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Comment by toyg | Hacker News Reader

Uh they are not doing fine, hence the issues at Hurley apparently, and the fact that all those brands have crashed in value.

This is more the classic “brand X is now bloated and failing because it forgot its roots when going mainstream” argument. Nothing to do with capitalism (author was a bit confused there, or clutching at straws), everything to do with losing view of your core values and value proposition.

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> This is more the classic “brand X is now bloated and failing because it forgot its roots when going mainstream” argument. Nothing to do with capitalism

I'm not sure I'd say nothing to do with capitalism. Underneath many of these "bloated" brands you find the same pattern. A niche or well-respected brand purchased by a private equity firm. They proceed to hollow out the brand (move production, cut warranties and customer support, etc.) while simultaneously playing financial tricks to extract money (saddle the company with debt/management fees).

This pattern may or may not be one unique to capitalism, but it's surely one which occurs frequently in the US implementation.

When Eddie Bauer declared Chapter 11 bankruptcy, I was amused to see the New York Times describe it as an "outdoorsy" brand. Well, in those days you could be an Eddie Bauer branded sports ute.

Eddie Bauer, once, a long, long, long time ago, was an actual outdoor-gear supplier. At least that's what it began as in the 1920s. It was Bauer down parkas that the first American summitting Everest in 1963 wore.

By the 1980s the line was better suited to arduous treks across a muddy quad to the campus coffeehouse, though outerwear garments from that era may remain serviceable. Today any modest muscular development simply exceeds the tailoring tolerances of upper or lower-body garments.

The "brand" still trades, or tries to, off its century-old origin story. That is an absolute lie.

author's point is that capitalist values is at odds with the core values and value proposition that these brands had at their genesis

Capitalism is kind of like evolution, you can't argue against it by giving the example of a poorly run company going extinct. That's capitalism at work.

Note quite. It’s easy to argue that making say very high quality chocolate and capitalism are at odds because it’s more profitable to make slightly worse chocolate in larger quantities. It’s not a question of any one company when market forces push companies in a different direction.

Further, stability is not necessarily an overriding goal. A 50% shot at 100m is generally preferred over a 100k/year lifestyle business.

PS: I don’t think this is even a downside of capitalism. More people enjoy a Micdonads hamburger in a day than eat at a given 5 star restaurant in a year.

You are confusing revenue with profit. The profit margin for a high-end chocolate is higher than a snickers bar's.

Making 20% on sales of $100k nets you $20k. Making 5% on sales of $1M nets you $50k. So in that scenario, do you prefer profit or revenue?

Revenue and Profit are intimately intertwined, with their cousin Cost riding shotgun.

It depends on what other options you have for investing the $900k. The grandfather's ghost of opportunity cost is always watching...

It’s extremely unlikely for a profitable company to need x$ in capital to drive x$ in sales. Cash flow is generally much faster than that.

I'm not sure what you mean, can you elaborate?

What he means is simple. Like at least 1 other poster, you seem to have considered the numbers I gave to represent capital investment: invest $100k, make $20k vs. invest $1M, make $50k.

But that's not the scenario at all. The scenario is about sales, not capital investment. The point is that its very unlikely (for retail at least) that you need to invest $X of capital in order to sell $X of merchandise. The question about returns here is not about returns on capital investment, but profit margins on sales.

Let’s say you’re a gas station. You need to spend 500k to get things running including buying 100k of gas. Every week rent and people’s salaries add up to 19k and you sell gas costing you 80k for 100k.

So, after 1 week you have 20k in gas and 100 - 19 = 81k in cash. You need to spend 80k of that on more gas for text week resulting in a net profit of 1k or a 1% profit margin.

But, repeat that for one year and you bought 80k x 52 weeks of gas = 4.16 million even though you only had 500k in capital. Further your profit margin might be low but your ROI was 52/500 or 10.4% which is not bad.

I prefer the 20% margin, of course. Why would I tie up an extra $900k to make 5% ?

You make the 20% with the 100k, and hopefully find similar opportunities with your other 9 stacks of 100k's.

Profit is the only driving force in the market.

Like others, you seem to have completely missed the context, set up by the grandparent post.

The comparison is not about investing $X and making $Y profit. It's about selling $X with a given profit margin.

The actual capital requirements to sell $X are assumed to be roughly the same for both scenarios.

Not necessarily, high end chocolate is often a brutal low margin business. Generally, food companies increase profit margins by lowering quality.

Massive companies also have low average profits, but it’s not low quality driving down profits so much as growing to the edge of unprofitability because high profit margins are not inherently as useful as total profits. If say Budweiser increased their price by say 10c a can their overall profit would decrease even if their profit margin would increase.

If say Budweiser increased their price by say 10c a can their overall profit would decrease even if their profit margin would increase.

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That's not neccesarily the case. The ideal price point for maximum profits is ever-changing.

Would Budseiser's profits increase if they lowered the price by $0.10?

The answer is the same: it depends.

While I don’t disagree with your point, I am going to assume a company like Budweiser is going to be very good at selecting a nearly optimal price.

I'd say capitalism really doesn't have values, it's just an economic system for how resources get distributed. People are already greedy by nature. So capitalism is a healthier way for greedy people to compete, versus other systems that become corrupt messes due to human greed.

> So capitalism is a healthier way for greedy people to compete, versus other systems that become corrupt messes due to human greed.

Yeah, that never happens with capitalism...

Greedies gonna greed

A suspect most of what you blame on corrupt capitalism is in fact corrupt govts trying to regulate capitalism to achieve some political agenda. But of course I'm only guessing here as your post contributes nothing but snark.

My point was that corruption isn't inherent to any economic system, but an unfortunate part of the human condition.

Trying to scapegoat a particular economic or political system as inherently corrupt is naive at best, and disingenuous or dishonest at worst.

And there's never been (and never will be) a 100% capitalist society, so even if they could be corruption free it doesn't help much.

Given your last couple posts I suspect you might not be aware of the forum guidelines: https://news.ycombinator.com/newsguidelines.html

Brainstorming a range of negative interpretations of my words then providing appropriate insults for each, isn't my idea of responding to the strongest plausible interpretation of my words. For that matter, if you can't imagine anything that isn't insult-worthy, you might simply ask me what I mean. The answer would be that I was arguing capitalism has a relatively unusual feature of actually channeling greed rather than trying to stamp it out. If "the new soviet man" makes a decision for personal profit versus that of society they are corrupting their communist system. Whereas a capitalist can do so completely within their capitalist system. It has nothing to do with name-calling or about who is and isn't "corrupt" as some inherent human or systemic flaw. Do you still not get my point?

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