5 ms·

Here's how I see it: in the absence of growth in market share or cost-reducing innovation, the only remaining strategy for profit maximization is the delivering

by hliyan 1y ago

Here's how I see it: in the absence of growth in market share or cost-reducing innovation, the only remaining strategy for profit maximization is the delivering of progressively lower quality products for progressively higher prices. This obviously destroys the brand over time, but brands can be recycled/reinvented. A purely rational and self-interested (i.e. unencumbered by moral sentiment or empathy) economic agent would, in this case, calculate the longest time period a brand could be sustained at the highest price and the lowest production cost, before the brand is lost. If the ROI during that period justifies the investment, such an agent would execute the strategy.

Ygg2 1y ago
Then from a purely rational and self-interested citizenry would hold any economic agents on the hook for future cleanups of land, water or air.
- rcbdev 1y ago
  Thankfully, the citizenry is irrational and self-interested, which enables an entire cottage industry of sheisters, marketers and psychologists, which then engineer our attention spans and purchasing decisions.
- bradly 1y ago
  Turns out a large enough number of humans can be controlled by ads that cost less money than the money they generate by controlling these humans.
- cyanydeez 1y ago
  Theyd also nationalize certain products to minimize unnecessary waste and churn.
- hilux 1y ago
  I like the idea, but "purely rational citizenry" is a theoretical construct. And even if they/we were purely rational, there's the intractable problem of measuring the cost of future cleanups stretching into forever. Plus the danger (certainty) of corporations paying out their current executives and then declaring bankruptcy.
  - Ygg2 1y ago
    > but "purely rational citizenry" is a theoretical construct. So is a "purely rational economic agent". Nothing about it is real. It's a model.
ImPostingOnHN 1y ago
That's pretty much the game plan for every private equity acquisition: exchange brand goodwill (and all other sources of value) for profits, pocket the profits, leave the empty husk behind.
- fnordlord 1y ago
  This is mostly how I see it too. I've wondered recently if it was possible to plot that curve and use it to show which companies are still on the quality portion of the arc and which are on the downturn.
- cgannett 1y ago
  Also almost everyone who works at that company gets laid off and the few remaining have the worst job ever now. LINE GO UP THO!!
cyanydeez 1y ago
You need to factor in planned obsolescence. The fundamentals of the market simply does not make sense when your product is cheap and lifecycle is long. Think of the LED bulb. It would make more sense for the government to manage the few resources needed and for them to maximize the lifecycle of a lightbulb.
- ethbr1 1y ago
  A lightbulb is a fascinating example, because there’s an argument to be made that a “minimum government specification” lightbulb would be superior to what the market provides (read: under-spec’d cheap caps that die due to heat https://www.edn.com/ensure-long-lifetimes-from-electrolytic-capacitors-a-case-study-in-led-light-bulbs/ https://www.edn.com/ensure-long-lifetimes-from-electrolytic-... ).
  - 0xabe 1y ago
    I’m tired of having to replace whole LED light fixtures instead of being able to replace a bulb. I am currently waiting on a special order to arrive with 2 fluorescent light fixtures. I refuse to put up more LED fixtures that will go bad in another 2 years.
- etbebl 1y ago
  It seems to me that for products that in general are cheap to buy as well as produce, companies would want to make these products somewhat longer-lasting to gain a better reputation and then make more sales and larger profits on more expensive items. I think the fundamental problem here is that nobody trusts brands anymore because we have been trained by strategies like market segmentation and private equity cost cutting that the vast majority of brands don't consistently indicate quality. That product A could be fine and a very similar-looking product B could be horrible, and any company or even product could become shit at any moment. Breyers in the US is a great example - they sell real (though still watery) ice cream in the cartons that say "naturals," and all the other very similar looking cartons are full of crap artificial frozen dairy dessert. They had a very strong brand, and they decided it was time to cash out that brand goodwill by cheaping out, but deceptively so they could ride it out for a few decades, at which point who cares? This has led to a situation where companies don't make any attempt anymore to gain a reputation for the quality of their products, because it's futile to convince the public that they can trust you. And also, they have to compete much more equally with alphabet soup brands on Amazon making the absolute cheapest version of products at the lowest margins (and labor costs). So why would anyone make a better lightbulb that no one will buy because it's $2 more expensive?
hinkley 1y ago
That’s not the only one it’s just the easier one. When people tear down new models of gaming systems they find fewer chips on the boards because they’ve found some chip that does two things for less than the price of both - below a certain point it’s financially infeasible to make simple parts because the capacity they consume makes a chip that does half as much only 15% cheaper. See also when people started putting Linux rescue disks into the EEPROM, because appropriately sized ROMs no longer existed. You can find better equipment and processes that get you more product per hour out the door without necessarily making the product shittier.
- klik99 1y ago
  Parent comment explicitly says this happens when a sector runs out of things to innovate on. Chips are still innovating like crazy which is why we're seeing some amazing processing/CPU/GPU/DSP chips/etc. If we ever hit on the limits of moores law, watch those CPUs become shittier and shittier over a 10 year period. I think this point is the key and kind of subtle point - "growth at any cost" does actually rise the tide and bring up all boats when there is a lot of room for innovation. It just starts harming when a sector has diminishing returns on innovation. So you'll be able to come up with plenty of counter examples where growth mindset is really beneficial because it's very context sensitive.
  - hinkley 1y ago
    > runs out of things to innovate on. I suspect you know better than this. Failure of imagination does not mean lack of options. People in our industry reach for next steps that cut off other options in the process, all the time. To assume manufacturing doesn’t have the same problem is questionable.
    - klik99 1y ago
      Sure, but it's a hacker news comment, not a book. To be more clear I mean functionally run out of things. To be even more clear, when ROI on innovation becomes less than ROI on simply making product cheaper. There's always innovations, and some may even be missed, but when the perception of the industry is that future innovations cost more than the loss of good will of making worse product then it's obvious what will be picked. I think the solution is to make "loss of good will" valued higher, right now it's valued very low by investors since people want to hold investments a short time and exit quickly. CEOs elected by boards controlled by shareholders are the same way. Short term growth is incentivized and that undervalues long term retention of customers, which makes it more likely "manufacture a worse product" a better option than "innovate and make a better product that more people will want".
klik99 1y ago
This is exactly what I came to say - growth as the primary goal DOES create innovation, until innovation in that field yields diminishing returns or bottoms out completely, then it creates shittier and shittier product. The entire American version of capitalism is built around growth as the primary goal, which did great things, but now (unequally, some sectors are still innovating) is creating more and more shitty things. It's so hard for anyone to acknowledge this because everyone wants to take a "side", pro- or anti-capitalism, without being realistic that there are different implementations of capitalism and there is no system that universally works, it really depends on the situation. Right now we need to make "lifestyle company" not a bad word in investment circles, focus on dividends/revenue sharing over stock growth, create incentives around steady, well run companies, and not companies that outspend and destroy competition and then make their product shittier and/or more expensive.
- WalterBright 1y ago
  Do socialist economies produce superior products?
  - nicoburns 1y ago
    If by "socialism" you mean the majority of economic activity being state-run, then probably not. If by "socialism" you mean things like worker-owned corporations, strong anti-competition laws, high levels of consumer regulation, then absolutely.
    - WalterBright 1y ago
      If worker-owned collectives produce superior products, why aren't they everywhere? It's not illegal to form one.
      - brendoelfrendo 1y ago
        Because capital doesn't like to fund them. Being worker-owned limits the potential upside for investors so a collective or co-op needs to be able to bootstrap itself to success, at which point capital will just fund a competitor that allows them to extract their desired rents.
WalterBright 1y ago
It boils down to what people are willing to pay for. How many of us go to buy something on Amazon, and buy the cheapest one? And if your product isn't the cheapest one, what are you going to do about it?
- fragmede 1y ago
  Buy the Dyson version at 4x the price, avoid thinking about the money and concentrate on the fact that it's not crap (yet). We can expect the Dyson brand to go through the same quality arc in twenty years, but for now, I'm happy with the times I have splurged for their products. The problem is naked capitalism doesn't have a meaningful reward function for quality products. If I buy a product and am happy with it in three years, or I buy a product and it's trash and unsuitable for its purpose, the company still already has my money. I have to care enough about the purchase to spend time and effort into writing a review online about the product, and the brand, which will go into the circular filing cabinet. For a $20 thermometer, I'm not even going to bother.
  - delfinom 1y ago
    Dyson makes great marketing and product concepts. The actual quality is debatable and varies. Do not get any of their fans. They are designed to fail. They use a wimpy brushless motor mounted vertically and then shove a impeller on the top of it to move air. The problem is, they don't balance the impeller. And when I saw the motor is wimpy, I mean it's shaft is barely a 1/4". The motor shaft ends up destroying the bearings within a year or two due to the unbalanced impeller load. You will be annoyed to fuck by the high pitched noises it starts making from shot bearings.the bearings are integrated into the motor assembly so you can't just replace them. You have to replace the entire motor and do this basically every year or two because it's not a motor defect, it's a design defect.
  - SoftTalker 1y ago
    Dyson is shit now though. Maybe it used to be good but like many other established names they are squandering their good name for more profits by cutting quality. I think GP is right. We buy stuff online now. You can't see, touch, or evaluate anything. Reviews are all fake. Brand names are comingled with counterfeits. The only signal left is price. So knowing it's likely going to be crap, why pay more than you have to.
hilux 1y ago
My first reaction: beautifully thought through and expressed! Upon reflection: as products become commodities, isn't the brand the most valuable thing, and the most expensive to reproduce?
- rchaud 1y ago
  The era of the "brand" is over. Consumers have gotten wise to companies cutting corners while raising prices, burning up the goodwill earned on their past reputation for quality. Apple had a top brand, yet most consumers are aware that now Apple Stores are overcrowded messes and the iPhone 16 doesn't offer anything meaningfully different than iPhone 13. Netflix replaced AAA TV series licensed from other networks with in-house material, the overwhelming majority most of which is cheaply produced shovelware that doesn't make it to Season 2.
  - hilux 1y ago
    > The era of the "brand" is over. That's just not true. Look around you right now. If you're American, almost everything you own is branded. Your phone, your laptop, TV, clothes you're wearing, shoes, books, food in your pantry, transportation. There is almost always a cheaper non-branded choice. If you are like 99.99% of Americans, you didn't make that choice in almost every case. Tellingly, you gave the example of Apple. Whether it's an iPhone 16 or an iPhone 13, more people than ever buy the Apple brand. I know I do.
DrScientist 1y ago
What's really annoying is when you do find a company that produces quality product and then it get's bought by one of the big brands and then the process you outline starts to happen - the brand is exploited through a combination of marketing and cost cutting. What makes these quality brands sell out? I suspect when they become a target of the bigger company, there is a combination of carrot and stick - with the stick having a significant component of the larger company using it's channel dominance to exert pressure.

by hliyan 1y ago

Ygg2 1y ago

Then from a purely rational and self-interested citizenry would hold any economic agents on the hook for future cleanups of land, water or air.

rcbdev 1y ago
Thankfully, the citizenry is irrational and self-interested, which enables an entire cottage industry of sheisters, marketers and psychologists, which then engineer our attention spans and purchasing decisions.
bradly 1y ago
Turns out a large enough number of humans can be controlled by ads that cost less money than the money they generate by controlling these humans.
cyanydeez 1y ago
Theyd also nationalize certain products to minimize unnecessary waste and churn.
hilux 1y ago
I like the idea, but "purely rational citizenry" is a theoretical construct. And even if they/we were purely rational, there's the intractable problem of measuring the cost of future cleanups stretching into forever. Plus the danger (certainty) of corporations paying out their current executives and then declaring bankruptcy.
- Ygg2 1y ago
  > but "purely rational citizenry" is a theoretical construct. So is a "purely rational economic agent". Nothing about it is real. It's a model.

ImPostingOnHN 1y ago

That's pretty much the game plan for every private equity acquisition: exchange brand goodwill (and all other sources of value) for profits, pocket the profits, leave the empty husk behind.

fnordlord 1y ago
This is mostly how I see it too. I've wondered recently if it was possible to plot that curve and use it to show which companies are still on the quality portion of the arc and which are on the downturn.
cgannett 1y ago
Also almost everyone who works at that company gets laid off and the few remaining have the worst job ever now. LINE GO UP THO!!

cyanydeez 1y ago

You need to factor in planned obsolescence. The fundamentals of the market simply does not make sense when your product is cheap and lifecycle is long. Think of the LED bulb. It would make more sense for the government to manage the few resources needed and for them to maximize the lifecycle of a lightbulb.

ethbr1 1y ago
A lightbulb is a fascinating example, because there’s an argument to be made that a “minimum government specification” lightbulb would be superior to what the market provides (read: under-spec’d cheap caps that die due to heat https://www.edn.com/ensure-long-lifetimes-from-electrolytic-capacitors-a-case-study-in-led-light-bulbs/ https://www.edn.com/ensure-long-lifetimes-from-electrolytic-... ).
- 0xabe 1y ago
  I’m tired of having to replace whole LED light fixtures instead of being able to replace a bulb. I am currently waiting on a special order to arrive with 2 fluorescent light fixtures. I refuse to put up more LED fixtures that will go bad in another 2 years.
etbebl 1y ago
It seems to me that for products that in general are cheap to buy as well as produce, companies would want to make these products somewhat longer-lasting to gain a better reputation and then make more sales and larger profits on more expensive items. I think the fundamental problem here is that nobody trusts brands anymore because we have been trained by strategies like market segmentation and private equity cost cutting that the vast majority of brands don't consistently indicate quality. That product A could be fine and a very similar-looking product B could be horrible, and any company or even product could become shit at any moment. Breyers in the US is a great example - they sell real (though still watery) ice cream in the cartons that say "naturals," and all the other very similar looking cartons are full of crap artificial frozen dairy dessert. They had a very strong brand, and they decided it was time to cash out that brand goodwill by cheaping out, but deceptively so they could ride it out for a few decades, at which point who cares? This has led to a situation where companies don't make any attempt anymore to gain a reputation for the quality of their products, because it's futile to convince the public that they can trust you. And also, they have to compete much more equally with alphabet soup brands on Amazon making the absolute cheapest version of products at the lowest margins (and labor costs). So why would anyone make a better lightbulb that no one will buy because it's $2 more expensive?

hinkley 1y ago

That’s not the only one it’s just the easier one. When people tear down new models of gaming systems they find fewer chips on the boards because they’ve found some chip that does two things for less than the price of both - below a certain point it’s financially infeasible to make simple parts because the capacity they consume makes a chip that does half as much only 15% cheaper. See also when people started putting Linux rescue disks into the EEPROM, because appropriately sized ROMs no longer existed. You can find better equipment and processes that get you more product per hour out the door without necessarily making the product shittier.

klik99 1y ago
Parent comment explicitly says this happens when a sector runs out of things to innovate on. Chips are still innovating like crazy which is why we're seeing some amazing processing/CPU/GPU/DSP chips/etc. If we ever hit on the limits of moores law, watch those CPUs become shittier and shittier over a 10 year period. I think this point is the key and kind of subtle point - "growth at any cost" does actually rise the tide and bring up all boats when there is a lot of room for innovation. It just starts harming when a sector has diminishing returns on innovation. So you'll be able to come up with plenty of counter examples where growth mindset is really beneficial because it's very context sensitive.
- hinkley 1y ago
  > runs out of things to innovate on. I suspect you know better than this. Failure of imagination does not mean lack of options. People in our industry reach for next steps that cut off other options in the process, all the time. To assume manufacturing doesn’t have the same problem is questionable.
  - klik99 1y ago
    Sure, but it's a hacker news comment, not a book. To be more clear I mean functionally run out of things. To be even more clear, when ROI on innovation becomes less than ROI on simply making product cheaper. There's always innovations, and some may even be missed, but when the perception of the industry is that future innovations cost more than the loss of good will of making worse product then it's obvious what will be picked. I think the solution is to make "loss of good will" valued higher, right now it's valued very low by investors since people want to hold investments a short time and exit quickly. CEOs elected by boards controlled by shareholders are the same way. Short term growth is incentivized and that undervalues long term retention of customers, which makes it more likely "manufacture a worse product" a better option than "innovate and make a better product that more people will want".

klik99 1y ago

This is exactly what I came to say - growth as the primary goal DOES create innovation, until innovation in that field yields diminishing returns or bottoms out completely, then it creates shittier and shittier product. The entire American version of capitalism is built around growth as the primary goal, which did great things, but now (unequally, some sectors are still innovating) is creating more and more shitty things. It's so hard for anyone to acknowledge this because everyone wants to take a "side", pro- or anti-capitalism, without being realistic that there are different implementations of capitalism and there is no system that universally works, it really depends on the situation. Right now we need to make "lifestyle company" not a bad word in investment circles, focus on dividends/revenue sharing over stock growth, create incentives around steady, well run companies, and not companies that outspend and destroy competition and then make their product shittier and/or more expensive.

WalterBright 1y ago
Do socialist economies produce superior products?
- nicoburns 1y ago
  If by "socialism" you mean the majority of economic activity being state-run, then probably not. If by "socialism" you mean things like worker-owned corporations, strong anti-competition laws, high levels of consumer regulation, then absolutely.
  - WalterBright 1y ago
    If worker-owned collectives produce superior products, why aren't they everywhere? It's not illegal to form one.
    - brendoelfrendo 1y ago
      Because capital doesn't like to fund them. Being worker-owned limits the potential upside for investors so a collective or co-op needs to be able to bootstrap itself to success, at which point capital will just fund a competitor that allows them to extract their desired rents.

WalterBright 1y ago

It boils down to what people are willing to pay for. How many of us go to buy something on Amazon, and buy the cheapest one? And if your product isn't the cheapest one, what are you going to do about it?

fragmede 1y ago
Buy the Dyson version at 4x the price, avoid thinking about the money and concentrate on the fact that it's not crap (yet). We can expect the Dyson brand to go through the same quality arc in twenty years, but for now, I'm happy with the times I have splurged for their products. The problem is naked capitalism doesn't have a meaningful reward function for quality products. If I buy a product and am happy with it in three years, or I buy a product and it's trash and unsuitable for its purpose, the company still already has my money. I have to care enough about the purchase to spend time and effort into writing a review online about the product, and the brand, which will go into the circular filing cabinet. For a $20 thermometer, I'm not even going to bother.
- delfinom 1y ago
  Dyson makes great marketing and product concepts. The actual quality is debatable and varies. Do not get any of their fans. They are designed to fail. They use a wimpy brushless motor mounted vertically and then shove a impeller on the top of it to move air. The problem is, they don't balance the impeller. And when I saw the motor is wimpy, I mean it's shaft is barely a 1/4". The motor shaft ends up destroying the bearings within a year or two due to the unbalanced impeller load. You will be annoyed to fuck by the high pitched noises it starts making from shot bearings.the bearings are integrated into the motor assembly so you can't just replace them. You have to replace the entire motor and do this basically every year or two because it's not a motor defect, it's a design defect.
- SoftTalker 1y ago
  Dyson is shit now though. Maybe it used to be good but like many other established names they are squandering their good name for more profits by cutting quality. I think GP is right. We buy stuff online now. You can't see, touch, or evaluate anything. Reviews are all fake. Brand names are comingled with counterfeits. The only signal left is price. So knowing it's likely going to be crap, why pay more than you have to.

hilux 1y ago

My first reaction: beautifully thought through and expressed! Upon reflection: as products become commodities, isn't the brand the most valuable thing, and the most expensive to reproduce?

rchaud 1y ago
The era of the "brand" is over. Consumers have gotten wise to companies cutting corners while raising prices, burning up the goodwill earned on their past reputation for quality. Apple had a top brand, yet most consumers are aware that now Apple Stores are overcrowded messes and the iPhone 16 doesn't offer anything meaningfully different than iPhone 13. Netflix replaced AAA TV series licensed from other networks with in-house material, the overwhelming majority most of which is cheaply produced shovelware that doesn't make it to Season 2.
- hilux 1y ago
  > The era of the "brand" is over. That's just not true. Look around you right now. If you're American, almost everything you own is branded. Your phone, your laptop, TV, clothes you're wearing, shoes, books, food in your pantry, transportation. There is almost always a cheaper non-branded choice. If you are like 99.99% of Americans, you didn't make that choice in almost every case. Tellingly, you gave the example of Apple. Whether it's an iPhone 16 or an iPhone 13, more people than ever buy the Apple brand. I know I do.

DrScientist 1y ago

What's really annoying is when you do find a company that produces quality product and then it get's bought by one of the big brands and then the process you outline starts to happen - the brand is exploited through a combination of marketing and cost cutting. What makes these quality brands sell out? I suspect when they become a target of the bigger company, there is a combination of carrot and stick - with the stick having a significant component of the larger company using it's channel dominance to exert pressure.