Death of the Roomba

As you may be aware, iRobot just declared bankruptcy, and the usual suspects blamed Lina Khan for blocking its merger with Amazon.

The usual suspects, of course, were the banksters on Wall Street.

In fact, the company was a dead man walking long before Lina Khan wrote her seminal paper on monopolies, because they were following the advice of those same banksters on Wall Street.

They killed all their research, stopped doing advanced work for the DoD, and eliminated all of their manufacturing, outsourcing that to China.

By last week, all they were was a holding company for the Roomba trademark, and giving their no-longer dominant position in the automated vacuum cleaner market, they had nothing.

There is nothing that high finance cannot destroy. 

A few days ago, consumer products company iRobot, the maker of iconic Roomba automated vacuum cleaner, declared bankruptcy. The CEO, a branding and mergers expert named Gary Cohen, sadly announced that the firm could not continue as a going concern.

The board, full of lawyers and financiers but not robotics experts, voted to sell iRobot off to Shenzhen Picea Robotics, the Chinese company to which it had offshored manufacturing. There are about 20 million active Roomba vacuum cleaners in operation, and unless Trump regulators or antitrust enforcers act, now all the data harvested from our homes will go to China.

The co-founder of iRobot, Colin Angle, was not introspective about this collapse, nor did he associate it within the broader context of the many firms who have had their technology transferred to China. Instead, he, like much of Wall Street, blamed the bankruptcy on Lina Khan. Why? Well she ran the Federal Trade Commission when it investigated Amazon’s possible acquisition of the company in 2022, a deal the two companies ultimately called off. Here’s Angle:

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Many Wall Street dealmakers and foes of antitrust enforcement echoed this sentiment. For instance, former Obama chief economist Jason Furman, who is now the Aetna Professor of the Practice of Economic Policy at Harvard, used it as an example of the problem with populist economics. Blocking mergers, he believes, leads to destructive outcomes and national security problems.

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In the mid-2010s, during Furman’s tenure running economic policy under Obama, the company sold its defense business, offshored production, and slashed research, a result of pressure from financiers on Wall Street.

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This is a sad story, it’s also a common one. China has captured technology and key process leadership from American and European firms, across everything from rare earths to batteries to chemicals to robotics. And the driver is that the American model of running corporations is to focus on “asset light” cream-skimming, which is to say, focusing on lines of business where the return on capital is exceptionally high.

Conversely, the Chinese government, to preserve and extend its particular authoritarian model, actually suppresses the return on capital for its financiers, forcing an “asset heavy” approach. They overly emphasize factories and engineering. The net effect of these two complementary forces used to be celebrated as “Chimerica,” where China produces and the U.S. consumes.