April 14, 2025 • 38 mins
One of the ironies of the tariffs is that, while ostensibly the goal is to reshore US manufacturing, it's actually been US makers of physical goods themselves that have warned about the damage that trade barriers can cause. Or, to put it another way, if we really want to see more domestic US production in order to decouple from China, then perhaps there are other levers to pull besides the tariffs. On this episode of the podcast, we speak with Sam D'Amico, the founder and CEO of California-based Impulse Labs, which makes an amazing induction oven. We talk about what the tariffs mean for his business, and the various things, including capital markets and NIMBYism, that really stand as impediments to building out mass US production of goods.
Read more:
The High-Tech Stove That’s Also a Home Battery
Everything You Need to Know About the Basis Trade Spooking Markets
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2 (00:18):
Hello and welcome to another episode of the Odd Lots podcast.
Speaker 3 (00:22):
I'm Joe Wisenthal and I'm Tracy Alloway.
Speaker 2 (00:25):
Tracy, I think one of the most interesting dynamics going
on right now is that you have a White House
and a lot of people in both parties, but specifically
the White House right now, that are very set on
reindustrializing manufacturing in the US. At the same time, actually
existing US manufacturers are talking about, Wait, everything you're talking
(00:45):
about is throwing our business into extreme chaos.
Speaker 3 (00:47):
Yeah, and we've had a lot of anecdotal evidence so
far of this happening. So we've already mentioned at this
point the Dallas Fed Energy Survey and a bunch of
businesses in the oil patch saying that things are slowing down,
they're having difficulty planning for long term capital investments. There
was one anonymous company that basically said they were asked
(01:08):
by a Canadian client if they could move production to Canada,
which again seems to be the opposite of what you
would assume the Trump administration is trying to achieve here.
We've talked to Rian Peterson about factories slowing down production
and things like that. And I think the big question
here is, Okay, tariffs are on pause, but are we
(01:31):
going to see lingering issues, lingering uncertainty because the assumption
of business people is Trump could always turn them back
on he could always start threatening them. And then the
other thing I would ask is, there's actually so many
questions that you could ask about all of this. But
Trump keeps talking about how he wants to do both
(01:52):
basic industrial manufacturing in the US, but also every once
in a while he talks about, you know, doing really
advanced stuff, and he wants to do everything I guess,
and it seems really difficult to me to thread the
needle between like very expensive high tech stuff where you
have to pay people a lot, and then very I
(02:14):
don't want to say it's cheap, because factories still cost
quite a lot, but less expensive basic stuff.
Speaker 4 (02:20):
I don't know. Here's the thing.
Speaker 2 (02:22):
I want to set up a factory in the United
States that's at the cutting edge of production.
Speaker 4 (02:26):
But some of the.
Speaker 2 (02:27):
Tools I might need for my factory might be made
in Germany, or maybe they're made in China or Vietnam.
And this seems like an issue. A couple of days ago,
we had headlines a company called has, which I have
to admit I had not heard of. They make c
and see lathes talking about how they were like canceling
over time, pausing all hiring, et cetera. Anyway, remember we
were out in San Francisco and we visited Impulse Labs.
(02:50):
They make that amazing stove. We had this great steak
and boils water in like two seconds.
Speaker 3 (02:54):
Oh, it was so good.
Speaker 2 (02:55):
Like that stove seemed like one of those products that
I would expect to see on TikTok from a Chinese
propaganda video about how good they have it over here.
But it's actually an American company like that, I said,
think it actually exists here, and I kind of want
to know what building that stove is like in a
world of teriff.
Speaker 3 (03:12):
Yeah, and looking back on it now that we have
Trump as president, there are a bunch of broader themes
that it definitely touches on. So it's an electric stove,
as you mentioned, electric battery in it. Yeah, electric versus
gas has been in the midst of the culture war
at various times recently. But then also it feeds into
green technology. We're not really certain how Trump feels about
(03:36):
green tech. He wants America to do cool stuff, presumably
make cool products, but does that include electric things, batteries,
green stuff? Again, I don't know.
Speaker 4 (03:47):
Well, let's find out some more.
Speaker 2 (03:50):
He cooked us an amazing steak several months ago, but
now we're not tager steak. We're talking about the reality
of us manufacturing. Back on the show, Sam Dimico, founder
and CEO of Impulse Labs. Sam, thanks for joining us.
Speaker 4 (04:03):
Yeah, good morning everyone. It's been a fun week or so.
Speaker 2 (04:06):
I'm enjoying it in the news business. If you're having fun,
I'm at least relieved that someone in industry is also
enjoying it. Let's start with this question. Listeners can go
back and check out our episode where we ate this
amazing steak, and like I said, you make this amazing
stove and it hits a battery in it and boils
water in two seconds and it will never burn an egg.
All this stuff, but just describe, like what do you
(04:27):
build here? And what are the inputs of the stove,
where do they come from? And then what do you assemble?
Speaker 5 (04:33):
So this is a really good question because you'll you
might see how my brain works, because I'll like build
it up from the base lego layer up. I'll try
to avoid that because our listeners love this stuff.
Speaker 4 (04:42):
Yeah.
Speaker 5 (04:42):
Basically, think of this like you mashed a Tesla power wall,
so like a Tesla home battery product with an induction
stove with like a tablet computer, and then a bunch
of sensor technology that requires us to do custom ceramic
parts and other things that aren't in the normal induction
stove supply chain.
Speaker 4 (05:03):
So that sounds like a lot.
Speaker 5 (05:05):
And what that means is the surface area of the
types of stuff we touch as inputs is quite substantial.
It is probably the best way to put it. It's
like everything from lithium ion battery cells all the way
to those customer ceramic parts in our temperature sensor which
lets you hold exact temperature in the pan, to like chips,
(05:26):
some of which are made in the United States, but
most are not packaged in the United States, if that
makes any sense.
Speaker 4 (05:31):
Yep.
Speaker 3 (05:32):
So where are you actually getting these things from? Like
walk us through I guess the evolution of your suppliers,
because I imagine it must have changed a little bit
over time.
Speaker 5 (05:41):
Yeah, so I'll go through kind of like the transition
of the company, because this is like key to kind
of understanding how to build complex hardware. There's an Elon
tweet I think it's actually a reply, but it's buried
in the replies, but basically says the factory is the product.
And this is incredibly true, where basically your supply chain
is how you build stuff. It's kind of like you're
(06:02):
picking a bin of legos effectively, and those legos may
mostly already exist, and you try to minimize the number
of new parts you have to make because like making
a new Lego brick is complicated and requires you to
make a new injection mold in that case. But if
you've got a bin of legos, and that bin of
legos is expansive and cheap, and then there's a lot
of experience with team knowing how to put those legos together,
(06:23):
like you have huge tailwinds and advantages. So basically first
year or so of the company, we essentially built prototypes
of like what we expected to need. And so the
example there would be like we built like a single
heating element temperature controlled stove prototype that ran off a
battery that we sourced from like some low volume battery
manufacturer or build ourselves. We needed to get the architecture right.
(06:45):
We needed to know how to build the product like
from a like it's almost like the specs you see
on like best buy dot com. You kind of needed
to figure out what those were and maybe some of
the high level stuff and also enough to tell like
your industrial designer and industrial designer is like the Johnny
Ive type character that like defines how the product looks
and feels and kind of like the interaction model and
(07:07):
stuff like that.
Speaker 4 (07:08):
So we need to do that prototyping.
Speaker 5 (07:09):
But then at that point we basically were like, Okay,
we know what we're going to make roughly, we don't
know how we're going to make it exactly. Let's go
start talking to what I call contract manufacturers to like
help us basically bring this thing to production. And we're
still like around twenty five people as a small team.
There's a couple of different ways to actually go and
(07:30):
design and build a product, and I think this is
something that is not well understood even by hardware founders
in many cases. So if you're a defense tech founder,
your options are cut out for you because you can't
go overseas and have a Chinese company or a cream
company or a Taiwanese company co design the product.
Speaker 4 (07:47):
With you because that violet export controls.
Speaker 5 (07:49):
So you see hardware founders talk about this, there's kind
of a I would I would almost call it like
a split between folks that can use the consumer hardware
supply chains and folks who can't.
Speaker 4 (07:59):
And so base we had kind of a choice.
Speaker 5 (08:01):
We'd go to like appliance contract manufacturer, or we could
go to a consumer electronics contract manufacturer. And we basically
realized it was easier to teach the consumer electronics guys
how to do the specific appliance stuff because a lot
of this faciliar plant stuff is handling large sheet metal
parts and like big boxes and stuff like that.
Speaker 4 (08:19):
So we went to a.
Speaker 5 (08:20):
Consumer electronics manufacturer and then effectively co opted their entire R.
Speaker 4 (08:25):
And D team to help US co design the product.
Speaker 5 (08:29):
But the advantage of this approach is that we got
to essentially co design it through their supply chain and
their existing supplier relationships. We did not have to boot
up that from scratch, which would have taken us I
don't know, fifty to one hundred people, because we would
have had, like, there's all these subdisciplines in hardware, and
even if you only need to fractionally use them, like
use zero point one percent of them or something like that. Well,
(08:51):
that would be one headcount if you did it in
the United States, or did it or even if you
did it in Mexico and just were going alone. And
so that's how we've actually been able to maintain a
really small team.
Speaker 2 (09:00):
So I'm guessing the it sounds like the appliance manufacturer
I'm guessing is in China. Talk to us about what
is the You know, there is this existing manufacturing tech
supply chain in the United States, as you said, it's
centered around defense for good reason. You can't outsource that stuff.
Talk to us about that capacity that exists in the
(09:21):
United States currently or that could you know, like we
hear the Gundo and all of these defense tech companies
in southern California that are doing cool stuff. Talk to
us about like these different options.
Speaker 4 (09:32):
Yeah.
Speaker 5 (09:33):
So I'm a friend and investor with a number of
these folks. So it's actually really interesting to be like, look,
what they're doing is admirable, but the volumes here are
different by orders of magnitude. Okay, so let's actually put
startups on the shelf, because instantly the startups will need
like substantial public private partnership money to really scale, so
it's a volume and some of that stuff is actually,
to my knowledge is like potentially forthcoming, which is pretty exciting.
(09:55):
But I need capacity now, so where would I go
in the US to do it? And it's basically there's
a couple different categories of contract manufacturer in the United States.
The most famous ones are Jabel and Flextronics, and I
actually this is over ten years ago. I've worked with
Jabel on a project that was a I'll be ambiguous here,
but you can figure it out if you poke a bit,
but a ambitious ahead of its time augmented reality project okay,
(10:19):
but effectively like there was a decision to make something
like this in the United States. Also, Motorola successfully did
a bunch of stuff in the United States as well,
and historically always did. The issue is into the twenty tens,
and this must be a I think the Great Financial
Crisis was actually a much bigger story to this than
any sort of like China trade policy decision. It was
(10:40):
like the Great Financial Crisis plus China blasting through with
investment in manufacturing was the real story. But effectively, none
of these companies deal with startups anymore or if they do,
it's specific kind of thing.
Speaker 3 (10:52):
So I remember when we were in San Francisco and
you were making that very very good stake for us.
We asked you about tariffs, right because they were already
floating around, given what was happening with election odds between
Trump and his competitor, and now here we are.
Speaker 4 (11:10):
Well.
Speaker 3 (11:11):
I think at the time we were talking about twenty percent,
and you seemed kind of like confident that you could
handle that. I think you said that that was your
assumption that we were going to have tariffs, and that
if they came online, you were going to be prepared,
and you'd already been doing some stuff to handle it.
I know what we've seen on China is dramatically higher
(11:35):
than twenty percent so far, but how well positioned do
you feel for something like that?
Speaker 5 (11:42):
Yeah, So I have a funny story, is one of
our key suppliers cut prices enough to almost compensate for
these tariffs as it. So China's reaction to some of this,
by the way, is like I don't know if it's
state subsidy or like they're viewing this stuff as temporary
and like some of these let's call it well funded
companies is like, no, they can power through it and
not upset their existing supply relationships. But my sense is
(12:05):
like there's something else that people aren't really factoring in,
which is just how expensive the US is versus everything else. So, like,
we got a lot of requests from consumers for like
they're like, I have a thirty six inch stove, but
I want to take it out and put an impulse in,
which is thirty inch.
Speaker 4 (12:19):
How do you solve that problem?
Speaker 5 (12:21):
So we ended up designing and building an adapter that
you can just put in and then you put our
thirty inch stoven and it looks pretty nice too, And hopefully
that goes on the website relatively soon. But I'm maybe
spoiling this from marketing team. But basically we quoted that
out in the US because we're like, this is a
stamped sheet metal part, we should just be able to
do that. In the US, that's simple seven hundred dollars,
and it was like sub two hundred in China. So
(12:42):
from a tariff standpoint, I don't know, Trump needs to
up to hundre percent or something like that.
Speaker 2 (12:46):
So this is the headline American manufacturer who is heavily
reliant on Chinese parts. Trump increased the terriff for three
hundred percent. Now I'm just kidding, but anyway, go on,
go on.
Speaker 5 (12:56):
But that's that's a simple seat metal part and you
can imagine simple shoot. Yeah, And then I kind of
like was like why and this was a Bay Area vendor.
I won't dox them because they're actually great, but who
are their customers? And it's like, if your customers are
like Google street view vehicles, medical device companies that make
like yeah, LiPo, like not liposeection, but those like cool.
Speaker 4 (13:18):
Sculpting machines, oh yeah, and like.
Speaker 5 (13:21):
Defense companies, you probably don't have cost sensitive customers. And
the volumes and mixed level like when you get a
big order from a customer, it's one hundred unit, it's
not like one hundred thousand units. And so a lot
of the US manufacturing capability is like exquisite and medium
or low volume, or if it's high volume, it's incredibly
(13:42):
automated and not retooling. So like, yeah, there's giant injection
molding firms in the US that make like lawn shares
or whatever, but like, good luck being able to call
them up and being like can you make me like
the underside enclosure for my stove or something like that.
Speaker 4 (13:57):
They'd be like, no, go away. So that's the point
of like China.
Speaker 5 (14:01):
Being like extremely eager to take your business even if
you're like a crank startup founder like me, versus the
US being like almost like actively dissuading you from talking
to them.
Speaker 2 (14:12):
I've heard this, Like people will say, like, you know,
you can WhatsApp the uh maker of some factory owner
at one in the morning. I saw some tweets about
this at one in the chat.
Speaker 4 (14:22):
Yeah, and you can't.
Speaker 2 (14:23):
Yeah, you can chat the factory owner like one in
the morning and they'll get back to you with a
quote in like five minutes.
Speaker 4 (14:28):
Yeah.
Speaker 5 (14:28):
I've gotten battery vendors email me cold being and these
guys like represent fairly large scale battery vendors. They're like
email me cold and they're like, what's your spec? And
I just like email them back like three lines and
then I get like a quoted design from them.
Speaker 3 (14:43):
It's weird, okay, just on the pricing note, I mean,
it does feel like the outlook for American inflation certainly
(15:07):
depends on how companies decide to pass on or not
pass on all these additional tariff costs. Do you get
the sense that some of that depends on your relationship
with your supplier and how important you are for that business.
So I imagine, for instance, we've had news this week
saying that Walmart is trying to negotiate even lower prices
(15:31):
with its Chinese suppliers. I don't think it's been successful
just yet, but you can imagine Walmart is a huge, huge,
gigantic business and a really important one for a lot
of Chinese companies. So maybe they'll end up being successful
at it versus a startup that's only making a limited volume.
(15:51):
Maybe the suppliers don't care about that business that much
and we'll treat it differently.
Speaker 5 (15:56):
Yeah, So, I mean I think there's a couple questions
going on too, because again, China runs a different industrial policy,
Like there's kind of this debate on the tariff side,
but it's like what is trying to actually do? And
could we rerun their playbook? And it's like China has
the equivalent of like state level champions. It's almost like
bid is like Guandong Province's champion, so you can be
like that's California's champion, and then c ATL is like
(16:19):
Texas is champion kind of thing, and the money flows
from this national government into the provincial governments. The provincial
governments actually like are the ones helping boost a lot
of these things because there's almost like delegated control. But
what this means is there's an aspect of competition here
where in China. It's not just like especially at the
Walmart level, like you're in competition with your rival province
(16:40):
to get that business.
Speaker 1 (16:41):
Oh yeah, yeah.
Speaker 2 (16:43):
This is a really important aspect of Chinese capitalism that
I think people don't really realize is how intensely the
province levels compete with each other. And you know we
have that here right like you.
Speaker 3 (16:55):
Know, I think we'll have more of it here.
Speaker 5 (16:57):
But the thing but people don't understand the way the
works there different. It's like because it's a single party system. Yeah,
it's almost like Gavin Newsom's boss is Donald Trump, vers
is their arrivals with different systems.
Speaker 2 (17:11):
This is a really important point. The governors of American
states are incentivized to win re election. The provincial leaders
in China are incentivized to rise up within the Chinese
Communist Party, and they do that based on various goals
that are set. And so even though you have some
analogy of state versus state competition with exists here and
on service that might have looked like provincial competition, the
(17:33):
reality is that in the US system, it's not obvious
that any given governor is actually optimizing for economic performance
as opposed to reelection. And of course sometimes that might
be correlated good economy more likely to be reelected, but
certainly not at all. And I think this is like
a very interesting difference. But let's say we accept this
(17:54):
premise and I kind of do that is not great
for the world to be so dependent on China for
manufactured goods, et cetera, Like is there a middle path here?
Like what would you're Okay, someone hears this from the
White House, Like, Sam, you're into manufacturing, You've worked with
all these companies. We want to be able to have
a competitive stovemaker here in the US that doesn't have
(18:14):
to rely on a sheet metal company in China or
a final assembly in China. Like give us some outlines
of what you think needs to be fixed here or
dressed addressed here.
Speaker 5 (18:24):
So let's actually look at who has solved this problem. Okay, Yeah,
what BS he had to deal with. It's funny that
when I say who and then I use.
Speaker 4 (18:32):
This single, we all know it's Elon.
Speaker 5 (18:34):
We know we all know it's Elon, And so how
the ever living crap this guy pull us off? Yeah,
and I think I've spent way too much time thinking
in reverse engineering this because it's really important. But I'll
use a very simple example. Do you all remember when
people were making fun of him for building a factory
any tent in the Fremont parking lot.
Speaker 2 (18:53):
I do remember the tent. People shouldn't made fun of him,
especially in retrospect.
Speaker 5 (18:57):
I mean it was it worked, so to refresh this
for the list. This was like during the Tesla Model
three ramp. They realized they like over automated and over
complicated the factory with exquisite shit. They then were like,
this line is misconfigured and we can't fix it because
there's not enough room in the building. But the problem
is if you wanted to build a building next to it,
(19:18):
Let's just say that California is a den of vipers
and those vipers' names are Nimbi's and you would not
be able to permit a new building in the time
that it would take or in Tesla's remaining time left,
if that makes any sense. Yeah, and you probably couldn't
get it done in three years, even just because we've
essentially made building in the built world next to engineers
(19:42):
illegal effectively, because like if it's a rich area, there
are nimbi's, and the nimbi's have infinite power. And so
what Elon did was he realized, you know what those
like graduation tents or like the tents they.
Speaker 4 (19:53):
Put over the.
Speaker 5 (19:56):
Football stadiums in like the Winner, like you go one
of the and they basically just put it in the
parking lot, and they moved all the factory and they
set up a mostly manual line to continue producing model
trees and ended up working. They ended up reconfiguring the
line inside, and the company didn't die. But there's a
million examples of this where it's kind of like Elon
(20:17):
versus the built world, where he just decided to say
no and figure out some sort of like I wouldn't
call it illegal, but like almost illegal loophole. And then
he also assembled probably the best team in litigation in
terms of like permitting and all that type of stuff.
So he's gotten an advantage versus everyone else in terms
(20:38):
of busting through all this stuff.
Speaker 3 (20:39):
Hey, an almost illegal loophole is still illegal loophole, right, yeah.
Speaker 5 (20:44):
I mean it's like you have to be kind of
like a goblin here, right, Like you gotta be like, okay,
let's figure out this tension of parking lot thing that
a mere mortal wouldn't have gotten that dring. It's like
you basically have to be out in space where like
these ideas would just be laughed at by like a
mere mortal here.
Speaker 4 (21:01):
Right. Wait.
Speaker 3 (21:02):
So the other thing that Elon is kind of well
known for doing is a lot of vertical integration over
the years, so you know, not just sourcing supply from
overseas and particular companies, but actually controlling all those different
stages of production, having investments in some of those companies
so that he can order whatever he wants at the
(21:24):
scale he wants, however fast he wants. Is that something
that could potentially happen as some of these tariffs get
ratcheted up, or is the concern for companies that, you know,
maybe you invest in a Chinese supply, well, I don't
even know if you could buy a Chinese supplier. I
don't think you could buy it wholesale. But let's say
you invest in, I don't know, a Mexican company, Suddenly
(21:48):
Trump changes his mind on something. There's a lot of
uncertainty over how he feels about international capital flows. All
of that is that a risk or is vertical integration
one possible solution to some of the pressures we've been
talking about.
Speaker 5 (22:03):
So I mean, I'll always blunt and say that I'm
not sure if anyone's going to make any decisions in
this direction within the next ninety days unless they've got
insider information.
Speaker 4 (22:10):
Yeah, So that's that's for one.
Speaker 5 (22:12):
Like I think, I think basically, like the frothiness of
the current situation makes it hard to plan ahead. And
I'll say that, like you know from my position as well.
But yeah, vertical integration is clearly I mean, there's like
two different types of vertical integration. And I think what
I would caution people is like a lot of tech
founders take after Elon literally but not understanding why, like
(22:33):
the real reasons why. So I'll say, where you can
get screwed by vertical integration is like it's I was
hinting at this earlier, but basically, let's imagine I build
something like the stove and I obviously there's metal parts
in there, so I need like a metal tooling designer
to like design the stamping tools that like end up
stamping at metal parts. But let's imagine I only need
that tooling designer for like a month for the whole
(22:56):
program for two years, and so if I vertically integrate,
like I go and hire that person to work on
my team, there's no way that someone's going to go
work for me for two months. And if I end
up stocking up every discipline I would need to basically
be fully self sufficient, I might have one hundred to
two hundred people and be burning hundreds of millions of
(23:18):
dollars on a program, which is fine if I'm building
stuff at the scale of Elon, right like if I
If I'm doing it that way, it's like SpaceX can
likely fill that tooling engineer's time with a million different things,
not just like one model of starlink dish, But me,
as a much smaller startup, cannot do that.
Speaker 3 (23:51):
You know, you mentioned how you don't think anyone is
making major decisions right now, and we started out this
conversation talking about whether or not all this back and
forth on tariffs was going to generate long term uncertainty,
and we know that the one thing both the business
industry and markets actually hate is a lot of uncertainty.
(24:14):
What would it take for you to, I guess, feel
better about making some long term plans.
Speaker 5 (24:22):
Yeah, so, I mean this also goes to I can
also mention the vertical integration side of this for a
little bit as well, which is like the level of
vertical integration we did was basically like we control every
aspect of our supply chains. It's not like if we
go and move stuff, we still know how like all
the subcomponents are designed, which is very different from how
like stoves are normally assembled, which are closer to like
(24:42):
pre Testla cars, And so our ability to kind of
like have control and micromanagement of the whole of everything
that goes in the product is unique, despite the fact
that there are layered sub suppliers and stuff like that.
But yeah, that said, like my senses, as soon as
there are deals going in place in like cell the East,
Asia or Mexico, like we're not realizing that there's gonna
(25:04):
be some random Mexico tariffs or something like that, this
gets a lot easier in terms of constraints because like
we were very conscientious to select our suppliers to make
sure that we were able to locate manufacturing somewhere that
was lower zero tariff. But yeah, the big issue too
is like I think the fact that the tariffs were
seen as while accomplishing multiple goals, meant that they couldn't
(25:25):
succeed in any way. And the example I would give
is like, why are we taxing inputs for domestic manufacturers.
I went and actually looked at this right now, and
I'm like, I want to manufacturing the United States something.
Speaker 4 (25:37):
I'm like dead set on doing that at some point.
Speaker 5 (25:39):
If I imported my bomb build of material, so like
the list of crap that's in your product, if I
imported that to the US and started manufacturing it right now,
it's like I'm sub just that China one and twenty
five percent tariff. I'm not magically going to get a
ceramics vendor that knows how to make our temperature sensor tomorrow.
It's going to take probably six months to figure out
(25:59):
and qualify vendor. Plus, like you're not guaranteeing the same process.
So like standing up a factory takes like eighteen months
for the stuff and it's sort of recursive down the
supply chain. So like if I was suggesting some of
the administration, it would be like, we should figure out
a way where you can basically get all of the
input tariffs refunded and then maybe figure out like how
(26:23):
to move the levels of abstraction down over time, because
like doing final assembly of our stove is like it's
not something where like we need to rely on cheap
labor or anything like that. It's like it's like the
hard steps are mostly automated. The expensive subcomponents assemblies is
almost completely automated, like the circuit boards and stuff like that. Like,
(26:44):
this is not something that is like hard, like impossible
to move to the US, if that makes any sense.
Speaker 2 (26:49):
This actually strikes me as a very interesting phenomenon, which
is that when people think about the constraints to US production,
they say, oh, our labor is more expensive. What you're
saying is so many which more interesting. What you're saying
is that it's not that the labor is expensive. It's
not that there's like a bunch of expensive assembly line labor.
It's that what little labor there is are well paid people,
(27:11):
and well paid people are Nimbi's and Nimbi's don't like
new factories, and that that is the dynamic, not on
the floor wage costs, but the political economy of the
people running advanced plants preventing the production of the advanced plants.
Speaker 4 (27:26):
Yeah.
Speaker 5 (27:27):
Actually, I would even be like, you're like, why can't
we have Shenjin in the United States? Yeah, well you
would need to put it in the Bay Area because
that's where that's where the engineers that are like the challenges.
Speaker 4 (27:36):
Yeah, and Dean Preston's going to block you is the story.
Speaker 5 (27:41):
Because also, by the way, like if you go look
at kind of like the Sierra Club breed of Nimby,
like those folks are starting to actually get more favorable
towards housing construction, but when they hear the word factory,
they assume like the river has turned yellow, not like, yeah,
we make some trash and it gets trucked out into
a landfill like consumer ly trins factory. It's like Amazon
warehouse like in terms Basically, the thing is these factories
(28:03):
are more like Amazon warehouses in terms of industrial emissions
than like probably less actually because there's no vehicles driving
through it. Then the like heavy industry plants of your
and the labor situation looks more like again like an
Amazon warehouse than the Triangle shirtwaist factory or whatever. And
we clearly allow Amazon warehouses in our communities, so.
Speaker 4 (28:25):
Why not this.
Speaker 5 (28:26):
But basically the thing is if you go to Byd
or similar places and you go to the HQ and
you see all their lineup of amazing vehicles, and like
you go inside their showroom, there's just like they literally
build everything. Yeah, you walk outside and directly across the
street there are high rise apartment buildings for the workforce.
Contrast that with Tesla where they're Fremont Factory. You walk
(28:47):
outside and it's all low rises. The Tesla does not control.
And then you go and ask the factory workers where
they're coming from, and they're all coming from like the
Central Valley. They're commuting two hours a day plus to
work at a factory because there is not enough housing
that is affordable for those factory wages.
Speaker 3 (29:04):
Well, Elon also wants his workers to sleep in the
office in the factory. Right. And also, I mean in America,
I would assume we're kind of talking about company towns here,
like corporate compounds for employees in America. That's I think
a lot of people might push back on that.
Speaker 5 (29:22):
Well, so I'll give an example of this where if
you want cheap, the problem effectively is like, so Shanzen
actually has an interesting conundrum that is worth discussing here
because in China the primary savings vehicle is also real estate,
right almost to a fault, and they almost have like
let's call it like universal prop thirteam, Like they don't
(29:43):
really have property texts.
Speaker 4 (29:44):
You buy the thing and it just like you hold it.
Speaker 5 (29:46):
And because of that, home prices are really expensive, like
we're talking million plus in Shanzhen. No problem, And so
how do you actually get workers, some of which are
paid like and by the way, the engineers at these
factory detention are are not paid super well. But like
you can imagine with purchasing power parity whatever, it's like
it's even like sixty seventy K in the United States
(30:06):
kind of thing is probably the way to put it.
But like, imagine I wanted to get a sixty K
junior engineer working at Tesla's factory in Fremont today, there's
a housing price issued convincing them to move to the
Bay Area, right, And so in a sense, it's like
the US needs to solve housing near where the top
(30:28):
technical talent is.
Speaker 4 (30:30):
And then one way to.
Speaker 5 (30:31):
Solve that housing problem without running into let's call it
people being upset their home prices have gone down, is
to do this factory town factory compound approach, where like
you have to work at Tesla to get the Tesla housing,
which then means that the Tesla housing doesn't necessarily deflate
Palo Alto households or whatever.
Speaker 2 (30:50):
I just have one last question, which is you talked
about how in you know, in the versioning defense tech
sector and other areas public private partnership. I don't know
if there's new administration has any interest in that. It
doesn't seem like it, but maybe on defense I wouldn't
be surprised. But talk to us about like VC funding
and their demands and their willingness or unwillingness to sort
(31:14):
of fund Basically, where's the funding come from for real
risky upfront capital outlay if we're talking about US manufacturing.
Speaker 5 (31:24):
Yeah, So, I mean, I think some folks successfully raise
for this in like twenty twenty one, twenty twenty two,
but there's like it's honestly, there's a missing piece here, right,
So the problem is the US has an awesome stock
market well until this week.
Speaker 4 (31:36):
Yeah, But basically, if.
Speaker 5 (31:39):
I want a three x return on something, there are
a million different competing things to do, So I have
to be uniquely obsessed with reindustrialization to like kind of
do something like that, like basically build a plant that
maybe three x's or something like that. It does not
have VC shape returns, is the problem. Yeah, and their
LPs are folks that are allocating into other types of
(32:02):
businesses or other types of investment vehicles, not just VC
that have those return profiles. So it's this weird game
of like the VC mandate is to basically fund advanced
technologies with disproportionate return, But hey, I want to build
a lift the m myron phosphate battery plant. We still
we seem to keep not succeeding at that because you
(32:25):
don't have like an advantage versus a Chinese plant. But
if I had went and invented like a new type
of battery material that three x is my energy density,
a VC would love to back that.
Speaker 4 (32:37):
But even then it's like do you invent that? How
do you actually get.
Speaker 5 (32:40):
Enough funding to build a plant to supply that to
all the automakers, you end up in this missing what
I think it's called like a missing middle situation. And
maybe this is more of an ask of private equity,
but like we need to get a little more ambitious here,
and maybe the right answer is like the government plus
private equity plus the banks need to get together and
figureigure out how to address some of these gaps. Basically
(33:03):
Elon again, I'll go pick on Elon because he's again
he's the only got.
Speaker 4 (33:05):
To figure this out.
Speaker 5 (33:06):
It's traditionally been the case where like you need to
figure out the kind of like increasingly growing lily pads
to hop to when you're like a frog. Yeah, and
eventually you get to a big one. But this is
not how like we built giant factories in World War Two.
It's like, this is not how we did this sort
of scale out in the past, requiring sort of like
you're almost like not doing the thing you eventually need
(33:28):
to do going you have to kind of.
Speaker 4 (33:30):
Keep growing again.
Speaker 5 (33:32):
I think Elon has solved this by being his own
fund in a sense, like he raises from VC, but
in some sense he's like an aggregation point where he's
like the general partner of Elon Industries.
Speaker 4 (33:43):
Effectively, and that's a hybrid VCP fund.
Speaker 2 (33:45):
Yeah, Sam Demiko, perfect guest to talk right now. Thank
you so much for coming back on odd Lunch.
Speaker 4 (33:51):
That was great. Thanks for hosting Tracy.
Speaker 2 (34:06):
In that conversation, we talked about Nimbi's and Yimbie's provincial
competition between China and how that compareson contrast versus state competition,
the limits to VC funding models in terms of domestic reindustrialization.
We hit a lot there that was a very like
that was a media Odd Lots conversation.
Speaker 3 (34:25):
There was so much there. I really thought, you know,
sound was going to come on and be like, oh, yeah,
we're looking for a new supplier in a country that
is not China, or we're thinking about maybe switching some
production domestically. That didn't come up, which kind of tells
you something. But yeah, he hit some pretty big structural
(34:45):
themes I think.
Speaker 2 (34:47):
Yeah, I mean, this is just the thing, like a
lot of people accept this premise that the US should
not be so dependent on China for various manufactured.
Speaker 3 (34:58):
Goods, right and others as well.
Speaker 2 (35:00):
Yeah, I mean this was big under the Biden administration,
is obviously big under Trump.
Speaker 4 (35:04):
One.
Speaker 2 (35:04):
Many people are concerned about this, but like when you
just look at the reality of actually existing supply chains,
that doesn't exist, and like, okay, like these immediate tariffs
go into plays, they don't exist, and I think, you know, look,
we're recording this right now, April tenth to eleven forty seven.
We see the Nasdaq it's down four point eight percent
(35:27):
again after Wednesday's big rally. It's sort of I think
today is about syncing in. Even with all else aside,
this gigantic tariff on China is massively disruptive and there
is no short term path for reshaping supply chains, right.
Speaker 3 (35:42):
And I think the other interesting point that Sam brought
up was this idea, well, you know, there is an
adjustment cost, and there's a certain amount of time you
need to actually make that adjustment to your point, And
it would be helpful if the administration maybe a sempted
certain things that it thinks are important to the kind
(36:04):
of American manufacturing that it wants to actually see that
hasn't happened. I don't know why not. I thought it
was kind of funny. Did you see, So the US
has been importing more eggs because of egg prices, egg shortages,
and apparently those are going to be tariff too, so
kind of kind of weird.
Speaker 2 (36:24):
The Elon tenth story, I did not realize so interesting
that actually was. I thought I sort of thought it
was like, Oh, they didn't have space in the factory,
so they're like throw this, And I did not realize
that that was actually a story about zoning, permitting, et cetera,
and that that was really about finding some loophole in
the law to stand up a manufacturing facility rather than
go through like a multi year process. That's fascinating to me.
Speaker 3 (36:46):
Did you never have to like be in a sort
of outflow like trailer while you were at school, Oh,
because they were working on something or there wasn't any
more room, they couldn't build any new space. That happened
a lot to me. Yeah, So I kind of imagine
Elon doing the same. On that note, shall we leave
it there?
Speaker 4 (37:06):
Let's leave it there.
Speaker 3 (37:07):
This has been another episode of the Audlots podcast. I'm
Tracy Alloway. You can follow me at Chracy Alloway and.
Speaker 2 (37:12):
I'm Joe Wisenthal. You can follow me at the Stalwart.
Follow our guest Sam Dimico, He's at s Dimico. Follow
our producers Kerman Rodriguez at Kerman armand dsh I'll Bennet
at dashbot and Kilbrooks at Kale Brooks. For more odd
Loss content, go to Bloomberg dot com slash odd Lots,
where we have a daily newsletter and you can check
out all of our episodes and you can chat about
all of these topics twenty four to seven in our
(37:34):
discord discord dot gg slash hot Lots.
Speaker 3 (37:38):
And if you enjoy odd Lots, if you like it
when we check in on the manufacturing of electric stoves
in the face of sweeping tariffs, then please leave us
a positive review on your favorite podcast platform. And remember,
if you are a Bloomberg subscriber, you can listen to
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to do is find the Bloomberg channel on Apple Podcast
(38:00):
and follow the instructions there. Thanks for listening.
Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2 (00:18):
Hello and welcome to another episode of the Odd Lots podcast.
Speaker 3 (00:22):
I'm Joe Wisenthal and I'm Tracy Alloway.
Speaker 2 (00:25):
Tracy, I think one of the most interesting dynamics going
on right now is that you have a White House
and a lot of people in both parties, but specifically
the White House right now, that are very set on
reindustrializing manufacturing in the US. At the same time, actually
existing US manufacturers are talking about, Wait, everything you're talking
(00:45):
about is throwing our business into extreme chaos.
Speaker 3 (00:47):
Yeah, and we've had a lot of anecdotal evidence so
far of this happening. So we've already mentioned at this
point the Dallas Fed Energy Survey and a bunch of
businesses in the oil patch saying that things are slowing down,
they're having difficulty planning for long term capital investments. There
was one anonymous company that basically said they were asked
(01:08):
by a Canadian client if they could move production to Canada,
which again seems to be the opposite of what you
would assume the Trump administration is trying to achieve here.
We've talked to Rian Peterson about factories slowing down production
and things like that. And I think the big question
here is, Okay, tariffs are on pause, but are we
(01:31):
going to see lingering issues, lingering uncertainty because the assumption
of business people is Trump could always turn them back
on he could always start threatening them. And then the
other thing I would ask is, there's actually so many
questions that you could ask about all of this. But
Trump keeps talking about how he wants to do both
(01:52):
basic industrial manufacturing in the US, but also every once
in a while he talks about, you know, doing really
advanced stuff, and he wants to do everything I guess,
and it seems really difficult to me to thread the
needle between like very expensive high tech stuff where you
have to pay people a lot, and then very I
(02:14):
don't want to say it's cheap, because factories still cost
quite a lot, but less expensive basic stuff.
Speaker 4 (02:20):
I don't know. Here's the thing.
Speaker 2 (02:22):
I want to set up a factory in the United
States that's at the cutting edge of production.
Speaker 4 (02:26):
But some of the.
Speaker 2 (02:27):
Tools I might need for my factory might be made
in Germany, or maybe they're made in China or Vietnam.
And this seems like an issue. A couple of days ago,
we had headlines a company called has, which I have
to admit I had not heard of. They make c
and see lathes talking about how they were like canceling
over time, pausing all hiring, et cetera. Anyway, remember we
were out in San Francisco and we visited Impulse Labs.
(02:50):
They make that amazing stove. We had this great steak
and boils water in like two seconds.
Speaker 3 (02:54):
Oh, it was so good.
Speaker 2 (02:55):
Like that stove seemed like one of those products that
I would expect to see on TikTok from a Chinese
propaganda video about how good they have it over here.
But it's actually an American company like that, I said,
think it actually exists here, and I kind of want
to know what building that stove is like in a
world of teriff.
Speaker 3 (03:12):
Yeah, and looking back on it now that we have
Trump as president, there are a bunch of broader themes
that it definitely touches on. So it's an electric stove,
as you mentioned, electric battery in it. Yeah, electric versus
gas has been in the midst of the culture war
at various times recently. But then also it feeds into
green technology. We're not really certain how Trump feels about
(03:36):
green tech. He wants America to do cool stuff, presumably
make cool products, but does that include electric things, batteries,
green stuff? Again, I don't know.
Speaker 4 (03:47):
Well, let's find out some more.
Speaker 2 (03:50):
He cooked us an amazing steak several months ago, but
now we're not tager steak. We're talking about the reality
of us manufacturing. Back on the show, Sam Dimico, founder
and CEO of Impulse Labs. Sam, thanks for joining us.
Speaker 4 (04:03):
Yeah, good morning everyone. It's been a fun week or so.
Speaker 2 (04:06):
I'm enjoying it in the news business. If you're having fun,
I'm at least relieved that someone in industry is also
enjoying it. Let's start with this question. Listeners can go
back and check out our episode where we ate this
amazing steak, and like I said, you make this amazing
stove and it hits a battery in it and boils
water in two seconds and it will never burn an egg.
All this stuff, but just describe, like what do you
(04:27):
build here? And what are the inputs of the stove,
where do they come from? And then what do you assemble?
Speaker 5 (04:33):
So this is a really good question because you'll you
might see how my brain works, because I'll like build
it up from the base lego layer up. I'll try
to avoid that because our listeners love this stuff.
Speaker 4 (04:42):
Yeah.
Speaker 5 (04:42):
Basically, think of this like you mashed a Tesla power wall,
so like a Tesla home battery product with an induction
stove with like a tablet computer, and then a bunch
of sensor technology that requires us to do custom ceramic
parts and other things that aren't in the normal induction
stove supply chain.
Speaker 4 (05:03):
So that sounds like a lot.
Speaker 5 (05:05):
And what that means is the surface area of the
types of stuff we touch as inputs is quite substantial.
It is probably the best way to put it. It's
like everything from lithium ion battery cells all the way
to those customer ceramic parts in our temperature sensor which
lets you hold exact temperature in the pan, to like chips,
(05:26):
some of which are made in the United States, but
most are not packaged in the United States, if that
makes any sense.
Speaker 4 (05:31):
Yep.
Speaker 3 (05:32):
So where are you actually getting these things from? Like
walk us through I guess the evolution of your suppliers,
because I imagine it must have changed a little bit
over time.
Speaker 5 (05:41):
Yeah, so I'll go through kind of like the transition
of the company, because this is like key to kind
of understanding how to build complex hardware. There's an Elon
tweet I think it's actually a reply, but it's buried
in the replies, but basically says the factory is the product.
And this is incredibly true, where basically your supply chain
is how you build stuff. It's kind of like you're
(06:02):
picking a bin of legos effectively, and those legos may
mostly already exist, and you try to minimize the number
of new parts you have to make because like making
a new Lego brick is complicated and requires you to
make a new injection mold in that case. But if
you've got a bin of legos, and that bin of
legos is expansive and cheap, and then there's a lot
of experience with team knowing how to put those legos together,
(06:23):
like you have huge tailwinds and advantages. So basically first
year or so of the company, we essentially built prototypes
of like what we expected to need. And so the
example there would be like we built like a single
heating element temperature controlled stove prototype that ran off a
battery that we sourced from like some low volume battery
manufacturer or build ourselves. We needed to get the architecture right.
(06:45):
We needed to know how to build the product like
from a like it's almost like the specs you see
on like best buy dot com. You kind of needed
to figure out what those were and maybe some of
the high level stuff and also enough to tell like
your industrial designer and industrial designer is like the Johnny
Ive type character that like defines how the product looks
and feels and kind of like the interaction model and
(07:07):
stuff like that.
Speaker 4 (07:08):
So we need to do that prototyping.
Speaker 5 (07:09):
But then at that point we basically were like, Okay,
we know what we're going to make roughly, we don't
know how we're going to make it exactly. Let's go
start talking to what I call contract manufacturers to like
help us basically bring this thing to production. And we're
still like around twenty five people as a small team.
There's a couple of different ways to actually go and
(07:30):
design and build a product, and I think this is
something that is not well understood even by hardware founders
in many cases. So if you're a defense tech founder,
your options are cut out for you because you can't
go overseas and have a Chinese company or a cream
company or a Taiwanese company co design the product.
Speaker 4 (07:47):
With you because that violet export controls.
Speaker 5 (07:49):
So you see hardware founders talk about this, there's kind
of a I would I would almost call it like
a split between folks that can use the consumer hardware
supply chains and folks who can't.
Speaker 4 (07:59):
And so base we had kind of a choice.
Speaker 5 (08:01):
We'd go to like appliance contract manufacturer, or we could
go to a consumer electronics contract manufacturer. And we basically
realized it was easier to teach the consumer electronics guys
how to do the specific appliance stuff because a lot
of this faciliar plant stuff is handling large sheet metal
parts and like big boxes and stuff like that.
Speaker 4 (08:19):
So we went to a.
Speaker 5 (08:20):
Consumer electronics manufacturer and then effectively co opted their entire R.
Speaker 4 (08:25):
And D team to help US co design the product.
Speaker 5 (08:29):
But the advantage of this approach is that we got
to essentially co design it through their supply chain and
their existing supplier relationships. We did not have to boot
up that from scratch, which would have taken us I
don't know, fifty to one hundred people, because we would
have had, like, there's all these subdisciplines in hardware, and
even if you only need to fractionally use them, like
use zero point one percent of them or something like that. Well,
(08:51):
that would be one headcount if you did it in
the United States, or did it or even if you
did it in Mexico and just were going alone. And
so that's how we've actually been able to maintain a
really small team.
Speaker 2 (09:00):
So I'm guessing the it sounds like the appliance manufacturer
I'm guessing is in China. Talk to us about what
is the You know, there is this existing manufacturing tech
supply chain in the United States, as you said, it's
centered around defense for good reason. You can't outsource that stuff.
Talk to us about that capacity that exists in the
(09:21):
United States currently or that could you know, like we
hear the Gundo and all of these defense tech companies
in southern California that are doing cool stuff. Talk to
us about like these different options.
Speaker 4 (09:32):
Yeah.
Speaker 5 (09:33):
So I'm a friend and investor with a number of
these folks. So it's actually really interesting to be like, look,
what they're doing is admirable, but the volumes here are
different by orders of magnitude. Okay, so let's actually put
startups on the shelf, because instantly the startups will need
like substantial public private partnership money to really scale, so
it's a volume and some of that stuff is actually,
to my knowledge is like potentially forthcoming, which is pretty exciting.
(09:55):
But I need capacity now, so where would I go
in the US to do it? And it's basically there's
a couple different categories of contract manufacturer in the United States.
The most famous ones are Jabel and Flextronics, and I
actually this is over ten years ago. I've worked with
Jabel on a project that was a I'll be ambiguous here,
but you can figure it out if you poke a bit,
but a ambitious ahead of its time augmented reality project okay,
(10:19):
but effectively like there was a decision to make something
like this in the United States. Also, Motorola successfully did
a bunch of stuff in the United States as well,
and historically always did. The issue is into the twenty tens,
and this must be a I think the Great Financial
Crisis was actually a much bigger story to this than
any sort of like China trade policy decision. It was
(10:40):
like the Great Financial Crisis plus China blasting through with
investment in manufacturing was the real story. But effectively, none
of these companies deal with startups anymore or if they do,
it's specific kind of thing.
Speaker 3 (10:52):
So I remember when we were in San Francisco and
you were making that very very good stake for us.
We asked you about tariffs, right because they were already
floating around, given what was happening with election odds between
Trump and his competitor, and now here we are.
Speaker 4 (11:10):
Well.
Speaker 3 (11:11):
I think at the time we were talking about twenty percent,
and you seemed kind of like confident that you could
handle that. I think you said that that was your
assumption that we were going to have tariffs, and that
if they came online, you were going to be prepared,
and you'd already been doing some stuff to handle it.
I know what we've seen on China is dramatically higher
(11:35):
than twenty percent so far, but how well positioned do
you feel for something like that?
Speaker 5 (11:42):
Yeah, So I have a funny story, is one of
our key suppliers cut prices enough to almost compensate for
these tariffs as it. So China's reaction to some of this,
by the way, is like I don't know if it's
state subsidy or like they're viewing this stuff as temporary
and like some of these let's call it well funded
companies is like, no, they can power through it and
not upset their existing supply relationships. But my sense is
(12:05):
like there's something else that people aren't really factoring in,
which is just how expensive the US is versus everything else. So, like,
we got a lot of requests from consumers for like
they're like, I have a thirty six inch stove, but
I want to take it out and put an impulse in,
which is thirty inch.
Speaker 4 (12:19):
How do you solve that problem?
Speaker 5 (12:21):
So we ended up designing and building an adapter that
you can just put in and then you put our
thirty inch stoven and it looks pretty nice too, And hopefully
that goes on the website relatively soon. But I'm maybe
spoiling this from marketing team. But basically we quoted that
out in the US because we're like, this is a
stamped sheet metal part, we should just be able to
do that. In the US, that's simple seven hundred dollars,
and it was like sub two hundred in China. So
(12:42):
from a tariff standpoint, I don't know, Trump needs to
up to hundre percent or something like that.
Speaker 2 (12:46):
So this is the headline American manufacturer who is heavily
reliant on Chinese parts. Trump increased the terriff for three
hundred percent. Now I'm just kidding, but anyway, go on,
go on.
Speaker 5 (12:56):
But that's that's a simple seat metal part and you
can imagine simple shoot. Yeah, And then I kind of
like was like why and this was a Bay Area vendor.
I won't dox them because they're actually great, but who
are their customers? And it's like, if your customers are
like Google street view vehicles, medical device companies that make
like yeah, LiPo, like not liposeection, but those like cool.
Speaker 4 (13:18):
Sculpting machines, oh yeah, and like.
Speaker 5 (13:21):
Defense companies, you probably don't have cost sensitive customers. And
the volumes and mixed level like when you get a
big order from a customer, it's one hundred unit, it's
not like one hundred thousand units. And so a lot
of the US manufacturing capability is like exquisite and medium
or low volume, or if it's high volume, it's incredibly
(13:42):
automated and not retooling. So like, yeah, there's giant injection
molding firms in the US that make like lawn shares
or whatever, but like, good luck being able to call
them up and being like can you make me like
the underside enclosure for my stove or something like that.
Speaker 4 (13:57):
They'd be like, no, go away. So that's the point
of like China.
Speaker 5 (14:01):
Being like extremely eager to take your business even if
you're like a crank startup founder like me, versus the
US being like almost like actively dissuading you from talking
to them.
Speaker 2 (14:12):
I've heard this, Like people will say, like, you know,
you can WhatsApp the uh maker of some factory owner
at one in the morning. I saw some tweets about
this at one in the chat.
Speaker 4 (14:22):
Yeah, and you can't.
Speaker 2 (14:23):
Yeah, you can chat the factory owner like one in
the morning and they'll get back to you with a
quote in like five minutes.
Speaker 4 (14:28):
Yeah.
Speaker 5 (14:28):
I've gotten battery vendors email me cold being and these
guys like represent fairly large scale battery vendors. They're like
email me cold and they're like, what's your spec? And
I just like email them back like three lines and
then I get like a quoted design from them.
Speaker 3 (14:43):
It's weird, okay, just on the pricing note, I mean,
it does feel like the outlook for American inflation certainly
(15:07):
depends on how companies decide to pass on or not
pass on all these additional tariff costs. Do you get
the sense that some of that depends on your relationship
with your supplier and how important you are for that business.
So I imagine, for instance, we've had news this week
saying that Walmart is trying to negotiate even lower prices
(15:31):
with its Chinese suppliers. I don't think it's been successful
just yet, but you can imagine Walmart is a huge, huge,
gigantic business and a really important one for a lot
of Chinese companies. So maybe they'll end up being successful
at it versus a startup that's only making a limited volume.
(15:51):
Maybe the suppliers don't care about that business that much
and we'll treat it differently.
Speaker 5 (15:56):
Yeah, So, I mean I think there's a couple questions
going on too, because again, China runs a different industrial policy,
Like there's kind of this debate on the tariff side,
but it's like what is trying to actually do? And
could we rerun their playbook? And it's like China has
the equivalent of like state level champions. It's almost like
bid is like Guandong Province's champion, so you can be
like that's California's champion, and then c ATL is like
(16:19):
Texas is champion kind of thing, and the money flows
from this national government into the provincial governments. The provincial
governments actually like are the ones helping boost a lot
of these things because there's almost like delegated control. But
what this means is there's an aspect of competition here
where in China. It's not just like especially at the
Walmart level, like you're in competition with your rival province
(16:40):
to get that business.
Speaker 1 (16:41):
Oh yeah, yeah.
Speaker 2 (16:43):
This is a really important aspect of Chinese capitalism that
I think people don't really realize is how intensely the
province levels compete with each other. And you know we
have that here right like you.
Speaker 3 (16:55):
Know, I think we'll have more of it here.
Speaker 5 (16:57):
But the thing but people don't understand the way the
works there different. It's like because it's a single party system. Yeah,
it's almost like Gavin Newsom's boss is Donald Trump, vers
is their arrivals with different systems.
Speaker 2 (17:11):
This is a really important point. The governors of American
states are incentivized to win re election. The provincial leaders
in China are incentivized to rise up within the Chinese
Communist Party, and they do that based on various goals
that are set. And so even though you have some
analogy of state versus state competition with exists here and
on service that might have looked like provincial competition, the
(17:33):
reality is that in the US system, it's not obvious
that any given governor is actually optimizing for economic performance
as opposed to reelection. And of course sometimes that might
be correlated good economy more likely to be reelected, but
certainly not at all. And I think this is like
a very interesting difference. But let's say we accept this
(17:54):
premise and I kind of do that is not great
for the world to be so dependent on China for
manufactured goods, et cetera, Like is there a middle path here?
Like what would you're Okay, someone hears this from the
White House, Like, Sam, you're into manufacturing, You've worked with
all these companies. We want to be able to have
a competitive stovemaker here in the US that doesn't have
(18:14):
to rely on a sheet metal company in China or
a final assembly in China. Like give us some outlines
of what you think needs to be fixed here or
dressed addressed here.
Speaker 5 (18:24):
So let's actually look at who has solved this problem. Okay, Yeah,
what BS he had to deal with. It's funny that
when I say who and then I use.
Speaker 4 (18:32):
This single, we all know it's Elon.
Speaker 5 (18:34):
We know we all know it's Elon, And so how
the ever living crap this guy pull us off? Yeah,
and I think I've spent way too much time thinking
in reverse engineering this because it's really important. But I'll
use a very simple example. Do you all remember when
people were making fun of him for building a factory
any tent in the Fremont parking lot.
Speaker 2 (18:53):
I do remember the tent. People shouldn't made fun of him,
especially in retrospect.
Speaker 5 (18:57):
I mean it was it worked, so to refresh this
for the list. This was like during the Tesla Model
three ramp. They realized they like over automated and over
complicated the factory with exquisite shit. They then were like,
this line is misconfigured and we can't fix it because
there's not enough room in the building. But the problem
is if you wanted to build a building next to it,
(19:18):
Let's just say that California is a den of vipers
and those vipers' names are Nimbi's and you would not
be able to permit a new building in the time
that it would take or in Tesla's remaining time left,
if that makes any sense. Yeah, and you probably couldn't
get it done in three years, even just because we've
essentially made building in the built world next to engineers
(19:42):
illegal effectively, because like if it's a rich area, there
are nimbi's, and the nimbi's have infinite power. And so
what Elon did was he realized, you know what those
like graduation tents or like the tents they.
Speaker 4 (19:53):
Put over the.
Speaker 5 (19:56):
Football stadiums in like the Winner, like you go one
of the and they basically just put it in the
parking lot, and they moved all the factory and they
set up a mostly manual line to continue producing model
trees and ended up working. They ended up reconfiguring the
line inside, and the company didn't die. But there's a
million examples of this where it's kind of like Elon
(20:17):
versus the built world, where he just decided to say
no and figure out some sort of like I wouldn't
call it illegal, but like almost illegal loophole. And then
he also assembled probably the best team in litigation in
terms of like permitting and all that type of stuff.
So he's gotten an advantage versus everyone else in terms
(20:38):
of busting through all this stuff.
Speaker 3 (20:39):
Hey, an almost illegal loophole is still illegal loophole, right, yeah.
Speaker 5 (20:44):
I mean it's like you have to be kind of
like a goblin here, right, Like you gotta be like, okay,
let's figure out this tension of parking lot thing that
a mere mortal wouldn't have gotten that dring. It's like
you basically have to be out in space where like
these ideas would just be laughed at by like a
mere mortal here.
Speaker 4 (21:01):
Right. Wait.
Speaker 3 (21:02):
So the other thing that Elon is kind of well
known for doing is a lot of vertical integration over
the years, so you know, not just sourcing supply from
overseas and particular companies, but actually controlling all those different
stages of production, having investments in some of those companies
so that he can order whatever he wants at the
(21:24):
scale he wants, however fast he wants. Is that something
that could potentially happen as some of these tariffs get
ratcheted up, or is the concern for companies that, you know,
maybe you invest in a Chinese supply, well, I don't
even know if you could buy a Chinese supplier. I
don't think you could buy it wholesale. But let's say
you invest in, I don't know, a Mexican company, Suddenly
(21:48):
Trump changes his mind on something. There's a lot of
uncertainty over how he feels about international capital flows. All
of that is that a risk or is vertical integration
one possible solution to some of the pressures we've been
talking about.
Speaker 5 (22:03):
So I mean, I'll always blunt and say that I'm
not sure if anyone's going to make any decisions in
this direction within the next ninety days unless they've got
insider information.
Speaker 4 (22:10):
Yeah, So that's that's for one.
Speaker 5 (22:12):
Like I think, I think basically, like the frothiness of
the current situation makes it hard to plan ahead. And
I'll say that, like you know from my position as well.
But yeah, vertical integration is clearly I mean, there's like
two different types of vertical integration. And I think what
I would caution people is like a lot of tech
founders take after Elon literally but not understanding why, like
(22:33):
the real reasons why. So I'll say, where you can
get screwed by vertical integration is like it's I was
hinting at this earlier, but basically, let's imagine I build
something like the stove and I obviously there's metal parts
in there, so I need like a metal tooling designer
to like design the stamping tools that like end up
stamping at metal parts. But let's imagine I only need
that tooling designer for like a month for the whole
(22:56):
program for two years, and so if I vertically integrate,
like I go and hire that person to work on
my team, there's no way that someone's going to go
work for me for two months. And if I end
up stocking up every discipline I would need to basically
be fully self sufficient, I might have one hundred to
two hundred people and be burning hundreds of millions of
(23:18):
dollars on a program, which is fine if I'm building
stuff at the scale of Elon, right like if I
If I'm doing it that way, it's like SpaceX can
likely fill that tooling engineer's time with a million different things,
not just like one model of starlink dish, But me,
as a much smaller startup, cannot do that.
Speaker 3 (23:51):
You know, you mentioned how you don't think anyone is
making major decisions right now, and we started out this
conversation talking about whether or not all this back and
forth on tariffs was going to generate long term uncertainty,
and we know that the one thing both the business
industry and markets actually hate is a lot of uncertainty.
(24:14):
What would it take for you to, I guess, feel
better about making some long term plans.
Speaker 5 (24:22):
Yeah, so, I mean this also goes to I can
also mention the vertical integration side of this for a
little bit as well, which is like the level of
vertical integration we did was basically like we control every
aspect of our supply chains. It's not like if we
go and move stuff, we still know how like all
the subcomponents are designed, which is very different from how
like stoves are normally assembled, which are closer to like
(24:42):
pre Testla cars, And so our ability to kind of
like have control and micromanagement of the whole of everything
that goes in the product is unique, despite the fact
that there are layered sub suppliers and stuff like that.
But yeah, that said, like my senses, as soon as
there are deals going in place in like cell the East,
Asia or Mexico, like we're not realizing that there's gonna
(25:04):
be some random Mexico tariffs or something like that, this
gets a lot easier in terms of constraints because like
we were very conscientious to select our suppliers to make
sure that we were able to locate manufacturing somewhere that
was lower zero tariff. But yeah, the big issue too
is like I think the fact that the tariffs were
seen as while accomplishing multiple goals, meant that they couldn't
(25:25):
succeed in any way. And the example I would give
is like, why are we taxing inputs for domestic manufacturers.
I went and actually looked at this right now, and
I'm like, I want to manufacturing the United States something.
Speaker 4 (25:37):
I'm like dead set on doing that at some point.
Speaker 5 (25:39):
If I imported my bomb build of material, so like
the list of crap that's in your product, if I
imported that to the US and started manufacturing it right now,
it's like I'm sub just that China one and twenty
five percent tariff. I'm not magically going to get a
ceramics vendor that knows how to make our temperature sensor tomorrow.
It's going to take probably six months to figure out
(25:59):
and qualify vendor. Plus, like you're not guaranteeing the same process.
So like standing up a factory takes like eighteen months
for the stuff and it's sort of recursive down the
supply chain. So like if I was suggesting some of
the administration, it would be like, we should figure out
a way where you can basically get all of the
input tariffs refunded and then maybe figure out like how
(26:23):
to move the levels of abstraction down over time, because
like doing final assembly of our stove is like it's
not something where like we need to rely on cheap
labor or anything like that. It's like it's like the
hard steps are mostly automated. The expensive subcomponents assemblies is
almost completely automated, like the circuit boards and stuff like that. Like,
(26:44):
this is not something that is like hard, like impossible
to move to the US, if that makes any sense.
Speaker 2 (26:49):
This actually strikes me as a very interesting phenomenon, which
is that when people think about the constraints to US production,
they say, oh, our labor is more expensive. What you're
saying is so many which more interesting. What you're saying
is that it's not that the labor is expensive. It's
not that there's like a bunch of expensive assembly line labor.
It's that what little labor there is are well paid people,
(27:11):
and well paid people are Nimbi's and Nimbi's don't like
new factories, and that that is the dynamic, not on
the floor wage costs, but the political economy of the
people running advanced plants preventing the production of the advanced plants.
Speaker 4 (27:26):
Yeah.
Speaker 5 (27:27):
Actually, I would even be like, you're like, why can't
we have Shenjin in the United States? Yeah, well you
would need to put it in the Bay Area because
that's where that's where the engineers that are like the challenges.
Speaker 4 (27:36):
Yeah, and Dean Preston's going to block you is the story.
Speaker 5 (27:41):
Because also, by the way, like if you go look
at kind of like the Sierra Club breed of Nimby,
like those folks are starting to actually get more favorable
towards housing construction, but when they hear the word factory,
they assume like the river has turned yellow, not like, yeah,
we make some trash and it gets trucked out into
a landfill like consumer ly trins factory. It's like Amazon
warehouse like in terms Basically, the thing is these factories
(28:03):
are more like Amazon warehouses in terms of industrial emissions
than like probably less actually because there's no vehicles driving
through it. Then the like heavy industry plants of your
and the labor situation looks more like again like an
Amazon warehouse than the Triangle shirtwaist factory or whatever. And
we clearly allow Amazon warehouses in our communities, so.
Speaker 4 (28:25):
Why not this.
Speaker 5 (28:26):
But basically the thing is if you go to Byd
or similar places and you go to the HQ and
you see all their lineup of amazing vehicles, and like
you go inside their showroom, there's just like they literally
build everything. Yeah, you walk outside and directly across the
street there are high rise apartment buildings for the workforce.
Contrast that with Tesla where they're Fremont Factory. You walk
(28:47):
outside and it's all low rises. The Tesla does not control.
And then you go and ask the factory workers where
they're coming from, and they're all coming from like the
Central Valley. They're commuting two hours a day plus to
work at a factory because there is not enough housing
that is affordable for those factory wages.
Speaker 3 (29:04):
Well, Elon also wants his workers to sleep in the
office in the factory. Right. And also, I mean in America,
I would assume we're kind of talking about company towns here,
like corporate compounds for employees in America. That's I think
a lot of people might push back on that.
Speaker 5 (29:22):
Well, so I'll give an example of this where if
you want cheap, the problem effectively is like, so Shanzen
actually has an interesting conundrum that is worth discussing here
because in China the primary savings vehicle is also real estate,
right almost to a fault, and they almost have like
let's call it like universal prop thirteam, Like they don't
(29:43):
really have property texts.
Speaker 4 (29:44):
You buy the thing and it just like you hold it.
Speaker 5 (29:46):
And because of that, home prices are really expensive, like
we're talking million plus in Shanzhen. No problem, And so
how do you actually get workers, some of which are
paid like and by the way, the engineers at these
factory detention are are not paid super well. But like
you can imagine with purchasing power parity whatever, it's like
it's even like sixty seventy K in the United States
(30:06):
kind of thing is probably the way to put it.
But like, imagine I wanted to get a sixty K
junior engineer working at Tesla's factory in Fremont today, there's
a housing price issued convincing them to move to the
Bay Area, right, And so in a sense, it's like
the US needs to solve housing near where the top
(30:28):
technical talent is.
Speaker 4 (30:30):
And then one way to.
Speaker 5 (30:31):
Solve that housing problem without running into let's call it
people being upset their home prices have gone down, is
to do this factory town factory compound approach, where like
you have to work at Tesla to get the Tesla housing,
which then means that the Tesla housing doesn't necessarily deflate
Palo Alto households or whatever.
Speaker 2 (30:50):
I just have one last question, which is you talked
about how in you know, in the versioning defense tech
sector and other areas public private partnership. I don't know
if there's new administration has any interest in that. It
doesn't seem like it, but maybe on defense I wouldn't
be surprised. But talk to us about like VC funding
and their demands and their willingness or unwillingness to sort
(31:14):
of fund Basically, where's the funding come from for real
risky upfront capital outlay if we're talking about US manufacturing.
Speaker 5 (31:24):
Yeah, So, I mean, I think some folks successfully raise
for this in like twenty twenty one, twenty twenty two,
but there's like it's honestly, there's a missing piece here, right,
So the problem is the US has an awesome stock
market well until this week.
Speaker 4 (31:36):
Yeah, But basically, if.
Speaker 5 (31:39):
I want a three x return on something, there are
a million different competing things to do, So I have
to be uniquely obsessed with reindustrialization to like kind of
do something like that, like basically build a plant that
maybe three x's or something like that. It does not
have VC shape returns, is the problem. Yeah, and their
LPs are folks that are allocating into other types of
(32:02):
businesses or other types of investment vehicles, not just VC
that have those return profiles. So it's this weird game
of like the VC mandate is to basically fund advanced
technologies with disproportionate return, But hey, I want to build
a lift the m myron phosphate battery plant. We still
we seem to keep not succeeding at that because you
(32:25):
don't have like an advantage versus a Chinese plant. But
if I had went and invented like a new type
of battery material that three x is my energy density,
a VC would love to back that.
Speaker 4 (32:37):
But even then it's like do you invent that? How
do you actually get.
Speaker 5 (32:40):
Enough funding to build a plant to supply that to
all the automakers, you end up in this missing what
I think it's called like a missing middle situation. And
maybe this is more of an ask of private equity,
but like we need to get a little more ambitious here,
and maybe the right answer is like the government plus
private equity plus the banks need to get together and
figureigure out how to address some of these gaps. Basically
(33:03):
Elon again, I'll go pick on Elon because he's again
he's the only got.
Speaker 4 (33:05):
To figure this out.
Speaker 5 (33:06):
It's traditionally been the case where like you need to
figure out the kind of like increasingly growing lily pads
to hop to when you're like a frog. Yeah, and
eventually you get to a big one. But this is
not how like we built giant factories in World War Two.
It's like, this is not how we did this sort
of scale out in the past, requiring sort of like
you're almost like not doing the thing you eventually need
(33:28):
to do going you have to kind of.
Speaker 4 (33:30):
Keep growing again.
Speaker 5 (33:32):
I think Elon has solved this by being his own
fund in a sense, like he raises from VC, but
in some sense he's like an aggregation point where he's
like the general partner of Elon Industries.
Speaker 4 (33:43):
Effectively, and that's a hybrid VCP fund.
Speaker 2 (33:45):
Yeah, Sam Demiko, perfect guest to talk right now. Thank
you so much for coming back on odd Lunch.
Speaker 4 (33:51):
That was great. Thanks for hosting Tracy.
Speaker 2 (34:06):
In that conversation, we talked about Nimbi's and Yimbie's provincial
competition between China and how that compareson contrast versus state competition,
the limits to VC funding models in terms of domestic reindustrialization.
We hit a lot there that was a very like
that was a media Odd Lots conversation.
Speaker 3 (34:25):
There was so much there. I really thought, you know,
sound was going to come on and be like, oh, yeah,
we're looking for a new supplier in a country that
is not China, or we're thinking about maybe switching some
production domestically. That didn't come up, which kind of tells
you something. But yeah, he hit some pretty big structural
(34:45):
themes I think.
Speaker 2 (34:47):
Yeah, I mean, this is just the thing, like a
lot of people accept this premise that the US should
not be so dependent on China for various manufactured.
Speaker 3 (34:58):
Goods, right and others as well.
Speaker 2 (35:00):
Yeah, I mean this was big under the Biden administration,
is obviously big under Trump.
Speaker 4 (35:04):
One.
Speaker 2 (35:04):
Many people are concerned about this, but like when you
just look at the reality of actually existing supply chains,
that doesn't exist, and like, okay, like these immediate tariffs
go into plays, they don't exist, and I think, you know, look,
we're recording this right now, April tenth to eleven forty seven.
We see the Nasdaq it's down four point eight percent
(35:27):
again after Wednesday's big rally. It's sort of I think
today is about syncing in. Even with all else aside,
this gigantic tariff on China is massively disruptive and there
is no short term path for reshaping supply chains, right.
Speaker 3 (35:42):
And I think the other interesting point that Sam brought
up was this idea, well, you know, there is an
adjustment cost, and there's a certain amount of time you
need to actually make that adjustment to your point, And
it would be helpful if the administration maybe a sempted
certain things that it thinks are important to the kind
(36:04):
of American manufacturing that it wants to actually see that
hasn't happened. I don't know why not. I thought it
was kind of funny. Did you see, So the US
has been importing more eggs because of egg prices, egg shortages,
and apparently those are going to be tariff too, so
kind of kind of weird.
Speaker 2 (36:24):
The Elon tenth story, I did not realize so interesting
that actually was. I thought I sort of thought it
was like, Oh, they didn't have space in the factory,
so they're like throw this, And I did not realize
that that was actually a story about zoning, permitting, et cetera,
and that that was really about finding some loophole in
the law to stand up a manufacturing facility rather than
go through like a multi year process. That's fascinating to me.
Speaker 3 (36:46):
Did you never have to like be in a sort
of outflow like trailer while you were at school, Oh,
because they were working on something or there wasn't any
more room, they couldn't build any new space. That happened
a lot to me. Yeah, So I kind of imagine
Elon doing the same. On that note, shall we leave
it there?
Speaker 4 (37:06):
Let's leave it there.
Speaker 3 (37:07):
This has been another episode of the Audlots podcast. I'm
Tracy Alloway. You can follow me at Chracy Alloway and.
Speaker 2 (37:12):
I'm Joe Wisenthal. You can follow me at the Stalwart.
Follow our guest Sam Dimico, He's at s Dimico. Follow
our producers Kerman Rodriguez at Kerman armand dsh I'll Bennet
at dashbot and Kilbrooks at Kale Brooks. For more odd
Loss content, go to Bloomberg dot com slash odd Lots,
where we have a daily newsletter and you can check
out all of our episodes and you can chat about
all of these topics twenty four to seven in our
(37:34):
discord discord dot gg slash hot Lots.
Speaker 3 (37:38):
And if you enjoy odd Lots, if you like it
when we check in on the manufacturing of electric stoves
in the face of sweeping tariffs, then please leave us
a positive review on your favorite podcast platform. And remember,
if you are a Bloomberg subscriber, you can listen to
all of our episodes absolutely ad free. All you need
to do is find the Bloomberg channel on Apple Podcast
(38:00):
and follow the instructions there. Thanks for listening.
Hosts And Creators
Joe Weisenthal
Tracy Alloway
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