139. Lawrence Steyn, Investing in an Industrial America

Show Notes:

Lawrence Steyn moved to Los Angeles to work with Walt Disney, where he helped think through financing new theme parks and movies. After leaving Disney, he went into traditional investment banking. He also mentions that he was a character in a theme park training program, where he was a penguin in full costume. His experience in LA and his role as a character in the training program were both memorable and challenging, and being a penguin was the hardest job he had in the 30+ years since graduating. 

From Investment Banking to the Tech Industry

Lawrence moved to New York and worked at Goldman, including spending several years in London. He worked at Morgan Stanley and also as vice chairman at  JP Morgan. After COVID-19, he faced a midlife crisis and decided to work at an autonomous vehicle company called Pony.ai. The company was Chinese-centric and had a large nexus with China. This was around 2020/21 during a time when relations between the U.S. and China were strained. The company faced financial and geopolitical challenges from China, who wanted to assert control over its tech sector, and restrictions from the US. Lawrence talks about an event that took place in the U.S. that allowed a government body to exert their control and limit the company. However, Lawrence started lobbying for Pony's cause, visiting Capitol Hill and California representatives,  however it became clear that Pony was never going to go public as an American-centric company. 

Joining a Manufacturing-centric P.E. Firm

As his time at Pony was coming to an end, a private equity firm, American Industrial Partners, approached Lawrence to join them. Lawrence discusses the changing business world, government issues, and supply chain changes post-COVID. As an American manufacturing-centric private equity firm, he observes the shrinking of supply chains and the refocus on American hard enterprise, but he compares this with his experience at Pony, as a $6-7 billion company started by seven guys in a garage, compared to the cost of manufacturing enterprises. Lawrence enjoys his work and the opportunity to create billions of dollars of value through low capital and high-IQ work. Lawrence also shares his experience with venture capital tech.

A Superpower and Brokering a Big Deal

Lawrence believes that his superpower is listening to people's words and being thoughtful, especially when dealing with potential clients. He emphasizes being creative and challenging himself to think of unexpected twists in situations. He shares an example from his time at Morgan Stanley,  and the most successful deal of his career. He was the sole advisor to United Technologies, which was the biggest industrial deal up to that date. The unique idea was that United Technologies wanted to buy Rockwell Collins. Lawrence talks about the idea he put forward that allowed United Technologies to keep the Rockwell Collins name and maintain its rich heritage, while United Technologies owned about 60% of the company. The deal was a complex and unique one, with high effort and structuring involved. 

Global Trade Wars and Tariffs

The conversation revolves around the ongoing global trade wars, particularly the tariffs. Lawrence states that while the uncertainty has slowed everything down, however, the outcome has not been terrible. The market has returned to close to all-time highs. Lawrence mentions that the long-term impact of these tariffs is questionable, as the reduction in the dollar's role as a global reserve currency is problematic. He also discusses the importance of having a strong US global leadership role and the need for a good manufacturing base. He mentions that the lack of access to various materials has proven problematic, and that the US should focus on American manufacturing capabilities. However, he also mentions that American Industrial Partners have been investing in American manufacturing capabilities for decades, and their history and majority of businesses are America-centric.

A Global Trade Slow Down

The Trump administration's focus on tariffs has slowed down global trade, with the US and Mexico experiencing increased tensions. The US has been focusing on geopolitical issues, such as China and Mexico, but the long-term impact of these tariffs is uncertain. The US has been investing in American manufacturing capabilities for decades, and many businesses have found that having an American manufacturing base is more valuable to people around the world. The uncertainty surrounding the introduction of tariffs has led to negotiations and investment being put on hold, as the US has good manufacturing capabilities in Mexico. The short-term impacts of these tariffs have been less dramatic, and the long-term impacts are more theoretical at this point. However, the US has managed to maintain its manufacturing base and maintain its global leadership role.

Barriers to Growth in Manufacturing

The conversation turns to barriers to the growth of the manufacturing industry in America, including electricity, skilled labor, zoning, local supply chain, permits, and environmental reviews etc. Lawrence highlights the importance of re-electrifying America, which is a complex process that takes time and requires skilled and unskilled labor. The supply chain, as seen with Apple's desire to manufacture in the US. The biggest challenge for manufacturers is the uncertainty of tariffs and their impact on the US manufacturing industry. If there were a sustainable and constructive policy in place for decades, manufacturers would be more comfortable investing in advanced manufacturing capabilities. However, the whimsy of these policies can be problematic, as they may be reversed or ended by lawsuits, hinders planning and investment.

An Effective Pro-US Manufacturing Policy

A more effective pro-US manufacturing policy with bipartisan support could be beneficial. Some goals that could be valuable include bringing manufacturing back to the US for data centers, shipbuilding, and auto manufacturing. However, the broad concept of remanufacturing in the US doesn't necessarily mean achieving everything at once. A thoughtful policy with bipartisan support could be powerful, but a more consistent, specific, targeted policy with broad support could be more effective.

Influential Harvard Courses and Professors

Lawrence mentions a Michael Sandel’s core class, Justice, that focuses on different theories of justice, which he believes are important for thinking thoughtfully about political and global events. He also enjoyed a seminar with Marjorie Garber on Shakespeare, which he took as a core class and then revisited as an alumni for a deep dive. He also mentions activities centered around the International Relations Council, Model UN, and American Industrial Partners. 

Timestamps:

04:16: Experiences at Pony.ai and Autonomous Vehicles 

09:36: Transition to American Industrial Partners 

23:35: Challenges in American Manufacturing 

37:17: Personal Reflections and Future Plans

40:58: Backgammon and Personal Interests 

43:35: Harvard Memories and Influences

48:05: Connecting with the Harvard Community 

Links:

Website: https://americanindustrial.com/team/lawrence-steyn/

Featured Non-profit:

The featured non-profit of this week’s episode is Lighthouse Youth and Family Services in Cincinnati, Ohio recommended by John Unger who reports: 

“Hello, class of 1992 this is your classmate, John Unger of Kirkland House in Weld North. I'm submitting to you the featured nonprofit for this week's episode of The 92 Report, Lighthouse Youth and Family Services in Cincinnati, Ohio. Lighthouse is a wonderful and impactful organization that gives guidance and support to orphans and foster care children in our city, and my mom has been a heavily involved volunteer for decades. You can learn about Lighthouse Youth Services at its website, lys.org Thank you for your consideration. Now here's Will with this week's episode”.

To learn more about their work, visit: LYS.org.