Of course small brands can exist and make amazing stuff. Respect to Rohloff, Intend, Pinion, and allllll the builders putting these bespoke bikes/parts together. But they’re...
Of course small brands can exist and make amazing stuff. Respect to Rohloff, Intend, Pinion, and allllll the builders putting these bespoke bikes/parts together. But they’re a rounding error in the market. If boutique shops had to supply the whole industry, they literally couldn’t meet demand.
And “not the cheapest” is really a big part of this debate. A Rohloff hub alone is around what... $1,300? A boutique shop can build one great bike for people who can afford it. Scale lets companies build a million good ones at prices normal people can pay. Fox, SRAM, and Shimano bring performance and value because they benefit from economies of scale. The examples you gave do not, and their pricepoints all show for it.
Those small companies also stand on the shoulders of giants: CNC machines, aluminum alloys, carbon, bearings, seals, damper design, modern oils, modern tech infrastructure, distribution networks, and industry standards like axle spacing, shock sizes, headset specs, and BB specs that the big players set and paid for. Any shop can service parts, and the rider base that supports premium niches exists in part because big brands grew the sport and had the ability to "set the standard". You conceded tires, but the same is true of rims, chains, and bearings.
Pinion is a funny example here. It was founded (I think) in 2008 by two engineers who met in Porsche’s development department, and its gearbox was modeled on a car manual transmission, born out of one of the most capital-intensive industries on earth. Since 2022, BRP, the publicly traded Ski-Doo and Sea-Doo maker, has owned 80% of it. That’s literally access to capital funding a challenger to Shimano and SRAM (i could be wrng here)
Private doesn’t mean no capital either, as I'm sure you know. Bootstrapped companies run on founder savings, bank lines, and customer deposits. Boutique builds one great bike, scale builds a million good ones, but in some way, shape or form - capital is what makes both possible.
Again, at a point we just are talking about the amount of capital, which feels really arbitrary to me. Who am I to say Fox, Shimano, SRAM, and a handful of other companies shouldn't have access to 10 figures of capital if needed?
Remember, without all this money in the market, and without all this competition, many of us probably wouldn't be able to afford the sport, nor would the tech be anywhere near where its at...
I thought we were talking about outside capital in just the bike industry.
What does "outside" mean?
My read of what Jeff wrote is he's thinking about the normal economics definition of outside vs inside capital. Basically inside capital is the cash generated by the business itself. Everything else is outside capital. Further this means that virtually all businesses require outside capital to get started.
Now if you just mean "outside the bike industry" capital... you're basically trying to draw a very squiggly, fuzzy ass line. And IMO it's so squiggly and fuzzy it's basically pointless to try and draw. And I think Jeff is basically making this point as well, but very nicely. (Correct me if I'm wrong, obviously).
At the end of the day it's a passion based industry. Which is one of the challenges for businesses. I think it's useful to view the market as a thing that contains ONLY actual financial transactions--this strips away the bullshit people say from what they actually do (how many people say they will buy one thing, and then don't, or buy another for example). Companies compete in the market. It's like evolution, survival of the fittest. Companies are born, they struggle, they thrive, they die. It's a VERY good thing that companies are born and die.
Of course small brands can exist and make amazing stuff. Respect to Rohloff, Intend, Pinion, and allllll the builders putting these bespoke bikes/parts together. But they’re...
Of course small brands can exist and make amazing stuff. Respect to Rohloff, Intend, Pinion, and allllll the builders putting these bespoke bikes/parts together. But they’re a rounding error in the market. If boutique shops had to supply the whole industry, they literally couldn’t meet demand.
And “not the cheapest” is really a big part of this debate. A Rohloff hub alone is around what... $1,300? A boutique shop can build one great bike for people who can afford it. Scale lets companies build a million good ones at prices normal people can pay. Fox, SRAM, and Shimano bring performance and value because they benefit from economies of scale. The examples you gave do not, and their pricepoints all show for it.
Those small companies also stand on the shoulders of giants: CNC machines, aluminum alloys, carbon, bearings, seals, damper design, modern oils, modern tech infrastructure, distribution networks, and industry standards like axle spacing, shock sizes, headset specs, and BB specs that the big players set and paid for. Any shop can service parts, and the rider base that supports premium niches exists in part because big brands grew the sport and had the ability to "set the standard". You conceded tires, but the same is true of rims, chains, and bearings.
Pinion is a funny example here. It was founded (I think) in 2008 by two engineers who met in Porsche’s development department, and its gearbox was modeled on a car manual transmission, born out of one of the most capital-intensive industries on earth. Since 2022, BRP, the publicly traded Ski-Doo and Sea-Doo maker, has owned 80% of it. That’s literally access to capital funding a challenger to Shimano and SRAM (i could be wrng here)
Private doesn’t mean no capital either, as I'm sure you know. Bootstrapped companies run on founder savings, bank lines, and customer deposits. Boutique builds one great bike, scale builds a million good ones, but in some way, shape or form - capital is what makes both possible.
Again, at a point we just are talking about the amount of capital, which feels really arbitrary to me. Who am I to say Fox, Shimano, SRAM, and a handful of other companies shouldn't have access to 10 figures of capital if needed?
Remember, without all this money in the market, and without all this competition, many of us probably wouldn't be able to afford the sport, nor would the tech be anywhere near where its at...
last time i checked intend forks are not due for a recall. rock shoxs are though. all that sweet sweet capital and they failed to properly qc their shit.
I think the vast majority of the bike industry is made up of people forgoing capital to be an engineer at rockshox, or trek, or wherever. Risking their life savings on a bike shop that will never increase in value. Just more work for more people who also are probably forgoing a better salary somewhere else to do it. People who run a second company while putting food on the table from a first job. hoping one day they can provide employees and themselves with a modest living built around riding bikes. And I think as far as innovation in the modern world. The vast majority is driven by people who are passionate about being a doctor, chemist, engineer, paleontologist, artisan, teacher, etc. etc. etc.
It’s been a century since anyone with the ford name offered innovation at ford. The same guy who did that innovation. who history teachers tell grade schoolers offered his workers high wages to pay for the cars they built. Also had to be forced by the president to agree to an auto union and give said workers a raise to reasonable wages for world war 2. Of course the ford family and its investors were still set to get rich off government contracts even with the raises. But it does show the difference between a government acting on behalf of regular folk doing the work and a government acting/not acting on behalf of the families with their name on the property.
Jeff, reading through your newsletter, one thing that jumped out to me was how Garmin is way outperforming everything else in your bike graph. How the hell are they pulling it off? Is it because it's tech? Is it because it covers a wide range of outdoor (boating, offroad, bike computers, watches)? I understand why it's doing better than GoPro (because they're actually innovating in ways the user notices, and not reliant on generating terabytes of content that the user then has to edit and post for no one to watch). I feel like Garmin might be a decent candidate for deep dive on what's actually working.
On your speculation point 5, I think that's spot-on. I'd bet significant real money that SRAM will be taking another swing at a motor (this time in house rather than just a Brose rebadge) for this reason.
What does "outside" mean?
My read of what Jeff wrote is he's thinking about the normal economics definition of outside vs inside capital. Basically inside capital is the cash generated by the business itself. Everything else is outside capital. Further this means that virtually all businesses require outside capital to get started.
Now if you just mean "outside the bike industry" capital... you're basically trying to draw a very squiggly, fuzzy ass line. And IMO it's so squiggly and fuzzy it's basically pointless to try and draw. And I think Jeff is basically making this point as well, but very nicely. (Correct me if I'm wrong, obviously).
At the end of the day it's a passion based industry. Which is one of the challenges for businesses. I think it's useful to view the market as a thing that contains ONLY actual financial transactions--this strips away the bullshit people say from what they actually do (how many people say they will buy one thing, and then don't, or buy another for example). Companies compete in the market. It's like evolution, survival of the fittest. Companies are born, they struggle, they thrive, they die. It's a VERY good thing that companies are born and die.
last time i checked intend forks are not due for a recall. rock shoxs are though. all that sweet sweet capital and they failed to properly qc their shit.
I think the vast majority of the bike industry is made up of people forgoing capital to be an engineer at rockshox, or trek, or wherever. Risking their life savings on a bike shop that will never increase in value. Just more work for more people who also are probably forgoing a better salary somewhere else to do it. People who run a second company while putting food on the table from a first job. hoping one day they can provide employees and themselves with a modest living built around riding bikes. And I think as far as innovation in the modern world. The vast majority is driven by people who are passionate about being a doctor, chemist, engineer, paleontologist, artisan, teacher, etc. etc. etc.
It’s been a century since anyone with the ford name offered innovation at ford. The same guy who did that innovation. who history teachers tell grade schoolers offered his workers high wages to pay for the cars they built. Also had to be forced by the president to agree to an auto union and give said workers a raise to reasonable wages for world war 2. Of course the ford family and its investors were still set to get rich off government contracts even with the raises. But it does show the difference between a government acting on behalf of regular folk doing the work and a government acting/not acting on behalf of the families with their name on the property.
Jeff, reading through your newsletter, one thing that jumped out to me was how Garmin is way outperforming everything else in your bike graph. How the hell are they pulling it off? Is it because it's tech? Is it because it covers a wide range of outdoor (boating, offroad, bike computers, watches)? I understand why it's doing better than GoPro (because they're actually innovating in ways the user notices, and not reliant on generating terabytes of content that the user then has to edit and post for no one to watch). I feel like Garmin might be a decent candidate for deep dive on what's actually working.
On your speculation point 5, I think that's spot-on. I'd bet significant real money that SRAM will be taking another swing at a motor (this time in house rather than just a Brose rebadge) for this reason.
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