Monthly Archives: October 2011

Babies, Manufacturing and Tandoori Chicken

Eurostat projections for Bulgaria show the sharpest population decline and the largest share of older people in the EU.

I attended the PMPA annual meeting last weekend and watched an inspiring talk by Herbert E. Meyer, Former Vice Chairman of the CIA’s National Intelligence Council.

He gave a unique perspective on where the opportunity lies in the coming decades for U.S. manufacturers. India, the Middle East and Africa will be the leading consumers in the next few decades, while Europe and Japan will literally die. According to Meyer, the Western capitalist democracies in Europe and Asia simply don’t produce enough children to support their aging populations. A rate of 2.1 births is needed to sustain a population, and modern capitalist welfare economies need young people to pay taxes to care for the retired geezers. In addition to providing tax revenue, large families spend a lot more money to fuel economies than the AARP folks.

Throughout Europe the family birthrate averages 1.5 children per family. According to Meyer, if Europe were to somehow reverse its downward spiral in population growth, it would take two generations to get back to the required replacement birthrate. In Germany 40 percent of college educated women have no kids. One out of seven couples gets married in England. Spain and Italy have rates of 1.2 children per family. Japan averages 1.5 births per family, and by 2020 one out of five Japanese people will be over age 70.

Everyone worries about the threat of China’s booming economy, but the country’s workforce shrunk for the first time last month as a result of its 1.1 birthrate. Nature’s ratio of males to females is 103 to 100. In India and China there are 118 males to 100 girls. One hundred million men in those countries will never marry–can’t be great for morale. According to Meyer, the present level of political unrest in China is higher than that in the Soviet Union two years before its 1992 revolution.

Speaking of Russia–the life expectancy of a male in that country is 58. Demographers predict that by 2050, Russia’s population will be smaller than that of Yemen. Thankfully, Hispanic immigrants have enabled the United States birthrate to hover right around the 2.1 children per family replacement required to leave its economy well positioned in the coming years.

While Europe dies, huge opportunity awaits in India, the Middle East and Africa. India has a healthy 2.8 children per family birthrate and many countries in the Middle East and Africa have large young populations. Manufacturing plants are finally beginning to sprout up in Africa. The Arab Spring is spawning democratic governments all over the Middle East (different interpretations of democracy than ours) that will eventually pave the way for a larger global middle class. Meyer said that each year throughout the world 50 million to 100 million people emerge from poverty. The new prosperous populations will need to build infrastructure, grow more food, and produce more fuel. They will manufacture goods domestically and want to buy goods produced by American companies.

Keep having babies and develop a taste for Falafel and Tandoori Chicken.

Question: Are you scared by the possibility of an Arab dominated Europe?

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How the American Visa System Keeps Skilled Workers Out


Although the nation-wide shortage of workers in science, technology, engineering and mathematics (the “STEM” fields) is well-known, the comparable and equally critical shortage of skilled workers in fields like manufacturing has hardly been publicized at all.

Most efforts by American industry, including those specific to machining, have focused on improving programs and training for young adults; even trying to grab the interest of students as young as 12 or 13 to entice them into a career in the skilled trades. Despite these efforts, nobody knows if the U.S. will produce enough skilled laborers to support the manufacturing sector in the coming years.

Unlike in the STEM fields, there have been few government- sponsored visa programs to bring skilled trade workers to the U.S.—so the affected industries have been left to solve the problem by themselves. One part of the solution to the skilled labor shortage could be to hire skilled trades-people from Europe’s strong apprenticeship system and bring them into local machine shops. But how does a shop go about doing this, and is it worth the time and cost? These questions bring up the role legal immigration could play in supplying the necessary amount of talent to support the U.S. manufacturing industry in the coming years.

An intro to the U.S. visa system
Each year the U.S. makes available 140,000 employment related visas that can lead to permanent residency by awarding a permanent resident card, or “green card,” and 65,000 H-1B visas, which are strictly employment-related and have an expiration date. Another 225,000 family-related “green cards” are also issued annually, but these have nothing to do with employment. All “green cards” are permanent, although they sometimes have conditions and must be renewed periodically, like drivers’ licenses. Employment related visas are issued based on the applicants’ education level, and there are multi-year backlogs to get one, said William A. Stock, an attorney specializing in business immigration with the Philadelphia law firm Klasko, Rulon, Stock & Seltzer, LLP.

The H-1B visa, which is good for six years, is one of an alphabet soup of temporary visas that companies can use to sponsor foreign nationals to come and work in the U.S. Other visas used for this purpose include the H-2A, H-2B, L and E visas. H-1Bs are different from the other temporary visas in that someone in the U.S. with one is eligible to apply for permanent residency.

Read full article here

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Why is my business so good if the economy is so bad?

CBS news announced in January that Austin, Texas, leads the U.S. in job growth and CNN has it in its list of the 10 fastest growing cities

I attended the Precision Machined Products Association’s annual meeting in Austin over the weekend. The question I heard often was, “Why is my business so good if the economy is so bad?” Unfortunately the speakers hardly addressed this topic, so I will try to explain it.

1) Structural changes in the world economy now favor American manufacturing. A lot of businesses have gone away in the last 10 years. They’ve closed, moved to China, downsized, gone bust, or merged—and not much has started up in the last decade and a half. Manufacturing was downsizing in the ’90s but it was masked because of the Internet and telecom boom.

2) Automotive is coming back, but we mistakenly think of automotive as just GM, Ford and Chrysler—American vendors are doing a lot of work with Toyota, Honda, and Mercedes, too. High yen and Euro values relative to the past make America a low cost producer.

3) Relentless productivity advances in manufacturing makes for better margins. The press mistakes “restructuring” and cutting people as indicative of bad business. It may be the reason for continued good business. Head count and profits no longer rise together and even the Wall Street Journal misses it.

4) Contrary to popular opinion we are starting to get better young people to join manufacturing. Old people always think the younger generation is shiftless and inept, but I think that the notion that you cannot recruit capable new people is obsolete in this labor climate. Nonexistent desk jobs no longer look appealing next to $80,000 machinist jobs with benefits.

5) China is struggling to compete—wages are rising 15-20 percent per year, the workforce turns over constantly, there is a shortage of skills, and high-energy costs. The realization of what it really costs to make things in China with the travel, logistics, and quality issues has made outsourcing to China less attractive for American firms.

6) Innovation. If you look at big companies like Apple, Cummins and Amazon.com you see that America still has game. Add the brilliance of our farmers and the revolution in oil and gas production with horizontal drilling and you see a core economy that is thriving and world class, but one does not necessarily hire unemployed 56-year-old bankers.

All of this does not mean that Europe is not a mess and that retired Chicago teachers are going to get the pensions that were promised them for the next 50 years. The world economy is in the throes of a nasty restructuring not that different than what American manufacturing has gone through for the last 15 years. I like our odds. I wouldn’t bet on the French though.

Question: Do you feel optimistic about 2012?

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The Rookie Machinery Dealer

Writing about the machine tool business while wondering if the Cubs will hire Theo Epstein.

I attended my first Machinery Dealers National Association (MDNA) convention in Chicago last weekend, and I was surprised to find that it had a powerful effect me. The convention, called “Weekend With The Pros,” revolved around touring several large successful used machinery dealers’ facilities and networking with other dealers at various bars. The tours were impressive, but as I expected, mingling at the hotel bar was the true feature presentation.

I’m the third generation to work at Graff-Pinkert & Co., but I only officially joined the business four and a half months ago. Being a dealer had always been a path that I thought I might try, but I never felt comfortable with the idea of joining “the family business” until this year. Selling machinery had never been my dream job, and I had hangups about working for Daddy.

I had few expectations for the weekend but had predicted meeting a lot of white Jewish men in their 50s or older. That was my stereotype for a machinery dealer, shaped by family members and several dealers I had met in Chicago (a lot of those old guys happen to be great people by the way).

Some of dealers I met last weekend fell into my stereotype, but I was pleasantly surprised to meet an entirely different demographic as well. There was a strong presence of dealers in their 20s and 30s from all over the country. I was impressed at how approachable virtually all the attendees were and how energized they were about the business. The first night I stayed at the hotel bar until 2:00 a.m. talking business with a 29-year-old and a 23-year-old. The 29-year-old, who happens to work for one of our competitors, told me that he had been hired as a dealer after working in his company’s warehouse. The 23-year-old (the only Asian and non-caucasian attendee for that matter) had only been working in the business a month. He was a salesman for the office supply house Quill before his present employer, a second-generation veteran in the machinery industry, decided to give him a shot. The 29-year-old raved to the 23-year-old that the used machinery business was an awesome job and that he should feel lucky to have been given the opportunity to get into it. He repeatedly emphasized to him that both their entries were quite rare, because traditionally to get into the used machinery business people are either born into it (like me), marry into it, or have some type of personal connection. But judging by the stories of these two guys and a few others I met at the conference, I think that trend is changing.

I came away from the weekend with a lot of new business ideas and contacts, but more importantly I came away feeling proud about what I do, more secure with my identity as a used machinery dealer. There aren’t that many used machinery dealers in the world compared to most occupations. The media doesn’t romanticize the occupation–it doesn’t even recognize its existence. When I meet someone and tell them I’m a machinery dealer most people give me a puzzled look. But last weekend I met people who understood what I do, and it felt really good. As I was talking with the young dealers at the bar a slightly inebriated veteran dealer, who reminded me of Donald Sutherland, came over and told us that a machinery dealer was the most important job in the world. He pointed to our table and said, “Everything on this table was made by some type of machine and there was another machine that had to make the parts for that machine.” Nuff said.

Question: Do you look forward to going to work every day?

Tour of Aaron Machinery, MDNA Weekend With The Pros

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The Sweet Tango of Business

Thoughts while making applesauce for the winter.

Is the screw machine the Winesap apple of machining? I was talking shop with some apple orchard owners at a couple of farmers markets over the weekend. I asked why there were virtually no old varieties like Gravenstein and Winesap sold anymore. Even the more common Jonathan is scarce. They said the answer was pricing power and demand. People will pay $3 per pound for Honey Crisp and Jonagold. For Gala and Macintosh they can shop the supermarket and buy them for 99 cents. The farmers are doing what business people do, planting the hot varieties, and chopping down the commodity apple trees.

We saw this in our used machinery business, Graff-Pinkert & Co., as people pruned their National Acmes and Wickmans and brought in CNC lathes and Hydromats. Even with the refocus, the pricing power of screw machine producers eroded in the 1990’s and 2000 decades. My radar tells me that this weakness in the marketplace has ended and has now reversed. Using the apple metaphor for machining again, screw machines are now “heirloom” technology.

As the skills have gone away the people who can figure out the mystery of the old cam operated multis can compete with the generic Mexican tomatoes of machining, the “Chinese bushings and Indian fittings” that are just mushy enough to be irritating.

The new “hot” apple is the Sweet Tango. It is similar to the Honey Crisp variety, but a little sweeter—same crunch as the Honey Crisp with a wonderful flavor.

The owner of a machining firm has an orchard of machines. The smart ones are constantly clearing the machine tools that do not have pricing power. They are continually planting the “in” new trees because they take years to produce quality fruit. But for those with patience and marketing skill there is also a place for the “heirlooms” to launch a comeback.

We are finally beginning to see it on the few well tended screw machine orchards that are left.

Question: Does your business have pricing power?

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Adoption and Abandonment

My son Ari ran the Chicago Marathon last Sunday and finished. My wife Risa, son Noah, and I were there along with his wife Elissa to cheer him on. As we were driving into the city to see him, my mind turned to Steve Jobs’ biological father, who abandoned his pregnant wife who then put the baby (Jobs) up for adoption.

Jobs’ biological father, a Syrian immigrant named Abdulfattlah “John” Jandali, ironically moved to San Francisco, the same city where Steve had been adopted by a high school dropout who became a machinist, and his wife Clara. Jandali eventually moved to Reno where he started a restaurant and worked at the Boomtown Casino, which he now manages.

John Jandali never met Steve Jobs or his other offspring, an acclaimed novelist named Mona Simpson.

Driving in for the Marathon I felt exhilaration and pride in Ari, as well as the fear of a father who knows that it is likely that at least one person running the Marathon will die before finishing. (This did happen. A 35-year-old firefighter from North Carolina collapsed and died 500 yards from the finish line).

It is hard for me to imagine what it feels like to give a child up for adoption. The huge number of unwed mothers in a world where prevention of pregnancy is relatively easy continues to baffle me, too. As somebody who has always treasured family, the story of abandonment of offspring, whether it is of the great and famous like Leonardo da Vinci and Steve Jobs, or the crack babies in the ghetto, touches me deeply.

Jobs and Jandali never met one another. Sad.

Question: If you were adopted would you want to meet your biological parents?

John Jandali (left) and Steve Jobs (right)

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Positive Things I See Happening In America Today

I am heartened by a lot of what I see in the marketplace. People are sobering up. They are more serious, less complacent. I see smart kids beginning to turn away from becoming aspiring hedge fund gamers to more meaningful work. The glumness in the media is probably a good contrarian indicator of a tilt in attitude toward productive work and away from the sickening day trader mentality of the last decade.

What does concern me a lot is the widening chasm between rich and poor in America. The success dream still lives on, but the path out of poverty seems more distant to me. Frankly, I am surprised we have not seen more demonstrations of angst and anger. The Tea Party has been relatively polite on the Right and the Lefties seem disoriented and despondent. No strident presidential candidate has any traction, which seems odd if we are in such a bad place.

Perhaps the government safety net has assuaged the rawness of popular opinion. Foreclosures get pushed back by legal maneuvering and unemployment benefits keep getting extended. Maybe we need more pain to move the needle.

American public education appears to be in a mess and we have nobody to blame except ourselves. We have tolerated mediocrity for so long we barely know what quality is. In manufacturing I see possibility primarily from small and midsize firms whose owners are willing to train smart kids with a glint in their eyes even though they may well leave them for future opportunity. The survival of family businesses is also hopeful. Immigration despite the idiotic hurdles government throws up still lives and rejuvenates the workforce and small business. The upward mobility of Hispanics is a very hopeful happening. The underclass, which sadly grows, is extremely discouraging.

Foreign competition increasingly feels like yesterday’s issue. Yesterday’s enemies are today’s partners. Sushi is now America’s grits.

Question: How do you picture America’s economic future, dire or hopeful?

This isn't a picture of Haiti or India, it's Camden, N.J.

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Jobs Knew Best

Steve Jobs did his best work after receiving a death sentence. He was diagnosed with pancreatic cancer in 2004. In the last seven years Apple has revolutionized the computer and telecom world with the iPhone and iPad.

In Jobs’ commencement address to Stanford, which is on the video below, he talked about his life. He said at 17 he read a quote that said that one should look in the mirror every day and ask yourself if this is the last day of your life are you living it the way you want to live it. He said that he had lived his life that way ever since. The contemplation of your own death strips you naked of pretense and focuses you.

I have learned this lesson myself in the three years since the doctors told my wife that I had a 20 percent chance of surviving my heart failure.

I am writing this piece during the week between the Jewish High Holidays when Jews pray to be inscribed in the “Book of Life” for the coming year. Steve Jobs lived an incredibly productive life. He made the most of his days. The inspiration he offered those Stanford grads may be even more valuable than the usefulness of my amazing iPad and iPhone.

***********

By Noah Graff

I often like to say, “Once you go Mac, you don’t go back.” Today I can’t stand to use a PC, I cringe when I just touch the keyboard of one of those brutish devices.

Apple’s are faster, easier to use, more intuitive to the user experience, sexy….blah blah blah — I know I sound like everyone today.

That said, Apple products have always had their quirks that got under my skin. The reason for this of course is that Steve Jobs, the visionary who made these wonderful machines possible, believed he knew what was best for me, regardless of what I thought I wanted. For example, when Apple came out with the G4 desktop it didn’t include a floppy drive, iPhones won’t read Flash, and Apple still doesn’t make a mouse with more than one button. And I still don’t understand why anybody would want to buy an iPod shuffle–an MP3 player that you can’t choose your own song on?

He was often a stubborn man, but Jobs was very right most of the time. He was the brains behind products that were so game changing that we didn’t even know we wanted them before they existed. Honestly, five years ago could you have fathomed a device that was an iPod, a computer, a phone, and a video/music/book store costing $100 and fit in your pocket? I didn’t know one was possible, I didn’t know I wanted one, I didn’t know that that device would change how I went about my daily life. Jobs knew better than me.

 Question: How do you feel about the loss of Jobs (the man)?

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It’s All About Jobs

A few years ago every time I got together with friends the conversation touched on stock prices. Then it was house prices. If I was talking with a woman it gravitated to diet and exercise. Now everybody wants to talk about jobs, and why their kids can’t find good ones, and what should their grandchildren learn to be able to make a living in 10 years.

This is actually a topic I’ve thought quite a lot about—not as much as baseball—but enough to blog like I know something.

1) Globalization affects everybody and it is not going away. Your X-ray is being read in India. This Web site you are reading has been prepared in part by an outsourcer in the Philippines. Your coffee came from Ethiopia or Peru or Indonesia. I’m selling British made screw machines to companies in Brazil, which are making product for Chinese auto companies. This connection will become more profound in the coming years. Kids need to get in step with the trend. Look for every opportunity to get your children to learn foreign languages at an early age. And it does not need to be a popular one—Chinese, Hebrew, Swedish, Czech, Portuguese, and German can all be useful. Having a world perspective at a young age is a big edge. I believe the Mormon mission experience gives the Mormon kids an edge because they have to do something hard in unfamiliar surroundings for a year or two before resuming a normal life in the States. The Israeli kids who travel for a year after military service get a similar boost.

2) You have to do something really well to get paid well. The gold standard is 10,000 hours of practice. Malcolm Gladwell discussed this in his book The Outliers. He used the Beatles as an example. They labored in little clubs in Germany for five years honing their sound and skills before going back to England for fame and fortune. There is no substitute for the experience of doing things badly, and gradually improving. It’s why we have minor leagues. Look for good supervision and don’t be afraid to jump ship to expand your knowledge.

3) Get yourself known. Network like crazy. People like to hire the people they know or their friends know. And it may have nothing to do with credentials or professional expertise because the perception of a good work ethic and ability to play with others often trumps resumes or skills. Go to conferences, lectures, book signings. Join a singing group, a flag football league, a charity—anything that gets you connected with more people.

4) Be willing and eager to freelance. This is the “new work.” I look at our small used machinery business and Today’s Machining World. We use a freelance National Acme rebuilder, a part-time Hydromat specialist, part-time machine cleaners, a freelance art director, and a half-time editor. And then add me to the list—as a part-time article writer. We are living in the gig world, the project-hiring world. The world of no company health insurance. Adjust to buying your own.

5) Learn to live with lean. Productivity improvement is endless in business. Less is more. Automation, doubling up tasks, outsourcing, downsizing, working from home. This is the trend and it will continue to proliferate. Financial institutions, government, the Post Office, have been late to this game, but they are being forced to catch up fast by economic reality. One of the main reasons the press is so gloomy is that New York and Washington have been spared the productivity ax until recently. Now that it has hit the financials and government it has become real to the Wall Street Journal, NY Times and NPR, and soon even the elite colleges. Education, the Post Office, and the government are just starting to be struck by the job ax.

But this trend also offers an excellent work opportunity for the people who can efficiently deliver things, for banks that treat people like human beings, and for improving the quality and productivity of educational efforts. Today’s schools are failing students and communities. It will be an enormous opportunity to add value and get paid for it in the coming decade.

This blog is an introduction to the topic. I welcome your observations and suggestions for kids and adults who want and expect to add value with work in the decades ahead.

Question: Would you want your kids to pursue a career in the manufacturing industry?

Working from “home.”

Working from “home”

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