Monthly Archives: March 2017

Paid by the Hour

By Lloyd Graff

I received an email recently from Steve Rose, a veteran of the machining wars who was educated in an apprentice program in England during the 1960s. Steve had a CNC training business in Cleveland for many years but now teaches Trig and programming while whiffing cutting oil again in lovely Olympia, Washington, where raindrops fall for two months straight.

Steve’s reason for writing to me was not to lament the wet, but to discuss the question of why so many jobs in machining go unfilled. In his opinion, wages are stubbornly low for people in the field, especially the technical school grads who he teaches and trains.

I have grappled with this issue myself for decades as I run a machine tool business and publishing business. I am always trying to figure out how much to pay employees in order to hold onto them. I also have to motivate the most productive people, yet not sow discontent among the marginal but still useful ones.

In my experience, we tend to not pay the best people enough while we pay too much on the low end. This hurts us in attracting promising young people.

I am finally trying to address the issue by hiring people when needed and paying them by the job, which probably means paying $30-$50 per hour for machinery rebuilding specialists who are very efficient. By doing this I avoid paying health insurance which would cost $10,000-$15,000 per employee. I also only pay for the labor when we need it.

I think that specialists in machining such as repair or setup people for Hydromats and CNC Swiss enjoy making $50 per hour while being paid to do a specific job extremely well.
It makes me think that one reason so many jobs are “unfilled” in machining is that businesses are organized in an old school, basically unproductive hierarchical system that actually overpays unproductive folks and underpays the truly outstanding people. If success is rewarded accurately and properly I see machining companies becoming more specialist oriented with experts making $50 or more per hour while being supported by $15 per hour assistants. There will be a mid-group of minor league prospects who have a chance to make it to the majors if they work hard and progress. Larger companies will have training programs and coaches to help promising candidates move up.

I am curious whether you think I am nuts in my analysis of the current and future trends of working in the machining realm. Will the cost of health insurance tend to keep the old wage system going or will it doom compressed wage ladders?

Question 1: How does health insurance affect your business or personal healthcare situation?

Question 2: Should factory workers be paid by the hour?

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You Bet Your Life

By Lloyd Graff

Fifteen years ago, I was in Las Vegas for a business conference in late March and ran into a used machinery dealer from Chicago named Earl Elman.  Earl was a contemporary of my Dad. I knew his wife had a fatal illness, and he was a starched collar, grey suit kind of guy—not a gambler.

“Hey, Earl, what are you doing out in Vegas?” I asked. “Lloyd, it’s March Madness. I come every year for the basketball games. I love it.”

It struck me as so unlike what I thought Earl did when he was not brokering Bridgeports, but then I thought to myself, why not? We all make bets with our money and our lives, every day. He put his dough on the Spartans or the Gophers.

This memory came back today because of the calendar and my daily scan of The Wall Street Journal. It’s March Madness time again. Intel is paying $15 billion for Mobileye, a young Israeli company with $300 million in sales. Tesla used Mobileye’s technology in its car that had the first fatality using artificial vision and blamed it on Mobileye’s software.

Intel is in a pickle at the moment because it missed the Smartphone and Cloud booms while focusing on the declining market of chips for personal computers.

The company still has plenty of cash and credit, and decided to make a big bet on vision systems for autonomous cars. Its arch competitor QUALCOMM recently made a $40 billion bet on NXP Semiconductors, an automotive chipmaker. These are massive business wagers that are by no means sure things.

Is Intel caught up in billion-dollar March Madness? Don’t ask David Ackman, the hedge fund gambler who just took his medicine on Valeant to the tune of $5 billion. Valeant is the company whose brilliant strategy was to buy drug franchises like EpiPen and raise the price ten-fold. It worked for a while until people started dying because they could not afford the drugs they had been buying for decades. The name “Valeant” has became equated with “predator.” Ackman lost 95% of his “investment.”

I wonder if the Wall Street wizard, Ackman, might want to make a career change like the son of a business associate of mine. He had the best education you could get in England, graduating from Oxford with a mathematics specialty. Rather than going into academia or the family machine tool business, he followed his passion for football (soccer) and gambling by joining a London firm that bets its own money on games around the world using “big data” and a little moxie. I think they are doing better than Bill Ackman these days.

Groucho Marx on “You Bet Your Life”

We all make bets each day. When you pick fresh strawberries out of the case, you are betting on their texture, sweetness and incipient mold. When you go to the doctor, you gamble that the tests she sends you to are interpreted correctly. Medicare just released a study showing that patients who spend more on tests and scans do no better than those who are unscanned.

My fascination with bets began as a child as I listened to my father’s stories about machinery deals. I think he only told me about the good deals, not the ones that went sour, because as a kid I thought his judgement was infallible.

I used to play poker in high school with neighborhood friends, which was a good lesson in losing. I graduated to Bridge in high school and usually lost. I think it cured me of depending on the luck of the draw to place my bets, but the used machinery business was a different game because I had my personal big data of a thousand deals done, in my head. I had my Dad’s experience etched into my cerebral context and I had pounds and pounds of green and yellow cards with the records of used machinery transactions of yesteryear.

In my decades of buying all sorts of imperfect used goods I have learned that making successful bets is hard, and the hardest part is continuing to bet on your own judgement when you have just screwed up big. When you lose your own confidence the percentages swing strongly against you.

The hardest part of business is staying in the game when the game turns against you.

In that light, I admire the leaders at Intel. They have been playing a losing game in the PC market since the iPad came out.

On the face of it, Mobileye is ridiculously expensive, but if an Intel just keeps doing what it has been doing it will become Sears Roebuck.

Life is a gamble. Business is a gamble. Spin the dice. Squeeze the oranges. And hope.

Question: What is the over-under on Donald Trump’s time in office?

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My Country

By Noah Graff

My dad and I arrived in Nashville last Thursday afternoon to go to a conference put on by the Precision Machined Products Association (PMPA). After checking in at our hotel I headed straight to Broadway to take in the main attraction of Nashville, the prolific Country music scene. I can’t say I’m a true country music fan, though I do love Johnny Cash, but I was in Nashville so I had to listen to some Country music. I find that even if I’m not an expert or big fan of something, be it jazz, bull riding, or sniper rifles (at the Shot Show in Vegas), if I’m in a place that features the best in world of something I can usually appreciate it and get into it. So in Nashville I was ready to expand my mind and hopefully be wowed by the next… shoot, I don’t know jack about about Country music so nobody clever comes to mind.

For those readers who don’t know about Nashville’s music scene—I really didn’t—it’s kind of the Mecca of Country music. It’s the place to see some of the best emerging Country artists in the world, the ones who are on the cusp of becoming stars on the radio. It’s also home to many great artists who will never be heard by people outside of Nashville but play for the love of the music and performing.

Artists in Nashville have the opportunity to practice their craft constantly, getting to perform long sets in medium-sized local bars with passionate audiences throughout the day and until 3:00 a.m. Sometimes they even play sets at more than one bar in the same day. There is probably no better place in the world for a musician to get in the 10,000 hours prescribed by Malcolm Gladwell to achieve mastery.

The main drag for Nashville’s music venues is Broadway, with some other interesting spots off the intersecting avenues, primarily 2nd Avenue. I strolled Broadway for a half hour in the late afternoon, feeling uninspired to go in anywhere. Music seemed uninteresting, and I was turned off by the street’s commercial Disneyland feel. Picture continuous neon signs of Cancun’s Party City framing the world’s highest per capita number of bachelorette parties riding booze bicycle trollies. Ehhhh! And so many tourists. I met more people in Nashville from Chicago than from Nashville!

The Risches Performing at Layla’s Nashville, March 2, 2017.

But then something caught my ear. Something twangy, melodic and fun, that at that moment reminded me of the soundtrack of the Coen Brothers movie, Oh Brother Where Art Thou. I looked up and saw a smiling middle-aged woman at the door who invited me inside of Layla’s to hear a Blue Grass band called The Risches. Layla’s seemed a little different from elsewhere. It felt more raw, more like how I would picture a real honky tonk. It had a simple decor, with some posters on the wall and hundreds of colorful license plates hanging from the ceiling.

On stage were six musicians. A skinny long haired man in his 20s or 30s played an acoustic guitar at left stage. At right stage a pregnant woman sitting on a stool also played guitar, and behind her was a man playing base. A cute fiery chick in her 20s with a quasi mohawk, wearing a miniskirt and cowboy boots, furiously played fiddle and guitar and sang, and a woman with a wild mop of short blond curly hair, wearing big dark sunglasses, belted out surprisingly powerful and beautiful tunes. I guess she gave me a rebellious Janis Joplin type vibe. Finally, a blond woman with short blond hair in her 50s or 60s sat discreetly on a stool in back playing a snare drum with brushes. Everyone on stage sang and played guitar at some point in the set, aside from the base player.

I had to leave after 30 minutes to go to the conference. When I stepped outside I chatted again with the sweet woman at the door. She told me that the older woman playing the drum was Layla, THE Layla who owned the bar. She said that everyone on stage were siblings. They have been playing in Layla’s since several of them were kids. She said some were practically raised on stage! I researched the Risches, formerly known as Jypsi for this piece. Turns out some of the members have solo albums in addition to those recorded as a group. They perform at Layla’s three days a week at various times a day. I’d recommend you check them out if you’re in the neighborhood. I saw some other talented musicians over the next few days at other decent venues, though nobody I loved like the Risches. I’m happy to say that underneath its commercial shell, Nashville does deliver the music it’s known for—it has a soul. And though I’ve developed an appreciation for both, I think I’m slightly more likely to download a Country song than buy a sniper rifle.

Question: Who is your favorite Country singer?

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