that is you're in an country whose culture you don't understand which as a wildly corrupt, crony-riddled military dictator and nobody has any rights at all. Do you want locally bottled Coke(tm) with the red label and dynamic ribbon for your very thirsty child or locally bottled "Odin's Thirst Quencher! (est. 2021)"? Coke are going to enforce quality control and safety to protect their brand or get out of that market. There is no regulation you can rely on in this mythical country - but there are quite a few countries like that which you may know yourself from having visited them. In France, say, you have regulation that safety is not a concern. When you don't have it you have brands - the owner has the incentive to protect them. So it goes also in France, or the USA or other wealthy countries to the parts of commerce that are not regulated (whether they could be or whether that's because it's not feasible). But the higher issue is information. Should you be able to sell the same product with a very different quality under the same name? Let's say we agree the answer is ideally "no, you can't do that." Now we want to regulate that you can't do that. How is it enforced? There may be ways. There may be grey areas. The cost may be prohibitive in many instances or there might be new solutions to mitigate those problems. What is isn't is easy which you can see as soon as you apply it to the industry and case under discussion. Intensive industry training schools.
  - lmm 5y ago
    > Do you want locally bottled Coke(tm) with the red label and dynamic ribbon for your very thirsty child or locally bottled "Odin's Thirst Quencher! (est. 2021)"? > Coke are going to enforce quality control and safety to protect their brand or get out of that market. There is no regulation you can rely on in this mythical country - but there are quite a few countries like that which you may know yourself from having visited them. I'd argue that in a lawless country people have no faith in the brands either. Look at the fake Apple stores in China, or at parents importing identically-branded baby formula from abroad because they (justifiably) didn't trust the locally produced version.
    - harry8 5y ago
      It's obviously not a panacea. You may not be able to trust the brand is what it claims to be. You frequently can't in wealthy countries with low corruption indexes. There are plenty of times what you trust is the interests of the brand holder to defend the value of the brand where regulation can't help you. Coke in a sealed bottle is extremely likely to be coke in a sealed bottle in Mogadishu. The brand "Coke" gives you some information about the probability of not drinking poison. Obviously it isn't perfect. I think it's evident that it isn't something to be dismissed as inconsequential information either. Coke will be trying very hard to make sure nobody impersonates them and kills their customers anywhere in the world because it would be an advertising disaster. Better that than nothing. (Just quietly I hate the coca cola company and think they are pretty evil. Diabetes. Obesity. They're similar to a cigarette company. Meh. Useful points can still be made using their business as an example.)
suzzer99 5y ago
Hertz is currently cannibalizing their brand and customer base by charging outrageous fees (cleaning, late) and refusing the refund them even when proven wrong. https://www.latimes.com/business/story/2021-06-11/column-hertz-smoking-fee https://www.latimes.com/business/story/2021-06-11/column-her...
- oceanghost 5y ago
  Fascinating. U-Haul was/is famous for this too. A decade ago I rented a large U-Haul for a move. I knew how crappy they were and purchased the insurance just figuring it in as the "true" cost of the rental. I pick up the truck at like 4:00pm. The truck they gave me had some serious damage to the box, it had been painted over. I documented everything and went on my way. I return the truck at ~12pm the next morning. I get a call a few hours later from U-Haul saying I'd damaged the truck to the tune of $1700 or so. I told them, "So whats your theory? That I drove the truck 100 miles, damaged it and had time to paint over the damage and for that paint to dry in 16 hours? And, I bought the insurance anyways SO WHY THE F** ARE YOU CALLING ME?!" Some businesses are so routinely corrupt its unusual if they're not trying to cheat you. Another time, I took my vehicle which had very expensive tires (think $650 each) to an Allen Tire for a slow leak in one of them (would deflate once a week). I took pictures of my tires bcause I had been dreading this and putting it off for months because-- I knew what would happen. And it did: They called me a few hours later and said one of my tires had been slashed and that I would have to replace both rear tires. The guy was a great actor. He genuinely sounded distressed over my misfortune. I told them to put the tire back on and I'd pay a reasonable fee. They refused, "Sir we can't do that, the car is unsafe to drive." I am livid at this point. I made probably a poor decision... I calmly explained that I was missing my regularly scheduled shooting practice (which was true) and I am coming down there, with the guns that I intend to take to the practice, so I hope my old tire will be on the car so I won't be late. When I got there (no guns of course), they had magically discovered a nail in the tire and they were sorry for the mistake. The same bastard trying to scam me was outrageously apologetic for the "mix-up." anyways, if you made it through this slog of a post thank you! Little bored this evening...
eru 5y ago
In a sense, this is all about interest rates. If capital becomes abundant enough that rates of return become low enough, then the long term becomes more and more important in corporate planning. If interest rates are high, then short term gutting of the business _is_ the rational move. (Interest rates have been rather low in the last decade or so. Not sure if that had much of an influence?)
- harry8 5y ago
  Disagree with that. The decision is between a higher probability shorter realization, bigger annualized result vs longer realization, lower annual return (possibly bigger return if things go particularly well) with a bigger probability of things going wrong, especially a few years into the future where the crystal balls get less sure of themselves. I can get a real 30% return this year and I'm out with high probability. Vs I could get 150% in 7 years time but not much this year or next and maybe it won't work out because the unknown unknowns etc? If you're pretty sure you're on a winner you take option b and hold. If you're less sure, a bird in the hand is worth two in your dreams... Your bonus this year is on this year's results, will you still work there and get the bonus in 7 years? The decision is probably not made by the owners of captial but their professional agents. The interest rate really doesn't figure in that calculation (real returns rather than nominal). It's all about the return probabilities and good enough with more certainty can win out where you might not like that and think more highly of the longer term prospects. Factoring in interest rates, when they're high its because inflation is high. At that point an inflation hedged investment (which most equity is) becomes relatively more valuable than money in the bank (bonds) because money in the bank is a sure, steady loser. Capital has to go somewhere and its owners will want to put it where it can "lose the least" Get it invested in some kind of business equity, diversified as hell, across industries, business sizes, geographically, startup vs established, precious metals, Art, all of it. Just get the hell away from bonds which will hemorrhage value from the inflation. Where capital is having trouble finding investment because all captial owners are looking the incentive becomes to hang on and hold, let the business run rather than rip the value out now and have to find somewhere else equivalent to put it which may not be easy at all.
  - 5y ago
RNCTX 5y ago
How do you know you prefer unregulated markets? I'm coming up on 45 and through my whole life, markets have been regulated in favor of corporate officers and the government agencies and officials paid to represent them.
- harry8 5y ago
  Could be an expression problem on my part. Perhaps I should have written "less regulated" as opposed "more regulated" markets. There's a regulation that when you buy something you can't shoot the counterparty and take your money back in most parts of the world so yes clearly "wholly unregulated" is largely fiction. In the same way that a (fully) regulated market such as a soviet style command economy usually has more than a few loopholes. Eg inmates in prison have a market that is as tightly regulated as anything in the world yet they work around it and it seems nobody has ever succeeded in keeping the drug trade out of jails. The regulatory capture you refer to is one of the downsides of over-regulation. De-regulating is not necessarily a panacea for regulatory capture. Sometimes the regulatory body that has been captured has power of regulation that is in some way completely necessary and that is use as an excuse to institute an abusive barrier to entry or similar. Or just regulated to grow the career, influence & power of the persons who are charged with advising and enforcing the regulation. Whether two people looking carefully and sensibly at a market see it the opposite way, one as over-regulated the other as under-regulated can be largely ideological and a good faith disagreement, both of whom can achieve a better understanding and policy prescription through sensible exchange of ideas - especially with regards important details like enforcement, corruption, abusive practice that is or could happen etc.. There isn't nearly enough of that about.
- eru 5y ago
  There's lots of different markets around the world in different goods and services. If you are sufficiently purist, none of them is free or unregulated. But they are regulated in different ways and to different degrees. You can learn a lot by observing how these varying degrees impact outcomes.

by harry8 5y ago

lmm 5y ago

I keep redrafting a blog post in my head about this cycle and how it means that even though the world is getting better, every specific brand is getting worse. (There was a wonderful post about Starbucks specifically that I now can't find, talking about how they grew their reputation by having hand-made coffee that people loved before switching to machine brewing that required less skill and people wouldn't hate). I suspect we're politically rather opposed, as I see this as a consequence of capitalism putting a price tag on everything, and something that regulation is appropriate for (some way of forcing brands to publicise when they've changed something, so that customers can know whether a review they read still applies, although the details of how to do that would be difficult). Indeed I'd argue that the only reason customers can trust a brand like Coca-Cola is strong regulation in the form of trademark law.

harry8 5y ago
Yeah it's a reasonable point of view. The other way to go on that is you're in an country whose culture you don't understand which as a wildly corrupt, crony-riddled military dictator and nobody has any rights at all. Do you want locally bottled Coke(tm) with the red label and dynamic ribbon for your very thirsty child or locally bottled "Odin's Thirst Quencher! (est. 2021)"? Coke are going to enforce quality control and safety to protect their brand or get out of that market. There is no regulation you can rely on in this mythical country - but there are quite a few countries like that which you may know yourself from having visited them. In France, say, you have regulation that safety is not a concern. When you don't have it you have brands - the owner has the incentive to protect them. So it goes also in France, or the USA or other wealthy countries to the parts of commerce that are not regulated (whether they could be or whether that's because it's not feasible). But the higher issue is information. Should you be able to sell the same product with a very different quality under the same name? Let's say we agree the answer is ideally "no, you can't do that." Now we want to regulate that you can't do that. How is it enforced? There may be ways. There may be grey areas. The cost may be prohibitive in many instances or there might be new solutions to mitigate those problems. What is isn't is easy which you can see as soon as you apply it to the industry and case under discussion. Intensive industry training schools.
- lmm 5y ago
  > Do you want locally bottled Coke(tm) with the red label and dynamic ribbon for your very thirsty child or locally bottled "Odin's Thirst Quencher! (est. 2021)"? > Coke are going to enforce quality control and safety to protect their brand or get out of that market. There is no regulation you can rely on in this mythical country - but there are quite a few countries like that which you may know yourself from having visited them. I'd argue that in a lawless country people have no faith in the brands either. Look at the fake Apple stores in China, or at parents importing identically-branded baby formula from abroad because they (justifiably) didn't trust the locally produced version.
  - harry8 5y ago
    It's obviously not a panacea. You may not be able to trust the brand is what it claims to be. You frequently can't in wealthy countries with low corruption indexes. There are plenty of times what you trust is the interests of the brand holder to defend the value of the brand where regulation can't help you. Coke in a sealed bottle is extremely likely to be coke in a sealed bottle in Mogadishu. The brand "Coke" gives you some information about the probability of not drinking poison. Obviously it isn't perfect. I think it's evident that it isn't something to be dismissed as inconsequential information either. Coke will be trying very hard to make sure nobody impersonates them and kills their customers anywhere in the world because it would be an advertising disaster. Better that than nothing. (Just quietly I hate the coca cola company and think they are pretty evil. Diabetes. Obesity. They're similar to a cigarette company. Meh. Useful points can still be made using their business as an example.)

suzzer99 5y ago

Hertz is currently cannibalizing their brand and customer base by charging outrageous fees (cleaning, late) and refusing the refund them even when proven wrong. https://www.latimes.com/business/story/2021-06-11/column-hertz-smoking-fee https://www.latimes.com/business/story/2021-06-11/column-her...

oceanghost 5y ago
Fascinating. U-Haul was/is famous for this too. A decade ago I rented a large U-Haul for a move. I knew how crappy they were and purchased the insurance just figuring it in as the "true" cost of the rental. I pick up the truck at like 4:00pm. The truck they gave me had some serious damage to the box, it had been painted over. I documented everything and went on my way. I return the truck at ~12pm the next morning. I get a call a few hours later from U-Haul saying I'd damaged the truck to the tune of $1700 or so. I told them, "So whats your theory? That I drove the truck 100 miles, damaged it and had time to paint over the damage and for that paint to dry in 16 hours? And, I bought the insurance anyways SO WHY THE F** ARE YOU CALLING ME?!" Some businesses are so routinely corrupt its unusual if they're not trying to cheat you. Another time, I took my vehicle which had very expensive tires (think $650 each) to an Allen Tire for a slow leak in one of them (would deflate once a week). I took pictures of my tires bcause I had been dreading this and putting it off for months because-- I knew what would happen. And it did: They called me a few hours later and said one of my tires had been slashed and that I would have to replace both rear tires. The guy was a great actor. He genuinely sounded distressed over my misfortune. I told them to put the tire back on and I'd pay a reasonable fee. They refused, "Sir we can't do that, the car is unsafe to drive." I am livid at this point. I made probably a poor decision... I calmly explained that I was missing my regularly scheduled shooting practice (which was true) and I am coming down there, with the guns that I intend to take to the practice, so I hope my old tire will be on the car so I won't be late. When I got there (no guns of course), they had magically discovered a nail in the tire and they were sorry for the mistake. The same bastard trying to scam me was outrageously apologetic for the "mix-up." anyways, if you made it through this slog of a post thank you! Little bored this evening...

eru 5y ago

In a sense, this is all about interest rates. If capital becomes abundant enough that rates of return become low enough, then the long term becomes more and more important in corporate planning. If interest rates are high, then short term gutting of the business _is_ the rational move. (Interest rates have been rather low in the last decade or so. Not sure if that had much of an influence?)

harry8 5y ago
Disagree with that. The decision is between a higher probability shorter realization, bigger annualized result vs longer realization, lower annual return (possibly bigger return if things go particularly well) with a bigger probability of things going wrong, especially a few years into the future where the crystal balls get less sure of themselves. I can get a real 30% return this year and I'm out with high probability. Vs I could get 150% in 7 years time but not much this year or next and maybe it won't work out because the unknown unknowns etc? If you're pretty sure you're on a winner you take option b and hold. If you're less sure, a bird in the hand is worth two in your dreams... Your bonus this year is on this year's results, will you still work there and get the bonus in 7 years? The decision is probably not made by the owners of captial but their professional agents. The interest rate really doesn't figure in that calculation (real returns rather than nominal). It's all about the return probabilities and good enough with more certainty can win out where you might not like that and think more highly of the longer term prospects. Factoring in interest rates, when they're high its because inflation is high. At that point an inflation hedged investment (which most equity is) becomes relatively more valuable than money in the bank (bonds) because money in the bank is a sure, steady loser. Capital has to go somewhere and its owners will want to put it where it can "lose the least" Get it invested in some kind of business equity, diversified as hell, across industries, business sizes, geographically, startup vs established, precious metals, Art, all of it. Just get the hell away from bonds which will hemorrhage value from the inflation. Where capital is having trouble finding investment because all captial owners are looking the incentive becomes to hang on and hold, let the business run rather than rip the value out now and have to find somewhere else equivalent to put it which may not be easy at all.
- 5y ago

RNCTX 5y ago

How do you know you prefer unregulated markets? I'm coming up on 45 and through my whole life, markets have been regulated in favor of corporate officers and the government agencies and officials paid to represent them.

harry8 5y ago
Could be an expression problem on my part. Perhaps I should have written "less regulated" as opposed "more regulated" markets. There's a regulation that when you buy something you can't shoot the counterparty and take your money back in most parts of the world so yes clearly "wholly unregulated" is largely fiction. In the same way that a (fully) regulated market such as a soviet style command economy usually has more than a few loopholes. Eg inmates in prison have a market that is as tightly regulated as anything in the world yet they work around it and it seems nobody has ever succeeded in keeping the drug trade out of jails. The regulatory capture you refer to is one of the downsides of over-regulation. De-regulating is not necessarily a panacea for regulatory capture. Sometimes the regulatory body that has been captured has power of regulation that is in some way completely necessary and that is use as an excuse to institute an abusive barrier to entry or similar. Or just regulated to grow the career, influence & power of the persons who are charged with advising and enforcing the regulation. Whether two people looking carefully and sensibly at a market see it the opposite way, one as over-regulated the other as under-regulated can be largely ideological and a good faith disagreement, both of whom can achieve a better understanding and policy prescription through sensible exchange of ideas - especially with regards important details like enforcement, corruption, abusive practice that is or could happen etc.. There isn't nearly enough of that about.
eru 5y ago
There's lots of different markets around the world in different goods and services. If you are sufficiently purist, none of them is free or unregulated. But they are regulated in different ways and to different degrees. You can learn a lot by observing how these varying degrees impact outcomes.