The Instant Pot Failed Because It Was a Good Product | Hacker News Reader

The Instant Pot Failed Because It Was a Good Product

theatlantic.com

44 pointstim_sw94 comments

The article is fine but the title is misleading; the Instant Pot is indeed a fantastic product, but the reason why it "failed" (note: it didn't as a product; only its parent company did) is because some private-equity firm raided it and tried to milk it for more than it was worth.

Private equity is very much like cancer: they grow and grow onto sane products until they kill the host.

Meanwhile, I absolutely can't do without my Instant Pot.

Every time a company I like and am a fan of announces they've accepted PE I just pour one out. They're dead. It will take a few years, but they're dead.

Who thought an instant pot air purifier was necessary?

The type of person that buys an instant pot is definitely the type of person to buy an air purifier. Probably a gamble on brand loyalty/recognition.

Though probably not the type of person who buys an air purifier from the instant pot brand lol.

PE can be good or bad. People are involved, so sometimes it's good and sometimes it's bad.

Companies rarely ever get PE because the people running it were doing a good job, it’s usually a bad option among bad options, so it’s not surprising PE is associated with vultures looking to “ruin” a good thing. Most people aren’t privy to how shitty the finances are at some companies, that could put it in such a position. Usually employees are oblivious to it because the executives hide it then all of a sudden a new owner is chopping it up for parts.

That said apparently the track record for companies that succeed after getting PE is higher than the straight up losses where it gets sold for assets. At least that’s what I remember reading in some pop business/finance book I read long ago. Maybe someone could correct me here.

Yeah, exactly, the PE vultures come in to a bad company, carve it up (sell and refinance their assets, debt-raise to pay themselves, cut staff), extract a bunch of money and then sell and leave them for dead with no accountability.

But usually only if they can’t turn it into something better. Anyone betting millions on a company goes in aiming a bit higher than selling off real estate or whatever asset. That’s usually the back up plan after a short play to turn the company around. It’s just not pretty when it doesn’t and people who care about the business naturally see them as shortsighted opportunists.

“Private equity catalyzes the creative destructive process in the labor market, with only a modest net impact on employment” [1]. (Service and retail do worst, in terms of employment.)

https://www.nber.org/system/files/working_papers/w17399/w173...

A friend does business turnaround.

He's seen both: a predatory buying of a company with a semi-fake promise of investment from one guy who just accelerated it into the ground charging management fees, but also a PE firm that airdropped my friend in to analyse it, and he turned a dying business into a profitable one that they decided to keep on the books as it's doing well.

Curious to hear success stories you can share from leveraged buyouts.

See AxleTech [1].

Broadly, buy-out comes in three flavours: vulture, where you buy a failing business and try to turn it around or get a last puff out (Toys ‘R’ Us); unlevered, where you provide convenient exit (Berkshire Hathaway); and growth, basically beefed-up VC (Silverlake).

Vulture gets paid for creative destruction. The company was going down, they come in with capital and try something crazy, it probably doesn’t work, in which case they get bad headlines and keep the asset value. Unlevered gets paid to help steady-state businesses exit. Growth gets paid to provide capital so existing management can focus on their plan. The latter two get less press than the first. (Read the story. Do you want one on an aerospace components manufacturer or Fresno-area cold-rolled steel roll-up next? This doesn’t sell clicks.)

Put another way: vulture is value investing, growth is growth investing and unlevered is dividend chasing.

[1] https://www.npr.org/templates/story/story.php?storyId=125717...

True, PE can be good when it takes a long term investment proposition. But mostly they take short term ones and everyone except them suffers.

Some examples of good ones?

Broadly speaking, buyout performance deteriorates with scale [1]. (Aside: buyout has, overall, a negligible effect on employment [2].)

Private equity’s success stories are in the no-name middle market. You know how people are shocked American manufacturing is usually at an all-time high [3]? That’s [4] private equity’s playground.

Put another way, headline consumer PE deals tend to be nonsense.

[1] https://academic.oup.com/rof/article/16/3/799/1590806 Figure 2

[2] https://www.nber.org/system/files/working_papers/w17399/w173...

[3] https://fredblog.stlouisfed.org/2018/02/hows-manufacturing/

[4] https://www.npr.org/templates/story/story.php?storyId=125717...

Maybe Hilton hotels and Dell? There's not many, that's for sure. Unless you count 'success' as the PE firm raking in cash regardless of ourcome

Dell is still alive for example. It did went private at one point. Not sure if there was net increase in value, but at least it is not entirely dead.

I remember being surprised at it going very well at the time. I don't know if that was accurate, but I can imagine not having the public markets constantly pressuring to be a big benefit.

I think the reality is that we don't just hear about reasonably run private companies. They might have had bad trajectory and now do reasonably well generating reasonable profits.

I think this depends on media sources. If one consumes media that exists to let people doomscroll capitalism (or their narrow, worst case view of capitalism) then that is indeed what they will hear about. If they read the Financial Times and local business news they probably have a much more balanced viewpoint.

How insightful

> Meanwhile, I absolutely can't do without my Instant Pot.

Gutted to say the least. I used my slow cooker for years and now I need to hoard replacements (mainly the silicone ring) because of this. Fantastic product.

We just recently bought our first one at home. It's a godsend! It's amazing and makes cooking so easy.

Sounds like the instant pot succeeded; it’s the company who owned the brand that failed, in no small part because of its overreach.

Play capitalism games with borrowed money, win capitalism prizes.

My prediction: the name will be bought by a competitor. The quality will nose dive in the next 5 years. The brand will be shut down following a fall in sales 5-10 years after that.

Honestly - having owned 2 of them, I think that process has already been happening for the last few years.

I think the name may be sold off, since it's well known - but there are already hundreds of non-instantpot electric pressure cookers. It's going to be a really tight commodity market.

Basically - go search amazon for "Electric pressure cooker" and you get a LOT of valid hits.

Ex: Brands already relatively well known, like

- Cuisinart - Ninja - Emeril - Yeti - Masterchef

You also get all the normal "Fake brands" that chinese resellers set up on amazon.

Exactly. This thing will be successfully manufactured by chinese factories for decades, no problem.

Capitalism works. You just need to be realistic. Its a cooking pot, not the next google.

Modern financialized capitalism, at least, perhaps any capitalism, demands growth (return on investment), so you can't entirely blame the company.

I think you can blame everyone not doing their best to create a better alternative, including the company.

The thing that demands growth is private equity investors. They demand that growth because they borrowed a ton of money and have to pay it back. No one demanded they borrow the money. No one demanded the bank lend them the money. They could have used half the leverage (and made half the profits per dollar invested if it succeeded.)

No one demanded they enter this line of business at all. It’s a risk game. It’s optional. If they had won, they’d be welcome to the cash; they didn’t, so, the banks that own the loan are welcome to ownership of the company. The real problem here is that if the bank had failed badly enough, the taxpayers might end up on the hook, which is why bailouts are bad, but that’s another matter, because the current wave of failures is more about interest rates on Treasuries than anything else. Maybe that will change. But with interest rates normalizing after 15 years, we’re liable to see less of this nonsense, not more.

PE is just the most egregious example of capitalism, where they can extract all the future value of a company immediately by swapping in debt.

But almost by definition, capitalism requires growth, else why would anyone place capital in a business.

If this were true “by definition”, no bank would issue loans, no pension fund would buy bonds, and the only place you’d find landlords renting out homes are in cities with massive price appreciation. There would be absolutely no business occurring in Japan and “value investing” strategies would never have been imagined.

Growth is lucrative, but capitalism can put a price on finitude just fine.

oh, so where do loans come from? They compare to govt money, which is constantly inflating, aka growing. growth is baked into the system.

Bank loans are tied to US government interest rates because borrowers are competing with the government to borrow money, not because the banks are relying on it in some economically fundamental way. (It might be fundamental to some bank’s business plan, especially in the moment, I’ll grant that.)

Although I will admit, the only story in which the US government debt is anything other than insanely irresponsible, destined to become a millstone around our necks for decades to come? That one involves growth, and lots of it.

Dividends

My understanding is that the main cause for failure was being brought up by private equity, loaded up with debt, and then being hit by huge interest rate rises.

Isn't this essentially the same thing that killed Toys-R-Us?

Yeah. It's bizarre that leveraged buyouts are even legal given how destabilizing it is to local economies; but also Bain Capital (the company which did the buyout of Toys R Us) was cofounded by Senator Mitt Romney, so you can start to understand why the FTC and Congress aren't really inclined stop the madness and regulate themselves more

Changes to retail (e.g. online, e.g. Amazon) killed Toys-R-Us, PE just pimped it out until they could sell it for parts

And Sears.

Kitchen gadgets are an interesting market, it's massively influenced by fashion and media. Get your new gadget on a morning TV magazine show during a cooking segment, sell it for between $100 and $300, and you have a hit.

The limiting factor for a business, not the idea, is that you will eventually end up competing against cheep copies of your product. There is a shelf like of something like max 5 years before your dominant, first mover, market position is completely destroyed.

On top of that, most people have limited space in their kitchens, and these gadgets tent to be all roughly the same size. That limits the market, how may of these things can someone get in their cupboards without throwing out the least used one they purchased.

In relatively short succession we have had an explosion of "instant pots", air fryers, sous vide, "George Forman grills", toasted sandwich makers, bread makers, ice cream makers, slow cookers, pressure cookers. People have run out of room for them all, I suspect that has had a massive impact on the market.

Just casually looking back, instant pot and air fryers are circa 2010, Anova sous vide circa 2013, George Forman grills are circa 1994, and I remember ice cream and bread makers getting popular in the early 00's. So effectively we get a "new thing" every 5-10 years, I wander what the next one is?

It's a little different than a kitchen gadget that sits on the countertop, but even Ycombinator got into the game, sort of. In 2013 Ycombinator invested 120k into Pantelligent[0]. It was a smart pan that would track temps as you cook. I remember when they got shut down due to patent infringement and being very disappointed. I think they tried to change the app to get around the copyright stuff, but in the end they couldn't get around the infringement.

https://tracxn.com/d/companies/pantelligent/__v3MfJ_9W6rQ9nR...

Steam Ovens are a thing... But I think they are outside that range and too big appliances. But still a type of trend I could see being next thing at least in some circles.

I think combi ovens might eventually make it. I've been waiting for the build-in ones for private homes to become affordable for about a decade now.

Title is misleading. The company failed because it was bought by private equity firm with leaders that loaded the company with debt and then ran it into the ground. A fate unfortunately too common for companies that dance with PE.

Timely. Last weekend I took my IP apart to replace the thermal fuse which had failed while I was making dinner. My impression is (apart from the thermal fuse not being the "reset" type), it's a very well constructed piece of kit. Everything inside was clearly safe, put together properly, plenty of insulation where needed, wiring to spec, metal parts earthed correctly, cleanly laid out PCB. And it cost me only £100.

We mostly use it to hard boil eggs: it's incredibly consistent on outputting eggs with easy to remove shells :)

What setting do you use for that?

Place 1.5 cups COLD water into an 8-quart Instant pot.

Add in up to 16 eggs on the steam rack.

Place lid on the pressure cooker and set for cook time for 5 minutes on high pressure.

Once cook time has elapsed, let the pressure release for 5 minutes. Then do a quick release and carefully remove eggs from Instant Pot and place in ice/cold water bath for 5 min.

Remove eggs from the water bath.

Store in the fridge for up to 7 days unpeeled or peel and use within 3 days.

Thats a lot of time. What consistency are the yolks? Seems they would be very dry and powdery and very close to turning green/gray

You can reduce the time to get exactly what you want with whatever consistency. The reproducibility is what makes it nice.

Not op but i do:

1 cup water

Eggs in egg holder above water

6 mins pressure cook on high

Wait about 30sec then release pressure

Straight into ice bath and peel while luke warm to warm.

If you don't need the shape there are muffin/egg trays you can use to simply crack eggs into and have 0 issue with shells.

Amen. The best.

Instant Pot PSA…if you haven’t already, cook rice with it.

We have a rice cooker so we never used the instant pot until recently. Turns out, the instant pot rice is significantly better than the rice cooker rice.

I'm quite surprised by this. What brand is your rice cooker? I can't believe the IP would beat a good Japanese or Chinese rice cooker.

https://archive.ph/bj54P

https://gitlab.com/magnolia1234/bypass-paywalls-firefox-clea...

That's a great find, thanks for the link!

Be very careful what you install in your browser, especially things which auto-update.

They should have looked into packaging Instant Pot-ready meals, a la Blue Apron, but with a more conventional delivery method (ie, store shelves). Heck, go to a successful food producer with a licensing deal to slap the Instant Pot brand on it.

It's all well and good to sell razors, but if you want to keep doing business and growing, it helps to be the one selling the blades.

It failed? In my part of the world these multi-cookers sell reasonably well, except those are cheap knockoffs. No one, including me, even heard about this Instant brand around here.

The Instant Pot, which is a specific product from a specific brand, failed, as the conpany has gone bankrupt.

wouldn't say it failed. lots of people are using pressure cookers. it's just a bit too complex for most people. i got one for pasteurizing. afterwards i occasionally used it for cooking but even i found it often a bit difficult to estimate how long you have to cook something at a given pressure setting. with normal pot you just lift the lid and take bite or poke around with a fork to find out.

TLDR: product is so good that it saturates market so much that there no room to 'grow'. Company tried different line of products with little no success, and... become bankrupt.

Moral of the story: why the fuck every company should grow forever?

I've been seeing this theme a lot lately.

Making something people want, charging them money for it, and earning a steady profit for a long time should be seen as a successful business. It seems increasingly rare for that to be the goal; instead, it's some form of demonstrating the potential for endless growth to pump up the stock price and enrich the current shareholders. We used to call the latter a Ponzi scheme and put people in prison for it.

>Making something people want, charging them money for it, and earning a steady profit for a long time should be seen as a successful business.

Yes. But it can only be counted as a success if your profits allow you to reduce your debt. Manufacturing goods can be quite capital intensive, which is why companies often have to take on debt to make things.

>pump up the stock price and enrich the current shareholders.

The problem here is that doing anything else as a publicly traded company is illegal. But also consider that shareholders loose everything they invested if the stock price goes to zero.

>We used to call the latter a Ponzi scheme and put people in prison for it.

That is not a Ponzi scheme.

The fiduciary duty to promote shareholder value often gets exaggerated in conversations like these.

Board members enriching themselves at the expense of shareholders or trying to turn a for-profit company into a nonprofit are clear violations. Using a business strategy that's arguably not the most profitable one possible is not, nor is prioritizing the long-term success of the company over short-term payouts to current shareholders.

Yes. It certainly is not as easy as the stock price and there is a broad spectrum of things which can be in the interest of shareholders, which do not relate to an immediate increase in stock price.

> The problem here is that doing anything else as a publicly traded company is illegal. But also consider that shareholders loose everything they invested if the stock price goes to zero.

Not sure if it is illegal or not, but it certainly isn't viable. Who would invest in a company that explicitly doesn't want to grow? Dividends could be an alternative, but due to how taxation works they are unattractive. They get taxed at a higher rate and I cannot control when they get paid. With investment returns from selling, I can control when I sell and pay taxes and can also turn the tax rate into the much lower long-term capital gains.

> The problem here is that doing anything else as a publicly traded company is illegal.

Sort of? It's more complicated than "get highest share price possible as quickly as possible." Plenty of companies out there are focussed on long-term, stable growth.

Tech companies are the weird perverted ones.

Many investors are happy just to take their yearly dividends. At least when these are on reasonable level. And some companies aim just at this. These could be the traditional "blue chip" companies.

They have to act in the interest of the shareholders. Certainly it is more complex than just the stock price. But certainly no shareholder sees an increase in stock price, everything else aside, as against his interest.

It's perfectly legal to not grow at all.

Absolutely. But refusing clear growth opportunities is an easy way to upset shareholders.

That's a completely different topic. I'm tired of hearing people spout about a legal obligation to grow.

If you mean "it will hurt somebody's feelings" don't say "it's illegal". Those words do not mean the same thing.

If a company earned a $1 dividend for the last five years and the stock price is $10, what is wrong with paying out $1 dividend again next year and having the stock price stay at $10?

If a stockholder wants a bigger payout they can sell their share and invest the $10 in some other stock and take their chances.

Personally, I think a $10 share that pays out $1 and is still worth $10 is incredible. It doesn't bother me at all that neither the price nor the dividend has grown. It doesn't bother me that the square meters of manufacturing floor space hasn't grown. I don't mind that the number of employees hasn't grown. It's ok that the number of SKUs has stayed the same.

All stocks fluctuate. If the stock price never growths, it is permanently falling.

>If you mean "it will hurt somebody's feelings" don't say "it's illegal". Those words do not mean the same thing.

To some extent they are the same thing. Dissatisfied shareholders are the ones who bring lawsuits.

>what is wrong with paying out $1 dividend again next year and having the stock price stay at $10?

Nothing. Unless they have significant debt.

>Personally, I think a $10 share that pays out $1 and is still worth $10 is incredible.

Which is why its stock price will rise. 10% return on investment is obviously quite good (therfore the stock price rises).

>>pump up the stock price and enrich the current shareholders.

>The problem here is that doing anything else as a publicly traded company is illegal.

No, it is not. You aren't breaking the law just because your stock price didn't go up.

>No, it is not. You aren't breaking the law just because your stock price didn't go up.

But if your goal is to get the stock price down, it gets dangerous quick.

> why the fuck every company should grow forever?

They don't have to. They don't have to list on the stock market. They don't have to take investment money. They don't have to do anything. A company is everything from IBM to a local plumber. They don't all follow the same rules, at all.

And this is why many people don't want VC money. if I had a company that brings in a million $ annually and I work 20 hours/week when and where I want, it would be a dream come true. I'd rather have this than start the next Meta or Google. However, for a VC or any professional investor that scenario would be a complete failure.

It wouldn't be for a professional investor if you paid dividends. VCs yes of course - they are part of the journey of growing a up front capital intensive company rapidly. They aren't generally long haul investors because if they were their money would all be tied up after a while.

We need exponential growth until the entire earth's crust is converted into widgets.

“Growth for the sake of growth is the 'ideology’ of the cancer cell.” -Edward Abbey

Companies do not grow for the sake of growth. Many would outright go bankrupt if they stopped growing, as debt grows continually while they do not.

Then they have taken too much debt. And deserve to fail.

A well run company only takes debt when return on investing it is larger than the interest and paying it back. Thus being able to use leverage for profits on net.

On other hand modern finance system with many public company is often short term idiotic one where debt is used to pay out to investors... Exactly like PE does...

>Then they have taken too much debt. And deserve to fail.

Many companies can not exist without taking on debt. Manufacturing can be extremely capital intensive and if every company had to wait for the profits of its previous product to finance its next product almost nothing would be made.

>A well run company only takes debt when return on investing it is larger than the interest and paying it back.

This is an unknown quantity. And it also growth as debt is taking on for the sake of increasing revenue. Taking on debt without expecting an increase in revenue from investing that money is insane for a company.

>why the fuck every company should grow forever?

Debt, specifically interest on that debt. Either you need significant profitability or you need growth to manage that debt.

Personally, I don't like it. It is fast but the boiled meat taste is not a worthwhile tradeoff.

Situation A:

Person makes $100K a year for 40 years.

Situation B:

Person makes $4M in year 1.

Assuming 0% inflation etc, how is situation B a failure?

Situation B is a failure because private equity buys your company and expects $4m a year for 40 years.

Considered in terms of the overall economy, it's a "failure" in that a smooth economy is better than one that progresses in fits and starts. A company that provides jobs over many years (even with employees changing over time) is more helpful in keeping people employed and productive than one that comes in, makes a bunch of cash, and departs.

It's also better as a way to smoothly expand the economy. An existing company can do research and development more easily than a brand new one. The overhead of starting a new company is a net drain on the economy.

Not every company is going to be like that. Some really will do best by doing one thing and disappearing. Even if it does, it's not a "failure" from all perspectives. But there are ways to look at it where there were better outcomes, and it "fails" relative to that.

> Assuming 0% inflation

This is very unrealistic assumption. Also, even in zero inflation, time value of money is non-zero.

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