Monthly Archives: September 2011

Industry Scuttlebutt – EMO, Moneyball, Tax Breaks, and Oil Prices

In talking to my correspondent who attended last week’s EMO show in Hanover, Germany, the mood in Europe is profoundly bullish. The aisles were packed and the frauleins in the booths were smiling. Every day the financial casino trembles with each whisper from Athens and Bonn, but at EMO people were quoting and selling stuff – lots of stuff.

Bill Cox of Cox Manufacturing in San Antonio was really excited by the new Tornos multi, which is basically six sliding headstock machines in one unit. It’s called the Tornos 514 and has a built-in integrated short barloader. Very elegant design with no Hirth Coupling or Geneva mechanism.

They have sold a few beta units in Europe and expect to be delivering in America early next year. Bill thought it could be a “game changer.”

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In the oil trading pits at the Nymex Exchange, crude oil in the U.S. is trading for around $80 per barrel, but Brent crude is around $30 a barrel higher. The pump price we pay seems tied to the European price, which is supposedly affected by the curtailment of shipments from Libya. To me this smacks of collusion on consumer pump prices with producers pocketing a windfall here.

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Very little is being written about the potential expiration of the liberal write-offs for capital equipment. For folks in the machining world this is a very big deal. If there is no extension – and with the standoff in Congress it looks like President Obama’s jobs infrastructure proposal is Dead On Arrival – the tax goodies will end December 31. If business holds up I foresee a rush to buy equipment in the fourth quarter.

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I saw “Moneyball,” the movie. Terrific performance by Brad Pitt as Oakland A’s General Manager Billy Beane, the former #1 draft pick who never really made it in the Major Leagues. The narrative nicely weaves Beane’s personal story and his search for a more effective way to evaluate what makes successful players and teams. As a baseball junkie I would have preferred more emphasis on the use of statistical metrics in the choice of players rather than the focus on the emotional and charismatic Beane, but with Brad Pitt as Executive Producer of the flick and the desire to make another blockbuster like “The Blindside” I can understand the choices. The movie is good and worth seeing – it just wasn’t the movie of the book I loved so much.

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For those who are interested, I’ve lost 15 pounds in six weeks. No bread, very few sweets. I’m a little worried about Thanksgiving.

Question: Who do you this will win this year’s World Series?

 Brad Pitt promoting his new film “Moneyball”

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Treasure Hunting

A picture of the SS Gairsoppa taken only one day ago by Odyssey Marine Exploration on their expedition.

A picture of the SS Gairsoppa taken only one day ago by Odyssey Marine Exploration on their expedition.

I’m in the business of finding gold in companies aged machine discards. To label our business as treasure hunting romanticizes the grimy work of sending flaked paint and replacing pitted bearings.

I read a fascinating article in the September 24th New York Times about a more traditional treasure hunting expedition worthy of my hero, Indiana Jones. A team of shipwreck treasure hunters has signed a deal with the British government to extract up to 240 tons of silver from the sunken SS Gairsoppa, which was torpedoed by a German U-boat 300 miles southwest of Ireland in 1941.

The boat had left Calcutta laden with tea, iron and tons of silver in December 1940. It joined a military convoy in Sierra Leon with 83 seamen on board and two gunners headed for Liverpool. Terrible weather conditions forced the ship to separate from the convoy and head for Galway.

The U-boat commander found the floundering ship and sunk it with one torpedo in the North Atlantic. Only one man survived after spending 13 days in a lifeboat.

Today the cargo is in play because robot technology has enabled salvagers to locate the sunken ship, three miles under the surface. Odyssey Marine Exploration of Tampa, Florida, is confident they have found the wreck and have signed a deal with the British government to attempt to lift the silver. Under the deal Odyssey assumes all of the risk in the expedition for 80 percent of the proceeds. The British government gets 20 percent of the take.

This is going to require some pretty nimble robots, robust lights and cameras, and some husky claws to pull out the submerged cargo. Think of the water pressure three miles deep. And they still may strike out because the surveillance robots have found the tea chests but not the precious metals vault.

I love the story. Even if they don’t pull up the sunken silver it will make a great series for Mike Rowe on the Discovery Channel or grist for a Steven Spielberg epic.

Silver bullion, three miles deep, the British Navy, Nazi U-boats. Add some beautiful women and George Clooney to the crew and you have the ingredients of a blockbuster. I wonder if the tea survived intact.

Question: Is Greed Good?

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An Ignorant View of a Factory Worker

Seth Godin, one of my favorite bloggers, wrote a piece this month called “Back to (the Wrong) School,” in which he argued that the U.S. education system is designed to churn out conformist, obedient factory workers. He claims the system is an an anachronism based on 1920s industrial revolution thinking. He says schools need to be emphasizing initiative, creativity, and risk taking because countries with cheap labor are going to beat us at the commodity producing race. Godin is right that our schools need to encourage more critical thinking and less standardized testing, but sadly he like so many people in the U.S. doesn’t understand that modern machinists require exactly the qualities that he is preaching schools need to teach.

I talked about the blog with my friend Miles Free, Director of Technology and Industry Research for the PMPA and also a fan of Seth Godin. He summarized Godin’s naivety nicely. Miles wrote this back to me on Facebook, “A worker bee wants to do a repetitive task–actually those are better done by automated equipment. Or, they want to be told what to do and not be ‘responsible.’ In our shops, we need responsible people who are self-starters and able to understand what they are trying to do, not just obey orders. Seth correctly points out there is no value in either of those behaviors. But a skilled machinist gets handed a piece of paper with lines and numbers on it and sets up a machine, and creates tooling and then produces parts by the score. That’s value! That’s responsibility. That’s risk.”

Question: Do you feel that U.S. schools are inferior to those of other countries?

Read Seth Godin’s blog here.

Early 20th century factory in Germany

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Know When to Hold ’em, Know When to Fold ’em

Herb Cohen

I’ve been negotiating deals for a living for a long time. It’s my livelihood, but I often feel like a bumbling novice.

Noah and I drove up to Western Michigan this week to facilitate a three cornered transaction—never easy.

While driving we listened to a CD by Herb Cohen, author of the superbly useful and entertaining book, You Can Negotiate Anything, which I recommend to everyone. My wife Risa and I have also attended Cohen’s lectures and Noah interviewed him in Today’s Machining World.

The thrust of his message was that successful bargaining relies on attaining information about the real needs of the other party, and then providing many options for him or her to choose from because you don’t really know the keys to an eventual agreement until you explore several possibilities. Cohen also emphasized that negotiations usually take time and successful ones usually require both sides putting in a significant time investment.

These are concepts I’ve learned and tested—and forgotten. I think most people develop a negotiating style which is “one size fits all.” Unfortunately people come in small to XXXL. You can’t negotiate with a Brazilian the same way you do with a guy from L.A. Clients from South America prefer a long slow tango. In California it’s “let’s get this done.”

The most memorable lesson from listening to Herb Cohen and tossing it around with Noah was that you need to “get out of yourself” to negotiate successfully. You can’t care too much about a particular outcome or you become extremely vulnerable to a shrewd bargainer. This is why people sometimes hire others to negotiate for them. The person who can negotiate without anxiety has a huge advantage over the one who feels like he’s playing with his last chips. If you are negotiating for yourself or your family or your company or organization you need to be able to get comfortable with you own discomfort. How do you do this?

No easy answer except practice, role-playing, coaching, and learning from experience. I like to do a post mortem on negotiations to analyze where I’ve succeeded or left money on the table, or worse, allowed a doable deal to collapse.

Kenny Rogers’ wonderful song, The Gambler, with the famous lyrics “Know When to Hold em, Know When to Fold ‘em,” rings in my head. Today I’ll add this corollary. Know when to go back to school again on the techniques of negotiation that will work for you every day.

Question: What is your best or worst gambling experience?

 

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Diary of a Used Machinery Dealer

6:00 AM – Wake up and pick up the iPad next to my bed to check email from Europe and Asia. Nothing interesting except some Tornos cam machines in Lithuania.

6:30 – Turn on CNBC to check out the world markets. Talking heads are bemoaning Greece on the verge of default and the awful economy. Joe Kernin and Rick Santelli are hopelessly pessimistic and angry at Obama. Why am I watching this crap? Turn on Sports Center.

7:00 – Hit the treadmill. I turn CNBC on the TV and watch while on the treadmill. Listen to more dumb economists and self-serving politicians. Am I on the treadmill or are the TV idiots? Yes, we both are.

8:00 – Risa is slowly waking up to NPR. I lift the blinds and tell her I’m good, which is absolutely true because I am alive and I got to work out for an hour in my own home.

8:30 – Wash up. Shower, prayer and meditation. This is the luxury of owning a business. I have adjusted my hours to fit my physical and emotional needs.

9:00 – My wife Risa and I have breakfast. We both have our iPads at the table looking for relevant email. We briefly discuss our schedules and dinner plans. She is working until 8 p.m., so I will cook. She will buy fresh salmon.

9:30 – Drive to work. Run through the drive-through at Dunkin Donuts for a large coffee with milk, one Splenda. Talk to brother and business partner Jim on the cell phone from the car.

10:00 – Business meeting to discuss what’s hot with Rex, Noah and Jim. Three deals are on the front burner—two sales and one buy. Jim feels if we cut the price on a Wickman we may be able to close a deal. Noah asks why the client will not buy at the asking price. Rex says he thinks we cannot push them. We decide to be patient, but that feels uncomfortable. The urge is to do something. Jim volunteers to travel to Ohio to look at some Acmes and Rex and Noah make plans to travel to Wisconsin to look at some CNC lathes and talk to an old customer who may be buying a screw machine soon.

10:30 – I study email, mostly Surplus Record and MachineTools.com, looking at the “Want Ads” and “For Sales.” This instantaneous bulletin board is fascinating because it tells you what is hot that day. It seems like everybody is looking for VF-2 and VF-3 Haas vertical machining centers and Mori SL-25 lathes, 2000 or newer. Nobody is looking for Acmes, Wickmans or Hydromats today, which is the norm. When you carve out a tiny fragment of the market you give up velocity and action for esoteric knowledge and theoretically better margins.

11:00 – Pick up on the PMPA (Precision Machined Products Association) List Serve. One thread is about parts cleaning issues, another is about looking for somebody to do 5000 pieces on Swiss CNC. Nothing controversial today. I check the activity on my blog. Six comments and a personal note relating to the previous day’s blog sent to 40,000 potential readers.

11:30 – I reluctantly lift off my seat and walk into the factory to see what progress has been made on the machines that are sold. Greg, our top rebuilder is cleaning disassembled parts of a Wickman. Why is a skilled person laboriously cleaning parts by hand? We’ve put a sandblaster at his workplace and a wash station, but he still spends too many hours doing this dumb work. We could hire a guy to help him clean, but it’s hard to justify the extra salary. Our electrician, John, is rewiring a Wickman—more slow work. The machine has an outdated control that might work, but a client pays us well to provide a machine that will always work (hopefully), so he painstakingly troubleshoots the electrical panel.

12:00 – Our banker struggles to understand our business after many years with him. Are we a distribution business, a manufacturing business, a maintenance business—or a floating crap game (dealing in crap)? Probably a cross between all of the above. Unfortunately, bank regulators are bureaucratically ignorant and want everything to fit into a neat category. Graff-Pinkert does not. I consider myself a speculator in 30-50 year old iron, an alchemist who turns other people’s trash into gold. Noah says he is a “treasure hunter” when he is asked by a girl in a bar what he does. To lay people I am a writer and a businessman, and they can fill in the blanks. I think our accountants are clueless about what we do. If they read this maybe they will start to get it—if they want to.

12:30 PM – Noah proposes that we get some “grub.” I am eating raw veggies and hummus for lunch. I propose we go over to the Forest Preserve lagoon five minutes away and eat lunch overlooking the water. He picks up a sandwich from the strip mall across the street and we drive to the lagoon. We talk business, dissecting various deal options, then movies, sports, politics, life. I am renewed by his presence and inquiring mind. Jim calls on my cell. Noah says to let it ring, but I feel compelled to answer. Maybe he was right.

1:30 – Check email again. Is the computer a valuable tool or a time waster? Still a little hungry. Ignore it. Drink water. The phone isn’t ringing today. Maybe the gloom and doomers are right, but I cannot afford to buy into pessimism. I must stay upbeat even if I’m faking it because if I’m down everybody in the office will feed off of it. I make some cold calls. If the mountain doesn’t come to Mohammed, Mohammed goes to the mountain. A bunch of voicemail. Doesn’t anybody answer the phone? Then I answer the ringing phone. It’s a parts call, but I take the opportunity to query the caller about his business.

3:00 – Our part-time receptionist/secretary, Luci, answers the phone and it’s a real live client whose name I recognize and he actually asks for me. I’ve tried to reach this guy for months to no avail and now he’s actually calling me. Noah wants to listen so he picks up too. The customer tells me he’s literally been putting out fires for two months after a July 4th 3:30 a.m. fire that messed up his plant. He wants to come in to look at Wickmans in a couple days. Will I be there? Are you kidding me? Customers are gold, especially one who has bought repeatedly in the past. I do tell him that prices have firmed since he bought last at the bottom of the market in 2009. At that point it didn’t matter what price you sold for—you just needed cash. Today I expect to make a decent profit. He didn’t flinch. When you are selling multi-spindle screw machines you have a tiny market, but you also don’t have a million competitors like you could selling Haas VF-2’s.

4:30 – Jim has left. Noah, Rex and I are talking shop. They want to understand how liquid we are if deals come up. I regard Rex as a partner, even though he has no financial ownership, and Noah wants to understand as much as he can absorb. I explain our financial position—how we are constantly balancing cash flow needs and the desire to hold out for a decent profit. This is the hardest part of the business. If you don’t gamble on machinery you work for peanuts. If you gamble big and lose, you go broke. Where is the value? One day I walk into the plant and machines look like they are made of gold. Other days it’s one big pile of junk.

5:00 – Rex leaves. Noah and I talk about Today’s Machining World. He has been working on a new Web site design. He shows it to me and I love it. Then we discuss blog ideas. He has a dance lesson, he’s huge into salsa. I head home to chill out a little and make a healthy dinner. I get home, read more email and talk to Jim about a deal in Europe. Then I play a word in “Words with Friends” on the iPad with my son Ari and check the newsfeed on Facebook—my daughter-in-law’s excited about cooking tonight. I’m happy. I make a snack for Risa and her student and put the sweet potatoes in the oven.

8:15 – Risa and I eat dinner. We share our days. I wish I could explain what really happened today. I didn’t sell anything. I didn’t buy anything. Hopefully I moved the ball. I taught Noah. I was a machinery dealer today. I had fun. I should have laughed more. Does she really get it after 40 years? Probably not, but who really does really get such a weird profession?

Question: What is the most important part of your day?

Lloyd Graff writing at his desk at Graff-Pinkert & Co. in Oak Forest. Ill.

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Hunting for Copper Treasure

Doug Purtee is a treasure hunter. He rummages though old barns around the Midwest, but his prey of choice is surprising––old copper fire extinguishers. I met him recently at a big craft show in Frankfort, Illinois, where he had his shiny copper fire extinguishers exquisitely stacked, selling for $280 each.

He showed me how they worked and told me his story. He’s semi-retired, but he loves these old Acme and Pyrene extinguishers and has found a market for them as home furnishings. He lovingly cleans and buffs the tarnish off them, and travels the fair circuit showing them off and peddling them. He buys the ugly ones mostly off of old repair guys who stashed them in barns and sheds hoping for the price of copper to rise, or maybe because they were too lazy to call the scrappie.

Doug recently found a hundred of them in a Missouri barn. If they were another metal they would have been oxidized garbage, but because they were pure copper they are readily restorable, like a vintage cast iron skillet.

I have a weakness for these old copper canisters because I used to sell 656 New Britain chuckers to Pyrene and Ansul, so I recognized the brands.

Do I want one for my office? Maybe if he’d give me a deal.

For more information Purtee’s fire extinguishers visit www.vintagefireextinguishers.com

Question: Do you think hunting animals for sport is immoral?

A fire extinguisher polished and fixed up by Doug Purtee

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Life After Carbs, I’m Now Ready to Lose the Weight

How do you change a habit, a behavior, a life pattern?

I have been a lifelong food abuser—eating an American diet rich in fat, simple carbohydrates and refined sugars. I have tried to compensate by exercising, but my quadruple bypass surgery and chronic high blood pressure indicates rather dramatically that exercise does not a trump lousy diet.

Since my near fatal heart catastrophe almost exactly three years ago I have recovered well—and gained 40 pounds. Complacency conspired with my lifelong love affair with bread and cookies to add the weight, ounce by pleasurable ounce. My wife and kids have been hounding me about my weight but I have shrugged them off. Risa tells me how scared she is, Noah rountinely embarrasses me at the office, Ari arranged a contest between us to shed weight, and Sarah just worries.

And none of it really made me change.

But three weeks ago I met a friend from grade school, Norman Sack, who I hadn’t seen in 40 years. Norm was always fat as a kid. He spent a year at Duke on the old “rice diet” and lost 100 pounds only to gain it back.

Today Norm is thin and I couldn’t believe it when I saw him. He lost 110 pounds and his chest pains by rigidly adhering to a sensible diet low in fat, carbs, and sugars.

The day before I reunited with Norm I watched Dr. Juel Fuhrman advocate his plant based eating regimen on Public TV. And the next day CNN’s Dr. Sanjay Gupta did a one hour show about how such a diet can make you almost heart attack proof.

It all finally clicked for me. Why should I sabotage my life for the ephemeral taste of a croissant or an Oreo? Life is sweet and I don’t need sweets.

Over the last 17 days I have not eaten a slice of bread or licked a spoon of ice cream. And I don’t even miss it. I’m doing it for me—for life—and I love beets and carrots and hummus. Life is good. I’ve lost a half a watermelon of weight already.

And this is for me and that’s the only way it can work.

Question: What do you think is the cause of the American obesity epidemic?

Lloyd Graff with his former favorite food – pie.

Lloyd Graff's favorite former food – pie.

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