Building Towards American Dynamism with Chris Power, CEO of Hadrian | a16z Podcast with Packy McCormick, Marc Andreessen and Katherine Boyle

Key Takeaways

  • The precision parts market is a huge industry, but incredibly fragmented
    • They all outsource roughly 80-90% of their custom parts
  • “The entire advance manufacturing base of the US is sitting on this house of cards of these 3000 small businesses.”Chris Power
    • The real problem for the country is that the average age of the owner of these small businesses is 60, and the average age of a worker is 55
  • What impressed Katherine Boyle about Chris Power was the types of people that he brought in Hadrian
    • Bringing machinists and computer scientists side by side to figure out automation questions together for the future of companies
  • Two most common versions of solving the industrial supply base problem:
    • Private equity version of financial engineering 
    • Arrogant Silicon Valley intelligentsia approach
    • “Both come from the same failure mode, which is effectively private equity guys in suits think they are smarter than the person on the shop floor with grease on their hands.”Chris Power
  • Failed robotics companies or failed manufacturing startups often fall into the trap of automating everything
    • At Hadrian, they only build stuff that is easy for computers to do but costs people a lot of time
  • How to rebuild America’s manufacturing workforce? Creating high tech jobs and making it easy for people to learn
    • There needs to be a meta-structure where they flood the front end of the funnel with self-learning
  • Automating and reshoring manufacturing are the most urgent national security issues
    • “When we outsourced manufacturing, we lost this industry that naturally generates serious people.”Chris Power

Intro

  • Chris Power (@2112Power) is the Founder & CEO of Hadrian. At Hadrian, they build highly automated precision component factories for the space and defense industries (10x faster and halve the cost of making rockets, satellites, jets & drones)
    • Chris Power, Packy McCormick (founder of Not Boring), and a16z co-founder Marc Andreessen join a16z’s general partner Katherine Boyle to talk about the key challenges confronting the precision parts industry and US manufacturing
  • Host: Katherine Boyle (@KTmBoyle)

Major Supply Chain Disruptions

  • The precision parts market is a huge industry, but incredibly fragmented
    • They all outsource roughly 80-90% of their custom parts
    • The machinist is usually the owner, running the business with no more than 15 employees
    • This was how the whole space defense industry got built up
  • The reality is, customers have started moving faster; new space and new defense companies speed up at the Silicon Valley pace
    • Due to the low quality and low customer service bar, most companies don’t have good experience with these machine shops
    • E.g. new rocker engine part could take 9-10 weeks to get the first part
  • “The entire advance manufacturing base of the US is sitting on this house of cards of these 3000 small businesses.”Chris Power
    • The real problem for the country is that the average age of the owner of these small businesses is 60, and the average age of a worker is 55
    • Because of the demographics of the retirement age, the supply base is going to get worse
  • This is the “…real hidden problem no one knows about because you look at all the advanced rocket companies and say ‘wow, the supply chain must be really slick’, when in fact it’s a complete disaster.”Chris Power

Building a Culture Where People Will Want to Work Together

  • What impressed Katherine Boyle about Chris Power was the types of people that he brought in Hadrian
    • Bringing machinists and computer scientists side by side to figure out automation questions together for the future of companies
  • Two most common versions of solving the industrial supply base problem:
    • Private equity version of financial engineering 
      • Chris’s initial attempt at solving this problem
    • Arrogant Silicon Valley intelligentsia approach
      • Coastal elite arrogance that looks down on people who work in factories
    • “Both come from the same failure mode, which is effectively private equity guys in suits think they are smarter than the person on the shop floor with grease on their hands.”Chris Power
  • Hire the first batch of people (10-12) that “get it”; who are close to understanding the alternative
    • The next step is building cultural reinforcements so anyone new coming in understands the dynamics at play
    • “People laugh at me for this, but literally everyone at the company (Hadrian) eats lunch together at the same table.”Chris Power
    • Fighting the class dynamic in Hadrian and intentionally reinforcing this alternative vision
    • Before building the core, they have rejected top software engineering candidates purely because there is a 5-10% risk they will come in and walk all over the machinists
    • It was intentional in the early days; now new people can see what they are doing for the ‘human’ aspect and adopt Hadrian culture

Mapping and Scaling the Reality of the Culture

  • Overexplaining stuff doesn’t work; you have to find the language which people understand 
    • A single sentence to grasp and match with previous experiences
  • What they say at Hadrian to the software engineering and product management team:
    • “The guy that is shipping the receiving station is your customer.” – Chris Power
  • For new operators and new machinists
    • Having them experience the revolution of suggesting something as a product change and making sure it gets prioritized, even if it’s not the best suggestion
    • The relationship is automation team – customer, not expensive automation team – people in the factory for which no one cares about

Building a Vertically Integrated Company

  • Chris’ previous experience building software as CRO in a highly technical environment in a great SAS company in Australia
    • They did workforce management automation for blue-collar businesses
    • Two big macro insights:
      • The old Silicon Valley way of building software for product management is too slow
      • A lot of what they do is resolve differences between master machinists or operators in mapping processes into software
  • Unless you define the process, you can’t software engineer it
  • A lot of the trick is having all these subject matter experts in the room with software engineers and product managers discussing how to do a particular process
    • “In machining and manufacturing in general, everyone knows how to make a part, or clean a part but there is not one single best way to do it.”Chris Power 
    • Breaking into different chunks of the process, discussing every single assumption, moving to process and moving to software
  • They hire the best artists in the world for whatever function (supply chain, machining, etc.)
    • They let them do their art
    • As soon as they think they have a good scale to meet their process they start engineering software and launch

What to Automate and What to Do With Hands

  • Failed robotics companies or failed manufacturing startups often fall into the trap of automating everything
    • At Hadrian, they only build stuff that is easy for computers to do but costs people a lot of time
  • Example: How do you hold a part in a machine?
    • Machine parts need custom geometry to fixture them in place for when you cut metal
    • Incredibly hard physics simulation that might not even be possible vs “…a 15-minute decision from an experienced person who can pick from a drop-down menu because they’ve seen 100 parts and have the patterns matching.”Chris Power
  • How can we snap this highly costly engineering long tail into a checklist process so that a human can do it?
    • “Manufacturing or automating the physical world has this trick where if you let the long tail screw you over you will die and not ship anything.”Chris Power

Getting up to Speed to Make the Final Call

  • I know the meta of everything, and I discretely know nothing.” – Chris Power
    • Knowing when to patent match vs. first principles
    • He’s good at making decent risk-adjusted decisions
    • Also, putting in the hedges for those decisions in case he is wrong
  • Building software for blue-collar businesses for so long he saw many types of situations (childcare, healthcare, industrial logistics, etc.) patterns match what matters and what doesn’t
    • Does an hour of overtime a week matter? Probably not
    • Does incurring paid leave for 20 hours a week matter? Yes, because you could bridge compliance law and it might screw the entire business

The Only Way to Rebuild America’s Manufacturing Workforce

  • Creating high tech jobs and making it easy for people to learn
  • The first big step is tribal knowledge (checklist processes)
  • E.g., here are the 10 steps for learning how to cut metal with a saw
    • If you get stuck on the last 3, please ask for help
    • Usually, it’s just an apprenticeship for 3 years with someone vaguely teaching you an hour or so
    • Floor the first part of the process with many smart and young people and incorporate a self-learning process throughout the funnel
  • How to learn from scratch?
    • You can’t have your top machinist spend 6 years training someone
    • There needs to be a meta-structure where they flood the front end of the funnel with self-learning
    • No need for guessing, find the best people who have done this before. Pick up the learning, test, and scale

The Cultural Impact of Manufacturing and the Financialization of America

  • Automating and reshoring manufacturing are the most urgent national security issues
  • Why did we offshore manufacturing in the first place?
  • It all started in the ’70s with the Bretton Woods system
    • Over-financialization of everything
    • “The people running the company grew up in such a peaceful time that offshoring manufacturing increases your risk and lowers your robustness.”Chris Power
    • People will overstretch the rubber band towards efficiency, not robustness; that’s exactly what happened
    • The state department naively believed that capitalism would make China a democracy
  • Reshoring manufacturing
    • Reshoring manufacturing is going to take a lot longer than people think
      • “It’s a long problem to fix because it takes 10-20 years to train a huge workforce to do that at scale because we offshored all the simple stuff.” – Chris Power
    • It’s more a cultural problem and less a supply problem
      • The way you train people and the way you learn skills you cannot skip any of the steps
      • You can only optimize how you make those runs, you cant skip to the top
    • The country doesn’t know how to build things fast anymore; cultural issues vs importing technical skills
    • “When we outsourced manufacturing, we lost this industry that naturally generates serious people.”Chris Power
      • Removing manufacturing or any “hardcore” industries from the equation because you have people who make decisions based on the “easy life”
  • “You could argue that the biggest thing that Elon has done with SpaceX for the country is the fact that they trained thousands of aerospace engineers who were 25 and are now 30 and starting all these companies.” Chris Power
    • One of Chris’ biggest goals with Hadrian is to teach people and encourage them to start advanced manufacturing companies
    • Teaching them the meta of how to build things in the real world
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