The Downside of Capitalism

[MikeBjerum]

It is time to bring Tom Bogan back and get the lynching ropes out, because I say there is a downside to capitalism.

Every morning, Monday through Friday, I read an eight-page industry newsletter. Everyday there are releases about mergers and buyouts. Over the past two years I have watched as several of our competition have been swallowed up by the same investment group. It does make for tougher competition, but that isn't my concern.  I am frustrated by the business philosophy brought on by this ownership base.

First, all business exists for one purpose and one purpose only - To make a profit and return on investment for the owner. That is it. PERIOD, END OF STORY! However, as business are created there is a plan on how to make that profit. For Bill Ruger it was about creating firearms that he believed in. Whether you agree with Ruger's stance that he knew what was best and that there was no purpose behind customer feedback or focus groups, his company developed several excellent and popular firearms.

While Bill knew he needed a return to pay his employees, pay other bills, pay himself, and to build his wealth, his focus was on improving the popular firearms he produced and coming up with the next gun he thought the public would buy. Today the company is publicly traded with an investment group, Black Rock, being the highest holder. Business decisions are no longer made by the man who loves the industry and brand. Decisions are made by looking at the bottom of the balance sheet and stock value.

What happened to DPMS? A maker of AR rifles and accessories. A premium brand that held several military contracts due more to quality and receptiveness than low bid. Randy Luth sold out to an investment group who was swallowing up the AR market. DPMS brand virtually disappeared, and the proprietary innovation was either adapted into the other brands or eliminated due to cost cutting.

Founders retiring, dying, family losing interest, or a poor business decision or two lead to a need for ownership change. Often times these companies are too large to simply move from enthusiast to enthusiast, so income mergers and buyouts. But the sorrow in my heart is what happens to the heart of the business when it is absorbed by others more interested in taking advantage of swallowing up the competition or by groups simply looking to maximize their stock portfolio.

In my aging mind I ask the questions:

• Who will be the next entrepreneur?
  What will be their strong points?
  How will I participate in supporting them and their growth?
  How long will they last before being copied by a low cost junk maker?
  How long will they last before being bought up and eliminated?

[Rastus]

It seems as though all good things of men come to an end.  I've watched this process over the years and invariably someone rises up to fill the gap that was left by the mba's taking over...when the market is free.  As politicians get involved then things don't work out.  Food is a thing I've seen swing from great products and then an ownership switch...and how do they pay for their purchase...usually by cheapening ingredients and by reducing volume.  Did you guys notice that Sonic was bought out a couple of years ago...I did and I bypass them for the most part now.

What was DPMS's proprietary innovation by the way? 

[Diamondback]

We see the same thing at first Douglas and then Boeing, where the professional "lives depend on our work EVERY TIME" planebuilder culture was overpowered and destroyed by the McDonnell "Acceptable Loss" MBA's.

These are things that the Sherman Antitrust Act was passed for. It is worth noting that Randy Luth in particular got P.O.'ed enough to come out of retirement and build a new company doing parts the way DPMS USED to... I just backfitted one of his Rapidex knobs onto the Charger MWS because it uses A1 rear sight mechanicals, and since that's a pure "Bond Movie Fun Gun" I don't see Q Branch doing things with tiny fidgety lose-able tools that can be more easily adjusted with an integral knob on the sight.

[Rastus]

I worked for a wholly owned subsidiary of Boeing called Boeing Petroleum Services that managed and operated the Strategic Petroleum Reserve.  From what I perceived there was a lot of bravado based on aerospace competence that carried over without recognizing the square peg round hole issues.  A lot of the successful innovation on the airplane side fell short on the petroleum side...because of course many of us on the petroleum side were not smart enough to recognize the brilliance of implementing aerospace practices and relied upon 100 years of petroleum engineering practices...I suppose.  They did a great job of organizing...which was needed...but the engineering did not always fit.  Another thing I perceived is that the software people could do no wrong...that was in the early-mid 90's...and the software gurus seemed to get promoted on a fast track. 

[alfsauve]

There’s a downside or dark side to all economic systems.  It’s just a matter of which one you’re willing to put up with. 

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