Monthly Archives: February 2019

Ep. 30 – Developing a Machining Culture with Victor and Betty DaCruz

By Noah and Lloyd Graff

On today’s podcast, we interviewed Victor and Betty DaCruz, owners of DaCruz Manufacturing in Bristol, Connecticut. Victor and Betty have transformed their company over the last three decades from a multi-spindle screw machine shop with ACMEs and New Britains into a high-tech CNC turning operation. While other companies complain about not being able to find quality employees, DaCruz has created a culture that attracts high level young people to work at the company.

Scroll down to listen to this week’s podcast.

Question: Is it a good idea for a husband and wife to work together?

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Michelle and I on Euclid Avenue

I’ve been listening to Michelle Obama’s wonderful autobiography, Becoming, with rapt attention. She is a brilliant writer and a terrific storyteller. What makes the book especially fascinating for me is her references to her birthplace and longtime home at 74th and Euclid in Chicago, 7 short blocks from my home growing up at 67th and Euclid. I’m 19 years older than Michelle, but we share similar memories of growing up on the South Side of Chicago. Yet many of our memories are quite different because of race, ethnicity, and the times.

Michelle Robinson came from a lower middle-class family, but they were rich with togetherness and their parents’ commitment to upward mobility for the two children. Michelle’s dad, Fraser, worked for the Chicago Water Department, checking filtration meters constantly at the enormous Navy Pier facility. It was a safe union job with the city. Fraser was also a Precinct Captain in his neighborhood, making sure everybody voted for Richard Daley and the Democratic machine.

Michelle’s mother, Marian, was a mostly stay-at-home mom who was home at lunch to make sandwiches for Michelle and her friends, and an emotional rock for the whole family, both then and now. She also lived in the White House during Barack’s time in the Oval Office, making sure the Obama daughters had all the love and guidance Michelle and her brother Craig had.

Michelle Obama's Childhood home in Chicago.Seven blocks away from the Robinsons, my mom stayed home to watch over me, my sister, and brother, making all of our meals and lending constant support. Like the Robinsons, who went to all of Craig’s basketball games (he played Division 1 in college), my parents always went to my basketball and baseball games. Several years earlier, I played baseball in the gravel schoolyard at Bryn Mawr Elementary, which Michelle attended, before I went to Hebrew school, three days a week. During the summer, I played Little League and Pony League at Rosenbloom Park, which bordered the Robinson house.

Despite our proximity and similar interests and outlooks, our childhoods did differ. Growing up on the South Side of Chicago Michelle and Craig Robinson constantly dealt with racism, not the overt type that kids encountered where my wife Risa grew up in Charlotte, North Carolina, but a type of debilitating racism stemming from diminished opportunities, low expectations, and schools with low-achieving classmates.

I went to an elementary school two decades earlier that had similarities to Bryn Mawr. There were black kids in my class, but the school’s Irish teachers treated white kids, who made up about 2/3 of the class, with respect and had high expectations for our success. The black kids, with a few exceptions, were treated as second-class. The 48 kids in our class were segregated by test scores, which dictated which row of eight we sat in. I was conscious of the unfairness and unkindness inherent in the seating arrangement, but the idea of complaining about it was not in my vocabulary at the age of 10 or 11.

Michelle Robinson graduated from Bryn Mawr and attended Whitney Young High School, a racially diverse, elite magnet public school attended by many of Chicago’s most affluent African Americans. This was the alternative to attending South Shore High, which was 98% black but a couple of blocks from her home. Whitney Young was an hour and a half bus ride on two Chicago buses for her, and the kids paid their own bus fare.

I would have gone to Hyde Park High School, which was also 98% black, but I got into the prestigious University of Chicago Laboratory School, a private school a few miles away, though I usually received a ride from my mom or dad in the morning. My classmates were an amalgam of kids from U of C parents, Jewish kids from the South Side, and commuters from around the city. About 20% were black.

Michelle writes vividly about friends she had growing up, especially one of the daughters of Jesse Jackson, who lived in a beautiful stone house a few blocks from me, although I did not know it at the time.

Michelle graduated from Whitney Young high school and went on to Princeton in 1981, as had her brother Craig, two years earlier. After Princeton, she earned a degree from Harvard Law School and a position at probably the most prestigious law firm in Chicago, Sidley Austin LLP. Nineteen years earlier, I attended the University of Michigan, then joined the Illinois National Guard, and later started peddling screw machines in an office on the South Side of Chicago in 1969.

Michelle eventually made it to the White House with Barack, whom she helped recruit for an internship at Sidley Austin. But both of us will always share Euclid Ave.

Question: Do you ever go back to where you grew up? How does it feel?

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Ep. 29 – Mark Fordyce, Hydromat Maestro

By Noah & Lloyd Graff

On today’s podcast, we interviewed Mark Fordyce, Team Leader of the Hydromat Parts & Rebuild department at Component Bar Products in St. Louis.

Mark is a Hydromat Maestro. He has been working with rotary transfer machines for over 40 years, first as a self-taught setup man in a job shop, followed by working in the engineering department at Hydromat Inc., and then at Component Bar. He is one of the first people Graff-Pinkert calls when we have a question about a Hydromat, and often the machine we are asking for help on was actually originally set up by him.

In the interview, Mark talks about the beauty of the Hydromat machining process and also where he sees the role of Hydromats in the manufacturing industry going forward.

Question: Is it a better business producing high volumes or low volumes of precision parts?

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Ceiling of Complexity

I took a quarterly seminar many years ago taught by Dan Sullivan. It was aimed at entrepreneurs and focused on how you could grow your business and enhance your life through planning and simplification. One of Dan’s catchphrases that I go back to frequently was, “reaching your ceiling of complexity.” As I entered the library this morning to write this piece, that line struck me between the eyes.

I realized that I was bumping my head against that “ceiling” that felt five feet high at that moment. I had attempted to write this blog three times in three days and hit a blank each time, something that rarely happens to me. My head was definitely bruised from bopping into that low ceiling. Why now?

A few days ago, Noah and I attended the Precision Machined Products Association annual Management Update Conference. There were more than 150 people at the event, many of whom I had known for decades. A lot of younger people attended too, which is a sign of vigor and optimism in the industry. The focus of the meeting was on change and the ability to build a foundation of relationships and culture which would enable a business to weather the inevitable ups and downs of being in the game.

Lloyd experiences deep thoughts on buying and selling machining businesses.

Underlying the topics was the tough reality of people nearing what they deem to be “retirement age” struggling to exit the industry and businesses they have loved and prospered in all their lives. How do they exit gracefully with the gains they have made? To whom do they sell the businesses or pass them on? Quite a few people are now asking me to help them in this process, and the emotional investment for families in the center of these decisions is heavier than I expected.

I’m not playing with the private-equity boys who are all about the numbers. The EBITDA, accounts receivable, and the viability of the customers is their only focus. It simplifies the game for them. For me, it is the people, their life’s work, more than just the money that is the magnet, and that’s what makes everything so damn complicated.

Selling a business is a quantum leap more complicated than selling a Wickman or a Nakamura. More emotions, more family input, more tugs and eventually hugs. It shouldn’t have surprised me, but it has. Knowing the buyer and seller by their first names is a blessing and a curse. The beauty of selling machining businesses is that I’m invited into people’s lives in a profound way. It gives me a purpose akin to the purpose of writing a blog aimed at the people in this industry.

The deals I’ve been working on are much more complex than selling one machine or buying a package of machines. When somebody is buying a business to gain access to contractual relationships and may encounter erratic income streams, the deal is constantly in flux. The broker becomes an interpreter of facts and feelings on both sides of the transaction and sometimes has to soften the emotions on both sides to keep things on track. My ceiling for complexity rises and falls with the vibes of each deal. I find the process exciting and exhausting at times. I think I’m getting better at it, but occasionally the ceiling is a little bit tight.

Question: How do you simplify your life?

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Ep. 28 – Bryan Batten, Mechanical Psychologist

By Noah Graff

On today’s podcast, I interviewed Bryan Batten, CEO of Palmetto Precision Machining, located in Anderson, South Carolina. Palmetto Machining is a precision machining/fabrication shop specializing in tooling and automation for the automotive industry. Bryan, who jokingly refers to himself as a mechanical psychologist, discusses the difference between working with automotive companies in different countries, his experience purchasing a machining company, and the manufacturing boom in the South.

Question: Do you have a machine that should go to a shrink?

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The Hole in China’s Apple

A tiny gecko can literally climb up sheer glass.

A team of robotics geeks in Denmark thought, wouldn’t it be cool if we could mimic the gecko in a robot’s gripper? Wouldn’t that be a great product?

They accomplished just that and started a company in Odense, Denmark to sell their gecko gripper, called OnRobot.

Odense, home of Universal Robots, is the robotics incubator of the world. Poetically enough, it is also where Hans Christian Andersen wrote his fairy tales. The gecko gripper concept grew from a research paper written at Stanford University in Palo Alto, which was picked up by NASA as having the potential for retrieving satellites in space. The folks in Odense saw its potential.

Would this have happened in Shanghai?

Recently, things have become quite ugly for China after 30 years of almost unimaginable growth. The Chinese leadership, starting with Deng Xiaoping, has been almost maniacal in pushing growth in China.  With shrewd planning, an industrious and hungry population, heavy borrowing, and a knack for stealing and copying the hard-won knowledge of their competitors in the United State and Europe, they have continued their ascent.

Shanghai is not Palo Alto, California, or Odense, Denmark. Companies like Huawei and ZTE have become electronics giants in recent years by developing copycat products based on intellectual property theft and industrial espionage while playing footsie with bad actors like Iran. This has been abetted by the Chinese government, which has afforded them immense lending resources as part of China’s extraordinary rush to catch up to the United States and ultimately surpass America in almost every way possible.

The Chinese leaders did not have time for the kind of entrepreneurial organic growth of a Universal Robots or OnRobot. They wanted to leapfrog the agonizing trial and error and market flops that little startups have. So Huawei and ZTE and countless other firms stole their way to the top.

They did not have to try that hard to do it. Many large firms virtually handed the Chinese their intellectual property in exchange for market opportunity. Apple’s current falling earnings are a direct result of weakening iPhone sales in China as their competitors are making nice copies for half the price. The only edge Apple has left is their high-class brand, but that apple is now more than half eaten.

Apple was not naïve about China. Its gamble was that they would make billions of dollars in China before the intellectual property theft really bit, and then they would use that money to fund research which would net the next generation of killer phones or some other monster product.

The Chinese leadership’s gamble was that the American leadership would make the same short-range gamble as Apple. In exchange for gaining lucrative markets for America’s relatively cheap commodities, the U.S. would allow intellectual property theft without retribution and the looting of the American and Western European industrial complexes by subsidized ones in China. For example, the Chinese steel industry has grown to be by far the world’s biggest, and yet it is hopelessly inefficient, as the government has run it as a make-work project for hundreds of thousands of workers.

The Trump tariffs on steel and aluminum have hurt American companies who use the materials, many of whom are our customers, as well as the Chinese. The Huawei case in which the founder’s daughter is the mouse who was caught in the trap in Vancouver, Canada, is as clear a signal as America can send to China — that things finally are changing.  It is starting to get uncomfortable for both the U.S. and China as the stalemate continues to bite.

Both countries have a huge amount at stake in the trade talks going on right now in Washington.  Shanghai is not Palo Alto.  It is not Odense. What is being exposed to the world at this moment is that despite the enormous growth in China over the last 30 years and its overarching ambition to surpass America in every way, it is weak at its core. It can be seen as similar to Japan in 1990.  Many futurists saw Japan surpassing the U.S. at that point, but despite America’s missteps, like the Iraq War, it did not happen.

China does not innovate. It mostly copies and steals intellectual property.  Its education system does not produce risk takers.  Nonconformists often end up in jail. I believe the top leaders in China understand this is a profound weakness, but it is extremely hard to address it because doing so would undermine the soft foundation of the country — economically, socially, and politically.

I think Donald Trump, the New York real estate developer and gut puncher, gets this. The amiable Bushes, Clinton, and Obama seemingly did not understand China’s basic weakness and refused to play the strong hand that they had.

The big question ahead of us is will Trump play his strong hand too aggressively and screw up the world economy, or will he find a path to a compromise? The Fed’s recent pullback on interest rate hikes was its statement that they are worried that the whole poker table might collapse.

Question: What copycat or knockoff products have you purchased?

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