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Corporations would like to increase prices and profits at all times. They don't need "excuses". If people are willing to pay more, they'll charge more. Why are

Corporations would like to increase prices and profits at all times. They don't need "excuses". If people are willing to pay more, they'll charge more. Why are people willing to pay more? I don't know, maybe they have more money [1]? [1] https://fred.stlouisfed.org/series/GPSAVE https://fred.stlouisfed.org/series/GPSAVE

rektide 5y ago
People are willing to pay more, in my view, because the competitive spirit has been eaten out of the market. I spent a bunch of 2012-2019 loosely tracking semiconductor acquisitions & there's like 8 decent-sized companies left. Everyone else has been gobbled up. You know why there's a chip shortage? Because only 2 companies still make diodes. Because only 3 companies still make pmics.Because everyone "for some reason" all use STM microcontollers. We used to talk about efficiencies of scale. To me, today, I keep asking myself exactly your question: > Why are people willing to pay more? And I keep finding the answer is: no one else knows how to supply or tries to supply anymore. There is no competition anymore. Getting started competing to produce/supply real goods/materials is too hard now. Getting good making goods/materials gets you bought now. People pay more because they have to, because there's no competitive supply, because companies can- as various replies to the topic suggest- charge whatever they want & don't need an excuse anymore. Why is that? There's no supply side competition. It's no longer about efficiencies of scale. Now we scale so we can make sure we have no competition. So we can serve the market well enough to prevent competition, then leverage our position.
- everforward 5y ago
  This is the unfortunate logical conclusion to industries becoming capital-intensive rather than labor-intensive. When most industries were labor intensive it made little sense to aggregate businesses. Your costs are defined by the price of labor; there's little to save by grouping up. It may even have been a negative, because of the unwieldiness of large businesses. Capital-intensive businesses love to aggregate because they can make more efficient use of the capital investment. You can buy one set of machines and do 100% utilization, rather than have two companies with two sets of machines each at 50% utilization. That's a gross oversimplification, but hopefully the point is clear. You can also see this in older companies. It's not an accident that the Dutch East India company was massive. The sailors cost nothing relative to the price of the ship and the goods it carries. And yes, competition does go down because nobody wants to get into a capital-intensive industry where the only way to be competitive is to scale up to the size of the existing competitor. It's a zero sum game, and you're starting out way behind. I don't know what to do about that, but I do think this aggregation is making our supply chains brittle in exchange for cheaper goods.

rektide 5y ago

People are willing to pay more, in my view, because the competitive spirit has been eaten out of the market. I spent a bunch of 2012-2019 loosely tracking semiconductor acquisitions & there's like 8 decent-sized companies left. Everyone else has been gobbled up. You know why there's a chip shortage? Because only 2 companies still make diodes. Because only 3 companies still make pmics.Because everyone "for some reason" all use STM microcontollers. We used to talk about efficiencies of scale. To me, today, I keep asking myself exactly your question: > Why are people willing to pay more? And I keep finding the answer is: no one else knows how to supply or tries to supply anymore. There is no competition anymore. Getting started competing to produce/supply real goods/materials is too hard now. Getting good making goods/materials gets you bought now. People pay more because they have to, because there's no competitive supply, because companies can- as various replies to the topic suggest- charge whatever they want & don't need an excuse anymore. Why is that? There's no supply side competition. It's no longer about efficiencies of scale. Now we scale so we can make sure we have no competition. So we can serve the market well enough to prevent competition, then leverage our position.

everforward 5y ago
This is the unfortunate logical conclusion to industries becoming capital-intensive rather than labor-intensive. When most industries were labor intensive it made little sense to aggregate businesses. Your costs are defined by the price of labor; there's little to save by grouping up. It may even have been a negative, because of the unwieldiness of large businesses. Capital-intensive businesses love to aggregate because they can make more efficient use of the capital investment. You can buy one set of machines and do 100% utilization, rather than have two companies with two sets of machines each at 50% utilization. That's a gross oversimplification, but hopefully the point is clear. You can also see this in older companies. It's not an accident that the Dutch East India company was massive. The sailors cost nothing relative to the price of the ship and the goods it carries. And yes, competition does go down because nobody wants to get into a capital-intensive industry where the only way to be competitive is to scale up to the size of the existing competitor. It's a zero sum game, and you're starting out way behind. I don't know what to do about that, but I do think this aggregation is making our supply chains brittle in exchange for cheaper goods.