Monthly Archives: May 2019

Swarfcast Ep. 41 – John Habe IV on Growing a Machining Business through Acquisitions

By Lloyd and Noah Graff

Today’s podcast is part 1 of a two part interview we did with John Habe IV of Metal Seal Corporation, a machining company based in Mentor, Ohio.

Scroll down to listen to the podcast.

John and his two brothers own Metal Seal and several other machining companies, along with some granite countertop firms. He told us that since they purchased their father’s machining business in 1999 they have built their enterprise into one doing over $100 million in sales per year.

In the interview John discussed how Metal Seal dealt with a catastrophic fire in 2014, as well as his approach to delegation of power in a family business.

Question: Do you have a fire story?

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The Journal Deserves a Medal

If you are interested in women’s soccer, obscure foods, and the tortured lives of Congressional Medal of Honor winners, last weekend’s Wall Street Journal provided hours of Gatorade for your thirst for quality content.

As a writer I appreciate a well-researched and written piece.  As a former magazine editor, I know what it takes to put together a readable monthly publication.  I can only applaud the editors of the Journal who produce a superb publication five days a week and an absolutely brilliant one on the weekend.

As the supposed competition, The New York Times and Washington Post, have deteriorated into political rags and the TV competition from the networks plus NPR are now biased jokes, the Journal shines like a ruby. On the financial side, Bloomberg is a legitimate challenger, but only on the business news.

I decided to read the WSJ weekend issue cover to cover over the recent holiday and was blown away by the quality and variety of articles.  Let me give you a brief review of just a fraction of this one issue.

On Page One was a photo of Dakota Meyer, a recent Congressional Medal of Honor winner, under the caption “Medal of Honor’s Heavy Burden.”  It directed you to the “C” section for the piece by Michael Phillips, so appropriate for Memorial Day weekend.  Phillips’ article was a 2000-word series of interviews with CMH recipients beginning with 71-year-old Gary Beikirch who received the Medal in 1973 for his actions in Vietnam.  Beikirch’s captioned quote was, “it is harder to live with the Medal that it was to earn it.”  He was a Green Beret medic whose unit was attacked by North Vietnamese at a Special Forces outpost on the Laotian border.  He was badly wounded but continued to treat his comrades while he was carried on the shoulders of two Vietnamese aides.

When Gary arrived home, “filled with rage and racked by guilt,” he decided to head for New Hampshire and live in a cave in the White Mountains, looking for “the peace and contentment he had lost in the jungle.” He took classes at a local seminary, and a few weeks after moving he found a note in the local post office instructing him to call the Pentagon. He called and found out about the CMH award and that he had an appointment to visit President Nixon. He met Nixon, who fitted the star-spangled blue choker and wreathed medal around his neck. A couple days later he returned to the cave with the Medal in his duffle bag.  He did not take it out for seven years.

Phillips’ soulful article continued with interviews with Ron Shurer, Flo Groberg, and Dakota Meyer, all of whom were wounded heroes who saw their comrades die. They are all living with the hell of the day that won them the CMH. They all wish that day, that brought them personal fame and honor, had never occurred. Dakota Meyer says “it represents the worst day of my life.”

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I read at least a dozen more memorable articles in this one newspaper. There was a long, thoroughly researched piece on Huawei Technologies, the Chinese electronics firm which epitomizes the America-China discord regarding intellectual property theft, and competition between the two countries. Five Journal writers had the byline on this article, detailing how Huawei plays the game of business. It was a damning article, but one written without an obvious editorial edge. It chronicled numerous lawsuits filed by electronics firms, large and small, illuminating Huawei’s ruthless pursuit of technical knowledge by any means available, including copying competitor Cisco’s products so closely that bugs deliberately left by Cisco and typos in the manuals were in Huawei products. A comprehensive, beautifully researched Journal piece.

Next to the Huawei article was one on Novartis attaining approval for a gene therapy cure that treats an inherited disease called spinal muscular atrophy which kills most babies it afflicts by the time they are two years old.

There was also a fascinating feature about the hunt for the next “superfood,” mostly in obscure locations in West Africa.  Entrepreneurs like Phillip Teverow are looking for the next quinoa and kale.  He was pushing “fonio,” which looks a lot like golden sand, at Whole Foods in Brooklyn trying to get adventurous eaters to give it a try.  The writer, Jessica Donati, also discussed moringa, a chewy green “energy plant” and baobab fruit from the biblical “tree of life.”

Also on the front page of the weekend Journal was the beginning of an in-depth article on Tesla and what its falling stock price was all about. Written by Charley Grant, it was a thorough piece about Elon Musk’s challenge to establish Tesla before the rush of electric car competitors start to really challenge the company and before their cash runs out. Elon Musk is probably the most interesting and gutsy entrepreneur in the world.  This article told us how close to the edge he continues to run.

Another piece tucked in the back of the “Off Duty” section by their auto writer, Don Neil, reviewed the new Audi e-tron and compared it to Tesla Model X. According to Neil it fell short of the Tesla in several significant ways.

I could keep going about the two hundred different unique articles in this one issue. But one that will stay with me is an op-ed piece by Burgess Owens, a former NFL player for the Oakland Raiders and today a writer and entrepreneur.

His great, great, great grandfather came to America shackled in a slave ship.  He was sold at an auction in Charleston, South Carolina, but eventually escaped with others via the Underground Railroad to Texas and ultimately became the owner of 102 acres of farmland and an entrepreneur.

In the article, Owens decried the notion of reparations for African Americans as divisive and demeaning for whites and blacks. “The idea of reparations demeans America’s founding ideals. A culturally Marxist idea promoted by socialists, reparations denies the promise granted by God that we are truly equal.”  He called it a cynical ideology promoted by an elitist class to divide us.

The Wall Street Journal is a consistent masterpiece of variegated content.  Last weekend’s issue was truly remarkable.

Question: What are you reading these days? What have you given up?

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Best of Swarfcast: The Self-Taught Machinist, With John Saunders of NYC CNC

By Noah Graff

In Throwback Thursday fashion, Lloyd and Noah are out of town this week, so we’re sharing one of our favorite podcasts from the past. Be sure to listen in and weigh in on the new question below.

In December, we interviewed John Saunders, founder of Saunders Machine Works and the creator of the NYC CNC YouTube channel. John is an innovative entrepreneur who lives and breathes CNC machining. When he was 24 he had an idea to sell an automatically resetting steel target for practicing firearms, but he had no engineering background, no CAD experience and no machining experience. After working on a prototype with a contracted engineer he decided that before he would pursue production of his product he wanted to fully understand the production process.

Scroll down to listen to the podcast.

He bought a Taig CNC milling machine and put it in his one-bedroom New York City apartment. He quickly realized he was passionate about CNC machining and taught himself to use his machine on nights and weekends for two years. Using resources on the Web, instructional DVDs and New York’s MakerSpace NYC community he eventually gained the skills to machine a prototype of his automatically resetting target by himself. Since his first time experimenting with his Taig until today he has religiously documented his machining projects on YouTube and now NYC CNC has acquired over 273,000 subscribers.

Today Saunders with a staff of six employees, runs a machine shop in his hometown of Zanesville, OH. His company runs an intensive training course on machining and welding, and it uploads at least one YouTube video a week about machining. He also cohosts a weekly podcast where he discusses his challenges running a small machining business.

Question: Is the machining business too capital intensive for most entrepreneurs?

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Swarfcast Ep. 40 – A New Person Every Day, With Noah Graff

By Noah Graff

In today’s podcast I was interviewed about a book I am writing which documents a year in which I have met at least one new person every day. I started 364 days ago when I met a guy named Tommy, working the bar at a restaurant in Chicago called the Blue Door Farm Stand.

Listen to the Podcast on the player below.

Over this year I estimate I have met 450 to 500 strangers. I have met people on the street, a ton of Uber drivers, and folks from all over the world. I have even been forced to call Comcast late at night, desperate to meet just one new person that day.

The quest to meet a new person every day has forced me out of my comfort zone, and it has made each day more meaningful than it would have been otherwise. How often does time go by and you wonder to yourself, what did I do this week? Maybe you can’t even remember what you did yesterday? But after meeting a person and writing about it, and often taking a selfie photo together, I usually feel that something meaningful happened. I learned something new. I had a new experience.

Right now I call the book “The Meeting People Project” as I haven’t thought of anything more clever.

Question: Who is the most interesting new person you have met this week?

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Tanking

In the world of professional sports “tanking” has become the trendy strategy for a losing team to turn a losing franchise into a contender.  In baseball, the Chicago Cubs and Houston Astros both transformed themselves by becoming ultra-awful losers for several years in order to draft potential stars and develop them into the nucleus of a winning team over five years.  Many teams try to “tank” and rebuild only to languish for years in the purgatory of sports.  The Cleveland Browns and Buffalo Bills of pro football come to mind.

The path seems pretty clear in pro sports, though not so easy to execute in real life.  In business change is constant.  I see the medium-sized suburban shopping centers that had a supermarket, a few restaurants, maybe a Starbucks, a movie rental store, a cleaners, two dress stores, and a Target are mostly pathetic relics.  The big-city print newspaper is another anachronism.  For these entities “tanking” is not a clear option.  There is no “draft” of young stores or advertisers.  For them bankruptcy is the equivalent to tanking, but there is no organized “draft” process for a defunct shopping center or print newspaper reliant on classified advertising.

I think most businesses face the possibility of extinction because of structural change in their industries, if they are successful enough to survive long enough to encounter it.

I am watching it firsthand now in the screw machine industry which has been attacked by foreign competition, technological change, an aging workforce that is difficult to replace, and in the next few years the likely decline in the use of internal combustion engines in vehicles.  Don’t forget the rise of cold heading and hot and cold forging to conserve metal.  The commercial side of the used machinery business has seen the transparency of the internet and

Tanking

the ascendancy of online auctions taking the mystery out of pricing illiquid, obscure market anomalies like machine tools.

For a used machinery dealer like me the “tanking” opportunity does not exist.  There is no “draft” to help the inept dealer.  The bankruptcy option that the shopping center owner has is a lousy one because the outdated inventory does not have underlying land to support its value like real estate.  Scrap iron is cheap.

My approach is to use another sports term, the “pivot.”  Use “quick feet” to change course, but stay on the field and compete.  For the Graff-Pinkert used screw machine business the cam multi-spindles are still profitable tools for new owners to the field but are not profitable enough to merit enlarging their numbers for most companies.  But firms need to keep them running even if they are old and tired.  Companies that used to buy several additional machines each year are now buying primarily repair parts.  Old multi-spindles become packages of scarce replacement parts.

One opportunity is clear. The high cost of labor is pushing even small firms into automation.  Graff-Pinkert is experimenting with buying and selling robots.  We recently bought two FANUC robots with a 15-pound “wrist” capacity.  They were bought new in 2016 and have barely any hours on them.

We also bought an ABB robot that was bought new in 2016 by a mattress manufacturer but never used.  It has a 300-pound lifting capacity.  The robot area appears to have potential.  We have already sold our first one, a FANUC robot that had been loading and unloading a CNC lathe.  Made a few bucks, and we’re building our knowledge and confidence.

We are also heavily involved in Swiss-type lathes and CNC multi spindles.  A lot of competition in this area but also significant demand.

Meanwhile, we continue to sell our older screw machines with heavy value-added options.  Customers will pay for our specialized knowledge even when they shun the old “commodity” screw machines.

Will our current “pivot” work in the changing machining environment?  Probably not.  We will have to continue to experiment and evolve.  Maybe pare down, maybe build up.  It’s business.  It’s constantly up hill.  But if you love “the game” it’s a fun job to try to figure it out.  At least some days.

Question: Is business easier or harder than it was 20 years ago?

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Swarfcast Ep. 39 – Jay Sauder on CNC Machining Parts for the Amish

By Noah Graff

On today’s podcast we interviewed Jay Sauder, owner of Sauder Machine in Plymouth, Ohio.

One of Sauder’s specialties is making hydraulic wheel cylinders for Amish horse-drawn buggies using sophisticated CNC equipment. Sauder and his 10 employees are all members of the Mennonite church. Earlier in his life, Jay himself drove a horse and buggy, but today he chooses to drive a pickup truck. However, all of his employees ride bicycles to work.

Jay told me that the company buys used equipment almost exclusively and seldom buys a machine for a specific job. He purchases equipment when he considers it a good value and fit for his company’s expertise. The company also is unafraid to use a variety of brands and controls, such as DMG, Traub, Haas, INDEX, Mazak, Matsuura, and Hurco because his workers are not bothered switching from one control to another. He enjoyed telling me about two 1988 CNC Traub TNA 480 Turn-Milling Centers that the company is currently refurbishing in-house.

Question: What is the most unusual job you’ve had?

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Betting on Yourself

I think I can learn something from anybody. I think there is a lot to be learned from James Holzhauer who has won $1,691,000 on Jeopardy and is still going strong.

I don’t watch the program, but I have seen it on occasion and remember Rosie Perez in the movie White Men Can’t Jump prep for the show like her life depended on it, hoping for her chance to make a big score. It is a quiz show competition with a betting component which is the perfect combination for James Holzhauer, a 35-year-old Chicagoan who is a trivia champion, math whiz, fast-twitch buzzer, and professional sports better.  He is the archetype of the Jeopardy savant that Rosie Perez dreamt of becoming.

His winning approach naturally depends on his breadth of knowledge and quick-twitch ability, but what sets him apart is his aggressive and unconventional strategy. James starts with the most difficult questions, trolls for Daily Doubles, and bets boldly, often risking his earnings in an effort to quickly put away his opponents.  He knows he is on a streak and so do most of his opponents, which gives him a big psychological edge.

His mantra is “all I have to lose is money,” and he knows he’s the smartest dude on the block, so he continually overwhelms his tentative opponents no matter how skilled they are.

I think there is a lot to be learned from Holzhauer.

I love his confidence and boldness. He believes in himself and that is vital to be a consistent winner. Intimidation can be a huge factor in sports and business. It does not have to go with obnoxiousness. You know when your opponent knows in their heart of hearts that they are going to win.

What really sets James Holzhauer apart is his audacity, his calculated chances in the betting.

In my own business career I have usually been cautious. My son Noah delights in questioning most of my business decisions, often challenging me for hedging my bets. Having seen a million things go wrong in my long business career I have good reason to be cautious, but I know I can learn from the aberrant tack that Holzhauer takes to bet big when he thinks he has superior knowledge.  This is how you win in sports betting and Jeopardy and probably in business over time.

A fascinating complement to the James Holzhauer story is the spotlight on Alex Trebek, the host of Jeopardy since its inception.  He is battling pancreatic cancer at the same time he is hosting the show and pulling in big ratings. Alex is showing supreme confidence in himself as he does five shows in a taping session while dealing with chemotherapy.

My hope is that he and James keep charging boldly into the dark nights of uncertainty.

Question: What is the best bet you’ve ever made?

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Swarfcast Ep. 38 – Connecting on Cobots: James Persenaire of FANUC

By Noah Graff

On today’s podcast I spoke with James Persenaire, a district manager at FANUC America Corporation. James gave insight into the strengths and weaknesses of collaborative robots and how Fanuc’s collaborative robots differ from competitors such as Universal Robot. He also addressed misconceptions about traditional robots that they are expensive and dangerous. He emphasized that the integration of the robot is the primary factor in both its cost and safety.

Listen to the podcast beneath the video.

Question: Have you brought robots into your machining operation?

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Mayday Mayday

Around the world May 1 is May Day, a holiday celebrated by Labor as a demonstration of its power and determination.

In the United States it is another work day and essentially forgotten as is the organized labor movement except by government workers and teachers. The industrial labor movement in America still has its vestiges in the United Auto Workers and Steelworkers and electricians, but it is a withering movement in the small- and medium-sized businesses I deal with.

Retail is a wasteland for organized labor. UPS is organized, but FedEx is not. Uber and Lyft are totally nonunion. McDonald’s and Starbucks are almost completely nonunion. Amazon is non-union.

Politically, the alliance of organized labor and the Democratic Party was significantly devalued by Donald Trump in 2016. He won Ohio, Pennsylvania, and Wisconsin with the votes of union and nonunion labor, and the Democrats were devastated and angry.  Even in the recent Chicago mayoral race, Toni Preckwinkel, who built her power in Chicago with the support of the Teachers Union, was humiliated by Lori Lightfoot, managing partner of one of the most powerful corporate law firms in Chicago.

What happened to labor unions in America?

Haymarket Riot in Chicago, May 1st, 1886

Haymarket Riot in Chicago, May 1st, 1886

A lot can be attributed to Richard Nixon and Henry Kissinger’s rapprochement with China in the early 1970s.  They saw it as a way to blunt the power of Russia, but it also set the stage for the development of China as an economic rival for America.  Our increasingly open trade policies and China’s incredibly successful combination of capitalism and communism captured millions of U.S. jobs and gave corporate America an easy option to combat organized labor.  Self-serving labor leadership in big unions like the Teamsters hurt it.  The opening of the South to big corporations badly wounded unions like the UAW.  Independent steel companies like Nucor opened plants in small towns and gave bonuses for production which whiplashed unions like the United Steelworkers.

To most young people today union membership is barely interesting unless they have a connection to get into a locally strong organization like Chicago’s electricians union, which has connections with big developers who have valuable relationships with key politicians.  This union style is not apt to draw big crowds to demonstrate on May Day.

It’s an insider’s game now.  If that approach continues organized labor will soon be seen as a relic of Depression days to be occasionally studied in American history classes.

Question: Would you want to be in a union?

 

 

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