WTF Daydreams: Going Commercial

I was thinking on this topic yesterday (while in an economics lecture). One of the issues standing in the way of making a living from building tube circuits (aside from capital) is that there are few concrete competitive advantages that can be maintained in the long run. Tube circuits are no longer patented for the most part and so any company that sees sudden success signals to other potential participants that there’s money to be made. More participants shifts supply up, which shifts equilibrium price down. So the market price hovers around a modest break-even (priced around marginal cost, like commodities).

Perhaps that is too textbook (and also sophomoric; I’m not pursuing a degree in economics), but I think there’s some truth to the idea that tube circuits are largely unprotected from copycats and so the tendency for successful ideas to become commodities is at play. So, what other potential competitive advantages are there?

  • Schitt seems to have found a place in the market as a low-cost manufacturer of some tube products (mostly headphone). In a way, they have a first-mover advantage here as they got into large scale production of tube headphone amps as the market began growing (still is, I think). The first mover approach is to grow as fast as possible to raise the barriers to entry for potential competitors. The caveat is that constant growth and diversification is necessary to stave off these nagging competitors (who are motivated by the amount of success they perceive you have).
  • Historic companies like McIntosh Labs have brand equity that simply cannot be replicated overnight. Although there are plenty of alternatives in terms of comparable products, McIntosh has done a really good job with their image and catalog (IMO). Failure for them would probably be more self-inflicted than competition-based if it ever comes (selling out, not keeping up with costs, poor management, etc). Their advantage is that they can charge a premium price that would be unrealistic for start-up competitors.
  • The most interesting example I can think of is those companies that thrive on outrageous claims and marketing (ie snake oil audio). Their competitive advantage is imaginary, but to a large amount of people that doesn’t matter. If a competitive product appears, these companies can simply wave it away because it doesn’t have their personal flavor of delusion baked into it. Not that I condone this approach, but there’s no denying it’s out there. Look at an audio commodity like cables and how they are marketed.

So I think getting into tubes as a business requires a very real evaluation of what competitive advantage a company could bring to the market and how it can be protected in the long run (there are more strategies than those above, to be sure). In the short run, coming up with a good sounding circuit or a cool look will always sell a few amps, but success will always invite copycats and push price down.

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