Fender and the Rise of Psychopathic Capitalism

Everything that’s happening now makes a lot less sense when you understand that “Capitalism” is theory of ethics. Adam Smith, the father of modern capitalism, wasn’t an economist. He was an ethicist, in that he studied how systems are affected by ethics. We only think of it as an economic system because, at this point, we’ve stripped out most of the ethics. Don’t worry, we’re not going to do a deep dive into how capitalism works.

In short, Adam Smith argued that within an ethical framework, a system that relies on capital investment can, through competition, produce greater innovation and benefit the world in general. We could argue all day about whether this has actually ever worked as intended, but most of us would agree that it isn’t working right now.

We often hear the term “late stage capitalism,” but how did we end up at late stage capitalism? That’s where psychopathic capitalism comes in, and Fender is currently finding out exactly why it isn’t a long-term strategy.

At their core, psychopaths simply don’t care. They don’t have empathy for other people. They don’t care who they hurt. They don’t care about taking unnecessary risks. And they don’t even usually care when they get caught for their behavior. They might appear to, at least, care about their own well-being, but it’s always self-defeating.

So, where does that put Fender? We can be generous and assume that Fender is suffering through this economy just like the rest of us, and they see their pandemic “let’s all learn to play guitar” boost fading into the red. They see other builders profiting from Fender designs, and they don’t like it. But that begs another question: How did other builders outpace Fender at their own game?

Roughly twenty years ago, I worked at a guitar shop that carried Fender Custom Shop guitars. Even then, many of them were priced in excess of $5000. And they were, to put it mildly, just ok. They looked cool, and they played well, but there was nothing about it that screamed “this is a $5000 guitar!” They didn’t sell particularly quickly. And like another major builder we all know, their attention to detail and quality control was notoriously lacking.

At that point, it was clear that there was a hole in the market that smaller and boutique builders could fill. As the classic brands became corporate lifestyle brands, these companies coasted on their logos and reputations. Meanwhile, smaller companies started cranking out better S-style guitars. For less money.

For years, Fender tolerated this, presumably because they understood that Leo may have erred in not patenting and trademarking his bodies like Gibson had with the Les Paul. Perhaps, they were just doing well enough that they didn’t care.

So, Fender had a choice, and it came down to which type of capitalism they would adopt. Spoiler: it was the wrong one. In an ethical capitalist framework, Fender would have looked at why they were losing market share and improved their processes in whatever ways necessary in order to produce a guitar that competes with other, smaller manufacturers. Heck, if Fender had been doing their job properly, there wouldn’t have been a market for other S-style guitars.

Fender made the same choice that many other brands are starting to make: to cannibalize their own brand for short-term gain. Maybe you’ve heard about the recent changes at Alamo Draft House, where the new CEO is implementing a plan to reduce human workers. The immediate response from ADH fans was clear: the human workers were what made ADH great. Without that, it would be “an overpriced AMC.” A decision that could boost revenue in theory could kill the brand in practice. This is exactly what Fender is doing: sacrificing a 70+ year legacy to win one quarter.

This isn’t functional capitalism. This isn’t what Adam Smith envisioned in “Wealth of Nations.” Sometimes it’s called “predatory capitalism,” or “late-stage capitalism,” but the reason we’re in a late stage is because capitalism is no longer even working for its own benefit. Not really.

We’re now in a period where corporate brands have shifted from winning the market by having the best product, to winning the market by destroying the market while to avoid having to have the best product. And not surprisingly, they’re not winning. In many ways, Fender’s recent cease and desist action is an admission of their weakness in the market— a confession that, yes, these smaller builders are producing a superior product for a better price.

For years, Fender has coasted on legendary brand recognition, and they’re not the only legacy brand to do so. But at this point, Fender has made a choice that corresponds with the greater problem with our entire economy. The more we veer from the ethical interpretation of capitalism, the worse products will get, and brands will only destroy their markets more aggressively. Fender may call this “competition,” but a more accurate term would be “sabotage.”

Capitalism is supposed to be a self-sustaining system in which companies are forced to excel in order to be a part or the market. What is happening now is a system where a company like Fender can simply try to burn down the rest of their market in order to maintain their own mediocrity. This, as we all know, is the reason why monopolies are the constant enemy of capitalism. They eliminate good-faith competition.

In all likelihood, Fender’s plan is to clear the market, and then start trying to license the S-style body back to other companies for a fee, just like they’ve done for decades with their headstock shape. Will this bring in some revenue for Fender? Maybe. But in the process, they’ve become the bad guy. The corporation that’s gotten so big that it doesn’t want to play by the rules of the market anymore.

We could argue about what kind of dysfunctional capitalism we’re dealing with. I don’t know the name for an economic system in which the dominant company effectively stays economically dominant by constantly degrading their own quality while also pushing any potential competition out of the market. But it sure isn’t capitalism.