Relentless
00:45:18 · Sam D'Amico
[00:45:18] S0: Yeah. So let me start from the demand side. So we're now at the point where, like, are... It seems like we're on track for tens of thousands of units a year of of cooktops and other things. But even with that capacity, let's start with like a... And that's a, know, like you like you could be like a 100,000,000 plus in revenue of your end product, and you would not need even... Like you would not be able to fully saturate the demand, like the the the capa... You would not be able to fully saturate the capacity of like an injection molding machine in some cases. So then it's like, why are you buying this machine that is sitting idle 75% of the time or something like that? And and like, even if you can go finance all the CapEx, can do all this other stuff, but it's like, okay, you're you're literally using something and not at full capacity. So the incentive is to go and fractionally do that. Like, just like for the same reason that, like, if I'm a mobile app company, I'll use AWS. Exact... Like, the exact same reason you'll wanna fractionally use these resources. And so I think there's, like, an... A logical incentive to kind of split the split the universe between design and build where it's like, okay. And hilariously, the Soviets were really good at this model. They had... Would have like a design agency and then they'd pair it with one or more factories that were often in the same town, but that factory would be like building, and you see this in, like, basically you have the design agency that knows how to design tanks, and they're like the best tank designers in the world. And the output of those tank designs go to the factory across the street in Ukraine, and then the factory across the Urals in, in Russia. And that's like how the Soviets built, you know, a lot of their military infrastructure, their space infrastructure, all this other stuff. It's basically Foxconn and Apple. It's almost the same... Almost the same analogy because, like, Foxconn taps different types of capital structures than what Apple can do. And when Apple's ramping production of a new product, like, they're clearly not using all of this all all of these machines.
00:47:06 · Sam D'Amico
So, like, they can fractionally, like, they're not paying for, like, the the next iPhone is not paying for all the complete equipment that is needed, you know, to produce for it two years ahead of time before the... While they're still prototyping it basically. And so you back this up and you're like, okay, well, also like how much money can I raise as an entrepreneur? It's like, this is my first go at it. You know, I'm not I'm not getting a billion dollar seed round or whatever like these AI lab people. If I had a billion dollar seed round, maybe the trade off's a little different. But but basically, but basically, it's like, what can you do with the money you can raise and the leverage you can get? And it's like, well, you definitely wanna use a contract manufacturer, and you definitely want one that ideally comes with a lot of engineering team. So that way, like, complicated design stuff, you know, you can you can leverage them for that. And then the last piece is you also want one that comes with supply chain or a lot of the supply chain. So, like, you give them a complicated thing, they figure out what, how in their network to source it. And then the last thing is you're a startup, so who's gonna work with you? And, and once you kind of go and bake all this stuff off, you kind of end up with like a couple options. You can you can go to firms in Singapore. You can go to... They exist. There's just not as many of them. You can go to firms in Taiwan if your thing is pretty much a standard consumer electronics device. If want build a laptop, you want to build a phone, you can go to the Taiwanese ODMs and and and do it. South Korea and Japan have all the capabilities to do this, but like LG is not a country manufacturer in a lot of cases. Japan's got a lot of the sub suppliers at excellent quality, but they're not... There's not really... There's not really a final assembly house that will play ball with you. And so, yeah, you're you're in China. And so that's kind of that's kind of the that's kind of the play. And then why do the Chinese wanna work with you? It's like they... You... They really respect Silicon Valley and they think that, you know, next generation products come out of there, and they wanna play ball and have... Helping create them in a lot of cases.
00:49:01 · Sam D'Amico, Ty Morse
And they've got their own, you know, they've got their own hyper powered companies doing similar stuff as well. So I think that's that's frankly how you end up in these situations. [00:49:10] S2: And, Aaron, Apple is like a $3,000,000,000,000 company, and yet they manufacture virtually nothing in The United States. And Tim Cook has famously said that the skills and all the supply chain required to build production at that scale is all in China, and it doesn't exist in The United States. How do we basically reverse that trend?
00:49:10 · Ty Morse, Aaron Slodov, Sam D'Amico
[00:49:10] S2: And, Aaron, Apple is like a $3,000,000,000,000 company, and yet they manufacture virtually nothing in The United States. And Tim Cook has famously said that the skills and all the supply chain required to build production at that scale is all in China, and it doesn't exist in The United States. How do we basically reverse that trend? [00:49:29] S1: He has a really famous clip that I think is... It's gotta be close to at least, like, 12 or 13 years old now at this point where he's like, I can't even fill a conference room full of tooling engineers, you know, in The United States, and I can fill a football field full of them in China. So this is it's very representative of kind of just the collective of, like, tacit knowledge. Right? The people that actually understand how to do the job, the process, all of it. And people have been sounding the kind of the re industrialized alarm for forty years since we started doing this, you know, and it's not an easy trend to reverse, but it... It's something that's gonna take decades to to accomplish. This is where I think this ultimately just comes down to how serious we we really treat, the matter, you know, and it's being able to absorb a lot of this kind of demand. Right? Like manufacturing is very inflexible ultimately, when you come down to... I'm trying... Like, from the very lowest level, from refining, you know, raw material and pumping it into [00:50:46] S0: Illegal in California.
00:50:47 · Aaron Slodov
[00:50:47] S1: Yeah. Another factory that forms it into some, you know, other raw thing that can be, you know, pumped into a component stack or whatever it is. So it's... There's there's really, in my brain, in my estimation, these kind of like feedback loops of learning all the processes, right, and capturing that knowledge. It's there's such an immense amount of opportunity there. It seems very insurmountable because there are just... There are literally thousands of industrial processes that you could do something like this with. We have to stack rank them. Right? And so the idea of, like, reindustrialization is if you wanna stack rank, that's fine, but there's still an ocean of things just sitting here, right, that like that we could go through the same set of motions with. And, I mean, if we don't do this now, what does the future look like? So it kind of... Guess, in a lot of ways, I live very much in the future. Right? Because, it's obvious that we should be doing this stuff up and down, you know, the entire industrial base. And if we don't do this, what does that mean? Are we going to be relegated to, you know, some kind of dependency model, that allows China to basically, you know, take power, because they have all this industrial might. And this is where it goes back to, like, how we ultimately stack rank these things, what the timelines look like, where the capital is gonna come from. And so if you go back to the demand side model, right, this is why it's really hard to do this on a like shop by shop basis. And this is why you're seeing, you know, like a BYD city being built. I don't know if that's actually real or not, but
00:52:53 · Sam D'Amico, Aaron Slodov
[00:52:53] S0: It is. [00:52:54] S1: Yeah. That, in my brain, is just like a level of seriousness that we need to step up to. Right? And, yeah, it's it's a huge systemic problem across regulation, across capital formation, and labor. Right? Because another piece of the systemic issue too is, you know, everything is a jobs program apparently. And, you know, unions are... They could be a force for good. And I think that, you know, we've seen blunder after blunder of attempting to, you know, stand up capacity, get things built here, and they're getting built, but we're we're learning the hard way.