I hope I live long enough to see sales people eliminated. In solar, they contribute the least to the process yet gobble up 30% of the money. It is a total waste of taxpayer money, adoption would be a lot faster if we got rid of the greedy freeloaders
How is a salesman a waste of taxpayer money?
I'm not a big fan of fakes people. But some do add value. There are a lot of cases were the middleman is important.
In USA people get tax credits for installing solar. The cost of solar has gone down, the cost to the consumer has remained the same or increased. It is sales people eating up that margin, which is being paid for by tax payers
I don't think anyone is suggesting that salesmen be forbidden, only that it should also be allowable to sell directly. Tesla, for example, has showrooms where people can learn about vehicles and try them out. But they don't order via a salesman whose comp depends directly on how many upsells are made.
I think it depends on the industry. In a specialized niche (B2B), sure.
In something like new auto sales, all of the information is available online and is usually more comprehensive and accurate than that offered by a car salesman. YouTube probably sells more cars than car salesmen these days (in terms of locating a product that meets your needs and convincing you to buy it)
It is illegal for a manufacturer to sell you a car directly in about 30 states. Since it's based on anticompetitive state dealer laws, it is unlikely anytime soon; separate legislation in each state. My brother, ironically a lobbyist, tells me it's possible with federal legislation but congress is not brave enough, and the auto industry too powerful, for them to even try. Alas. It is likely to be this way for the foreseeable future.
This is another problem with the current institutions: improving any little thing can be such an insane slog. Unless it's a hot issue that doesn't really matter and that can get a lot of cheap press coverage.
At some point there was some hope for "lobbying as a service" - for example with EFF or ACLU - but that wave has mostly failed also.
> improving any little thing can be such an insane slog.
One of the possible improvements here is to make procedural changes that nobody in particular sees an obvious need to oppose, but that make good things easier.
For example, make it easier to repeal laws than pass them. Most legitimately good laws have broad public support and would survive. But controversial bullshit that only passed as a result of midnight shenanigans would be gone by the next open session and it would weaken the incentive for omnibus bills because the bad bits could be repealed piecemeal with less than the consensus necessary to pass the omnibus to begin with.
> At some point there was some hope for "lobbying as a service" - for example with EFF or ACLU - but that wave has mostly failed also.
The trouble here is that these organizations can move a certain number of votes, but not nearly as many as large media and tech companies through their control over content on their platforms. So when that's who's on the other side, you have problems.
Which is, in a sense, a technical problem. You could reduce their undue influence through legislation or government action, but that's chicken and egg. Whereas if you get people to stop using their platforms in favor of alternatives, they have less influence, and then they have less control.
There has been a meme for a decade or so that normal people don't care about things tech nerds care about and aren't going to make even minor sacrifices to gain an advantage over the institutions subjugating them. "There is no point in you doing it because you'll be alone." This meme is presumably promoted people who enjoy the status quo, because history is full of examples to the contrary, when people refuse to be indoctrinated into defeatism.
>normal people don't care about things tech nerds care about and aren't going to make even minor sacrifices to gain an advantage over the institutions subjugating them.
I've seen more and more laypeople variously complaining about google and meta doing not-great stuff with their personal info and undue societal influence. Frequently they say 'no one saw this coming' and I always try to rub it in that 'yes the linux[0] guys have been absolutely screaming about this since the 90s but you ignored them because they're geeky and uncool'.
[0]FOSS guys is more correct, but normal people don't know that term, nor would they understand it.
Does the auto industry like dealers? One of Tesla’s two best differentators is its direct sales model. If I could buy a Mach E directly from Ford that would raise its value like 20% for me.
Yes because I’ll avoid markups raising the price and save days or weeks searching for the model I want, comparison shopping, negotiating.
I won’t necessarily stand by 20 if I actually ran the numbers, but if I had an option between a dealer’s 50k and Ford’s 50k+ the dealer would need to get me that car on day one before I would give up and pay extra to Ford.
Same deal with CarMax: Oh you have the car you say you have and it’s the price you say it is and it costs a bit more?
I’d pay thousands more to be able to actually choose the options I want instead of being forced to take packages, especially when they artificially limit choices for no apparent reason.
“Oh, you can have the off-road package OR the heated seats” - why can’t I have both? Just bolt the heated seats into the off-road model!
The amount is already being spent — but it's spent in the much more valuable currency of time right now.
Buying a car is a nightmarish process of emailing/calling dealers, making the rounds (often in person) to see what variations/colors are in stock, building spreadsheets of numbers, sanity-checking prices by surfing various online forums, and eventually facilitating your own personal local bidding war to decide which dealer gets your business.
It takes weeks — and, even after that's done, the actual process of physically buying the car is another multi-hour slog of paperwork, shuffling through an endless series of drab fluorescent-lit offices as you physically sign things on literal pen and paper like a caveman. Why?
There's no rational reason that buying a car can't be as easy as buying anything else online. It should be about as much work as ordering a pizza — go to the web site, pick your options, punch in your credit card number, and get a live tracking page that shows your order being put together and then delivered to your door in realtime.
I think most people would gladly pay a healthy premium to have that kind of streamlined experience instead of having to endure their own personal multi-week Homeric odyssey.
Ok, you can pay the healthy premium and streamline the process by removing all of the bits that you’ve deemed necessary but aren’t.
If I asked you to buy a certain vehicle today and gave you MSRP+20%, I’m sure you’d drive off the lot today, with plenty of time to do other things.
I’ve watched someone walk onto a showroom floor and buy a car from the lot like that. It wasn’t too complicated. You’re complicating it if you’re actually willing to pay the premium.
I guess not everyone knows about it, but someone does offer it. On tesla.com you can order a car in about 5 minutes including the time it takes to put in your email and choose a password.
> The amount is already being spent — but it's spent in the much more valuable currency of time right now.
> It takes weeks
This doesn't jive with your willingness to spend 20% more for the same car as a direct sale.
The dealer experience can take weeks if you want it to, because you want to comparison shop and negotiate to the last penny. Some people enjoy this (I hate it).
But if you're willing to pay more, you can be in and out in an hour. Walk to the closest dealer, point at a car and say you want it and will pay the price in the window sticker. Zero searching or negotiating, fill paperwork and drive out. It won't even cost you +20% over the best negotiable price, although you will pay a bit extra for the convenience.
If dealers actually add a value they don’t need a law to protect them from direct sales. And if they don’t it’s just a lawful money extortion. Why such laws do exist?
The problem is (also) laws that will "just solve the problem right up". The premise that laws solve problems is false.
A perhaps reasonable compromise would be to (1) not "solve the problem right up" until there is some solid evidence of both the problem and that the law would help it. In general that would require waiting for, indeed, evidence, before passing laws. Which would require not passing laws when the issue is still hot. And (2) making these laws temporary so that they might actually require evidence before becoming entrenched. Including preventing rubber-stamping a law into its next 10 years.
Probably none of which makes sense anyway as long as "riders" exist. The current system is ridiculously corrupt and broken.
The premise is not "always"... if anything, the premise is rathar that in this case it produces better outcome for the costomers?
Also, the mechanism is explicitly outlined (of cause very briefly) in the comment, so no need to resolve to premises. If you do have something concrete to counteract and add for the discussion, that would be awesome!
I think I get your point and I kind of agree, but one nit about phrasing:
> those who add value
There's a concept of "value-add" intermediary, and it pretty much universally means reducing value for the customer. Car dealerships are a typical example.
I'm torn on this. On the one hand, it makes sense in theory that excessive vertical integration is bad for society, and local businesses are good for society. On the other hand, I observe that in practice, competitive markets are subject to Gresham's law[0] - the shitty ones win over the good ones. So it follows, and something I also observed to be good as a heuristic, that the more layers of competing intermediaries you add, the shittier it gets for the customer.
> There's a concept of "value-add" intermediary, and it pretty much universally means reducing value for the customer. Car dealerships are a typical example.
That nonsensical. Dealerships of course add value, they allow you to actually see and test drive the car, they physically deliver the car, and they fix the car.
You could argue that the value is not worth the cost. Maybe so. But middlemen almost always add some value. And that’s independent of the more meta-value, which is providing a check against the market power of manufacturers.
> Your comment contains the unstated premise that market forces always produce efficient outcomes.
> That premise is false.
"Markets are efficient" is not a law of physics, it's a heuristic. Given the free choice between two alternatives, people will tend to prefer the one which is to their advantage.
There are cases where that isn't true. Market concentration, collusion, regulatory capture, information asymmetries etc. But if you're going to assert that one of these is the case, you should be ready to explain the failure mode and how your proposed solution is the best way to address it.
In particular, most of the failure modes have known solutions. In case of market concentration, break them up. In case of regulatory capture, remove the rules that benefit incumbents. In case of information asymmetry, labeling and consent requirements etc.
"Middlemen are required by law to participate in the transaction" bears a far closer resemblance to something that would cause market inefficiency than prevent it, so if you're going to respond with "markets aren't always efficient" in response to that, let's hear your reasoning for why that would increase efficiency in this case.
> "Middlemen are required by law to participate in the transaction"
This is a non-standard way of describing the concept here.
The actual concept at work is a prohibition against vertical integration.
There are plenty of examples of why this can be a problem dating back to the original Standard Oil trust that’s the archetypal example which spawned the need for antitrust laws.
A very clear example of laws against vertical integration is finance, where it’s just illegal to operate without middlemen. For example one firm can’t be a broker, dealer, and custodian of assets all at once. For very good reasons.
We’re seeing plenty examples of vertical integration being a problem today. One example is Amazon, another is pharmacy PBMs owned by insurers.
Maybe it’s an issue in this example as well, maybe not. But consolidation leads to market power and concentration and market power and consolidation are the main barriers to free markets in the US today.
Which means the original comment I’m responding to is just ideological blindness. The way to answer questions like this is by determining the actual consequences, not assuming a spherical cow.
> The actual concept at work is a prohibition against vertical integration.
Vertical integration is when you have two plausibly separable products that the maker requires you to buy both together. A good example in this context would be cars and car repair services. A law that prohibited automakers from locking out independent repair shops would be a completely different thing.
Whereas "cars" and "car sales" aren't really separable markets -- it's just a single product and the act of purchasing it.
> The way to answer questions like this is by determining the actual consequences, not assuming a spherical cow.
The point is that a cow may not be a perfect sphere but it's still kinda roundish and suitable for use as a first approximation. At which point you need to articulate not that the map isn't the territory (which everybody knows) but rather why the differences are relevant in this case.
There's a legend that General Motors tried direct sales way back when (when they had >50% of the market), and lost their shirts in the process. Traditionally, the domestic manufacturers would push as much product as they could onto the dealers, who then would pay them finance rates to 'floor' the cars until they were sold. So this was a mutually beneficial arrangement.
These laws come from a very different time. The original theory was that:
1) it's an easy way to do antitrust without breaking up the economics of scale in the manufacturing side
2) dealers would keep money locally / respond to local consumer demand better and
3) dealers were smaller entities that would negotiate better with consumers because they wouldn't have a monopoly on local supply of a manufacturer's vehicles
None of these are regularly true today (and it's questionable how true they were at the time). There are far more viable automakers than when this regulation was originally passed and dealers don't offer better pricing or try to meet local demand more than manufacturers. Dealerships also typically aren't small local businesses anymore, but instead large corporate chains whose owners may live just as far away as the OEM.
Don't know what it's like in the US, but here in Australia we have a huge industry of independent mechanics - on the scale of maybe 10-20 independents for every one dealer.
We have that in the US, but the quality can vary from exploitative and/or incompetent to better than the dealer. They especially like to take advantage of women and visible minorities.
There's that stereotype in Australia (more women than visible minorities, good luck scamming an Indian dad), but I'm not sure how true that is. Every mechanic we've been to has been honest and respectful with my wife, and generally half the price of the dealer.
I've seen enough accounts and had enough myself to know it's more than a myth. They'll "huh, looks like you're right" and do the needed cheaper repair if you know enough to call them on it, but you have to know enough to call them on it.
>Cars used to require an absolutely huge amount of regular maintenance
To a degree ICEs still do. Check the recommended service intervals in the user manual on a modern car. You basically need to visit the shop at least every year or sometimes every 6 months.
Obviously the sky won't fall if you don't do it as often as they recommend and the car will run just fine, but then you're voiding your warranty in case something breaks.
Thats a far cry from when they used to check your oil every fill up (because your car was definitely consuming it). You had you had to grease mechanical joints on the body and suspension every 1k miles - now those are all sealed.
Although when considering the original theory, it should be noted that the US's global manufacturing leadership in cars collapsed. It moved form the States in 1950 to Asia - first Japan, then China.
If the US consumers having cheap cars was a goal (which, implicitly, is what those 3 dot points support) it would seem that US policies were ineffective. If anything, car prices depend on labour costs and the dealership structure is a sideshow.
Car dealers generate tremendous profits for themselves due to regulatory capture. As an example, UT Austin's McCombs school of business is named after a car dealer in San Antonio.
It really says something about how broken US politics are. Removing these bans would benefit basically everyone who doesn't own or work for a dealership. A quick google search says roughly 1M people work for car dealerships (a number that is kind of staggering actually, and is likely that large because of how much money is artificially funnelled into it due to the regulation). I suspect we can neglect the number of people who own dealerships. With 300M people in the US, that's 1:300 in favor vs against this regulation. And yet because the real votes in the US are cast with dollars, not ballots, this will likely never change.
US laws and constitutions were created to stop tyranny by making it very difficult to change anything. The result is most laws need a supermajority to pass.
That's probably good at stopping bad laws, but it really stops all laws.
IMO a sideeffect of this is that because courts create law by simple majority, they are often the only body capable of changing anything. As a result, we have politicized courts deciding things that should really just be legislated.
If there was one thing I could change about American law it would be to make it easier to change the law, including constitutional amendments.
TIL Tesla opens their service centers on Native American land to get around these rules in New Mexico. New Mexico doesn't allow dealerships or service centers that are manufacturer owned.
68 comments
[ 4.9 ms ] story [ 147 ms ] threadA more recent analysis can be found in the work of Professor Dan Crane of U. Michigan
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3796359
https://profdancrane.com/direct-distribution/
And the Federal Trade Commission from 2015.
https://www.ftc.gov/enforcement/competition-matters/2015/05/...
One could argue that sales adds the most value to the process.
In something like new auto sales, all of the information is available online and is usually more comprehensive and accurate than that offered by a car salesman. YouTube probably sells more cars than car salesmen these days (in terms of locating a product that meets your needs and convincing you to buy it)
At some point there was some hope for "lobbying as a service" - for example with EFF or ACLU - but that wave has mostly failed also.
One of the possible improvements here is to make procedural changes that nobody in particular sees an obvious need to oppose, but that make good things easier.
For example, make it easier to repeal laws than pass them. Most legitimately good laws have broad public support and would survive. But controversial bullshit that only passed as a result of midnight shenanigans would be gone by the next open session and it would weaken the incentive for omnibus bills because the bad bits could be repealed piecemeal with less than the consensus necessary to pass the omnibus to begin with.
> At some point there was some hope for "lobbying as a service" - for example with EFF or ACLU - but that wave has mostly failed also.
The trouble here is that these organizations can move a certain number of votes, but not nearly as many as large media and tech companies through their control over content on their platforms. So when that's who's on the other side, you have problems.
Which is, in a sense, a technical problem. You could reduce their undue influence through legislation or government action, but that's chicken and egg. Whereas if you get people to stop using their platforms in favor of alternatives, they have less influence, and then they have less control.
There has been a meme for a decade or so that normal people don't care about things tech nerds care about and aren't going to make even minor sacrifices to gain an advantage over the institutions subjugating them. "There is no point in you doing it because you'll be alone." This meme is presumably promoted people who enjoy the status quo, because history is full of examples to the contrary, when people refuse to be indoctrinated into defeatism.
I've seen more and more laypeople variously complaining about google and meta doing not-great stuff with their personal info and undue societal influence. Frequently they say 'no one saw this coming' and I always try to rub it in that 'yes the linux[0] guys have been absolutely screaming about this since the 90s but you ignored them because they're geeky and uncool'.
[0]FOSS guys is more correct, but normal people don't know that term, nor would they understand it.
I won’t necessarily stand by 20 if I actually ran the numbers, but if I had an option between a dealer’s 50k and Ford’s 50k+ the dealer would need to get me that car on day one before I would give up and pay extra to Ford.
Same deal with CarMax: Oh you have the car you say you have and it’s the price you say it is and it costs a bit more?
“Oh, you can have the off-road package OR the heated seats” - why can’t I have both? Just bolt the heated seats into the off-road model!
Buying a car is a nightmarish process of emailing/calling dealers, making the rounds (often in person) to see what variations/colors are in stock, building spreadsheets of numbers, sanity-checking prices by surfing various online forums, and eventually facilitating your own personal local bidding war to decide which dealer gets your business.
It takes weeks — and, even after that's done, the actual process of physically buying the car is another multi-hour slog of paperwork, shuffling through an endless series of drab fluorescent-lit offices as you physically sign things on literal pen and paper like a caveman. Why?
There's no rational reason that buying a car can't be as easy as buying anything else online. It should be about as much work as ordering a pizza — go to the web site, pick your options, punch in your credit card number, and get a live tracking page that shows your order being put together and then delivered to your door in realtime.
I think most people would gladly pay a healthy premium to have that kind of streamlined experience instead of having to endure their own personal multi-week Homeric odyssey.
If I asked you to buy a certain vehicle today and gave you MSRP+20%, I’m sure you’d drive off the lot today, with plenty of time to do other things.
I’ve watched someone walk onto a showroom floor and buy a car from the lot like that. It wasn’t too complicated. You’re complicating it if you’re actually willing to pay the premium.
> It takes weeks
This doesn't jive with your willingness to spend 20% more for the same car as a direct sale.
The dealer experience can take weeks if you want it to, because you want to comparison shop and negotiate to the last penny. Some people enjoy this (I hate it).
But if you're willing to pay more, you can be in and out in an hour. Walk to the closest dealer, point at a car and say you want it and will pay the price in the window sticker. Zero searching or negotiating, fill paperwork and drive out. It won't even cost you +20% over the best negotiable price, although you will pay a bit extra for the convenience.
That premise is false.
If you want to assess the value of car dealers you’ll have to use evidence rather than ideology.
A perhaps reasonable compromise would be to (1) not "solve the problem right up" until there is some solid evidence of both the problem and that the law would help it. In general that would require waiting for, indeed, evidence, before passing laws. Which would require not passing laws when the issue is still hot. And (2) making these laws temporary so that they might actually require evidence before becoming entrenched. Including preventing rubber-stamping a law into its next 10 years.
Probably none of which makes sense anyway as long as "riders" exist. The current system is ridiculously corrupt and broken.
Also, the mechanism is explicitly outlined (of cause very briefly) in the comment, so no need to resolve to premises. If you do have something concrete to counteract and add for the discussion, that would be awesome!
The premise basically states that those who add value cannot be exploited, marginalized, or excluded from the system.
In real life of course they can, via market power, political power, violence, deception, or many other forces.
It happens daily, probably to you or your family.
> those who add value
There's a concept of "value-add" intermediary, and it pretty much universally means reducing value for the customer. Car dealerships are a typical example.
I'm torn on this. On the one hand, it makes sense in theory that excessive vertical integration is bad for society, and local businesses are good for society. On the other hand, I observe that in practice, competitive markets are subject to Gresham's law[0] - the shitty ones win over the good ones. So it follows, and something I also observed to be good as a heuristic, that the more layers of competing intermediaries you add, the shittier it gets for the customer.
--
[0] - https://en.wikipedia.org/wiki/Gresham%27s_law - "Bad money drives out good".
That nonsensical. Dealerships of course add value, they allow you to actually see and test drive the car, they physically deliver the car, and they fix the car.
You could argue that the value is not worth the cost. Maybe so. But middlemen almost always add some value. And that’s independent of the more meta-value, which is providing a check against the market power of manufacturers.
> That premise is false.
"Markets are efficient" is not a law of physics, it's a heuristic. Given the free choice between two alternatives, people will tend to prefer the one which is to their advantage.
There are cases where that isn't true. Market concentration, collusion, regulatory capture, information asymmetries etc. But if you're going to assert that one of these is the case, you should be ready to explain the failure mode and how your proposed solution is the best way to address it.
In particular, most of the failure modes have known solutions. In case of market concentration, break them up. In case of regulatory capture, remove the rules that benefit incumbents. In case of information asymmetry, labeling and consent requirements etc.
"Middlemen are required by law to participate in the transaction" bears a far closer resemblance to something that would cause market inefficiency than prevent it, so if you're going to respond with "markets aren't always efficient" in response to that, let's hear your reasoning for why that would increase efficiency in this case.
This is a non-standard way of describing the concept here.
The actual concept at work is a prohibition against vertical integration.
There are plenty of examples of why this can be a problem dating back to the original Standard Oil trust that’s the archetypal example which spawned the need for antitrust laws.
A very clear example of laws against vertical integration is finance, where it’s just illegal to operate without middlemen. For example one firm can’t be a broker, dealer, and custodian of assets all at once. For very good reasons.
We’re seeing plenty examples of vertical integration being a problem today. One example is Amazon, another is pharmacy PBMs owned by insurers.
Maybe it’s an issue in this example as well, maybe not. But consolidation leads to market power and concentration and market power and consolidation are the main barriers to free markets in the US today.
Which means the original comment I’m responding to is just ideological blindness. The way to answer questions like this is by determining the actual consequences, not assuming a spherical cow.
Vertical integration is when you have two plausibly separable products that the maker requires you to buy both together. A good example in this context would be cars and car repair services. A law that prohibited automakers from locking out independent repair shops would be a completely different thing.
Whereas "cars" and "car sales" aren't really separable markets -- it's just a single product and the act of purchasing it.
> The way to answer questions like this is by determining the actual consequences, not assuming a spherical cow.
The point is that a cow may not be a perfect sphere but it's still kinda roundish and suitable for use as a first approximation. At which point you need to articulate not that the map isn't the territory (which everybody knows) but rather why the differences are relevant in this case.
maybe Ford wanted to avoid antitrust lawsuits and promoted a car store to dilute their participation?
I’m curious
1) it's an easy way to do antitrust without breaking up the economics of scale in the manufacturing side
2) dealers would keep money locally / respond to local consumer demand better and
3) dealers were smaller entities that would negotiate better with consumers because they wouldn't have a monopoly on local supply of a manufacturer's vehicles
None of these are regularly true today (and it's questionable how true they were at the time). There are far more viable automakers than when this regulation was originally passed and dealers don't offer better pricing or try to meet local demand more than manufacturers. Dealerships also typically aren't small local businesses anymore, but instead large corporate chains whose owners may live just as far away as the OEM.
To a degree ICEs still do. Check the recommended service intervals in the user manual on a modern car. You basically need to visit the shop at least every year or sometimes every 6 months.
Obviously the sky won't fall if you don't do it as often as they recommend and the car will run just fine, but then you're voiding your warranty in case something breaks.
Old cars needed a ton of work frequently.
Check out this 1950s car owners manual: https://chevy.oldcarmanualproject.com/chevyowner/50om22.htm
If the US consumers having cheap cars was a goal (which, implicitly, is what those 3 dot points support) it would seem that US policies were ineffective. If anything, car prices depend on labour costs and the dealership structure is a sideshow.
Not always true. The value-add could be a positive externality/hard to monetize.
https://www.mccombs.utexas.edu/about/the-mccombs-difference/....
That's probably good at stopping bad laws, but it really stops all laws.
IMO a sideeffect of this is that because courts create law by simple majority, they are often the only body capable of changing anything. As a result, we have politicized courts deciding things that should really just be legislated.
If there was one thing I could change about American law it would be to make it easier to change the law, including constitutional amendments.
https://www.youtube.com/watch?v=wnbTem-8q8U
https://en.wikipedia.org/wiki/Namb%C3%A9_Pueblo,_New_Mexico#...