Comment by sofixa | Hacker News Reader

Comment by sofixa | Hacker News Reader

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> Look at "inflation" - every business was able to blame "supply chain issues" (that they caused by removing redundancies) during COVID to extract unthinkable price increases out of the public.

Are you implying there were no supply chain difficulties? China wasn't under heavy lockdown for months on end? There weren't ports with months of backlog? Factories weren't closed due to lockdowns or outbreaks all around the world? That civilian aviation ground to almost a complete halt for a few months, and the cargo it used to carry now didn't need to find an alternative route?

Anyone trying to pin a singular reason for the inflation spikes after Covid is at best misinformed and arguing in bad faith. Covid wrecked supply chains, Russia's invasion of Ukraine wrecked a number of important raw materials' markets (oil, gas, nickel, grain, etc), the Houthis' shenanigans impacted the Suez Canal, droughts impacted the Panama canal. Sprinkle a heavy dose corporate greed and voilà, inflation.

"The biggest study of ‘greedflation’ yet looked at 1,300 corporations to find many of them were lying to you about inflation" – https://fortune.com/europe/2023/12/08/greedflation-study/

> The biggest perpetrators were energy companies like Shell, Exxon Mobil, and Chevron, which were able to enjoy massive profits last year as demand moved away from Russian oil and gas.

> Food producers including Kraft Heinz realized their own profit surges. The war in Ukraine rocked global grain supplies and fertilizer prices, significantly increasing the cost of food, which remains sticky.

Funny, in both cases external causes made the global prices go up, so specific companies used the opportunity to increase their prices because there was less competition on the market.

headline: "many of them were lying to you about inflation"

actual article:

>A joint study by think tanks IPPR and Common Wealth found profiteering by some of the world’s biggest companies forced prices up significantly higher than costs during 2022.

>[...]

>While this obviously contributed to rising prices, the report finds that company profits increased at a much faster rate than costs did, in a process often dubbed “greedflation.”

Where's the "lying"?

Doesn’t everyone sell at the highest price they can, without regard for their COGS?

I don’t break out my household expenses when I negotiate pay at a new employer.

The meat of the article is basically "profit margins went up". The same arguably happened for software engineers. By the same logic, there should be headlines of "The biggest study of ‘greedflation’ yet looked at 1,300 software engineers to find many of them were lying to you about inflation".

Imagine you own a grocery store in a small town. The only one, in fact, and the nearest competitor is a 30 minute drive.

You, being a free market enthusiast, decide to test how much the market will bear, and raise your prices across the board.

Your customers, who are also your neighbors and friends, respond by socially ostracizing you.

This doesn’t exist at scale, because the people responsible for the unnecessary price hikes live far away from their customers, and do not intend to ever meet them, much less explain themselves.

People should price products to make a fair profit, one where both parties are satisfied. I don’t begrudge a car salesperson for selling me a car at above their cost, but I do if it’s wildly marked up.

I don’t have to imagine, I do it every day. I sell my services for the most amount of money I think I can get.

Of course, if I am selling services or goods with lots of repeat business, it might behoove me to not piss off the customers and hence incentivize me to keep my price lower (which is still optimizing for the most money I think I can get, just over the long term rather than short term). If I am selling land or a business, then I am maximizing for that specific transaction, even if my profit margin is 100,000%.

When you get a job offer, and you respond back with a request for an additional $20k per year or whatever, that is doing the same thing.

> make a fair profit

What is fair is an opinion. For people living in huts, a 1,000 sq ft Soviet style apartment bloc with plumbing is unfair. And for people living in Soviet style apartment blocs, a modern 5 over 1 apartment building is unfair. And then you might find a detached single family home unfair. And then you might find a 3k sq ft home unfair.

And so on and so forth.

> Are you implying there were no supply chain difficulties? China wasn't under heavy lockdown for months on end?

I think they were more stating that consolidation, which often results in a reduction in redundancies in the system, made the supply chain issues worse than they otherwise would have been. Consolidation can increase the instances of single points of failure.

For a smaller scale example: in 2016 flooding took a biscuit factory out of action for a time, and suddenly you couldn't get bourbon biscuits (and a few other varieties) anywhere. It turns out that all the UK supermarkets (except Sainsbury IIRC) and some big-name brands were supplied by that one factory¹, so they all had a stoppage of supply at the same time, and those being supplied from elsewhere were out of stock too because the remaining smaller supplies could not ramp up production to meet the new demand². The consolidation that brings more efficiency when all is well can make things worse when something goes wrong.

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[1] This also lead to “I told you so” comments from some of us, to people who were suddenly asking “if the ones I buy come from the same place, exactly the same production line, why have I been paying 25p/pack more for them?”.

[2] And even if they could, it would have been a bad business decision because once that big factory was back online the market wouldn't bare the new excess of supply meaning prices would drop, potentially below cost where margins are tight.

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