Economic & Business Development


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Read the story in The Atlantic  here.
Americans don’t make things any more? Tell it to (from left) First Joe, Pauly, and Capt. Jerry, who are building the Mon Tiki Largo on Montauk, Long Island.  You can’t make a 100-foot boat with 3-D printers, yet.  (David Ryan)

After these two articles on why the Maker Movement matters — “Part 1, the Tools Revolution” and “Part 2, Agility,” I’ve received a lot of replies from people in the middle of this transformation in existing companies, or new ones they are starting.

Let’s kick off with two. First, from reader David Ryan, a one-time filmmaker who in recent years has become a boat-builder and charter-boat captain on Montauk, Long Island. He responds to the observation by Liam Casey (“Mr. China”), in this WSJ interview by Matthew Kassell, about why some manufacturing is coming back to the United States. Ryan writes:

“Where it’s made doesn’t really matter, when you look at the margin breakdown—you mostly win and lose in the selling, not in the making.” [So Liam Casey says.]

What I learned financing, producing, and distributing my films is that even if you are very good at what you do and are unopposed in the market, no less than 30% of your cumulative enterprise effort will go into marketing,promotion, and sales. And that’s if you are very good and unopposed. If you’re merely good, or have competitors, or both, the percentage will be higher.

Much of the reason for this higher than in he past percentage (remember, “if you build a better mouse trap….”?) is a result of the profound democratization of communications tools. As previously mentioned, this democratization has been a boon to peer-to-peer communication (videos for fixing sanders and smartphones) but my own opinion is it hasn’t made the task of marketing, promotion, and sales any easier (when everyone is super, no one is super) and this would seem to be supported by Mr. China’s assertion about where the battle is won and lost.

Because of this and other things I believe I perceive about the effect of the (hyper) democratization of communication tools, I am somewhat more leery, perhaps even bearish about the effect that the democratization of manufacture tools can and will have on that sector of our economy and society.

The Mon Tiki Largo under construction. (David Ryan)

Speaking of manufacturing, Mon Tiki Largo [the next charter boat Ryan is building, shown above] is scheduled to launch in about 10 days. No one’s 3-D printing 100 passenger sailing catamarans –not yet at least!

Now, a long account from Ronald Russell, a reader in Washington state, who tells a detailed and absorbing story of how new production tools have transformed his business, and those of his clients. Like David Ryan, he emphasizes the important things that have changed, and the also-important ones that have not — yet. Emphasis added:

I often say my wife and I were crash test dummies for the “maker” movement, long before it had that name.

In the mid 90’s we began working on a specialized electronic instrumentation idea we had for one of my then clients. When that company fell on hard times and couldn’t continue the project, we decided- rather naively- to go forward on our own, at a time when it was just barely possible to make sophisticated electronics without a lot of resources.

We are now responsible for a product that is sold internationally and is produced in the US, and that has been somewhat transformative in our small market. I don’t want to publicly name our product or our licensee, as their customers perceive it as a product that comes from them, not us. And that perception is in our interest as well.

I’ve thought a lot about how these changes in tools, access to materials, and the new business models they make possible are likely to change the economy and society.  Even though I’m approaching what most people consider a sane retirement age, I see such incredible possibilities with the combination of new technologies, particularly in areas like sensors, combined with the democratization of entrepreneurship and access to tools, that I can’t step back.

At the same time I’m a little dismayed at the over hyped and over simplified way this is often portrayed in the media.

It’s far more possible now to do technical products with little capital. What sometimes gets missed, though, is that you still need to know what you are doing. Education and experience matter a lot.

That’s why I have a lot of trouble with the Silicon Valley image of the 20-something coder who has a brilliant idea and spends a few hard weeks creating the next killer product and ends up making millions. That doesn’t really transfer to the world of hardware. Or with the idea that 3D printers and maker spaces are going to turn everyone into designers. Or the idea that creating an Arduino powered cat feeder makes you an embedded systems programmer.

In reality, this stuff takes years of difficult, painstaking work and hard won experience. It is more accessible, but not necessarily easy. But the more accessible part is- to quote a prominent public figure- yuuuge.

The story I see when I visit our contract manufacturer and see the jobs they are working on is a different one than the typical image. It’s the story of the person who has worked for many years in a particular field and knows it well, who probably has significant education and training and is highly qualified to understand their particular area of manufacturing or technology.

It could be energy transmission, or some corner of aviation, or medical devices, or like us, a specialized recreational or industrial market.  This person may have an idea about how to do something better, or how to design a product that meets a currently unmet need- that’s what happened to us.

A generation ago their only option, almost always, would have been to go to their employer with the idea and offer it up hoping it would be able to work its way through the bureaucracy and find favor- and that perhaps he would be rewarded with a promotion or a bonus. A lot of ideas died.  Very few individuals were able to muster the resources to strike out on their own. The barriers of access to capital, to tools and suppliers, and to manufacturing facilities, were just too great.

Those barriers have been shrinking for a generation or more, and they are becoming quite low. These people are now able to start businesses. In most cases this new class of entrepreneur will never get rich (we certainly have not) or attract public notice outside their field- their markets are too focused and specialized and often small. Yet our electronics sales reps tell me that an ever increasing and quite significant part of their business is now coming from small scale or kitchen table startups- that’s a big change.

This type of entrepreneur may never employ more than a few people directly- though they may generate far more employment from contract manufacturers, services, or by making parts of the economy more efficient.  Their product probably won’t be the next big consumer hit. It won’t put them on the cover of Time, or find them hanging out at backyard barbecues with Sergey or Elon. They won’t attract venture capital money- as one VC presenter at a design conference I attended said, if a project doesn’t have 100 million plus potential, they aren’t at all interested.

But the point is they don’t need to attract VC money- costs are coming down to the point that significant market impacts can come with fairly small investment. That changes the dynamics a lot. Most of these businesses are not a big deal in themselves, but I suspect they will have a cumulative impact in the overall economy, and will have an outsized impact when it comes to design influence and making incremental improvements to many areas of life.

When we started our current business direction 20 years ago the tools that made it possible for a couple of individuals to design and actually produce sophisticated embedded electronic products were just beginning to become accessible. The internet was coming into full flower, with companies like Digi-Key stocking and shipping millions of parts almost instantly- with no minimums.  Circuit design tools, embedded development tools, CAD tools, were all becoming more available and less expensive. US based fab houses were established that could take your electronic design files and turn them into finished circuit boards in days to weeks. Companies like Proto-Mold or Quickparts could take CAD designs and turn them into real parts in days- and even do small run production.

None of this was hobby-level cheap (then, anyway, it’s much closer now), but if you were coming from a design environment where just keeping track of electronic parts required a parts librarian on staff and a full time purchasing agent, and where building any prototype required an investment of hundreds of thousands, rather than just a few thousand, the possibilities were pretty astonishing.

This makes possible new models for business. When asked, I sometimes say we run a family farm- we just happen to grow technology rather than vegetables. In our case, we wanted to stay on the design side rather than run a factory and work at marketing- so we licensed our technology and designs to an established company in the market.

For all their customers know, the products were developed by our licensee. We work with them to keep designs current, continue development, and oversee production, which is contracted out.  We still have only ourselves as employees, yet I can point to several people at a Washington state circuit board assembly plant who have jobs working on our products, and more people in California who work assembling, testing, and servicing them.

Note that this is assembling and producing electronic products entirely in the US.  We export to Europe and Asia, we have received top ratings and “best of” awards in domestic and international publications, and compete successfully with established companies that employ large teams of engineers. They would probably be shocked to know there are only two of us. We are successful mostly because we focused intently on making our instrument very easy to use.  Making something easy is always hard, but it may be easier for a small group than for a big organization. This is a design and development model I expect will become more common.

That’s not to say it was something just anyone could just decide to do-  when we started I had 25 years spent designing and marketing in the business, understood the customers and market well, and had good connections. My wife and partner is a physicist with an advanced degree in Scientific Instrumentation Design and 30 years of experience in embedded systems, electronics, and software. It was very hard- it just about did us in. But it was doable, and it would be far easier today.

This change in technology has profound implications for the economy, for the nature of business itself, and for the larger society. I don’t begin to understand what all those are. But my background was in anthropology, and I’m interested. I like to look back at popular predictions for the future made 50, 60, or more years ago. When I do, two things are striking.

One is how much of the technology they got right (jetpacks and flying cars excepted).  The other is how completely they missed the social and cultural changes these technological changes engendered.  Domestic conveniences helped change gender roles. Increased communications have helped lower levels of conflict and have led to an increase in the global standard of living, education, health, and almost any other metric for general well being.  The world is changing in a positive direction, by most measures, at an unprecedented and accelerating rate. I believe that the democratization and decentralization of production that is now possible will have major implications for our future.

I don’t think we are going to be 3D printing our toasters anytime soon, but I do believe we will see a proliferation of great design, more “long tail” options, and less reliance on major manufacturers for many types of products. Powerful and very sophisticated circuit design and 3D CAD tools are now available online freely, worldwide. What happens as gifted teenagers in Mumbai or São Paulo get their hands on these tools- and along with them, the tools for manufacturing? And can learn how to use them online as well? I don’t know, but it’s going to be fun to find out.

Obamacare gets too little notice for how much it helps this kind of entrepreneurship. One of our biggest struggles was simply finding and affording health insurance. If we hadn’t been healthy, or one of us had a pre-existing condition, our business might not have been possible.

Contrast the fine grain of these reports, and others to come, with general political talk about what’s involved in fostering more new companies and more good jobs. Additional reports to come.