The American Dream: "It is a lie, and it is a multi billion dollar lie."

[kpete]

Featherbed of Lies Take 6 Death of a Dream
by Im a frayed knot
Sat Jan 01, 2011 at 08:33:22 AM PST

Today I pull a bunch of feathers out of the featherbed as I look at what what is commonly known as "The American Dream."

................

We raise our children believing it. We see it on TV. It is a favorite topic among motivational speakers. If you have the belief and the discipline, you can get rich by owning your own business. Only in the US, they proclaim, can any child who puts his or her mind to it open their own storefront and become a millionaire. It is a lie, and it is a multi billion dollar lie.


This is a personal story. It is hard to tell. It hurts.

Five years ago last month, my son and partners negotiated a lease on a store front in a strip mall. To ensure their acceptance on the lease, I cosigned. They were sure I would never have to pay in any money, they were going to be able to pay it easily from the profits they would make. My son and his partners were about to realize their dream, the American Dream. They were going to own their own gym. They bought a franchise and began the build out. It would be spectacular. They were talking about the lavish lifestyles they would have when the profits came rolling in.

The profits weren't there immediately. That was ok, because I told them it would take three to five years before any new business that required capital would show a profit. So they worked. And worked. After a few months one partner left, then before they had been open a year the other partner walked out. Now it was just my son - and me. He did the work, I infused the cash (well, my husband and I did, month after month, exhausting our savings and the equity in our home). My other son worked too, to help out. Those profits weren't coming in.

Over the years, 9 other gyms went under and we got many of their members. We expanded to include day care and a classroom to retain them. We were always within a hair's breath of making a profit but each time we were there something would happen - a furnace would blow out and need to be repaired. A bad snowstorm. A trainer would leave and take his clients. The horrible economy cost several members their jobs and forced them to quit. A multinational company came in right up the street. We weathered that too. Over the summer, our franchise agreement came to term and the franchise wanted us to spend thousands of dollars to remodel in their new image as well as wanting to change our pricing structure, so we left them to another local franchise. As a result, we had to hire several new employees. After many snafus and much expense in making the change, we were beginning to click. It looked like we would finally be profitable. My son took great pride in the fact that even in this economy he was providing employment to some 30 employees and another 25 independent contractors. The employees were not full time, but it was work they would not have otherwise had. One time he posted a help wanted ad on Craig's list and within half a day he had over 200 applications. Times here were tough.

Then another multinational moved in. they began charging new members so little we could not process the paperwork for the price they were charging. And they were much bigger, with many more amenities. They were funding their initial pricing with profits from other locations. Yes, it was predatory pricing as described in the Sherman Antitrust Act and the Clayton Act. But those laws have either been gutted by corporate owned courts or are no longer enforced. In three weeks, we lost 40% of our members. It wasn't just us. Even established, very profitable gyms suffered similar losses. We could not survive. When we first decided that we had to shut down, it was like being punched in the gut. I found myself recalling the words from the Stones' Angie, "they can't say we never tried." "All the dreams we held so close seemed to all go up in smoke."

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THE REST:
http://www.dailykos.com/storyonly/2011/1/1/931596/-Featherbed-of-Lies-Take-6-Death-of-a-Dream

[Statistical]

1. "In three weeks, we lost 40% of our members"

Sounds like a poor business plan. One has to know that competitors can undercut you. That is why most gym require year long contract with hefty termination fees. Not doing so opens you up to risk. The competitor undercutting them wasn't doing so with lifetime low prices. More likely "first x months at $19.95 then it jumps to $49, $59, $79 or more. How do the keep the consumer hooked after the huge markup? Contracts.

[fasttense]

12. You can NOT fight a huge corporation as a small business, unless the anti-trust laws are enforced.

The corporation comes in and sells the same item at below cost. They continue to sell it at below cost until they have wiped out their competition. There is no standard x number of months. They continue it until the other businesses have lost all and are wiped out.

When Wal-Mart came to our part of the country, a friend of mine was involved in setting them up. He said that the Wal-Mart executives drove around town and pointed out each business they were going to shut down. The Wal-Mart executives all had a good laugh over it.

The Wal-Mart, when they 1st opened, use to offer fabric at $1.00 a yard. Within a two years all the fabric retail outlets (about 5 of them) were closed and out of business. One had been in business for 75 years and another was a smaller corporation. They all went under. Wal-Mart continued to offer $1.00 a yard fabric for another 5 years. Then Wal-Mart decided to stop carrying any fabric at all. Now, I have to drive 50 miles to find a fabric store.

None of the wiped out fabric store outlets have ever come back. What retail store could have put up with 7 years of below cost price attacks? I'm sure there are other similar specialty stores that were wiped out. We no longer have a vibrant downtown area. It is merely a group of empty store fronts.

You can not fight a bottomless pit of profit guzzling corporation if the Sherman anti-trust laws are not enforced. It is impossible.

The only way to win is to find something they aren't doing and hope and pray they don't decide to take you down.

[FormerDittoHead]

2. It's called "economies of scale" and that's a phrase you'll never hear from the right.

Of course, you'll hear about economies of scale in your intro to economics course.

The reason you won't hear about it from the MSM or esp the right is that the nature of the term acknowledges that large companies (and rich people who have the economies of scale in money) have an advantage in the marketplace against small players and start ups.

In other words, the whole point of giving smaller businesses tax breaks (and other assistance / breaks) versus large businesses is without such help, the large businesses will *always* win out.

This is exactly how Walmart got where it is, and why there are "mergers" - because the bigger the business, the more it can spread out its fixed costs, the more market it can have to reduce its overall risk (which is essentially profit) the more it can underprice (for the short term) its competition.

"The market" is NOT fair to all the players, and that's the lesson you'll never hear from the right.

[w4rma]

5. Exactly. (nt)

[c14444c]

8. Economies of Scale disrupt the familiar supply and demand curves

The simple supply and demand equilibrium curves of Econ 101 are a big factor in the Libertarianism of American politics.

Yet with economies of scale supply curves are downward sloping and to the right.

Moreover economies of scale create "winner-take-all" economies.

http://findarticles.com/p/articles/mi_m1316/is_n12_v27/ai_17828362/?tag=content;col1

http://www.prospect.org/cs/articles?article=talent_and_the_winnertakeall_society

With winner take all economies, demand curves can become upper sloping and to the right. These are the demand curves for luxury products.

With this situation the basic parable of equilibrium breaks down.

If prices are "above equilibrium" market forces will push them higher.

If prices are "below equilibrium" market forces will push them lower.

And the economy breaks down.

I am not stating this is universal. It only has to be possible for the simple equlibrium of econ 101 to be sent into storage.

[Quantess]

15. Welcome to DU!

[postulater]

3. Same thing with single doctor offices.

Corporate medicine has destroyed personal health care.

My brother in law is a VP at a large insurance company.

We were discussing health care over the holiday, he agreed that single payer was the best system and then said "but not until I retire."

What a slimeball.

He was in the middle of planning the helicopter trips for his Hawaiian vacation that he is paying for with his significant bonus this year.

[Starry Messenger]

4. k&r

There is very little place for small business anymore. All of the start-up people I know plan on being a desirable asset to the big boys as part of their business plan and just pray that they get bought up.

[fasttense]

13. Yup, hope and pray is a big part of the small business plan.

As long as the Sherman anti-trust laws are ignored and go unenforced, small businesses will either get swallowed up or forced out of business.

[HCE SuiGeneris]

6. Unfortunately, I know this story all too well.

The smaller businesses have very little chance against the power leveraged by the economies of scale that large corporations wield. It becomes a race to the bottom unless you have a unique product/proposition.

[kestrel91316]

7. Anyone who thinks Repuke policies favor SMALL businesses definitely

needs their head examined. Everything they do is all about making the BIG boys bigger and trampling the little guys so they can't threaten the big guys.

[customerserviceguy]

9. I've never understood

why people pay for a specific place outside their home to sweat.

[Kievan Rus]

10. George Carlin said it best...

it's called the American Dream, because you have to be asleep to believe it.

[HippieCowgirl]

11. first mistake was opening a franchise

You wind up giving away 20% of your income right away, you'll never make a profit.

[proud2BlibKansan]

14. John Boner still cries when he thinks of the American Dream

But then, he's an idiot. :rofl:

[earth mom]

16. Kick-sorry to late to rec!

:kick:

[Nye Bevan]

17. Yes, many startups fail.

But many succeed, too. I don't think you can conclude that the American Dream is a "lie" based on a sample size of one. Here is a more upbeat example.


The Baby Einstein Company was founded in 1996 by stay-at-home mom and former teacher Julie Aigner-Clark at her home in suburban Alpharetta, Georgia. Aigner-Clark and her husband, Bill Clark, invested $18,000 of their savings to produce the initial product, a VHS video called Baby Einstein, later sold as Language Nursery.

The original video shows a variety of toys and visuals interspersed with music, stories, numbers, and words of many languages. Eventually, the video was marketed across the United States, Europe, Asia and Australia. Other videos followed, some featuring the Clarks' two daughters, Aspen and Sierra.

Baby Einstein became a multi-million dollar franchise; its revenue grew from $1 million in 1998 to around $10 million in 2000. Aigner-Clark sold a 20% stake in the company to Artisan Entertainment in February 2000 and sold the rest to The Walt Disney Company for an undisclosed amount in November 2001. The franchise is named after and pays significant royalties to the estate of deceased physicist Albert Einstein, putting him in the top 5 of most earning dead celebrities, according to Forbes.


http://en.wikipedia.org/wiki/Baby_einstein