The End of Guitar Center

"Here’s what this really means: it’s the end of big box retail, an irrational addiction to growth, and the scourge of unregulated structured finance. For a few years, unwise urban planning and unregulated banks created a new bubble in the American suburbs. People bought homes they could not afford and turned their houses into lines of credit. This swindle eventually brought the economy to its knees and has taken most a decade to regain some state of uneasy equilibrium. Still, it was particularly stimulating to a certain type of retail that also depended on constant growth and financial trickery. The objective truth is that the growth of the last decade was financed by banking fraud, and that financial trickery of this sort only fools people in the short-term. Eventually, you must have a product people demand, sold by competent people who care about the business, financed in a way that makes sense.

This unforgiving reality will work great for local stores and entrepreneurs with a classic, cautious approach to business management. For a while, suspending our disbelief in reality allowed standard-issue corporate financiers to run a pump-and-dump scheme on all kinds of retail, selling risky ventures to “dumb money” and reaping the rewards for a select few. We are all wiser now, and the market conditions simply will not support that behavior.


This is not a moral judgment, merely an assessment of market engineering. Small and smart will carry the future while big, dumb, complex, and dishonest will bite the dust."