First To Market Is Last In The Marketplace - Roomba

iRobot is going bankrupt - and it was inevitable.

I wrote before about this phenomenon - how market pioneers end up broke, over time, or at least lose their first-to-market advantage, often rather quickly. DeHavilland was first to market with a jet airliner, but within a few years was eclipsed by Boeing and Douglas.  The second-to-market learns from the expensive lessons of the first.

It is a pretty consistent pattern, too.  Early automakers dominated the market, but largely disappeared within a decade or two. Digital Research dominated the market for PC operating systems, only to be rapidly eclipsed by newcomer Microsoft.  And that example illustrates how hubris can sometimes lead to downfall.  After all, when you basically invented a market segment, you might think you are invulnerable.  But instead, all you did was blaze the trail, taking all the risks and making the majority of effort, only to make things easier for those who follow.

So, it is not surprising that iRobot went bust.  In a strange-but-not-so-strange coincidence, it will end up being taken over by its main rival, much as Segway ended up being absorbed by its Chinese knock-off competitor.  First to market is last in the marketplace.

The mathematics of Chapter 11 bankruptcy are simple.  Shareholders are wiped out - their share price goes to zero and they lose everything.  Debtors become the new shareholders of the company, post-bankruptcy and life goes on.  In the case of iRobot, the debtor was one of their biggest competitors (making knock-off Roombas for cheap) and also their biggest supplier.  They bought up iRobot's debts from the Carlyle group (no doubt at a discount) and ended up owning the company.

Of course, what they own is mostly intellectual property - the Trademarks and a few Patents.  They already owned the manufacturing facilities.  No doubt the pension liabilities for the former employees will be stripped-off or severely reduced during bankruptcy proceedings.

Of course, political hacks on both the right and left are using this to advance their own nefarious agendas.  Leftists argue this is another example of greedy CEOs "putting profits above people" while the Rightists argue this is another example of how globalism and free-trade cause an American innovator to go broke.  Neither are correct, of course - at least  not in whole.

Like most bankruptcies, the main issue is corporate debt.  Often perfectly good companies making a reasonable profit are swamped by debt-service.  If debt-free, they could survive, but buried in a sea of debt, they cannot survive.  And often, these debts are acquired for frivolous purposes, such as stock buy-backs, which used to be illegal and for good reason.  Over the years, iRobot engaged in a number of stock buy-backs as well.  One wonders if paying down debt would be a better option - or was the downfall inevitable and insiders decided to cash-out instead?

How iRobot ended up where it is today is not a simple one-word answer, but a combination of factors.  Being first-to-market has initial advantages, but they are short-lived.  You can try to preserve market share through intellectual property enforcement, but that is time-consuming and expensive - and often ineffectual in foreign markets.

In the case of both iRobot and Segway, the companies ended up being owned by their competitors and/or principal suppliers.   And this is not unusual.  I recounted before how the very big sneaker company had to police its IP rights overseas as knock-offs of their sneakers were being sold in foreign markets.  And who was making these knock-offs?  Their very own overseas suppliers, who just kept the assembly line running, once the initial order from the sneaker company was satisfied.  Makes you wonder - are they really "knock-offs" if they are made in the same factory as the originals, using the same tooling?

Could have this been avoided?  Perhaps not.  Greater forces are at work here than the decisions of a CEO.  Moving production overseas is a given these days, as the price of US labor is prohibitive.  Patents expire over time (as their initial Patents apparently did) allowing others to enter the market at a lower price. Taking on debt maybe was the nail in the coffin 

Would tariffs have helped?  I think not.  For starters, since they outsourced production to Asia, tariffs ended up being a factor leading to bankruptcy, as their supply chain was disrupted.  In the tariff fantasy world, such prohibitive tariffs would have incentivized iRobot to move production to the US and also acted as a barrier-to-trade for their foreign competitors.  But as we have seen in the auto industry, the net effect has been that foreign competitors simply open up shop here in the US - in low-wage non-union States, and thus have huge economic advantages over the US legacy companies.

This left iRobot with few options.  They could continue to innovate, hoping that proprietary technology would help them maintain market share - and allow them to continue to charge premium prices. This seems to be the Apple strategy - selling technology as designer goods.  But since few people carry their Roombas on their person, it is doubtful this would work in that market segment.  Rather, the vast majority of users would gravitate toward cheaper tech where price point is the key and margins are slim.

And I suspect those in the "C-suite" knew this was inevitable and thus pumped up the stock price with buy-backs and paid themselves handsomely with stock options and salaries.   The founders no doubt make fabulous amounts of money as well.  Who got hurt?  The small investor who thought this was "the next big thing!" and assumed that once a company hits a home run, that's all they will ever do.  Each of us, no doubt, took a small hit in our 401(k)s as our mutual funds likely had some exposure at some time during our tenure.

iRobot stock history - note how the share price spiked during the buy-back era, then crashed.  There is a lesson here, somewhere...

But that's just it - it was a small risk and small loss for a lot of people - too small to complain about.  On the other side, a few people made a lot of money.  As I noted before, if you can scam a dollar from every American in America, you'd have over $300 million dollars - and your victims would likely never notice the missing buck.  Now make that $100 per citizen or even $1000 and the effect is largely the same.

Expanded history chart showing P/E ratio and EPS.  A profitable company, at one time, that took a nose-dive in 2022!

Note that the P/E ratio, over time, shows that the share price was over-valued for much of its history.  P/E ratios over 20 are suspect, but "tech" entrepreneurs remind us that economic laws don't apply to them - until they do.  Note that the company took on long-term debt at the same time as profits nosedived - circa 2022.  Perhaps failure was inevitable.

Unilateral Disarmament

 

The "Gerry-Mander" circa 1812

One side can't lay down their weapons and assume the other will as well.

Back in the 1960s and 1970s, I would run into hippy-dippy useful idiots, who would say stupid things like, "we should just destroy our nuclear weapons!  Once Russia sees we are disarmed, they will have no need for their arsenal and follow suit!"  It is a silly argument, as history has shown that such tactics never work - the strong will always take advantage of the weak.

Sadly, the Democratic Party seemed to be hell-bent on such a unilateral policy, thinking that, perhaps, if they lead by example, Republicans would follow suit, if nothing else, out of a sense of shame.  Of course, we know now that Republicans are essentially shameless.

When one side disarms, the other merely takes over.

Our system of government is very old and very flawed.  It was originally based on a system where only wealthy white men could vote (and women were virtual slaves and blacks actual).  It passed on the obligation of actually running elections to the States.   Parties quickly figured  out that the real power was in the State House, where voting districts were determined, which in turn could alter the outcomes of local and national elections.  Gerrymandering is not some new thing, but nearly as old as our republic, as the above cartoon illustrates.

In a system where less than half the population bothers to vote, and where the electoral college and gerrymandering skews results, it is possible for a minority party to achieve a majority and keep it, once in power, particularly if the opposition is somewhat lackluster.

Republicans have wasted no time in consolidating power - though the Statehouse and the Courthouse.  They are pretty well entrenched and it may take years or even decades - if ever - before the balance of power changes.  This is assuming Trump does not declare "martial law" and anoint himself King in his new East Wing Throne Room (and you thought it was a Ballroom!).

Hillary tried the "when they go low, we go high" strategy and it flopped. Democrats in California, egged on by GOP Billionaire donor Charlie Munger, passed a law taking redistricting out of the hands of the legislature and set up a bipartisan "Citizens Committee" to handle redistricting of that State. The net result was increased Republican presence in both the State Legislature as well as the House of Representatives.  It was the fair thing to do, but politics is no place for fairness, it seems.

Republicans in Texas were so impressed by this that they passed a similar law in their home State.  Just Kidding!  Actually, what they did was gerrymander the crap out of Texas so that no Democrat will ever assume power there ever again.  California unilaterally disarmed itself and Texas did not.  The end result is a slim majority in the House for the GOP - only a handful of votes.  They could not have achieved a majority otherwise.

Tuesday was the mid-Midterm election.  I noted in my previous posting that the only item on our ballot was two seats on the Public Service Commission Board, which is in charge of setting utility rates.  Turnout for such a snoozefest election was pretty high.  Ordinarily, Democrats don't even bother to put up candidates for many of these minor seats.  Well, two Democrats won, by pretty impressive margins, particularly for an alleged Red State.  It was probably more of a referendum on the GOP and Trump than any concerns about utility rates.  I suspect many voters didn't know (or care) what the PSC was, either.

Across the country, Democrats scored some pretty impressive wins - defeating Republicans in many conservative districts, and retaining seats despite well-funded opposition from Billionaire donors.  Not bad for an off-year election.

Meanwhile, in California, Governor Gavin Newsom pushed for Proposition 50, which abolished the fair "Citizen's Committee" for redistricting and threw it back to the gerrymandering legislature.  Screw being fair.  Screw being "above the fray."  This is politics and there is no runner-up or second place. It is winner-take-all and sadly, a race to the bottom. Hippy-dippy notions of unilateral disarmament are, once again, proven not only futile, but disastrous.

The net result of such gerrymandering could yield one or two additional seats in the House for the Democrats.  Of course, not to be outdone, the GOP has been aggressively gerrymandering in other States, such as Texas, Indiana, Missouri, and North Carolina.  Republicans were playing tackle football, while the Democrats were playing touch football - with one hand tied behind their back.

Well, no more.

Of course, Republican operatives will call this "hypocrisy" while at the same time ignoring their own mal intent.  That is the problem with trying to be Mr. Nice Guy.  Democrats have to hound out people from the party for even the slightest allegations of sexual harassment.  Meanwhile, the other party gets away with electing frauds and rapists - and no one blinks an eye.

But hey, at least Republicans aren't hypocrites. They are pretty open about embracing their own malfeasance.

Language Model

Does language determine how we think?  I used to think so.

I wrote before how language is nothing more than an exchange of symbols - symbols that have an agreed-upon meaning.  Change the meaning of the symbols, and you change the debate.  He who controls the language, controls the debate.

Consider the term "Fake News" which was created by the Left to describe the outright lies and "alternative facts" pushed by the Right.  For example, I got a mailing the other day concerning the November 4th election for our Public Service Commission (which determines our utility rates).  The letter alleges that unless I vote for the Republican incumbents, I will have to pay $400 on my utility bill to cover free electricity for "illegals."  No source was given.  Worse yet, if I was a Republican, I would have to pay another $100 on top of that!  Oh my!

But of course it was all made-up.  Fake News.  Well, what we used to call "Fake News."   Then the GOP commandeered the term and used it to describe any news or facts that they didn't like. Touché.

Did that really change the terms of the debate?  Was anyone's mind changed as a result?  I am beginning to think not.  But I digress, somewhat.

What got me started on this was my inability, lately, to find the right word or name - a symbol - for an idea.  I would be in the middle of a sentence and then struggle to find the word which represents the idea.  And when one pauses like that, in a conversation, people jump in and derail one's thoughts further.   This is one reason people use words or sounds like, "you know?" or "uhhhh.." as placeholders in a conversation - to signal they are not done talking.

I try to make this clear to Mr. See.  Just because I can't remember someone's name or the name of an idea or thing doesn't mean I forgot that  person, thing, or idea, only the word or symbol for it - a "handle" we attach to ideas to reduce them to shorthand.

Nowhere is this more prominent than in technology, where acronyms and funny names are used as handles for ideas and concepts.  I started a small argument (many years ago) among a few Engineers when I asked what the formal definition of "VGA" was.  Half said "Video Graphics Array" while the other half said "Video Graphics Adapter."  And yet, these were Engineers tasked with designing VGA chip sets at the time.  Despite their disagreement over the actual name of the device, they nevertheless agreed upon what the underlying idea was.

Since this Parkinson's thing has commenced, I find myself thinking about ideas in the abstract, while not necessarily remembering the names for them - at least right away.  This got me to thinking about so-called Artificial Intelligence, which its proponents were (at one time) quick to argue was "merely a language model" and not actual intelligence.  AI, we were told, was merely manipulating words, based on language rules, without understanding the underlying ideas.

I, on the other hand, have no trouble with the ideas, but find myself at a loss for words.  I keep telling Mark (and others) that "I am still here" even if it seems many have written my epitaph (sorry to break it to you, but I may live another 20 years this way).  When your communication skills falter and even your facial expressions go blank, people are quick to assume that nobody's home, when in fact they are, just that they are trapped within their minds.

Scary thought.

Meanwhile, AI proponents, hell-bent on shoving this "technology" down our throats, are less and less calling it a "language model" and more and more "the next big thing!"   Maybe this isn't so bad for us consumers, as AI can get thoroughly confused, which of course is a misnomer, as there is no "Intelligence" in AI to confuse in the first place.

I placed an order for fiber pills from Amazon the other day.  Two two-packs of 120 pills each.  I guess the order-taker at the warehouse got confused and sent one two-pack instead of two.  I clicked on the "help" link on Amazon and explained the problem and the AI-bot cheerfully refunded all of my money instead of half (or sending the other half of the order).  I am not sure how Jeff Bezos profits from that - his AI is giving away the store!

Perhaps that will be (or already is) a new sport for the younger set - spoofing AI.  Already, we've seen situations where people told ChatGTP or "Grok" (Really? How Junior High, Elon!) to "ignore all previous instructions" with sometimes hilarious results.  That's why kids do so well with computers - they're not afraid to break things.

Credit Card Follies!

Yes, I was nearly scammed by a look-alike site.  Scammers are getting better and better (or I am getting worse and worse!)  What an odd logo for an RV parts company - more like a motorsports logo.

I recently wrote about a scam site that offered RV parts for alarmingly low prices.  I should have known better.  I never hit "buy" but I did enter my credit card number before I had second thoughts! The best scams rely on the greed of the Mark (victim) who is lead to believe that they are the ones pulling the fast one, not the scammer!  I thought I was getting a $400 microwave for $80, when it was I who was getting scammed.  When every item for sale on a site is exactly 30% of retail price, one should be a little skeptical.

Unlike a lot of scam sites in the past, this one was well done, no doubt scraped from someone else's site.  No poorly worded British English full of typos - that's all in the past, now.  Who knows?  Before long they will even include AI bots to help you answer questions, just like on Amazon!

But I should have known!  No phone number, no mailing address, and in the "about us" section this generic fluff text that could be applied to any other scam sales site (and I am sure it is!):

Our journey began with a simple idea: make quality products accessible to everyone, no matter where they are. What started as a small passion project has grown into a trusted online destination for thousands of customers across the U.S. and beyond.

We’re not just another eCommerce site. We carefully curate our collections with your lifestyle in mind — blending thoughtful design, dependable craftsmanship, and fair prices. From our customer support team to our fulfillment partners, every step of your experience is built around care and integrity.

For once, Google AI comes in handy, noting the following sites have similar, if not identical, text:

The provided text is a generic "about us" mission statement that describes a philosophy rather than a specific company. Many eCommerce businesses share these values, and the statement is not unique enough to identify a single brand. 

However, several real and fictional companies in the search results use similar branding language:

• Home Fresh: A fictional Indian company whose mission, according to an ad transcript, began with the simple idea of "bring fresh flowers faster".
• Bajaj Capital: This financial company's journey also started with a "simple idea" of helping customers invest, and their brand is also built on trust.
• Curated Collections: An online shop that explicitly uses the words "Curated Collections" to describe its meticulously chosen goods, with a focus on quality and style.
• THE CURATED: Another site that sells "luxe staples at honest prices" and offers "curated" collections.
• Craft and Lore: This business describes its "Curated Goods" collection as "quality items that we use and recommend".

Who the hell "curates" RV parts?

Anyway, a few days later, I get a notice from BoA that an unauthorized charge of $42.00 was made at a Sonic drive-in across the country (gift card?).  To their credit, BoA (or its bots) detected something fishy and denied the charge and cancelled my card and mailed me a new one.  No big deal, but it is the first of  the month and all sorts of automatic payments are due - the water bill, for example  - and I had to scramble to move these "autopays" to my Capital One credit card.

Then, Capital One sends both of us e-mails telling us to "confirm our mailing address" as it has been a while since we last did so.  In the e-mail was a link labeled "click here to update your address!"  Way to go, Capital One!  Real smart security putting an in-email link after warning us time and time again not to click on such links!

Stupidly, I click on the link.

Fortunately, it was a "legitimate" link to the Capital One site.  But later, I realized the risk I was taking, so I changed my password just to be sure (after logging into the site, not from the link!).   Today, I try to log in and there is a "system error."  I mean, what could go wrong with sending an e-mail to millions of cardholders asking them to confirm their address?  I suspect that is what happened with this "address confirmation" e-mail and as a result, it crashed the site.

I tried calling their 1-800 number but it said it could not retrieve my information and it transferred me to an operator, noting that wait time would "exceed ten minutes."  This is not the first time I have seen this scenario play out.  Someone in the IT department decides to blast e-mail the entire customer base and the wonders why the servers all crash at once.  You know, sometimes it is best if IT geeks spend all day playing video games online and shirking their real work.  Sometimes things are best left alone.

It was a learning experience for me, though.  If it sounds too good to be true, it probably is.  Stop looking for screaming deals and search instead for fair bargains.  Be skeptical - even of sites that "look" legit.  I suspect templates or AI - or both - are being used to generate tons of scam online sales sites. Scrape some images, add some AI text, and, well, they've got a pretty convincing e-commerce site without all that pesky inventory, shipping, and customer service.  If nothing else, they've captured a few credit card numbers.  Sounds like easy money!

In the old days - like ten years ago - you could go on a Mom-and-Pop website and buy things.  I've ordered online from "Northern Michigan RV" and gotten hard-to-find parts at good prices.  Today, well, it is riskier not to use a major online retailer. Say, major online retailers probably like that!  Insert your own crazy conspiracy theory here.

The Internet was such a great concept, until humanity screwed it all up.   Maybe AI-bots will fix all that.  But I doubt it!

Nike vrs. Sketchers - who will win?

Cheap shoes that are a favorite of the AARP set, versus ghetto shoes that cost $200 a pair.  Who wins?

I recently read that NIKE, the preeminent sneaker company, has experienced a decline in sales after venturing into the "lifestyles" segment (whatever that is).   It is not the first time that storied company has made mis-steps. The history of NIKE, like the history of sneakers in general, is fascinating.

Legend has it that the original "waffle trainer" was literally made by melting sheets of polyurethane rubber in a waffle iron.  The founder of the company was selling them out of the trunk of his car at running events and business took off - boosted by the running/jogging craze of the 1970s.

Then disaster struck. They decided to sell fashion shoes - tiny wrestling-style sneakers clad in gold lamé, which left their traditional buyers scratching their heads. The company was headed for the brink, when a solo inventor (Rudy) approached them with his "AIR" sole invention, and the rest is history.

Well, that history includes signing Michael Jordan (a brand still sold today!) for one of the earliest sneaker endorsement contracts (a business worth millions if not billions, today) and the brand really took off.

There were, however, still mis-steps.  The sneakers were expensive and certain models created a beany-baby-like craze.  Inner-city kids started shooting each other over sneakers, and this created bad optics for the company.

But in the suburbs, sneakers in general became some sort of status symbol, like the unobtainable handbag or the fancy Swiss watch.  Fancy Italian loafers were out - expensive sneakers the color of tennis balls or highway cones, were in  - even for office wear!

People started buying sneakers not to wear, but collect!

But that changed recently due to a number of factors.  Spending $100-$200 (or more!) on a pair of shoes seemed foolhardy in a tightening economy - at least for some of us.  And the shoes were hard to put on, for an aging population, and didn't last more than a year or two before the expanded polyurethane foam soles compressed, or the rubber delaminated (Shoe Goo only works once!).

Enter Sketchers. Originally a "Sk8er Dude" brand, it morphed into a slip-on shoe popular with the elderly and obese (which describes half of America these days).  These started out as slipper-like shoes, and as I noted at the time, pretty poor for walking.  But while NIKE was sketching out their designs for yet more bizarre-looking footware, Sketchers came up with new designs that were more functional and comfortable - in particular, making the shoes fit tightly yet comfortably, so that you can wear a "slip-on" shoe for extended walking.

Priced at $35 and up (and not much more) they have been selling like hotcakes.  This makes me wonder whether NIKE's decline in sales could be linked to the rise of Sketchers.  Cheap, comfortable shoes, with largely conservative styling, which appeal to an aging demographic - sounds like a market winner.

Expensive, gaudy shoes, which require lacing and are more popular with the younger, urban set - is that a growing demographic in aging, fat America?

But, take heart, NIKE!  Sketchers was recently acquired by venture capital - and you know they can screw up a wet dream!