6 ms·

On agricultural issues: be careful about making assumptions. I was talking about the labels on fruits (you know, those labels you just peel off so you don't ea

On agricultural issues: be careful about making assumptions. I was talking about the labels on fruits (you know, those labels you just peel off so you don't eat them) with someone who knew about this sort of thing . I ignorantly said "that's gotta be a low-margin business." He said, "Actually, it's a high-margin business." If you get a monopoly in some market that's very difficult to enter, you've got yourself a steady cash flow. I don't think "repairing tractors out in the middle of nowhere" is a very easy one to get into.

throwawayboise 5y ago
I understand the tractor repair example to some degree, though "difficult to enter" in the case of Deere is largely because Deere is making it difficult. But how is the market for fruit labels difficult to enter?
- AlbertCory 5y ago
  Well, I can only speculate, not having tried. It could be that the farmers & handlers already know the main suppliers and they're satisfied with them: low prices, good service, acceptable quality. And they're not looking for even lower prices. If you have a monopoly and you've ridden the learning curve far enough that you're making a good profit while not pissing off your customers, and the market is pretty static, you're in. But I could be wrong.
  - ethbr0 5y ago
    I'd hazard it's probably due to order of magnitude different absolute profit amounts. E.g. you can double your margins on fruit labels, and still be a rounding error for fruit producers Consequently, being invisible and fanatically attentive to what your customers want (e.g. ease of use) means the hassle of switching suppliers outweighs the cost savings.
    - AlbertCory 5y ago
      I was pondering this while walking the dog: family-run businesses, small business, etc. In some businesses, having been around for a long time, being part of the community, and knowing your customers is worth WAY more than a few points of profit. In fact, those businesses are everywhere. Look and see who buys the ads for the high school sports teams. Tractor repair ought to be like that. Not the monopoly of John Deere. (I don't know anything about who owns fruit-labelling, and it might even be some giant conglomerate.) But let's say someone owns such a loyalty business, everything is great, and then they die or retire. Then what? It's the source of a million dramas, like Yellowstone or King Lear. Maybe a son or daughter takes over. Then they're incompetent. Or not. Maybe the kids fight over it. The possibilities are endless. Or maybe the giant conglomerate DOES buy it. Promising "nothing will change" of course.
      - ethbr0 5y ago
        I think often... it just ceases to exist. E.g. What happens when the local diner goes out of business? There's no Law of Diners that mandates someone else step up. Sure, a McDonald's or Wendy's might drop in. But that's not really the same thing. (Restaurants are the obvious example, but it could just as easily be a machinist or florist. Flavor analogy to desired niche industry) As an example: Royall Machine, Lottsburg, VA https://www.google.com/maps/place/2461+Northumberland+Hwy,+Lottsburg,+VA+22511/@37.9627178,-76.5196366,3a,75y,79.68h,90t/data=!3m7!1e1!3m5!1sGcS9Vcq_B10gVw6KwkcXNg!2e0!6shttps:%2F%2Fstreetviewpixels-pa.googleapis.com%2Fv1%2Fthumbnail%3Fpanoid%3DGcS9Vcq_B10gVw6KwkcXNg%26cb_client%3Dsearch.gws-prod.gps%26w%3D86%26h%3D86%26yaw%3D79.67581%26pitch%3D0%26thumbfov%3D100!7i16384!8i8192!4m5!3m4!1s0x89b7569c05eab757:0xfd3982578edc427c!8m2!3d37.9627719!4d-76.5192646 https://www.google.com/maps/place/2461+Northumberland+Hwy,+L... Was there for 30+ years. Could make about anything you needed out of metal. Now, just isn't. And moreover, the customers, having become cultured to dealing with the existing business, now have to radically alter their expectations when interacting with a more corporate entity. McMaster-Carr is great, but it's a darn sight different than bringing in a broken part, and having a duplicate made in about a week.
        AlbertCory 5y ago
Frost1x 5y ago
People tend to overestimate how reasonable it is to become a real competitor. Just because someone's sitting on a fluffy market with fat margins doesn't mean competition will just fly in and regulate pricing structures down for consumers. Typically, quite the opposite happens and investors and entrepreneurs see the opportunity to compete, but quickly discount it because the risk to compete is too high relative to barriers to entry. As long as your barriers to entry are high enough, a bonus if on of the barriers is capital intensive (time is something many can sacrifice but capital can be conjured out of thin air), you're going to be nearly impossible to dethrone by a competitor coming in. You can usually spot competitors a mile away approaching the outermost mote your castle has and head them off early, perhaps establish an early friendship, or acquire them at a low cost before they get anywhere near the crown jewels. The trick is to get the foothold and momentum in a market. After that it's difficult for competitors to actually compete unless you're asleep at the wheel.
MisterTea 5y ago
> I don't think "repairing tractors out in the middle of nowhere" is a very easy one to get into. Not as hard as you think (I've worked on cars, vans and even semi trucks). By the local Autozone (a chain of automotive parts store) there is a man who repairs cars on the street out of a an old, short school bus. He also does house calls. He has a generator, air compressor, welder, jacks, engine hoist, all the tools needed, and even some parts. Same setup would enable tractor repair with the addition of some heavier tools to handle the larger bolts and so on. John Deere is electronically locking their equipment so no one but them can figure out whats wrong or reset/clear error codes to restore normal operation. It's just shenanigans.
- bluGill 5y ago
  Every tractor comes with a display in the cab that tells you what the code means. This display is populated from the same database that goes into John Deere's dealer service tool. I wrote some of that code. (I don't speak for John Deere of course) The only thing you cannot do without a dealer is replace a ECU. This is part anti-theft, and part to ensure you don't mess with the emissions.

throwawayboise 5y ago

I understand the tractor repair example to some degree, though "difficult to enter" in the case of Deere is largely because Deere is making it difficult. But how is the market for fruit labels difficult to enter?

AlbertCory 5y ago
Well, I can only speculate, not having tried. It could be that the farmers & handlers already know the main suppliers and they're satisfied with them: low prices, good service, acceptable quality. And they're not looking for even lower prices. If you have a monopoly and you've ridden the learning curve far enough that you're making a good profit while not pissing off your customers, and the market is pretty static, you're in. But I could be wrong.
- ethbr0 5y ago
  I'd hazard it's probably due to order of magnitude different absolute profit amounts. E.g. you can double your margins on fruit labels, and still be a rounding error for fruit producers Consequently, being invisible and fanatically attentive to what your customers want (e.g. ease of use) means the hassle of switching suppliers outweighs the cost savings.
  - AlbertCory 5y ago
    I was pondering this while walking the dog: family-run businesses, small business, etc. In some businesses, having been around for a long time, being part of the community, and knowing your customers is worth WAY more than a few points of profit. In fact, those businesses are everywhere. Look and see who buys the ads for the high school sports teams. Tractor repair ought to be like that. Not the monopoly of John Deere. (I don't know anything about who owns fruit-labelling, and it might even be some giant conglomerate.) But let's say someone owns such a loyalty business, everything is great, and then they die or retire. Then what? It's the source of a million dramas, like Yellowstone or King Lear. Maybe a son or daughter takes over. Then they're incompetent. Or not. Maybe the kids fight over it. The possibilities are endless. Or maybe the giant conglomerate DOES buy it. Promising "nothing will change" of course.
    - ethbr0 5y ago
      I think often... it just ceases to exist. E.g. What happens when the local diner goes out of business? There's no Law of Diners that mandates someone else step up. Sure, a McDonald's or Wendy's might drop in. But that's not really the same thing. (Restaurants are the obvious example, but it could just as easily be a machinist or florist. Flavor analogy to desired niche industry) As an example: Royall Machine, Lottsburg, VA https://www.google.com/maps/place/2461+Northumberland+Hwy,+Lottsburg,+VA+22511/@37.9627178,-76.5196366,3a,75y,79.68h,90t/data=!3m7!1e1!3m5!1sGcS9Vcq_B10gVw6KwkcXNg!2e0!6shttps:%2F%2Fstreetviewpixels-pa.googleapis.com%2Fv1%2Fthumbnail%3Fpanoid%3DGcS9Vcq_B10gVw6KwkcXNg%26cb_client%3Dsearch.gws-prod.gps%26w%3D86%26h%3D86%26yaw%3D79.67581%26pitch%3D0%26thumbfov%3D100!7i16384!8i8192!4m5!3m4!1s0x89b7569c05eab757:0xfd3982578edc427c!8m2!3d37.9627719!4d-76.5192646 https://www.google.com/maps/place/2461+Northumberland+Hwy,+L... Was there for 30+ years. Could make about anything you needed out of metal. Now, just isn't. And moreover, the customers, having become cultured to dealing with the existing business, now have to radically alter their expectations when interacting with a more corporate entity. McMaster-Carr is great, but it's a darn sight different than bringing in a broken part, and having a duplicate made in about a week.
      - AlbertCory 5y ago

Frost1x 5y ago

People tend to overestimate how reasonable it is to become a real competitor. Just because someone's sitting on a fluffy market with fat margins doesn't mean competition will just fly in and regulate pricing structures down for consumers. Typically, quite the opposite happens and investors and entrepreneurs see the opportunity to compete, but quickly discount it because the risk to compete is too high relative to barriers to entry. As long as your barriers to entry are high enough, a bonus if on of the barriers is capital intensive (time is something many can sacrifice but capital can be conjured out of thin air), you're going to be nearly impossible to dethrone by a competitor coming in. You can usually spot competitors a mile away approaching the outermost mote your castle has and head them off early, perhaps establish an early friendship, or acquire them at a low cost before they get anywhere near the crown jewels. The trick is to get the foothold and momentum in a market. After that it's difficult for competitors to actually compete unless you're asleep at the wheel.

MisterTea 5y ago

> I don't think "repairing tractors out in the middle of nowhere" is a very easy one to get into. Not as hard as you think (I've worked on cars, vans and even semi trucks). By the local Autozone (a chain of automotive parts store) there is a man who repairs cars on the street out of a an old, short school bus. He also does house calls. He has a generator, air compressor, welder, jacks, engine hoist, all the tools needed, and even some parts. Same setup would enable tractor repair with the addition of some heavier tools to handle the larger bolts and so on. John Deere is electronically locking their equipment so no one but them can figure out whats wrong or reset/clear error codes to restore normal operation. It's just shenanigans.

bluGill 5y ago
Every tractor comes with a display in the cab that tells you what the code means. This display is populated from the same database that goes into John Deere's dealer service tool. I wrote some of that code. (I don't speak for John Deere of course) The only thing you cannot do without a dealer is replace a ECU. This is part anti-theft, and part to ensure you don't mess with the emissions.