In a comment to my post on subscription products, an Anonymous user had this to say:

The marketplace is a feedback mechanism to discover what buyers want. The feedback vendors are getting is that products with remote controls leased on a subscription are acceptable, because buyers keep accepting them. This is not a “market failure”, and we don’t need communism to force other people to give us what we want.

No policeman would stop you if you made and sold an aftermarket engine computer for a tractor. Farmers can buy a $300,000 350 HP 8-wheel-drive tractor, but all farmers nationwide can’t chip in $500 each to hire a techie to car-customize it? Why do you trust farmers to vote?

To tackle the first paragraph: The problem is that this isn’t a free market. In a free market, companies that are poorly run go out of business. This means that businesses in a free market have a disincentive to make poor decisions. In this market, they get a bailout, pay huge bonuses to the executives that made the poor decision, and continue business as usual.

Businesses getting bailed out has become a huge part of what the government does. Just in the last 20 years, the following bailouts have happened:
GM and Fiat Chrysler received multiple bailouts for a total of $85.6 Billion, Amtrak: $1 billion, Adidas $3.3 Billion, US air carriers have received $26.6 Billion, Bear Stearns $25 Billion, Citigroup $45 Billion, Bank of America $45 Billion, AIG received $180 Billion, Fannie Mae $116 Billion, Freddie Mac $71 Billion, the list goes on. Over the past 20 years, bailouts have totaled over $1 trillion.

Addressing your second paragraph: The reason that farmers can’t just modify a truck or tractor to circumvent that software is simple: Federal Law prohibits it. It is a felony under the Digital Millennium Copyright Act (DMCA) to modify the software of a product that has some of its capabilities controlled or restricted by software. So those subscription based devices, vehicles, and tools? They have the full protection of the might of the US government.

That isn’t a free market.

Categories: economicsGovernment


TechieDude · August 6, 2021 at 8:20 am

You aren’t modifying the software of the product if you rip out it’s computer and replace it with a different one to run your hardware.

For instance, there are many, many aftermarket ignition systems for cars.

Borepatch · August 6, 2021 at 9:53 am

Your last point is the key one. Big businesses use regulations to hobble small innovative competitors, and Regulatory Capture is the recognized term by which large companies essentially take over governmental agencies that regulate them via an SES revolving door.

I would go so far as to say that regulatory capture is the equilibrium state for any government agency.

“Free Market” indeed.

Anonymous · August 6, 2021 at 11:40 am

I’m not seeing bailouts being given to the smaller power tool manufacturers implied by the original post. So these companies are still subject to substantial market discipline. Just don’t buy a Milwaukee anything with bluetooth.

Sounds like Deere is trying to sell a contradiction, that the product is both sold and leased depending on who is asking. That’s a huge exposure. There’s a whole Deere sales organization which is claiming you own it. Didn’t the loan you got for the tractor from a non-Deere third party claim you owned it? If you don’t own it then what’s the security interest for the loan? Is the value to repossess the opportunity to resell the license, not to resell the hardware? Fine, I’ll stop paying on the loan, the bank repossess my license, I’ll keep the hardware. Oops no more loans thus no more Deere sales.

Automakers have legally avoided import tariffs by importing one class of vehicle, then removing seats to make another class of vehicle. So, perhaps the market would now be interested in 80% tractor kits. Kits could be manufactured by taking new tractors apart, selling the parts to a scrapyard which cuts the engine computer into pieces with a torch, then having a third company buy the parts from a scrapyard and ship them as kits.

    Divemedic · August 6, 2021 at 6:24 pm

    Milwaukee Tools are a wholly owned subsidiary of Tektronics Industries, which is owned by the Chinese government. The company also owns AEG, Ryobi, Homelite, Hoover, Oreck, Stiletto, Vax, Dirt Devil, and Imperial Blades. It is listed on the Hong Kong Stock exchange as TTI. Their headquarters and manufacturing plant is in Dongguan, China. Unless you are going to argue that Chinese companies aren’t engaged in unfair competition?
    Milwaukee gets away with saying they are made in the USA because they take components made in China and perform final assembly here. The bulk of manufacturing is still done in China.

      Anonymous · August 7, 2021 at 2:55 pm

      If Milwaukee has China-flag ownership, then it won’t be receiving money payments from the US government, because the usual dodges of foreign aid/weapons sales don’t fit the narrative.

      If Chinese taxpayers are subsidizing the production of power tools sold to US taxpayers, one response for US taxpayers who work in US power tool factories is to simply accept the gift and shift to another job. They can always create their own job by producing food they eat themselves.

      Over the longer term of 50 years, the group putting the money out loses and the group taking the money in wins. The wider and deeper the subsidies the quicker this happens.

AC47spooky · August 6, 2021 at 4:23 pm

Hey … ain’t nobody free when they be tracked 24-7-365.

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