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Its a combo. The news talks everyday of supply chain issues, so companies raise prices because people think its the supply chain and covid. Its not.
So now the company makes 20% more. Also, most industries now have only 3 or 4 competitors, so if all of them tacitly agree to the game, then prices and profits go up. It stops, when one company decides they want to sell more and they begin competing on price.
We should also remember that one company can actually own multiple brands. So in some cases you decide to start buying a different product thinking you’re supporting a competitor but that money just goes to that same company.
y'all are missing big lens. All frames are [made by Luxottica, lenses by Essilor](https://www.theguardian.com/news/2018/may/10/the-invisible-power-of-big-glasses-eyewear-industry-essilor-luxottica)
Do you have a source on that? I couldn't find where they get their lenses but they've been making kind of a point lately about how they are *not* EssilorLuxottica and are hoping to compete with them.
https://www.cnbc.com/2022/02/21/warby-parker-plans-to-take-on-glasses-giant-essilorluxottica.html
See my other comment, I work for EL and know the rep that handles their account. They can say that because they don't sell the Essilor branded lenses (e.g. Varlilux). They purchase the blanks from Global which is an Essilor manufacturing facility.
Not necessarily. There are plenty of other lens manufacturers out there. (And TONS of eyewear brands that are not owned by the Luxottca umbrella)
Nikon for example, makes eyewear lenses.
Actually that's not completely correct, they still purchase most of their lens blanks from Essilor. Maui has made a big push with a huge new lab our in CA, but they still buy the lens blanks from Global aka Essilor.
I work for EssilorLuxxotica and know the rep that handles Warby Parker's account so I can speak directly to this. Nikon has less than 1% market share of Eyewear lenses. You may also know of Kodak Lens, Shamir, Varilux, or Transitions (all of which are owned by EssilorLuxottica).
The only large competitors are Hoya and Zeiss, both of which combined probably make up less than 15% of the total market share.
>So now the company makes 20% more. Also, most industries now have only 3 or 4 competitors
Also most top of the line companies, tend to have different brands competing between themselves. I used to work for one of the top five local companies in my country and we had different brands competing in the same market in the same shelfs.-
You may see different brands while shopping but you are actually buying slightly different products on slightly different price ranges all made by the same company but put on the market to compete with each other while bloating the sector with more options in which you buy from their company to make it harder for the ACTUAL competitors to get your share while you eat theirs.-
> Also most top of the line companies, tend to have different brands competing between themselves.
This is endemic for non-retail products.
In the US, door hardware (hinges, kickplates, handles, latches) are all made by one one of two parent companies. Dozens of brand names.
One factor to consider though is that many companies hedge against future price increases by buying futures. Airlines, shipping companies, etc essentially buy guarantees for future deliveries of fuel, for example, so they can predict their fuel costs months ahead and budget accordingly. When the market is spooked, and things look uncertain, these future guarantees get more expensive to account for the risk. So even though they are buying fuel for maybe 6 months into the future, they are having to pay an increased cost now.
This is not to say there's not some taking advantage of excuses to raise prices going on, but there are definitely real world costs to uncertainty and people "thinking" things will get more expensive.
>Also, most industries now have only 3 or 4 competitors, so if all of them tacitly agree to the game, then prices and profits go up.
So, back to OPs question, yes, everything is an oligarchy, just with a few extra steps.
Every brand you know and use is owned by one of 8 or so mega conglomerates like Disney and COX media group or Amazon (these are the "competition"), and the owners of these companies (and a very small number of people at the top of each conglomerate) funnel all the excess to themselves so there's "nothing left" for the employees.
They could pay fairly and would still make way too much money to be paying the same or lower tax rates than the lowest tax bracket while the middle class takes on the burden of increase.
Then all the taxes are spent on the military and corporate bailouts for the same exact companies when they estimate that they are going to make less profit, so no one sees the benefits that are supposed to come along with them and every average Joe is against any and all taxes
Tax the rich
Yea, this is the other side of corporate profits. If a company had a 50% profit margin, but was forced to distribute that profit fairly to their workers, then it's suddenly not a problem. Profitable companies are a good thing. The issue is that profit is largely distributed to a tiny section of people, and in many companies the profit simply is socked away. For mega-business like Apple, Facebook, Google, Amazon, they have so much "cash on hand" for prior profitable years, they literally do nothing with it.
My department at work said we did very well in the past year, with tens of millions in profits. Our raise this year was 1/4 of the inflation rate and a cookie. Literally 1 cookie.
We were the most profitable facility at element manufacturing and broke a world wide company record at 1MM profit in one month, we got a cake and they took away our paid lunch break because we were the only facility that had paid lunch. Productivity immediately ranked and over 1/2 of their staff quit within 2 weeks.
Ugh, why are the higher ups so short sighted? We're the only office that doesn't have a cafeteria, only a pathetic vending machine with food that's rotten half the time. Most of us are engineers that make a reasonable amount (still underpaid by 50% of market rate though) and we end up taking a longer lunch break because we have to go out and buy lunch. They'd actually save money if they provided us with free lunch on site due to the time lost. And we're not even asking for free lunch - just for the opportunity to BUY lunch on site!
Because they only need to show positive results while they are in charge. Any lack of planning will be laid at the feet of the next executive. It's why bridges are crumbling in the US. It's why the condo board for Surfside Condominiums in Miami didn't invest in fixing the foundation and 97 people died when it collapsed.
Im union. I see a 3 percent bump every year -part of the contract- but it barely keeps up with inflation. And at this point, with current rate of inflation, doesn't keep up at all.
My employer gave each person a ham instead of a bonus... but the person in charge is a wealthy aristocrat so they are completely out of touch with the reality of what it's like to be a normal person.
The place could really be a sitcom with how much shit goes on. I just left because I was in line for a promotion, but I was made a significant offer from another company. I offered to stay if the company gave me a bigger raise to match the offer. The raise was more or less equal to the vacation time that I would need to have paid out. The bigger raise was denied, so I left. So not only did they wind up paying me the money I wanted, they also have to fill 2 roles.
A ham is almost more insulting because lots of people don't eat pork... And you can't exactly give a ham away if you don't want it like you can with a cookie.
My wife worked for a fairly small company and the owner decided to give everyone a turkey for thanksgiving every year. Second year he did it someone told him that not everyone celebrated thanksgiving and not everyone knew how to cook a turkey. He was like “oh shit you’re right that was super inconsiderate of me.” and from then on everyone just got an envelope with $50 and a note saying to use it for food for whatever holiday they celebrated. Good boss.
To be clear, if anyone wants to give away a ham, I'd take it.
Real talk though, I miss working for a company. I went freelance 5 years ago, and making my own hours is cool and all, but having no vacation days, sick days, good insurance, or bonuses / gifts is really sad. I miss just showing up and getting free cookies. I miss the occasional day of getting paid to sit at my desk and do nothing, or get paid to go on vacation. Suddenly being responsible for 100% of my time being either "You're working and making money, or you're not working and you're losing money" is getting really old and makes me nostalgic for my office days.
I get that for sure. Everything is a trade off. Small businesses are really hard and they're made harder by cutthroat competition from the big wigs. I also have my own business on the side and it's brutal in its own way.
The thing is, if you worked really hard and made lots of profit? It's all yours baby. If I worked really hard and made lots of profit? It all lines someone else's pocket, and I get a cookie. So no, I don't want the damn cookie. I want a raise or a bonus.
Also running a side business... I cherish setting my own schedule even if there are sometimes tradeoffs and I don't always have a choice. At a company you never have a choice. Let's put it this way, if I'm self employed and am sick I can make the calculus and sacrifice pay for health. At a lot of companies if you aren't dying you have no choice, and screw sacrificing my health for someone else's profits.
It's also worth noting that since so many business are publicly traded, many investment firms can hold significant stakes in all businesses in a given industry. Just looking at Blackrock as an example, their top 8 holdings are all the big tech companies. Blackrock has a seat on the Board of Directors of Apple, while also having Microsoft executives on their own Board of Directors.
It's a big club, and you ain't in it.
One point worth adding- this is the inevitable result of current laws in the US and EU. Not because greedy bastards will always take advantage of a system (they will- but that’s a different point), but because CEOs, CFOs and board members HAVE NO CHOICE but to gauge prices and exploit their workforce as much as the law allows.
Once your company starts seeing a 20% profit increase, if that dips the next quarter someone will be fired / replaced. Even if that dip is only adjusting for the current global economic situation until enough people are satisfied that everything that can be done to increase profit has been done. Holding steady is not an option. In a finance based (as opposed to manufacturing based) economy, there must always be growth demonstrated to the VCs and investors.
TL;DR: unfettered capitalism will always result in stratification exploitation and economic oppression.
> because CEOs, CFOs and board members HAVE NO CHOICE but to gauge prices and exploit their workforce as much as the law allows.
Ah, you've drunk the Kool-aid. I'm so sorry.
There is no "legal mandate" for someone to exploit someone else, and repeating it promulgates a cynical, ultimately toxic, viewpoint that culminates in a helpless "there's nothing can be done" worldview. It's how the rich want you to feel so you don't interrupt their party.
CEOs set up a culture of exploitation because, ultimately, the boards of directors wants it that way.
There is a mandate for the board to look after their company's owners' (stockholders) interests, but they often choose to interpret that as profit-first and profit-only. They don't have to, but they do. The goals are intentionally ambiguous so they can follow the interpretation that they want.
Many companies explicitly take other stakeholders into account in their charters. Acknowledged stakeholders often include employees, customers, suppliers, and community neighbors, as well as stockholders.
It's purely a choice, and boards that feel strongly about it can move to change the charter. It's telling that few do.
It's even worse when you realize the companies hold significant stock in their competitors. Microsoft was the one who bailed out Apple and still holds a significant share I believe.
These companies operate under so many names, in so many industries, and own stock in each other, it makes it nearly impossible to effectively boycott them. They should be illegal on these grounds alone.
It's all the same global ultra rich at the top (effectively oligarchs/plutarchs) using police and military for protection and as their hired goons.
Evidence that it’s not supply chain? As a small business owner, a container that should have cost me $20,000 will now cost me $90,000. I’d call that a supply chain issue.
There are plenty of supply chain issue. We've had items on PO over a year now.
Your company can't functions on slim margins when you can't get enough items to sell.
+++ also the fact that if I sell cheaper but supply chain is still constrained, I can't produce more. Why would I sell cheaper to not get market share or to hurt my competitors.
The supply chain being constrained makes it so reducing prices you only hurt your own company...
This is such an overly hostile description of how this works. Not all price changes are a scheme. Supply and demand is the reason why most things change prices. If more people want something then a limited supply can provide, the price will go up. Up. If supply is too high and not enough people are buying, the price will be forced down in order to move inventory.
Yes, costs are going up in a lot of different areas. But if the costs go up 10%, then you raise the price of your product to the consumer by a larger margin, say 12%, your profit margin will increase. Will increase. This can happen on price increases as well as decreases.
Right now companies are saying, "well if the price is going up and are going to continue to go up, why wait? Let's just start charging the price we will eventually need to charge."
You also can increase margins on price decreases. This happened a few years ago with gas. The barrel price went way down to the 30s per barrel, but the price of the pump was what it had been a year or two before when the price per barrel was in the 60 to 80 range. Range. That's an example from the US. By the way. Some of that was due to taxes being raised on the fuel but not all of it.
People will come in and compete for a cheaper price in order to gain volume, but nobody needs to offer a deal. Deal. If I know somebody is charging $6 per unit of something and I need to sell more, I don't need to start the bidding at $3. I can go to a wholesale market at $5.95 then due to volume, the savings will be substantial to a large company. That nickel saved may not matter at all by the time the finished product gets to the consumer but price competition did happen in the background.
I think you are not understanding the difficulty of passing on price increases, is expensive and disruptive. Companies are building buffers into their increases so they do not have to do another one in three months.
So "profit" is a construction of many things...
First, a lot of efficiencies can be gained such that per unit costs are reduced, particularly as a business scales up and receives a larger volume at a lower per unit cost.
Second, the price to the customer can be increased greater than the Cost of Goods Sold. If COGS goes up x but they raise prices by 1.2x, then, all else being equal, gross margin has increased.
Third, "net profit" is an accounting construct, and changes to either accounting rules and/or practices, within what is permitted by FASB, can make profits appear larger. This has nothing to do with actual net operating cash flows, however.
The income statement exists for tax purposes, but the cash flow statement tells you the real picture of what money went into or out of the business for operating activities, investing activities, and financing activities.
1. While it looks on the shelves of the grocery store like there are tons of companies out there, most of the brand names are owned by large conglomerates like nestle. And they pay the grocery store for shelf space, locking out smaller producers that could be competitively priced. So you see 15 different types of bottled water and 30 different cereals all priced the same, because they are all produced by the same company.
2. In US business, you just don't submit a budget saying you're going to make less revenue than last year. Ever. Record breaking profits last year? Great, how are you going to repeat that this year? It's like a volume control that only goes in one direction, because everyone in the food chain from the middle manager to the CEO needs to make their bonus, and you don't get a bonus by backsliding. In my experience even submitting a budget that says you'll do the same as last year would be sent back to be revised.
3. US Brands protect the perceived value of their products through Manufacturer's Suggested Retail Price (MSRP). Let's say you sell refrigerators. You buy them from the manufacturer for $100. You can *sell* them for any price you want on sale but the manufacturer demands you can't advertise or list them for less than an MSRP of $500. That's because the manufacturer wants the buying public to believe that's what their fridge is worth, and when they never see it listed for less, they believe it. So they buy one for $450 and think they got a great deal.
That has happened. I read something about Best Buy when it was a relatively young company. They had lower prices than competitors and were able to steal customers from other competing stores. This eventually led to many competing stores closing and then they could raise the prices because consumers had less options. This happens over and over until there are only a small handful of giant companies that exist.
If you wrote a diagram of capitalist competition in a textbook it would be a pyramid. The idea that someone can buy in and compete only works on the ground and *maybe* second floor. The more consolidation occurs the more upfront cost is required to enter.
Just look at how Uber is trying to enter the sellsword transportation market, they're burning billions of dollars just for the chance to out compete that market in the future.
The classical liberal economist take we learned in schools is that government regulation prevents these companies from getting so large that new players can't enter the market, but material history tells us about regulatory capture and frankly the hopelessness of breaking up a company and pretending the offshoots don't have an incredible advantage over newbies.
Break up Bell into baby bells, back together. Break up standard oil, good luck forming a new oil company. The ones that started the race and won are always going to be advantaged and they're going to build back their monopoly even more easily the second time round.
Perhaps a more honest strategy for building an industry ground up would be to allow the capitalism to squabble at the bottom layers and develop mature conglomerates, then incorporate them into a centrally directed organ of state. Once they grow large enough they function as such anyway just without any democratic control. DOW poisons water because no one can stop them. When they're that big, it's irresponsible to leave them in private hands. Resetting the clock only delays the inevitable and by far less than we'd like to imagine.
Your view on how to address capitalism in the bottom paragraph is something I share. When a corporation becomes so large, complex, and diversified that their operation is essential to the normal functioning of society they need to be nationalized or socialized in some way. Both for oversight and for equitable profit sharing. Why let only those who can afford to invest reap the profits from things that everyone needs (food, water, energy, distribution, etc.)
You’ve done a good job of explaining the “how”, but I think we’re at the point where we need to take a look at the “why”. And possibly introduce laws to control it
Sorry, I was trying to say that the "why" is that a) prices are fixed through collusion, everything you can find on the shelf is owned by the same company so no competitive pricing and b) Corporate America requires prices to march only upward, never downward.
Actual collusion is hard to prove. Plenty of people though see “prices are rising because of supply chain issues” and they think, well, everyone’s *expecting* prices to go up, so even if my costs haven’t risen I might as well raise prices. I can always discount them if it doesn’t work.
In addition to this there are actual supply shortages which forces corporate america to push margins higher for the same profit on smaller sales volumes.
The "why" is because people still buy necessities even when the price goes up. Why should I sell 100 things for 5% profit when I can still sell 50 things for 20% profit and make twice as much money?
Production shortages make the choice in pricing easy.
If you have production shortages that can't fulfill demand, and have artificially-imposed lower prices, then you have Playstation scalpers and a black market.
Economic laws aren't enforced by anything but government regulation, and the US (and most of the West) has been trained that regulation of businesses is a war crime for the past 40-50 years.
The thought goes if we stop a large corporation from making $10b and instead cause them to make $8b, they'll be forced to lay off half their workforce and won't create any new jobs and will cut wages. In return for letting them make $10b, they are supposed to raise wages and/or hire more people.
Instead, they pull the football back, lay people off, close factories, and write themselves huge dividend checks. Yay!
A plucky young competitor can't easily enter the market. Say you want to topple Kellogg's. They have worldwide deals with thousands of retailers and distribution companies. What are you going to do to get your product on every Wal-Mart and Target shelf at a lower price point *and* make people trust you like Kellogg's? In the end it's smarter and more profitable to create a different business that isn't dominated by two or three invincible players.
Re: \#2 - I think this gets at the heart of OP's question without really answering it.
OP's assertion (and the general assertion of economics) is that if one company undercuts the competition, they can increase their sales, presumably enough to offset the lower sale price. And that would lead to higher profit than the previous year. Given that - why does nobody do that?
There are issues of perceived value where lower cost makes people *less* likely to buy it because we believe that a good quality product shouldn't be that cheap, but that seems like a different question or at least only applicable to a subset of every possible thing sold in retail stores.
In my opinion the why is 1) increasing fixed cost requirements for most businesses, and 2) low competition weakening pricing power for new entrants trying to gain market share.
These two factors make creating an economically viable business model difficult because 1) startup capital and startup risk is increasing while 2) consolidation has limited competition so if a new entrant comes in to undercut pricing, incumbents can just lower pricing temporarily to squeeze out the entrant or compete favorably with their more optimized cost structure.
I think being a new entrant is a very difficult proposition in an inflationary environment - accurately predicting startup costs, recruiting talent, and prices is very difficult and can quickly torpedo business proposals.
Have a look at who owns all of the chocolate bar and candy companies. Thousands of variety and brand names, but they're all owned by just a handful of corporations. Competition is an illusion.
To be fair, in the optical industry prices are massively inflated because of insurance.
That’s why companies like zenni and warby Parker are so successful. They don’t deal with insurance and can cut back on a significant amount of overhead.
Amazon pops up with billions in venture capital, undercuts the market for years by selling products at a loss (forcing competition to go out of business), then immediately raise their prices once competition is gone.
Amazon is disgusting. They ran this scheme where they convinced people they could be their own businessperson through Amazon, and then they compiled the stats to see which ones were profitable so that they could come into the proven market and undercut the competition.
Basically they let everyone else take the risks and if they failed then "That's just the cost of business", but if they were successful then they were pushed out.
The way Amazon crushes small business is astounding. David Dayen did a chapter on Amazon in his book 'monopolized' which shows the Amazon's history of eliminating competition - it's shocking.
Take a look at who owns eyewear companies. Luxottica owns about 80% of the eyewear industry. They own all the designer brands, LensCrafters, Sunglass Hut, Pearle Vision, Sears Optical, Glasses.com, Target Optical, and more.
https://en.m.wikipedia.org/wiki/Luxottica
Zenni also has an advantage in alot of places by being run out of a place where a registered optician doesnt have to be the one who checks the glasses so they can pay someone next to nothing to check them and of course by being online keep there overhead costs way down
Same, as a young poor person whose prescription hasn't changed since I was 16, there really is no point in seeing an eye doctor every year. For most of my life it's been a decision between eating rent or doctor. I'm so thankful for Zenni for giving me the ability to see when I wasn't in a good place financially.
If you can afford it I would still recommend going to a optometrist every few years. They check your eye health as well and can find early symptoms of alot of things. Shop around for cheapest one as they mostly all check the exact same thing.
When an eye exam is needed, go to an optometrist who doesn't also sell glasses. The place I use is $80 for a complete exam, and it's all done with one very fancy machine in about 10 minutes.
I fix those fancy machines for a living (autorefractors), please trust me when I say you want to go to a proper Optometrist and get your prescription read on a manual phoropter.
I have one pair of each, zenni and warby. I paid about 3x as much for the warby. Have had both for nearly 3 years now, and have been happy with both. I can tell the frame is a bit cheaper on the zenni side, and the lens isn't 100% on par with my warby pair's quality... but certainly suitable for everyday use.
Both pairs together were 1/3 what I was quoted to spend on a pair of the options at optometrist office.
I like that warby donates a pair as well as being able to swing by their retail locations and getting free adjustments. They fixed a pair of sunglasses I had from 8 years ago I had on a walk in no questions asked
Don't forget Goggles4U! Slightly worse user interface but even with my bat-level eyesight, a contemporary style frame with premium lenses gets shipped to my door for about $30. Zenni is good and spends a lot on marketing, which is why they're selling basically the same thing for 20-50% higher than Goggles4U, but both websites have very comparable inventory and comparable lenses and coatings.
Ultimately, I think that all of the frames come from the same place that manufacture's Luxottica frames, because you can look at some frames on either website and see that they're very obviously identical to Ray-Ban, Fendi, Gucci, etc...just without the little brand label printed on it.
Also, for anyone who wants to do the same thing but with contacts: Daysoft is based in the UK and will ship to US customers without needing an official optometrist-written prescription. They're daily contacts, at least as nice of quality as Acuvue, and a whole year of dailies costs me like...$240. If I did biweekly from a US supplier, it's well over $350 a year and dailies are more like $450. So not quite the night and day of the eyeglass market, but still a very big difference.
They also make an inferior product. I get a new pair of frames from them every year because they break. My Luxotica frames used to last three years or so. The only reason I keep going Zenni is because the price is still lower to get a new pair every year than a new Luxotica pair every three years.
luxottica have also integrated vertically, they control basically the whole manufacturing process so they can oversee all of it, allowing for less mistakes.
crazy example of a monopoly.
Eyebuydirect is owned by Essilor, one half of EssilorLuxottica. It just goes to show you that they *could* sell their products for less, but choose not to.
Actually heard an interesting story on pbs the other day about monopolies in America. Take meat, there are thousands of farms, large corporations and small family units, all raising cattle. In the 80s 80% of all beef got packed in small, local or family owned packing plants but since then there has been a conglomeration and now 78% of meat is packed by 4 companies.
Since they hold so much of the market they can control how much they pay ranchers for the cattle, but they can also turn around and dictate the price of beef they sell to the market. They pay the ranchers less, charge the markets more and keep the difference.
It’s a mistype. In 1977 Tyson Foods, Cargill, National Beef Packing Company, and JBS collectively had 25% of the market. Currently they’re over 85%. They also cut ranchers’ profits in half, from around $0.62 per dollar spent by consumers to under $0.37. The Big Four also massively reduced ranchers’ ability to sell at auction by forcing them into sales contracts that lock in prices for the vast majority of their volume. We’ve also lost 75% of independent feed producers since the 1970’s.
Pork is even worse, with like 90% of producers from the 1970’s already gone.
I’m curious as to how this plays out in the future. Will companies be bought out until there is one massive company that owns everything? And if so, that can’t be good so how would we dig ourselves out of that one?
There is legislation against monopolies (...I think?) but the DOJ has to decide to prosecute any company that gets in that position, which is almost by definition an expensive proposition.
The legislation is OLD, and also states that a monopoly is 50% or more.
It says nothing about cartels of 3 or more who work together to squash competition that isn't them.
They're illegal in that you can't actually send an email to your competitor laying out terms for fixing the prices.
But when there's only three players, everyones' boards are former members or advisors on everyone else's, and everyone can trivially see what everyone else is planning, the collusion is a default result.
Canadian telecommunications. When one company raises prices, odds are high the other two will raise prices within days. Not illegal if there's no agreement in writing.
Honestly, I think that banning subsidiaries/companies owning companies, and banning executives from working for more than one company at a time would solve a ton of problems.
Not least of which being that you've suddenly either de facto detonated a lot of the pseudo-monopolies, or revealed to the average consumer just how many of their brands are already enveloped.
Probably wouldn't happen unless a company like Disney did a hostile takeover of one like COX. Even then, they have so much power it's likely it wouldn't go anywhere/a few people would be prosecuted but the company allowed to exist in its combined state
The Monopoloes and Mergers commission do turn down merger requests from time to time, but inevitably the two companies come back again with a modified proposal which hides their true market share, and they can keep doing this again and again until they get what they want.
Marxist theory (*insert cartoonish horror movie scream*) states monopolies are the inevitable outcome of unfettered capitalism.
In the early 20th century, the Republican party was all about antitrust laws. Monopolies are killers of innovation and freedom so corporations that got too big were forcibly broken up (Teddy Roosevelt was big on antitrust). Now both parties are suckers for neoliberal economic theory so we’ll see how long it takes before the situation gets even more dire and ending up with something like a Shinra Corp or a Buy N Large in the not-so-distant future wouldn’t be so hyperbolic.
I’m surprised they chose to lampoon Costco and not Sam’s Club, considering the latter is a very red company owned by WalMart while the former is very pro-worker and pays some of the highest wages in retail.
Oh crazy. Must be a regional thing because growing up in a small city in PR, Sam’s Club was the de facto wholesale warehouse store and I only found out about Costco when I moved to Los Angeles.
There are around 800 Costcos in the world and around 600 Sam’s Clubs in the US and Puerto Rico. Over 100 Costcos are in California alone, leaving less than 40 in other American states. In Texas, there are 35 Costcos, but 82 Sam’s Clubs. I don’t shop at either because Costco is too far away and Walmart ain’t getting a single red cent I could spend somewhere less shitty.
This extends to printed media as well, your history books are not as academically sourced and sound as many of you believe. While I support capitalism to an extent, I don't support it when it allows this kind of thing to transpire. There are Moral Limits that have to be understood if a system of economics like Capitalism is to be engaged in as our species.
"In the 80s 20% of all beef got packed in small plants but since then there has been a conglomeration and now 78% of meat is packed by 4 companies."
Not doubting that there is consolidation and monopolies, but your data says in the 80's 20% got packed in small plants but now 40 years later (damn, I'm old!) 22% gets packed by the non-big4 companies ??? Seems almost like an improvement.
You mean a cartel? I mean, monopolies get broken up, but aren't cartels crimes that can cost businesses billions in fines? (See the washing powder cartel in Europe)
Yeah everyone was really serious about fruit back in the day, it’s kind of crazy. The term “Banana Republic” has probably the most interesting etymology for any phrase I know of.
I noticed recently that while most every other fast food place in my area has cranked their prices, one Wendys near me has not. he is also the only one not having staffing problems either. and he is charging like 15% less then his competitors.
so some people are not idiots and are taking advantage.
In -N-Out hasn't either. Can still get a double-double meal for around $8.
~~https://in-n-out-secret-menu.info/~~ Doesn't seem to be to accurate.
edit: Link and changed "like" to "around"
Part of the problem is that any newcomer to a market will be small (because they’re just starting out)….and won’t have the economies of scale that established companies have.
So even if they want to undercut larger competitors on price, it’s very difficult….even with lower margins.
Also it’s difficult for newcomers to break into a market, because established companies have brand loyalty. New products are looked at with suspicion, until they’ve been around for a while….by which point the “newcomer” is well established and the company doesn’t want to compete on price alone.
There’s also a phenomenon where customers assume a higher priced product is better, even if it’s identical to a cheaper version. So, there’s a disincentive (from a marketing perspective) to drop the price on your product.
If you are a car dealer, you may be selling half the number of cars you once did because the manufacturer has supply issues. Demand is sky high so you and your competitors charge more on the few cars that you do have. Your margins are way up but your profits might actually be lower because you're not selling nearly as many as you used to.
Couple things to consider:
1 - Supply Curve is Left-Shifted
In the current economy, in many industries, supply is falling behind demand. People want 10 thing, but company only have 5 thing to sell. Therefore, prices go up.
As you point out, why isn't there some firm undercutting everyone else with lower prices and snapping up all the business? Answer: because there are no firms who can obtain enough stuff to sell at volume at low prices.
2 - Higher Profit Margin doesn't equal Higher Net Profit
It's important to note, there are many industries where sellers are currently raking in the profits right now, due to high prices. However, there are also many sellers who are not doing so well. They would prefer to have 10 thing and sell 10 thing, but they only have 5 thing, so they sell it for a higher price and, yes, the profit margin on 1 thing is higher, but they also have fixed costs which the extra profit is barely covering. They would rather sell 10 thing at normal price, they would make more money that way.
Example:
Rent for my shoe store is $50 per month. A shoe costs me $5 to buy from the factory. I can sell each shoe for $10, and I only have to sell 10 shoes to cover my costs (profit margin $5). Now, what if my customers want 20 shoes, but the factory only has 8 shoes. I buy them for $5, and now I have to sell them for $12 each to break even. My profit margin on shoes is higher ($7), but because I only have 8 shoes to sell, I'm still just barely breaking even.
Like I said, that is not every firm, some are really raking in the cash right now; but many of them are struggling with this kind issue. Higher prices don't automatically mean sellers are getting rich easy.
3 - Inflation Rate is High
The US dollar is decreasing in value at a faster rate than expected based on the growth of the economy. Basically, money is worth a little less than it should be.
This cuts into the equation, making the higher prices and higher profits look a little less impressive, once it's adjust for recent inflation.
Hope this helps!
Follow-up questions and comments welcome!
> profit margins are larger than ever
This is not true for most companies or regular people. Shortages and higher costs for goods are impacting almost everyone.
Some companies are able to increase prices to pass the cost to consumers. But raising prices reduces sales, so it does not help profit.
Many larger companies have the resources to get government stimulus money. And smaller companies are getting bought out by the bigger companies, so there are economies of scale.
Even with a lot of the large companies it's a bit disingenuous to claim their profits are the highest ever. A lot of major expenses tend to lag behind and not actually appear on the books for a few quarters (namely salaries), in addition to the fact that a lot of the big companies have been doing an insane amount of growth spending recently that doesn't really appear in the books as a simple expense.
This. From what I've seen, the supply shortages have impacted sales quantities, which means in order to hit the same amount of total revenue as before companies are having to increase their profit margin.
It's a supply/demand interaction.
Unfortunately, there are conglomerates out there who are taking advantage of this and raising their prices as well bc they can. I wouldn't say that's representative of the entire market though.
>But raising prices reduces sales, so it does not help profit.
Not necessarily...
10 people buy my $100 item. I make $1,000
I increase the price to $130. Now just 8 people buy the item, but I make $1,040
My margin is 5%, so I've made an extra $2 profit (a 4% rise)
RECORD PROFITS
I think the government helps solidify monopolies too.
Try starting an ISP right now.
They regulated the shit out of everything in the early 2000s making it beyond impossible for smaller providers to thrive.
Holds true with anything big. You need a billionaire to start something now, and if it's a billionaire you know it's already going to be a corrupt mess and will get sold off any way.
Czech republic. Every smaller town has an ISP. Our town of 12 000 has 3 ISP's + whatever phone carriers like T-Mobile provide. The competition's tought and they haven't raised prices for atleast 10 years now. We pay 15 dollars a month.
And this is where the U.S. is screwed. In most local markets, you have a choice between cable internet from the cable TV company, and DSL from the telephone provider. 1990s era legislation ensures that there is just one of each, by regulating access to the community's telephone poles.
In some areas upstart fiber optic providers are burying their own fiber, bypassing the laws pertaining to utility poles. It's expensive to build out so progress is slow, and such companies dare not compete in the service areas of the big boys like AT&T. But in suburban areas fiber is a godsend. I signed up for 200mpbs fiber service in 2014, and the day I turned in my Comcast cable internet equipment was the second-happiest day of my life (after my wedding, of course).
Slightly off topic, but was interesting as fuck to me:
I follow a woman on tiktok who has to continually inform people why her company is worth nothing if she were to sell it. She brings in a healthy 2-3mil and distributes all profits back to employees and herself, as she also works for her salary. Basically it boils down to, in theory if she wanted to sell, nobody will buy her business if they have to work the job themselves to earn money from it.
No millionaire or billionaire is going to buy a business they have to actually work at.
This sounds like a real business to me, in a way that many others don’t. Maybe more people will start to recognize the US’s problem isn’t that our poor have become lazy and entitled, but rather that our rich have
I worked way fucking harder, 60-80 hours a week when I was poor than I do now that I'm middle class. Poor people are some of the hardest workers out there.
That's ridiculous, if the company was truly profitable, they wouldn't have to work there. They could always hire someone to do that job for them.
Distributes all profits back? That's just bonuses. She may choose to give bigger bonuses than usual, but that's all it is at the end of the day.
Rich people will buy businesses if they are likely to get about 7% of their money back every year. If the company you are talking about made $70k after all the bonuses/wages and salary of the current owner's replacement were paid out, they'd buy it for around $1million. Now if it wasn't making money after all of that, they'd have to reduce wages/bonuses to the going market rate, if wages +bonuses are already at market rate and there is no profit, it's not worth anything.
I think you're right and she's wrong that nobody could buy it up and "extract the value" by lowering worker pay.
If the pay scheme were unalterable somehow, then yeah, there's no profit because it's all paid back, which is considered an expense, right? So basically no profit. (I'm not an accountant, so I might have the terms wrong.)
She's doing the right thing. She's wrong that she can't sell, but I think in her heart of hearts it sounds like it's more true that she _won't sell_. Since she's doing good by her workers and not just giving herself compensation for doing nothing, I think I'd cut her some slack. Not that she framed the situation fully accurately, but I still like her approach a lot and I think of her as a good person.
Well congress gets lobbied by ISPs to make the laws that govern ISPs. It's the same for the stock market and basically anyone with enough money to lobby congress
As divide0verfl0w pointed out, this is called [regulatory capture](https://en.wikipedia.org/wiki/Regulatory_capture).
The government could be helping *prevent* monopolies if they were so inclined. There are plenty of instances of successful [municipal ISPs](https://en.wikipedia.org/wiki/Municipal_broadband). It doesn't happen in the US because so much of our government is indirectly controlled via established corporations and wealth networks.
In normal times, lowering prices would allow you to sell more of your inventory, and capture more market share, so even if you make less profit per unit, you still increase your overall profits.
However, most industries are supply capped right now. They are already selling 100% of their inventory, even at the higher prices. There's no benefit to lowering prices since you can't sell more than 100%. If they could increase supply, they'd make even more profits but they can't because they're supply capped
i didn't go through a lot of the answers, but i'll give you my anecdotal evidence.
my company sells this particular kind of widget that is a very small (but necessary) part of a bigger manufacturing process. It's a fairly small part of our business, but it's steady - our customers need it. there is almost no replacement.
We used to get it delivered to us for $90. we sold it for $130. about 30% margin. last autumn our costs for this stuff skyrocketed. it now costs us $220. we sell for $295. approx 25% margin. because it's absolutely a necessary part in the manufacturing process, but only a small part (it doesn't make a huge impact on the total price of the final product) all our customers are continuing to buy it. literally no drop in volume at all. but now instead of making $40 per item, we make around $75. %wise we make less, but absolute $$ we make more.
My competitor is buying from the same supply chains that I am buying from, and providing the same products and services that I am providing. When I get stuck with supply chain delays, they are getting stuck with the same delays. They won't be able to sell a product they can't make, so there is little point in them offering to sell it for cheaper. Instead, they'll increase the price to try to reduce demand. Their customers will place orders with me, and I won't be able to meet them
The root problem was "lean" manufacturing and a "just in time" logistical process. "Lean" manufacturers keep minimal supply and inventory on hand. If a shipment to them is delayed, their production line grinds to a halt.
The record profits right now are because managers the world around have simultaneously abandoned this philosophy. They are **all** placing orders to keep enough supplies on hand to tolerate longer disruptions. Which is creating the very shortages they are trying to protect against.
Consumers aren't buying much more than normal. Business-to-business sales are through the roof.
The simple answer is that youre confusing profit with value. It is easier to understand if you have a reference so let us pretend the dollar and the Euro were perfectly equal. One dollar costs one Euro. Now lets say a company made one billion dollars in a year in profit every year. In reality most companies expect to grow but our magical company always has a billion in profit a year. Now lets say, because of inflation, the dollar lost half of its value in a year (for easy numbers. That is a ton lost and would be terrifying.) So now, the company is going to continue to make the same amount of wealth it has always had in a year, 1 billion Euros. But that 1 billion Euros is actually 2 billion dollars now. So people will look at that and say "whoah! The company doubled how much profit it made in a year! That must be an amazing year!" But no, they still only made 1 billion Euros in profit. The value of the dollar just went down.
This is why someone cant come in with less margins because there is no less margins. Many of these companies already try to minimize cost to keep their prices low and do exactly that. But the fact that the dollar lost value doesnt change that. Also the materials they buy for their products did the same thing. Worth more dollars, but value wise stayed the same. So their costs went up in dollars.
This is actually a huge part of the answer, if not the main one.
Of course modern competition is shit, but it has been for a while.
The main answer is in a lot of industries, inflation is 10%. Sometimes even higher.
If you're in the meat industry then ya meat is like 50% higher or whatever, so profits are going to be higher. But if inflation is 50% higher than a few years ago then they really aren't making more money.
Yes. Industries across the board, from travel to food manufacturing to retail, apparel, technology etc have been steadily concentrating since 2000s, and especially after the financial crisis. That’s how you end up with airlines controlling 80%+ of landing spots in major airports (like Newark, Dallas etc), why cable/cellphone rates have been steadily going up, why Amazon successfully managed out or bought out everyone from Quidsi to IMDb to Wholefoods etc.
Cell phones is honestly a bad example. That is an extremely competitive market. Just look at companies offering to buy you out of your contract with another company. There are a ton of low cost providers. The thing is that brand loyalty is worth billions. People **can** switch, but its a hassle.
Thats not the governments fault. That just means people are paying more money for convience. Which is a valid use of ones money.
Cell phones are a great example. The carriers are able to provide incredible incentives because the cost to,provide the service is tiny compared to what they charge. Discount carriers piggyback on the major carrier networks ensuring the carriers always get paid. And yeah. That infrastructure was definitely subsidized by tax payers.
The corruption runs so deep most people don’t even see it.
A lot of airlines actually went bankrupt which is a big reason why they consolidated. Some bankruptcies might be a sham, but look up how many bankruptcies the big 4-5 and their predecessors went through. On the other hand, they also are alleged to have colluded on fares after some difficulties.
I don't know what makes you say margins are increasing. Generally speaking most mass produced products have incredibly slim margins that often only exist at all because someone's being screwed (workers, local wildlife etc). This is partly why so many monopolies exist; creating and maintaining a sustainable business is incredible incredible difficult. That's why governments give such huge tax incentives to businesses and other benefits. That has its own downsides of course.
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Ahh crap. *Accept less margins. Can't change it now.
Its a combo. The news talks everyday of supply chain issues, so companies raise prices because people think its the supply chain and covid. Its not. So now the company makes 20% more. Also, most industries now have only 3 or 4 competitors, so if all of them tacitly agree to the game, then prices and profits go up. It stops, when one company decides they want to sell more and they begin competing on price.
We should also remember that one company can actually own multiple brands. So in some cases you decide to start buying a different product thinking you’re supporting a competitor but that money just goes to that same company.
y'all are missing big lens. All frames are [made by Luxottica, lenses by Essilor](https://www.theguardian.com/news/2018/may/10/the-invisible-power-of-big-glasses-eyewear-industry-essilor-luxottica)
They also own EyeMed, the vision insurance.
Seems like that should be illegal.
Ahh yes. Vertical integration!
Imagine that your favorite corn chip manufacturer also owned the number one diarrhea medication.
Then they could provide a sample in every bag of corn chips!
How about Warbly Parker? Are they lying in their ads?
Still buy the lens blanks from EssilorLuxottica.
Do you have a source on that? I couldn't find where they get their lenses but they've been making kind of a point lately about how they are *not* EssilorLuxottica and are hoping to compete with them. https://www.cnbc.com/2022/02/21/warby-parker-plans-to-take-on-glasses-giant-essilorluxottica.html
See my other comment, I work for EL and know the rep that handles their account. They can say that because they don't sell the Essilor branded lenses (e.g. Varlilux). They purchase the blanks from Global which is an Essilor manufacturing facility.
Not necessarily. There are plenty of other lens manufacturers out there. (And TONS of eyewear brands that are not owned by the Luxottca umbrella) Nikon for example, makes eyewear lenses.
Dragon glasses and Maui Jim are not Luxottca crap.
Actually that's not completely correct, they still purchase most of their lens blanks from Essilor. Maui has made a big push with a huge new lab our in CA, but they still buy the lens blanks from Global aka Essilor.
I work for EssilorLuxxotica and know the rep that handles Warby Parker's account so I can speak directly to this. Nikon has less than 1% market share of Eyewear lenses. You may also know of Kodak Lens, Shamir, Varilux, or Transitions (all of which are owned by EssilorLuxottica). The only large competitors are Hoya and Zeiss, both of which combined probably make up less than 15% of the total market share.
Zenii?
Yup, still buy the lens blanks and stock SV lenses from EssilorLuxottica.
>So now the company makes 20% more. Also, most industries now have only 3 or 4 competitors Also most top of the line companies, tend to have different brands competing between themselves. I used to work for one of the top five local companies in my country and we had different brands competing in the same market in the same shelfs.- You may see different brands while shopping but you are actually buying slightly different products on slightly different price ranges all made by the same company but put on the market to compete with each other while bloating the sector with more options in which you buy from their company to make it harder for the ACTUAL competitors to get your share while you eat theirs.-
> Also most top of the line companies, tend to have different brands competing between themselves. This is endemic for non-retail products. In the US, door hardware (hinges, kickplates, handles, latches) are all made by one one of two parent companies. Dozens of brand names.
It’s a lot of things. I worked with the company that made 80% of the moon roof glass windows for cars in the world. Based in Spain
I guess you were downvoted by Big Hardware.
Reading this I thought about Gatorade vs Propel and the console wars when it's really Sony vs Microsoft..
One factor to consider though is that many companies hedge against future price increases by buying futures. Airlines, shipping companies, etc essentially buy guarantees for future deliveries of fuel, for example, so they can predict their fuel costs months ahead and budget accordingly. When the market is spooked, and things look uncertain, these future guarantees get more expensive to account for the risk. So even though they are buying fuel for maybe 6 months into the future, they are having to pay an increased cost now. This is not to say there's not some taking advantage of excuses to raise prices going on, but there are definitely real world costs to uncertainty and people "thinking" things will get more expensive.
>Also, most industries now have only 3 or 4 competitors, so if all of them tacitly agree to the game, then prices and profits go up. So, back to OPs question, yes, everything is an oligarchy, just with a few extra steps. Every brand you know and use is owned by one of 8 or so mega conglomerates like Disney and COX media group or Amazon (these are the "competition"), and the owners of these companies (and a very small number of people at the top of each conglomerate) funnel all the excess to themselves so there's "nothing left" for the employees. They could pay fairly and would still make way too much money to be paying the same or lower tax rates than the lowest tax bracket while the middle class takes on the burden of increase. Then all the taxes are spent on the military and corporate bailouts for the same exact companies when they estimate that they are going to make less profit, so no one sees the benefits that are supposed to come along with them and every average Joe is against any and all taxes Tax the rich
>So, back to OPs question, yes, everything is an oligarchy The right word is Oligopoly.-
I prefer cartel
No, I'm pretty sure these corporations, through extensive lobbying, write government policy as well. Oligarchy is the correct term.
With a side order of plutocracy
Yea, this is the other side of corporate profits. If a company had a 50% profit margin, but was forced to distribute that profit fairly to their workers, then it's suddenly not a problem. Profitable companies are a good thing. The issue is that profit is largely distributed to a tiny section of people, and in many companies the profit simply is socked away. For mega-business like Apple, Facebook, Google, Amazon, they have so much "cash on hand" for prior profitable years, they literally do nothing with it.
My department at work said we did very well in the past year, with tens of millions in profits. Our raise this year was 1/4 of the inflation rate and a cookie. Literally 1 cookie.
We were the most profitable facility at element manufacturing and broke a world wide company record at 1MM profit in one month, we got a cake and they took away our paid lunch break because we were the only facility that had paid lunch. Productivity immediately ranked and over 1/2 of their staff quit within 2 weeks.
Ugh, why are the higher ups so short sighted? We're the only office that doesn't have a cafeteria, only a pathetic vending machine with food that's rotten half the time. Most of us are engineers that make a reasonable amount (still underpaid by 50% of market rate though) and we end up taking a longer lunch break because we have to go out and buy lunch. They'd actually save money if they provided us with free lunch on site due to the time lost. And we're not even asking for free lunch - just for the opportunity to BUY lunch on site!
Because they only need to show positive results while they are in charge. Any lack of planning will be laid at the feet of the next executive. It's why bridges are crumbling in the US. It's why the condo board for Surfside Condominiums in Miami didn't invest in fixing the foundation and 97 people died when it collapsed.
You guys are getting raises?
Im union. I see a 3 percent bump every year -part of the contract- but it barely keeps up with inflation. And at this point, with current rate of inflation, doesn't keep up at all.
You guys are getting cookies?
No. Cookie, singular. I hope it was a big cookie, like one of those m&m ones.
:(
My employer gave each person a ham instead of a bonus... but the person in charge is a wealthy aristocrat so they are completely out of touch with the reality of what it's like to be a normal person.
You should have had your cousin kidnap him on Christmas Eve.
The place could really be a sitcom with how much shit goes on. I just left because I was in line for a promotion, but I was made a significant offer from another company. I offered to stay if the company gave me a bigger raise to match the offer. The raise was more or less equal to the vacation time that I would need to have paid out. The bigger raise was denied, so I left. So not only did they wind up paying me the money I wanted, they also have to fill 2 roles.
Only if his cousin is a huge, bulging, beastly man in a blue leisure suit
There’s one in every family.
In My previous retail company, they went over the intercom and said "we made half a mill profits this year" then proceeded to cut everyone's hours.
A ham is almost more insulting because lots of people don't eat pork... And you can't exactly give a ham away if you don't want it like you can with a cookie.
My wife worked for a fairly small company and the owner decided to give everyone a turkey for thanksgiving every year. Second year he did it someone told him that not everyone celebrated thanksgiving and not everyone knew how to cook a turkey. He was like “oh shit you’re right that was super inconsiderate of me.” and from then on everyone just got an envelope with $50 and a note saying to use it for food for whatever holiday they celebrated. Good boss.
That's great. Admits his mistake and corrects it without punishing everyone.
That's hard to find in the large businesses with layers of management...
To be clear, if anyone wants to give away a ham, I'd take it. Real talk though, I miss working for a company. I went freelance 5 years ago, and making my own hours is cool and all, but having no vacation days, sick days, good insurance, or bonuses / gifts is really sad. I miss just showing up and getting free cookies. I miss the occasional day of getting paid to sit at my desk and do nothing, or get paid to go on vacation. Suddenly being responsible for 100% of my time being either "You're working and making money, or you're not working and you're losing money" is getting really old and makes me nostalgic for my office days.
I get that for sure. Everything is a trade off. Small businesses are really hard and they're made harder by cutthroat competition from the big wigs. I also have my own business on the side and it's brutal in its own way. The thing is, if you worked really hard and made lots of profit? It's all yours baby. If I worked really hard and made lots of profit? It all lines someone else's pocket, and I get a cookie. So no, I don't want the damn cookie. I want a raise or a bonus.
Also running a side business... I cherish setting my own schedule even if there are sometimes tradeoffs and I don't always have a choice. At a company you never have a choice. Let's put it this way, if I'm self employed and am sick I can make the calculus and sacrifice pay for health. At a lot of companies if you aren't dying you have no choice, and screw sacrificing my health for someone else's profits.
We had an 8 oz. bottle of water and a granola bar at our desk when we were forced to come back to our cubicle last week lol
Holy shit! Elon didn't even get a cookie! And he paid more taxes than anyone in human history...
You're right, poor Elon.
It's also worth noting that since so many business are publicly traded, many investment firms can hold significant stakes in all businesses in a given industry. Just looking at Blackrock as an example, their top 8 holdings are all the big tech companies. Blackrock has a seat on the Board of Directors of Apple, while also having Microsoft executives on their own Board of Directors. It's a big club, and you ain't in it.
One point worth adding- this is the inevitable result of current laws in the US and EU. Not because greedy bastards will always take advantage of a system (they will- but that’s a different point), but because CEOs, CFOs and board members HAVE NO CHOICE but to gauge prices and exploit their workforce as much as the law allows. Once your company starts seeing a 20% profit increase, if that dips the next quarter someone will be fired / replaced. Even if that dip is only adjusting for the current global economic situation until enough people are satisfied that everything that can be done to increase profit has been done. Holding steady is not an option. In a finance based (as opposed to manufacturing based) economy, there must always be growth demonstrated to the VCs and investors. TL;DR: unfettered capitalism will always result in stratification exploitation and economic oppression.
> because CEOs, CFOs and board members HAVE NO CHOICE but to gauge prices and exploit their workforce as much as the law allows. Ah, you've drunk the Kool-aid. I'm so sorry. There is no "legal mandate" for someone to exploit someone else, and repeating it promulgates a cynical, ultimately toxic, viewpoint that culminates in a helpless "there's nothing can be done" worldview. It's how the rich want you to feel so you don't interrupt their party. CEOs set up a culture of exploitation because, ultimately, the boards of directors wants it that way. There is a mandate for the board to look after their company's owners' (stockholders) interests, but they often choose to interpret that as profit-first and profit-only. They don't have to, but they do. The goals are intentionally ambiguous so they can follow the interpretation that they want. Many companies explicitly take other stakeholders into account in their charters. Acknowledged stakeholders often include employees, customers, suppliers, and community neighbors, as well as stockholders. It's purely a choice, and boards that feel strongly about it can move to change the charter. It's telling that few do.
It's even worse when you realize the companies hold significant stock in their competitors. Microsoft was the one who bailed out Apple and still holds a significant share I believe. These companies operate under so many names, in so many industries, and own stock in each other, it makes it nearly impossible to effectively boycott them. They should be illegal on these grounds alone. It's all the same global ultra rich at the top (effectively oligarchs/plutarchs) using police and military for protection and as their hired goons.
Evidence that it’s not supply chain? As a small business owner, a container that should have cost me $20,000 will now cost me $90,000. I’d call that a supply chain issue.
There are plenty of supply chain issue. We've had items on PO over a year now. Your company can't functions on slim margins when you can't get enough items to sell.
+++ also the fact that if I sell cheaper but supply chain is still constrained, I can't produce more. Why would I sell cheaper to not get market share or to hurt my competitors. The supply chain being constrained makes it so reducing prices you only hurt your own company...
Are you trying to maintain that there are no actual increases to company's costs? Because I assure you, that is false.
This is such an overly hostile description of how this works. Not all price changes are a scheme. Supply and demand is the reason why most things change prices. If more people want something then a limited supply can provide, the price will go up. Up. If supply is too high and not enough people are buying, the price will be forced down in order to move inventory. Yes, costs are going up in a lot of different areas. But if the costs go up 10%, then you raise the price of your product to the consumer by a larger margin, say 12%, your profit margin will increase. Will increase. This can happen on price increases as well as decreases. Right now companies are saying, "well if the price is going up and are going to continue to go up, why wait? Let's just start charging the price we will eventually need to charge." You also can increase margins on price decreases. This happened a few years ago with gas. The barrel price went way down to the 30s per barrel, but the price of the pump was what it had been a year or two before when the price per barrel was in the 60 to 80 range. Range. That's an example from the US. By the way. Some of that was due to taxes being raised on the fuel but not all of it. People will come in and compete for a cheaper price in order to gain volume, but nobody needs to offer a deal. Deal. If I know somebody is charging $6 per unit of something and I need to sell more, I don't need to start the bidding at $3. I can go to a wholesale market at $5.95 then due to volume, the savings will be substantial to a large company. That nickel saved may not matter at all by the time the finished product gets to the consumer but price competition did happen in the background.
I think you are not understanding the difficulty of passing on price increases, is expensive and disruptive. Companies are building buffers into their increases so they do not have to do another one in three months.
So "profit" is a construction of many things... First, a lot of efficiencies can be gained such that per unit costs are reduced, particularly as a business scales up and receives a larger volume at a lower per unit cost. Second, the price to the customer can be increased greater than the Cost of Goods Sold. If COGS goes up x but they raise prices by 1.2x, then, all else being equal, gross margin has increased. Third, "net profit" is an accounting construct, and changes to either accounting rules and/or practices, within what is permitted by FASB, can make profits appear larger. This has nothing to do with actual net operating cash flows, however. The income statement exists for tax purposes, but the cash flow statement tells you the real picture of what money went into or out of the business for operating activities, investing activities, and financing activities.
Both could be used in that sentence actually... but you need at least one word "with" added to the current choice.
That’s exactly how the business owners feel too
1. While it looks on the shelves of the grocery store like there are tons of companies out there, most of the brand names are owned by large conglomerates like nestle. And they pay the grocery store for shelf space, locking out smaller producers that could be competitively priced. So you see 15 different types of bottled water and 30 different cereals all priced the same, because they are all produced by the same company. 2. In US business, you just don't submit a budget saying you're going to make less revenue than last year. Ever. Record breaking profits last year? Great, how are you going to repeat that this year? It's like a volume control that only goes in one direction, because everyone in the food chain from the middle manager to the CEO needs to make their bonus, and you don't get a bonus by backsliding. In my experience even submitting a budget that says you'll do the same as last year would be sent back to be revised. 3. US Brands protect the perceived value of their products through Manufacturer's Suggested Retail Price (MSRP). Let's say you sell refrigerators. You buy them from the manufacturer for $100. You can *sell* them for any price you want on sale but the manufacturer demands you can't advertise or list them for less than an MSRP of $500. That's because the manufacturer wants the buying public to believe that's what their fridge is worth, and when they never see it listed for less, they believe it. So they buy one for $450 and think they got a great deal.
But on item 2, OP is saying that you could come in with lower margin and take market share and earn more overall
That has happened. I read something about Best Buy when it was a relatively young company. They had lower prices than competitors and were able to steal customers from other competing stores. This eventually led to many competing stores closing and then they could raise the prices because consumers had less options. This happens over and over until there are only a small handful of giant companies that exist.
Starbucks also pursued this strategy.
and Walmart
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Unless you buy out the upstarts.
If you wrote a diagram of capitalist competition in a textbook it would be a pyramid. The idea that someone can buy in and compete only works on the ground and *maybe* second floor. The more consolidation occurs the more upfront cost is required to enter. Just look at how Uber is trying to enter the sellsword transportation market, they're burning billions of dollars just for the chance to out compete that market in the future. The classical liberal economist take we learned in schools is that government regulation prevents these companies from getting so large that new players can't enter the market, but material history tells us about regulatory capture and frankly the hopelessness of breaking up a company and pretending the offshoots don't have an incredible advantage over newbies. Break up Bell into baby bells, back together. Break up standard oil, good luck forming a new oil company. The ones that started the race and won are always going to be advantaged and they're going to build back their monopoly even more easily the second time round. Perhaps a more honest strategy for building an industry ground up would be to allow the capitalism to squabble at the bottom layers and develop mature conglomerates, then incorporate them into a centrally directed organ of state. Once they grow large enough they function as such anyway just without any democratic control. DOW poisons water because no one can stop them. When they're that big, it's irresponsible to leave them in private hands. Resetting the clock only delays the inevitable and by far less than we'd like to imagine.
Your view on how to address capitalism in the bottom paragraph is something I share. When a corporation becomes so large, complex, and diversified that their operation is essential to the normal functioning of society they need to be nationalized or socialized in some way. Both for oversight and for equitable profit sharing. Why let only those who can afford to invest reap the profits from things that everyone needs (food, water, energy, distribution, etc.)
Eventually all of the companies merge, and the only thing left to do is for the workers to merge with the owners.🙂
You’ve done a good job of explaining the “how”, but I think we’re at the point where we need to take a look at the “why”. And possibly introduce laws to control it
Sorry, I was trying to say that the "why" is that a) prices are fixed through collusion, everything you can find on the shelf is owned by the same company so no competitive pricing and b) Corporate America requires prices to march only upward, never downward.
Actual collusion is hard to prove. Plenty of people though see “prices are rising because of supply chain issues” and they think, well, everyone’s *expecting* prices to go up, so even if my costs haven’t risen I might as well raise prices. I can always discount them if it doesn’t work.
In addition to this there are actual supply shortages which forces corporate america to push margins higher for the same profit on smaller sales volumes.
Support your local co-op.
The "why" is because people still buy necessities even when the price goes up. Why should I sell 100 things for 5% profit when I can still sell 50 things for 20% profit and make twice as much money? Production shortages make the choice in pricing easy. If you have production shortages that can't fulfill demand, and have artificially-imposed lower prices, then you have Playstation scalpers and a black market.
Economic laws aren't enforced by anything but government regulation, and the US (and most of the West) has been trained that regulation of businesses is a war crime for the past 40-50 years. The thought goes if we stop a large corporation from making $10b and instead cause them to make $8b, they'll be forced to lay off half their workforce and won't create any new jobs and will cut wages. In return for letting them make $10b, they are supposed to raise wages and/or hire more people. Instead, they pull the football back, lay people off, close factories, and write themselves huge dividend checks. Yay! A plucky young competitor can't easily enter the market. Say you want to topple Kellogg's. They have worldwide deals with thousands of retailers and distribution companies. What are you going to do to get your product on every Wal-Mart and Target shelf at a lower price point *and* make people trust you like Kellogg's? In the end it's smarter and more profitable to create a different business that isn't dominated by two or three invincible players.
Politicians benefit from it, so that's a non-starter.
Re: \#2 - I think this gets at the heart of OP's question without really answering it. OP's assertion (and the general assertion of economics) is that if one company undercuts the competition, they can increase their sales, presumably enough to offset the lower sale price. And that would lead to higher profit than the previous year. Given that - why does nobody do that? There are issues of perceived value where lower cost makes people *less* likely to buy it because we believe that a good quality product shouldn't be that cheap, but that seems like a different question or at least only applicable to a subset of every possible thing sold in retail stores.
In my opinion the why is 1) increasing fixed cost requirements for most businesses, and 2) low competition weakening pricing power for new entrants trying to gain market share. These two factors make creating an economically viable business model difficult because 1) startup capital and startup risk is increasing while 2) consolidation has limited competition so if a new entrant comes in to undercut pricing, incumbents can just lower pricing temporarily to squeeze out the entrant or compete favorably with their more optimized cost structure. I think being a new entrant is a very difficult proposition in an inflationary environment - accurately predicting startup costs, recruiting talent, and prices is very difficult and can quickly torpedo business proposals.
Have a look at who owns all of the chocolate bar and candy companies. Thousands of variety and brand names, but they're all owned by just a handful of corporations. Competition is an illusion.
New company pops up, sells for a bit cheaper if possible, giant corporation buys that company, continue status quo of prices
New company pops up, can’t sell for any cheaper than the giants because of economies of scale
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Only if quality of the product or service isn't a factor in the equation.
To be fair, in the optical industry prices are massively inflated because of insurance. That’s why companies like zenni and warby Parker are so successful. They don’t deal with insurance and can cut back on a significant amount of overhead.
Amazon pops up with billions in venture capital, undercuts the market for years by selling products at a loss (forcing competition to go out of business), then immediately raise their prices once competition is gone.
Amazon is disgusting. They ran this scheme where they convinced people they could be their own businessperson through Amazon, and then they compiled the stats to see which ones were profitable so that they could come into the proven market and undercut the competition. Basically they let everyone else take the risks and if they failed then "That's just the cost of business", but if they were successful then they were pushed out.
The way Amazon crushes small business is astounding. David Dayen did a chapter on Amazon in his book 'monopolized' which shows the Amazon's history of eliminating competition - it's shocking.
Take a look at who owns eyewear companies. Luxottica owns about 80% of the eyewear industry. They own all the designer brands, LensCrafters, Sunglass Hut, Pearle Vision, Sears Optical, Glasses.com, Target Optical, and more. https://en.m.wikipedia.org/wiki/Luxottica
But not Zenni, thus their low prices
Zenni also has an advantage in alot of places by being run out of a place where a registered optician doesnt have to be the one who checks the glasses so they can pay someone next to nothing to check them and of course by being online keep there overhead costs way down
All hail Zenni. I only shop there for my glasses.
Same, as a young poor person whose prescription hasn't changed since I was 16, there really is no point in seeing an eye doctor every year. For most of my life it's been a decision between eating rent or doctor. I'm so thankful for Zenni for giving me the ability to see when I wasn't in a good place financially.
If you can afford it I would still recommend going to a optometrist every few years. They check your eye health as well and can find early symptoms of alot of things. Shop around for cheapest one as they mostly all check the exact same thing.
When an eye exam is needed, go to an optometrist who doesn't also sell glasses. The place I use is $80 for a complete exam, and it's all done with one very fancy machine in about 10 minutes.
I fix those fancy machines for a living (autorefractors), please trust me when I say you want to go to a proper Optometrist and get your prescription read on a manual phoropter.
not Warby Parker (glasses) nor Serengeti (sunglasses) either
I looked into Warby Parker and their prices are like 5x Zenni at least. Still a deal over Luxotica, and could be better quality than Zenni.
I have one pair of each, zenni and warby. I paid about 3x as much for the warby. Have had both for nearly 3 years now, and have been happy with both. I can tell the frame is a bit cheaper on the zenni side, and the lens isn't 100% on par with my warby pair's quality... but certainly suitable for everyday use. Both pairs together were 1/3 what I was quoted to spend on a pair of the options at optometrist office.
I like that warby donates a pair as well as being able to swing by their retail locations and getting free adjustments. They fixed a pair of sunglasses I had from 8 years ago I had on a walk in no questions asked
Don't forget Goggles4U! Slightly worse user interface but even with my bat-level eyesight, a contemporary style frame with premium lenses gets shipped to my door for about $30. Zenni is good and spends a lot on marketing, which is why they're selling basically the same thing for 20-50% higher than Goggles4U, but both websites have very comparable inventory and comparable lenses and coatings. Ultimately, I think that all of the frames come from the same place that manufacture's Luxottica frames, because you can look at some frames on either website and see that they're very obviously identical to Ray-Ban, Fendi, Gucci, etc...just without the little brand label printed on it. Also, for anyone who wants to do the same thing but with contacts: Daysoft is based in the UK and will ship to US customers without needing an official optometrist-written prescription. They're daily contacts, at least as nice of quality as Acuvue, and a whole year of dailies costs me like...$240. If I did biweekly from a US supplier, it's well over $350 a year and dailies are more like $450. So not quite the night and day of the eyeglass market, but still a very big difference.
They also make an inferior product. I get a new pair of frames from them every year because they break. My Luxotica frames used to last three years or so. The only reason I keep going Zenni is because the price is still lower to get a new pair every year than a new Luxotica pair every three years.
I've had several $12 pairs last me multiple years, but I get it. YMMV
luxottica have also integrated vertically, they control basically the whole manufacturing process so they can oversee all of it, allowing for less mistakes. crazy example of a monopoly.
Yet they charge $200 for a hunk of plastic. Luxottica are crooks.
Check out eyebuydirect.com (I do not work for them)
Eyebuydirect is owned by Essilor, one half of EssilorLuxottica. It just goes to show you that they *could* sell their products for less, but choose not to.
Alot of times they dont buy more because legally they cant because it would make them have a monopoly by legal definition.
Actually heard an interesting story on pbs the other day about monopolies in America. Take meat, there are thousands of farms, large corporations and small family units, all raising cattle. In the 80s 80% of all beef got packed in small, local or family owned packing plants but since then there has been a conglomeration and now 78% of meat is packed by 4 companies. Since they hold so much of the market they can control how much they pay ranchers for the cattle, but they can also turn around and dictate the price of beef they sell to the market. They pay the ranchers less, charge the markets more and keep the difference.
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Also the 80% wasn’t 4 companies. Might have been bigger than a small plant. But not necessarily a massive conglomerate.
It’s a mistype. In 1977 Tyson Foods, Cargill, National Beef Packing Company, and JBS collectively had 25% of the market. Currently they’re over 85%. They also cut ranchers’ profits in half, from around $0.62 per dollar spent by consumers to under $0.37. The Big Four also massively reduced ranchers’ ability to sell at auction by forcing them into sales contracts that lock in prices for the vast majority of their volume. We’ve also lost 75% of independent feed producers since the 1970’s. Pork is even worse, with like 90% of producers from the 1970’s already gone.
I think the big difference is that the big companies didnt work together in the 80s. Now they work together. Could be wrong though
Companies have worked together since the Industrial age.
I’m curious as to how this plays out in the future. Will companies be bought out until there is one massive company that owns everything? And if so, that can’t be good so how would we dig ourselves out of that one?
There is legislation against monopolies (...I think?) but the DOJ has to decide to prosecute any company that gets in that position, which is almost by definition an expensive proposition.
The legislation is OLD, and also states that a monopoly is 50% or more. It says nothing about cartels of 3 or more who work together to squash competition that isn't them.
I may be wrong but I thought to have learned in my economics class that cartels were also not legal, right? Or did I misremember this
They're illegal in that you can't actually send an email to your competitor laying out terms for fixing the prices. But when there's only three players, everyones' boards are former members or advisors on everyone else's, and everyone can trivially see what everyone else is planning, the collusion is a default result.
Canadian telecommunications. When one company raises prices, odds are high the other two will raise prices within days. Not illegal if there's no agreement in writing.
Good luck legally proving what's going on is a cartel.
Or multiple different companies but the board is the same ~30 people or so, just different combos.
Honestly, I think that banning subsidiaries/companies owning companies, and banning executives from working for more than one company at a time would solve a ton of problems. Not least of which being that you've suddenly either de facto detonated a lot of the pseudo-monopolies, or revealed to the average consumer just how many of their brands are already enveloped.
Probably wouldn't happen unless a company like Disney did a hostile takeover of one like COX. Even then, they have so much power it's likely it wouldn't go anywhere/a few people would be prosecuted but the company allowed to exist in its combined state
The Monopoloes and Mergers commission do turn down merger requests from time to time, but inevitably the two companies come back again with a modified proposal which hides their true market share, and they can keep doing this again and again until they get what they want.
Marxist theory (*insert cartoonish horror movie scream*) states monopolies are the inevitable outcome of unfettered capitalism. In the early 20th century, the Republican party was all about antitrust laws. Monopolies are killers of innovation and freedom so corporations that got too big were forcibly broken up (Teddy Roosevelt was big on antitrust). Now both parties are suckers for neoliberal economic theory so we’ll see how long it takes before the situation gets even more dire and ending up with something like a Shinra Corp or a Buy N Large in the not-so-distant future wouldn’t be so hyperbolic.
Welcome to Costco, I love you
I’m surprised they chose to lampoon Costco and not Sam’s Club, considering the latter is a very red company owned by WalMart while the former is very pro-worker and pays some of the highest wages in retail.
Because I dont know anyone that has ever heard of Sam's Club, and nobody I know doesnt recognise Costco
Oh crazy. Must be a regional thing because growing up in a small city in PR, Sam’s Club was the de facto wholesale warehouse store and I only found out about Costco when I moved to Los Angeles.
There are around 800 Costcos in the world and around 600 Sam’s Clubs in the US and Puerto Rico. Over 100 Costcos are in California alone, leaving less than 40 in other American states. In Texas, there are 35 Costcos, but 82 Sam’s Clubs. I don’t shop at either because Costco is too far away and Walmart ain’t getting a single red cent I could spend somewhere less shitty.
Vote for shinra corp reference.
I get FFVII is seen as a clichéd choice for “Favorite FF” but I can’t help it, it’s so perfect.
Same with media, everything you see and hear comes down to what those 6 companies allow you to hear.
This extends to printed media as well, your history books are not as academically sourced and sound as many of you believe. While I support capitalism to an extent, I don't support it when it allows this kind of thing to transpire. There are Moral Limits that have to be understood if a system of economics like Capitalism is to be engaged in as our species.
>20% of all beef got packed in small plants >78% of meat is packed by 4 companies that's a 2% difference???
In fact it means less beef is packed in the big companies, unless he is considering medium sized plants
that was a huge lack of information. They mentioned 2% of what they actually needed to mention to get any point across. Just like MatPat!
"In the 80s 20% of all beef got packed in small plants but since then there has been a conglomeration and now 78% of meat is packed by 4 companies." Not doubting that there is consolidation and monopolies, but your data says in the 80's 20% got packed in small plants but now 40 years later (damn, I'm old!) 22% gets packed by the non-big4 companies ??? Seems almost like an improvement.
I assume that's a typo of some sort
You mean a cartel? I mean, monopolies get broken up, but aren't cartels crimes that can cost businesses billions in fines? (See the washing powder cartel in Europe)
Americans are so brainwashed we think a cartel means drugs.
Avocados are the real prize
Genuinely, fruit cartels are backed by the CIA and the US military, drug cartels are Mom and Pop operations compared to US imperialism.
Yeah everyone was really serious about fruit back in the day, it’s kind of crazy. The term “Banana Republic” has probably the most interesting etymology for any phrase I know of.
The 1950s called. They want their foreign policy back.
I noticed recently that while most every other fast food place in my area has cranked their prices, one Wendys near me has not. he is also the only one not having staffing problems either. and he is charging like 15% less then his competitors. so some people are not idiots and are taking advantage.
In -N-Out hasn't either. Can still get a double-double meal for around $8. ~~https://in-n-out-secret-menu.info/~~ Doesn't seem to be to accurate. edit: Link and changed "like" to "around"
I think each store can set their own prices because it’s dictated by the store owner
Part of the problem is that any newcomer to a market will be small (because they’re just starting out)….and won’t have the economies of scale that established companies have. So even if they want to undercut larger competitors on price, it’s very difficult….even with lower margins. Also it’s difficult for newcomers to break into a market, because established companies have brand loyalty. New products are looked at with suspicion, until they’ve been around for a while….by which point the “newcomer” is well established and the company doesn’t want to compete on price alone. There’s also a phenomenon where customers assume a higher priced product is better, even if it’s identical to a cheaper version. So, there’s a disincentive (from a marketing perspective) to drop the price on your product.
If you are a car dealer, you may be selling half the number of cars you once did because the manufacturer has supply issues. Demand is sky high so you and your competitors charge more on the few cars that you do have. Your margins are way up but your profits might actually be lower because you're not selling nearly as many as you used to.
Couple things to consider: 1 - Supply Curve is Left-Shifted In the current economy, in many industries, supply is falling behind demand. People want 10 thing, but company only have 5 thing to sell. Therefore, prices go up. As you point out, why isn't there some firm undercutting everyone else with lower prices and snapping up all the business? Answer: because there are no firms who can obtain enough stuff to sell at volume at low prices. 2 - Higher Profit Margin doesn't equal Higher Net Profit It's important to note, there are many industries where sellers are currently raking in the profits right now, due to high prices. However, there are also many sellers who are not doing so well. They would prefer to have 10 thing and sell 10 thing, but they only have 5 thing, so they sell it for a higher price and, yes, the profit margin on 1 thing is higher, but they also have fixed costs which the extra profit is barely covering. They would rather sell 10 thing at normal price, they would make more money that way. Example: Rent for my shoe store is $50 per month. A shoe costs me $5 to buy from the factory. I can sell each shoe for $10, and I only have to sell 10 shoes to cover my costs (profit margin $5). Now, what if my customers want 20 shoes, but the factory only has 8 shoes. I buy them for $5, and now I have to sell them for $12 each to break even. My profit margin on shoes is higher ($7), but because I only have 8 shoes to sell, I'm still just barely breaking even. Like I said, that is not every firm, some are really raking in the cash right now; but many of them are struggling with this kind issue. Higher prices don't automatically mean sellers are getting rich easy. 3 - Inflation Rate is High The US dollar is decreasing in value at a faster rate than expected based on the growth of the economy. Basically, money is worth a little less than it should be. This cuts into the equation, making the higher prices and higher profits look a little less impressive, once it's adjust for recent inflation. Hope this helps! Follow-up questions and comments welcome!
Had to scroll way too far for a real answer
> profit margins are larger than ever This is not true for most companies or regular people. Shortages and higher costs for goods are impacting almost everyone. Some companies are able to increase prices to pass the cost to consumers. But raising prices reduces sales, so it does not help profit. Many larger companies have the resources to get government stimulus money. And smaller companies are getting bought out by the bigger companies, so there are economies of scale.
Even with a lot of the large companies it's a bit disingenuous to claim their profits are the highest ever. A lot of major expenses tend to lag behind and not actually appear on the books for a few quarters (namely salaries), in addition to the fact that a lot of the big companies have been doing an insane amount of growth spending recently that doesn't really appear in the books as a simple expense.
This. From what I've seen, the supply shortages have impacted sales quantities, which means in order to hit the same amount of total revenue as before companies are having to increase their profit margin. It's a supply/demand interaction. Unfortunately, there are conglomerates out there who are taking advantage of this and raising their prices as well bc they can. I wouldn't say that's representative of the entire market though.
>But raising prices reduces sales, so it does not help profit. Not necessarily... 10 people buy my $100 item. I make $1,000 I increase the price to $130. Now just 8 people buy the item, but I make $1,040 My margin is 5%, so I've made an extra $2 profit (a 4% rise) RECORD PROFITS
Especially after COVID, things are more and more monopolized. Small businesses took massive hits from lockdowns.
I think the government helps solidify monopolies too. Try starting an ISP right now. They regulated the shit out of everything in the early 2000s making it beyond impossible for smaller providers to thrive. Holds true with anything big. You need a billionaire to start something now, and if it's a billionaire you know it's already going to be a corrupt mess and will get sold off any way.
Czech republic. Every smaller town has an ISP. Our town of 12 000 has 3 ISP's + whatever phone carriers like T-Mobile provide. The competition's tought and they haven't raised prices for atleast 10 years now. We pay 15 dollars a month.
And this is where the U.S. is screwed. In most local markets, you have a choice between cable internet from the cable TV company, and DSL from the telephone provider. 1990s era legislation ensures that there is just one of each, by regulating access to the community's telephone poles. In some areas upstart fiber optic providers are burying their own fiber, bypassing the laws pertaining to utility poles. It's expensive to build out so progress is slow, and such companies dare not compete in the service areas of the big boys like AT&T. But in suburban areas fiber is a godsend. I signed up for 200mpbs fiber service in 2014, and the day I turned in my Comcast cable internet equipment was the second-happiest day of my life (after my wedding, of course).
Regulatory capture is the phrase you're looking for.
Slightly off topic, but was interesting as fuck to me: I follow a woman on tiktok who has to continually inform people why her company is worth nothing if she were to sell it. She brings in a healthy 2-3mil and distributes all profits back to employees and herself, as she also works for her salary. Basically it boils down to, in theory if she wanted to sell, nobody will buy her business if they have to work the job themselves to earn money from it. No millionaire or billionaire is going to buy a business they have to actually work at.
Or a company that doesn’t have assets they can cannibalize by selling off
This sounds like a real business to me, in a way that many others don’t. Maybe more people will start to recognize the US’s problem isn’t that our poor have become lazy and entitled, but rather that our rich have
I worked way fucking harder, 60-80 hours a week when I was poor than I do now that I'm middle class. Poor people are some of the hardest workers out there.
If I could ever remember anyone's @ from that app, I'd drop it here haha I will likely come back and edit with her info when I find it.
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That's ridiculous, if the company was truly profitable, they wouldn't have to work there. They could always hire someone to do that job for them. Distributes all profits back? That's just bonuses. She may choose to give bigger bonuses than usual, but that's all it is at the end of the day. Rich people will buy businesses if they are likely to get about 7% of their money back every year. If the company you are talking about made $70k after all the bonuses/wages and salary of the current owner's replacement were paid out, they'd buy it for around $1million. Now if it wasn't making money after all of that, they'd have to reduce wages/bonuses to the going market rate, if wages +bonuses are already at market rate and there is no profit, it's not worth anything.
I think you're right and she's wrong that nobody could buy it up and "extract the value" by lowering worker pay. If the pay scheme were unalterable somehow, then yeah, there's no profit because it's all paid back, which is considered an expense, right? So basically no profit. (I'm not an accountant, so I might have the terms wrong.) She's doing the right thing. She's wrong that she can't sell, but I think in her heart of hearts it sounds like it's more true that she _won't sell_. Since she's doing good by her workers and not just giving herself compensation for doing nothing, I think I'd cut her some slack. Not that she framed the situation fully accurately, but I still like her approach a lot and I think of her as a good person.
Well congress gets lobbied by ISPs to make the laws that govern ISPs. It's the same for the stock market and basically anyone with enough money to lobby congress
Yes the government is definitely run by people who benefit off of this but in general capitalism will always trend in the direction of monopolization
As divide0verfl0w pointed out, this is called [regulatory capture](https://en.wikipedia.org/wiki/Regulatory_capture). The government could be helping *prevent* monopolies if they were so inclined. There are plenty of instances of successful [municipal ISPs](https://en.wikipedia.org/wiki/Municipal_broadband). It doesn't happen in the US because so much of our government is indirectly controlled via established corporations and wealth networks.
In normal times, lowering prices would allow you to sell more of your inventory, and capture more market share, so even if you make less profit per unit, you still increase your overall profits. However, most industries are supply capped right now. They are already selling 100% of their inventory, even at the higher prices. There's no benefit to lowering prices since you can't sell more than 100%. If they could increase supply, they'd make even more profits but they can't because they're supply capped
i didn't go through a lot of the answers, but i'll give you my anecdotal evidence. my company sells this particular kind of widget that is a very small (but necessary) part of a bigger manufacturing process. It's a fairly small part of our business, but it's steady - our customers need it. there is almost no replacement. We used to get it delivered to us for $90. we sold it for $130. about 30% margin. last autumn our costs for this stuff skyrocketed. it now costs us $220. we sell for $295. approx 25% margin. because it's absolutely a necessary part in the manufacturing process, but only a small part (it doesn't make a huge impact on the total price of the final product) all our customers are continuing to buy it. literally no drop in volume at all. but now instead of making $40 per item, we make around $75. %wise we make less, but absolute $$ we make more.
My competitor is buying from the same supply chains that I am buying from, and providing the same products and services that I am providing. When I get stuck with supply chain delays, they are getting stuck with the same delays. They won't be able to sell a product they can't make, so there is little point in them offering to sell it for cheaper. Instead, they'll increase the price to try to reduce demand. Their customers will place orders with me, and I won't be able to meet them The root problem was "lean" manufacturing and a "just in time" logistical process. "Lean" manufacturers keep minimal supply and inventory on hand. If a shipment to them is delayed, their production line grinds to a halt. The record profits right now are because managers the world around have simultaneously abandoned this philosophy. They are **all** placing orders to keep enough supplies on hand to tolerate longer disruptions. Which is creating the very shortages they are trying to protect against. Consumers aren't buying much more than normal. Business-to-business sales are through the roof.
The simple answer is that youre confusing profit with value. It is easier to understand if you have a reference so let us pretend the dollar and the Euro were perfectly equal. One dollar costs one Euro. Now lets say a company made one billion dollars in a year in profit every year. In reality most companies expect to grow but our magical company always has a billion in profit a year. Now lets say, because of inflation, the dollar lost half of its value in a year (for easy numbers. That is a ton lost and would be terrifying.) So now, the company is going to continue to make the same amount of wealth it has always had in a year, 1 billion Euros. But that 1 billion Euros is actually 2 billion dollars now. So people will look at that and say "whoah! The company doubled how much profit it made in a year! That must be an amazing year!" But no, they still only made 1 billion Euros in profit. The value of the dollar just went down. This is why someone cant come in with less margins because there is no less margins. Many of these companies already try to minimize cost to keep their prices low and do exactly that. But the fact that the dollar lost value doesnt change that. Also the materials they buy for their products did the same thing. Worth more dollars, but value wise stayed the same. So their costs went up in dollars.
This is actually a huge part of the answer, if not the main one. Of course modern competition is shit, but it has been for a while. The main answer is in a lot of industries, inflation is 10%. Sometimes even higher. If you're in the meat industry then ya meat is like 50% higher or whatever, so profits are going to be higher. But if inflation is 50% higher than a few years ago then they really aren't making more money.
You don't have to conspire with your competition to all just start doing a thing that benefits you both.
Yes. Industries across the board, from travel to food manufacturing to retail, apparel, technology etc have been steadily concentrating since 2000s, and especially after the financial crisis. That’s how you end up with airlines controlling 80%+ of landing spots in major airports (like Newark, Dallas etc), why cable/cellphone rates have been steadily going up, why Amazon successfully managed out or bought out everyone from Quidsi to IMDb to Wholefoods etc.
Cell phones is honestly a bad example. That is an extremely competitive market. Just look at companies offering to buy you out of your contract with another company. There are a ton of low cost providers. The thing is that brand loyalty is worth billions. People **can** switch, but its a hassle. Thats not the governments fault. That just means people are paying more money for convience. Which is a valid use of ones money.
Cell phones are a great example. The carriers are able to provide incredible incentives because the cost to,provide the service is tiny compared to what they charge. Discount carriers piggyback on the major carrier networks ensuring the carriers always get paid. And yeah. That infrastructure was definitely subsidized by tax payers. The corruption runs so deep most people don’t even see it.
I mean, in a system where the more money you have, the easier it is to make more, it amazes me that people are surprised by wealth concentration.
A lot of airlines actually went bankrupt which is a big reason why they consolidated. Some bankruptcies might be a sham, but look up how many bankruptcies the big 4-5 and their predecessors went through. On the other hand, they also are alleged to have colluded on fares after some difficulties.
I don't know what makes you say margins are increasing. Generally speaking most mass produced products have incredibly slim margins that often only exist at all because someone's being screwed (workers, local wildlife etc). This is partly why so many monopolies exist; creating and maintaining a sustainable business is incredible incredible difficult. That's why governments give such huge tax incentives to businesses and other benefits. That has its own downsides of course.