What an American Stove Maker Wants You to Know About US Manufacturing

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 BatteryEverything You Need to Know About the Basis Trade Spooking Markets Only Bloomberg.com subscribers can get the Odd Lots newsletter in their inbox each week, plus unlimited access to the site and app. Subscribe at bloomberg.com/subscriptions/oddlotsSee omnystudio.com/listener for privacy information.

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  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting

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  and hiring practices, but according to recruiters, advisors and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at chatgpt.com.

• 1:41Speaker 01

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• 1:57Joe Weisenthal?

  Hello and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

• 2:03Tracy Alloway?

  And I'm Tracy Alloway.

• 2:04Joe Weisenthal?

  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 about is throwing our business into extreme chaos.

• 2:26Tracy Alloway?

  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 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 Ryan 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

• 3:10Tracy Alloway?

  we 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 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 don't want to say it's

• 3:54Tracy Alloway?

  cheap because factories still cost quite a lot, but less expensive, basic stuff. I don't know.

• 4:00Joe Weisenthal?

  Here's the thing. I want to set up a factory in the United States that's at the cutting edge of production, but some of the 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 Haas, which I have to admit I had not heard of. They make CNC lathes, talking about how they were like cancelling overtime, pausing all hiring, et cetera. Anyway, remember we were out in San Francisco and we visited Impulse Labs? They make that amazing stove. We had this great steak. It boils water in like two seconds.

• 4:34Tracy Alloway?

  Oh, it was so good.

• 4:35Joe Weisenthal?

  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's the thing. It actually exists here. And I kind of want to know what building that stove is like in a world of tariffs.

• 4:52Tracy Alloway?

  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.

• 5:02Joe Weisenthal?

  Has a battery in it.

• 5:03Tracy Alloway?

  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 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.

• 5:26Joe Weisenthal?

  Well, let's find out some more. He cooked us an amazing steak several months ago, but now we're not talking steak. We're talking about the reality of US manufacturing. Back on the show, Sam D'Amico, founder and CEO of Impulse Labs. Sam, thanks for joining us.

• 5:42Speaker 04

  Yeah. Good morning, everyone. It's been a fun week or so.

• 5:46Joe Weisenthal?

  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 has 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 build here? And what are the inputs of the stove? Where do they come from? And then what do you assemble?

• 6:12Speaker 04

  So this is a really good question, because you'll, 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.

• 6:20Joe Weisenthal?

  Our listeners love this stuff.

• 6:21Speaker 04

  Yeah, 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. So that sounds like a lot. And what that means is the surface area of the types of stuff we touch as inputs is quite substantial, is probably the best way to put it. It's like, everything from lithium ion battery cells, all the way to those custom ceramic parts in our temperature sensor, which lets you hold exact temperature in the pan, to like, chips, some of which are made in the

• 7:06Speaker 04

  United States, but most are not packaged in the United States, if that makes any sense.

• 7:10Joe Weisenthal?

  Yep.

• 7:11Tracy Alloway?

  So where are you actually getting these things from?

• 7:13Joe Weisenthal?

  Yeah.

• 7:14Tracy Alloway?

  Like, walk us through, I guess, the evolution of your suppliers, because I imagine it must have changed a little bit over time.

• 7:21Speaker 04

  Yeah, so I'll go through kind of like, the transition of the company, because this is like, key to kind of understanding how, how to build complex hardware. There's an Elon tweet, and he's actually a reply, but it's buried in the replies. But basically, he 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 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.

• 7:59Speaker 04

  And then there's a lot of experience with team knowing how to put those legs together. 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 built ourselves. We needed to get the architecture right. We needed to know how to build the product like from a like, it's almost like the specs you see on like bestbuy.com. You kind of needed to figure out what those were and maybe some of the high level stuff.

• 8:35Speaker 04

  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 and and kind of like the interaction model and stuff like that. So we didn't do that prototyping. But then at that point, we basically were like, okay, we know what we're gonna make. Roughly, we don't know how we're gonna 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 25 people. As a small team, there's a couple of different ways to actually go and 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

• 9:20Speaker 04

  go overseas and have a Chinese company or Korean company or a Taiwanese company co-design the product with you. Because that violent export controls. 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. And so basically, we had kind of a choice. We'd go to like a 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 the specific appliance stuff is handling large sheet metal parts and like big boxes and stuff like that. So we went to a consumer electronics manufacturer and then

• 10:01Speaker 04

  effectively co-opted their entire R and D team to help us co-design the product.

• 10:08Speaker 04

  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, 50 to 100 people, because we would have had, like, there's all these sub-disciplines in hardware. And even if you only need to fractionally use them, like, use like 0.1% of them or something like that, well, 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.

• 10:39Joe Weisenthal?

  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 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.

• 11:12Speaker 04

  Yeah, 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.

• 11:22Joe Weisenthal?

  Okay.

• 11:23Speaker 04

  So let's actually put startups on the shelf, because I think some of these startups will need, like, substantial public-private partnership, might need to really scale to volume. And some of that stuff is actually, to my knowledge, like, potentially forthcoming, which is pretty exciting. But I need capacity now. So where would I go in the US to do it? And it's basically, there's a couple of different categories of contract manufacturer in the United States. The most famous ones are Jabil and Flextronics. And I actually, this is over 10 years ago, I worked with Jabil 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.

• 11:58Joe Weisenthal?

  Okay.

• 11:59Speaker 04

  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 2010s, 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 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.

• 12:28Joe Weisenthal?

  Hmm.

• 12:28Speaker 04

  Or if they do, it's specific kind of thing.

• 12:31Tracy Alloway?

  So I remember when we were in San Francisco and you were making that very, very good steak 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. Well, I think at the time, we were talking about 20%. 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 than 20% so far.

• 13:16Tracy Alloway?

  But how well positioned do you feel for something like that?

• 13:21Speaker 04

  Yeah, so I have a funny story is one of our key suppliers cut prices enough to almost compensate for these tariffs as is. 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, like know they can power through it and not upset their existing supply relationships. But my sense is 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 36-inch stove, but I want to take it out and put an impulse in, which is 30-inch. How do you solve that problem? So we ended up designing and building an adapter that you can just put in and then you put our 30-inch stove in and it looks pretty nice, too.

• 14:06Speaker 04

  And hopefully that goes on the website relatively soon, but I'm maybe spoiling this for our 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. $700. And it was like sub 200 in China. So from a tariff standpoint, I don't know, Trump needs to go up to 300%, 200% or something like that.

• 14:26Joe Weisenthal?

  This is the headline, American manufacturer who is heavily reliant on Chinese parts, Trump increased the tariffs to 300%. No, I'm just kidding, but anyway, go on, go on.

• 14:35Speaker 04

  But that's a, that's a simple sheet metal part and you can imagine.

• 14:38Joe Weisenthal?

  It's a simple sheet metal, yeah.

• 14:39Speaker 04

  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 uh, who are their customers? And it's like, if your customers are like Google, Street View Vehicles, medical device companies that make like,

• 14:54Joe Weisenthal?

  Oh, yeah.

• 14:54Speaker 04

  Lipo, like not liposuction, but those like cool sculpting machines. Oh, yeah. And like defense companies, you probably don't have cost sensitive customers and the volumes and mix level, like when you get a big order from a customer, it's a hundred units, not like a hundred thousand units.

• 15:12Joe Weisenthal?

  Ah.

• 15:12Speaker 04

  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 automated and not retooling. So like, yeah, there, there's giant injection molding firms in the US that make like lawn chairs 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? They'd be like, no, go away. So that's the other point of like China 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.

• 15:51Joe Weisenthal?

  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 morning.

• 16:02Speaker 04

  Yeah, and you can't.

• 16:02Joe Weisenthal?

  Yeah, or you can WeChat the factory owner like one in the morning and they'll get back to you with a quote in like five minutes.

• 16:07Speaker 04

  Yeah, 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. It's weird.

• 16:40Speaker 00

  What's next for virtual assets? I'm Jacob Rees, host of Economy Scale, a series exploring growth in key global sectors. And in this episode, we're diving into the digital forces shaping finance. Sean McHugh from Dubai-based Virtual Assets Regulatory Authority has this to say.

• 16:56Speaker 05

  We're seeing a lot of institutional players come in, digital asset dedicated hedge funds, high frequency traders and that sort of thing, and folks who service institutional clients.

• 17:05Speaker 00

  As more capital enters the market, adaptive regulation is likely to become increasingly key. Rees-McRae's Rippel says.

• 17:12Speaker 06

  A lot of regulators globally would like to keep the industry at arm's length. That's the opposite here. I think also what you'll find is that regulation and frameworks can come out, but some of them are maybe a slight iteration on some 80-year-old policy and not actually in line with what the technology can do and offer. And again, that's very different in Dubai.

• 17:32Speaker 00

  Listen to the full episode wherever you get your podcasts. This series is brought to you by Bloomberg Media Studios and the Dubai Department of Economy and Tourism.

• 17:42Speaker 01

  This is the Bloomberg Tech Minute, brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Businessweek's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting

• 18:24Speaker 01

  and hiring practices, but according to recruiters, advisors and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company. And Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates quote, "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute, brought to you by ChatGPT. Get started at ChatGPT.com.

• 19:05Tracy Alloway?

  Okay, just on the pricing note. I mean, it does feel like the outlook for American inflation certainly 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 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

• 19:51Tracy Alloway?

  versus a startup that's only making a limited volume. Maybe the suppliers don't care about that business that much and will treat it differently.

• 20:00Speaker 04

  Yeah, so I mean, I think there's a couple of 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 China actually doing? Could we rerun their playbook? And it's like, China has the equivalent of like state-level champions. It's almost like BYD is like Guangdong Province's champion. So you can be like, that's California's champion. And then CATL is like Texas's 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 to get that business.

• 20:45Joe Weisenthal?

  Oh, yeah, yeah. 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 know.

• 20:59Tracy Alloway?

  I think we'll have more of it here.

• 21:01Joe Weisenthal?

  But the thing.

• 21:01Speaker 04

  But people don't understand the way the government works there is different. It's like, because it's a single party system.

• 21:08Joe Weisenthal?

  Yeah.

• 21:09Speaker 04

  It's almost like Gavin Newsom's boss is Donald Trump versus they are rivals with different, with different systems.

• 21:15Joe Weisenthal?

  This is a really important point. The governors of American states are incentivized to win reelection. 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 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.

• 21:57Joe Weisenthal?

  But let's say we accept this premise, and I kind of do, that it's 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 your, 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 stove maker here in the US that doesn't have to rely on a sheet metal company in China or a final assembler in China. Like, give us some outlines of what you think needs to be fixed here or addressed, addressed here.

• 22:28Speaker 04

  So let's, let's actually look at who has solved this problem.

• 22:31Joe Weisenthal?

  Okay, yeah.

• 22:32Speaker 04

  And what BS he had to deal with. And it's funny that when I say who, and then I use the singular.

• 22:37Joe Weisenthal?

  We all know it's Elon.

• 22:38Speaker 04

  We know, we all know it's Elon. And so how the ever living crap did this guy pull this off?

• 22:43Joe Weisenthal?

  Yeah.

• 22:43Speaker 04

  And I think I've spent way too much time thinking and 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 in a tent in the Fremont parking lot?

• 22:57Joe Weisenthal?

  I do remember the tent. People shouldn't have made fun of him, especially in retrospect.

• 23:01Speaker 04

  I mean, it was, it, it worked. So to refresh this for the listeners, 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 it's, there's not enough room in the building. But the problem is if you wanted to build a building next to it. Let's just say that California is a den of vipers and those vipers names are NIMBYs. 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.

• 23:37Joe Weisenthal?

  Yeah.

• 23:37Speaker 04

  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 illegal, um, effectively because like if it's a rich area, there are NIMBYs and the NIMBYs have infinite power. And so what Elon did was he realized, you know what those like graduation tents or like the tents they put over? And they, the tents they put over like football stadiums in like the winter, like you got one of those. 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 threes. It ended up working. They ended up reconfiguring the line inside and the company didn't die.

• 24:17Speaker 04

  But there's a million examples of this where it's kind of like Elon versus the built world. Where he just decided to say no and figure out some sort of like. I, 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 this other stuff. So he's got an advantage versus everyone else in terms of busting through all this stuff.

• 24:43Tracy Alloway?

  Hey, and almost illegal loophole is still a legal loophole, right?

• 24:47Speaker 04

  Yeah, it's 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, the parking lot thing that a mere mortal wouldn't have gotten that deranged. Like it's like, 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, right?

• 25:05Tracy Alloway?

  Wait, 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 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

• 25:46Tracy Alloway?

  wholesale. But let's say you invest in, I don't know, a Mexican company. Suddenly, 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?

• 26:07Speaker 04

  So I mean, I'll always blunt and say that I'm not sure if anyone's gonna make any decisions in this direction within the next 90 days unless they've got insider information.

• 26:14Tracy Alloway?

  Yeah, fair.

• 26:15Speaker 04

  So so that's, that's, that's for one. 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 think there's like two different types of vertical integration. I think what I would caution people is like, a lot of tech founders take after Elon literally, but not understanding why, like, 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 this 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 the metal parts. But let's imagine I only need that tooling designer for like, a month.

• 27:00Speaker 04

  For the whole 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.

• 27:11Tracy Alloway?

  Right.

• 27:11Speaker 04

  And if I end up stocking up every discipline I would need to basically be fully self-sufficient, I might have 100 to 200 people and be burning hundreds of millions of dollars on a program, which is fine if I'm building stuff at the scale of Elon, right? Like 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 Sterling dish. But me as a much smaller startup cannot do that.

• 27:57Speaker 01

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting

• 28:39Speaker 01

  and hiring practices, but according to recruiters, advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company, and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates quote, "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at ChatGPT.com.

• 29:19Tracy Alloway?

  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. What would it take for you to, I guess, feel better about making some long-term plans?

• 29:50Speaker 04

  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 chain. So 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, pre-Tesla 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 sense is, as soon as there are deals going in place in like, Southeast Asia, or Mexico, like, we're not realizing that like, there's going to be some random Mexico tariffs or something like that.

• 30:35Speaker 04

  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 accomplishing multiple goals, meant that they couldn't 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 manufacture in the United States. I'm like, dead set on doing that at some point. If I imported my bomb, bill of materials, 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 subject to that China 125% tariff.

• 31:20Speaker 04

  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 and qualify the 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 something to 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 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.

• 32:02Speaker 04

  It's like, it's like the, the hard steps are mostly automated. The expensive subcomponents assembly is almost completely automated, like circuit boards and, and stuff like that. Like this is not something that is like hard, like impossible to move to the US, if that makes any sense.

• 32:17Joe Weisenthal?

  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 much 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 and well-paid people are NIMBYs and NIMBYs don't like new factories. And that that is the dynamic, not the on the floor wage costs, but the political economy of the people running advanced plants, preventing the production of the advanced plants.

• 32:54Speaker 04

  Yeah, and actually I would even be like, you're like, why can't we have Shenzhen in the United States?

• 32:58Joe Weisenthal?

  Yeah.

• 32:59Speaker 04

  Well, you would need to put it in the Bay Area because that's where the, that's where the engineers that are like.

• 33:04Joe Weisenthal?

  The challenges, yeah.

• 33:05Speaker 04

  And Dean Preston's going to block you is the, is the story. 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 is turned yellow, not like.

• 33:22Joe Weisenthal?

  Right.

• 33:23Speaker 04

  Yeah, we make some trash and it gets trucked out into a landfill like a consumer electronics factory. It's like a Amazon warehouse, like it's basically, the thing is these factories are more like Amazon warehouses in terms of industrial emissions than like. Probably less actually because there's no vehicles driving through than uh the like heavy industry plants of your and the labor situation looks more like again like an Amazon warehouse than a than the triangle shirtwaist factory or whatever. And we clearly allow Amazon warehouses in our communities. So why not this? 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.

• 34:06Speaker 04

  You walk outside and directly across the street, there are high rise apartment buildings for the workforce. Hmm. Contrast that with Tesla where their Fremont factory. You walk 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.

• 34:32Tracy Alloway?

  Well, Elon also wants his workers to uh sleep in in the office in the factory, right? And also, I mean, in America, I would assume we're 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.

• 34:51Speaker 04

  Well, so I'll give an example of this where if you want cheap, the problem effectively is like. So Shenzhen 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 13, like they don't really have property taxes. You buy the thing and it just like you hold it. And because of that, home prices are really expensive, like we're talking million plus in Shenzhen, no problem. And so how do you actually get workers, someone which are paid like? And by the way, the engineers at these factories in Shenzhen are are not paid super well, but like you can imagine with purchasing power parity, whatever, it's like it's even like 60, 70 K in the United States kind of thing is probably the way to put it.

• 35:36Speaker 04

  But like, imagine I wanted to get a 60K junior engineer working at Tesla's factory in Fremont today. There's a housing price issue 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 technical talent is. And then one way to 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.

• 36:18Joe Weisenthal?

  I just have one last question, which is, you talked about how in, you know, in the burgeoning defense tech sector and other areas, public-private partnerships. I don't know if this 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 of fund, basically, where does the funding come from for real risky upfront capital outlay? If we're talking about US manufacturing?

• 36:52Speaker 04

  Yeah, so I mean, I think some folks successfully raised for this in like 2021, 2022. But there's like, it's honestly, there's a missing piece here, right? So, the, the problem is the US has an awesome stock market, well, until this week. But, but basically, if I want a 3X 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 3X's or something like that. It does not have VC-shaped returns, is the problem.

• 37:24Joe Weisenthal?

  Yeah.

• 37:25Speaker 04

  And their LPs are folks that are allocating into other types of 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 lithium iron phosphate battery plant. We still, we seem to keep not succeeding at that because you 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 3X is my energy density, a VC would love to back that. But even then, it's like you invent that, how do you actually get enough funding to

• 38:09Speaker 04

  build a plant to supply that to all the automakers? You end up in this missing, well, 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 figure out how to address some of these gaps, basically. Elon, again, I'll go pick on Elon because he's, again, he's the only guy who figures this out. 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.

• 38:42Joe Weisenthal?

  Yeah.

• 38:43Speaker 04

  And eventually you get to a big one. But this is not how like, we built giant factories in World War II. 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're eventually need to do, you know, and you have to kind of keep growing. Again, 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 effectively. And that's a hybrid VC PE fund.

• 39:14Joe Weisenthal?

  Yeah. Sam D'Amico, perfect guest to talk right now. Thank you so much for coming back on Odd Lots. That was great.

• 39:20Speaker 04

  Thanks for hosting.

• 39:33Joe Weisenthal?

  Tracy, in that conversation, we talked about NIMBYs and YIMBYs, provincial competition between China and how that compares and contrasts 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 meaty odd lots conversation.

• 39:53Tracy Alloway?

  There was so much there. I really thought, you know, Sam 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 themes, I think.

• 40:15Joe Weisenthal?

  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 goods.

• 40:26Tracy Alloway?

  Right. And other administrations as well, right?

• 40:29Joe Weisenthal?

  This was big under the Biden administration. It was obviously big under Trump. One, 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 10th, it's 11:47. We see the NASDAQ, it's down 4.8% again after Wednesday's big rally. It's sort of, I think, today is about sinking 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.

• 41:10Tracy Alloway?

  Right. 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 exempted certain things that it thinks are important to the kind 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 tariffed too. So kind of, kind of weird.

• 41:52Joe Weisenthal?

  The Elon tent story, I did not realize how interesting that actually was. I thought, sort of thought it was like, oh, they didn't have space in the factory. So they're like, throw up this end. 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.

• 42:14Tracy Alloway?

  Did you never have to like be in a sort of outflow like trailer while you were at school?

• 42:21Joe Weisenthal?

  Oh.

• 42:22Tracy Alloway?

  Because they were working on something or there wasn't any more room and they couldn't build any new space? That happened a lot to me.

• 42:29Joe Weisenthal?

  Yeah.

• 42:29Tracy Alloway?

  So I kind of imagine Elon doing the same. On that note, shall we leave it there?

• 42:34Joe Weisenthal?

  Let's leave it there.

• 42:35Tracy Alloway?

  This has been another episode of the Odd Lots Podcast. I'm Tracy Alocke. You can follow me at Tracy Alocke.

• 42:40Joe Weisenthal?

  And I'm Joe Wazenthal. You can follow me at the Stallwork. Follow our guest, Sam D'Amico. He's at S D'Amico. Follow our producers, Kerman Rodriguez at Kerman Armin, Dashell Bennett at Dashbot, and Kale Brooks at Kale Brooks. For more Odd Lots content, go to Bloomberg.com/oddlots, where we have a daily newsletter and you can check out all of our episodes. And you can chat about all of these topics 24/7 in our Discord, discord.gg/oddlots.

• 43:06Tracy Alloway?

  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 Podcasts and follow the instructions there. Thanks for listening.

• 44:02Speaker 07

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