Businesses That Act Like Leeches

[bizaro86]

 

I think this is a great insight. Any business that isn't completely monetizing its pricing power has a huge moat. It makes it very difficult to compete with them, because a new entrant would need to either offer more or charge less, and the lower-than-possible margins make that hard.

 

A few other things I think fit this model:

-Interactive Brokers - their margin rates are way lower than the competition. They could raise them and still be by far the lowest. But their margins are still good.

 

-Disney Parks - they have discovered pricing power, and raise ticket prices every year. The parks are still always packed, so they are under-doing this. This is weaker than the other cases mentioned, imo.

 

-High speed internet - I would pay more than I do right now for this. A lot more. Maybe competition keeps this down. There are two sets of fibre to my neighbourhood (one telco, one cableco) so there are two choices for true high speed.

 

I'm gonna disagree with all three:

 

IBKR - they are nickel-and-diming their customers like there's no tomorrow. Pay for quotes, pay trade commissions, pay if you don't have enough trades per month. Some of these may have been removed, but because of competition and not because IBKR are good guys. So zero loyalty to IBKR, screw them.

 

DIS - I think the park prices are ridiculous.

 

High-speed internet - most countries have much cheaper high-speed internet than US. US monopoly pricing sucks.

 

Shrug. I would pay more for all three of these services.

 

Part of it for some of them is being non-USA. IBKR is much better than competitors here in Canada - no free trades for everyone here. Given how fast their customer base is growing it seems I'm not the only person who feels this way.

 

I also think Disneyland is great value. Tickets are expensive, but a lot is included as well. Different strokes for different folks, but enough people agree with me that they keep raising prices and attendance still grows. Obviously we'll see if that holds post covid, but I think it will.

 

High speed is likely colored by being outside USA. I pay $105 CAD (so under $80 USD) for 300/30 high speed, basic cable, and a home phone. I would pay much more than that just for high speed if necessary.

[Castanza]

 

I think this is a great insight. Any business that isn't completely monetizing its pricing power has a huge moat. It makes it very difficult to compete with them, because a new entrant would need to either offer more or charge less, and the lower-than-possible margins make that hard.

 

A few other things I think fit this model:

-Interactive Brokers - their margin rates are way lower than the competition. They could raise them and still be by far the lowest. But their margins are still good.

 

-Disney Parks - they have discovered pricing power, and raise ticket prices every year. The parks are still always packed, so they are under-doing this. This is weaker than the other cases mentioned, imo.

 

-High speed internet - I would pay more than I do right now for this. A lot more. Maybe competition keeps this down. There are two sets of fibre to my neighbourhood (one telco, one cableco) so there are two choices for true high speed.

 

I'm gonna disagree with all three:

 

IBKR - they are nickel-and-diming their customers like there's no tomorrow. Pay for quotes, pay trade commissions, pay if you don't have enough trades per month. Some of these may have been removed, but because of competition and not because IBKR are good guys. So zero loyalty to IBKR, screw them.

 

DIS - I think the park prices are ridiculous.

 

High-speed internet - most countries have much cheaper high-speed internet than US. US monopoly pricing sucks.

 

Shrug. I would pay more for all three of these services.

 

Part of it for some of them is being non-USA. IBKR is much better than competitors here in Canada - no free trades for everyone here. Given how fast their customer base is growing it seems I'm not the only person who feels this way.

 

I also think Disneyland is great value. Tickets are expensive, but a lot is included as well. Different strokes for different folks, but enough people agree with me that they keep raising prices and attendance still grows. Obviously we'll see if that holds post covid, but I think it will.

 

High speed is likely colored by being outside USA. I pay $105 CAD (so under $80 USD) for 300/30 high speed, basic cable, and a home phone. I would pay much more than that just for high speed if necessary.

 

My wife drug my ass to Disney World in February. She said, lets go before we have kids. I'm thinking to myself "why? isn't this place for kids?".....I trudged on, and by the end of our week I was decked out in Disney apparel trying to get a reaction out of the storm troopers in Galaxy's Edge.

 

I don't think ticket prices are that expensive when compared to amusement parks. Take Hershey Park here in PA. It's your average park (few roller coasters, nothing special). Tickets are $70 a pop....Disney at what $120 a pop is a bargain. All the free shows, transportation, extreme generosity of workers, general attention to detail in everything, wait time app, wrist band integration, etc. is worth way more than $120 imo.

 

The resorts are what kill you price wise....Animal Kingdom is like $6-800 a night for some rooms....Yeah, I'll pass on that since I spent maybe 2 hours a day (minus sleep) in our hotel room.

[Spekulatius]

Arn’t most GP/ LP relationships like leech/ host.

 

For a leech/ host relationship the following would need to be true.

1) it’s hard to impossible to get rid of the leech

2) the leech can suck on the host, but it can’t suck it dry without imperiling itself

3) The leech benefits much more with less effort

 

So a hedge fund GP isn’t really a leech because typically the LP can  Get rid of him. A closed end fund manager may be a leech, or private equity or the beloved BAM. With MLP, the GP in most cases acts as leech. I mean the GP/LP relationship is basically a codified leeching relationship.

[Guest]

 

I think this is a great insight. Any business that isn't completely monetizing its pricing power has a huge moat. It makes it very difficult to compete with them, because a new entrant would need to either offer more or charge less, and the lower-than-possible margins make that hard.

 

A few other things I think fit this model:

-Interactive Brokers - their margin rates are way lower than the competition. They could raise them and still be by far the lowest. But their margins are still good.

 

-Disney Parks - they have discovered pricing power, and raise ticket prices every year. The parks are still always packed, so they are under-doing this. This is weaker than the other cases mentioned, imo.

 

-High speed internet - I would pay more than I do right now for this. A lot more. Maybe competition keeps this down. There are two sets of fibre to my neighbourhood (one telco, one cableco) so there are two choices for true high speed.

 

I'm gonna disagree with all three:

 

IBKR - they are nickel-and-diming their customers like there's no tomorrow. Pay for quotes, pay trade commissions, pay if you don't have enough trades per month. Some of these may have been removed, but because of competition and not because IBKR are good guys. So zero loyalty to IBKR, screw them.

 

DIS - I think the park prices are ridiculous.

 

High-speed internet - most countries have much cheaper high-speed internet than US. US monopoly pricing sucks.

 

IBKR was the first big platform to go zero commissions. They also eliminated the monthly fee for smaller account sizes. Even if you have small account, margin is still way, way less than competitors.

[meiroy]

 

Big international banks.

[Spekulatius]

Litigation lawyers and lobbyist are leeches, at least on the society as a whole. however depending on how you look at it, they do provide a lot of value for their “customers”, ar least in some cases.

 

Controversial take: All religious organizations can be regarded as leeches. I would rate the Catholic Church as the biggest and certainly one of the most durable ones ( full disclosure: I was raised catholic)

[Guest cherzeca]

litigation lawyers and lobbyists each are advocates.  we cant have society/capitalism without advocates, even though they may be obnoxious and contrary to what might normally think to be the public good.

[Guest cherzeca]

I would say that politicians are the only true leeches I can think of.

 

I know the question involves businesses, but government is a sort of non-profit business, taking in revenues and bearing costs.  the whole process of capitalism to my mind culls out leeches...which is why politicians survive.  Politicians are not subject to any culling mechanism other than the voting process, which is why politicians pander to voters, which actually increases their leeching behavior.

[Cigarbutt]

I would say that politicians are the only true leeches I can think of.

 

I know the question involves businesses, but government is a sort of non-profit business, taking in revenues and bearing costs.  the whole process of capitalism to my mind culls out leeches...which is why politicians survive.  Politicians are not subject to any culling mechanism other than the voting process, which is why politicians pander to voters, which actually increases their leeching behavior.

i guess one could say that elected officials are advocates. :)

Leeches appeared on the evolutionary scene not as survivors but only because they could. In exchange for regeneration potential, leeches developed suckers. The necessary reaction is reform (eg tort reform) and you can call it drain the swamp if you want but it needs to be done, hopefully earlier than late.

----

Here's some data on an example (mentioned before): US-based healthcare insurers. Most evidence suggest that, on a net basis, costs will be down this year and a component of COVID costs will be shared with the 'consumer' and back-stopped by public entities. Still, the "business" continues as usual, only because they can.

https://finance.yahoo.com/news/insurance-premiums-expected-to-rise-4-to-6-before-factoring-in-covid-162932394.html

 

[DooDiligence]

I went home with a waitress the way I always do

How was I to know she was with the Russians, too?

 

I was gambling in havana, I took a little risk

Send lawyers, guns, and money

Dad, get me out of this, hiyah!

 

An innocent bystander

Somehow I got stuck between a rock and a hard place

And I'm down on my luck

Yes, I'm down on my luck

Well, I'm down on my luck

 

I'm hiding in honduras, I'm a desperate man

Send lawyers, guns, and money

The shit has hit the fan

 

Send lawyers, guns, and money

Send lawyers, guns, and money

 

Send lawyers, guns, and money, hiyah!

Send lawyers, guns, and money, ow!

[rkbabang]

I would say that politicians are the only true leeches I can think of.

 

I know the question involves businesses, but government is a sort of non-profit business, taking in revenues and bearing costs.  the whole process of capitalism to my mind culls out leeches...which is why politicians survive.  Politicians are not subject to any culling mechanism other than the voting process, which is why politicians pander to voters, which actually increases their leeching behavior.

 

Government and organized crime.  They both leach off of the productive and provide "protection" (mostly from what they will do to you if you don't pay and obey).  Just parasites like viruses are to biological systems or different kinds of viruses are to computer networks.

 

"All Complex Ecosystems Have Parasites" --Cory Doctorow

 

 

[mountboney]

Ha. Now i know that if I'm a leech and want to sleep at night I call myself an advocate (but without the self sacrificing salary of course).

[rkbabang]

Ha. Now i know that if I'm a leech and want to sleep at night I call myself an advocate (but without the self sacrificing salary of course).

 

Carlo Gambino was a "neighborhood advocate".

 

[Jurgis]

I would say that politicians are the only true leeches I can think of.

 

I know the question involves businesses, but government is a sort of non-profit business, taking in revenues and bearing costs.  the whole process of capitalism to my mind culls out leeches...which is why politicians survive.  Politicians are not subject to any culling mechanism other than the voting process, which is why politicians pander to voters, which actually increases their leeching behavior.

 

Government and organized crime.  They both leach off of the productive and provide "protection" (mostly from what they will do to you if you don't pay and obey).  Just parasites like viruses are to biological systems or different kinds of viruses are to computer networks.

 

"All Complex Ecosystems Have Parasites" --Cory Doctorow

 

YES! People should just govern themselves! We should all just do whatever we want to do! Don't ever trust professionals! Power to the common people!

 

https://www.imdb.com/title/tt0387808/

 

 

(This message is approved by Communist Party of Soviet Union)

 

 

[LongHaul]

 

I think this is a great insight. Any business that isn't completely monetizing its pricing power has a huge moat. It makes it very difficult to compete with them, because a new entrant would need to either offer more or charge less, and the lower-than-possible margins make that hard.

 

A few other things I think fit this model:

-Interactive Brokers - their margin rates are way lower than the competition. They could raise them and still be by far the lowest. But their margins are still good.

 

-Disney Parks - they have discovered pricing power, and raise ticket prices every year. The parks are still always packed, so they are under-doing this. This is weaker than the other cases mentioned, imo.

 

-High speed internet - I would pay more than I do right now for this. A lot more. Maybe competition keeps this down. There are two sets of fibre to my neighbourhood (one telco, one cableco) so there are two choices for true high speed.

 

I'm gonna disagree with all three:

 

IBKR - they are nickel-and-diming their customers like there's no tomorrow. Pay for quotes, pay trade commissions, pay if you don't have enough trades per month. Some of these may have been removed, but because of competition and not because IBKR are good guys. So zero loyalty to IBKR, screw them.

 

DIS - I think the park prices are ridiculous.

 

High-speed internet - most countries have much cheaper high-speed internet than US. US monopoly pricing sucks.

 

IBKR is much better for smaller HFs than consumers.  Now that the competitors offer free trade, it is much easier to trade through TD Ameritrade.

 

IB is essentially is very efficient and passes much of it on.  Payment for order flow is super sleazy IMO. 

 

 

[JRM]

Has anyone said realtors yet?  The National Association of Realtors is consistently one of the top two lobbying spenders every year.  I'm not saying they don't serve a purpose, but the incentives are very misaligned.

[Guest cherzeca]

I would say that politicians are the only true leeches I can think of.

 

I know the question involves businesses, but government is a sort of non-profit business, taking in revenues and bearing costs.  the whole process of capitalism to my mind culls out leeches...which is why politicians survive.  Politicians are not subject to any culling mechanism other than the voting process, which is why politicians pander to voters, which actually increases their leeching behavior.

 

Government and organized crime.  They both leach off of the productive and provide "protection" (mostly from what they will do to you if you don't pay and obey).  Just parasites like viruses are to biological systems or different kinds of viruses are to computer networks.

 

"All Complex Ecosystems Have Parasites" --Cory Doctorow

 

YES! People should just govern themselves! We should all just do whatever we want to do! Don't ever trust professionals! Power to the common people!

 

https://www.imdb.com/title/tt0387808/

 

 

(This message is approved by Communist Party of Soviet Union)

 

politicians would be less leech like if they were subject to term limits

[Liberty]

Has anyone said realtors yet?  The National Association of Realtors is consistently one of the top two lobbying spenders every year.  I'm not saying they don't serve a purpose, but the incentives are very misaligned.

 

Seconded! We recently bought a house, and didn't use realtors on both sides, and it was fine, and I'm glad we saved the money.

 

I'd pay a good realtor a flat fee or hourly rate for good advice and help, but I would never pay them a % of the transaction that amounts to tens of thousands of dollars, especially since many/most of them basically just unlock doors and do minimal hand-holding and are incentivized to get you to accept a worse deal than you might have gotten.

[Guest cherzeca]

funeral service.  customer is in a fog with grief and basically is in no position to negotiate.

[rkbabang]

politicians would be less leech like if they were subject to term limits

 

Yes.  As short a term as possible.  With the ideal, of course, being a term of 0.

 

[DTEJD1997]

hey all:

 

Most education in America acts like a leech on society.

 

Obviously, not all educators and schools...but a surprising amount.

 

"For profit" education is perhaps the worst...

 

followed by low level "professional" skools.  Best of example of this is Law Skools where their graduates come out with $250k+ of student loan debt and no chance of paying it off...with Admins paid many hundreds of thousands per year, profs paid well over $100k, all the while working part time.

 

Then you've got all the "regular" universities playing all sorts of games with tuition and scholarships.  They may be "non-profit" but the stakeholders are the admins & profs getting all the "profits".

 

Then you've also got blights such as the Detroit Public Skools.  DPS has a budget of about $770mm for the year...but they are getting sued because so many of their graduates are illiterate.  What is society getting for all that capital going into the skools?  Well paid administrators and teachers.  That is about it...society has been failed by the folks at DPS. 

 

Sadly, Detroit is not the only city in America with skool systems in shambles.

[jamesmadison]

I think a frequent commonality in what constitutes a "leech" is a business/profession in which the costs are not (fully) borne by the user or the cost is somehow "hidden" or incredibly diffused:

 

Seemless: User is the person ordering; restaurants pay

 

Real estate brokers: Seller ostensibly pays, so buyers may think it doesn't matter if a broker is involved.  Obviously the cost is borne by both parties

 

Government: All taxpayers pay, diffusing the cost

 

Healthcare: Massive disconnect between payers and users

 

[JRM]

I think a frequent commonality in what constitutes a "leech" is a business/profession in which the costs are not (fully) borne by the user or the cost is somehow "hidden" or incredibly diffused:

 

Seemless: User is the person ordering; restaurants pay

 

Real estate brokers: Seller ostensibly pays, so buyers may think it doesn't matter if a broker is involved.  Obviously the cost is borne by both parties

 

Government: All taxpayers pay, diffusing the cost

 

Healthcare: Massive disconnect between payers and users

 

I think you missed the mark on realtors.  The problems are:

 

1.  The higher the potential commission the greater the gap between commissions paid and value-add

2.  Misalignment of incentives for BOTH buyer and selling realtors

3.  System that is protected by massive lobbying and blackballing of outsiders

[jamesmadison]

I think a frequent commonality in what constitutes a "leech" is a business/profession in which the costs are not (fully) borne by the user or the cost is somehow "hidden" or incredibly diffused:

 

Seemless: User is the person ordering; restaurants pay

 

Real estate brokers: Seller ostensibly pays, so buyers may think it doesn't matter if a broker is involved.  Obviously the cost is borne by both parties

 

Government: All taxpayers pay, diffusing the cost

 

Healthcare: Massive disconnect between payers and users

 

I think you missed the mark on realtors.  The problems are:

 

1.  The higher the potential commission the greater the gap between commissions paid and value-add

2.  Misalignment of incentives for BOTH buyer and selling realtors

3.  System that is protected by massive lobbying and blackballing of outsiders

 

All three points you make are true but I believe that they are all "in addition to" my prior observation, not "instead of". 

 

[JRM]

I think a frequent commonality in what constitutes a "leech" is a business/profession in which the costs are not (fully) borne by the user or the cost is somehow "hidden" or incredibly diffused:

 

Seemless: User is the person ordering; restaurants pay

 

Real estate brokers: Seller ostensibly pays, so buyers may think it doesn't matter if a broker is involved.  Obviously the cost is borne by both parties

 

Government: All taxpayers pay, diffusing the cost

 

Healthcare: Massive disconnect between payers and users

 

I think you missed the mark on realtors.  The problems are:

 

1.  The higher the potential commission the greater the gap between commissions paid and value-add

2.  Misalignment of incentives for BOTH buyer and selling realtors

3.  System that is protected by massive lobbying and blackballing of outsiders

 

All three points you make are true but I believe that they are all "in addition to" my prior observation, not "instead of".

 

agreed.