Comment by llmslave
6 days ago
Private equity, and computers, optimized all the profits which drove profit quality down. We all have lower quality products to enrich a few finance individuals
6 days ago
Private equity, and computers, optimized all the profits which drove profit quality down. We all have lower quality products to enrich a few finance individuals
Optimization is gonna kill us all in the end.
Or more likely consumers vote with their dollar and cost matters over quality. PE is just a bad scape goat, there are obvious outliers but largely companies make products that consumers want.
Companies are incentivized to sell the worse, most expensive version of a product that they can convince someone to buy. Many companies sell with huge margins, meaning there is significant slack to allow quality to increase for the current price point - there just isn't enough competition to matter. Many manufacturing companies also have complex supply chains, making this problem worse as everyone along the chain tries to maximize their own margin.
It's not at all rare for a company to sell a quality product at a low margin for some years, building up a reputation, and then start decreasing quality to increase profitability once the quality branding is established.
Of course, optimal companies maximize for margin. Buyers have their own optimization mental model and maybe is surprising but a vast majority are thinking mostly on cost. Buyers and sellers do a dance and in the perfect long run you hit the optimal balance.
Consumers/buyers still play a large role in this, it is easier to put all the blame on PE or Big business.
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Or more likely consumers aren't paid enough to buy quality.
How do you come to that conclusion? It is certainly a luxury that not everyone can afford but for the average consumer in America it’s possible but folks still opt out.