The Growth Machine Doesn't Just Overproduce. It Destroys Value.
A response to Part One of "Overproduction as Rational Equilibrium"
My colleague, Shivam Gusain, has written something worth reading carefully. The structural map is precise: asymmetric risk, minimum order quantities, SKU proliferation, incentive misalignment, the financial mandate for unit growth. Each mechanism is real. Taken together, they produce a system that prefers overestimation to underestimation, and surplus to scarcity. I don't dispute the diagnosis.
What I want to challenge is the implied conclusion — that because overproduction is structurally rational, it is therefore structurally inevitable. That because the incentives point one way, the outcome is fixed. This framing is more dangerous than it appears, because it offers the industry a kind of absolution. If the system produces surplus inevitably, then no individual brand, buyer, or executive is meaningfully responsible for changing it. We are all just operating rationally inside a machine we didn't design.
The evidence suggests otherwise. And the evidence is now financial, not philosophical.
The Brands That Opted Out
Some brands have been built on precisely the opposite logic to the one my colleague describes. They do not manage the asymmetric risk of surplus by absorbing it across markdown cycles and outlet channels. They transfer it back to the consumer. The mechanism is scarcity — not as a marketing tactic, but as a structural operating principle.
Supreme, before its acquisition by VF Corporation, was the clearest example. Founded in 1994 as a single skate shop on Lafayette Street, it built a business model around controlled drops, limited quantities, and genuine sell-through. There was no outlet channel because there was no surplus to outlet. The fear of missing out sat entirely with the customer, not the brand. By 2020, that model had produced a business valued at $2.1 billion.
Supreme is not alone. Hermès has operated on deliberate scarcity for decades — Birkin waitlists are not a supply chain failure, they are a design choice. Aimé Leon Dore, New Balance's collaboration programme, and a growing number of direct-to-consumer brands have built meaningful equity on the same logic: produce less than demand, not more.
These brands are not unicorns. They are existence proofs. The system my colleague describes so carefully is a default, not a law of physics. Some brands have exited it, deliberately, and it has worked.
What Happens When the Growth Machine Absorbs a Scarcity Brand
Here is where the story gets instructive — and uncomfortable for anyone who still believes the volume-growth model is a safe default.
When VF Corporation acquired Supreme in December 2020 for $2.1 billion, the strategic logic was straightforward: take a high-equity brand and scale it. Apply operational leverage. Grow revenue toward $1 billion. The growth machine would amplify what the scarcity model had built.
It did the opposite.
By 2024, VF sold Supreme to EssilorLuxottica for $1.5 billion — a $600 million loss in under four years. The reasons given were telling: cultural misalignment, limited synergies, over-commercialisation that diluted the brand's core appeal. In plain terms, the growth mandate had eroded the very thing that made Supreme worth $2.1 billion. Scarcity, once compromised, does not recover easily.
But the Supreme sale was not the full cost of this miscalculation. VF Corporation itself has been in freefall. Its stock traded at an all-time high of $82.52 in January 2020 — the year of the acquisition. It now trades around $20. That is a destruction of roughly 75% of shareholder value. Revenue has been declining for multiple consecutive quarters. Core brands like Vans are down 26% in recent periods. The company is now the subject of class action lawsuits from investors and pressure from activist shareholders.
The growth machine did not just fail to fix Supreme. It broke VF.
The Question This Raises for Buyers and Merchandisers
My colleague's framework is useful precisely because it names the mechanisms that sit below the waterline. The asymmetric risk logic is real. MOQ pressure is real. The incentive structures that reward availability over surplus reduction are real. I am not arguing these forces don't exist.
I am arguing that accepting them as inevitable is itself a choice — and an increasingly expensive one.
For buyers and merchandisers specifically, the question is not whether the system produces these pressures. It does. The question is which of them are genuinely outside your control, and which are inherited assumptions that have never been stress-tested against a different model. The answer, increasingly, is that more is negotiable than the industry has been willing to admit.
The brands that have sustained value over time — Hermès, the pre-acquisition Supreme, the best of the collaboration and limited drop economy — share a common architectural decision. They chose a financial model that does not require volume growth to generate returns. They built customer relationships around desire and restraint rather than availability and scale. They made scarcity load-bearing.
That is not a romantic or impractical position. It is, at this point, the position with the better financial track record.
What the System Actually Optimises For
My colleague argues that overproduction is the rational equilibrium of a system structured around asymmetric risk and volume-driven finance. I think that's right. But rational equilibrium is not the same as optimal outcome. Systems can be rationally structured toward self-defeating ends. The tobacco industry was rationally structured for decades. So was subprime lending.
The fashion industry's overproduction machine is now producing outcomes that are visibly destroying value at the brand level, the conglomerate level, and the balance sheet level. VF Corporation is not an outlier. It is a highly visible data point in a pattern that buyers, merchandisers, and brand leaders cannot afford to keep treating as someone else's problem.
The system my colleague describes is real. It is also breaking. The brands that will be standing in ten years are more likely to be the ones that figured out how to exit it than the ones that optimised their way through it.
That is the conversation Part Two should open.