Monthly Archives: October 2015

All Eggs In One Basket

By Lloyd Graff

I was talking to a client recently about his company’s business strategy. I loved his transparency and clarity about his approach.

He said that he and his management team had chosen to be an automotive supplier. He was only interested in quoting on long run, high volume work in which his company could add real value. He did not want to run a little of this and a little of that. He did not want to really diversify to even out the shifting sands of automotive demand. He would take his chances with market swings.

He is riding high now with automotive running at 18 million units in America. He knows it will change, but he is confident in the rightness of his strategy.

What do you think about this kind of the “all in” approach?

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My company, Graff-Pinkert, has a client who was running a Wickman multi-spindle screw machine 24 hours a day, 7 days a week, with a high-low clutch that was slipping badly with every index. The brass part on it, which could run optimally at 6 seconds, was running at 12 seconds, and the clutch was so hot, even with oil dripping on it, the clutch plates were starting to melt and fuse with the housing.

But the company management refused to stop the machine to replace the clutch and do other maintenance because “we’ve got to get the parts out the door or our customer will get another source.” The expedient trumped the common sense once again.

In this particular case, the machine started smoking and they had to shut it down and search desperately for a replacement clutch. We see cases like this every week, in which companies delay obvious maintenance or repairs because they are slaves to the god of production and expediency, running inches from catastrophic breakdown everyday. This reckless approach was not caused by malice, just laziness and poor planning.

Do you see this problem in your factory? How do you prevent it from becoming the norm?

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From my observation, every successful firm has a few “glue people” who keep things going despite the chaos of everyday business.

Successful companies recognize the glue people and give them wide latitude to solve problems without getting fouled up by ignorant procedures and bureaucracy. The task of wise management is to identify the key people, hold onto them, and encourage them.

There is another group of “glue people” who I see getting on airplanes every time I travel. These service mechanics going on house calls keep the world’s fragile infrastructure and machinery running despite poor maintenance, occasional sabotage, and daily wear and tear. No matter how much money these folks make they are underpaid compared to the value they add.

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I was talking to a client recently about his choice of CNC machines for his Mexican factory. He said that when they started up in Mexico they bought all Mori Seiki machines, but in recent years they have been buying exclusively Okuma. I asked him why.

“Simple answer,” he said. “Okuma opened a service center in Monterrey. They are able to send a capable service person the same day we have a problem. Mori was too far away,” he said.

I find it surprising that service is seldom advertised clearly by machine tool builders, when it is often much more critical in the perception of the buyers than technical superiority. Haas has built its long-term success on the Haas vans rolling around its markets with able fix-it people and immediately available spare parts.

Service is hard to execute well, but it remains the single most important piece of a successful machine tool business.

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I saw an email blast this week from Hardinge, America’s premier collet maker, promising 5-day delivery on collets for Swiss-type screw machines. I applaud Hardinge for raising their game on delivery. I imagine it was a decision made for competitive reasons. What I find interesting is that normal lead times for multi-spindle screw machine collets remain at 18 working days, though the company occasionally delivers faster.

I think Hardinge believes it is bulletproof on multis but vulnerable on Swiss. With the number of multi-spindle machines shrinking, and new machines all coming from Europe, they may be correct, but it would be an interesting business experiment to see if their volumes increased by shortening delivery times. Perhaps, a premium for shorter lead times, like UPS or FedEx employ, would also be a worthwhile market test.

Question: Do you believe in “all in” or diversification?

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For the Love of the Game

By Lloyd Graff

Chicago Cubs celebrate defeating the St. Louis Cardinals 6-4 in game four of the National League Division Series at Wrigley Field. Associated Press.

My Chicago Cubs have been berry berry good to me.

I know many of you are not baseball fans, but bear with me for awhile as I write about my baseball season rooting for the Chicago Cubs and how I feel today after my team was swept in four games by the New York Mets on Wednesday.

I have loved baseball since I was 5 years old. My Mom was a fan. She grew up near Wrigley Field and could easily walk to games, though I think she seldom went even though her father was an avid follower of the Cubs. When she married my Dad at 19 they moved to the Southside of Chicago where he was from, a huge culture shock for her in many ways. Chicago is a city of neighborhoods, usually defined by ethnic and racial backgrounds, but also by one’s baseball team preference. She moved from the urbane, wealthy North Lake Shore Drive area to an upwardly mobile Jewish ennclave on the Southside, surrounded by Irish Catholics and African Americans who were devoutly tied to the White Sox.

So I grew up amidst rabid Sox fans who ridiculed me for rooting for my Cubbies.

But I have held to my Cubs religion all these decades. I would drift away at times as the team was generally awful. The Wrigley family made billions in the gum business, and Cubs owner P.K. Wrigley coined money broadcasting his team on WGN TV whether they won or lost. The Cubs were usually a laughing stock but they usually had excellent radio and TV broadcasters, and stars like Ernie Banks to keep interest alive.

Occasionally a good team would come together like in 1984 and 2003, but they did not have staying power and quickly disintegrated into mediocrity or worse. But finally, after all the depressing decades, a new regime running the Cubs has built a team of talented, extremely young players with a brilliant manager in Joe Maddon to mold them into a winner. Management did not overhype the new players, but if you followed the team you felt something good was actually going to happen soon. Maybe not in 2015, but pretty soon.

From the beginning, this season felt quite different to me. It was apparent from Spring Training that Maddon was cerebral, comedic and psychological. He is a baseball lifer who seems to have absorbed the essence of the game in his bones and still loves it like a kid. He is not a jock, but he totally understands jocks and respects their talent. He is also unafraid of the players or of being wrong. He was free to make controversial decisions like replacing incumbent shortstop Starlin Castro with rookie Addison Russell (he moved Castro to second base), and batting the pitcher eighth.

I watched all this with utter fascination from the first game in April. The Cubs virtually had a whole new team by May from the 73-win team of 2014. Joe Maddon was loving it. The players were improving every week and they were winning a few more than they were losing. Maddon brought in a magician one day, had a pajama party on a night flight from California, and brought in party dresses and hairdressers as they dressed up like girls going to a prom. The kids were having fun – and winning. As a fan I could feel it. I was devouring baseball articles every day, learning esoteric sabermetrics and listening to Maddon deliver management treatises after games.

Players who had been decent became very good and some showed true greatness. Jake Arrieta transformed into a legitimately elite pitcher in the second half of the season with a dominance comparable to that of a Sandy Koufax and Bob Gibson. He averaged less than one run a game over his last 20 starts, an absurdly low number. When he pitched the players knew they would win. And they did.

For a fan like me or my son Noah, it felt like the great days of Michael Jordan and the Chicago Bulls of the 1990s. Coming to our beloved Wrigley Field, it was magical, amazing and just so much fun. And the beauty of it was that I could savor it. The season felt like a blessing that I was privileged to have. After almost dying seven years ago, every game with this team felt like a gift and part of my reprieve from death.

My daughter Sarah who lives in California came in with her husband and three girls and insisted we go to a game. It turned out to be the pivotal game of the regular season as the Cubs swept a four game series against the Giants, their rival for the wild card slot in the playoffs.

And the beautiful thing is that her daughters were becoming Cubs fans like their parents, grandparents, great grandparents and great great grandparents.

During these playoffs at least six of us, composed of friends and family all over the country, group texted during the games, everybody adding pithy comments during our highs and lows. My seven-year-old granddaughter Chava texted about her team, spelling words phonetically, as she watched and cheered the Cubs in front of the TV in Palo Alto. My wife Risa, who had always been indifferent but tolerant of my love for the Cubs, finally became an avid fan herself, swearing liberally when the Cubs goofed up or the other team scored. The circle had closed for five generations, and it felt so good.

We were all frustrated by the Mets sweeping the Cubs in the National League Championship Series, but I was not heartbroken. After all these years, I had my best season ever rooting for the Cubs! The playoffs were all gravy.

My wonderful granddaughter Chava summed up my feelings in her last text Wednesday night, “Let’s get excited for next year cuz thats when theyll win it!”

That’s my payoff for all these long years of being a Cubs fan.

Question: What is your sports religion?

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Born Different

By Lloyd Graff

I have been listening periodically to a brilliant book by Andrew Solomon entitled Far From the Tree. It is ridiculously long, 40 hours on audio, but every time I hear it I learn something.

Solomon writes about the lives of people who are born “different” from their parents and most other people in the world. He sympathetically tells their stories and the stories of the people who are close to them.

While telling a story of the family of a Down Syndrome child he reads this short essay written by Emily Perl Kingsly, the child’s mother. I found it very moving and hope you find it worth reading. Welcome to Holland.

-Lloyd Graff

Emily and her son Jason who has Down Syndrome.

Welcome to Holland
By Emily Perl Kingsley. All rights reserved. c1987

I am often asked to describe the experience of raising a child with a disability – to try to help people who have not shared that unique experience to understand it, to imagine how it would feel. It’s like this…

When you’re going to have a baby, it’s like planning a fabulous vacation trip – to Italy. You buy a bunch of guide books and make your wonderful plans. The Coliseum. The Michelangelo David. The gondolas in Venice. You may learn some handy phrases in Italian. It’s all very exciting.

After months of eager anticipation, the day finally arrives. You pack your bags and off you go. Several hours later, the plane lands. The stewardess comes in and says, “Welcome to Holland.”

“Holland?!?” you say. “What do you mean Holland?? I signed up for Italy! I’m supposed to be in Italy. All my life I’ve dreamed of going to Italy.”

But there’s been a change in the flight plan. They’ve landed in Holland and there you must stay.

The important thing is that they haven’t taken you to a horrible, disgusting, filthy place, full of pestilence, famine and disease. It’s just a different place.

So you must go out and buy new guide books. And you must learn a whole new language. And you will meet a whole new group of people you would never have met.

It’s just a different place. It’s slower-paced than Italy, less flashy than Italy. But after you’ve been there for a while and you catch your breath, you look around…and you begin to notice that Holland has windmills…and Holland has tulips. Holland even has Rembrandts.

But everyone you know is busy coming and going from Italy…and they’re all bragging about what a wonderful time they had there. And for the rest of your life, you will say “Yes, that’s where I was supposed to go. That’s what I had planned.”

And the pain of that will never, ever, ever, ever go away…because the loss of that dream is a very very significant loss.

But…if you spend your life mourning the fact that you didn’t get to Italy, you may never be free to enjoy the very special, the very lovely things…about Holland.

Question: If you could do it all over again would you have kids?

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Is Business Travel Worth it?

By Lloyd Graff

Hydromat has its Oktober Fest Open House in St. Louis coming up next week. The Precision Machined Products Association (PMPA) has its annual meeting this weekend in Hawaii. The Machinery Dealers National Association (MDNA) has their bi-annual Weekend With The Pros starting Friday. It’s time to get together and schmooze. These are extremely valuable get-togethers, especially in the time of Web ascendance which turns us all into iPad zombies. I do think the PMPA Hawaii con fab is too out of the way. Maybe they should do Winnipeg next year.

The industrial auctioneers would love to do most of their sales online, but the sad fact for them is that used machines are not generic. They vary greatly in wear and tear and filth. It takes a human eye to make an intelligent call. But despite that, many people shun the travel, even for expensive equipment they need. In some cases auctioneers grant a 3% discount to people who trek to the sale and eliminate Bidspotter’s cut.

Perhaps a 5% advantage for attendees would make sense for all because of the cost of travel and the greater likelihood that an onsite bidder will push the price higher because of the social pressure of the crowds, and the skillful prodding of the auctioneer.

I am a believer in personal relationships and business travel. They are increasingly expensive and physically demanding, but the Web is still a hollow vehicle for developing trust. Hawaii may be a stretch, at least for me, but pressing the flesh is still vital in building a business.

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Tipping is one of those modern practices that always poses decisions I’d rather not make. I find myself avoiding haircuts because I never know what to tip my female barber, who owns her own one-person shop. Over the years we’ve become more conversant, usually about sports, but occasionally about her personal life. Her divorce, and her stepson going into the Marine Corps are now open topics and I tend to tip her more than I used to when we barely said two words. But I’m clueless about the etiquette of tipping a proprietor of a small business. The old convention was you don’t tip the owner, but that seems unfair in a one-person shop.

Tipping came up for me when I read that Danny Meyer, the famed New York restaurant owner, is now experimenting with a no tipping policy in his restaurants including , which is spreading over the country. Tipping is a staple of the waitstaff, but it discriminates against the cooks that keep the establishments running. There is a Federal law against tip sharing so it makes the whole situation quite tricky for an owner. Meyer is a very shrewd businessman. He had meetings with the staff of his restaurants to develop consensus.

I think fast food joints have an advantage over old school places because there is usually no significant tipping. For convenience I prefer not tipping, but I think a person who delivers extraordinary service deserves extra.

I remember my Dad had a unique approach to tipping, especially when we went to Miami Beach when I was young. We would go to a great sandwich joint called The Rascal House where the lions would snake out the door at 5pm. When we finally sat down he would tip the waitress immediately. He said it was to ensure good service after the long wait. It perplexed me then, but today I can see a certain logic to it. It takes some of the decision making out of the end-of-meal tipping ritual and warms up the server to remember you amidst the restaurant chaos. What do you think about tipping or no tipping?

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I have to say something about the Major League Baseball Playoffs and my Chicago Cubs.

I feel like I’ve waited for this team my whole life. I’ve suffered, and I mean SUFFERED, so long with terrible teams, dumb managers, lackadaisical players and bad karma. But it finally feels different. The Cubs may not win it all this year, but they really could, even should win this year, and be contenders for quite a while. Joe Maddon, the manager, is brilliant and articulate. I feel like he gives me a management lesson after every game that I can apply to my own business.

I am grateful. This team has brought me real honest joy. May it continue for eight more wins.

Question: What business travel is worth your time and why?

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Surprisingly Friendly Skies

By Noah Graff

Coach Section on a United Flight

I recently had the pleasure of taking a 10 hour international United flight. Why did I fly the notoriously “unfriendly skies” when historically I have always hated United? The airline’s seats have the worst leg room of them all, unless you pay hundreds of dollars for the privilege of not developing blood clots. The food — I don’t want to look at it, smell it, and definitely not taste it. Worst of all, United flight attendants often seem to ooze negativity straight from their pores. Too often they transmit a grouchy vibe and simply look like they don’t won’t to be there. I have to chuckle sometimes because it often feels like they are trying to live up to their stereotype of unfriendliness.

However, the price of the flight was decent and United was the only airline to offer a direct route to my destination, so I braved the expectedly unfriendly skies.

But this trip, I have to say, wasn’t an entirely negative experience. Some of the United folks were indeed unpleasant as I expected, but I’d say 50 percent of them were actually quite friendly to me, although they still complained about their nasty employer, which I believe is the true root of their sheer sourpussness.

Traveling both to and from my destination, I sat in the exit row, across from the jump seat that the flight attendants sit in, so I had the chance to actually get to know two of them. On the way to my destination, I talked a little while with a short African American flight attendant, in his 50s, who had been with United for over 20 years. He was friendly and personable but still glum as he complained to me about the company he worked for. He joined me in mocking the “breakfast” provided by the flight — one croissant, still half frozen, and horrible coffee. At morning chow time, the announcer referred to our morning piece of bread as a “breakfast snack,” as though she knew she would be lying if she referred to it as breakfast.

The flight attendant told me that the “breakfast snack” had only been implemented two or three months before, and he was clearly embarrassed by it. He brooded about United’s former CEO Jeff Smisek, who had just been forced to resign from the company after federal investigators found that United had created money losing direct flights from Newark to Columbia, South Carolina, specifically to transport David Samson, the chairman of the New Jersey Port Authority, to his vacation home, in exchange for favors. Incidentally, Samson is also the guy behind the “Bridgegate” scandal in New Jersey. The flight attendant proceeded to detail Smisek’s golden parachute upon leaving United. After Smisek resigned, he received a separation payment of a $4.9 million lump sum. He also retained his company car, and lifetime flight and parking benefits. I’m not sure what the parking benefits are, all I know is the parking perk is something that I surely need living Chicago.

On the way back to sweet home Chicago, I met a really friendly flight attendant. She complimented me several times on my diligent diary writing. I had to finish chronicling my journey, something I try hard to do when I take big trips. She also complimented me on my sleeping ability in the horrible airplane seats. I told her that the only thing that made it possible to sleep was my mild narcolepsy condition. It’s a blessing and a curse for me. I can go into REM in about a minute, while it takes many people an hour or more. It’s a great condition for planes, terrible for meetings and lectures, and especially terrible while DRIVING!

I digress.

When I brought up my narcolepsy to the woman, I told her about Provigil, the truly wonderful medicine I take to combat the condition. Provigil was originally created for soldiers in the U.S. special forces to stay awake in combat. The drug does not constrict your blood vessels or boost your heart rate in the manner of amphetamines such as caffeine or Adderall, it just suppresses the chemicals in your brain that make you sleepy. It really is wonderful because when you take it you don’t feel hyper or anxious, you just don’t feel sleepy.

The flight attendant then told me that she and all her coworkers take Provigil too. Doctors can prescribe it for what they call “shift disorder,” the logical affect of having a job with unnatural hours. I also learned from her that the flight attendants on international flights have an area of their own under the main cabin, with bunk beds to sleep on. She said the beds are stacked on top of each other so closely that it feels like she is lying in a coffin. Maybe it feels like a coffin (whatever that feels like), but anything sounds better to me than sleeping in a coach airplane seat, which all seem designed to be in the most uncomfortable shape possible.

The flight attendant enthusiastically recounted some of her favorite destinations she flies to in Asia and South America, but lamented that the company is talking about decreasing the stay-overs in international destinations to a mere 18 hours. I asked her what the point was of working international flights if flight attendants have no time to spend where they land? She just smiled and shook her head, acknowledging that she didn’t know the answer. She also said she wondered if her body could even handle the proposed schedule.

If I worked for that company, I might be grumpy too.

Question: Are long work hours a curse or a gift?

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My Fill of Recycling

By Lloyd Graff

Photo courtesy of jenike.com

Martin Winterkorn, the CEO of Volkswagon, is now unemployed because his company dealt improperly with the waste from 12 million diesel cars.

Waste is a hot topic again. An XPRIZE of $20 million is now being offered as a challenge to make useful, economically viable products from the carbon dioxide waste, which pours out of coal and natural gas fired power plants all over the world. The unfortunate people who live in Singapore, Malaysia and Beijing are now walking around with masks. They deal everyday with the awful debilitating haze which blankets their air.

In America we recycle our plastic water bottles almost like a religious ritual. Kids who have grown up on environmental orthodoxy since they were three think that they are saving the planet one yogurt cup at a time.

I think we need to think about what’s important in the waste world and what is just a waste of time and energy.

I buy into the consensus view that CO2 from power plants burning coal and natural gas is a legitimate hazard. But I think the fervor over recycling, versus just burying our leftovers like we used to do in the good old days, is misplaced. Most of the lovely forest preserves in the Chicago area are covered up landfills. In New York City the gorgeous tennis facility where they play the U.S. Open Tennis Tournament is a former landfill. Let’s give garbage its due. Dig a big hole in a strategic spot and a decade later you may have a spectacular piece of real estate.

John Tierney has written extensively about the reign of recycling. In his recent piece in The New York Times he argues quite persuasively that for regular people the only environmentally sensible products to recycle are aluminum, paper and cardboard. Plastic and especially food scraps are environmentally wasteful to recycle. He says it would take 40,000 recycled plastic bottles to offset the greenhouse effect of one passenger’s coach round-trip flight from New York to London, 100,000 bottles to compensate for business class trip. If you rinse the bottles that figure would be even higher as it puts more carbon in the atmosphere from obtaining the water.

The environment virtues of electric cars have been strongly promoted by Tesla and Toyota, but the bottom line carbon dioxide savings versus an efficient gasoline engine are minimal if you figure in the carbon dioxide coming from the coal burning power plants that are charging the batteries each day.

I have heard the blind recitations from the waste groupies about saving the planet by joining Seattle and San Francisco in moving toward a “zero waste” policy by recycling every button and hot dog wrapper, but it does not make either economic or environmental sense to go that far.

From the financial side, the recycling business is in the toilet. It is cheaper to produce virgin material in many cases than to recycle, even if you accept the argument that greenhouse gases are a significant cost to the people and the planet. I remain hopeful that the best and brightest minds, with the new economic incentive of the XPRIZE, which is funded by a big utility, NRG, and the Alberta Oil Sands Group, will figure out a good way to recycle the carbon dioxide waste of electricity generating power plants and manufacturing facilities. Meanwhile, plenty of communities will happily host environmentally safe landfills for a fee, and I can guiltlessly send my food scraps down my disposal and throw out my accumulating plastic bags without any tinge of remorse.

Question: Do you feel guilty when you don’t recycle?

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Phony Fumes

By Lloyd Graff

In this Sept. 23, 2015 file photo, company logos of the German car manufacturer Volkswagen sit in a box at a scrap yard in Berlin, Germany. (AP Photo/Michael Sohn, File)

The mess that Volkswagen now finds itself in will be a business case study that students at Harvard and Penn will have fun with for years. But for VW it is a problem that just keeps getting worse by the day. It has cost VW CEO Martin Winterkorn his job and will cost the company many, many billions of dollars.

As a spectator who has never even considered owning a diesel automobile, I find it a fascinating case of over-reaching, because Winterkorn promised everybody he was going to run the biggest car company in the world and do it by pushing diesel cars.

Unfortunately, the EPA in the U.S. would not oblige VW like the Europeans had by relaxing the emissions standards on the uniquely nasty emissions of diesels. A conspiratorial thinker might believe that the tough diesel emissions standards were instigated by VW’s competitors in America, but I doubt it. The EPA, particularly under the Obama administration, appears to hate all the auto companies, except maybe Tesla. VW probably thought it could buy the EPA or cajole it, or muscle it like it does the European regulators, but then the company discovered nothing was going to work except adding very expensive pollution control equipment to its cheap little small cars that would make the cars either uncompetitive on price or unprofitable, or both. So VW decided to go with the cheating software fix, that in its arrogance figured nobody would ever catch.

You can fool some of the people, some of the time – you know the rest. The suspicion is that maybe somebody from BMW, who knew how much it cost to put the costly diesel emission controls on their $60,000 SUV, made a call or sent a love note to the EPA, saying that VW’s cheap pollution fix did not add up. So the EPA decided to test and retest the small VWs to find out what the company’s secret sauce was. The secret sauce was software trickery that falsified the emission test results.

If it was only diesels in the U.S. it would have been a blow to the company, but since VW’s cars were a sales flop here, anyway, it would not have been a catastrophe. But when you are dealing in lies, you better be a consistent liar, which VW was. The deceptive diesel software is in all of the small European diesels too, about 11 million on the streets, all spewing worse fumes out the tailpipe than their test readings indicated. Wolfsburg – you have a problem!

As a business story, it is all so juicy. Corporate arrogance, lies, clever masking software, CEO resignation, regulators in Europe running for cover! Personal injury lawyers are probably figuring out whether they can manufacture some lawsuits out of it.

The Tanaka airbag failure took many years to unravel, but the Volkswagen diesel bubble broke quickly.

Volkswagen’s disconnect with the American market has some parallels with what I discussed in the DMG MORI story I wrote a couple of days ago. DMG wants to be the biggest machine tool builder in the world. Tying up with Mori-Seiki seemed like a good way to get there. But like VW’s difficulties working with an American market that dislikes diesel and navigating American regulators who would not simply wink at an inconsistency when it stared them in the face, DMG has had trouble responding to the service needs of American manufacturers.

The automotive industry as a whole must feel edgy these days. We appear to be close to the beginning of an enormous shift in the market. Apple and Google want to sell an autonomous car in five years. Tesla hopes to bring its mass market electric car to market in 2017. Uber wants to change the way we own and drive cars. It just commandeered almost the entire robotics department from Carnegie-Mellon to speed up its driverless car ambitions. Mercedes, BMW and VW recently bought Nokia’s mapping software for $3 billion to try to catch up on the autonomous car.

We are near some kind of inflection point where software will become more significant than hardware in car purchases. This is what Silicon Valley sees as the trillion dollar opportunity.

Martin Winterkorn was playing yesterday’s game by trying to use software trickery to mask a flaw in his hardware. Apple and Google are rich enough to muscle their way into the automotive world by either buying or hiring Tesla or another car builder to make their vehicles, which they see as software delivery packages. VW and many other car companies have more to worry about than phony fumes.

Question: If diesels were price competitive would you buy one?

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