Inside Tony Hsieh's Quiet Plan To Bankroll Hardware Startups 40
curtwoodward writes "Tony Hsieh made a fortune turning Zappos into a customer service-obsessed online shoe store. But as an investor, his newest obsession is ... robots? Welcome to the hardware boom, where startups making connected gadgets, smart vehicles, and drones are catching investors' eyes. A combination of cheaper components and crowdfunded pre-orders are behind the surge. But as the woman running Hsieh's hardware investments can tell you, getting those grand plans actually built overseas is the hard part."
So why not build them in the US, then? (Score:4, Interesting)
"But as the woman running Hsieh's hardware investments can tell you, getting those grand plans actually built overseas is the hard part."
So lets build them here (the US, for this writer) instead of overseas? Or if someone in Germany comes up with a startup idea, build it there. Why must everything be outsourced? Keep production local with design and management for faster communication, better quality, and better paying jobs in your area!
Re:So why not build them in the US, then? (Score:4, Informative)
Because your job running a corporation nowadays is solely to provide a return to your investors soon, and little else, with little regard for anyone's long-term best interests.
I hate being all, Coprorations are evil, maaaaaaaaaan, but well...
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From a practical standpoint, it's about liability. All three of those jobs perform duties that society considers important enough that we need to be able to "reach out and touch" them with the legal system (either civil or criminal) if they screw it up badly enough. Foreign nationals are notoriously hard to punish with US laws. This is, of course, ignoring the legal reality that (at least in the case of politicians) the legal system doesn't seem to apply to them much of the time. Right or wrong, most com
Not evil, they're facing senior citizens (Score:2)
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So when you complain about Wall Street wanting returns now, bear in mind that this is due to the boomer population retiring and wanting their money right away.
Of course, it's the evil boomers! Never before has Wall Street concentrated on short term gains. The 80's and 90's never happened.
the greatest wealth transfer in recorded history is going on right now. It's not the 99% to the 1% as we like to think; it's the younger generations paying off the Boomers, and it's going on around the world.
So there's something wrong with retired people cashing in on the investments they made so they could retire? If it's happening on such a vast scale, it should mean there are some great deals for younger generations to invest in. BTW, which cliche is correct, the one that says boomers didn't invest for their retirement, or the one that says them cashing in on those investments the
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"But as the woman running Hsieh's hardware investments can tell you, getting those grand plans actually built overseas is the hard part."
So lets build them here (the US, for this writer) instead of overseas? Or if someone in Germany comes up with a startup idea, build it there. Why must everything be outsourced? Keep production local with design and management for faster communication, better quality, and better paying jobs in your area!
It says right in the article:
“We faced this kind of valley of utter despair that most hardware companies face,” McCabe recalls. “You realize that you can’t make many more products in-house, and you can’t do it in the United States—you have to go overseas.”
OK, it doesn't say in the article. Someone should elaborate on that "despair of the hardware companies".
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OK, it doesn't say in the article. Someone should elaborate on that "despair of the hardware companies".
Yes, and particularly this bit about "you can't do it in the United States." That seems a rather outrageous claim to me, especially now that many corporations are moving their manufacturing and production facilities back to the United States.
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Not jobs, just the facilities. We've got robots!
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"Not jobs, just the facilities. We've got robots!"
Either way, it's still "production capacity" which is a boost for the local economy. While more jobs might be desirable, for the overall economy the production capacity is still a good thing.
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I don't know if you've noticed, but "the economy" when taken as a widescale, averaged thing is doing just fine, and has been since at least 2010.
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I don't know if you've noticed, but "the economy" when taken as a widescale, averaged thing is doing just fine, and has been since at least 2010.
I would have to take issue with that. 0% prime interest plus QE plus huge deficits plus inflation plus low employment doesn't equal "fine".
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here's a link to a Sparkfun blog article on the "pit/valley of despair" that small hardware companies face: https://www.sparkfun.com/categories/20 [sparkfun.com]
Basically you make a few things by hand for yourself, and your friends, or you go to China and Manufacture (with a capital "M") there's nothing in between the two that's economical, though I do think that's changing with the arrival of cheap pick and place machines (another fallout from the 3D printer revolution)
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https://www.sparkfun.com/news/909 [sparkfun.com]
Is this the article?
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I do think that's changing with the arrival of cheap pick and place machines (another fallout from the 3D printer revolution)
Pick-and-place machines were not terribly expensive to begin with, there haven't been any recent big cost reductions, it has little or nothing to do with 3D printing, and pick-and-place machines cost the same here or in China. For many years now even small job shops (fewer than a dozen people) have had their own pick-and-place and reflow equipment.
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After reading the article in more depth, the person interviewed apparently just gives up on the idea of making stuff here in the US:
"You realize that you can’t make many more products in-house, and you can’t do it in the United States—you have to go overseas."
I would disagree. You may not be able to make or source every little component here in the US, but the overall product certainly could be built here. It would cost more, that is true, but in many cases the benefits will outweigh the c
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They do this China vs US breakdown every time a new iPhone teardown happens.
It costs Google about $4 more a unit to make Motorola phones here:
http://www.forbes.com/sites/timworstall/2013/09/25/if-apple-brought-iphone-manufacturing-to-the-us-it-would-cost-them-4-2-billion/ [forbes.com]
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There is a difference between making stuff cheap, and making stuff good.
If you want to make it cheap, then China is your go-to place.
If you want to make quality items, then you have a choice from a lot of countries. The US is one of the best choices for anything robotics, Germany and most of Europe is good for high tolerance manufacturing (high security tumblers for locks), and so on.
Re:So why not build them in the US, then? (Score:5, Interesting)
I work for a semiconductor factory in the US. We have factories in Japan, China, Taiwan and Malaysia as well.
Which one actually makes the lowest cost and highest quality parts? The one in the US.
Yes, the average salaries are far lower in most of the other countries. But their quality is crap and we have to fly our engineers over there to supervise their engineers all the time. Innovations and changes only come from the US factory. The rest are content to do it the way they always have and fight us on making any change. It's a cultural thing, really.
If we had been as resistant to change here in the US we would have closed down a decade ago and all our manufacturing would be overseas. But we're pretty dynamic and we change the way we do things fairly regularly to stay efficient.
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"Russian Components, American Components, all made in Taiwan!"
The difference between assembled in the USA and assembled in China is that in China, you can roust several thousand people out of bed at 2 AM and have them start assembling by 3 AM
I would disagree. You may not be able to make or source every little component here in the US, but the overall product certainly could be built here. It would cost more, that is true, but in many cases the benefits will outweigh the costs IMHO.
The benefits don't outweigh the costs, or everyone would have moved their manufacturing already.
China's main benefit is a critical mass of manufacturing that's all in one place.
They have industrial zones where you can find/spec almost any component you need.
But, as Chinese wages are increasing, the gap is closing with Central/Sout
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in China, you can roust several thousand people out of bed at 2 AM and have them start assembling by 3 AM
Only if you have Apple's clout. They're not going to do that for some outfit that needs a measly 100k units/month.
The benefits don't outweigh the costs, or everyone would have moved their manufacturing already.
That doesn't follow - the costs and benefits depend on a number of factors, including production volume. Not everyone produces in Apple's quantities. Also, you seem to think that businesses always make cold rational calculations, and never follow fads. Nothing could be further from the truth.
China's main benefit is a critical mass of manufacturing that's all in one place.
You mean like the US used to? That's the vicious cycle of American stupidity in letting everything be mov
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Except in Mexico, you have to worry about cartels kidnapping your employees or shaking down your factories. Mexico is a failed state; they now have vigilantes who are so sick of the corruption they've taken up arms and seized towns, shooting at both cartels and Federal police and arresting the latter. There is no rule of law in Mexico, and the situation is getting worse. You'd have to be insane to set up a factory there.
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"You realize that you can’t make many more products in-house, and you can’t do it in the United States—you have to go overseas."
I would disagree. You may not be able to make or source every little component here in the US, but the overall product certainly could be built here. It would cost more, that is true, but in many cases the benefits will outweigh the costs IMHO.
Building everything in China is a mindless reflex. These startups are often only looking to make a thousand pieces or so at first. I can tell you from experience that it's not worth making that in China - the headaches, other costs, delays and quality and communication problems vastly outweigh the small cost savings. Just the airfare will kill you. If you're making millions of pieces, it's another story.
The problem from my experience is that American manufacturers, including small contract manufacturers (wh
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From what I've seen, the American contract manufacturers generally have extremely high prices, because they get most of their business from the military sector where they're happy to pay $600 for a toilet seat. If you're not doing military-funded work, it generally is just too expensive to get anything made in America.
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Even as a damnyankee I recognize that the South is part of the US. Actually our position has always been that states can't secede, so despite the late unpleasantness, you never left the union. Language can be a problem, but an English speaker can usually get the hang of it more easily than Mandarin.
All joking aside, I would love to see more of this stuff built in any part of the US. I pray this is not some overly hopeful perception on your part.
As for semiconductor foundries though, Dallas and Austin have l
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Because while getting them built overseas is hard, getting them built in the US is impossible.
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Because while getting them built overseas is hard, getting them built in the US is impossible.
And on what experience do you make that statement?
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Why must everything be outsourced
Cause that's how they were taught in MBA school.
Are there other ways? Yes. Do a lot of folks know them? No. Hence, would you take a risk to an alternative business approach (e.g. Zappos doesn;t make anything, just aggregates from the real manufacturers... in Asia)? Hell no.
It's much like SpaceX keeping manufacturing in the US. Surely they could go overseas, but they did find a way to keep it local.
Customer service versus Order Fullfilment (Score:2)
And while we want jobs that are not critically dangerous, like mining, or just morally wrong, like selling psychotropics to kids, the jobs that Amazon provides are not considered ethical. I can certainly see the point. Amazon should spend more on wages for workers and providing a comfor
Robots are the way to go. (Score:2)
I wish someone would fund my robot invention. The profit in this industry is stupidly crazy for the right design. Alas I don't have the business skills to go along with my technical skills.