Latest / The ReForge Podcast / What Survives to 2036 (with Const Ivanov) | ReForge 022

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What Survives to 2036 (with Const Ivanov) | ReForge 022 · The ReForge Podcast

• 0:03
  Welcome to the Reforge podcast.
• 0:05
  I'm Matthew Chang, and we're here to explore all things AI, automation, and the American worker, proving that the American re-industrialization is possible, pivotal, and pressing.
• 0:17
  Thanks for joining us today.
• 0:18
  Let's get into the episode Welcome back everyone.
• 0:25
  I'm Colin Russ, and this is episode 22 of The Reforged Podcast.
• 0:30
  Today, joining us is Konst Ivanov.
• 0:33
  Konst is the founder and CEO of DigiFabser, a platform that helps job shops and custom manufacturers with their entire instant quoting, order management, and digital sales, often described as the Shopify for manufacturing.
• 0:49
  With over a decade of hands-on experience in the industry, Konst previously ran his own machine shop and has worked with hundreds of manufacturers across dozens of countries.
• 0:57
  He's also the author of the recent Hopium newsletter, where he cuts through the hype with clear data-driven analysis on US manufacturing and reindustrialization.
• 1:09
  And we have brought him here today to talk through his latest piece, which looks ahead onto what manufacturing will actually look like in 10 years, 2036, that 10-year bull run that we love, and that's exactly what we're gonna dive in today, along with how his company is helping shops navigate that future.
• 1:27
  Konst, welcome to the show.
• 1:28
  Thank you.
• 1:29
  Great to, great to be here.
• 1:31
  So, you know, absolutely loved the, the article.
• 1:35
  Um, we'll get into that in a minute, but tell us, what did I miss, you know, i- in that brief intro, what, what did I miss about you?
• 1:43
  Um, not a lot actually.
• 1:45
  I mean, um, I think you covered pretty well.
• 1:47
  So again, um, mostly in the last, I don't know, 15 years, last 15 years, I basically run machine shop for about, I don't know, six years or something like that.
• 1:56
  So we sold the shop then.
• 1:58
  And yeah, uh, since then we basically built DigiFabser.
• 2:01
  Uh, we try to, you know, sell to as ma- as, as, as many, as many shops as possible on the market, like here and abroad.
• 2:09
  And it was interesting.
• 2:10
  Um, interesting journey for sure because again, like you can imagine, like, you know, it's a, it's a very different challenge, uh, when it comes to working with the shops, you know, in US, abroad, different, you know, dealing with different owners, different, different business models and all of that.
• 2:27
  But again, like, I think it's a, it's a great journey because again, we, we learned and I, I'm of course myself, I, I, I learned a lot.
• 2:34
  A lot of the everything from the business models to how those shops run, you know, and everything in between.
• 2:40
  So it's a, it's, it's just great thing.
• 2:42
  Yeah.
• 2:43
  That's awesome.
• 2:43
  You know, and we were talking before we started a bit how, you know, s- so many of these shops are just not really, um, necessarily prepared for some of that, and it's, you know, that, that model hasn't really changed much in 40 years.
• 2:55
  But even with that, you know, there's still so much to learn.
• 2:58
  You, you mentioned kind of the international piece.
• 3:00
  Matt obviously has extensive experience traveling around the world with, with some of those, uh, international conglomerate company types, so he can relate, I'm sure.
• 3:09
  Yeah.
• 3:09
  I'm curious, um, from your time hands-on running the shop, you know, you said you ran it for six years.
• 3:15
  What i- what was kind of the big learning that said,"Okay, now I'm gonna make a technology product for that industry"?
• 3:22
  Yeah.
• 3:22
  Mostly, again, we deal with a lot of the customers that don't have a lot of experience, like in, for example, even preparing, you know, CAD models to be sent to, like, you know, uh, to the actual shop on the design side, on the DFM side, and all of that.
• 3:36
  And we just try to, like, basically make the barrier, entry barrier as low as possible.
• 3:42
  And that's why, again, like that, that was the kind of the initial, you know, um, initial inspiration behind Digifabster.
• 3:49
  Well, I mean, behind the software that we built for the shop even before Digifabster.
• 3:54
  So basically...
• 3:55
  And again, I mean, we try to...
• 3:57
  And again, that's one of the reason why we're called, like, Shopify for, for machining, Shopify for machine shops.
• 4:02
  We just try to make it as, as easy as possible, first for the customer, but second, secondly, of course, we quickly realized that we actually making our own work, front office work and back office work at the shop much easier.
• 4:14
  Because again, a lot of the stuff that we're getting from the customers is basically ready to be machined, to be printed, because again, we also, uh, did a lot of 3D printing at the time.
• 4:23
  Uh, so yeah, it just, you know, just actually help you to run things more efficiently, which I think is the most important thing at the shop.
• 4:32
  Because again, you can't run a shop with, like, 50 people, 100 people, hun- 150 people.
• 4:37
  You can scale it to that kind of, to that level, but it's, but it's really, it's extremely, extremely hard.
• 4:43
  So if you, if you kind of from the ground up think about efficiency, like maybe even revenue per, uh, employee, you know, uh, as the, as the biggest metric, I guess, that's what we kept in mind for, for many years, and that was the basic intention behind the software initially.
• 5:01
  That's amazing.
• 5:01
  So you- And Colin, let me get your take.
• 5:04
  The operator turned technologist, how important is it to have that operations experience up front?
• 5:11
  I, I th- I mean, I, I'll, I'll go ahead and, and let you jump in a second, Kos.
• 5:16
  I think, Matt, to your point, I, I think both, you know, either direction you go, operator to technologist, technologist to operator, I think there's a huge amount of alpha in there just because you have such a different perspective.
• 5:30
  If you can bring that operations piece to the technology, the understanding of how things actually work, not just, okay, here's what the straight line path should be, but understanding practically speaking, why do we have these little steps?
• 5:44
  Why do we have these little things that take us kind of off what would appear to be the straight line path?
• 5:49
  That knowledge is incredibly valuable, so being able to bring that to, well, how do we build a technology solution that supports that in a real world scenario i- i- is massive.
• 6:01
  But it also from product perspective means, hey, people are actually going to use it and take advantage of it because it is a process that is more natural and they're something they're more acclimated to.
• 6:12
  The biggest problem is when you have a solution in search of a problem, which so many of these software, quote, unquote software, um, it's bloatware half the time, but software that these people build, they don't have that experience in the industry.
• 6:27
  And so they, they go off of what they think because of a Google search or today AI search said the process should be- Or, or what it should look like, but they've completely missed all the practical real world issues, or even just the things that you don't track in a process but happen and are, are part of just that day-to-day life cycle.
• 6:48
  Yeah.
• 6:49
  Yeah.
• 6:50
  I, I, I think I'm gonna have a bigger...
• 6:52
  A bit, a bit longer que- uh, longer answer on that.
• 6:55
  But again, probably because I started probably my first company about 20 years ago or something like that, so again, I did, like, tons of mistakes, like tons of mistakes, of course.
• 7:06
  And specifically to your point, like, yeah, I mean, in the past we build the solutions before knowing actual problems and, like, knowing everything, you know, what actually happened on the ground.
• 7:15
  So we did those mistakes multiple times.
• 7:18
  So it was a, it was interesting to learn, but- It's a great way to learn.
• 7:21
  It can be expensive, but it's a great way to learn.
• 7:23
  I think that's the best way to learn, especially if you are in your 20s.
• 7:27
  Probably the whole thing that you need to do for the next 10 years, you just need to learn through your mistakes, and that's gonna be the best kind of the school, I guess, for you.
• 7:36
  So that's, that's my reading of that.
• 7:38
  But, but, but yeah, like, uh, to the point of the, uh, operation.
• 7:41
  So yeah, I mean, it's, it's a, it's a quickest feedback loop.
• 7:44
  It's a basically quickest possible feedback loop.
• 7:47
  And that's one of the reason why, again, I mean, we initially obviously build this software for our own shop, again, talking about this, uh, quick, uh, feedback loop, and that's one of the reason why now those shops are building or white coding, I guess, a lot of the software in-house also because of the same reasons.
• 8:04
  It's a quick feedback loop.
• 8:06
  Which is very good, of course, it's, it's, it's extremely v- valuable of course.
• 8:10
  At the same time, again, um, there's some ceiling to that, so you can white code to, like, some of the level of course, and then probably the maintenance cost gonna be pretty, pretty high, you know, to sustain that.
• 8:24
  Uh, and again, if you are the scale where you can actually spend, like, millions per year on actual only, only development, only software development specifically, well, I mean, you're in a good position.
• 8:33
  You're definitely in a good position.
• 8:34
  You can keep going.
• 8:35
  You can, you can keep going with all the in-house development.
• 8:38
  If not, that's, that's a problem.
• 8:40
  Again, you white code, you, you whi- you white code your way to, like, uh, have expensive, expensive, very expensive departure, uh, department at your company, which is not actually create actual, you know, revenue.
• 8:51
  They actual just, you know, the, the expense, expense department, basically.
• 8:55
  But yeah, again, like, I think the feedback loop is extremely, extremely, uh, important and, you know, with AI it's, yeah, it just a way to, to, to break things, you know, faster, learn and all of that.
• 9:06
  So that's, that's beauty of course.
• 9:07
  But again, you just need to be conscious about, like, you know, limitations and the ceiling and all of that.
• 9:13
  So No, ab- absolutely.
• 9:16
  I mean, I think you, uh, hit, hit on some key stuff that really leads well to, uh, the, the post you wrote, What Survives to 2036?
• 9:26
  Um, I, I mean, this is just a, a really great Great piece here.
• 9:31
  Um, I, I mean, I, I don't, I don't know where, uh, w- there's so many different places we could start, but Matt and I obviously are very bullish on the 10-year run.
• 9:41
  Um, huge upside opportunity there.
• 9:44
  A- and I think one of the things that stood out to me, um, was the labor section.
• 9:49
  I, I thought that was just so strong, particularly where you hit on it about kind of pushback on the just make manufacturing cool again.
• 9:57
  Everybody would love to.
• 9:59
  You know, it's, uh, I, I think easy to say make manufacturing cool, um, and that fixes things.
• 10:05
  Um, but I, I'm, I'm curious, you know, w- what is your kind of view on that?
• 10:11
  What, what's the single biggest lever you think so many shops could, could actually take to move wages and, and really drive participation in the skilled trades?
• 10:22
  Um, yeah, so it's interesting topic because again, like at the beginning, sort of the beginning of the reindustrialization movement, I like, I was also like, you know, pretty hyped to be honest.
• 10:33
  Like, yeah, you know, it's, uh, actually pretty exciting to...
• 10:36
  Uh, partially because again, like we started DigiFabser in 2016 or'17 or something like that.
• 10:42
  So at that point, I mean, it, it, it was completely impossible to raise the money to actually make anyone ex- excited about that, excited about manufacturing at all.
• 10:51
  And of course once you like, you know, you see like it's actually popping up all the reindustrialization stuff, it's, it's happening, you're like,"Okay, it's cool." So yeah, so from that perspective, I was excited as well.
• 11:02
  Then of course I started to realizing, you know, it's, uh, as we- every single, um, kind of the hype cycle that happened before, you know, you know, you, you, you started to see the companies that's popping up, raising money sometimes for very odd things, awkward things that doesn't make any sense and like you're thinking about why it happens.
• 11:23
  But you of course then realize like, you know, this is how YC works sometime, this is how VC works sometime, this is how money works.
• 11:31
  So totally get it.
• 11:32
  Totally get it.
• 11:33
  And again, it's at the end of the day, it's a lot of just, you know, people making bets, which is, which is fine probably.
• 11:40
  But yeah, so like my, my kind of reading, so I would love to make manufacturing more exciting to more people of course.
• 11:48
  At the same time, it still need to answer the same question, which is basically pay, like wage of course and all of that.
• 11:56
  So if you can't make a living, especially in US, especially in like top states, if you can't make a living with a paychecks from your manufacturing company that you work for, I mean, you can think about manufacturing whatever you th- whatever you, whatever you want, of course it, it makes it as cool as possible, but it's not gonna pa- pay your bills.
• 12:15
  At the end of the day, people, people have families they gotta support.
• 12:19
  Yes.
• 12:19
  Yeah.
• 12:19
  We, we have this concept we've talked about before called my dad's job is cool, or my mom's job is cool So when you're, when you're a kid and your parent works in a manufacturing site, they have access to technology, software, robotics, those sort of things, then it's, it's one of those deals that makes the job cool for the kids.
• 12:39
  'Cause you could take your kids, it's, you know, take your kids to work day or have a school field trip.
• 12:43
  To, to Colin and I, that's where things have to get to, is where the technology inside the factory is so cool that that's where the schools wanna schedule the field trips.
• 12:52
  Mm-hmm.
• 12:52
  And that's what leads to a lot of pride in the family.
• 12:54
  Mom and dad wanna go work in manufacturing'cause it's a cool job.
• 12:58
  But one of the things I love that you did is you connected, so far in this interview, you've connected it to two economics.
• 13:03
  Number one, revenue per employee, and then the next one is wa- real wages going to the workers and the operators.
• 13:10
  One of the things I'm curious about is, I think you're probably on the frontier with DigiFabster.
• 13:16
  Uh, do you think we have excess capacity in our machine shops and factories in the US that we could unlock if we could connect demand to production?
• 13:27
  It looks so.
• 13:28
  It really looks so.
• 13:29
  It looks like that, again, at least from the perspective of the customers that we work with, there's a lot of the, you know, they have a lot of the equipment that just sitting could do nothing.
• 13:39
  I mean, not most of the time, but maybe 30%, 40%, which is a lot.
• 13:43
  You know, it's a lot.
• 13:44
  It's not like 24/7 uh, operations, nothing like, like even close to that.
• 13:49
  Also, of course, it depends on the shops.
• 13:51
  Like, some of the most successful shops, yes, they busy.
• 13:54
  They, they extremely busy.
• 13:55
  But again, if we're talking about like, like the, the, the total market, and again, uh, I mean, obviously there is different numbers, uh, about that.
• 14:02
  So so- some people saying it's 20,000 shops, uh, in US.
• 14:05
  My reading is, like, maybe 10, maybe 10,000 at, at best.
• 14:10
  Really, at best.
• 14:11
  And among those 10,0000, you, you, you may think about only maybe couple thousands what we could consider, like, really the best shops from the perspective of, you know, they nail it down operations.
• 14:23
  They nail it down everything.
• 14:24
  It's really almost 24/7 operations.
• 14:27
  It's a lot of automations involved already, so they know all their stuff, of course.
• 14:31
  So the market itself not that big, actually.
• 14:35
  I mean, it's still kind of big, but not like, not like 20,000 kind of a shop big.
• 14:40
  It's, it, it, it's, it's much smaller.
• 14:42
  Um, and yeah, so again, I think it's, uh, we, we have a capacity.
• 14:46
  We, uh, a 100% we have a capacity.
• 14:48
  That's not a question.
• 14:49
  It's more about, like, uh, you know, this old thing where again, shops just refusing, uh, taking the jobs because it's not a good fit for some actually, like, reasonable reasons, actually.
• 15:02
  Yeah, so it, for, for them it's not a good job because again, it's, they gonna be running it through couple people to just, you know, estimate it then to generate the G code and all of that.
• 15:12
  Yeah, makes sense because it's labor-intensive thing.
• 15:15
  But it shouldn't be like- They don't need the loss leader.
• 15:17
  Yeah.
• 15:19
  So I, I, I, I'm gonna agree in a weird way with you that, yes, I think we have that, th- theoretically we have that capacity, Matt.
• 15:30
  I think one of the biggest things is it is unrecognized capacity because to the point Const made, we have thousands of these shops, but if you look at the OEE for most of them, if you look at the spindle time for them, they are operating at such a low level in terms of that utilization and that OE that that's where we get to this whole we don't have the capacity.
• 15:52
  We don't have, you know, the, the bandwidth to put these out.
• 15:56
  I've talked to shops, I was looking at a shop that they run, you know, a single t- 4/10 shift.
• 16:02
  They aren't taking any more work because doing so would mean they have to add another shift.
• 16:09
  They're running one shift.
• 16:10
  They have more capacity.
• 16:11
  They could be tripling their output theoretically, but they don't for labor, for, for all sorts of reasons, uh, to, that Const kinda laid out with the investment you have to make.
• 16:21
  But it's this weird gray area, I would argue, is that we, we don't have- Yeah it filled out, and I think that's what I, is, wh- what I loved about the ar- what, what you pointed out in the article and frankly what you're doing with DigiFabster is those are the things that we have to use to unlock that unrealized capacity, that is kind of dormant capacity.
• 16:41
  Yeah, I mean, we see this, um, you know, traditionally, uh, Colin, you know this, at Chang Robotics we serve very large, high velocity manufacturers, and we don't do a lot with low volume or single shift.
• 16:53
  Um, it's kinda this old anecdote that automation doesn't pay back on a single shift.
• 16:59
  Um, it, it breaks even on the second shift, and it prints money on the third shift, right?
• 17:03
  Mm-hmm.
• 17:03
  So for those firms that are kinda stuck in that SMB trap where they, they can't quite get to the 24/7 production, the six or seven day a week production, um, a lot of our clients, uh, manufacture for 350 days a year, then you've got this kinda weird thing where, um, the order profile coming from the industry, which requires all kinda different value added steps, like it could be anodizing or it could be painting or it could be sandblasting or it could be some sort of special chemical treatment that goes along with the part order.
• 17:35
  I, I would assume, Const, that's why some of these orders get turned down is there's too many little supply chain steps required.
• 17:42
  We as a country haven't done a good job connecting all those, that web of interdependencies so that people can really manage the supply chain and unlock their own capacity for receiving orders or contracts- And then the next is the, the customers don't necessarily know where to go if they want a part, right?
• 18:01
  There's not a true marketplace that they feel comfortable turning to where they say,"Oh, okay, it's like Amazon provides a marketplace.
• 18:07
  I can get most things I want there." Um, Shopify provides a marketplace.
• 18:12
  I'm glad you're solving that, but it sounds like prior to DigiFab, sure, taking off, there was no marketplace.
• 18:18
  And then, you know, at Reindustrialize we met with, um, with Tom Cizek.
• 18:23
  He and I flew the, the plane together, the Boom, uh, simulator, Colin, and, uh, and he's doing the same thing for bill of materials, right?
• 18:30
  So he's trying to create all these...
• 18:32
  the different data and intelligence around the various components that go into sub-assemblies and assemblies.
• 18:37
  It's such a complex environment, I think we have to solve several things at once.
• 18:42
  We have to solve the marketplace, we have to solve this complexity of the bill of materials and any traceability that goes into it, and then we have to create a training and capital environment where the small shops can automate to get that second shift and that third shift.
• 18:58
  Uh, and that's one of the things we see with capacity constrained smaller manufacturers.
• 19:02
  Uh, I've got a handful of aerospace clients right now that do four tens.
• 19:06
  That's their standard.
• 19:06
  Yeah.
• 19:07
  They're complaining that they're capacity constrained.
• 19:10
  Easiest way to do that- Mm-hmm add a second shift.
• 19:12
  But to add a second shift, you have to add automation.
• 19:15
  You have to take half your workers from the first shift and move them to the second shift because they're in towns where they can't employ more people.
• 19:21
  You just literally can't get more people in the building.
• 19:24
  And that's, that, that's runs into tons of issues.
• 19:26
  I mean, I, I've, I've seen that as well.
• 19:28
  It's like, okay, yeah, I could split them, but now I don't necessarily wanna pay, you know, a premium to have these guys work in that late shift or whatever.
• 19:36
  And I get it, it makes sense.
• 19:38
  It's...
• 19:38
  but these are exactly the types of challenges these smaller shops, especially in, you know, if they're outside of El Segundo, if they're outside of Detroit, you know, if they're, they're not in, quote-unquote, your, your big time markets for this, y- you're...
• 19:52
  it's not talent constrained, it's just that's the environment you're in, and it certainly is a, uh, a, a challenge to, uh, say the least.
• 20:02
  Now, one of the, um- Uh, y- y- you hit on the tourist capital.
• 20:09
  Um, frankly, I freaking love that term.
• 20:11
  Um, I think it is just such a dead-on way to, uh, fr- frame a, a lot of the players out there.
• 20:20
  You're-- You sound pretty confident that it leaves around 2028, 2030.
• 20:26
  Um, what kind of would make you maybe think that happen sooner or later, um, you know, or i- i- is that, do you think there's anything that changes that, that, that can really influence whether or not we see the sustained investment of capital and, and attractiveness?
• 20:44
  W- well, I mean, I, I, I, I will probably say, like, one of the obvious thing that, um, one of the things that can make, make, make a change, obviously, you know, sh- just, just, uh, a- administration cycle.
• 20:57
  That, that change the things a lot in the country.
• 21:00
  So, uh, we just have no idea what's gonna be next.
• 21:04
  Uh, and that might change all the, you know, VC focu- focus as well on the capital, on where exactly they deploying the capital and all of that, and that's, that will happen in what?
• 21:15
  In, like, three years from now, in two year from now, um, roughly.
• 21:19
  And yeah, so that's one of the thing, of course.
• 21:21
  Um, so, so, so yeah, again, like, that's kind of the structural problem, I guess.
• 21:27
  It, that's nothing, not like a thing that you can change, not even overnight, not even in, i- in, in decades likely, unless something big happen, which, you know, always can happen, of course.
• 21:38
  Um, so yeah, so, so I'm fully expecting that this kind of the, uh, VC w- wave o- of c- of capital, uh, specifically to the manufacturer's gonna, you know, gonna, gonna leave the, leave the ground to the next, you know, like, probably three, four years, five years max, I guess.
• 21:54
  That's, uh, to my mind.
• 21:57
  Um, and what's gonna be the next?
• 21:59
  That's a big question.
• 22:01
  I don't think it is, uh, it is change the defense and aerospace, um, area at all because, again, obviously, those guys have, like, very long-term plans, like, at least next 10 years kind of the plans, which also, like, hard to, hard to change, so that's not gonna, gonna change.
• 22:18
  So the problem is- It might not change anything like from what we saw in the last, whatever, 40 or 30, 40 years.
• 22:28
  So defense and, and, and aerospace always was well-funded, relatively well-funded, right?
• 22:33
  Yeah.
• 22:34
  Um, so this wave of the, this money goes into like, you know, general manufacturing is nice of course.
• 22:40
  And then the question is, who actually can survive post that, right?
• 22:44
  Who can actually get to the level where they have like, you know, what I call boring revenue, all of that.
• 22:50
  Uh, so those gonna be winners for sure, because again, they might survive through, you know, kind of the next cycle where, you know, money is not gonna be, you know, in reach from like any VCs, so you have to live on your own revenue and then all of that.
• 23:06
  So, and I think it's nice.
• 23:08
  It's a healthy thing.
• 23:09
  It's a healthy thing.
• 23:10
  So yes, it's kind of the, you know, only, only the best will survive.
• 23:14
  So why not?
• 23:15
  It's, it's a natural, natural thing, so.
• 23:18
  Yeah.
• 23:18
  I mean, my take, and I wanna hit two things w- while we have you, Konst,'cause I think you've got deep expertise.
• 23:23
  One is, is the capital transition.
• 23:26
  I agree with you.
• 23:27
  I think the tourist capital or the VC capital that's going into manufacturing right now is, um, it's like a sugar high.
• 23:34
  And, you know, I see what happens to my kids when I- Busy for a little bit, then we have a, a little crash afterwards.
• 23:43
  I think this is gonna be exactly the same, especially as firms become successful and transition to boring revenue.
• 23:50
  It's not a venture play anymore once we get to stable, boring revenue, and the, the, uh, the word that everyone in VC is allergic to is EBITDA, right?
• 23:58
  So when some of these companies get to profitability, okay, move on, look for the next industry.
• 24:04
  Um- So, so if Kelly Loffler ends up getting a, a, uh, the chance to listen to this, you know, what I've been plugging, I want your feedback on it, Const, is, um, we need to be implementing SBA SuperMAX loans for manufacturers.
• 24:19
  And the number that I'm thinking of that makes sense is 100 million.
• 24:23
  Everybody knows the SBA.
• 24:25
  Everybody knows the rules.
• 24:26
  Personal guaranteed debt, and you can use it for, you know, an approved list of, um, business activities.
• 24:32
  But I think we need to equip our SMB manufacturers, general manufacturers, with access to capital that doesn't rely on being sexy enough or vibe-cody enough for Silicon Valley.
• 24:43
  It just needs to be a bank application based on prior performance that unlocks their next step of capital investment.
• 24:50
  What's your take on SBA debt for manufacturers?
• 24:54
  Um, yeah, I think it's clear, um, that, you know, we all need, like, some sort of the government involvement into this thing, because this is a core thing.
• 25:03
  It's not like, you know, kind of random non-critical kind of the stuff like, you know, finance apps or, you know, like, dating apps.
• 25:12
  Nothing, like, even close to that.
• 25:14
  It's a core thing.
• 25:15
  It's really foundational core thing, which is, I mean, obviously government needs to be involved, and what's the best way to government to be involved?
• 25:23
  Yes, give them money and please, like, do not interrupt, do not, like, do anything else beyond that.
• 25:29
  Just give them money and walk away.
• 25:31
  That's, that's the best they can do.
• 25:33
  Sometimes it happens.
• 25:34
  Well, looks like in this country it happens more than in others.
• 25:37
  But yeah, I'm agree.
• 25:39
  I'm agree.
• 25:39
  It should, it, it should be there, for sure.
• 25:41
  And I mean, it's more, more to that, of course, like, when you think about, like, you know, uh, kind of the bigger picture with, uh, you know, uh, prices for materials and all of that.
• 25:51
  Some of those things extremely hard to change.
• 25:54
  Extremely hard to change.
• 25:55
  Like, you need to do a lot of the things, uh, locally, which is, which is investment.
• 26:00
  It's all about investment.
• 26:00
  It's like, it's the same, if not, if not bigger investments that it's already happening to AI.
• 26:07
  So, but who gonna, who gonna fund, like, all the kind of, you know, um, I, I don't...
• 26:12
  mills or, or stuff like that, like, with a- Yeah with the actual metal.
• 26:15
  Who gonna, who gonna fund that?
• 26:17
  Like, is it sexy?
• 26:18
  No.
• 26:19
  Is it gonna...
• 26:20
  And is it gonna, like, like, generate enormous returns tomorrow?
• 26:25
  No, of course not.
• 26:26
  So maybe boring money we can borrow sort of from a government.
• 26:32
  Yeah.
• 26:32
  I, I like to call it patient capital.
• 26:35
  But yeah- That's how I frame it.
• 26:37
  Yeah.
• 26:37
  All right.
• 26:37
  So do we have the endorsement that we, we should have a SBA product?
• 26:41
  Again, my proposal is 100 million, but it's the same criteria.
• 26:45
  The banks that do SBA loans know how to do it.
• 26:48
  We've got a number of, uh, you know, very active, um, SBA attorneys and whatnot and, and capital facilitators on X that we, we respond to.
• 26:58
  We have the infrastructure.
• 27:00
  Just give manufacturers, if they have the risk appetite to expand, to get the automation for second shift, to add the new warehouse so they can hold more inventory, that we should equip them with an avenue to do that.
• 27:11
  Yeah.
• 27:11
  100%.
• 27:12
  All right.
• 27:12
  100%.
• 27:13
  Cool.
• 27:13
  My, my next question is the silver tsunami.
• 27:17
  You've gotta be coming front and center with this with your customers?
• 27:20
  So many machine shops looking to retire.
• 27:22
  Of course, you have some, some, uh, some counter-narrative examples.
• 27:26
  You know, we see OSH 切 cut and Sin Cut Sin are just exploding, uh, because they are streamlined and they're very organized.
• 27:33
  Um, how do, how do we think about capacity expansion?
• 27:37
  Is it letting these old businesses retire out and just go away, or do we need somebody to step in that kind of wants to roll up the space and continue on their legacy, you know, in a, in a more modern operation?
• 27:49
  Uh, it's really depends, like, and again, like mostly it's a question who can, who can actually take a lead on that?
• 27:56
  I know a couple people, of course.
• 27:58
  They are kind of the best people to go acquire those shops, actually do some, some, uh, some, uh, roll-ups, but in a good way, it's kind of the roll-ups.
• 28:09
  Um, yeah, I know a couple of people, but I mean, uh, we need more, it's first.
• 28:14
  Yeah.
• 28:14
  Uh, secondly, I mean, every single acquisition of the shop, it's a, it's a big deal on the, uh, due diligence of course.
• 28:22
  So you, you, you really need to know what exactly you're buying, and again, you need to have this expertise.
• 28:28
  So maybe, I don't know, just maybe have a, have a kind of a group, I don't know, of people with this expertise that you somehow can leverage if you wanna buy, you know, kind of boring machine shop, so why not?
• 28:42
  To make sure that this asset is actually gonna be, gonna be good at least.
• 28:46
  Um, so, and again, it happened in all possible ways now, like we see private equities do the, all the roll-ups.
• 28:54
  We see just, you know, just, um, um, you know, persons with like, people with the expertise doing those kind of the roll-ups, buying the shops.
• 29:02
  We also, I, I also had a number of talks with just random people from like kind of let, let's call finance industry, have no i- have n- no background in manufacturing at all, buying the shops and, and trying to build kind of the boring revenue, boring business type of stuff.
• 29:18
  Which again, well, some of them will survive, some others not.
• 29:22
  And also, I know a lot of the guys ju- just, just starting from scratch.
• 29:26
  Like, okay, so I wanna, I wanna start with just one Swiss lathe.
• 29:29
  Why not?
• 29:30
  And then hopefully in a two, three years I will expand to three, uh, to two, two, three Swiss lathe and more.
• 29:36
  So again, it's all, all the place, like people trying to build that stuff, and luckily now I'm seeing those people more and more, espe- especially in, in the la- in, in, in different like trade, not even trade shows per se, it's more like a kind of the meetups of the machinists and stuff like that which is, which is amazing because it's not like huge, like- Oh yeah you know, kind of IMTS stuff.
• 29:56
  It's really like- It's more organic.
• 29:58
  Absolutely.
• 29:58
  Absolutely.
• 29:59
  And yeah, people, people, you know, just, just hanging around there- Talk to other operators, just learning stuff and then buying next Swiss ma- machine or something like that and, and trying to build s- build stuff.
• 30:12
  So it's, it's happening.
• 30:14
  So, so again, I don't have like clear answer whether or not we need to keep all those, you know, legacy machine shops, um, because again, some of them just, uh, not a good asset.
• 30:24
  Some others maybe do, but, but some, some, you know, a lot of them just, just not.
• 30:29
  So, yeah.
• 30:31
  Yeah.
• 30:31
  So one of the things- I got a couple...
• 30:33
  Sorry, I got, I have to finish this, Colin.
• 30:36
  Sorry to interrupt you.
• 30:36
  No, you're good.
• 30:36
  So what I, what I think around the horn, in your article you mentioned Will Averson.
• 30:41
  You know, Will, Will came into a family business.
• 30:44
  He's very expansion focused.
• 30:45
  He'll be joining us in a few weeks, don't worry.
• 30:47
  Yeah, yeah.
• 30:48
  Let's team up.
• 30:49
  Very expansion focused, right?
• 30:51
  And, and he's actively trying to grow his family's legacy, you know, in a, in a boring manufacturing space.
• 30:57
  And it's not, it's not boring to Colin and I.
• 30:59
  We don't say that to be, uh, negative, but that- Term of endearment possibly a finance investor or VC investor it may appear that way.
• 31:06
  Um, then y- you also mentioned Zane Hindesberger.
• 31:10
  Zane's made a lot of noise by just offering a simple thing.
• 31:14
  His, his physical service is very simple.
• 31:16
  He cuts metal.
• 31:17
  Yeah.
• 31:18
  But he's got transparency in pricing, right?
• 31:20
  And so he's the only guy that can get you a rapid quote in that sector of aluminum sales, which is novel and, and exciting.
• 31:28
  Um, Paul Sweeney.
• 31:30
  Paul bought, on the private equity side I wanna say about 17 factories, Colin, something like that, or, or somewhere between 15 and 20 in the past year.
• 31:40
  And so he's a guy, the type of guy that has that expertise to consolidate and create a larger operational company.
• 31:45
  Not everybody has that.
• 31:47
  And then, um, we also got to hang out recently with Jack Watson.
• 31:51
  You know, he's up in Buffalo, and they, they're focused on precision, right?
• 31:55
  They do these kind of high specialty processes that are very niche and really impossible to farm out.
• 32:02
  Um, so when I look across the people that we know, and, and of course Colin, Colin's building lights out, you know, CNC machining factories.
• 32:12
  We have the expertise.
• 32:13
  We just have to get organized so that all these people can offer different solutions,'cause I agree, some, some assets are worth buying, some just need to retire, there's not much there.
• 32:23
  Some, it's just about the people.
• 32:25
  Some, it's about the customers that they have and the long-term contracts, you wanna keep those going.
• 32:29
  But I think we have to have solutions or else we're just gonna have a decline because people are getting older, and a lot of these founders aren't as young as you, Const.
• 32:37
  They're, uh, you know, they're, they're getting in, up there in age and they've probably only got four or five years left before they have to hang it up.
• 32:46
  Absolutely, yeah, I agree, and that's, that's a big problem.
• 32:49
  That's a big problem for sure.
• 32:51
  Um, but again, it looks like, and again, this is one of the, one of the things why I still very excited about the industry obviously, because again, there's a, there's a people now, much younger people with the expertise, with everything, that really wanna build.
• 33:05
  Really wanna build boring stuff, let's call it k- kind of boring stuff.
• 33:08
  Not boring for you- Look, hey, look- term of endearment.
• 33:10
  You love them look in HVAC.
• 33:11
  Just look, just look at HVAC.
• 33:13
  If you go back 20 years, how boring were air conditioning companies?
• 33:16
  Yeah.
• 33:16
  And now it's one of the hottest assets you can buy- Yeah because people need air conditioning.
• 33:20
  Yeah.
• 33:21
  So people will pay a premium.
• 33:23
  There, there, there, there was a couple, couple tweets just, I think, last week which actually make me thinking about why, why exactly people calling, ca- call it boring.
• 33:31
  Uh, it looks like it's mostly, and again, I don't wanna, don't wanna blame new, new generations and all of that, but I kind of have to.
• 33:40
  So the problem is, a- again, like people now chasing kind of shiny things.
• 33:44
  Well, I mean, it always was the case, but now they're trying to chase multiple shiny things at the same time just to make sure that they actually have a, uh, at least a several backups, you know, from the revenue perspective and all of that.
• 33:55
  So that's why, like, building some- one, like single thing, single boring business for the next 10, 15, 20 years, it's not exciting.
• 34:03
  It's not exciting for a lot of the people, especially young people.
• 34:06
  So those young people who actually like the boring stuff, we need to treat them not only well, but actually we need to, yeah, definitely team up because it's rare.
• 34:15
  Amen.
• 34:15
  It's, it just rare.
• 34:16
  That's the problem.
• 34:17
  It's rare.
• 34:18
  So A- amen.
• 34:21
  Amen.
• 34:21
  So what, we're, we're starting to get to the end there, but I do wanna bring us back to Digifabster a bit.
• 34:26
  So one of the things we talked about a bit today is you've got a lot of these legacy shops.
• 34:30
  You know, there's a question of some of them are good assets, some of them not so much.
• 34:34
  A, a big piece that, you know, as well contributing to kind of capacity piece is the friction in their processes.
• 34:41
  Really bad processes makes things very difficult for so many shops.
• 34:44
  Makes, um, just eliminates them completely from that conversation of can they be acquired, grown, whatever.
• 34:50
  Digifabster obviously helps shops with that friction, the quoting, the order intake, customer stuff.
• 34:57
  So, you know, how does that, from your experience working with some of these customers that have taken on Digifabster, how does that help?
• 35:06
  I mean, what, how does that really make them survive and thrive, not just today as, uh, once they've adopted it, but going forward those next 10 years to 2036, like you described?
• 35:16
  Yeah, I think there's, um, one of the very simple concept that actually, uh, starting to be, uh, accessible for you once you adopt instant quoting technology, which is basically upfront cash.
• 35:28
  So it's just upfront cash that you're getting from the customers to fund your operations, to fund your everything.
• 35:34
  And that's the beauty, and that's one of the reason, of course, uh, why, you know, guys like Fabworks, Oshkat, uh, SunCut Sand, actually very successful because, again, you're luckily not relying on the stuff like net 90, net 120, whatever kind of the terms that you have to, to lock into, like, big customers and all of that.
• 35:55
  So with the instant quoting, you're getting, getting cash upfront, which is extremely- Mm important for- You're not free financings smaller shops.
• 36:03
  Yeah, it, well, it's true.
• 36:05
  It's true.
• 36:06
  I mean, it costs you something with, like, Stripe charges and all that, but again, it's like, it's fine.
• 36:10
  So that's, that's...
• 36:12
  And again, this is kind of the thing that make it easy and also, like, pretty complicated for the shops because all the legacy shops not built that way, right?
• 36:21
  So they are just not built that way at all.
• 36:23
  But the new shops, of course, they kind of, they kind of extremely flexible.
• 36:27
  They can adopt these things much faster.
• 36:29
  And that's why, again, we started 10 years ago, and we have a customers that has been with us, like, for, for really 10 years.
• 36:35
  Basically 10 years.
• 36:36
  They use Digifabster for, for last 10 years.
• 36:38
  They're very successful.
• 36:39
  Yes, they scale up.
• 36:40
  But again, they- they've been like that from the ground up.
• 36:43
  Like, from the very beginning, their business model was exactly supportive of this kind of upfront cash kind of perspective, so instant quoting and all of that.
• 36:53
  And that's one of the reason why it's much harder to adopt this technology for, uh, or the concept, I guess, for, for the legacy shops.
• 37:00
  So yeah, so but it all comes down to kind of what we call kind of change management, kind of the stuff which happen in the shops.
• 37:08
  So some of the shops actually open for that.
• 37:10
  Like, yes, they- Yeah they get to the point where- You know, they fully understand that they're not gonna survive in the next, whatever, five, 10 years if they're not gonna, uh, not gonna adopt this technology or that kind of technology and that kind of approach and that kind of the business model.
• 37:26
  So they starting to actually changing their business model.
• 37:29
  And those, and those who are not, well, I mean, they either in defense and aerospace, they, they just don't care at all, or they kind of, you know, they kind of leave for the next, I don't know, maybe five years and then probably gone because that's reality.
• 37:44
  That's reality.
• 37:44
  They, they gonna feel even bigger competition from the guys who actually do it in ano- in a different way.
• 37:51
  But that's reality.
• 37:51
  That's, that's how I read all, all, all what happen in the market now.
• 37:57
  We need Digit Fabster for our payment terms, Colin.
• 38:00
  Yeah, no kidding.
• 38:01
  That was amazing.
• 38:01
  I, it, it, it's, there's, there is...
• 38:04
  We- we'll have to get into that in another episode, but I mean, just that whole net, net 90, net 120 is, is an absolute killer when, when you're sitting on...
• 38:13
  I mean, especially with the, the price of, you know, raw billet going up through the roof, so.
• 38:18
  Uh, Konst, this has been great.
• 38:20
  Um, thank you.
• 38:22
  Awesome conversation.
• 38:23
  Loved the article.
• 38:24
  I know Matt did too.
• 38:24
  He, I think he probably could have gone on and, you know, written another book on that.
• 38:28
  Maybe he will with, with you on there.
• 38:30
  But, um- Sure where can people find you?
• 38:32
  How can they get in touch?
• 38:34
  Socials, all that good stuff.
• 38:36
  Yeah.
• 38:36
  Best to find me on X, I guess.
• 38:38
  Again, I'm Konst on X.
• 38:39
  Uh, uh, luckily probably the only one.
• 38:42
  So that's, that's, that's the best place.
• 38:44
  And of course digitfabster.com, that's, yeah, that's our website, so.
• 38:48
  Awesome.
• 38:49
  And yeah, and yes, please read Opium, The, The Opium.
• 38:51
  So it's- And Opium on Substack.
• 38:54
  Yeah.
• 38:54
  They can find that from, through you on X as well?
• 38:56
  Yes.
• 38:58
  Awesome.
• 38:59
  Well, awesome episode, and to all of you listening, thank you for tuning into the Reforge podcast.
• 39:04
  Whether we're talking robotics on the factory floor, policy that moves the needle, digital quoting or what the future 2036 looks like, our goal is always the same: to prove that reindustrializing America isn't just possible, it's happening right now and it's pivotal.
• 39:19
  If you enjoyed the episode, make sure you subscribe and follow The Reforge Pod everywhere, and check out thereforgepodcast.com for more.
• 39:27
  Till next time, keep building the future.
• 39:34
  Thanks for tuning in to the Reforged podcast.
• 39:37
  Make sure to like, subscribe and follow us on all of our social media@thereforgedpod.
• 39:42
  We will see you next time