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

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1:18Hello and welcome to another episode of the Odd Lots podcast. I'm Joe Weisenthal. And I'm Tracy Alloway. 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 U.S. At the same time, actually existing U.S. manufacturers are talking about, wait, everything you're talking about is throwing our business into extreme chaos. 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.

2:00They'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, OK, tariffs are on pause, but are we going to see lingering issues, lingering uncertainty? Because the assumption of business people is Trump could always turn them back on.

2:41He 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 U.S., but also every once in a while he talks about, you know, doing really advanced stuff. Right, right. 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 cheap because factories still cost quite a lot.

3:18But less expensive, basic stuff. I don't know. 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 canceling overtime, pausing all hiring, etc. Anyway, remember we were out in San Francisco. And we visited Impulse Labs. They make that amazing stove.

3:52We had this great steak. It boils water in like two seconds. Oh, it was so good. 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. Yeah. 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. Yeah, right.

4:23Has a battery in it. Yeah. Electric versus gas has been in the midst of the culture war at various times recently. But then also it feeds into green technology. We're not really certain how Trump feels about 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. 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 U.S. manufacturing. Back on the show, Sam D 'Amico, founder and CEO of Impulse Labs.

5:01Sam, thanks for joining us. Yeah, good morning, everyone. It's been a fun week or so. 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?

5:33So this is a really good question because 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. Our listeners love this stuff. Yeah. Basically, think of this like you mashed a Tesla Powerwall, 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.

6:12It'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 chips, some of which are made in the United States, but most are not packaged in the United States, if that makes any sense. Yep. So where are you actually getting these things from? Yeah. Like walk us through, I guess, the evolution of your suppliers, because I imagine it must have changed a little bit over time. Yeah. So I'll go through kind of like the transition of the company, because this is like key to kind of understanding how to build complex hardware.

6:48There's an Elon tweet. I think it's actually a reply, but it's buried in the replies. But basically, it 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 and then there's a lot of experience with team knowing how to put those legos 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.

7:31And 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 need 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. And also enough to tell like your industrial designer and industrial designer is like the Johnny Ive type character that like defines how the product looks and feels and kind of like the interaction model and stuff like that.

8:08So we didn't do that prototyping. But then at that point, we basically were like, okay, we know what we're going to make roughly. We don't know how we're going to make it exactly. Let's go start talking to what I call contract manufacturers to like help us basically bring this thing to production. And we're still like around 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 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.

8:49So you see hardware founders talk about this. There's kind of a, 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 an 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 effectively co-opted their entire R &D team to help us co-design the product.

9:29But 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 subdisciplines 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.

10:00So 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. Yeah. So I'm a friend and investor with a number of these folks.

10:35So 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. So let's actually put startups on the shelf because I think some of these startups will need substantial public-private partnership money to really scale to volume. And some of that stuff is actually, to my knowledge, potentially forthcoming, which is pretty exciting. But I need capacity now. So where would I go in the U.S. to do it? And it's basically, there's a couple different categories of contract manufacturer in the United States. The most famous ones are Jabil and Flextronics.

11:07And 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 uh ambitious ahead of its time augmented reality project okay but uh 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.

11:47But effectively, none of these companies deal with startups anymore. Or if they do, it's a specific kind of thing. So I remember when we were in San Francisco and you were making that very, very good stake for us, we asked you about tariffs, right? Because they were already floating around given what was happening with election odds between Trump and his competitor. and now here we are. Well, I think at the time we were talking about 20 percent and you seemed kind of like confident that you could handle that. I think you said that that was your assumption that we were going to have tariffs and that if they came online, you were going to be prepared and you'd already been doing some stuff to handle it.

12:30I know what we've seen on China is dramatically higher than 20 % so far. But how well positioned do you feel for something like that? 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.

13:11So 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. 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.

13:39$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. So 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. But that's a simple sheet metal part. And you can imagine. That's a simple sheet metal, yeah. And then I kind of was like, why? And this was a Bay Area vendor. I won't dox them because they're actually great. But who are their customers? And it's like, if your customers are like Google Street View vehicles, medical device companies that make like, not liposuction, but those like cool sculpting machines.

14:19Oh, 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. And so a lot of the U.S. 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's giant injection molding firms in the U.S. 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?

14:58They'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. I've heard this. Like people will say like, you know, you can WhatsApp the maker of some factory owner at one in the morning. I saw some tweets about this at one in the morning. Yeah, and you can. Or you can WeChat the factory owner at like one in the morning and they'll get back to you with a quote in like five minutes. Yeah, I've gotten battery vendors email me cold.

15:33And these guys represent fairly large-scale battery vendors. They're like, email me cold. And they're like, what's your spec? And I just email them back like three lines. And then I get like a quoted design from them. It's weird. Wow.

15:52Thank you.

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17:03Okay, 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.

17:46So maybe they'll end up being successful at it 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. 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 guandong 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.

18:44Oh, 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, I think we'll have more of it here. But the thing but people don't understand the way the government works there is different. It's like because it's a single party system. Yeah. It's almost like Gavin Newsom's boss is Donald Trump versus their rivals with different with different systems. This is a really important point. The governors of American states are incentivized to win re-election.

19:19The 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 look like provincial competition, the reality is that in the U.S. 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.

19:55But 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, etc. Like, is there a middle path here? Like, what would your—OK, 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 U.S. 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 here. So let's actually look at who has solved this problem and what BS he had to deal with.

20:32And it's funny that when I say who and then I use the singular. We all know it's Elon. We all know it's Elon. And so how the ever-living crap did this guy pull this off? Yeah. 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 and a tent in the Fremont parking lot? I do remember the tent. People shouldn't have made fun of him, especially in retrospect. I mean, it worked. So to refresh this for the listeners, this was like during the Tesla Model 3 ramp, they realized they over-automated and over-complicated the factory with exquisite shit.

21:10They then were like, this line is misconfigured and we can't fix it because there's not enough room in the building. But the problem is, if you wanted to build a building next to it, 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. 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. effectively because like if it's a rich area there are nimby's and the nimby's 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 they like a wedding or something 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 equipment 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 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 wouldn't call it illegal but like almost illegal loophole and then he also assembled probably the best team in litigation in terms of like permitting and all that other stuff so he's got an advantage versus everyone else in terms of busting through all this stuff.

22:42Hey, an almost illegal loophole is still a legal loophole, right? Yeah. I mean, it's like you have to be kind of like a goblin here, right? Like you got to be like, OK, let's figure out this tension to 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. 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.

23:29Is that something that could potentially happen as some of these tariffs get ratcheted up? Or is the concern for companies that, you know, maybe you invest in a Chinese supply? Well, I don't even know if you could buy a Chinese supplier. I don't think you could buy it wholesale. But let's say you invest in, I don't know, a Mexican company. Suddenly, 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? So, I mean, I'll be blunt and say that I'm not sure if anyone's going to make any decisions in this direction within the next 90 days, unless they've got insider information.

24:13Yeah, fair. So that's for one. Like, 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. And 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 the stove and I, obviously there's metal parts in there.

24:48So 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 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. 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?