Monthly Archives: March 2022

The Joy of Missing Out

By Noah Graff

I’m not releasing a podcast this week because next week or perhaps the following week I’m going to become a father, so I want to have a podcast episode in reserve. Podcasts take a lot of time and energy to produce, items I fear will be scarce commodities in the coming weeks.

Very soon, everything in my life will be turned upside down. Many of my normal daily routines will never be the same. That’s what I’m told at least, and I can envision it happening.

Lately I’ve been listening to two books, Atomic Habits: an Easy & Proven Way to Build Good Habits & Break Bad Ones and Four Thousand Weeks: Time Management for Mortals. Sometimes I listen to the two books one right after the other. Their messages sometimes clash, which I kind of like.

Atomic Habits is giving me tools to manage my time. The book is filled with methods to help me take on new activities to make me healthier, more successful, and hopefully happier. 

Meanwhile, the message of 4,000 Weeks is that rather than trying to optimize time in order to squeeze in everything, sometimes it’s best to just choose one activity over another. The book’s author, Oliver Burkeman, a former time optimization zealot, argues that if we try to squeeze in too many tasks, we may never feel satisfied with what we are already doing. We will always want to use the new saved time to cram in new tasks. The title, 4,000 Weeks, stems from the fact that if we live to age 80, we get a mere 4,000 weeks on this earth. That doesn’t sound like a lot of time to me, so I better make that time count. My conundrum is, what does “making time count” mean?

The author, Noah Graff, outside the Graff-Pinkert office

Burkeman says that when he first became a father, his inclination was to try as hard as he could to optimize his time. He would keep tight schedules, automate and outsource tasks, etc. But that didn’t lead him to feel increased satisfaction or fulfillment.

One concept he talks about the book that really struck me is what he refers to as “the joy of missing out.” This is the opposite of the popular term nowadays, FOMO, the “fear of missing out.” 

Burkeman believes that making a choice to do one activity rather than try to cram several into your schedule makes that chosen activity meaningful. It’s special because you chose it over something else.

I want to write these blogs and make podcasts. I want to dance and see friends. I want to excel in my profession, the art of turning overlooked, imperfect equipment, into gold—the job that pays the mortgage. I also want to be a great father and husband. I want to spend time with my loved ones. At 42 years old, if I’m fortunate, I should have a good 3,000+ weeks left. Soon I will have to figure out how to fit the myriad of great gifts in my life into my crowded schedule. At the same time I will have to decisively choose what wonderful stuff to sacrifice.

Question: Does anybody have advice for me?

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Putin’s Folly

By Lloyd Graff

Why did Vladimir Putin start this war to take Ukraine?

I’ve heard and read a dozen theories about why he started this evil venture, which now appears to be both madness and failure. I think that a year ago or even a decade ago this invasion would not have seemed foolish to him because he was so blinded by what he saw as his destiny and his foes’ weakness. 

Putin grew up in the Cold War in the Soviet Union. His college was the KGB, which hated the West. He was stationed in East Germany when the Berlin Wall was pulled down, and it seemed like that sowed the seeds of revenge for the humbling of the Russia he loved.

Poland, Hungary, Romania, the Czech Republic, and the Baltic states dumped Russia as soon as they dared. Those events must have sickened him and left him with a burning rage. It appeared to grow as he got older and he shrewdly seized more power year by year. Putin never seemed to mellow with age.  

The KGB experience taught him to mistrust everybody. It also seems to have inculcated in him the belief that everybody could be corrupted and those who sought power and wealth were the easiest to corrupt and blackmail.

His corrupting of the German head of state, Gerhard Schroeder, must have reinforced this belief as he attempted to weaken Germany, the strongest European country economically, by making it almost totally dependent on Russian natural gas with the Nordstream pipelines. 

After Schroeder left government, he became the economic head of the Nordsteam company, though Putin and his henchmen held the real power. It was the ultimate buying of a prominent politician, and it must have confirmed Putin’s belief that he could own anybody by putting enough money in their pockets

Putin’s cynicism about Europe and America is limitless. He surrounds himself with KGB types, sycophants, and oligarchs who owe him their wealth and power. 

The photo of Putin sitting at the head of an endless table with generals and spies at the other end became the symbol of his regime. He isolated himself in his castle like a czar. He listened only to people who saw the world like he did. His observations of the prosperous Western countries surely galled him as his lust for power and revenge festered.

Russia took over Crimea in Ukraine in 2014 and then a Russian speaking region after that. If he could capture Ukraine, with its agricultural resources and its Black Sea port of Odessa, he would be well on his way to putting the Soviet Union back together. The Baltics would be pushovers. America was divided with no taste for war. The Afghanistan pull out only confirmed that view. NATO countries were captives to Russian energy exports and intimidated by his nuclear bombs and missiles as he saw it.

Vladimir Putin as the shirtless horseman

It must have seemed like the perfect time to invade Ukraine. Its head of state was an actor and former comedian, almost a perfect counterpoint compared to Putin, the virile shirtless horseman.

Putin trucked 150,000 troops into Ukraine and nobody raised a finger in Europe or America. NATO did nothing. It was all so easy. 

Then it all fell apart. Zelinsky stood up to the bully. Ukraine did not fold or give up. Zelinsky did not flee. Putin’s army was soft, and his tanks were the helpless elephants of WWII. All Russia could do was shoot missiles at civilian targets, kill helpless people, and destroy cities. 

Overnight, Vladimir Putin became the new Hitler. Western countries attacked the Russian economy with potent sanctions. He became a pathetic a joke. His reputation was shattered and the weaknesses of Russia—rampant alcoholism, an average lifespan of 10 years less than the rest of Europe, a bankrupt army, poorly led unmotivated soldiers, and a war criminal running the country—became obvious.

Vladimir Putin is finished as a world leader. He is a victim of his own folly, blinded by a pathetic desire to avenge the demise of the Soviet Union. Suicide is a more likely ending for him than a trial as a war criminal.

Question: How do you think the war in Ukraine will play out?

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How to Find the Right Asian Supplier, with Jennifer Grant—EP. 152

By Noah Graff

Our guest on the podcast today is Jennifer Grant, marketing manager for Haizol Global Europe.

Haizol is a company that connects manufacturing companies in plastics and metal working with suppliers in Asia, most often China. The company’s value proposition is that it bypasses daunting challenges inherent when outsourcing to foreign countries, such as vetting suppliers and communicating in a foreign language. 

Haizol has to two separate Web platforms, haizolglobal.com and haizol.com. 

Scroll down to read more and listen to the podcast. Or listen on your phone with Google Podcasts, Apple Podcasts, Spotify, or your favorite app.

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Main Points

Haizol.com

Haizol.com is a matchmaking service, connecting buyers in Western countries with suppliers in Asia. Buyers log on to haizol.com where they can submit part drawings and receive quotes from available suppliers. They narrow down choices of suppliers using filters for characteristics such as certifications, location, capacity, number of employees, and R&D departments. Haizol.com assists with negotiation and communication between the companies, but the buyers and suppliers have autonomous relationships.

Haizolglobal.com

Rather than acting as a matchmaker, Haizol Global serves buyers directly. It has its own manufacturing capacity and sometimes outsources work to some preferred manufacturers. The advantage of Haizol Global over haizol.com is that buyers receive constant customer support with an English speaking account manager who works with them throughout the production process. Haizol Global has a portal which gives buyers realtime information throughout the process. Account managers are available to answer buyers’ questions.

Buyers submit their drawings on Haizol Global’s website. Engineers look at the design and decide which of its shops should produce the part. A sample part is produced, which buyers then must approve. Then full scale production begins. Buyers don’t have the burden of having to choose between different suppliers. Haizol Global takes on the responsibility to deliver the part to the expectation of the buyers. Buyers don’t have to spend resources coordinating with Asian suppliers or performing regular quality checks. 

Haizol Global’s customers are able to visit the shops making their parts, though Jennifer says very few companies have made the trip in the last few years during the pandemic. Usually the customers who travel to the factories in Asia are doing larger part runs, rather than single prototype jobs.

Jennifer says some clients want constant updates during production, while others are satisfied just waiting for the finished parts to arrive. Haizol Global guarantees parts will arrive at the promised time, baring unforeseen circumstances like worldwide pandemics. 

Nondisclosure Agreements

Before buyers upload part prints to either Haizol Global or haizol.com, they can upload NDAs online. I questioned Jennifer about the risks of sending proprietary drawings to Chinese companies, notorious for stealing intellectual property. She argues that though that is a risk, Haizol has vetted the factories it works with, meaning it would be less risky working with Haizol than with a company found in Asia through a less established channel. Haizol has been working with the same factories for years and weeds out the ones who produce inferior work. 

Jennifer Grant of Haizol Global Europe

Language

Jennifer says the language barrier is one of the biggest hurdles preventing companies from outsourcing overseas.  Even small misunderstandings from language discrepancies can cause huge problems, which is why a company like Haizol is so attractive for Western buyers.

The majority of the manufacturing for haizol.com and Haizol Global takes place in China, but it also uses shops in Vietnam and the Philippines, which is advantageous in case of a problem with the supply chain in one country. 

Effects of Reshoring

Haizol Global has a lot of customers in Western Europe, but most customers are located in the United States. 

Jennifer says Haizol has not seen a recent reduction in users, despite current trends of bringing back manufacturing work to North America. She says that using Haizol helps prevent some of the supply chain issues that have given outsourcing to China such a bad reputation. 

She says that the quality of manufacturing in China is significantly better than it was a decade ago. China’s Made in China 2025 initiative passed in 2015 has improved its manufacturing standards. Also, as more Western countries continue to outsource to China manufacturing abilities have improved. 

Haizol’s Female Founder and CEO

Haizol’s CEO, Sherry She, founded the company. Jennifer says female CEOs are quite uncommon in China, but it is becoming more normal to find women in leadership positions at large companies.

Jennifer’s Story of Living In China

Jennifer moved to China in 2013 and spent most of her 20s living in Shanghai. Before starting at Haizol four years ago, she worked for a different Chinese firm, also in the manufacturing sector. She says she loved living in China, but decided to return to London at the end of 2020. She lived in China for the first year of the COVID-19 pandemic when the world still believed it would not spread to the rest of the globe. If you listen to the interview, you can hear details about what it was like to be “locked down” in China. There were guards at the door of her apartment complex, baring people from leaving.

Question: What is a part or service you have outsourced?

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There’s a Haas in the House

By Lloyd Graff

One reason I continue to push the boulder uphill in a small business smack-dab in the middle of the industrial economy is that I get to hear the stories of so many people who have decided to start their own businesses in 2022. I cannot remember a time when I had the opportunity to connect with so many starter uppers.

If you read or listen to the mainstream media you would probably miss the epidemic of startups in post-pandemic (we hope) America. I think the COVID-19 phenomena which exiled so many people to the solitude of their homes probably ignited the movement. A lot of people asked themselves when they were separated from offices, associates, and bosses, “Is this all there is?”

Commuting was such a time sucker. Now regimented hours seem unnecessary, outsourcing resources are everywhere, and the Internet connects you to a world of other people thinking the same way.

For many, the seeds of work Independence germinated in the isolation of COVID fear and then sprouted when the economy opened up.

Many people moved to less expensive locations, freeing up start-up capital and, equally important, spurred the confidence to be a pioneer in a new home with new friends and neighbors.

Supply chain problems, particularly with Asian goods, moved bigger companies to search for alternate sources. China’s militancy spread fear in the US and cast doubt on its long-term reliability as a supplier. President Xi moved to squash entrepreneurship, which cast more doubt about the country as a partner. Once a dictator takes these steps in such an interconnected world, it is hard to reverse course.

Other factors also played a part. The real estate market shifted. Office buildings languished and shopping centers withered, while Amazon flourished, needing giant “fulfillment centers” everywhere there was vacant space near an expressway. Airbnb found a new market in longer-term rentals to complement their vacation model. Homes rose rapidly in value, opening up startup money. Stocks went up, surprising the pessimistic banks and economists.

The semiconductor shortage hobbled big auto companies, but the move toward electric cars provided new opportunities for people working from their homes or in association with others with similar desires to work independently. Tesla reached out for suppliers who were not already wedded to big automotive companies.

CNC workshop in a garage

The stories we hear in our small segment of the precision machining business fill in some details. We hear from people in their thirties and forties who have worked in shops for several years. They have seen what works and what doesn’t. They have a barn or a garage and have saved enough money to buy a CNC lathe, maybe a Haas mill they can imagine paying off in a year. In many cases, their current employer has overflow work that they are happy to have them run. A second income often is a cushion for startup couples.

The traditional mainstays of the precision parts industry — automotive, military, aerospace, oil and gas — are generally not providing the bulk of the start-up work today.

We now find guns and ammunition are often a staple of start-ups. A complement to that is medical-related parts, which are always in short supply.

I wonder if this unusual confluence of events, a pandemic, a real-estate boom, skilled labor shortage, supply miseries, and risk-taking Millennials, will continue to fuel a long-term start-up boom in America. 

I doubt inflation will kill it unless the feds get crazy raising interest rates. Bungling politicians have probably helped sustain it by making life difficult for big companies.

We had a burst of start-ups after WWII, the Korean War, and the start of the Internet surge in the 1990s. It is shocking to see the 250-year-old United States become a start-up nation, but it really is happening.

Questions:

If you were going to start a new small business, what would it be?

Who do you like for the NCAA Tournament?

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The Fracking Revolution and Ukraine Part II, with Andrew R. Thomas—EP. 151

By Noah Graff

Nobody knows how the current tragic war in Ukraine will play out, but I hope that those listening to the second half of our interview with Dr. Andrew R. Thomas will get a little bit of new insight into how the conflict fits into the world’s energy economy.

Andrew is an author and business professor at University of Akron. In 2018, he published a book called American Shale Energy and the Global Economy. He also published a book in 2014 called Geopolitics, Development and National Security, Romania and Moldova at the Crossroads. His latest book coming out in 2022, is about the Panama Canal, The Canal of Panama and Globalization: Growth and Challenges in the 21st Century.

Scroll down to read more and listen to the podcast. Or listen on your phone with Google Podcasts, Apple Podcasts, Spotify, or your favorite app.

Find us on Social:

Facebook: https://www.facebook.com/swarfcast

Instagram: https://www.instagram.com/swarfcast/

LinkedIn: https://www.linkedin.com/company/todays-machining-world/

Twitter: https://twitter.com/tmwswarfblog

Main Points

Where Ukraine fits into the current situation of Europe

[02:17] Andrew points out that the Russia has been at war with Ukraine for eight years, starting with invading Crimea. The rest of the world did very little in response, partly because United States was already in Afghanistan and Iraq. The US imposed a few sanctions to appease the media and try to demonstrate it was doing something, but Russia never faced real consequences for its actions from the US or Europe. People didn’t realize what had been happening until Russia ratcheted up the violence in the last few weeks.

What the Ukraine-Russia Issue means for Global Energy

[03:54] Andrew says the war in Ukraine is going to put a lot more unpredictability into the world’s energy system. When nations do not buy Russian energy in order to punish Putin, it dramatically alters global energy production, pricing, and availability. In the past the variable in the energy economy was energy suppliers who refused to sell, but in the current situation we have energy consumers saying they are not going to buy

Andrew says that companies cannot instantly start mining more oil and gas. It will take several quarters to “turn the spigot on.”

Canada Mining for Oil and Gas in the Tar Sands

[08:17] Before fracking took off in the United States, the Canadians had figured out how to extract oil and natural gas from tar sands. Tar sands contain a lot of energy, but extracting it is a very intensive and costly process. When oil prices were shooting up in the early 21st Century, processing oil from the tar sands made more sense.

The Environmental Aspects Mining Tar Sands

[08:51] A key issue with mining in the tar sands is that if it’s not managed properly the environmental damage can be huge. This makes it an expensive process. It requires a massive amount land, water, and labor, and can produce a lot of residue. Because we have been living in an era, starting with the fracking revolution, where the price of energy has been pretty low, mining in tar sands has not been that attractive. But if oil stays consistently at $120-$150 a barrel, there is a good chance for investment and activity going in that direction.

Is Putin “putting the Soviet Union back together?”

[10:10] Putin cannot to put the Soviet Union back together because that would involve many other states that are now in European Union and NATO. Currently, Russia is faced with several ongoing crises. One is a demographic challenge. The life expectancy in Russia is low, and Russians are not having many children. 

Putin is on the defensive. Russia has a lot of territories to defend. With the expansion of NATO and Romania joining the European Union, those organizations push right to the boundaries of Ukraine, which historically has been a buffer for Russia. Putin views NATO’s expansion near Russia’s borders as an offensive gesture. He does not want to see military bases and nuclear missiles pointed at Russia from such a close range. This fear is similar to what the United States felt when missiles were pointed at it from Cuba in 1962.

[12:55] Belarus is playing a very important role in facilitating the invasion of Ukraine. Russian troops have used Belarus to enter into Ukrainian territory. Rather than a reconstruction of the Soviet Union we are witnessing an alliance network in Eastern Europe, made up of Belarus, Russia, Moldova, and parts of Ukraine. This is a reconstitution of some elements of the Soviet state as it existed in that portion of the Black Sea region.

Timing of the Invasion

[13:28] It seems as though Putin timed the recent invasion carefully. The United States will not have reconstituted its military following the wars of Afghanistan and Iraq until 2028, according to the latest DOD estimate. Europe doesn’t want to get into a conflict. The United States does not want to send American soldiers anywhere to fight. Also, Andrew says that he does not think Russia would have invaded if it did not have China’s blessing. Russia needs China’s help to withstand the sanctions from Europe and the US. 

The Panama Canal

[17:48] The Panama canal was originally built to avoid developing a 2-ocean fleet navy. Yet, within 25 years after World War Two, the canal was rendered useless because US had created a multi-ocean fleet navy, and its ships were too big to fit through it. Eventually, President Carter gave the canal back to a dictatorial government of Panama, which the country has done a brilliant job running. Panama has made more money with the canal in the last 20 years than the US did in the entire time it ran it. 

In 2006, Panama decided to invest billions of dollars, about 15% of the country’s GDP, to expand the canal to handle larger ships. This timed well with the fracking revolution in the US. The US can now send ships transporting liquefied natural gas (LNG) to Europe and Asia through the expanded canal. The canal is also being used for transporting agricultural goods to Asia from Argentina and Brazil. 

America is reluctant to send troops around the world 

[21:09] The United States has become incredibly reluctant to intervene worldwide at a national level. Most people agree that the US exited Afghanistan poorly, but at the same time most Americans are still glad that we left. 

The nations of the world are realizing that the United States is not going to be the policemen of the world anymore, that the American people do not have the stomach to send their soldiers and their treasure to fight in faraway places. The US is spending less money on its global military, from 60% 30 years ago at the end of the cold war to around 40% today. Other countries are increasing their spending on their own defense because they know the US is not going to defend them. Andrew thinks we’re going to enter back into a period that will be much more dangerous, unpredictable, and violent.

Has the Green Energy Movement reached its peak ?

[26:07] Andrew says the European Union admitted it was impractical to reach its goal to sustain itself without fossil fuels in the coming decades when it quietly reclassified natural gas as a “renewable” in January.

Learn more about Dr. Andrew R. Thomas at https://andrewrthomas.us/

Question: Have you donated to help Ukraine? If so, how have you done it?

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What I Learned Driving to Work Yesterday

By Lloyd Graff

I backed my 2016 Acura sedan out of the garage and headed toward Bergstein’s Deli to pick up the chicken matzo ball soup I had ordered a few minutes earlier on the phone. 

It is six minutes away. I order it a couple times a week. A teenager delivers it to my car five steps from the entrance. I always give the person who delivers it a couple dollars tip. I figure they are poorly paid and I want them to stick around because I value the good service. I got in the habit during the pandemic of picking up the soup and I’ve continued it since. 

In the little strip center with Bergstein’s is an Asian owned nail salon on one side and an African grocery store on the other. Next to the grocery is a gaming shop, and next to it lies a newly opened “Dixie Food Store.” All tiny independent businesses.

Leaving the parking lot, I see an office building which has been converted into a dialysis center. On my way to Graff-Pinkert, I will pass a bank and two other office buildings that have been converted to dialysis facilities in the past three years. Obviously dialysis is more lucrative than vacant office space or local banking. 

Lloyd Graff in his parking spot at Graff-Pinkert

At my second stoplight after the deli, I hit a red light. A car drives up beside me with music blasting. I hear it loudly, even with hearing aids and my windows tightly shut in the 20 degree winter air. I know it is a cultural statement, but I am annoyed anyway. 

Soon I pass by my dentist’s office. He is an entrepreneur and has a flashing billboard in front of his recently-built office addition. He is advertising “walk-in cleanings.” Another irritant. 

In three minutes I pass a local shopping center with a Walgreens. It used to have a Starbucks and Panera Bread. Both closed, I’m guessing because they did not have drive-thrus. Panera’s space is still vacant, and the Starbucks is a pizza by the slice joint now. There are several other vacancies, but Walgreens still looks busy.

I pass several office buildings. Most are either for sale or advertising vacant space for rent. 

I’m getting close to my office now. I pass a Walmart and a bunch of fast food franchises. McDonald’s, Wendy’s, Sonic, Panda, Subway. Sonic is always empty, but the others are all advertising looking for workers. 

The shopping center takes up a small fraction of the space in this one square-mile acreage. Most of it has been vacant for many decades despite being across from I-57, an Interstate Highway. It is only a half hour from downtown Chicago on a good traffic day.

Two years ago, they started building massive warehouses in the open space. There are now four 500,000 square-foot buildings with 30-foot high cement wall buildings. Amazon occupies one, but the others appear to be empty. They are advertising for tenants. I’ve talked to the leasing agent and they sound very confident about filling them soon.

My 20 minute drive is now about finished. I turn into the Oak Forest Industrial Park. The building with a 20 ton overhead crane that my father built is now owned by another machinery dealer, but we have our offices in it and share the factory space. The 32,000 square-foot vacant lot next to the building has a for sale sign, but it is being sold as part of an Aldi’s grocery store, soon to be built. It will be a parking lot. 

I know the territory very well, but it keeps changing every month. 

***

What did I learn? 

First, treating kidney failure must be a lucrative business. Office buildings are a disaster area. Entrepreneurs in the kidney business obviously see opportunity in moribund office space. 

Second, if you do not have a drive-thru restaurant or delivery to your car, you probably are “toast” in the dining business.

Third, small businesses can still make it if they make good soup or do nails, but they have to be really good at it and run with a smile. 

Fourth, fulfillment centers are everywhere. People moan that they can’t hire people, but Amazon and others have figured out a way to lure them. 

Fifth, the amazing thing about America is that businesses will always come and go. The successful ones shift when they see an opportunity. 

The last business I have to mention is a funeral home located five minutes from Graff-Pinkert that has a primarily African American clientele. When they are not hosting funerals, they are doing COVID testing and vaccinations. 

Opportunity is always knocking while I keep driving to work.

Question: What changes have you noticed lately on your way to work?

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The Fracking Revolution and Ukraine, with Andrew R. Thomas —EP. 150

By Noah Graff

Today’s podcast is Part 1 of a two part series discussing the current state of the global energy supply and how it ultimately relates to the war in Ukraine.

Our guest is Dr. Andrew R. Thomas, author and business professor at University of Akron. He has published 25 books, most of them at the intersection of global strategy, business development, security and energy. In 2018 he published a book called American Shale Energy and the Global Economy. He also published a book in 2014 called Geopolitics, Development and National Security, Romania and Moldova at the Crossroads

Scroll down to read more and listen to the podcast. Or listen on your phone with Google Podcasts, Apple Podcasts, Spotify, or your favorite app.

Andrew started the interview by explaining the fracking process. Fracking is defined as fracturing the rock under the earth’s surface to extract trapped carbon fossils, particularly oil and natural gas. Fracking in the United States first began in the late 19th Century, in Titusville, Pennsylvania. People shot artillery shells down holes using old Civil War cannons to break up rock.  

By the 1940s, companies like Halliburton started experimenting with shooting water down holes in the ground to break up rock. The process pretty much remained the same until 1995, when Nick Steinsberger, an engineer at Mitchell Energy, discovered that by shooting water 20 or 30 times more intensely than had been done previously one could break up the rock enough to release substantially more oil and natural gas. Fracking suddenly had the potential to be a sustainable and profitable business. Other technological advancements in fracking were developed in following years, namely, drilling horizontally. In the mid 2000s the United States suddenly found itself energy independent for the first time in decades. Energy independence dramatically changed US foreign policy, which often had been dictated by its reliance on oil and gas from other countries, who were not always the friendliest to the US.

Dr. Andrew R. Thomas, author and professor

Fracking does have some environmental problems, which Andrew says have been significantly reduced in recent years. There are two main environmental issues fracking companies run into. Sometimes drilling can pollute drinking water if it is too close to the water table. In the fracking process the fluid that is shot down to break up the rock contains chemicals such as sulfuric acid and guar gum. Guar gum happens to be an ingredient in Twinkies, but it’s not a good addition to drinking water.

For a while, drillers didn’t know of a good way to dispose of the fluid they used for fracking, and sometimes they dumped it into rivers. Also, frackers dispose of fluid shooting it down into concrete-lined injection wells, going 20,000 to 30,000 feet beneath the surface of the earth. The fluid usually doesn’t leak, but the process can cause earthquakes because it’s done around geological plates. The US Federal government, primarily under the Obama administration, insulated itself from handling the environmental regulations of fracking by designating most oil and gas drilling under the jurisdiction of state governments. Most States with fracking industries have dramatically improved their environmental regulations for fracking. Unfortunately, Oklahoma and Texas have not self-regulated significantly. Texas happens to have the greatest supply of oil and natural gas in the country.  

In recent years, the private investment going into fracking has softened because releasing large amounts of energy resources into the world causes prices of oil and gas to fall, making the business less profitable. Also, energy producing countries such as Saudi Arabia and Russia flooded the world market with their oil and gas in an effort keep energy prices low, which would put American frackers out of business. Vladimir Putin even put out propaganda arguing the negative environmental effects of fracking. Some fracking companies did not survive the falling energy prices, but the ones who did survive improved their companies, coming up with new creative, more efficient processes. 

European countries, aside Great Britain for a time, have stayed away from fracking, primarily for environmental reasons. They don’t have a federalist system like that of the United States, which grants autonomy to state governments to make their own environmental regulations. Russia has enough easily accessible oil and natural gas that it has no need to frack. 

In 2010, Germany set a virtually impossible goal to no longer rely on fossil fuels or nuclear energy by 2020. During that period, the Germans became reliant on Russia to supply them with natural gas, which they deemed more environmentally friendly than other types of energy. Because it has become clear that for the foreseeable future they will remain dependent on natural gas, they have started building liquified natural gas (LNG) terminals that enable them to import natural gas from the United States. Natural gas must be converted into LNG when it is transported long distances. When it reaches its destination it then must be converted back to its former state.

The three largest importers of natural gas are China, Japan, and South Korea, and now there is an increasing demand for US natural gas in Europe because it is cheaper than most other sources. Andrew says China is in an energy crises right now. The country has had rolling blackouts since October because they don’t have enough coal and natural gas. In October, China started buying coal from North Korea (violating US sanctions). China also relies on Russia for energy, which explaines Putin’s visit with Xi Jinping a week before the Olympics. There is a pretty good chance they also discussed an invasion coming in the next few weeks.

Tune in next week to hear how all this relates to the war in Ukraine. 

Question: Would you mind if fracking was done near your home?

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Why the Machining Industry is Thriving, with Miles Free —EP. 149

By Noah Graff

Our guest on the show today is my friend Miles Free, Director of Industry Affairs at the Precision Machined Products Association (PMPA).

Miles was actually the first featured guest on this podcast four years ago, and we are very thankful to have him back for episode 149. He is definitely one of the most passionate people I know about the machining world. It was a great conversation in which we covered an array of topics, such as tariffs, shop safety, electric cars, and even a bit about Ghostbusters.

Scroll down to read more and listen to the podcast. Or listen on your phone with Google Podcasts, Apple Podcasts, Spotify, or your favorite app.

Miles and I started the interview reflecting on the first episode we did together back in April of 2018. It was right around the time when President Trump was introducing tariffs on imported metals. Despite leaning conservative politically, Miles was very critical of the policy at the time and still is. He labels it the equivalent of implementing economic sanctions on ourselves—harsh sanctions. He reported to me that in December of 2021, for hot roll band, the US price for steel was $1,947 per ton. In Europe that same steel was $1,016 per ton, in China it was $634 per ton, and the world export price was $820 per ton. The policy was originally implimented to prop up the production of US steel mills. Today US steel mills are at 82.4% capacity, up less than 15% since the tariffs were implemented 

Despite the huge disadvantage in raw material costs, US manufacturing is currently thriving, which Miles attributes to the fantastic ingenuity of US shops. He says several months after the initial Covid-19 panic caused demand for parts to plummet, customers suddenly needed new parts and demand shot back up. US contract manufacturers were prepared to step up to the plate to fill the demand. In 2021, PMPA shops had their highest average sales ever for December, up 23% from the average sales of the last five Decembers. Sales were up 18% over the prior year.

Miles says he is not sure if reshoring is actually occurring but according to the last census report, exports of US manufactured goods were up 18% from 2020 to $1.1 trillion. 

Miles Free, Director of Industry Affairs with PMPA

Miles is a huge believer in the future of electric cars. He loves to reminisce about his first white paper for the PMPA back in 2003 in which he predicted a bright future for electric cars. Many association members said he was crazy at the time. Miles says today he can only think of five shops in the PMPA currently making automotive parts for the Big 3 automakers, but he can name a dozen PMPA members making parts for Tesla. 

He pointed outside his office window to show me his own Tesla Model Y, which he was able to buy from selling portion of his own investment in Tesla stock. He boasts that he spends 1.7 cents per mile driving the car. Prior to gas prices shooting up, his 2015 Honda Civic Hybrid got him 5 cents a mile. He estimates a conventional internal combustion engine car would get about 15 cents a mile. 

Miles made a point of covering the topic of safety in our interview. He says shops need to prioritize keeping their talented employees safe. He argues that if companies have a reputation for neglecting the safety of their people they will have trouble finding good talent. Also, the penalties for breaking safety laws can kill companies economically. Starting in 2022, the government passed a law that if a company even fails to post a sign with safety regulations they can be fined $14,502. Even accidental first offenses can trigger huge fines. It’s possible for a company to be fined $145,000 per violation per day.  

According to Miles, the EPA also has very harsh punishments for violations—harsh for gross violations that are obviously detrimental to the environment, but also harsh punishments for unnecessary regulations designed by people ignorant about the processes in question.

I told him that sometimes talking about the EPA makes me think about the scene in Ghostbusters when the the ignorant EPA agent shuts down the protection grid, releasing all of the captive ghosts. 

But I digress. 

Talking to Miles is always interesting and an upper because he is so passionate about our industry. If you want more of his wisdom, I suggest you check out his blog at pmpaspeakingofprecision.com and his podcast, Speaking of Precision: Mondays with Miles.

Question: What has been the most surprising thing to you about the machining business in the last year?

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Real Estate Populism

By Lloyd Graff

As Putin impersonates Hitler and attempts to steal a big piece of real estate with 44 million people, I’d like to discuss a few small pieces of the American real estate dream where ambitious folks are trying to build an investment safety net that will grow in value.

In the last five years, accelerated by COVID-19, Americans moved away from staying in hotels. They are seen as sterile, institutional, unsafe, and boring. The remarkable entrepreneurs who run Airbnb and their competitor Vrbo picked up on this trend early and figured out how to capitalize on it. When some observers saw the pandemic as their armageddon, they turned it into an opportunity.

Maybe pleasure travel would die for a while, but Americans travel from one place to another for millions of different reasons. Many are tired of hotel boxes, waiting at front desks, and sleeping on institutional beds with the wrong pillows.

The Airbnb business model is brilliantly thrifty in its use of capital. Let individual owners be the host. Airbnb is the enabler, the rental agent, who takes a commission off the top for their internet marketing, branding, and knowledge of the business. A multibillion-dollar enterprise was born from this contrarian idea. Conrad Hilton would have smiled if he was alive. 

In the last decade, hundreds of thousands of regular people have scraped together a few bucks, lined up bank loans, very cheap money until recently, and looked for properties, usually in areas they know well, planning to convert them into Airbnb rentals.

This week I spoke to a machinery business acquaintance who gave me a free education on building an Airbnb side business with his wife, who recently retired after 21 years as an airline attendant. Before entering the Airbnb business, Chris had little real estate experience, but he understood borrowing from a quality lender, the value of a well-connected real estate agent, and the power of the Airbnb brand. He moved from Chicago to Charlotte with his wife. His business office was his phone and home. He quickly realized that Charlotte was a spot that many people wanted to move to, and if he was ever going to take the property plunge, Charlotte was the place. 

Over the last few years, he bought three rental homes, all in Union County, a middle-class suburb outside of Charlotte, and gradually learned how to turn them into cash cows.

He told me the first thing to do when getting into the Airbnb business is to make sure an area is accepting of rentals and that there are no regulations to get in your way. A good real estate agent will know where to check before the buying process gains momentum. Chris, with his machinery selling experience, knew how to check the pricing comps and borrowing costs, which would establish price ground rules.

Airbnb, with its fees, takes around 14% of the rental proceeds. Short-term rentals tend to be more lucrative but require more work by a host. Cleaning costs money, bedding gets holes in it, and big parties alienate the neighbors quickly. 

Being an Airbnb landlord is a second job with a lot of annoyances, but Chris and his wife felt they could handle the task. They took the jump and bought their first house, hoping for the best. Over the next couple of years they purchased two more, despite the red-hot Charlotte home market. 

Chris’s wife welcomes each tenant and gives them a bottle of wine. She makes sure the towels are clean and ample. She is available in emergencies and Chris is handy enough to do a lot of repairs. 

 One house has been continuously rented by a single person whose own house burned down. Insurance has paid the rent for 18 months. That property brings in less money but is less trouble than the other two homes, which average 5 to 7 renter changes a month. 

Airbnb and Vrbo provide most of Chris’s renters. He says he and his wife average about $7,000 gross rental per month. For the lodgings with frequent renter turnover they try to screen the renters, but outward appearances can be deceiving. He said their biggest partier was a woman who was celebrating after earning her Ph.D. 

Chris would like to buy another property for short-term rental. The tax benefits with the depreciation have made these investments extremely worthwhile, but high prices in the Charlotte area have him sitting tight. Also, three homes are plenty of work for him and his wife at the moment. 

The Airbnb game is definitely not for everybody, but it seems like a nice side gig and a great opportunity to build wealth. It’s America, not Russia. Opportunity is all over the place if you have the guts and are willing to work. Have you tried it?

Questions:

What’s your favorite place you’ve ever stayed in your travels?

Would you stay at an Airbnb?

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