Machinery dealer Jim Graff just got back from a Delphi auction in Kettering Ohio. He reported that most machines there were selling very cheaply and that many were leaving the country. The two biggest buyers at the auction were from India and Peru, who primarily bought small production machines such as milling machines, Bridgeports, and Dennison Presses. Most of the Acme multi spindles and Acme repair parts were baught by dealers. Jim also observed that there was a strong presence of online bidders.
This day on March 18, 1662, the first bus service began in France. Blaise Pascal, most famous for his mathematics, physics and philosophical genius, conceived the idea. The system started with seven horse-drawn vehicles running along regular routes. Each coach could carry six or eight passengers. King Louis XIV granted a royal monopoly: Try to compete, and your horses and vehicles would be taken away.
The fundamental problem of the bus service’s business model was that in the feudal society of seventeenth century France only the nobility and gentry were allowed to ride, which they did purely for amusement. The common folks that the service could really benefit, the soldiers and peasants, weren’t allowed to ride, so when the novelty of the new invention wore off, bus service ended in 1695.
The bus concept did not reappear in France, along with New York City and London until early Nineteenth Century – post feudalism.
Most great inventions follow a similar pattern as the bus’s. They start out as a novelty only accessible to the elite. Not until they finally become accessible to the masses do they have the power to change the world. When the first computers were invented only a select group of scientists could use them. People dismissed the idea that they could be useful to the common man. Not until personal computers became affordable to the world’s middle class and easy enough for an average person to operate, did they revolutionize how people communicate and find information. Yesterday, March 17, Tesla Motors began production on its Tesla Roadster, which will sell for a base price of 98,000 dollars. It will look cool, it will be better for the environment than cars with internal combustion engines, it will eliminate the need for its owner to buy gasoline, but until the masses can afford one and reap its benefits the electric car will not change the world.
Sources, Wired Magazine, www.teslamotors.com
A recent story by Frank Langfitton on NPR’s “All Things Considered” reported that rising costs and shifts in Chinese government policy are actually forcing hundreds of smaller Chinese factories to close. According to the story, profit margins are disappearing as a result of the rising Chinese currency value, which has forced manufacturers to move their operations to lower cost countries such as Vietnam.
The story reports that China’s government wants to encourage higher-tech manufacturing, so it is taking away the incentives it used to give to cheap goods manufacturers such as no taxes and cheap rent. China wants to follow the same path as its fellow Asian countries such as Japan and Taiwan, whose products eventually progressed from low-tech to high-tech. This movement to more sophisticated types of production has created the same obstacle for Chinese companies that challenges U.S. companies – finding skilled labor.
Familiar patterns aren’t they.
In the 2008 January issue, Today’s Machining World did an interview with Dennis Hoff, president of Hoff-Hilk Auction Services, an online auctioneer which sells commercial and capital equipment exclusively. In the interview Hoff gives an insider’s perspective on the online auction business, discussing the effects of auctions on both the buyers and sellers from both a monetary standpoint as well as psychological one.
In this video Hoff addresses how site coordinators for an auction sale often must play “psychologist” to help sellers cope with the pain or angst which often accompanies selling their businesses.
In this video Hoff says candidly that while both buyers and sellers often don’t feel auctions are fair, he thinks that after an online sale the sellers generally feel more satisfied. He attributes this to the convenience of bidding online, which brings more people from far off places to compete in the sale.
On Jan. 10, 2008, Tata Motors unveiled its revolutionary $2500 car, the Tata Nano, also being called “The People’s Car” by its maker.
The vehicle measures 3.1 meters in length, 1.5 meters in width and 1.6 meters in height. It has a mono-volume design, with wheels at the corners and the power-train at the rear in order to provide both maneuverability and space on the inside to accommodate families.
The Nano has a rear-wheel drive, all-aluminum, two-cylinder, 623 cc, 33 PS, multi point fuel injection petrol engine. It’s the first time that a two-cylinder gasoline engine is being used in a car with single balancer shaft. That might seem pathetic compared to industry standards but in a country in which millions use motor scooters to transport families it will revolutionize the lifestyle of India’s masses. According to Forbs.com, $2,500 is three times higher than India’s per capita income, and the average pay for a Tata Motors factory worker is $5,500 a year.
Read the “Next” feature in Today’s Machining World’s December issue for further insight on the $2,500 car from auto industry experts.
In this video of the car’s unveiling, Mr. Ratan N. Tata, Chairman of the Tata Group and Tata Motors compares the innovation of “The People’s Car” with the moon landing, the invention of the bicycle and the evolution of today’s personal computer.
One of the best early indicators of the American economy may be breast implants, tummy tucks and LASIK procedures. According to the December 8th Wall Street Journal, cosmetic surgery is a dead-on indicator of consumer confidence. Confidence is not a perfect match for consumer behavior, but uninsured cosmetic procedures are expensive, put off-able acts like car buying and condo shopping.
The Journal tells us that breast building is soft, and the fat has been sucked out of the liposuction racket for the moment, so we can expect the stock market to droop.
Cutera, the Brisbane, California laser maker, says that their earnings picture has darkened like liver spots, which may translate into weaker house remodeling sales and affect our world adversely.
Never underestimate the importance of Botox. It’s one more wrinkle in understanding the path of the machining world.
The $100 computer and the $2500 car are the hottest products on the planet today. Neither one is yet a reality, but the intense interest in developing these mass produced items for potentially a billion new customers in Asia, Africa, and South America is driving a mega battle in electronics and autos.
Video of $100 Computer
A few years ago, the personal computer push built the Microsoft and Intel fortunes. But in 2005, Nicholas Negroponte, of MIT, postulated that the $100 dollar computer was doable and set out to build the market and design the product. In the Nov. 24, 2007, issue of the Wall Street Journal, a front page article denotes the competitive struggle he has had as Intel attempts to co-opt his idea. The essential fact is that national governments will buy the production in the millions of units, and prices of Negro Ponte’s and Intel’s computers are now circa $200 and falling. Intel is scared of the product, which uses $3 software of Linux variety, but they are more scared that arch foe AMD will get the processor business, so they are pushing their low cost Classmate version all over the globe.
In cars, Tata Motors of India is rushing to develop a $2500 car for the new middle class of India in the hope that young people everywhere will covet one. Today we have over production in cars in the U.S. and Europe, but the potential market for cheap vehicles is absolutely enormous.
The big Japanese builders; Toyota, Nissan, and Honda, are ardently developing a $6000 car which could also reach a huge audience in Eastern Europe and China. For the suppliers of automotive, this offers a gigantic new market for brakes and tires and transmissions. It will be fascinating to see who will be able to serve this next great market.
On the computer front it seems likely that Silicon Valley will be the center of development of the $100 computer. It is less clear where the $2500 car will emerge. India and China have the cheap production capability, but I am skeptical about technical breakthroughs. Yet it is certain that the inexpensive, serviceable car will come soon because the demand will be insatiable, and it will be a lot more sophisticated than the Yugo.
I recently made a trip to downtown San Francisco and discovered a new approach to fast food that seems to be prospering — the soup and oatmeal take-out restaurant.Take-out Soup Restaurant Review
This is limited menu to the extreme. One location was an eight foot wide hole in the wall. Oatmeal was served until 10:00 a.m. and then replaced by soup. The soups rotated daily. When they run out of one, that particular variety was finished for the day.
The other soup outlet had a dozen tables, more staff, longer hours, but also stuck to the oatmeal and soup theme. I think the approach will spread to other cities that have a lot of walking traffic. Today, the number of people who leave home in a rush without eating breakfast is huge. The oatmeal fix trumps the Egg McMuffin for the nutrition oriented Generation X and Y’ers who are the bulk of the clientele. Soup is time consuming to make but cheap per serving. For a low rent spot, the margins could be stunning for an owner operator.
An interesting analogy in the machining realm is taking shape at Tim Timson’s shop in Willetts, California. Tim is a 60-year-old screw machine junkie. For several years he has been bargain picking older National Acme screw machines. He sets each machine up for a specific job in a big old building in an old lumber mill town, a two and a half hour drive from the Bay Area. He has 30 multis now which he keeps running with four people including him and his wife.
With this kind of cheap overhead operation he can compete successfully on price. With the machines constantly set up he has extremely fast turnaround time, especially if he keeps several bars of metal in stock.
It’s not exactly soup and oatmeal out of a nook in San Fran, but it has the same elements for success. Tim’s shop’s production is cheap, accessible, and high quality. The formula is as old as porridge and broth.
Two decades ago, a cashmere sweater was a soft symbol of wealth and status warn by pipe smoking duffers at the club. Eventually women also wanted to wear the wool from the shaggy goat. The boosted demand beyond the capability of shepherds filled in the production shortfall.
But the sharp folk in Bentonville Arkansas who run Wal-Mart believed that cashmere was not the exclusive wool for the rich, and decided cashmere sweaters should be brought to the masses. It was the perfect Christmas present. They asked the disintermediating question, “Why not sell a $49 cashmere women’s sweater, or a $39 or even a $29 one?”
And the Shepherds in China and Mongolia heard them. A herder with 30 goats living in a tent soon had 300 grazing goats. He did what capitalists everywhere do – expand to meet the demand. And shepherds reaped the reward of Wal-Mart’s audacious bet on the desires of its customers to have buttery sweaters for $30 to $40. And soon the Asian shepherds had small homes and televisions and toilets and life was good.
Except 10 times more goats ate all the green grass, and the bigger herds needed to move to greener pastures. The old land turned to dust and the wind blew. Huge clouds of dirt miles long and wide lifted off the ground, browning the local air and ultimately circling the earth. The shepherds had to leave their newly built homes to search for new grass, and China and the world was a dirtier grittier place. But Wal-Mart got their cheaper wool, and you and I got our comfy cardigans.
The net gain for the Chinese economy was real in this case. New sweater factories were built. Girls got jobs at the sewing machines after fleeing the poverty of rural China. The sewing machine firms sold product and the machine guys sold them components for bobbins and stitches. The shepherds tasted prosperity and the goats found more company. But the gains were diminished by the communal degradation of the air pollution. That is not in the Chinese growth statistics, but the people on the ground know it’s real. This is the yin and yang of “Wild East” growth. Eventually the Chinese people will not take it anymore.
By the numbers, growth will slow and the markets will no longer fawn over the Chinese stocks. The Olympics will come and go. Wal-Mart will still sell cashmere sweaters. I don’t know if they’ll cost more or less than they do today
I hear that Sprint has notified 1,000 of its customers that they are being terminated by the cell phone service provider.
Sprint will get some momentary snickering PR, but frankly, I am sympathetic to the idea of dumping the nags. I believe that not all customers are worth the aggravation. A demanding but intrinsically fair client is a good thing because he or she forces you to raise your game, but some people just “drey your kop” (Yiddish for “play with your head”). Life is too short to diddle with such time wasters. The chronic malcontent customer is always worthy of being pruned. Sprint has the right idea to forgive their balance and direct them to AT&T or Verizon with a gracious kick in the butt.