Category Archives: Current Events

Quandry, Gold or Dross?

The scary, little, chubby chess piece sat in the old Scottish antiques dealer’s desk for 50 years.  He bought it for a few pounds and stuck it in a drawer.  After his death his heirs were checking out his belongings and discovered the elaborate carving made from a walrus tusk.  One of them thought it might have some value.  They guessed correctly.

On July 2, it will be auctioned off by Sotheby’s. Its anticipated sale price is around $1 million.

It is a piece from the collection of Lewis Chessmen, carved in the 12th century in the form of Norse warriors.  In 1831, 93 pieces of the group were found on Scotland’s Isle of Lewis.  They now are on display in museums in London and Edinburgh, Scotland.

I read about the 3-1/2” high Lewis Chessman yesterday morning in The Wall Street Journal at my factory office.  Later that morning we had an inquiry from South America on a used threading attachment for a 2-5/8”-6 spindle Wickman screw machine.  I immediately started wondering if the attachment was a potential Lewis chess piece.  I haven’t sold a big Wickman machine for years.  I have stripped several of them for key parts, but we don’t sell much big Wickman stuff anymore.

Then came the pricing quandary.  What do you ask for a 50-year-old attachment for a machine few folks in the world use anymore?  I am blessed to have a complete one in stock and the components to almost complete another one.

I pulled a price out of my behind, $7,500.  Another member of the team objected.  He suggested that another party who was apt to also have a complete attachment available might be asking more money for theirs.  He argued that we probe the other dealer’s price before quoting our prospect in South America.  I pushed back.  To me $7,500 was a nice price for a probably useless antique that would very likely outlast me.  To me it was iron.  To him it was gold.  It’s what makes a market and attracts all those cars to estate sales.

I am fascinated by how things are valued by people.  It is also the apple pie of my business, guessing the value of stuff, believing in my judgment, but having a willingness to throw in the towel when the market proves me wrong.

If I had bought that Lewis Chessman and I didn’t know the ugly carving was 900 years old, I probably would have dished it off, made a few hundred quid, and celebrated with chocolate ice cream.  If you have a business with expensive employees, rent to pay, taxes, and health insurance bills you need a semblance of steady cash flow.  It is hard to wait for the market to discover your hidden brilliance.

I knew that the potential buyer for the seldom-coveted threading attachment might decide to run his other big Wickman longer hours, rather than schlep a heavy piece of metal 5000 miles, pay 40% duty, then find a technician to put it on his machine correctly.  Or maybe he could find a soon-to-be-scrapped machine in Sao Paolo for $1,000.  A collector can afford to wait, but a business person has tuition to pay.

I may have a few ugly ivories on my shelves – dusty, grimy die heads or screw machine manuals that Mr. Davenport may have signed.  I don’t know, and I don’t really care.  Very often less is more in business, and a visually impaired old dude like me is quite likely to trip over a vagrant ivory that falls on the shop floor.

Question:  Do you collect or throw out?  Why?

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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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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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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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Machining Show Business

I attended PMTS, the exhibition put on by the Precision Products Association last week, not really to sell screw machines, but to learn and connect. Accomplishing this goal gave me a satisfaction and closure that I’ve never felt before at a show. Here’s the crux of what I learned.

This was the happiest crowd I’ve ever seen at an event of this type. The endless mope of the last recession finally has drifted away.  Nobody mentioned losing work to China which was a theme for so long. The prevailing vibe was that big companies are finding China a scary place to make large bets. Costs are converging with America finally, and production mistakes and logistical headaches make China a wash as far as costs go. The Trump tariffs cut both ways as far as competitiveness is concerned, but they do emphasize the uncertainties of depending on a competitor for crucial production. “I’ll make it in China,” used to be an automatic response by large corporations to a production requirement. Today it isn’t. This does not mean a torrent of work is coming back, but it is more than a trickle. The major point is that the gutting of American manufacturing has ended, and the mood of suppliers has changed to positive.

Another nonissue for PMTS participants was the worker shortage. In three days of connecting with participants I never heard it mentioned. My sense is that owners and companies are adjusting to the employee scarcity. Interest in robots is keen for the dumb jobs that used to require thoughtless loading and unloading. Robotics programming and training is a hot category. Recycling 5- to 10-year-old refugee robots is getting to be an important business category.

Lloyd, Noah, and Rex at the PMTS 2019 Graff-Pinkert Booth

Lloyd, Noah, & Rex at the PMTS 2019 Graff-Pinkert Booth

The large number of young people attending makes me think they are starting to get intrigued by interesting factory work and becoming disenchanted with piling up debt in four-year collegiate programs. I also saw more women who have moved into shop floor work and supervision. It is still a piddling percentage, but growing.

I found it odd that the machine tool behemoths like Mazak, DMG-MORI, Okuma, and Doosan chose not to display. They seemingly blow millions of bucks on IMTS and then claim poverty for off-year shows like PMTS. This leaves the field open for specialty builders to make a big pitch for capex budgets.

Davenport made a splash with their CNC multi-spindle. Many old Davenport folk gasped at the $345,000 price tag, but compared to European 20mm multis the price looked provocative. They sold two the first day.

All of the Swiss CNC folks showed except Tornos. The field is crowded, with Citizen, Star, and Tsugami hogging most of the market.  Citizen folk were beaming as they were coming off their best year ever, their fiscal year having ended just a few days before in March.

Reflecting the boom in Swiss sales, Kevin Meehan of Edge was ebullient about his past year, selling record numbers of FMB and Taiwanese bar loaders and hiring the staff needed to get them out the door and install them.

Yet this was not a crowd of people jumping for joy and putting up new factories. The folks I talked to were pleased but not complacent. Nobody wanted to talk politics, which was not the case during the later Obama years. OSHA was never mentioned.  People wanted to buy stuff, update, improve, but not add square footage. They wanted to buy shops to get customers and employees, not bricks and roofing. It was a Midwestern crowd, an increase over previous years in Columbus, Ohio. I think that was not an indictment of Columbus, but a reflection of happier times and greater convenience.

Hopefully the 2021 PMTS will show similar trends and even greater optimism.

Question: Do you still go to trade shows? Why?

 

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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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Legalize Pot, Why?

By Lloyd Graff

The big push is on all over the country to legalize recreational marijuana. My gut reaction is that I am appalled, but I’ve been reading up on the topic to see if I am just an old fuddy-duddy teetotaler or if there is a good reason to oppose and fear it. It also has real ramifications in the machining industry with hiring decisions. Will drug testing for cannabis become obsolete or forbidden?

Since Canada has legalized the sale of marijuana, as have states like Washington and Colorado, pot has become hot. Canadian pot companies like Tilray have gone public and their value has gone up tenfold in a matter of months. Tobacco companies, beer and wine behemoths, and investors like Peter Thiel, who made billions on Facebook, have bet big on Canadian cannabis. Politicians and lobbyists in every state have joined the frenzy to rack up loot on pot.

If you are an agnostic speculator it may be a dream come true.  If you’ve made your fortune on booze or cigarettes why not get in early on a potential legal addiction play? But if you aren’t in the addiction business why should we make it easy for my 13-year-old granddaughter to vape, or to snack on cannabis brownies after school?

In recent days, writer Malcolm Gladwell and former Wall Street Journal reporter Alex Berenson, now a successful mystery writer, have come out with prominent pieces discussing the dangers of marijuana usage.  Both men sound the alarm about the relationship between pot usage and violent behavior.

The statistics in Washington State, Finland, and Denmark definitely point to an increase in reported murders and other violent crimes after the drug was legalized. Is murder unequivocally associated with legalization? No, but analytics point in that direction. The published literature appears to show a distinct relationship between increased instances of schizophrenic and bipolar people acting out violently after using marijuana. This may account for the significant rise in the criminal violence stats.

Another concerning trend is the widespread breeding of marijuana plants to yield a much higher content of the compound THC, which is much more potent than the garden variety bootlegged for so many years. These designer compounds have been touted for the amelioration of nausea in chemotherapy patients and potentially for therapy for Alzheimer’s, depression, Parkinson’s, and other maladies.

There does appear to be evidence that there is a medical rationale for cannabis use, but Anheuser-Busch and the Marlboro Man are not investing in pot companies to stop patients from shaking.

The intersection of mental illness, marijuana usage, and violent behavior is probably the most troubling aspect of the legalization of cannabis.  But as a business person, I am fearful of the widespread use of pot by potential employees in a legalized world.  I know a lot of people use pot now, knowing that the penalties for usage are a slap on the wrist in most cases.  However, if it is illegal, there are a lot of folks who will not make the extra effort to obtain a verboten substance that may harm them.

To me, the bottom-line question is:  What good does it do to legalize it?  Cash-starved states like Illinois might get substantial revenue from taxing it, but is that a good reason for sanitizing it for 13-year-olds by removing the stigma of illegality? In the political frenzy to legalize it, the talk about pot being a gateway drug to even more-addictive drugs like heroin or opiates has quieted.  It does scare me that giving millions of people access to it in vaping parlors could be a public health disaster in America.

Why should we do this?  Give me a good reason why it would be good for you or your children – or the country – to legalize the stuff.

Question:  Why should we legalize pot in the U.S.?

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