Happiness is Another Gun

My first essay on gun control, posted on July 21^st, discussed how the poorly written Second Amendment to the U.S. Constitution has been intentionally misinterpreted over the past twenty years by the Supreme Court, politicians, and the American public.  In short, America decided to ignore the clauses in the Amendment regarding a well-regulated militia and the security of a free state.  We now think of the Second Amendment in its entirety as the truncated sentence: “… the right of the people to keep and bear arms, shall not be infringed.”  This is not what the Second Amendment says, but the U.S. has decided to pretend that it does, aided along by a self-serving republican party and gun industry.  Those who disagree have been shouted down so successfully for so long that they have all but given up.

The question posed in this second essay is “Why?”  Why are we as a people so intent on maintaining an increasingly unregulated gun industry while the damage to the public by guns is so clearly evident?  The statistics on the harm done by the ubiquity of guns are frightening.  According to the CDC, there were 45,222 deaths attributed to firearms in 2020 and nearly 49,000 in 2021.  These numbers have been rising steadily each year.  Gun homicides have surpassed auto accidents as the leading cause of death among America’s youth, aged 10 to 24.  While mass murders of children in schools such as Uvalde and Sandy Hook gain the most press, the majority of gun deaths are suicides (54.0% in 2020) while 43.0% are murders and 3.0% are due to other causes such as police shootings and unintentional deaths.  Although school shootings are widely publicized, the majority of murders occur in our cities; deaths per 100,000 people among the U.S. urban population is about twice the overall national rate.  This statistic tends to get less attention since the victims tend to be minorities and the assumption is that they themselves must be criminals.

Regardless of the cause, a comparison of U.S. gun deaths to a sampling of countries which have banned or strictly regulate firearms is striking.

GUN FATALITIES PER 100,000 BY COUNTRY

Great Britain – 0.23

France – 2.83

Canada – 2.05

Australia – 1.04

Germany – 0.99

United States – 12.21

Japan – .06

Norway – 1.75

Italy – 1.31

India – 0.285

The only countries that come close to the carnage experienced in the United States are developing nations which have profound problems with narcotics, crime, and social unrest, such as nations in central and south America as well as South Africa.  Except for the U.S., the developed countries shown above have strict gun control measures.  Great Britain allows licensed rifles for sport but bans all handguns.  France has more liberal gun laws, but strict controls over licensing, the types of weapons that can be purchased, and the amount of ammunition that can be stored by any one individual.  Australia requires all gun owners to be licensed and does not allow ‘self-defense’ as a legitimate reason to obtain a license.  There are only three countries that have the right to own a gun enshrined in their constitution – the United States, Mexico, and Guatemala (and as my prior essay discusses, no such constitutional right in the U.S. exists in reality).  The United States and Yemen are the only two countries that allow the ownership of semi-automatic long guns without having a permit.  The number of guns in circulation in the U.S. is 120.5 per 100 persons (i.e., more than one gun out there for every man, woman, and child).  The #2 country is the Falkland Islands (62.1) and the #3 country is Yemen (52.8).  The overwhelming number of developed nations have less than 20 guns per 100 persons in circulation.

In short, the United States stands alone.  Gun control laws at both the federal and state levels in America range from the paltry to the non-existent.  Virtually anyone can walk into a gun show in the U.S. and purchase a handgun as easily as he can buy a hamburger at McDonald’s.  The only realistic hindrance to the purchase of handguns or ammunition is supply – as fast as the gun manufacturers can make them, we’re willing and able to buy them.  To obtain an AR-15 in the U.S., one merely has to get online, place the order with a manufacturer, and go to the local gun dealer when it arrives (manufacturers will not ship to your home).  The local gun dealer is obliged to ask the buyer for proof of age (18 years) and proof that he has no criminal record.  In many states it is perfectly legal to walk down the street with an automatic rifle slung over your shoulder or a handgun on your hip.  We are the wild, wild, west.

How did we get here, especially given the indisputable correlation between the countries with strict regulation and countries with far lower murders?  We got here because of the manufacturers, the gun lobby, and the lawmakers who are loathe to even hint that our absurd gun permissiveness should be curtailed.  And oh yes, there is one more guilty party – an apathetic majority population who are indifferent to urban murder and are outraged at school shootings for at most one news cycle after the event.

First, let’s look at the gun industry.  As industries go, gun manufacturing is not that big, with only $19.5 billion in aggregate sales volume in 2021 (the oil & gas industry and the auto manufacturing industry are both in the trillions of dollars).  38.0 percent of the gun industry sales volume is comprised of five large companies that are mostly in the national defense market.  The industry is also divided into four product segments: 1) small arms ammunition; 2) other ammunition; 3) small arms and machine guns; and 4) ordnance and accessories.  Much of the money spent on national defense in the U.S. is not included in these industry statistics, such as ships, jets, etc.  However, the categories of small arms and machine guns and ordnance do include weapons and ammunition sold to the U.S. military.  For the most part, the gun problem exists in the much smaller manufacturers who do not sell to the Pentagon. 

The guns we’re talking about in this essay are manufactured by companies that are mostly privately owned with sales ranging from $2.0 million to $340 million.  The large defense contractors’ sales are in the billions, they sell to the U.S. government, and are typically excluded from the gun controversy as it’s presented in these essays.  You may disagree with the amount of tax dollars going to Northrup Grumman or General Dynamics, but that’s a different controversy.  We’re talking here about the companies that mostly generate well below $75 million in sales and depend on a vibrant personal gun market to survive.

Several years ago, I had the opportunity to interview the CEO of one of these gun manufacturers.  As a valuation specialist I was hired to put a price on the Company for the purpose of a private equity purchase.  My profession’s ethics mandate that I not reveal the company’s name.  The company does fall in the group of small arms manufacturers which makes lines of handguns and rifles.  Although they sell some small arms to the defense industry, most of their weapons are sold to private owners.  The purpose of the interview was for the CEO to explain how the industry works, his company’s position in the industry, and their strategy for outperforming their competition.  The CEO explained one critical fact about guns that, although obvious when you think about it, is not normally discussed in the gun conversation.  I certainly hadn’t thought of it, but it’s key to how the industry operates.

He told me that guns don’t wear out.  Any gun that is properly maintained can be passed down through the generations and will not lose its utility, assuming that ammunition for the gun is still manufactured.  Muskets from the civil war can still kill people as long as you know how to load it and fire it.  Imagine buying a new car in your twenties and a half century later bequeathing it to the next generation in your will.  Essentially, gun enthusiasts should only need to buy a single weapon for each purpose – a rifle for hunting and a handgun for protection.  Once you buy those guns, you’re set for life and so are your descendants. 

This product durability however poses a potential disaster for gun manufacturers.  If manufacturers are limited to only one sale in a customer’s life, how do they stay in business?  How does a manufacturer grow when everybody who wants a gun has a gun and there’s no need for them to ever replace it?

There are about 400 million guns in circulation today in America.  32.0% of the U.S. population, or 106 million people, report owning at least one gun.  This means that on average gun owners owns 3.8 guns.  It is this number that the gun industry is focused on.  If you own a gun, you are a convert, and the gun manufacturers depend on you to buy more guns.

The CEO of every company, regardless of the industry, must be focused on growth.  The primary rule in the business world is grow, or die.  Given the lifespan of a typical gun, achieving growth is markedly harder than in other industries.  If the people who own guns don’t need to ever replace them, and if the people who don’t own guns (by now) don’t want guns, how do you grow?  The industry has always been aware of these challenges and have a threefold plan to ensure growth:

1. Restrictions on gun ownership must not be allowed to be passed into law.
2. People who own guns must be convinced that they need more guns.
3. People who don’t own guns must be convinced that they need them.

For many years the industry was very effective at achieving #s 1 and 2.  They only lately are showing progress on the third strategy.

The first strategy is probably the most important, and sadly, the easiest to achieve. The National Rifle Association is the largest and most effective lobbying organization for the gun industry.  Lobbying expenditures by the NRA peaked in 2017 and 2018 at over $5 million in each year.  That declined to $3.31 million in 2021 due partially to legal problems the organization has been experiencing.  Mitt Romney has received an aggregate amount of $13.6 million over the years from the NRA; Richard Burr got $6.99 million; Roy Blunt got $4.6 million; Thom Tillis got $4.4 million, and so on.  Although the NRA manages to get money to both parties, the Republican Party is by far the larger beneficiary of the NRA’s largesse. 

To make sure their spending is effective, the NRA also grades politicians on what they give back to the gun industry in terms eliminating all calls for gun reform.  Just like high school, politicians get grades from A to F.  95.0 percent of the republicans in Congress get A grades each year.  As of 2021, only one democrat got an A grade.  The intention of the NRA’s efforts is very straightforward – if you are a member of Congress, you are expected to continue to allow a basically unrestricted gun industry.  If you vote for restrictions, you get no more money, and the public is told you get low grade from the NRA.  This is the reason why republican congressmen call for “thoughts and prayers” after each school shooting or say that it’s too soon to discuss gun restrictions out of respect for the dead.  It’s a way of saying something while doing nothing.

The point of the first strategy is if the government eliminates any segment of the industry, say automatic weapons, or if it restricts the population of individuals who can purchase firearms, say 18-21 year-olds, that will constrain manufacturers’ ability to grow.  Any single restriction, no matter how sane or obviously beneficial to the country, is presented by the NRA as the dreaded first step on a slippery slope which will end up with government agents breaking down your door to take all your guns.  In effect, the 49,000 people who died from firearms in 2021 is the price the industry is willing to pay to ensure the U.S. population has free access to firearms.  My CEO didn’t put it in these words of course, but he made it clear that the mere thought of restrictions on the sale of any existing weapon is anathema to industry participants.  They see it as an existential matter.

Manufacturers have been very successful in the second strategy as well.  If customers figure out they never need to buy another gun as long as they take of their existing gun, then that too could eliminate most smaller arm sales.  The CEO said they address this challenge by making the gun industry operate more like the fashion industry.  You may own a beautiful Balenciaga jacket, but is it a 2022 jacket, or last year’s model?  Gun manufacturers make multiple versions of what is basically the same gun.  They sell different colors.  Each type of gun has multiple options, almost like an automobile.  The objective of this is to entice people who own guns to keep coming back for more – even to buy basically the same gun.  If you can’t decide which options to buy, why not buy all the options?  There is a comical line attributed to insurance salesmen back in the day who opened their sales’ pitch with the line “There is no such thing as enough insurance.”  Well, the gun industry has adopted this strategy to achieve growth.  There’s no such thing as enough guns.

The third strategy hasn’t worked as well historically, although the industry is making great strides lately.  The holy grail for gun industry growth is the 68.0% of the population who don’t own a single gun.  For most of us, the reasons are simple.  Anyone can be a victim of crime, but the likelihood seems remote to most people and even if they are victimized, they are skeptical of engaging the criminal in a gun battle.  I experienced a break-in in the middle of the night while I lived in Philadelphia thirty years ago and though it was frightening it didn’t make me want to buy a gun, primarily due to a conversation with a Philly cop who arrived on the scene about two minutes after the 911 call.  The criminal got away before they arrived.  While writing his report, I asked the policeman if it made sense to buy a gun.  He replied, “If you had a gun here tonight we’d most likely be carrying your body out of the house right now.  Remember, the bad guy brought a gun and he does this for a living.  You don’t.  He wanted to steal your stuff, not kill you.  If you confront him with a gun you put him in a position where he has to open fire.  It’s him or you.  My money’s on him.”

Despite this expert advice, the way you get the 68.0% to start buying guns is to scare them to death.  The industry has a great friend in the media to achieve this goal and as always, republican politicians never miss a chance to remind us that Antifa are hiding under the nation’s beds (especially during democratic administrations).  Think of Donald Trump’s inauguration speech in 2017 about the “American carnage.”  Republican pundits on television all read from the same talking points of the nation’s concerns about the democrats: inflation, crime, and runaway immigration.  The latter two are of course related.  If Antifa or BLM don’t get you, the immigrants will.  The woke mob is coming for you.  The blacks are coming for you.  The immigrants are coming for you.  What’s the solution?  Buy a gun.  Or better yet, buy ten guns in case the first nine break.  There is no such thing as enough guns to protect you.

 Over the past two years, these scare tactics have started to work.  Of the number of people applying for gun permits (in those cases where a permit is required), 40.0% came from new gun buyers in 2020 and 33.0% came from new gun buyers in 2021.  It could be the pandemic or it could be hysteria from the media selling bloody headlines, but there is no question that it’s having the desired effect.  The number of gun owners is increasing.  If the manufacturers can keep this trend going, growth won’t be a problem.

Still, industry growth is not setting any records in the business world.  Annual industry sales growth between 2017 and 2021 was 5.2% according to IBISWorld, and the annual growth projection for 2022 and 2027 is only 2.7%.  These numbers are only for the U.S. manufacturers though.  Some of the most popular handguns are Glock and Beretta, which are foreign companies and not included in the statistics.

Without question, the gun manufacturing industry is mature, as evidenced by the 400 million guns owned by just over 100 million people.  As my CEO said, these 400 million guns will not wear out.  For gun owners, the gun purchase is discretionary and spending $500 on another handgun during a recession may be beyond the family budget.

But compared to the industry’s nightmare, conveyed to me by my CEO, any growth at all should be considered exceptional since the majority of gun sales are pointless.  While it’s true that it might make sense to replace your blunderbuss with a modern Remington rifle, we’ve already done that and no one needs 15 Remington rifles.  Yes, the single shot pistol was replaced by the six shooter which was replaced with the 17-bullet clip.  The technology has advanced.  But how can manufacturers keep improving a gun’s lethality?  The fact is, even in an unrestricted market, the United States doesn’t need 400 million guns or anything close to it.  We don’t need 31 bullet clips.  And has been so often pointed out, there is no reason why anyone should have military style semi-automatic rifles.

So why does America, the most accomplished nation in history, have some of the most uncivilized gun laws in the world?  We know there are children being born right now who won’t make it through high school because they’ll be shot and killed along the way – while sitting at their desks.  We know that thousands of inner-city kids will be gunned down next year and the year after that.  For what?  So, an individual can walk into a gun store and purchase his tenth shotgun without any inconvenience?  As discussed, the root of the problem is gun manufacturers who want to do what every company wants to do – grow and make money.  Also, there are the politicians who actually can make a difference but won’t because they’ve been bought and paid for by the gun lobby.

But the biggest reason we are willing to exchange 49,000 lives for free access to guns is the 68% of us who personally don’t own a gun.  We are in the majority but we’re apathetic and we are no match for an organized minority who are motivated by money and have a cavalier disregard for the price the nation pays each year to let them make that money.  So, we pretend.  We pretend the first two phrases of the Second Amendment don’t exist, we pretend that we’re going to pour money into mental health initiatives, we pretend that the most recent school shooting will be the last school shooting, we pretend that our thoughts and prayers are somehow relevant.  Pretense.  It’s what gets America through each day.

• John Barton