John Carmack's idea of manufacturers auctioning hardware directly to consumers is flawed

[Shawn Knight]

What just happened? As the third-party market for new consoles and PC hardware continues to thrive, some are starting to wonder if traditional sales channels should be done away with. In a recent post on Twitter, id Software co-founder John Carmack said it seems like we would be better off with a “transparent auction system directly from the manufacturers and a more efficient market.”

“There would be much indignation at reported prices out of the gate, but removing intermediaries should net out better for consumers in the end,” Carmack added.

Given shortages and speculators on things like 3090 GPUs and new consoles, it seems like we really would be better off with a transparent auction system directly from the manufacturers and a more efficient market. The world of sales channels prevented that in the past, but we \

— John Carmack (@ID_AA_Carmack) February 19, 2021

There’s a lot to digest here, so let’s take it a bite at a time. For those who haven’t been keeping up with the gaming and hardware markets as of late, both are facing multi-faceted retail issues stemming in part from:

• Chip shortages due to the pandemic
• Retailers limiting sales to the Internet due to the pandemic
• Scalpers using bots to buy up all the online inventory and reselling for huge profits
• A thriving crypto market that is attracting amateur miners

Carmack isn’t wrong to think out loud about how to remedy issues currently impacting consoles and PC hardware, but the solution he presented has many flaws.

Selling directly to consumers via auction would effectively eliminate scalpers, but that doesn’t solve anything from the buyer’s standpoint. Inventory would still be in short supply and prices would still be well above retail. The only difference is that hardware makers would be netting the extra profits instead of individual scalpers.

That opens a whole new can of worms. Suddenly, Nvidia and AMD would be receiving all the criticism and negative press for high prices, not scalpers. You’d also have to worry about the risk of artificial inventory shortages. What’s more, it’d require a complete restructuring of the sales process.

Manufacturers have one task: to make products. Selling goods directly to customers isn’t part of their job description, and with no experience, they probably wouldn’t be very good at it. It reminds me of a line from comedian Mitch Hedberg: “It’s not fair, you know? It’s as though if I was a cook, and I worked my ass off to become a really good cook, and they said “alright you’re a cook… can you farm?”

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https://www.techspot.com/news/88686-john-carmack-proposes-console-hardware-auctions-beat-scalpers.html

 

[Avro Arrow]

This article has a lot of excellent points but mostly, it just reminds me how much I miss the comedy of Mitch Hedberg, the most underrated comic genius ever.

My favourite one-liner from Mitch is sadly the one most connected to his untimely death:

I'm just glad that we still have Steven Wright:

 

[m4a4]

So, trade 1 form of inflation for another? Yeah, a brilliant plan! /s

I wouldn't want to see this either, especially since I wouldn't put it past them to artificially limit the availability of products to then drive up the auction prices in this scenario...

 

[m4a4]

As long as the chain is making money, I don't see any meaningful fix being implemented to benefit the average consumers (beyond the odd one here and there from people who want to care).

 

[VaRmeNsI]

People still haven't figured out that all this government money printing has consequences: inflation.

Unless manufacturers price realistically the shortages will continue.

 

[madboyv1]

This article has a lot of excellent points but mostly, it just reminds me how much I miss the comedy of Mitch Hedberg, the most underrated comic genius ever.

My favourite one-liner from Mitch is sadly the one most connected to his untimely death:

I'm just glad that we still have Steven Wright:

Same man, every now and then I look up his old stand up for a good time. Even if I know the punchlines, it's all about the delivery.

 

[QuantumPhysics]

I am thankful to live close enough to Microcenter to have just been able to stalk them till they got 3090 FTW3's in and be first on line to get them.

The problem with these scalpers and miners is that they virtually have "bottomless pockets" and believe that they can pay whatever, to buy as much as they can, and that they'll be fine.

The only way to deal with them is for the individual auction sites to limit their sales potential.

The actual GPU makers would also be better if they directly sold to customers rather than the scalpable stores.

 

[arrowflash]

Carmack's logic is ridiculously flawed...! Geez, looks like superstars really tend to lose grasp of reality, even in the tech world.

Carmack's absurd idea will only make the problem even worse. In the kind of market Carmack proposes, scalpers and whales will still exist, and they're still the ones who will hoard most auctioned cards to resell them to consumers at an even higher price than they were auctioned for. It would never work. It would only inflate prices even more.

No, the only proper ways to deal with the problem are:

1. Manufacturers doing their part by increasing supply;
2. Retailers doing their part by doing everything in their power to limit sales of hyped launch products with limited supply to one or two units per consumer (online store websites that can't be used by bots, limiting units per consumer AND shipping address, purchases registered with consumer's id on a database shared between all retailers that would be cross checked at moment of purchase, etc).
3. Governments doing their part by:
3.1. Regulating retailers to enforce adherence to guidelines similar as the suggestions above, if necessary;
3.2. Making scalping a felony punishable with bankrupting fines and prison sentences.

 

[cliffordcooley]

Let me guess John Carmack owns an auction house. The auctions will simply replace the scalpers. Those willing to spend thousands on cards will now spend even more to have the first cards. I don't see this helping anyone other than the auction house.

 

[Squid Surprise]

Apparently he's never heard of supply and demand... the market will correct any price flaws automatically... just make more cards, and no one will be able to scalp them...

 

[fraggleki]

Can someone explain to me why retailers cant just ask for ID? Limit the sell of GPU's to 1 GPU per person until stock returns to normal.

 

[Lionvibez]

This would work if they are selling directly to consumers at MSRP.

No middle men no marks up. You would still have stock issues but that would kill the rest of the BS.

 

[Squid Surprise]

Can someone explain to me why retailers cant just ask for ID? Limit the sell of GPU's to 1 GPU per person until stock returns to normal.

Because, despite the nonsense you hear, retailers LIKE scalpers!
They guarantee that their stock is sold!

The only people who hate scalpers are those unwilling to pay a markup in order to get a product quickly.... you don’t want to pay extra? Just wait a few months...

 

[arrowflash]

This would work if they are selling directly to consumers at MRSP.

No middle men no marks up. You would still have stock issues but that would kill the rest of the BS.

Yep, a possible alternative would be manufacturers allowing pre-orders at MSRP - as long as they implement all possible rules, measures and checks in place to ensure 1 card = 1 consumer.

However it's clear by now that manufacturers and retailers are all too happy to sell to scalpers, so I don't think any measures will be taken without state intervention.

 

[Lionvibez]

Yep, a possible alternative would be manufacturers allowing pre-orders at MSRP - as long as they implement all possible rules, measures and checks in place to ensure 1 card = 1 consumer.

However it's clear by now that manufacturers and retailers are all too happy to sell to scalpers, so I don't think any measures will be taken without state intervention.

They are happy because their primary goal is getting rid of hardware, it doesn't matter to them if its consumers, scalpers, bots, miners at the end of the day they are good.

However if they don't do something to address the situation eventually their consumers will turn against them. The fact that you have governments starting to look at this situation shows how much of an issue it is.

 

[brucek]

"Selling directly to consumers via auction would effectively eliminate scalpers, but that doesn’t solve anything from the buyer’s standpoint. Inventory would still be in short supply and prices would still be well above retail. The only difference is that hardware makers would be netting the extra profits instead of individual scalpers."

I'm a buyer and that would solve plenty from my standpoint. The manufacturer can offer a warranty, support, and perhaps most importantly, is able to respond to the increased incentives of increased revenue by doing things that may increase supply. The more buyers bid up the price, the more options that the manufacturer previously discarded as not cost effective will be back on the table. More revenue into an industry will attract more investment and entrepreneurs into all segments of that industry. Scalpers are currently short circuiting those mechanisms and everybody but the scalper is worse off for it.

 

[Avro Arrow]

Same man, every now and then I look up his old stand up for a good time. Even if I know the punchlines, it's all about the delivery.

Yep, Mitch had an incredible delivery. He was like a modern-day Beatnik with that bass playing in the background. Just top-notch man!

 

[Avro Arrow]

"Selling directly to consumers via auction would effectively eliminate scalpers, but that doesn’t solve anything from the buyer’s standpoint. Inventory would still be in short supply and prices would still be well above retail. The only difference is that hardware makers would be netting the extra profits instead of individual scalpers."

I'm a buyer and that would solve plenty from my standpoint. The manufacturer can offer a warranty, support, and perhaps most importantly, is able to respond to the increased incentives of increased revenue by doing things that may increase supply. The more buyers bid up the price, the more options that the manufacturer previously discarded as not cost effective will be back on the table. More revenue into an industry will attract more investment and entrepreneurs into all segments of that industry. Scalpers are currently short circuiting those mechanisms and everybody but the scalper is worse off for it.

This is very true. Buying a card from a scalper essentially voids the warranty because the scalper usually isn't a proper retailer.

 

[Rdmetz]

Carmack's logic is ridiculously flawed...! Geez, looks like superstars really tend to lose grasp of reality, even in the tech world.

Carmack's absurd idea will only make the problem even worse. In the kind of market Carmack proposes, scalpers and whales will still exist, and they're still the ones who will hoard most auctioned cards to resell them to consumers at an even higher price than they were auctioned for. It would never work. It would only inflate prices even more.

No, the only proper ways to deal with the problem are:

1. Manufacturers doing their part by increasing supply;
2. Retailers doing their part by doing everything in their power to limit sales of hyped launch products with limited supply to one or two units per consumer (online store websites that can't be used by bots, limiting units per consumer AND shipping address, purchases registered with consumer's id on a database shared between all retailers that would be cross checked at moment of purchase, etc).
3. Governments doing their part by:
3.1. Regulating retailers to enforce adherence to guidelines similar as the suggestions above, if necessary;
3.2. Making scalping a felony punishable with bankrupting fines and prison sentences.

Yea you see all those Trump supporters out there screaming about "stay away big government" are also many of the ones screaming for this type of regulation.

the fact is this is its capitalistic market and how would any government control companies / markets that work on a global scale?

This is isn't buying concert tickets to Madison Square garden.

This is international business with independent companies and independent 3rd party markets (from around the world).

There's no real way to "regulate" this that would truly fix it.

The answer to me is to be better prepared next time and don't let they hype train beat you... You beat the hype train.

I KNEW this was coming for almost a year and I was fully prepared on day for a battle. I never used paid for bots or anything of the sort but I did make sure my notification game was top tier and my checkout process was down to a science (I mean how many people likley got screwed cause they didn't memorize their cvv code?)

I did the work before hand and even stayed phsyclaly attached to my phone / pc for days at a time but all in all I pulled 1 3080 on day 1 after 8 hours of trying and within the first 3 weeks I had gotten 9.

Not to sell so don't come at me with that just have lots of friends and family (and their gamer spouses) who headed my advice and "got 1 now before it's too late" so I hooked them up and now they all owe me a life debt lol

I even kept picking up cards as the initial one I got wasn't the one I wanted and in the end by December I had bought a total of 12 with no bots or scalping involved.

There was plenty of warning all year that this was going to happen and if you truly absolutely knew you couldn't make it without you should have done the work to make sure you didn't miss out.

 

[Rdmetz]

"Selling directly to consumers via auction would effectively eliminate scalpers, but that doesn’t solve anything from the buyer’s standpoint. Inventory would still be in short supply and prices would still be well above retail. The only difference is that hardware makers would be netting the extra profits instead of individual scalpers."

I'm a buyer and that would solve plenty from my standpoint. The manufacturer can offer a warranty, support, and perhaps most importantly, is able to respond to the increased incentives of increased revenue by doing things that may increase supply. The more buyers bid up the price, the more options that the manufacturer previously discarded as not cost effective will be back on the table. More revenue into an industry will attract more investment and entrepreneurs into all segments of that industry. Scalpers are currently short circuiting those mechanisms and everybody but the scalper is worse off for it.

A reasonable response and likley where Carmack's thinking is.

The fact is the products have a "value" much higher than what they were priced at and no matter how much you want the product to be available to you at that price with a market that's values this item so much higher the likelyhood of you getting it without putting in some kind of "value" to match (more money / effort) is unlikely.

Doing it this way at the very least you know you're money is hopefully going to help the situation in some way with a scalper it absolutely is doing nothing for anyone but them.

 

[pcnthuziast]

The ruling class will be fine.

#poorpeopleproblems

 

[Neatfeatguy]

Can't do anything if you're not part of the distribution chain.

How do normal consumers that rely on the retail chains (be it online or brick & mortar) have a chance when you see pictures of GPUs that are already in the hands of scalpers and miners before the GPUs are officially released to go on sale?

The question that needs to be answered and fixed:

How do we prevent manufacturers/retailers from selling on the backend to miners/scalpers?

 

[Squid Surprise]

The question that needs to be answered and fixed:

How do we prevent manufacturers/retailers from selling on the backend to miners/scalpers?

Why does this question need to be answered? Or fixed?

There is NOTHING wrong with the system. The only problem is that the cards are in short supply - let me remind you that there's a global pandemic going on right now...

This will all be fixed in a few months...

As of right now, the cards' MSRP are simply too low - supply and demand dictate pricing... it's called capitalism.

 

[Shadowboxer]

I’d I were a manufacturer I’d absolutely auction the parts. It would make more money and isn’t that the idea here? Gamers will moan but gamers will always moan. Who cares you’re selling your product. And let’s face it, you aren’t getting boycotted, especially if you’re Nvidia. Why not take the profits from the scalpers, what did they do to deserve them?

I think we need to wait it out, markets sort themselves out, particularly for luxury items. Who knows maybe Intel will come out with a decently priced graphics card that isn’t waiting on wafers from TSMC? (And yes I know TSMC doesn’t make Ampere wafers). If I were an exec at Intel I’d be looking at all this demand and think “we have all these fabs!”.

Something I would like to see is reviewers stop being so hard on manufacturers for high prices of items that sell out and get marked up. Because there’s going to be an awful lot of that coming and clearly the “high” prices don’t deter.

 

[Nobina]

Have MSRP Edition GPUs just to piss gamers off even more.