7 ms·

How to get beyond the parasite economy

105 points by Hoff 13y ago

creeble 13y ago
A great article. But now maybe Eric Garland should look into the capital structure of Fender Musical Instrument Company. Then we can all get really depressed.
FD3SA 13y ago
Such discussions always remind me of the short-sightedness of man. Anyone with a cursory understanding of history knows that if left to their own devices, the rich continuously consolidate wealth until there is a single Monarch, apparently chosen by God, who rules above everyone with impunity. That this is not obvious shows how far we've fallen off the path of simple rational thought.
- goodgoblin 13y ago
  Yes history is full of monarchs but our current configurations of government in the West are also reactions to them. We are programmed from birth to revolt at the notion of an American King, and safeguards exist to prevent concentrations of power. What isn't always obvious is the ways that new abuses are being perpetrated, but once that reaches a certain level then the threshold for action is crossed, and new safeguards can be implemented.
  - deleted 13y ago
    [deleted]
  - izend 13y ago
    People under the Roman Republic were also programmed to revolt at the notion of a Roman King...
    - goodgoblin 13y ago
      True -- though the Republic lasted over 500 years and embodied a conscious understanding of the dangers of power concentration. Roman Senators demanded that foreign kings pay deference to them, and no self styled absolute ruler was allowed to set foot in the city limits. The power elite of the day saw themselves as custodians of an excellent system to some degree and took pains to maintain it. These days it does seem that very few at the top have that sense of responsibility.
  - tedks 13y ago
    >What isn't always obvious is the ways that new abuses are being perpetrated, but once that reaches a certain level then the threshold for action is crossed, and new safeguards can be implemented. Why do you assume that the novel abuses of the system become non-obvious in time for anything to be done about them? It's perfectly feasible that the creeping forces of darkness stay hidden until far after it's too late to do anything to stop them. Life is not a movie. In reality, you sometimes lose; the hero sometimes dies alone; the person you love sometimes marries someone else and lives a happy, fulfilling life never thinking about you. In reality, you can't rely on literary clichés to save you. Nothing will save you. You are on your own.
    - nostrademons 13y ago
      In reality, when you lose you usually end up redefining the victory conditions so that you've won. Life's not a board game where you play it by someone else's rules. You are, to a large extent, free to make up the rules so that they suit you.
      - tedks 13y ago
        This is very true! But that doesn't make it right. Life usually has objective victory conditions. Even if you're playing by your own rules, the rules tend to be objective, because humans tend to care about the real world, not what we can convince ourselves. If your startup fails, you are not going to wave a wand in your mind and say "I've won!" If you do, you will not feel fulfilled. You will not feel happy. Even if your startup was viciously heaving its death throes for years and you finally, finally pulled the plug, you will not feel "victory" in the sense you would if you were bought by Oracle and made a millionaire, because of your stock options. Your employees will not sit around a table clapping, like this: https://www.youtube.com/watch?v=3nObH1R9ONw https://www.youtube.com/watch?v=3nObH1R9ONw It's very true that people try to convince themselves, following a loss, that they in fact won. They try to convince themselves that now they're free to start the next company, which will surely be a success, or that the person who left them wasn't right for them anyways, and that they'll meet someone new. But in reality, the next company is sometimes also a failure, and the person who left you sometimes was your only soulmate, driven away by your workaholism or your nagging or whatever else you did. We can lie to ourselves, but it's hard to truly deceive yourself. Think back to the times in your life when you've lost; you know what they are, and you know how they feel. When you lose again, and you will lose again, you'll know that you've lost then too.
  - evanlivingston 13y ago
    Yes and no. http://en.wikipedia.org/wiki/Inverted_totalitarianism http://en.wikipedia.org/wiki/Inverted_totalitarianism
  - kzrdude 13y ago
    You'd better start implementing those safeguards now soon, since the SCOTUS allowed even more money into politics in a decision today.
    - goodgoblin 13y ago
      I saw that -- it was an amazing reversal. Apparently those limits have stood for almost 50 years, surviving a challenge in 1979 even on the grounds that campaign contributions can quickly turn into legalized bribery. It does seem like something that needs to run its course though. At some point people have to think for themselves, and learn to ignore or deconstruct the commercials which result.
mindslight 13y ago
Despite the title, the article lacks any exploration of "how to". This is disappointing.
- musesum 13y ago
  "I recommend that you refuse to buy as much as a guitar pick from any company currently owned by a private equity firm, or any financial entity that does not come from the music industry itself." The problem is that any boycott initiative needs both a datasource and a UX that integrates into our buy habits. Something like a "PQ" - a parasitic quotient.
  - mindslight 13y ago
    But that's about all he says, and it's coupled with this: > There are dozens of industries that have been locked up by a few players in this way I can perhaps see boycotting working for musical instruments, at least in the short term. They're crafted items that are infrequently bought, heavily researched, can be sent direct from manufacturers, and have a talkative and reputation-based community. But that doesn't really address any of the countless sundry-supplying industries that have been dominated in the same way. Now, maybe I'm just one of the "people [who] believe that ... there is no other game in town", but I don't see that "voting with your wallet" works well in general. Perhaps with some automation it could, but similar automation would also help people compare prices, which is the thing your average person will be interested in. And at any rate, he really needs to expand on how he thinks boycotting can be made to work this time.
    - musesum 13y ago
      > but I don't see that "voting with your wallet" works well in general. I agree. Would need to span all products - not just music - and mindlessly enhance my existing buying behavior. The problem is that boycott-able products are a small fraction of my total purchases. Could work, once I start buying everything with a smart phone. Then a plug-in, similar to those found on iPhone's Passbook, could pop up with a vendor rating. I would subscribe to such a service. Until then, I’ll just boycott Guitar Center.
gregw134 13y ago
...so what wrongdoing did the banks do, exactly? Told another way, a failing company was headed towards bankruptcy, until the banks stepped in and saved the day by recapitalizing the company, saving thousands of jobs and a good brand in the process.
- justincormack 13y ago
  It was failing because of the amount of debt it had loaded up in it in the previous buyout.
  - michaelfeathers 13y ago
    Yes, I think the gist of the article is that interest in outcomes evaporates with financing and consolidation. The creative destruction of capitalism becomes capricious destruction under those circumstances.
    - gregw134 13y ago
      That's what he's saying, and it might be true, but he hasn't demonstrated that in the article. He's done all of this research which supposedly demonstrates that Guitar Center is going to be run into the ground, but he never actually goes anywhere with his research. He's just using this as an opportunity to gripe about banks, which is fine, but he shouldn't have fluffed up his vitriol by pretending like he has a scoop.
      - rayiner 13y ago
        He's not griping about banks, but rather private equity firms.
    - bsder 13y ago
      It's actually worse than that. Consider the fact that all of this financial crap is propping up Guitar Center who is undercutting all the local shops and driving them out of business. So, until Guitar Center actually collapses, it is actually harming the economy because its existence is preventing the formation of companies that might actually make a profit.
chrisdevereux 13y ago
So, if there is a large amount of money that is searching for risky investments to the extent that investors are willing to finance an obviously failing business, how come more of it doesn't end up in risky ventures that might actually go somewhere? Is the problem a lack of information, the lack of better investments, or that investors don't care about their money?
- bequanna 13y ago
  I think what the author may be getting at, and I hate using this term, is moral hazard. Those investing the in debt (most likely with someone else's money, mind you) are yield chasing. They probably aren't betting the farm on this company, just a small % of whatever money they manage. If it works out and the company doesn't go under, great! They just make 8% in a low-yield environment, they look smart, they get bigger bonuses! If the company goes under, that sucks. But, they can rationalize it to investors as 'this stuff happens' and becomes a write-off. Imagine this is a hedge fund, the managers probably didn't lose their money, they lost their investors' money.
bequanna 13y ago
"...but in the meantime, you can help as an individual. I recommend that you refuse to buy as much as a guitar pick from any company currently owned by a private equity firm, or any financial entity that does not come from the music industry itself." Well, ok, but how many people really pay attention to the ownership structure of companies they purchase products from? I know that 'vote with your dollars' is a typical answer to problems like this. On average, I suppose I purchase ~5 individual items each day. I don't really have the time to make sure that each of these companies that make these products conduct themselves in a manner that I consider ethically sound.
- ryandrake 13y ago
  There's an app idea in the making: Scan a bar code before you buy a product and see either a big red "EVIL" banner or a big green "GOOD" banner, depending on the ownership structure of the company who makes the product. Version 2 could let you configure what things you consider evil (owned by private equity, venture-backed, owned by cigarette companies, etc.)
  - bequanna 13y ago
    I used to work in Investment Management, primarily with wealthy clients. Some clients would request that portions of their portfolio be devoted to 'Ethical', 'Socially Responsible', 'Green', etc. companies or funds. Ask them to elaborate on what exactly constitutes a 'Socially Responsible' company, and you get wildly different answers. I guess what I am getting at is any definition of 'EVIL' or 'GOOD' is highly subjective. For example, not everyone would consider cigarette companies to be 'EVIL' ;)
    - gordaco 13y ago
      Easy, just set a number of traits for each company/product and let the user decide what doesn't they want to buy. Add info about country of origin, political affiliation of owner, or things like that, and you have a nice tool for boycotts. Didn't something like this already exist?
  - 13y ago
Mz 13y ago
I tend to dislike pieces like this. Advice like this: ... but in the meantime, you can help as an individual. I recommend that you refuse to buy as much as a guitar pick from any company currently owned by a private equity firm, or any financial entity that does not come from the music industry itself. tends to not be very practical or helpful. It means that for many people their choice is do this evil immoral thing that the author is decrying as the downfall of civilization or go without entirely. Given that choice, most people will do this presumably immoral, evil thing. Because people have needs. Stuff I would prefer to see: A list of websites helping to support alternative business models that the author thinks is not all evil and immoral. A list of businesses that try to source their products from approved, moral places as much as they can. Other pro-active things that one can actually do (other than "just don't buy from Bad Guys" -- I mean more in the vein of "here are the Good Guys you can and should buy from"). Last, "parasite" economies tend to kill themselves. Historically, Greece, India and Persia all placed extremely high value on bees as a naturally occurring mental model for business, basically: Bees neither kill flowers nor get killed by them. They exchange their service (pollination) for product (pollen, with which to make honey) and both sides gain something of benefit without being harmed. This is a brilliant thing to value culturally when most of your examples from nature fall into the category of "kill or be killed". It is brilliant because it is the only paradigm that is sustainable. If you are enough of an asshole, you can and will be taken out eventually. Even Roman emperors sometimes got offed by their own Praetorian Guard for being too assholish to put up with. No one is beyond reach. You learn to engage in a symbiotic exchange where both sides gain something or you eventually get a Darwin Award. That's just how it is.
- unclebucknasty 13y ago
  >Last, "parasite" economies tend to kill themselves Yeah, the problem is that there are a lot of good people who depend on this economy. This is why its last near-death experience resulted in a bailout sponsored by "the rest of us".
  - Mz 13y ago
    I don't see how that is really any kind of response to any of my points. The author is suggesting we basically kill that which we do not approve of rather than telling us how to better foster something they think would be good. There are other things going on in the world. The business he criticizes is not the be all and end all of the economy. Advocating killing that which you do not approve while not promoting or fostering that which you do approve is absolutely not a solution to the problem you posit. In fact, it is part of the problem.
ama729 13y ago
There is something funny when you have an entire post about supposed "parasites", that then try to sell you $800 dollars conference seats ("Transition Economics", "Book Now!").
jeffdavis 13y ago
Who exactly are the parasites, who is the host, and how did the parasite benefit at the expense of the host? If the parasites are investment bankers, and the hosts are the investors with 401(k)s, then fine. But that has nothing to do with music. If GC is the host and the investment bankers are the parasites, that doesn't quite make sense. GC apparently sought out the "parasites" at every turn, and that doesn't sound like a normal parasite/host relationship. It sounds to me more like a business that just used too much leverage/debt, presumably to grow quickly. That works sometimes, and sometimes collapses. This time it collapsed. The times it works it doesn't make the news. So what's special about GC?
jsun 13y ago
This piece is entirely incomplete. It purports to examine the entire ecosystem from the angle of a single company, and writes an article not unlike painting eagles (or vultures as the case may be) as the villain conspiring against the innocent rabbits. Let's go through this logic again. So a hedge fund comes in, buys a company, levers it up with a partner's money, leaving a pile of toxic debt on their neighbor's lawn. With you so far. The company issues more junk bonds in order to pay it's existing creditors, and that gets snapped up by other PE firms / Hedgefunds, who need it in order to fulfill a never-ending quest for returns. Yup got it. GC then goes bankrupt and the banks are evil. Whoa, wait a minute. Where is this whole process did anyone get hurt? The author seems to think Guitar Center, and YOU, the average consumers. But in order to really understand that, let's look back in time. Guitar center, if were any other company, were started by a few enterprising individuals with a passion for what they do. In turn, they were able to build a great business, and grow it to serve the entire country. After a while, wanting to cash in their success, they sell the company to a buyer, knowing very well what they planned to do with the company. The rest is history. Not as clear anymore is it? Now lets look at what happens in the future. GC goes bankrupt. Or it doesn't but becomes irrelevant. The 800-pound gorilla in the space dies, and there's room in the space now for another innovator, a new group of passionate individuals who can now bring their vision to life. And the cycle starts anew.
- gregw134 13y ago
  He's pretending to present a well-researched article, but he's not actually saying anything. What a waste of time.

105 points by Hoff 13y ago

A great article. But now maybe Eric Garland should look into the capital structure of Fender Musical Instrument Company. Then we can all get really depressed.

FD3SA 13y ago

Such discussions always remind me of the short-sightedness of man. Anyone with a cursory understanding of history knows that if left to their own devices, the rich continuously consolidate wealth until there is a single Monarch, apparently chosen by God, who rules above everyone with impunity. That this is not obvious shows how far we've fallen off the path of simple rational thought.

goodgoblin 13y ago
Yes history is full of monarchs but our current configurations of government in the West are also reactions to them. We are programmed from birth to revolt at the notion of an American King, and safeguards exist to prevent concentrations of power. What isn't always obvious is the ways that new abuses are being perpetrated, but once that reaches a certain level then the threshold for action is crossed, and new safeguards can be implemented.
- deleted 13y ago
  [deleted]
- izend 13y ago
  People under the Roman Republic were also programmed to revolt at the notion of a Roman King...
  - goodgoblin 13y ago
    True -- though the Republic lasted over 500 years and embodied a conscious understanding of the dangers of power concentration. Roman Senators demanded that foreign kings pay deference to them, and no self styled absolute ruler was allowed to set foot in the city limits. The power elite of the day saw themselves as custodians of an excellent system to some degree and took pains to maintain it. These days it does seem that very few at the top have that sense of responsibility.
- tedks 13y ago
  >What isn't always obvious is the ways that new abuses are being perpetrated, but once that reaches a certain level then the threshold for action is crossed, and new safeguards can be implemented. Why do you assume that the novel abuses of the system become non-obvious in time for anything to be done about them? It's perfectly feasible that the creeping forces of darkness stay hidden until far after it's too late to do anything to stop them. Life is not a movie. In reality, you sometimes lose; the hero sometimes dies alone; the person you love sometimes marries someone else and lives a happy, fulfilling life never thinking about you. In reality, you can't rely on literary clichés to save you. Nothing will save you. You are on your own.
  - nostrademons 13y ago
    In reality, when you lose you usually end up redefining the victory conditions so that you've won. Life's not a board game where you play it by someone else's rules. You are, to a large extent, free to make up the rules so that they suit you.
    - tedks 13y ago
      This is very true! But that doesn't make it right. Life usually has objective victory conditions. Even if you're playing by your own rules, the rules tend to be objective, because humans tend to care about the real world, not what we can convince ourselves. If your startup fails, you are not going to wave a wand in your mind and say "I've won!" If you do, you will not feel fulfilled. You will not feel happy. Even if your startup was viciously heaving its death throes for years and you finally, finally pulled the plug, you will not feel "victory" in the sense you would if you were bought by Oracle and made a millionaire, because of your stock options. Your employees will not sit around a table clapping, like this: https://www.youtube.com/watch?v=3nObH1R9ONw https://www.youtube.com/watch?v=3nObH1R9ONw It's very true that people try to convince themselves, following a loss, that they in fact won. They try to convince themselves that now they're free to start the next company, which will surely be a success, or that the person who left them wasn't right for them anyways, and that they'll meet someone new. But in reality, the next company is sometimes also a failure, and the person who left you sometimes was your only soulmate, driven away by your workaholism or your nagging or whatever else you did. We can lie to ourselves, but it's hard to truly deceive yourself. Think back to the times in your life when you've lost; you know what they are, and you know how they feel. When you lose again, and you will lose again, you'll know that you've lost then too.
- evanlivingston 13y ago
  Yes and no. http://en.wikipedia.org/wiki/Inverted_totalitarianism http://en.wikipedia.org/wiki/Inverted_totalitarianism
- kzrdude 13y ago
  You'd better start implementing those safeguards now soon, since the SCOTUS allowed even more money into politics in a decision today.
  - goodgoblin 13y ago
    I saw that -- it was an amazing reversal. Apparently those limits have stood for almost 50 years, surviving a challenge in 1979 even on the grounds that campaign contributions can quickly turn into legalized bribery. It does seem like something that needs to run its course though. At some point people have to think for themselves, and learn to ignore or deconstruct the commercials which result.

mindslight 13y ago

Despite the title, the article lacks any exploration of "how to". This is disappointing.

musesum 13y ago
"I recommend that you refuse to buy as much as a guitar pick from any company currently owned by a private equity firm, or any financial entity that does not come from the music industry itself." The problem is that any boycott initiative needs both a datasource and a UX that integrates into our buy habits. Something like a "PQ" - a parasitic quotient.
- mindslight 13y ago
  But that's about all he says, and it's coupled with this: > There are dozens of industries that have been locked up by a few players in this way I can perhaps see boycotting working for musical instruments, at least in the short term. They're crafted items that are infrequently bought, heavily researched, can be sent direct from manufacturers, and have a talkative and reputation-based community. But that doesn't really address any of the countless sundry-supplying industries that have been dominated in the same way. Now, maybe I'm just one of the "people [who] believe that ... there is no other game in town", but I don't see that "voting with your wallet" works well in general. Perhaps with some automation it could, but similar automation would also help people compare prices, which is the thing your average person will be interested in. And at any rate, he really needs to expand on how he thinks boycotting can be made to work this time.
  - musesum 13y ago
    > but I don't see that "voting with your wallet" works well in general. I agree. Would need to span all products - not just music - and mindlessly enhance my existing buying behavior. The problem is that boycott-able products are a small fraction of my total purchases. Could work, once I start buying everything with a smart phone. Then a plug-in, similar to those found on iPhone's Passbook, could pop up with a vendor rating. I would subscribe to such a service. Until then, I’ll just boycott Guitar Center.

gregw134 13y ago

...so what wrongdoing did the banks do, exactly? Told another way, a failing company was headed towards bankruptcy, until the banks stepped in and saved the day by recapitalizing the company, saving thousands of jobs and a good brand in the process.

justincormack 13y ago
It was failing because of the amount of debt it had loaded up in it in the previous buyout.
- michaelfeathers 13y ago
  Yes, I think the gist of the article is that interest in outcomes evaporates with financing and consolidation. The creative destruction of capitalism becomes capricious destruction under those circumstances.
  - gregw134 13y ago
    That's what he's saying, and it might be true, but he hasn't demonstrated that in the article. He's done all of this research which supposedly demonstrates that Guitar Center is going to be run into the ground, but he never actually goes anywhere with his research. He's just using this as an opportunity to gripe about banks, which is fine, but he shouldn't have fluffed up his vitriol by pretending like he has a scoop.
    - rayiner 13y ago
      He's not griping about banks, but rather private equity firms.
  - bsder 13y ago
    It's actually worse than that. Consider the fact that all of this financial crap is propping up Guitar Center who is undercutting all the local shops and driving them out of business. So, until Guitar Center actually collapses, it is actually harming the economy because its existence is preventing the formation of companies that might actually make a profit.

chrisdevereux 13y ago

So, if there is a large amount of money that is searching for risky investments to the extent that investors are willing to finance an obviously failing business, how come more of it doesn't end up in risky ventures that might actually go somewhere? Is the problem a lack of information, the lack of better investments, or that investors don't care about their money?

bequanna 13y ago
I think what the author may be getting at, and I hate using this term, is moral hazard. Those investing the in debt (most likely with someone else's money, mind you) are yield chasing. They probably aren't betting the farm on this company, just a small % of whatever money they manage. If it works out and the company doesn't go under, great! They just make 8% in a low-yield environment, they look smart, they get bigger bonuses! If the company goes under, that sucks. But, they can rationalize it to investors as 'this stuff happens' and becomes a write-off. Imagine this is a hedge fund, the managers probably didn't lose their money, they lost their investors' money.

bequanna 13y ago

"...but in the meantime, you can help as an individual. I recommend that you refuse to buy as much as a guitar pick from any company currently owned by a private equity firm, or any financial entity that does not come from the music industry itself." Well, ok, but how many people really pay attention to the ownership structure of companies they purchase products from? I know that 'vote with your dollars' is a typical answer to problems like this. On average, I suppose I purchase ~5 individual items each day. I don't really have the time to make sure that each of these companies that make these products conduct themselves in a manner that I consider ethically sound.

ryandrake 13y ago
There's an app idea in the making: Scan a bar code before you buy a product and see either a big red "EVIL" banner or a big green "GOOD" banner, depending on the ownership structure of the company who makes the product. Version 2 could let you configure what things you consider evil (owned by private equity, venture-backed, owned by cigarette companies, etc.)
- bequanna 13y ago
  I used to work in Investment Management, primarily with wealthy clients. Some clients would request that portions of their portfolio be devoted to 'Ethical', 'Socially Responsible', 'Green', etc. companies or funds. Ask them to elaborate on what exactly constitutes a 'Socially Responsible' company, and you get wildly different answers. I guess what I am getting at is any definition of 'EVIL' or 'GOOD' is highly subjective. For example, not everyone would consider cigarette companies to be 'EVIL' ;)
  - gordaco 13y ago
    Easy, just set a number of traits for each company/product and let the user decide what doesn't they want to buy. Add info about country of origin, political affiliation of owner, or things like that, and you have a nice tool for boycotts. Didn't something like this already exist?
- 13y ago

Mz 13y ago

I tend to dislike pieces like this. Advice like this: ... but in the meantime, you can help as an individual. I recommend that you refuse to buy as much as a guitar pick from any company currently owned by a private equity firm, or any financial entity that does not come from the music industry itself. tends to not be very practical or helpful. It means that for many people their choice is do this evil immoral thing that the author is decrying as the downfall of civilization or go without entirely. Given that choice, most people will do this presumably immoral, evil thing. Because people have needs. Stuff I would prefer to see: A list of websites helping to support alternative business models that the author thinks is not all evil and immoral. A list of businesses that try to source their products from approved, moral places as much as they can. Other pro-active things that one can actually do (other than "just don't buy from Bad Guys" -- I mean more in the vein of "here are the Good Guys you can and should buy from"). Last, "parasite" economies tend to kill themselves. Historically, Greece, India and Persia all placed extremely high value on bees as a naturally occurring mental model for business, basically: Bees neither kill flowers nor get killed by them. They exchange their service (pollination) for product (pollen, with which to make honey) and both sides gain something of benefit without being harmed. This is a brilliant thing to value culturally when most of your examples from nature fall into the category of "kill or be killed". It is brilliant because it is the only paradigm that is sustainable. If you are enough of an asshole, you can and will be taken out eventually. Even Roman emperors sometimes got offed by their own Praetorian Guard for being too assholish to put up with. No one is beyond reach. You learn to engage in a symbiotic exchange where both sides gain something or you eventually get a Darwin Award. That's just how it is.

unclebucknasty 13y ago
>Last, "parasite" economies tend to kill themselves Yeah, the problem is that there are a lot of good people who depend on this economy. This is why its last near-death experience resulted in a bailout sponsored by "the rest of us".
- Mz 13y ago
  I don't see how that is really any kind of response to any of my points. The author is suggesting we basically kill that which we do not approve of rather than telling us how to better foster something they think would be good. There are other things going on in the world. The business he criticizes is not the be all and end all of the economy. Advocating killing that which you do not approve while not promoting or fostering that which you do approve is absolutely not a solution to the problem you posit. In fact, it is part of the problem.

ama729 13y ago

There is something funny when you have an entire post about supposed "parasites", that then try to sell you $800 dollars conference seats ("Transition Economics", "Book Now!").

jeffdavis 13y ago

Who exactly are the parasites, who is the host, and how did the parasite benefit at the expense of the host? If the parasites are investment bankers, and the hosts are the investors with 401(k)s, then fine. But that has nothing to do with music. If GC is the host and the investment bankers are the parasites, that doesn't quite make sense. GC apparently sought out the "parasites" at every turn, and that doesn't sound like a normal parasite/host relationship. It sounds to me more like a business that just used too much leverage/debt, presumably to grow quickly. That works sometimes, and sometimes collapses. This time it collapsed. The times it works it doesn't make the news. So what's special about GC?

jsun 13y ago

This piece is entirely incomplete. It purports to examine the entire ecosystem from the angle of a single company, and writes an article not unlike painting eagles (or vultures as the case may be) as the villain conspiring against the innocent rabbits. Let's go through this logic again. So a hedge fund comes in, buys a company, levers it up with a partner's money, leaving a pile of toxic debt on their neighbor's lawn. With you so far. The company issues more junk bonds in order to pay it's existing creditors, and that gets snapped up by other PE firms / Hedgefunds, who need it in order to fulfill a never-ending quest for returns. Yup got it. GC then goes bankrupt and the banks are evil. Whoa, wait a minute. Where is this whole process did anyone get hurt? The author seems to think Guitar Center, and YOU, the average consumers. But in order to really understand that, let's look back in time. Guitar center, if were any other company, were started by a few enterprising individuals with a passion for what they do. In turn, they were able to build a great business, and grow it to serve the entire country. After a while, wanting to cash in their success, they sell the company to a buyer, knowing very well what they planned to do with the company. The rest is history. Not as clear anymore is it? Now lets look at what happens in the future. GC goes bankrupt. Or it doesn't but becomes irrelevant. The 800-pound gorilla in the space dies, and there's room in the space now for another innovator, a new group of passionate individuals who can now bring their vision to life. And the cycle starts anew.

gregw134 13y ago
He's pretending to present a well-researched article, but he's not actually saying anything. What a waste of time.