Not to dismiss the issues here, but the entire American automotive sector works like this.
It's practically standard policy for OEMs to stiff smaller vendors with flagrant disregard for their obligations, because every day of delay and every dollar they don't have to pay is more margin for the OEM. In many cases it doesn't even matter if doing so it's detrimental to the long term health of the OEM, as happened during the COVID supply shocks. Finance gets their way.
As an engineer, I've found out from more than one vendor that the delivery I was expecting to start production isn't happening because finance just decided they didn't want to issue payment.
97b in revenue per year. 10% of cars is made by suppliers, so maybe 9b goes to suppliers. 750m of liabilities per month. There's going to be millions hanging out there perpetually. AKA normal for every large business.
p.s. Tesla is not indebted like every other business (10-15x less debt, 5-6x more cash), so interest doesn't really count for them.
I think this needs to be understood by more people, and as a society, we need to start acting against these practices (e.g. by collectively blacklisting organisations who do not fulfil their obligations).
Let them. And let them eat the higher cost - foreign suppliers will not ship that stuff for free, and will demand securities for large orders. At some point, there will be a financial equilibrium.
After working at small companies most of my career. Anytime someone angrily states that little people must pay their bills or else I reflexively think about how much corporate America does not. Really common they'll withhold the last payment until they need something else.
I keep coming back to a study I read a long time ago where they administered college students a test to score sociopathy as freshmen and again as seniors. Not surprising seniors scored lower then freshmen, except business and economics where they scored a lot higher. Makes me more receptive to the old school idea that college is partly there to provide a moral education.
The big tier ones (Bosch, Continental, etc) insist on payment up front specifically to avoid this. It's the smaller vendors that don't have leverage to set payment terms who get screwed.
One tactic I've seen OEMs use is to buy for multiple products and stop payments for one as a test. If the vendor complains, they lose all the unrelated business (possibly including clawbacks!) and the OEM moves to the second source. This can kill the supplier.
As a small player in the services game (data consulting) the only way to do it is to have good relationships with the people paying the bills. Even with good agreements, you still need the client to be on your side.
One big secret in economics is that essentially the whole world is demand constrained. There's exceptions, but they're few and far between. And in all of economics you will not find a solution to that anywhere, hell they don't even explain this. Obviously the supply/demand curve is in reality not linear: at low prices it goes entirely horizontal and constrained below physical needs it goes entirely vertical. Obviously, no linear model can do this.
There's no real point in doing more of anything than we are doing now. Think of it like this: if in Paris double as much bread was made tomorrow, and sold at any price, there would not be even a minimal rise in bread consumption. We have enough. Essentially all of it would be thrown away. Now replace bread by just about anything, and you'd see the same problem.
So "relationships" are what gets business, or as you might call it "selling demand". And it's very easy for buyers to abuse the system.
Look, I get it, I was starting out once, and out of necessity did some "high risk" work where we invested a lot of time before getting paid. Sometimes it worked out, sometimes it failed.
I learned to understand that -risk- has a value. All transactions have risk, maybe I don't deliver, maybe you don't pay.
I now explicitly factor risk into quotes. We can share risk (you pay some, but not all, up front, coupled with progress payments), or I can take the risk (I'm pricing it higher, and assuming you're skipping the last payment), or you can take the risk (pay up front, but pay less.)
Treating risk as a line-item in the budget helps both parties understand the pricing better. Having a track record (of paying or producing) helps the other party accept more if the risk.
I've had some clients prove to be unreliable payers. For them I accept no risk. All work us done on a "pay first" basis. Some choose to find another supplier. I don't consider that a loss.
If you keep working, you still run the risk of never getting paid — in which case your lost investment would be more time and money than it would've been if you'd stopped after the first unpaid bill.
"You" (not you) already took a risk which failed. Now you are talking about taking on more risk with the same person who cheated you, like a lallu (Hindi term for a sucker)?
You're promoting wrong ideas, which are harmful to everyone here who is a supplier.
For software related things, if it stops working, you will then get paid immediately to fix it. That's when you get paid, fix it, and never work for them again.
One wonders if this is merely the age of information, and during "the before times" the rich people really sucked too.
Soap box:
Having A LOT of money can suggest to a person that Everyone Else's Rules Do Not Apply To ME. Because they don't, largely. The trick is not letting that idea infest your mind with fallacies, such as YOUR Rules Do Not MATTER.
I'm curious how this works over time. I read somewhere (would have to search to find it) that after Trump became notorious for stiffing small contractors on his properties, the wisdom them became you just quoted a ~50% premium, because you knew Trump would only pay you 2/3 of what he originally said he would.
But agree with your statement, which is why I always gag a little when I see working class people lionize these two as "champions of the working man".
Trump believes there is a winner and loser in everything. So you stiff the contractor, he gets upset and might not work with you again, you just get another contractor. Trump was a big enough name and has enough money that even if his reputation is horrible, people aren't just going to not work with him. You can imagine that how works on a global scale as president.
> Trump believes there is a winner and loser in everything.
This, precisely. It's Fred Trump's mantra, inherited.
It's also bound up with his malignant narcissism; no deal is ever closed, it can always be renegotiated and he can always decide it was bad for him even when it was his deal.
People did refuse to work with him, though I am sure the rest came to realise you overbilled so you got paid at all.
And he made some hilariously bad deals when he was desperate (the ghostwriter for The Art of the Deal got comically good terms because Trump was so desperate to have a book).
Famously his lawyers would only meet with him in pairs. He is that untrustworthy.
All of this factors into how the tariff deals are going; any diplomatic department anywhere in the world understands all of this.
> All of this factors into how the tariff deals are going; any diplomatic department anywhere in the world understands all of this.
NYTimes (I think it was) just had an article that talked about how these other countries made these outlandish commitments to buy way more gas from the US than they'd ever need, or make insane amounts of investments in the US that they would never need to do, but the agreements were "light on implementation details". That shit is never going to happen.
Similar psychology, too, and extremely similar backstory: a truly dreadful, cruel, selfish man for a father. Fred Trump would have found a lot in common with Errol Musk, and they both did a lot of emotional damage to their sons in their early years. They are fully the products of emotional damage in early childhood.
(Musk has the small advantage of being able to express his feelings about his father’s behaviour; Trump still worships his)
If this were the whole story you'd expect all of Trump and Elon's siblings to be equally terrible. Maybe they are and just haven't had the opportunity to demonstrate it? I have the impression, though, at least in Trump's case, he's in a different league.
Not necessarily. Every psychopath has a golden child, after all; perhaps it’s the same here. It depends who was singled out for more abuse and coldness or demands, and it depends who had more parental love from the other parent, and it could also be a question of genetic predisposition in terms of how they react, it might be different if you have more siblings, etc.
Maryanne Trump Barry —- a federal judge —- was nevertheless part of the family tax cheating scheme.
Robert Trump cheated on his wife and his egregious behaviour seemingly drove her to an overdose.
Fred Trump Jr (Mary’s dad and Fred’s eldest, intended to run the business) drank himself to death, unable to survive the unbearable pressure his father put on him.
DJT is in a different league for sure: he is a malignant narcissist which is already a very unusual personality type, and he was also shaped and protected by Roy Cohn.
Either way, evil dads are always in the back stories of these guys (Emory Tate was a cruel, diagnosed narcissist, a misogynist and adulterer, and often absent too)
Not to dismiss the issues here, but the entire American automotive sector works like this.
It's practically standard policy for OEMs to stiff smaller vendors with flagrant disregard for their obligations, because every day of delay and every dollar they don't have to pay is more margin for the OEM. In many cases it doesn't even matter if doing so it's detrimental to the long term health of the OEM, as happened during the COVID supply shocks. Finance gets their way.
As an engineer, I've found out from more than one vendor that the delivery I was expecting to start production isn't happening because finance just decided they didn't want to issue payment.
It’s like the Gastronomie Branche in Vienna
Can you share what that means? To a non German speaker this is of no significance
He used the German term for the hospitality sector.
As a German speaker, it doesn’t make much sense either
Agreed, or like the the inshoku gyōkai in Tokyo.
97b in revenue per year. 10% of cars is made by suppliers, so maybe 9b goes to suppliers. 750m of liabilities per month. There's going to be millions hanging out there perpetually. AKA normal for every large business.
p.s. Tesla is not indebted like every other business (10-15x less debt, 5-6x more cash), so interest doesn't really count for them.
I think this needs to be understood by more people, and as a society, we need to start acting against these practices (e.g. by collectively blacklisting organisations who do not fulfil their obligations).
Well then they'll just source the part from abroad. This is the same flavor of thinking as "tech workers should unionize".
Excuse me? Unionization is responsible every worker's rights law ever passed.
Exactly, tech workers would be fools to not unionise. All of them, in every country.
Let them. And let them eat the higher cost - foreign suppliers will not ship that stuff for free, and will demand securities for large orders. At some point, there will be a financial equilibrium.
After working at small companies most of my career. Anytime someone angrily states that little people must pay their bills or else I reflexively think about how much corporate America does not. Really common they'll withhold the last payment until they need something else.
I keep coming back to a study I read a long time ago where they administered college students a test to score sociopathy as freshmen and again as seniors. Not surprising seniors scored lower then freshmen, except business and economics where they scored a lot higher. Makes me more receptive to the old school idea that college is partly there to provide a moral education.
Never keep working after the first unpaid bill.
The big tier ones (Bosch, Continental, etc) insist on payment up front specifically to avoid this. It's the smaller vendors that don't have leverage to set payment terms who get screwed.
One tactic I've seen OEMs use is to buy for multiple products and stop payments for one as a test. If the vendor complains, they lose all the unrelated business (possibly including clawbacks!) and the OEM moves to the second source. This can kill the supplier.
The winning move is not to play.
As a small player in the services game (data consulting) the only way to do it is to have good relationships with the people paying the bills. Even with good agreements, you still need the client to be on your side.
If no one plays then nothing will be made.
Absolutely brutal. Wow.
One big secret in economics is that essentially the whole world is demand constrained. There's exceptions, but they're few and far between. And in all of economics you will not find a solution to that anywhere, hell they don't even explain this. Obviously the supply/demand curve is in reality not linear: at low prices it goes entirely horizontal and constrained below physical needs it goes entirely vertical. Obviously, no linear model can do this. There's no real point in doing more of anything than we are doing now. Think of it like this: if in Paris double as much bread was made tomorrow, and sold at any price, there would not be even a minimal rise in bread consumption. We have enough. Essentially all of it would be thrown away. Now replace bread by just about anything, and you'd see the same problem. So "relationships" are what gets business, or as you might call it "selling demand". And it's very easy for buyers to abuse the system.
At the risk of never getting paid and losing the rest of the contract and any money you've invested getting to the first delivery and payment point.
Look, I get it, I was starting out once, and out of necessity did some "high risk" work where we invested a lot of time before getting paid. Sometimes it worked out, sometimes it failed.
I learned to understand that -risk- has a value. All transactions have risk, maybe I don't deliver, maybe you don't pay.
I now explicitly factor risk into quotes. We can share risk (you pay some, but not all, up front, coupled with progress payments), or I can take the risk (I'm pricing it higher, and assuming you're skipping the last payment), or you can take the risk (pay up front, but pay less.)
Treating risk as a line-item in the budget helps both parties understand the pricing better. Having a track record (of paying or producing) helps the other party accept more if the risk.
I've had some clients prove to be unreliable payers. For them I accept no risk. All work us done on a "pay first" basis. Some choose to find another supplier. I don't consider that a loss.
https://en.m.wikipedia.org/wiki/Sunk_cost
If you keep working, you still run the risk of never getting paid — in which case your lost investment would be more time and money than it would've been if you'd stopped after the first unpaid bill.
Wrong notion.
Eff, what kind of sucker [1] are you?
"You" (not you) already took a risk which failed. Now you are talking about taking on more risk with the same person who cheated you, like a lallu (Hindi term for a sucker)?
You're promoting wrong ideas, which are harmful to everyone here who is a supplier.
You need a principle from Econ 101:
Animats is right.For software related things, if it stops working, you will then get paid immediately to fix it. That's when you get paid, fix it, and never work for them again.
This current crop of rich people really sucks.
One wonders if this is merely the age of information, and during "the before times" the rich people really sucked too.
Soap box:
Having A LOT of money can suggest to a person that Everyone Else's Rules Do Not Apply To ME. Because they don't, largely. The trick is not letting that idea infest your mind with fallacies, such as YOUR Rules Do Not MATTER.
It's the high cost of the legal system that allows large companies with deeper pockets to bully small suppliers.
Not just in USA but many other countries too.
Musk pulled the same stunt with vendors after buying Twitter.
The news is full of stories about him settling cases because his actions were either illegal or in breach of contracts.
He comes across as supremely arrogant—someone who refuses to play by the rules and probably never will.
At this point, if you extend him credit or don’t demand full payment up front, that’s on you for trusting him.
Trump and Elon are two peas in a pod. Same tactics, different industries.
https://www.nbcnews.com/politics/2024-election/cities-seek-7...
https://www.usatoday.com/story/news/politics/elections/2016/...
I'm curious how this works over time. I read somewhere (would have to search to find it) that after Trump became notorious for stiffing small contractors on his properties, the wisdom them became you just quoted a ~50% premium, because you knew Trump would only pay you 2/3 of what he originally said he would.
But agree with your statement, which is why I always gag a little when I see working class people lionize these two as "champions of the working man".
Trump believes there is a winner and loser in everything. So you stiff the contractor, he gets upset and might not work with you again, you just get another contractor. Trump was a big enough name and has enough money that even if his reputation is horrible, people aren't just going to not work with him. You can imagine that how works on a global scale as president.
> Trump believes there is a winner and loser in everything.
This, precisely. It's Fred Trump's mantra, inherited.
It's also bound up with his malignant narcissism; no deal is ever closed, it can always be renegotiated and he can always decide it was bad for him even when it was his deal.
People did refuse to work with him, though I am sure the rest came to realise you overbilled so you got paid at all.
And he made some hilariously bad deals when he was desperate (the ghostwriter for The Art of the Deal got comically good terms because Trump was so desperate to have a book).
Famously his lawyers would only meet with him in pairs. He is that untrustworthy.
All of this factors into how the tariff deals are going; any diplomatic department anywhere in the world understands all of this.
> All of this factors into how the tariff deals are going; any diplomatic department anywhere in the world understands all of this.
NYTimes (I think it was) just had an article that talked about how these other countries made these outlandish commitments to buy way more gas from the US than they'd ever need, or make insane amounts of investments in the US that they would never need to do, but the agreements were "light on implementation details". That shit is never going to happen.
Similar psychology, too, and extremely similar backstory: a truly dreadful, cruel, selfish man for a father. Fred Trump would have found a lot in common with Errol Musk, and they both did a lot of emotional damage to their sons in their early years. They are fully the products of emotional damage in early childhood.
(Musk has the small advantage of being able to express his feelings about his father’s behaviour; Trump still worships his)
If this were the whole story you'd expect all of Trump and Elon's siblings to be equally terrible. Maybe they are and just haven't had the opportunity to demonstrate it? I have the impression, though, at least in Trump's case, he's in a different league.
Not necessarily. Every psychopath has a golden child, after all; perhaps it’s the same here. It depends who was singled out for more abuse and coldness or demands, and it depends who had more parental love from the other parent, and it could also be a question of genetic predisposition in terms of how they react, it might be different if you have more siblings, etc.
Maryanne Trump Barry —- a federal judge —- was nevertheless part of the family tax cheating scheme.
Robert Trump cheated on his wife and his egregious behaviour seemingly drove her to an overdose.
Fred Trump Jr (Mary’s dad and Fred’s eldest, intended to run the business) drank himself to death, unable to survive the unbearable pressure his father put on him.
DJT is in a different league for sure: he is a malignant narcissist which is already a very unusual personality type, and he was also shaped and protected by Roy Cohn.
Either way, evil dads are always in the back stories of these guys (Emory Tate was a cruel, diagnosed narcissist, a misogynist and adulterer, and often absent too)