Category Archives: Business

Swarfcast Ep. 60 – Alec Mandis, Machining in New Zealand Part 2

By Lloyd and Noah Graff

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Today’s podcast is part 2 of an interview we did with Alec Mandis, Chief Executive of Accord Precision, the largest machined component manufacturer in New Zealand. Over the years Accord has strived to set itself apart by developing a diverse group of niche products. One example is a stainless steel diving helmet made from an investment casting which took the company three years of R&D to produce successfully.

Main Points of the Interview

(2:30) Alec talks about the process to produce Accord’s stainless steel diving helmet from an investment casting. He says that five years ago the commercial diving industry needed a more durable helmet than the standard light weight fiberglass ones at the time. Accord spent three years of R&D to bring its helmet to market.

(7:15) Alec talks about why Accord spent so much time and money to develop its stainless steel diving helmet despite it being a low volume product. He says that creating a difficult product like the helmet elevated the company’s capabilities for process controls. Accord became better prepared to produce other difficult or high risk products such as those for the medical device industry. It also demonstrated the company’s abilities to potential customers.

Alec Mandis with diving helmet made by Accord Precision

(11:30) Alec says that Accord has put great emphasis on statistical process control and ISO registration for decades. The company has ISO 13485 medical device accreditation which enabled it to get FDA registration in the United States in six months, which Alec says normally takes companies four or five years to obtain.

(12:50) Alec says his best trait for running his business is his ability to manage people. He says it is essential to communicate with employees and create strong relationships with them. He says it is important to help them when they need it but push them when possible.

(13:50) Alec says the thing he would most like improve upon is a work-life balance in his personal life. He is trying to spend more personal time with family but says it is difficult while running a business. He thinks New Zealand has a pretty balanced work schedule. Accord’s employees work 40 hours a week over a four day work week, but Alec still works five days a week.

(16:55) Alec says that New Zealand’s geographically remote location has spurred the country’s innovation and self-sufficiency. He says the country has the best magnet manufacturer in the world and is a world leader in the production of MRI machines. The country also shines in the agricultural and dairy sectors.

(18:40) Alec explains that the nickname “Kiwi” for a New Zealander comes from the kiwi bird, which is native to the country.

Question: Can a small machining company afford to do extensive R&D?

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Swarfcast Ep. 59 – Alec Mandis on Machining in New Zealand

By Lloyd and Noah Graff

Scroll down to listen to the podcast.

Today’s podcast is part 1 of a two part interview with Alec Mandis, Chief Executive of Accord Precision, the largest machined component manufacturer in New Zealand. Accord exports precision products around the world, with 30% going to the United States. Alec described to us what it’s like to run a machine shop in a country of 5 million people, more associated with rugby and sheep than manufacturing. After the interview we started scheming how we could get down there for a sales call.

Main Points

(3:40) Alec gives the history of Accord Precision. The company has around 50 employees. It is based in Auckland, New Zealand, and was started 45 years ago. It is one of the largest machine shops in the country.

(4:10) Alec estimates there are 30 to 40 machine shops in New Zealand, which he says is quite a lot when you consider the country has a population around 5 million people.

(4:45) Alec describes types of products Accord Precision makes. The company produces a wide range of part sizes from a variety of materials including various steels, aluminum, bronze, stainless steel, brass, composites, and plastics. The company has been transitioning over time from automatic screw machines to 4-axis and 5-axis CNC lathes.

(6:35) Alec gives an overview of New Zealand. He says that in recent years New Zealand has become more known around the world. The country’s landscape varies throughout the island. He says a person could ski in the mountains and surf on the ocean in the same day. The country receives 20 million tourists per year.

Alec Mandis

(8:45) Alec discusses New Zealand’s indigenous Māori population and the diverse immigrants in the country from all over the world. He says his shop’s workforce reflects this, with people from South Africa, Europe and Pacific Islands.

(15:45) Alec talks about the Accord’s progression to CNC machining.

(17:15) Alec says that the cost of skilled labor in New Zealand is similar to that in the U.S.

(18:10) Alec says that Accord is able to export to the United States because of its various ISO certifications and it is FDA registered in the U.S. so it can make compliant products for medical companies.

(19:40) Alec talks about the Accord’s origins. Its original business was supplying components to the appliance industry. Later the company diversified, making faucets, and products for the electrical, marine, and medical sectors.

(20:00) Alec talks about growing up in Rhodesia (Zimbabwe). He started a family in South Africa and eventually emmigrated to New Zealand.

(21:30) Alec talks about New Zealand’s rugby team’s custom of doing a traditional Māori dance before games.

(24:25) Alec talks about Accord Precision’s preference for Haas equipment. He said that Haas is the only major CNC machine tool builder that has opened a spares and service center in New Zealand, and it is only a 10 hour flight from New Zealand to Los Angeles. He says that Haas machines may be slightly lesser in quality than DMG or Mazak, but Accord has been able to machine excellent complex components using them.

Question: Are you a fan of Haas machines?

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Swarfcast Ep. 58 – Romas Juodvalkis, Centered on Centerless Grinding

By Noah Graff

On today’s podcast we delve into the world of centerless grinding, a vital process in precision machining that some less informed folks label as a dirty, dark art. Our guest is Romas Juodvalkis, founder of Allways Precision, one of the largest Cincinnati centerless grinder rebuilders in the United States. 

Scroll down to listen to the podcast.

Main points of the interview

(3:00) Romas discusses founding Allways Precision 27 years ago as a repairer and rebuilder of Cincinnati centerless grinders. He says the company over the years has grown its capabilities and now provides automation devices, both for the grinders it sells as well as other types of machines. The company now builds grinders with CNC capability that have as many as 11 axes for doing complex features on parts.  

(5:00) Romas discusses more about the advantages of his CNC retrofitted centerless grinders. For example, instead of doing four passes on a part to get all the dimensions a machinist can do the job in one pass.

(6:30) Romas discusses various uses of centerless grinders such as grinding bar stock so it can be run in the collets of a CNC Swiss machine or finishing off parts that have already been machined to obtain better tolerances. 

(7:25) Romas discusses the advantages of using centerless grinders over cylindrical grinders. 

(9:20) Romas discusses the lack of proficiency of most machine shops at operating centerless grinders. He says people are a little scared of centerless grinders because they don’t understand the process. He talks about which machining companies can justify having centerless grinders. He says they are only worth owning if a company has a high enough volume of parts and skills to run the machines efficiently. 

(12:30) Romas says that centerless grinding is not difficult to learn. His company is usually able to train people to use his machines in three days. 

(13:30) Romas says that all types of metals can be centerless ground. He also has customers who centerless grind plastics, glass, ceramics, carbide and diamond. He says anything that needs to be round with precision can be ground.

(14:55) Romas says Allways has been growing constantly and estimates he only has around 10 competitors, and they all vary in their specialties and work standards.

(16:44) Romas says that most of the best centerless grinders available are rebuilt Cincinnati grinders since Landis bought out Cincinnati in the ‘90s. He says Landis built only eight centerless grinders last year while he sold 25 rebuilt ones. He says some centerless grinders are built overseas but most of them are poor quality and will last only a few years before they should be thrown out. Allways Precision uses Cincinnati centerless grinder castings from all the back to the 1940s because they were built so well. Allways stabilizes the castings, rescraping, refitting, and realigning everything.

(19:45) Romas talks about the B&R CNC control Allways puts on its machines, which he says can be continuously updated. He says it is a big improvement from controls such as Allen Bradley or Windows, which become obsolete after a few years.

(22:45) Romas says Allways rebuilds one machine every two weeks and has 350 machines in its inventory available for rebuild. 

(23:00) Romas says prices for machines from Allways range from $50,000 for used machines in good working condition to $350,000 for full rebuilds with CNC controls. 

(23:45) Romas talks about Allways’ business as a robot integrator for CNC machines and centerless grinders.

(25:20) Romas talks about the safety features on his rebuilt machines. 

(26:20-31:50) Romas talks about his company’s emphasis on educating customers and potential customers on how to get the most out of Cincinnati centerless grinders. He says that with a few days of proper training he can dramatically improve a shop’s output.

Question: Do you have a desire to learn to centerless grind?

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Not About Money

By Lloyd Graff

Let’s start with a discussion of two labor strikes that affect my life.

The General Motors strike that may be in its final stages is less about money than it is about control. GM and the UAW seemingly agreed on the basic pay issues before the strike even started.  What GM President Mary Barra and the GM Board were really concerned about was the ability to make key decisions such as closing a factory or moving work to Mexico without the UAW having veto power.  Indication of that is workers at the Spring Hill, Tennessee, plant voting against the settlement because they see it as an opportunity for GM to continue to use a significant number of temporary workers to staff the factory. GM is offering $60,000 buyouts to older workers.  The strategy of GM is to hire younger, cheaper employees.  To younger factory workers it appears the union is selling them out.  There appears to be a power struggle between younger and older workers for control of the UAW.

GM employees and Chicago school teachers have something in common

Another factor involved in the GM approach is the comparative financial weakness of Ford and Fiat Chrysler.  The UAW has little power in most foreign builders’ plants but still has a strong grip on Ford and FAC workers.  The GM-UAW settlement will be very difficult for these companies to accept in a weakening vehicle market requiring potentially massive changeover costs to electric vehicles.

*   *    *    *    *

The Chicago Teachers Union strike is also about power and control, not so much about wages.

Chicago has a new mayor, Lori Lightfoot.  She is an unusual political newcomer to Chicago.  She is an African-American lawyer and Yale graduate from Massillon, Ohio, with no ties to the Democratic machine which has run Chicago for 60 years.  She trounced the machine candidate Toni Preckwinkle 3 to 1, winning every single ward in the city.  Preckwinkle was backed by the Teachers Union and other city unions, and the strike is their attempt at revenge.  If the union “wins” it will strangle the city, which is already in desperate financial shape, by forcing more borrowing at 10% or more and essentially bankrupting Chicago.  Preckwinkle and the Union apparently think they can pick up the pieces of a failed Lightfoot tenure.  Meanwhile, the kids are out of school, the schools are half empty when in session because many are in poor repute, and wages and benefits are already among the highest in the country.

*  *   *   *   *

The World Series and the NBA season both start tonight (when I’m writing this).

Houston and Washington in Major League Baseball are shockingly similar teams.  Both have two potential Hall of Fame starters and excellent third starters who played for the Arizona Diamondbacks last season.  In Alex Bregman and Anthony Rendon at third base, respectively, they have likely MVPs at the hot corner.  Both have outstanding outfields, decent bullpens, and good defensive catchers.  The one clear edge goes to Houston where Jose Altuve plays for the Astros.  The 5’6” Altuve is the most charismatic player in baseball and perhaps the best all-around star in the game.

The NBA is hard to figure in October with 82 games and the playoffs lasting into June.  LeBron is with the Lakers, and Anthony Davis joins him.  Kawhi Leonard has moved to the LA Clippers to team with an overrated Paul George who is already injured.

The Golden State Warriors still possess Steph Curry and Klay Thompson, but Thompson is recovering from a torn ACL.  Kevin Durant is gone so Steph needs to score 46 points a game.

In the East the Boston Celtics will probably be better without the selfish Kyrie Irving.  Milwaukee has the unpronounceable “Greek Freak,” and Philly boasts the brute, Joel Embiid, and Ben Simmons who can’t shoot at all.

And finally, Houston still has James Harden and his step-back jumper that nobody else can do nearly as well as he can.

The NBA will be fun again in April.

Question: Is salary the first thing you look at when considering a job offer?

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Swarfcast Ep. 57 – Jerry Gates on Running Well Oiled Machines

By Noah Graff

Today’s podcast is about reducing friction in our machining and our lives. Our guest is Jerry Gates, founder of Gates Engineered Lubricants, a company near Houston, Texas, which produces metal working fluids, industrial lubricants, and rust inhibitors for a variety of applications.

Scroll down to listen to the podcast.

Main points of the interview

(3:15) Jerry explains the metal working products his company sells such as forming fluids, cutting fluids, corrosion inhibitors, and cleaners. The company’s flagship product, Aladdin 334, is used for deep hole drilling applications such as ejector drilling, trepanning, and gun drilling.

(5:10) Jerry explains the ejector drilling jobs faced by TimkenSteel, one of his company’s significant clients. TimkenSteel drills holes from 2 inches up to 14 inches in diameter through bar stock as long as 60 feet. This requires a mineral oil based product with extreme pressure additives and anti-welding additives because of the long duration of the cut.

(6:15-10:30) Jerry talks about his background. He is the son of a carpenter. He worked in construction but changed his career to selling industrial supplies. He began his training in coolants and lubricants with Master Chemical. Later in his career, Jerry worked for Castrol’s marine division, where he learned more about industrial lubricants.

(10:40) Jerry talks about what led to him founding Gates Engineered Lubricants in 2005. After decades working in the industrial supplies business, he switched careers to sell insurance, but former clients still called him to consult them on their metal working needs. He helped a former Castrol client with its injector drilling problem, which led to him founding his company.

(15:25) Jerry says it is easier for his smaller company to solve customers’ problems because he can focus on executing their specific applications. He says his larger competitors are often set in their ways, using older methods that are less specifically tailored to clients.

(15:55) Jerry talks about improving TimkenSteel’s tool life for injector drilling from 40 feet to 450 feet since Gates took it on as a client 12 years ago. He says his company is usually able to increase clients’ tool life 30-40%.

(16:45) Jerry talks about how Gates’ oil differs from competitors in metal working fluids. His company’s oil based machining products contain no chlorine or animal fats, which he says are still used by 90% of shops. We joke that this makes his oil “kosher.” He says products with animal fats and chlorine are hard to dispose of, bad for the environment, and have been banned by the European Union.

(21:30) Jerry talks about vegetable oil products. Gates offers a few of them, but it focuses more on mineral oils because vegetable oils have the same disposal problems as other products.

(29:30) Jerry discusses the complications that resulted from the Trump administration’s roll backs on environmental regulations. He also talks about the negatives and positives of the Obama administration’s environmental policies.

Question: Are you happy with your tool life?

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A Time to be Bought, a Time to Die

By Lloyd Graff

It seems like it’s the season for a lot of machining businesses to be selling out or auctioned off. I have worked as an advisor on some of these situations as well, so I have had an inside look at buyers and sellers contorting to get a deal done on an operating business. Selling a job shop as a going concern is really tough unless it is a big and growing business, blessed with depth of management and ownership that is clear about what it wants and decisive when an appropriate buyer materializes. Having a limited debt also helps because it keeps lenders out of the negotiations.

There are buyers constantly looking for deals for attractive firms. Often these sellers are businesses that have already been sold before.

A company I am familiar with near Chicago in the screw machine business started more than 60 years ago with three old Davenport multi-spindles. They may still have those Davenports, along with 100 other ones rebuilt several times, as well as Acmes and New Britains, even a few Brown and Sharpes. They have bought out many small players along the way, been highly disciplined on capital equipment purchases, built up a factory in Mexico, diversified their locations, avoided unions, and consistently rewarded their private equity owners. Their reward—being sold every five to eight years to a new private equity company that can take advantage of fresh depreciation to shelter cash flow.

For better or worse, this is the game for profitable job shops these days because private equity firms are decisive and clear about what they are looking for. For profitable businesses over $10 or $15 million in sales, private equity firms are usually vying against other firms like themselves because most other job shop owners do not have the expertise or banking connections to compete with them for clean, nonproblematic companies.

However, some job shop owners like John Habe IV of Metal Seal Precision in Mentor, Ohio, have decided to challenge the private equity guys on deals that are a little too small for them or that are turn around situations.

John has acquired several turned parts firms, most of them under the radar for private equity firms because they lack profitability or size. But they fit into John’s group of companies. They add value that is greater than potential auction value, or they have extra equipment that can be quickly turned into cash.

John has developed internal talent that can dissect the financials of a target like a private equity firm would do, and he has access to consulting firms to augment his own people. He also has his brothers as partners to run the day-to-day operations of Metal Seal.

Most job shops are not easy turnaround candidates or fertile turf for private equity groups. They usually end up as auction or liquidation situations, often dictated by a lender, but not always.

There are no perfect times to sell or buy a job shop. Often owners wait for a market improvement to build up their free cash flow numbers. Private equity buyers and most other potential buyers usually want to buy a job shop for a multiple of EBITDA (earnings before interest, taxes, depreciation, amortization). That multiple is usually 3-5 times depending on the buyer’s perception of the company’s strength.

This is not a rule set in stone. Businesses that are breaking even or losing money can be sold if they have some vital ingredient that other companies covet, like people, location, unique customer relationships, or unusual processes or licenses that are hard to duplicate such as nickel plating or FDA approvals. Sometimes a synergy with a company’s customer base enhances the value of a business.

Yet the sale of businesses as going operations is usually a long contorted happening. Lawyers always slow things down with cumbersome contracts which require other lawyers to untangle. Environmental issues often pop up. Family jealousies derail many deals. Often buyers and sellers dislike one another, and emotions count when family businesses are being sold to outsiders.

When you see the auction brochure of a competitor come across your desk it was probably a candidate for a buyout as a going operation at one time. In the end, at least one important missing piece led to its eventual liquidation.

Question: Will the 2020 election affect your business or job?

 

 

 

 

 

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Swarfcast Ep. 56 – The Screw Machine Guy, Part 2

By Noah Graff

Today’s podcast is part 2 of an interview we did with Wes Szpondowski, plant manager at Wyandotte industries, a 60-year old screw machine shop in Wyandotte Michigan founded by his grandfather.

Wes talks about his aspirations to keep Wyandotte relevant for the next forty years. He also discusses the fatal traps a machining company can fall into if it’s not careful.

Scroll down to listen to the podcast.

Main Points of the Interview

(3:18) Wes discusses Wyandotte’s preferred quantities for jobs. He says the company’s sweet spot is 15,000 to 20,000 pieces, as opposed to million piece orders.

(4:08) Wes talks about Wyandotte’s automotive work. He says the company is Tier 2 or Tier 3. He says that American car companies always try to take every cent they can from suppliers, while Japanese automakers are less greedy and gravitate toward forming longterm partnerships.

(7:20) Wes says the shop has no plans to buy million dollar machines. It doesn’t have the work to justify those machines or the stomach for the risk. He says that the company can’t survive running mostly Acmes, not because of the inferiority of the machines but because it will be too difficult to get the next generation to work on them.

(10:10) Wes says he plans to buy LICO machines for Wyandotte. He says they are like Brown & Sharps that can do more sophisticated parts with a quick setup time. He said LICOs are much faster than typical CNC lathe and he thinks it’s a machine that young people would enjoy running. He thinks that $250,000 to $350,000 is a price range that is sensible for his company.

(17:40) Wes says he likes to examine the course of events that led machining companies to go out of business. He calls it “auction forensics.” He says people often repeat the same story—the grandkids ran the company into the ground and the company bought expensive equipment that did not pay off.  As a grandson of Wyandotte’s founder, Wes says the story gives him extra impetus to work hard and make responsible equipment decisions.

(21:52) Wes talks about his first job at Wyandotte. He had to work his way up from the bottom and was not even given a full-time shift to start. Some of his coworkers liked him, and others felt threatened by him.

(25:50) Wes gives his thoughts on whether or not he will have partial ownership of Wyandotte in the future. He says ownership is a possibility, but in any case, he is grateful for the privilege of working at the company for so long and being plant manager.

(27:00) Wes says he is able to relate to the company’s employees because he started from the bottom.

(28:10) Wes talks about his admiration for his uncle who owns Wyandotte. He respects that he is almost 80 years old and still comes to work everyday.

(30:30) Wes likes his role as plant as plant manager at the company. He sees himself working as plant manager for the foreseeable future because the company does not have a replacement with his skills both for working with the machines and with the employees.

Question: Do you think we’re headed for a recession?

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The Auction Deal

By Lloyd Graff

Today, I thought it was time to write something that I actually know something about.

Why are some of the big players in the machining business selling out or being auctioned off these days?

One of the biggest screw machine sales in years is coming up in November at Triumph Manufacturing in Tempe, Arizona, just outside of Phoenix. Triumph’s owner Chris Mueller went into business in the late 1960s after coming to America from Switzerland as a Tornos employee. Mueller built Triumph into a strong player in long run parts and has been running the company with his daughter in recent years. He has had many ups and downs over the years but always managed to survive because of his technical acumen and resourcefulness. He was on the verge of selling to numerous operating groups but never seemed to get a deal that worked for all parties.

A person who is familiar with Mueller and Triumph Manufacturing told me he thinks Mueller felt an American was probably incapable of running his many Swiss and German screw machines effectively. I have also heard that he preferred Hilco as an auction firm because he liked their prominence in Europe. I believe that Triumph would have sold for quite a bit more money several years ago, but Mueller always believed he would turn the company around—a trap many entrepreneurial owners fall into.

Finally, a few months ago, he made the decision to let go and allow the auction process to proceed. Competitors quickly grabbed all the major contracts. Auction groups formed almost overnight to bid on the project. I chose not to be involved in the bidding because I saw the market weakening in Europe for the Swiss and German machines. With a falling Euro, I did not have the stomach for the risk, but many others did.

From a screw machine dealer’s viewpoint the seventeen 20mm 8-spindle Tornos machines are the key element in the sale. If they go at retail prices the sale will be a triumph. If not, c’est la vie. I wish them well.

Questions:

Do you like buying at Auctions?

Do you feel you are a more disciplined buyer bidding online?

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Swarfcast Ep. 55 – Wes Szpondowski, Screw Machine Guy

By Noah Graff

Today’s podcast is part 1 of a 2 part interview we did with Wes Szpondowski, plant manager at Wyandotte industries, a 60-year-old screw machine shop in Wyandotte, Michigan, founded by his grandfather.

Scroll down to listen to the podcast.

Wes gave me the inside scoop of what it takes to run a high production shop floor. We talked about getting the most out of employees, updating equipment, and his mission to NOT waste the company’s money.

Main Points of the Interview

(3:05) Wes gives history of Wyandotte industries. His grandfather made parts on Acme-Gridley screw machines for the custom fastener market—mainly various types of nuts. The company’s original machines were the Acme Model G machines that were taken from a junk yard.

(5:25) Wes talks about the evolution of Acme multi-spindles that Wyandotte used over the years. The company graduated from Model G to Model R and then to Models RA and RB, which people joked was the Cadillac of Acme.

(6:30) Wes talks about how Acmes were designed to run forever.

(10:50) Wes talks about taking over Davenport screw machine work from one of Wyandotte’s suppliers. He says it is his harder for him to find people with skills to run Davenports than to run Acmes, but he likes the speed of Davenports and likes that attachments for Davenports are more affordable than those for Acmes.

(13:35-20:45) Wes compares the challenges of making fasteners to those of more complex parts Wyandotte produces. He classifies the complex parts as “screw machine parts” such as pins, fittings and bushings. He talks about how Wyandotte’s employees have developed their skills over time, using more attachments and limiting the need for second ops.

(20:50-22:30) Wes talks about the company’s gravitation to using Mazak CNC lathes.

(22:35) Wes talks about when he bought Wyandotte’s first Mazak, fall of 2009.

(23:55) Wes talks about how he saved several hundred dollars on airfare when he traveled to New Jersey to buy the company’s first used Mazak. He says that no matter how rich a company may seem, being cost conscious with a company’s money is the only essential and ethical way to run a business.

Question: Do you think it is nuts to run 60-year-old Acmes?

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Talking to Strangers

By Noah Graff

Not long ago our company made a deal to purchase a significant amount of machinery outside the United States. The deal seemed like a great opportunity, but we thought the sensible thing would be to visit the seller before making any purchase because he was someone who we had never met before.

I traveled a long way to meet him, and we spent several days together looking at machines. He brought his wife along with him for the whole trip. We had dinners together during which they told me about their children. His wife repeatedly acted like a concerned mother when she noticed my runny nose. They seemed like decent people, and they gave us a good price so we made a significant deposit on some machines. In the end, things did not go as planned. The company attempted to pocket the deposit and did not send any machines.

We felt dumb. We asked ourselves, how could we not have realized we were being conned?

I recently finished listening to Malcolm Gladwell’s new book, Talking to Strangers, which sheds some light on our experience. The thesis of Talking to Strangers is that the majority of people are incapable of judging the true character of others based solely on “getting to know” them. The book contains many powerful examples of people who seemed genuine but then turned out to be liars, along with other examples of people who seemed suspicious but turned out to be innocent.

Talking to Strangers - What We Should Know About The People We Don’t Know, by Malcolm Gladwell.Early in the book, Gladwell tells a story about multiple double agents in the CIA who spied for Cuba for many years before being uncovered. The agents who were supposed to be spying on Cuba were in actuality spies for Cuba! U.S. Intelligence agents who were supposed to have been “experts” on judging the honesty of other people were made to look like complete fools.

Gladwell discusses another example of flawed human character assessment in a passage about judges in New York whose job is to choose which suspects should be released on bail and who is too risky to let out of custody. Several elite computer scientists, a Harvard economist and a bail expert from the University of Chicago created a computer program to research the ability of the judges for discerning which suspects should be released. From 2008 to 2013 550,000 defendants were brought for arraignment to the group of New York judges, and the judges released just over 400,000.

The researchers built an artificial intelligence system and fed it the same information that had been given the judges in the 550,000 arraignment cases, mainly the defendant’s age and criminal record. The artificial intelligence system chose its own 400,000 defendants to be released over that time period to see which 400,000 releasees committed the fewest crimes on bail and made their trial date. The 400,000 released by the computer were 25% less likely to commit a crime than those chosen by the judges. The computer program only had the defendant’s age and rap sheet to make its judgment, while the judges also got to hear the arguments from the lawyers and look the defendants in the eye.

Gladwell also writes about Neville Chamberlain misjudging Hitler after meeting him several times. He writes about the people who misjudged Bernie Madoff and sex offenders such as Jerry Sandusky and Larry Nassar.

Gladwell says that the usual inclination of people is to “default to truth.” People want to trust other people because that trust is what makes society function. If the default opinion of a youth sports team coach is that they are a pedophile nobody would let their child play on a team, and nobody would take a job as a coach.

If my default opinion of every person selling machines is they are trying to cheat me, I will never be able to make any deals. Business must go on, and life goes on because I know most people are relatively honest. Going forward I will try to keep my guard up, and I won’t put as much stock into looking people in the eye.

Questions:

Do you trust most people you do business with?

Have you ever been conned?

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