Fidget spinners made a lot of money for about 3 months. Most were made in China, where everything is considered efemeral. That is the fundamental difference between them and a lot of US companies. Here everyone wants to set up a business for ROI or MRR, with the ultimate exit being IPO at which point a company is expected to never die, else the last purchasers of the stock are left holding the bag. Could your company…
Should we normalize ephemeral businesses?
71–80 of 123 posts
Re: Should we normalize ephemeral businesses?
#72Starting a business is really challenging, as anyone who has tried it knows. Trying to make the finances work in something ephemeral is likely even more challenging. In any case, most businesses fail so ephemeral business is sort of the default unless you succeed. There are individual businessmen who ride different business waves (like getting into frozen yogurt a little over a decade ago). But the skill those people…
Starting a trade business is orders of magnitude easier, especially right now with a shortage.
I helped a friend lease a floor sander and they make almost what I do in tech after a couple years (I took a pay cut for reduced work load; not making FAANG cash) Bought their own floor sander.
The VC-tech bubble really screwed up the economics for the majority. Will be great if higher rates mean bunch of people working for funds and yet another clone of bear are scooping ice cream in a few years
Re: Should we normalize ephemeral businesses?
#73Earlier quoted context omitted.
A single car wash isn't making most people a millionaire. After a low 7 figures in sales, you've got to subtract costs and wages, and the money left over will hopefully cover your family's living expenses. Being able to save up a million is going to be tough. And starting a car wash from scratch probably isn't going to wind up being worth close to a million either, in most locations, in terms of being able to sell th…
I believe the wealth is in the car wash itself, not the profit you keep. You have to sell when it’s time retire/exit. I am also not claiming that this wealth building process is anything close to fast.
a. You start a new car wash which, given that the market for car washes is already saturated, probably has a much lower success rate than 70%. You also need to be able to afford the startup costs, which are substantial.
b. You buy it, in which case you already have money, and you're probably better off investing in index funds.
c. You inherit it.
It seems like the best way to have a successful car wash is to be born into it. But that's true of many things, and not necessarily relevant to those of us who head the misfortune to be born to parents who don't own a car wash.
Re: Should we normalize ephemeral businesses?
#74Pretty much all businesses used to be basically ephemeral until about 150 years ago. The whole idea of a business that is intended to run perpetually just didn't exist in the West, and anything that ran long was tied to a family that plied a trade. Businesses were also a lot easier to understand: a corporation might run a ship or a mine, and go out of business (still having made everyone a lot richer) when the captai…
Yes. The East India Company was notoriously short lived.
Re: Should we normalize ephemeral businesses?
#75Psychologists who study brands tell us that people who like brands like them (in part) because they guarantee a minimum level of quality. Sometimes that "quality" is the lack of expense. I'm thinking of Costco's "Kirkland" brand. For instance, I shop at Uwajimaya here in Seattle because I associate a minimum quality level with their seafood. I buy gas for my gas-burner at Chevron, Shell or Arco because I once got a tank of bad gas from Marathon. I wear Hoka running shoes because my shins stopped hurting after I bought them.
It took years for these companies to establish their brands.
A short-lived company is fine, but if you're competing in a space where there's a competitor with an established brand story, there may be a number of customers who favor a "least bad experience" over your "more great experience." (This assumes you can make something that is a "more great experience.")
David Graber in Debt: The First 5000 Years, notes the correlation to the development of professional militaries with the rise of cash. The implication here is cash is useful for people who invade your turf and steal your things, but credit might be a better idea for someone with whom you want to have an extended community relationship.
Or at least that's the theory.
But what I see from this is "I don't want to bother with establishing a relationship with my customer." This is fine, of course. Even the carpet dealers I drink tea with in Istanbul know our relationship is fleeting.
But if you're going to focus on transactions rather than relationships, I fear that puts you in the quadrant where you're competing on price. Why would anyone trust you if they know you won't be around next month? You can't say it's quality, because quality usually requires a guarantee. Mediocrity even requires a warranty. Neither of these are possible if your company vanishes into thin air every month. The only possible axis to compete would be price. Is that where you want to start out? Competing on price?
Still... I think it's great someone's out there asking these questions and I would love to be proven wrong. Also, adding some data like "what is the average lifetime of a small business with $XXX of capitalization in market YYY?" might make the argument a bit more compelling. I know that data's out there somewhere.
Re: Should we normalize ephemeral businesses?
#76Earlier quoted context omitted.
Yes. The East India Company was notoriously short lived.
I know this was intended to be sarcastic, but it is the exception that proves the rule. The big East India Companies (both the Dutch and English ones) only really lasted so long because of governmental charters that granted them valuable monopolies on trade, and they later became models for Standard Oil and other similar monopolistic businesses that really kicked off the era of the perpetual company. However, they we…
Re: Should we normalize ephemeral businesses?
#77And people are welcome to do it, but as a business owner I'd much rather find a profitable business/moat and exploit it indefinitely (see Charlie Munger's point about how cola has no taste memory leading to Coca-Cola making for a great business).
Re: Should we normalize ephemeral businesses?
#78It's funny how this is a weird or foreign idea to so many. I teach in IT, so I'm soaked in all the "entrepeneurship" stuff; but somewhere else here had it right. One way to think of a business is that it's simply a machine to solve a problem. It doesn't have to be a self-sustaining money maker. I'd go so far as to argue that generally, the former is probably better for the world. Anecdotally, this 100% describes why…
Agree, "a business is simply a machine to solve a problem." The problem is when keeping the business alive as long as possible becomes the core problem to solve.
Re: Should we normalize ephemeral businesses?
#79Earlier quoted context omitted.
I know this was intended to be sarcastic, but it is the exception that proves the rule. The big East India Companies (both the Dutch and English ones) only really lasted so long because of governmental charters that granted them valuable monopolies on trade, and they later became models for Standard Oil and other similar monopolistic businesses that really kicked off the era of the perpetual company. However, they we…
So if you countered with a list of companies in the 1830s that lasted only 3 months, that would be great.
Re: Should we normalize ephemeral businesses?
#80Fidget spinners made a lot of money for about 3 months. Most were made in China, where everything is considered efemeral. That is the fundamental difference between them and a lot of US companies. Here everyone wants to set up a business for ROI or MRR, with the ultimate exit being IPO at which point a company is expected to never die, else the last purchasers of the stock are left holding the bag. Could your company…
The factories that made the fidget spinners are still in business. Amazon, who sold the fidget spinners, is, last I checked, still in business. The brick and mortar shop down at the mall that sold them is definitely out of business, but I don't think that's because fidget spinners themselves lost their luster.