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Comment author: Lumifer 30 June 2016 02:39:18PM *  6 points [-]

I'm theorizing that the VCs believed that the fact that the big companies did not make any such product proved there was no profitable demand for it, because the market worked.

That doesn't look like a viable hypothesis because if it were true, such people would not be VCs at all.

Generally speaking, you seem to expect perfection in business agents. Clearly, this is not so in reality. "The market" is not each individual agent, it is the sum of them all. Moreover, the market works by self-correcting which implies that there are a LOT OF MISTAKES being made all the time. The market is successful because it provides negative feedback to those who make mistakes, so on the average it does what it does quite well, but it would be an error to think that each individual decision is optimal.

The market failure is that competition has not driven the cost down close to the cost of production.

Nope. Reality is primary, theories are secondary. In real life the markets drive the price down to the cost of production only occasionally. If your theory says they should, it's the theory that needs to be adjusted.

Comment author: PhilGoetz 25 July 2016 12:54:08AM 0 points [-]

That doesn't look like a viable hypothesis because if it were true, such people would not be VCs at all.

That statement makes no sense and has no support. What, you're imagining that I said that VCs think all profitable things are already being done? That is not what I said. What I said, which is true, is that VCs don't jump into established markets that already have huge dominant players.

In real life the markets drive the price down to the cost of production only occasionally.

"Close to", not "to". The difference is enormous--it's the difference between free market theory and Marxism.

The theory of the free market is that markets do so; failure to do so is called a failure of the market. It is a theoretical term, so saying "theories are secondary" is nonsense.

Restated:

In real life the markets drive the price down close to the cost of production only occasionally.

Citation needed.

Comment author: Jiro 01 July 2016 07:14:55PM 0 points [-]

In real life the markets drive the price down to the cost of production only occasionally. If your theory says they should, it's the theory that needs to be adjusted.

In real life, you can find the $30 bottle available for $4.29. I don't know if that's exactly the cost of production, but it's low enough that we can stop talking about how this is a market failure because the product can only be sold at high prices.

Comment author: PhilGoetz 25 July 2016 12:49:04AM 0 points [-]

Where?

Comment author: Lumifer 30 June 2016 04:14:16AM 1 point [-]

So, Thinx did a kickstarter and has now sold hundreds of thousands of thousands of absorbent underwear for about $30 each.

I fail to see how this is a market failure. At most this was a bad bet by VCs.

No profit to be had?

Maybe. Without knowing the details it's hard to tell. And again, at most this was a bad decision by Tums. The market is selling the sugar-free Tums at the appropriate price, is it not?

Comment author: PhilGoetz 30 June 2016 05:55:08AM *  -1 points [-]

I fail to see how this is a market failure. At most this was a bad bet by VCs.

You are focusing on the actions of the VCs. That isn't the failure. The failure was by the big players already in the market.

I'm theorizing that the VCs believed that the fact that the big companies did not make any such product proved there was no profitable demand for it, because the market worked. These are not miracle high-tech underwear; they could have been developed years ago. The belief that the market works demands some explanation why they weren't.

Maybe. Without knowing the details it's hard to tell. And again, at most this was a bad decision by Tums. The market is selling the sugar-free Tums at the appropriate price, is it not?

$46 a bottle is "the appropriate price"? The phrase is meaningless if it means "whatever price the market is selling it at", so don't use the phrase as if it had a normative aspect. Of course people sell it at some price. The market failure is that competition has not driven the cost down close to the cost of production. "Market failure" doesn't always mean "a failure to sell a product". In this case it means failure of competition to lower costs.

Comment author: James_Miller 30 June 2016 02:02:18AM 4 points [-]

Kickstarter is part of the market so, from what you have described, Thinx is a market success story.

Comment author: PhilGoetz 30 June 2016 05:51:35AM 0 points [-]

My point is that the existing companies failed to provide a product that consumers wanted, and VCs relied on the "fact" that the market is efficient to "prove" that Thinx could not succeed, since it did not bring anything to the table that the big companies couldn't have done themselves..

Comment author: jimrandomh 30 June 2016 01:01:32AM 4 points [-]

Diabetics can't have the tablets with sugar

This is false.

Comment author: PhilGoetz 30 June 2016 05:50:09AM 4 points [-]

Many diabetics think they can't. I've found their comments on the internet.

Comment author: Lumifer 18 June 2016 03:48:16AM 1 point [-]

I would argue all those values are irrational.

Please do.

The expression "irrational values" sounds like a category mistake to me.

Comment author: PhilGoetz 30 June 2016 12:23:26AM *  0 points [-]

What you're really doing by saying "My utility function might value my self-perception as a person who votes for X" is phrasing virtue ethics as utilitarianism. That's a move which confuses rather than clarifies. If you value your self-perception as a person who votes for X, you aren't a consequentialist; you believe in virtue ethics.

Can you say it? Yes; you can in theory be a virtue utilitarian. But no real-life virtue ethicists are utilitarians. Hence, confusion.

Market Failure: Sugar-free Tums

3 PhilGoetz 30 June 2016 12:12AM

In theory, the free market and democracy both work because suppliers are incentivized to provide products and services that people want.  Economists consider it a perverse situation when the market does not provide what people want, and look for explanations such as government regulation.

The funny thing is that sometimes the market doesn't work, and I look and look for the reason why, and all I can come up with is, People are stupid.

I've written before about the market's apparent failure to provide cup holders in cars.  I saw another example this week in the latest Wired magazine, a piece on page 42 about a start-up called Thinx to make re-usable women's underwear that absorbs menstrual fluid--all of it, so women don't have to slip out of the middle of meetings to change tampons.  The piece's angle was that venture capitalists rejected the idea because they were mostly men and so didn't "get it".

I'd guess they "got it".  It isn't a complicated idea.  The thing is, there are already 3 giant companies battling for that market.  The first thing a VC would say when you tell him you're going to make something better than a tampon is, "Why haven't Playtex, Kotex, or Tampax already done that?"

So, Thinx did a kickstarter and has now sold hundreds of thousands of thousands of absorbent underwear for about $30 each.

The failure in this case is not that VCs are sexist, but that Playtex, etc., never developed this product, although there evidently is a demand for it, and there is no evident reason it couldn't have been produced 20 years ago.  The belief that the market doesn't fail then almost led to a further failure, the failure to develop the product at the present time, because the belief that the market doesn't fail implied the product could not be profitable.

I just now came across an even clearer case of market failure: Sugar-free Tums.

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Comment author: PhilGoetz 29 June 2016 11:51:13PM *  1 point [-]

Why is nobody but CFAR staff posting articles anymore? The button is still there to submit to LessWrong rather than to Discussion.

Comment author: Alicorn 01 April 2016 03:42:34AM 2 points [-]

Didn't there use to be a formatting stripping button?

Comment author: PhilGoetz 01 April 2016 03:53:51AM *  2 points [-]

Doh! I forgot about that. 'Coz it is indicated by an eraser icon.

When I use it, it looks like it isn't working--it resizes everything to a tiny font, and converts all quotes to indents. Inspecting the HTML, it looks like it's done the right thing. I'll have to test it some to decide whether I trust it.

Fixing that tool to not change what's displayed so much would be perfect.

Comment author: PhilGoetz 01 April 2016 02:16:43AM *  -1 points [-]

I really wish the LW editor would strip font specifications out of the HTML when I do a paste into its editor while creating a new post. It's a pain in the ass to have to go thru the raw HTML by hand and strip out all the font specifications. I have never yet wanted to copy the fonts from quotes and links that I've copy-pasted.

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