Short off-the-cuff thread with the 6 reasons why Chinese manufacturing is so cheap.
Conclusions draw from my experience buying from China for 11 years, Vietnam 6, Cambodia 3, and USA on and off.
Also based father-in-law's experience who operated factories in Taiwan, Malaysia,
China, and Vietnam.
Reason #1: Cheap labor. Chinese workers are significantly less expensive than other countries'. 1.4 billion people matters, a lot. Especially when there's a glut going into the workforce, but what about now?
Reason #2: High worker efficiency. My Korean-run
factories outside of China say the same thing that Taiwanese father-in-law says: Chinese worker efficiency is unparalleled. Direct quote from Korean factory boss "Chinese workers are happy to work 11 hour days. Vietnamese workers want to relax and enjoy life."
Chinese workers work faster than neighboring countries'.
Reason #3: Superior supply chain. China is a big country, so whatever that needs to get made, gets built on massive scale, which means the cheapest possible prices. Labor rates maybe cheaper in other countries, but the
materials need to be imported, which both higher cost and slower. Big advantage for China.
Reason #5: Outstanding infrastructure. Only India has the capacity to match China in size of market and labor pool, but the infrastructure is not at China's level. Low prices need big
volumes. Big volumes need high capacity functioning ports, bridges, roads, and trains. China's got'em. India's still working on that.
Reason #6: These advantages compound on each other. When your components are cheaper, you can be cheaper. When you are cheaper, you get more
sales, so you can buy the machine that drives down your cost. There are virtuous cycles everywhere driving costs down. It's a very difficult moat for other countries to overcome, even with 25% tariffs.
What about America? We have good infrastructure, but our labor rates are
astronomical compared to Asian countries' labor, in part because of reserve currency status. Further, while I have people on my team who can go toe to toe with the Chinese, generally American workers are way slower. Even management is slower here. China runs 24/7.
That's the end fo the thread.
P.S. Viahart was not built on Taiwanese father-in-law connections, though that would have been nice. Different industry and I cut my teeth in China the hard way.
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It definitely feels like we’re headed into another bout of 1970s style US inflation but the more I think about it the more I think it will be similar but also different.
1) we didn’t have software in the 1970s like we do today. Demand for
software does not drive price increases like it does for fixed supply high marginal cost physical products. So it’s unclear what will happen there.
2) In the 1970s a much larger percentage of the hardware we bought was made here. Now it’s all made overseas. Before demand could
for domestic wages but now it drives a lot of that demand in Asian wages, which is very different.
The prices of goods are definitely going up but outside of government assistance and lower wage earners it doesn’t have to go up here.
Does Amazon make money on the shipping and fulfillment it charges FBA sellers?
They don't reveal these data but there are clues implying this is a strong profit center.
Here's one example:
- $5.27 to ship out of our warehouse
- $7.48 to ship out of Amazon.
Here is a graph of 152 skus for which we have data.
When the red line is above the blue line, it means our shipping cost is higher than Amazon's.
When the blue line is higher, it means Amazon is more expensive.
To make this comparison apples to apples, remember:
- Amazon is including the cost of the box and fulfillment, we're not here ($0.30-$0.50 for us).
- Amazon has robots, we don't.
- Amazon has warehouses all over the country. We have one.
I reread Influence, one of the greatest books of all time.
It will teach you to be more persuasive and how to avoid being conned by people who know its techniques.
This is a 🧵 of its core concepts based on excerpts 1/n
👇👇👇
It's important to understand that people will do things without thinking about them consciously. Check out Thinking Fast and Slow for more information about this. My use of the 🧵 and 👇 emojis are an attempt thoughlessly trigger retweets.
This is the author, Professor Cialdini Ph.D.
Very importantly he didn't craft this book from an academic ivory tower. They way he came up with the 6 concepts of persuasion was through joining multi-level marketing programs and the like.
Between 1971 and 2021 the supply of US dollars in circulation has compounded at 7% per year.
🤯
Meanwhile the gross the domestic product of the United States compounded at 6% per year over the same period.
🤯 🤯
This is just staggering to me.
The GDP is quoted in terms of USD. Who would have guessed that GDP growth could be outpaced by the monetary unit that it is quoted in. If you made every $1 bill $2, GDP would double in nominal terms.
The first place I started doing business in was China and I knew I was going to get screwed because it was “China”, a lane of fake products and scams. I had heard the horror stories.
I was right in I did get screwed.
A few years later I came back to the United States and I tried working with a US manufacturer for something that I was previously making in China after my Chinese supplier had screwed me.
Boy was it expensive!
And something very strange happened. I had paid a lot of money for a mold made by an American mold maker and the mold was not working as it should and I told my American supplier that.