
How to get beyond the parasite economy - Hoff
http://www.ericgarland.co/2014/03/29/parasite-economy/
======
FD3SA
Such discussions always remind me of the short-sightedness of man. Anyone with
a cursory understanding of history knows that if left to their own devices,
the rich continuously consolidate wealth until there is a single Monarch,
apparently chosen by God, who rules above everyone with impunity.

That this is not obvious shows how far we've fallen off the path of simple
rational thought.

~~~
goodgoblin
Yes history is full of monarchs but our current configurations of government
in the West are also reactions to them. We are programmed from birth to revolt
at the notion of an American King, and safeguards exist to prevent
concentrations of power. What isn't always obvious is the ways that new abuses
are being perpetrated, but once that reaches a certain level then the
threshold for action is crossed, and new safeguards can be implemented.

~~~
tedks
>What isn't always obvious is the ways that new abuses are being perpetrated,
but once that reaches a certain level then the threshold for action is
crossed, and new safeguards can be implemented.

Why do you assume that the novel abuses of the system become non-obvious in
time for anything to be done about them?

It's perfectly feasible that the creeping forces of darkness stay hidden until
_far_ after it's too late to do anything to stop them.

Life is not a movie. In reality, you sometimes lose; the hero sometimes dies
alone; the person you love sometimes marries someone else and lives a happy,
fulfilling life never thinking about you. In reality, you can't rely on
literary clichés to save you. Nothing will save you. You are on your own.

~~~
goodgoblin
Yes, there always is the possibility of "full fail", but look at how difficult
it is for autocratic regimes of the world today to suppress human curiosity.
My faith is in the endless reaching and searching embedded in the human DNA,
though one worry is that we could reach a future state which may not be
obviously dystopian but still represents a far from optimal resource
configuration. We may in fact we approaching that now. One trump card humans
have always held is violent revolution, but the TV shows keep getting better
and better, and as long as they aren't murdering union members and forcing
children to work in dangerous factories, our corporate overlords may be able
to escape a new round of safe guards.

~~~
tedks
>but look at how difficult it is for autocratic regimes of the world today to
suppress human curiosity.

Westerners say that, as if the Reganesque march of progress will destroy any
and all nation-states not ideologically subservient to the US of A, but in
reality, China is never going to fall; Iran is never going to have free
elections; not even Myanmar or even North Korea are going to shift.

The greatest and most heralded revolt of the 21st century replaced an
autocratic president with a military dictatorship. But we pretend that Twitter
can solve the dire social problems we face; that autocratic regimes can
_never_ suppress human curiosity; that one day, maybe not this day, maybe not
the next day, but one day, freedom _will_ ring.

But again, life is not a movie; you are not Mel Gibson; you live in reality,
and in reality sometimes you lose.

~~~
goodgoblin
I wasn't making a jingoistic point, but you can take the opposite side of
'never' quite easily. China already has fallen, the communist revolution took
place in 1949. Iran recently (from a historic perspective) had free elections
in 1951, see Mohammad Mosaddegh. Ideas really are the most powerful things in
the world.

~~~
tedks
The Soviet Union did actually fall, as well; that was before globalization.
Iran will never fall while the world buys its oil. China will never fall while
it makes your computer.

But this point is too far afield to be useful here.

------
Mz
I tend to dislike pieces like this. Advice like this: _... but in the
meantime, you can help as an individual. I recommend that you refuse to buy as
much as a guitar pick from any company currently owned by a private equity
firm, or any financial entity that does not come from the music industry
itself._ tends to not be very practical or helpful. It means that for many
people their choice is do this evil immoral thing that the author is decrying
as the downfall of civilization or go without entirely. Given that choice,
most people will do this presumably immoral, evil thing. Because people have
needs.

Stuff I would prefer to see: A list of websites helping to support alternative
business models that the author thinks is not all evil and immoral. A list of
businesses that try to source their products from approved, moral places as
much as they can. Other pro-active things that one can actually do (other than
"just don't buy from Bad Guys" \-- I mean more in the vein of "here are the
Good Guys you can and should buy from").

Last, "parasite" economies tend to kill themselves. Historically, Greece,
India and Persia all placed extremely high value on bees as a naturally
occurring mental model for business, basically: Bees neither kill flowers nor
get killed by them. They exchange their service (pollination) for product
(pollen, with which to make honey) and both sides gain something of benefit
without being harmed. This is a brilliant thing to value culturally when most
of your examples from nature fall into the category of "kill or be killed".

It is brilliant because it is the only paradigm that is sustainable. If you
are enough of an asshole, you can and will be taken out eventually. Even Roman
emperors sometimes got offed by their own Praetorian Guard for being too
assholish to put up with. No one is beyond reach. You learn to engage in a
symbiotic exchange where both sides gain something or you eventually get a
Darwin Award. That's just how it is.

~~~
unclebucknasty
> _Last, "parasite" economies tend to kill themselves_

Yeah, the problem is that there are a lot of good people who depend on this
economy. This is why its last near-death experience resulted in a bailout
sponsored by "the rest of us".

~~~
Mz
I don't see how that is really any kind of response to any of my points. The
author is suggesting we basically kill that which we do not approve of rather
than telling us how to better foster something they think would be good. There
are other things going on in the world. The business he criticizes is not the
be all and end all of the economy. Advocating killing that which you do not
approve while not promoting or fostering that which you do approve is
absolutely not a solution to the problem you posit. In fact, it is part of the
problem.

~~~
unclebucknasty
> _I don 't see how that is really any kind of response to any of my points_

I wasn't addressing all of your points; just the one I quoted. The implication
that "parasite economies tending to kill themselves" is somehow helpful
because the problem is thus self-limiting has a major flaw. That is, the death
of such an economy can be catastrophic for everyone; not just the bad actors.

Otherwise, I agree 100% with your sentiment that we should promote positive
solutions vs. simply attempting to punish businesses we don't like. I have
long believed as much myself, and have worked to that end. In the meantime, we
do also have to be aware when an economy threatens the greater good and take
specific measures (regulatory, activism, and otherwise) to directly address
the threat.

I upvoted that comment, by the way.

------
ama729
There is something funny when you have an entire post about supposed
"parasites", that then try to sell you $800 dollars conference seats
("Transition Economics", "Book Now!").

------
bequanna
"...but in the meantime, you can help as an individual. I recommend that you
refuse to buy as much as a guitar pick from any company currently owned by a
private equity firm, or any financial entity that does not come from the music
industry itself."

Well, ok, but how many people really pay attention to the ownership structure
of companies they purchase products from?

I know that 'vote with your dollars' is a typical answer to problems like
this. On average, I suppose I purchase ~5 individual items each day. I don't
really have the time to make sure that each of these companies that make these
products conduct themselves in a manner that I consider ethically sound.

~~~
ryandrake
There's an app idea in the making:

Scan a bar code before you buy a product and see either a big red "EVIL"
banner or a big green "GOOD" banner, depending on the ownership structure of
the company who makes the product.

Version 2 could let you configure what things you consider evil (owned by
private equity, venture-backed, owned by cigarette companies, etc.)

~~~
bequanna
I used to work in Investment Management, primarily with wealthy clients.

Some clients would request that portions of their portfolio be devoted to
'Ethical', 'Socially Responsible', 'Green', etc. companies or funds. Ask them
to elaborate on what exactly constitutes a 'Socially Responsible' company, and
you get wildly different answers.

I guess what I am getting at is any definition of 'EVIL' or 'GOOD' is highly
subjective. For example, not everyone would consider cigarette companies to be
'EVIL' ;)

~~~
gordaco
Easy, just set a number of traits for each company/product and let the user
decide what doesn't they want to buy.

Add info about country of origin, political affiliation of owner, or things
like that, and you have a nice tool for boycotts.

Didn't something like this already exist?

------
jsun
This piece is entirely incomplete. It purports to examine the entire ecosystem
from the angle of a single company, and writes an article not unlike painting
eagles (or vultures as the case may be) as the villain conspiring against the
innocent rabbits.

Let's go through this logic again. So a hedge fund comes in, buys a company,
levers it up with a partner's money, leaving a pile of toxic debt on their
neighbor's lawn.

With you so far.

The company issues more junk bonds in order to pay it's existing creditors,
and that gets snapped up by other PE firms / Hedgefunds, who need it in order
to fulfill a never-ending quest for returns.

Yup got it.

GC then goes bankrupt and the banks are evil.

Whoa, wait a minute. Where is this whole process did anyone get hurt? The
author seems to think Guitar Center, and YOU, the average consumers. But in
order to really understand that, let's look back in time.

Guitar center, if were any other company, were started by a few enterprising
individuals with a passion for what they do. In turn, they were able to build
a great business, and grow it to serve the entire country. After a while,
wanting to cash in their success, they sell the company to a buyer, knowing
very well what they planned to do with the company. The rest is history.

Not as clear anymore is it? Now lets look at what happens in the future.

GC goes bankrupt. Or it doesn't but becomes irrelevant. The 800-pound gorilla
in the space dies, and there's room in the space now for another innovator, a
new group of passionate individuals who can now bring their vision to life.

And the cycle starts anew.

~~~
gregw134
He's pretending to present a well-researched article, but he's not actually
saying anything. What a waste of time.

------
creeble
A great article.

But now maybe Eric Garland should look into the capital structure of Fender
Musical Instrument Company. Then we can all get really depressed.

------
chrisdevereux
So, if there is a large amount of money that is searching for risky
investments to the extent that investors are willing to finance an obviously
failing business, how come more of it doesn't end up in risky ventures that
might actually go somewhere?

Is the problem a lack of information, the lack of better investments, or that
investors don't care about their money?

~~~
bequanna
I think what the author may be getting at, and I hate using this term, is
moral hazard.

Those investing the in debt (most likely with someone else's money, mind you)
are yield chasing. They probably aren't betting the farm on this company, just
a small % of whatever money they manage.

If it works out and the company doesn't go under, great! They just make 8% in
a low-yield environment, they look smart, they get bigger bonuses! If the
company goes under, that sucks. But, they can rationalize it to investors as
'this stuff happens' and becomes a write-off. Imagine this is a hedge fund,
the managers probably didn't lose their money, they lost their investors'
money.

------
mindslight
Despite the title, the article lacks any exploration of "how to". This is
disappointing.

~~~
musesum
"I recommend that you refuse to buy as much as a guitar pick from any company
currently owned by a private equity firm, or any financial entity that does
not come from the music industry itself."

The problem is that any boycott initiative needs both a datasource and a UX
that integrates into our buy habits. Something like a "PQ" \- a parasitic
quotient.

~~~
mindslight
But that's about all he says, and it's coupled with this:

> _There are dozens of industries that have been locked up by a few players in
> this way_

I can perhaps see boycotting working for musical instruments, at least in the
short term. They're crafted items that are infrequently bought, heavily
researched, can be sent direct from manufacturers, and have a talkative and
reputation-based community. But that doesn't really address any of the
countless sundry-supplying industries that have been dominated in the same
way.

Now, maybe I'm just one of the "people [who] believe that ... there is no
other game in town", but I don't see that "voting with your wallet" works well
in general. _Perhaps_ with some automation it could, but similar automation
would also help people compare prices, which is the thing your average person
will be interested in. And at any rate, he really needs to _expand_ on how he
thinks boycotting can be made to work this time.

~~~
musesum
> but I don't see that "voting with your wallet" works well in general.

I agree. Would need to span all products - not just music - and mindlessly
enhance my existing buying behavior. The problem is that boycott-able products
are a small fraction of my total purchases. Could work, once I start buying
everything with a smart phone. Then a plug-in, similar to those found on
iPhone's Passbook, could pop up with a vendor rating. I would subscribe to
such a service.

Until then, I’ll just boycott Guitar Center.

------
jeffdavis
Who exactly are the parasites, who is the host, and how did the parasite
benefit at the expense of the host?

If the parasites are investment bankers, and the hosts are the investors with
401(k)s, then fine. But that has nothing to do with music.

If GC is the host and the investment bankers are the parasites, that doesn't
quite make sense. GC apparently sought out the "parasites" at every turn, and
that doesn't sound like a normal parasite/host relationship.

It sounds to me more like a business that just used too much leverage/debt,
presumably to grow quickly. That works sometimes, and sometimes collapses.
This time it collapsed. The times it works it doesn't make the news.

So what's special about GC?

------
gregw134
...so what wrongdoing did the banks do, exactly? Told another way, a failing
company was headed towards bankruptcy, until the banks stepped in and saved
the day by recapitalizing the company, saving thousands of jobs and a good
brand in the process.

~~~
justincormack
It was failing because of the amount of debt it had loaded up in it in the
previous buyout.

~~~
michaelfeathers
Yes, I think the gist of the article is that interest in outcomes evaporates
with financing and consolidation. The creative destruction of capitalism
becomes capricious destruction under those circumstances.

~~~
gregw134
That's what he's saying, and it might be true, but he hasn't demonstrated that
in the article. He's done all of this research which supposedly demonstrates
that Guitar Center is going to be run into the ground, but he never actually
goes anywhere with his research. He's just using this as an opportunity to
gripe about banks, which is fine, but he shouldn't have fluffed up his vitriol
by pretending like he has a scoop.

~~~
rayiner
He's not griping about banks, but rather private equity firms.

