Knock Off Artists

Knocking off another product line is an ancient practice, and Norman Lear has collected a yeoman group to compare the phenomenon in both fashion and music...

learcenter.org/pdf/RTSSinnreichGluck.pdf

(Note: the link goes straight to a .pdf download)

Lear’s group is anti-”intellectual property law” as any sensible person should be.  I would like to add some real world experience to the above academic review.  

The principle is “the who does the work ought to earn the money.”

Never mind that any idea is the result of all ideas that went before, and let’s just look at what is involved once one commits to investing time, talent and treasure in knocking off a design.

First the knock-off artist must believe there is a market.  The market is likely second rate in some way, discount stores, an owned chain, or some sort of assured selling method.  There are also the utterly delusional folks who believe that if they can just get the goods, they can make a killing selling.    These people are always wrong, because there is no such market.  These people could easily test their hypothesis by simply asking those they anticipate would buy if in fact they would buy.  But none take this step, many regret their original enthusiasm.  

(There is also the danger that such target market would encourage the neophyte knocker-off, with a view that when the goods actually arrived, to then decline to buy.  In distress, the knocker-off would be obliged to cut price, to the delight of the target customer.)

Let say the design is for a woman’s coat. First you must find a pattern maker who will charge a minimum of $500 to reverse-engineer the coat at the design spec-level. A factory needs explicit  and precise instructions as to every element (fabric, cut, size range, thread, stitch, buttons, etc...) in order to fill your order. The pattern maker can do that easily (and in fashion there is no IPR so no one cares if you are doing that....);  but you'll need to spec the fabric, even if it is "same as sample." It may take the pattern maker time and money to figure out what that fabric happens to be, but the pattern maker will do all of that, so you'll get exactly what you are looking for.

Excellent designers demand to be paid on a royalty basis because the more it sells the more they make, whereas the knocker-off has to pay up front for the patterns.  

Then you want to find the best factory to make your goods, likely overseas.  The first rate factories are the busiest, and are likely to decline a request to work for a knock-off artist since there is better business, longer term business working with the best USA designers.

There are plenty of reputable, honest second rate factories, but you get second rate work.  The knocker-off is most interested in cheapest price, so the expertise in cutting as many corners as possible and yet still arriving at “coat” is valued by the knocker-off.  The target customer in USA understands this.

In any event, the pattern makers specs need to be integrated into an order to the factory.   This part of the business is as complicated as hand surgery, but the factory is happy to assist you here.  Yet even with assistance, as one makes decisions, the inexperienced are at a loss to anticipate the results of the decisions, good or bad.  The Factory just needs a decision, and does not care abut the results, since the knocker-off is unlikely to economically survive the experience anyway. 

Here is a link to an expose of a sweatshop, of no particular interest, except for the fact they have some purchase orders docs that may be enlightening...

http://www.globallabourrights.org/reports?id=0639

(scroll down to see the purchase order...)  You will be obliged to achieve that level of complexity in writing an order.

So say all goes well, and time and treasure is now sunk in made up goods, then comes the reality of the challenges.  You will be up against all along the process the awareness that your project is as it is...  although you can have professional services all along, everyone will see this as a one shot deal and treat it accordingly.  The knocker-offs are making these fundamental errors.

1.  Underestimating the originators ability to respond to your entry into the market.

2. Overestimating your target market's willingness to work with you instead of the originator, due to lower price.

3. Overestimating the margins available if you do this (or underestimating cost, or overestimating sell price, or something in the costings somewhere...)  Are you well versed in "markdown dollars" and ad allowances, and other rag trade practices?  Cherry growers are happy to lose money for 6 years because they usually a seventh year makes it all worthwhile.  The rag trade is not that different.  The joke “the way to make a small fortune in this business is to start with a large fortune” originated in the rag trade.

4. You are underestimating your capacity to come up with something far better than this project.

So the idea that knock-off artists have it easy or should be somehow curtailed is obtuse.  They risk much in a very uphill battle.  They are likely to lose, and in any event, they do everything an originator must do, except draw some pictures, like in second grade.

The above is true for all industries and all knock-off activity.  The most important point is #4.  Although there is absolutely nothing wrong with knocking off other people in any moral or economic sense, the activity crowds out the time the knocker-off would be providing a genuine value in the marketplace.  They do 99% of the work, they should do the 1% more.

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World Trade Keeps Growing

The lads down at USCensus send along another happy report: world trade just keeps growing, what is a big import item?  Autos and parts.  And a big export item?  Autos and parts.  Full details at the link...

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Consumers To Be Denied Choice

Capitalism is designed to concentrate power in the hands of a very few, who then use this power to benefit themselves and harm others.  An example is the coming trade war with China over photovoltaic power.

From the article:

Presiding over a dispute that has fractured the renewable energy industry, federal trade officials could decide within days whether to levy steep tariffs on a flood of low-cost Chinese solar panels.



Why does the government have to get involved, and why are tariffs the solution?  Governments pick winners and losers, and in a system that is ordered along the lines of capitalism, the losers are the consumers.
The outcome could have far-reaching consequences for installers and consumers of solar energy systems – who have benefited from plummeting prices – and U.S. solar manufacturers, who have seen their profits pummeled.


Why do we tolerate this?  Here is the outrage in question:

The filing claims Chinese rivals – propped up by tens of billions in government subsidies – are “dumping” solar panels in U.S. at below fair value to seize market share and drive out competitors. The Chinese government aid ranges from cash grants to preferential loans to deep discounts on land, water, power and raw materials, the complaint alleges.


Can you say Solyndra?  There are 1000 more Solyndras in USA, at various sizes.  How come it is a crime for the Chinese to do it, but OK for USA to do it?  (Note the objection is Solyndra might be a case of political influence, not that USA gives a half billion in subsidies to USA companies...)

And so what if the Chinese were dumping solar panels: the tactic is stop making what they are giving away, and make what else is still needed.  And get those inexpensive, subsidized panels on USA roofs, installed by an army of small business contractors, who will be busy for years with service agreements. This is a works projects that costs the taxpayers not a dime, compliments of our friends in China.  It is sad that the only hope for American workers is the Communist Party of the Peoples Republic of China.

The data to support the complaint is compelling. China’s share of the U.S. solar panel market jumped from 8 percent in 2008 to 45 percent last year, and has risen further since. Chinese sales of solar cells and panels rose 135 percent, to $2.8 billion last year. And prices for solar panels in the United States have tumbled as much as 50 percent over the same span, to about $1 a watt.


How come this is ok for computers, but not ok for solar panels?

As a result, domestic solar panel manufacturers have been forced to idle production and slash at least 1,700 jobs – pains that will be more deeply felt unless the federal government levels the playing field, the complaint says.

The only companies that will idle workers are the capitalist companies that do not know how to make money without government protection.  This is a distinct advantage democrats have over republicans:  there are no republican businesses that do not depend heavily on government subsidies.  Although there are democratic biz that take subsidies, most free market businesses tend to be liberals.  Such businesses are already listening to the customers, so they know what to do given Chinese dumping.  Republicans go straight to emotional blackmail... "help us, or we'll hurt these workers!"  With republicans, it is always "hurt the workers."

Under federal trade law, the Commerce Department investigates complaints about dumping and unfair subsidies for imported products. The International Trade Commission, an independent, quasi-judicial federal agency, studies the effects of those goods on U.S. industries.

It is not independent.  It is the messenger, when the decision is made as to who wins and who loses.  A free market needs no such intervention.  With a free market we get more better cheaper faster.  But such a beneficial structure might lead people to wonder why they need a state for government.  Why, people might start thinking about freedom.

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Coming to a Store Near You

Someone found a chicken McNugget in his serving, which resembled the profile of George Washington on the United States quarter dollar coin.  He put it up for sale on eBay, and netted over $8,000.00.

This reminds of a story about massive crowds forming in the 1980s out side of a church in New York in which there was a statue representing the Blessed Virgin Mary, that had tears coming down the cheek of the statue.  The crowds grew and this made news, worldwide.  Pictures of ecstatic believers, crowding into the church on a sweltering day, reverently praying to a crying statue, were transmitted worldwide.

Some eager Chinese businessmen had taken to studying USA newspapers to see what they might make that would sell well in US.  Clearly from the news article, there was great demand yet an amazing shortage of statues of the Blessed Virgin Mary that cried.    Try as they might, they could find absolutely no one in USA, or anywhere in the world in fact, that sold statues of the Blessed Virgin Mary that "cried."  Undoubtedly their research was about to pay off.

The entrepreneurs consulted with master ceramicists on how it is done.  "No problem, just make pin-holes from the hollow interior of the statue out beyond the face, through where tear ducts would be. Next paint, glaze and fire with these tiny wholes clear.  Fill the statue with water, and insert a rubber plug.  Capillary action would do the rest, and the hotter the day, the more the tears (since the coefficient of warming water expands faster than warming ceramics, tears flow aplenty.)

So in all sincerity, and with a desire to meet the needs of the faithful second only to a Pope, these Chinese entrepreneurs created, packaged and offered into the USA market statues of the Blessed Virgin Mary "guaranteed to cry, or your money back!"

Imagine their chagrin when the market proved apoplectic.  Neither Smart & Final, Ruby Tuesday nor Big! Lots! were interested in the unsaleable item.

Lesson:  1. If you want something to sell in USA, it must be designed and tested in USA, by Americans.  You just cannot guess at these things.  And if you do not test, you are guessing.  The plural of anecdote is not science.

2. The reason the Catholic church expends so much effort disproving "miracles," more so than anyone else, is because it's members are too easily duped. Even after deciding such a thing may be worthy of reverence, the church requires no one to believe it.  The scientific community has no such formal challenge to goofy ideas, and seeks to destroy any academic who does not toe the line. Hence so much bad science is so widespread. Whether you believe in Science or Religion, a bit of skepticism can be very healthy.

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Jobs Explains How It is Done

Steve Jobs learned what I learned, that is what matters in business start up.  He teaches what he and I both learned and that is serve the customers, in the second video.  In the first video he talks about passion, and although he does not mention it by name, he talks about the joy.   Now everyone says "serve the customer" and "passion" but few create an integrated response mechanism to act on customer feedback.   So it is just words coming out.  And passion is pointless and useless without the joy of working on the solution.  Jobs had both.

And earlier, circa 1997, on customers...

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Thin May Be In - But Fat is Where It's At

Although it is getting harder and harder, you can find doctors you can trust to give you good advice, and long ago mine warned me away form bad fats like hey sell everywhere.  Raw butter and creams, raw milks, especially goat, and good fats like lard and poultry fats.  I won't touch the salad oils and crisco and cooking with olive oil at anything over low heat is not a good idea.  A wonderful oil/fat to cook with is duck. You can get a whole duck for about $12, which can easily serve four.  Then come two bonuses, the fat and the carcass.

I easily get a pint of fat from a duck, when drained off chills to a light brown color.  The other things from baking a duck make for a great gravy.  The organs I dice and throw in a meatloaf so I eat those too.  The fat is used to cook eggs, meat, anytime people normally use the Murder, Inc oils recommended by the government and it's lackeys in the medical profession.

If you want stunning white fat, cook a goose.  They run about $50 and need some work to get them to cook evenly, but well worth the trouble.  I do one for a holiday.  (And for the best pie crust, you cannot beat bear fat, I have it on good authority.)

Then the carcass. Boil it in a couple cups of water with herbs and some onion and garlic, and then when you have broth, drain it off and cook some rice in it.  When the rice is cooked throw in the already cooked bits of duck meat for a mean duck/rice soup.

For $12 you get four servings of duck, 2 servings of duck soup, and cooking fat for a month.

What we need is people packing and selling real lard and tallow, not the white death stuff they mislabel in stores today.

Hmmmmm... what's for dinner?

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As Empires Fade

From  lecture by a historian of Rome:

We could start with the class known as the decurions. This was your prosperous, small and middle landowning class who were the dominate elements of the cities of the Roman Empire. They were the class from which were chosen the municipal counsels, the municipal magistrates and officials. Traditionally, they had viewed service in the governments of their towns as an honor and they had responded to this by donating, not merely their time, but their wealth to the betterment of the urban environment: building stadiums and bathhouses and repairing the streets and providing for pure water. These were considered benefactions, it was a kind of philanthropic element and their reward was, of course, public recognition and esteem.

Read on to find out what happened to the small business people, and how these things go.  Another example of "escape to anarchy."

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How Recovery Happens

Mish has a story on a 55 room Irish seaside resort, that was sold at auction for $6 million a few years ago, and sold again of $860,000.  Auctions are normally for distressed owners, so whoever thought the price at $6 million was good, calculated wrong and had to take quite a haircut.

The buyer, who no doubt was smart enough to save money during the boom for just such an eventuality, announced he can keep the 25 employees on staff.  No doubt...  At $6 million the 55 rooms cost about $110,000 each, twice what a standard city hotel room costs in USA.  At $860,000 the rooms are a little over $16,000 each, about a quarter of the going cost.  The new owner will make better profits than his competitors charging less for comparable rooms.  When more dollars chase goods, we call it inflation.  When fewer dollars chase goods, we call it deflation.

Deflation, which our government works hard to fight, is a very good thing.  Yes, the person who foolishly paid 6 million for the hotel is no doubt out some money.  Perhaps a Warren Buffet is down $5.5 million.    But 25 people, make that 26 with the owner, are gainfully employed.

What we badly need is more of this.  This is an important aspect, facet, of recovery.  The sooner interest rates hit a natural level and the banks are no longer enjoying a continuous bailout, the important work of recover can begin.  The powers that be are counting on a new war to change the topic.  That usually works.

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