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Private equity discovered that regulations, compliance requirements, & other similar barriers to entry are the most effective 'moats' which allow businesses to
by nickff 2y ago
Private equity discovered that regulations, compliance requirements, & other similar barriers to entry are the most effective 'moats' which allow businesses to raise prices and have little impact on demand; they are now exploiting this 'hack' ruthlessly.
- tdb7893 2y agoWe've seen consolidation across the whole economy (which have vastly different regulation schemes) so I'm skeptical of it being just regulation driven
- JumpCrisscross 2y ago> I'm skeptical of it being just regulation driven It seems to be blatantly obviously regulation in this case. There are electric wheelchairs in other countries. What's stopping them from being imported are the regulations.
- kazinator 2y agoThen, how would it fix things then if it wasn't private equity dominating that market? There would still be regulations that would allow public equity wheelchair makers to jack prices.
- JumpCrisscross 2y ago> how would it fix things then if it wasn't private equity dominating that market? I'd start importing them for less than $500 from India [1]. (Versus $1,500 to $6,000 for these jalopies.) [1] https://www.amazon.in/electric-wheelchair/s?k=electric+wheelchair https://www.amazon.in/electric-wheelchair/s?k=electric+wheel...
- MichaelZuo 2y agoThe regulations don't just disappear to allow for such imports as in your example ...?
- JumpCrisscross 2y ago> regulations don't just disappear to allow for such imports as in your example My point is the regulations are leading to the duopoly, which is the source of the problem. The last private-equity owner seems to have been fine. And the market was competitive before the CMS rules in 2005. I’m not suggesting scrapping the rules. But the rules are clearly well past safety.
- MichaelZuo 2y agoPerhaps you've confused which comment I was replying to with one further up, from what I can see you were trying to answer the question, and nothing else is visible: > how would it fix things then if it wasn't private equity dominating that market? The visible answer is clearly contingent on some future regulatory landscape coming into existence, otherwise it makes no sense, so I was wondering how does it answer the original question?
- cogman10 2y agoWell, that's the interesting thing. You likely can import and use these wheelchairs, but they can't be sold as medical devices and, subsequently, won't be covered by your insurance. The dumb thing is these super cheap wheelchairs would likely cost the end users more money than the expensive ones as they will buy them out of pocket vs having their insurance/medicare cover most/all of the cost. The reason these companies don't sell these wheelchairs in the US is likely because the marketing would run afowl of regulations about selling medical devices. You probably could sell these as bicycles and hobby chairs though.
- charrondev 2y agoI mean they could market similar to Not a Wheelchair I guess? https://notawheelchair.com/products/the-rig https://notawheelchair.com/products/the-rig
- dahinds 2y agoIt would not necessarily fix things if private equity wasn't involved, but private equity is particularly effective at identifying cases where a market or regulatory inefficiency is not being maximally exploited, and jumping in to extract profits from that. So sort of by construction, when private equity enters a particular market, things are likely to get worse for consumers. It doesn't mean that things are golden if private equity is not involved.
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- fzeroracer 2y agoWhat exactly do you mean 'blatantly obvious'? Because to me, the issue that is blatantly obvious is that we don't have enough regulations on PE. Let's say in this scenario you do import an electric wheelchair. You fork out a few thousand dollars on the expensive costs of said purchases. It breaks. No one in America can repair it. Or if they can repair it, you have to go through the PE-owned wheelchair market, whom charge a premium. Your options are fork out the money for repairs, import another wheelchair, or send it abroad for repairs. Assuming that instead you create a company designed around importing said wheelchairs, PE buys you out and then sells imported wheelchairs at monopolistic prices.
- Gormo 2y agoRegulation across the whole economy is one of the principle mechanisms of consolidation. Vested interests sell regulation to the public as a "consumer protection" mechanism, then use regulatory capture as a tool to erect barriers to entry and impose complex rules that supersede common-law jurisdiction while giving them a range of tools to evade liability. The threat of competition is restrained, and a de facto collusive oligopoly can squeeze the market dry.
- akira2501 2y agoThe regulation is what drives the ratio, here, though. Consolidation often brings price increases and worse service for customers, but in a regulated industry, you can push this practice quite a bit further than you might consider doing in any other one.
- pdonis 2y agoThis is a good illustration of the difference between capitalism and a free market. In a free market, "moats" like regulatory capture would not exist. In a market like this, where the customers--wheelchair users--are generally pretty savvy about what they need, a free market would have no trouble providing products that met customer needs at an affordable cost, because customers would have meaningful choices about who to buy from and who not to buy from, and customers would see the full cost of the products so they could make meaningful cost-benefit calculations. In capitalism such as we currently have, none of that is happening. The government aids and abets rich people who want to siphon off even more wealth than they already have by putting regulatory barriers in place that stifle competition, and it removes visibility into actual costs by forcing all medical products and services to be provided through health insurance, even when, as in this case, there is no insurable risk involved--it's an ongoing medical need that is already known (not a risk) and which is predictable (so insurance makes no sense anyway). The result, of course, is that the customers get shafted while rich people get richer.
- kazinator 2y agoCapitalism refers to the system of individuals pooling money together (capital) to start a venture that they couldn't if they acted separately. The idea of a company being a person-like legal entity with its own assets and liabilities is capitalistic. In a free marked that is absent of regulatory hurdles, it is far from guaranteed that costs would be affordable. Freedom from regulation about how wheelchairs have to be constructed would go hand-in-hand with freedom from regulation against monopolistic practices!!! In a completely free market, devoid of regulation, wheelchair makers can get together and fix prices. Or buy each other.
- JumpCrisscross 2y ago> idea of a company being a person-like legal entity with its own assets and liabilities is capitalistic It independently evolved in Rome and India to provide legal personhood to cities, guilds, public works and later, in the former, the Catholic Church.
- pdonis 2y ago
- mhh__ 2y agoThat some people apparently can't see this strat with AI "safety" laws is genuinely bizarre.
- api 2y agoLots of people see it. It's very clear to me and many others that a lot of the AI safety push is about going straight for regulatory capture and effectively outlawing competition.
- discardedrefuse 2y agoYup. Sam Altman stood before congress and practically begged them for a regulatory moat. Straight up rent-seeking behavior. I don't think people give Meta enough credit for their roll in that. Microsoft/OpenAI got cozy and thought they had a huge moat made of $100K hardware to protect their $10B investment. Then Meta shadow drops Llama and within weeks regular folks were running GPT3 level LLMs on consumer hardware. That was such a huge win for opensource and consumers.
- api 2y agoZuckerberg invented engagement farming social media to ruin the mind of humanity and drive the political discourse to madness, so anything he wants to do to redeem himself is great.
- wolverine876 2y agoHow do think we should address security around AI, and the public's control over a major impact on their lives, welfare, freedom, prosperity, etc.
- sangnoir 2y ago> How do think we should address security around AI The same way we address security around cars: we don't ban individuals from working on project cars, or driving them on public roads - instead, we have standards for OEMs and individuals, and prosecute negligence. AI safely is similar to GM lobbying for laws making it illegal to tweak your own car or changing your own brake fluid for "public safety".
- vrc 2y agoIt’s interesting. The regulation ostensibly protects vulnerable classes from exploitation and lets them use reimbursement structures to defray cost. At the same time it causes costs to go up and allows people to buy their way across the moat. I wonder if regulation that stipulated that a change of ownership of some percentage would require recertification of the entity would stem this a bit. Or restrictions on buying HIPAA covered businesses with patient data. Might pose a problem to folks in the business today, but could slow down the massive acquire-and-merge train in these industries.
- wolverine876 2y agoNot all regulation causes costs to go up. Some causes costs to go down, for example, by correcting inefficiencies created by raw game-theory market competition. Some reduce costs by creating a safer environment for investment, reducing risk. Regulation serves market participants too.
- johngladtj 2y agoRegulation always increases costs, it's just that not all costs are easily visible
- jhawleypeters 2y agoWhat's the invisible cost when cigarette advertising is banned, eliminating the arms race to out-advertise the competition?
- wolverine876 2y agoIs that established theoretically by someone?
- vrc 2y agoIn this case it’s regulation on who can sell DME paired with how payor negotiations are handled. So even if you had cash to buy many DME, you still need a prescription and sometimes forced to pay the contracted price if you are known to have insurance.
- burnte 2y agoThey're huge in healthcare for this very reason.
- wolverine876 2y agoIt's impressive that not only has private equity enshittified even nursing homes and wheelchairs, they have persuaded people to empower PE even more by reducting regulations. Do you think PE will suddenly change without regulation? PE is responsible for PE's actions. If these services and goods decline under PE, with the same regulations as before, then the cause is clear.
- EMCymatics 2y agoWe should be more vocal in our opposition
- tmaly 2y agoIt is not just wheelchairs and nursing homes. My eye doctor office got bought out. They pay the doctors as little as possible and maximize the number of appointments per day.
- throwaway48476 2y agoHow hard is it for them to leave and start their own business?
- bcrosby95 2y agoNot every doctor also wants to be a small business owner. Usually what happens is a doctor/dentist/vet started a practice, wants to retire, and sells it to PE. At smaller places, sometimes the owner sells to PE and stays on - they just don't want to deal with the business side of things anymore. Quitting your job to start your own thing is never an easy step.
- benced 2y agoThat sounds great for the consumers of optometry services in your area.
- Zenzero 2y agoSure if you like mistakes.
- fakedang 2y agoThe brevity of this statement belies the prescience of it. Back in my former life in PE, businesses with industry moats were actively hunted down and targeted, regardless of location. That obviously led to the three basic necessities of man - healthcare, education and housing - being the most affected sectors.
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- esafak 2y agoIs there anything that PE doesn't turn to shit?