Re: Will the bubble burst?


Otto wrote:
> "sandro" <sandro.fouche@xxxxxxxxx> wrote in message
> > If the hobby continues to grow, and there's demand for 100 million
> > Addams Family at $1000/ea, same story.
>
>
> You may have lost me here but I don't see the "same story". If Williams can
> sell 100 million Tafs for 40 million a piece, they can do that and they
> will. If they can sell 10 trillion Tafs at 1000 dollars a piece, they won't.

Got any evidence?

> Now if they were an airline, they would. That industry decided a long time
> ago that they would develop their own business model--Sell the product below
> cost and make up for it with volume. The problem with this type of model is
> the more you sell the more you lose.

You're missing a key concept in costing for airlines. There is a large
sunk cost in lifting an airplane of the ground (the plane, maintenance,
ground personnel, crew, fuel). Taking a plane off the ground with no
passengers is close to the same cost as a full plane (modulo extra fuel
needed for the additional weight). Anything less than a full plane is
guaranteed to be lost revenue. The FAA mandates certain rules for
canceling flights, and the airline needs to get the planes from certain
profitable destinations back to profitable departure points. All of
this means that sometimes it's worthwhile to fly people at *any* cost
just to make back some of the money you're going to spend anyway.

I think there used to be (in the 80's) a sunday morning breakfast
flight from Dulles Airport (Ashburn, VA) to BWI airport (Baltimore, MD)
a distance of less than 100 miles. If I remember you could catch this
flight for $40, and they served a little breakfast meal for the however
minutes it took to make the flight. It works out that the airline
needed to move that one plane each week, and they decided to make a few
bucks on the transit.

>
> Nobody, not even the Chinese, can get a Williams quality Taf to my door for
> 1000 dollars. Can not be done even with a backlog of 10 trillion orders.
> Unless of course, you want to lose lots of money.
>

Again, got any evidence?

Funny things happen when you've got a 100 BILLION dollar market (100
million TAFS @ $1000/ea). It's becomes worthwhile building custom
robotics, specialized tooling, and foreign factories. Materials costs
drop radically as quantities increase. There are no parts in a pinball
machine that depend on constrained goods. Plastic, circuit boards,
metal and wood are readily available and bought in those quantities
they become increasingly cheap. Skilled labor is the only real
constraint, and that's what would probably prevent pins from becoming
sub $500 items (at any quantity). But I'm not rash enough to claim it
isn't possible, just weary enough to have picked a valid example.

Otto, try this, get a hold of Gary Stern (or anyone else who makes/made
pins on a large scale), and ask them if they had 100 million orders for
TAF's, exactly how much they could be produced for. Now find someone
in automotive manufacturing who's into pins, and ask them. You might
be surprised.

-Sandro

.

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