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Schiit Happened: The Story of the World's Most Improbable Start-Up

Discussion in 'Jason Stoddard' started by jason stoddard, Jan 23, 2014.
  1. Oveja Negra
    [​IMG]
     
  2. HumanFly
    I sometimes have erect opinions myself.
     
  3. Pietro Cozzi Tinin
    Yeah,,,, some bone head you are....
     
  4. Robert Padgett
    catlegs.jpg
     
  5. ScubaMan2017
    +1 for @wink
    You are an awesome creature. Your purple prose made my evening.
     
    CAPT Deadpool likes this.
  6. sam6550a
    You are most welcome. Please free to post if we can help you.
     
    the finisher and Rensek like this.
  7. Byronb
    Thanks for making me spit water all over my keyboard.....:)
     
  8. barondla
    Those of you running the Vali 2 with headphones, is it at low or high gain setting? Thanks.
     
  9. Robert Padgett
    I am using a JJ-Electronics, new production 6SN7 on the Vali 2. Through my 48-ohm Audio-Technica headphones, prefer the flexibility of low-gain. I only pop it to high when it is a tube buffer for the Sprout and speakers.
     
    thebmc, Rensek and barondla like this.
  10. wink
    I, also would like to help you out..............................:ksc75smile:


    Which way did you come in....? :beerchug:
     
  11. thebmc
    I'm running Hifiman HE400i and I use low gain with Modi2U and high gain with my vinyl coming out of an AVR with a cheapy phono pre in it. need to get a second Mani and a sys for the office vinyl/digital setup. I think I only need high gain with vinyl due to the relative crappiness of the phono pre in the AVR. probably only has ca 36db gain and my cart would work better with a higher gain setting. more like 42
     
    scclimber and barondla like this.
  12. thebmc
    I should clarify; I run the Modi into the AVR and run the Vali 2 from the tape out and doesnt seem to be affected by the volume control on the AVR. don't know if that information makes any difference with your question. my volume stays at around 11 O'clock when listening to digital. its more than enough volume for me, and thats taking into account that I play live music regularly and likely suffer some mild hearing loss.
     
    Last edited: Jan 23, 2019
    barondla likes this.
  13. RickB
    I'm using it on low gain with the volume knob around 9 o'clock. This is with HD650.
     
    RCBinTN likes this.
  14. scclimber
    I have a mani and sys that I would be willing to let go of if you are interested. The have maybe 15 minutes of play time on them. Let me know.
     
    CAPT Deadpool and thebmc like this.
  15. Jason Stoddard
    2019, Chapter 2:
    “Made” No More


    This is how it started: with a phone call.

    Now, it isn’t unusual for me to get calls during the day at Schiit. Although my phone is permanently on DND, my Apple Watch hasn’t been irritating enough—yet—for me to turn off its haptics. It’s easy enough to look at the watch and see:

    1. It’s yet another ****ing robocaller from my area code (I know nobody in my area code, it makes it easy to screen).
    2. It’s a vendor who hasn’t figured out the world has moved on from the days of calling people. Hint: it has. Text me. If it’s important, I’ll respond quickly. Unless my phone is off. Which it is. Often.
    3. It’s someone I can talk to later.

    “Wait a sec, that sounds like you never answer the phone,” you might be saying. And you might be right. There’s simply no reason to let a text/call/Snapchat/Instagram/other-stupid-social-media-thing interrupt me talking to the person I’m with, or doing what I’m doing.

    Don’t agree? Cool. Fight me. I’m old. Soon I’ll have a cane to shake at you.

    Sigh. In any case, back to the story. It isn’t unusual for me to get phone calls, but this one was odd, in that it was a friend from way, way back…and a friend who also ran an audio company. I usually pick up the phone and talk to him. Why? Because he’s entertaining. And we go way back.

    So, seeing the number, I picked up the phone.

    “Bob! (real name redacted), how’s it going?” I asked

    “You guys ever get a notice from the FTC?” Bob asked.

    I didn’t answer for a long time, due to a sinking feeling in my stomach. Bob was also the same guy who alerted me to the California Prop 65 thing, where changes in the law meant that bored people with legal degrees were starting to fish in the pool of Prop 65 compliance, which is a law that states you have to disclose what possible harmful substances might be in your products if they are sold in California.

    Aside: this includes over 800 different compounds, and includes things like wood dust, salted fish and testosterone. No, you can’t make this up.

    “FTC?” I said, finally. “Like, the FTC FTC? The Federal Trade Commission.”

    “Yeah, them,” Bob said. “I figured you might have a problem like us.”

    My stomach dropped about 18 inches. “A problem? Why?” I managed to choke out.

    “Because of the ‘Made in USA’ thing!” Bob said.

    “Made in USA?” I asked, not understanding.

    “Yeah!” Bob exclaimed. “You can get in big trouble for that stuff!”

    I frowned. “But Bob, some of your products are made in China.”

    “No no no!” he said. “This is for something just like you do. The chassis is done here, the boards are done here, the packaging is done here, it’s put together here, same thing exactly!”

    Huh. That held me up. That made no sense. “Wait a sec. Stop, then start again.”

    “We got a notice from the FTC about our ‘Made in USA’ labeling,” Bob told me. “For a product that’s made exactly like yours. We have a US chassis manufacturer, we have the boards done here, we assemble and test in our own facility.”

    My stomach, still a foot and a half lower, twisted into knots. “What did the FTC say?” I asked.

    “They said we had to stop using ‘Made in USA,’ of course!” Bob said.

    “Wait a sec, but it IS made in USA!” I said.

    “Not to them,” Bob told me.

    And that, my friends, is how we started down the path to being “Made” no more.


    You May Have Noticed…

    Recently, some of you may have already noticed this change. We no longer claim “Made in USA” on the website. Also, by the time of this writing, we’re probably starting to see the first chassis that say, “Assembled in USA,” rather than “Made in USA.”

    Aside: guys, this isn’t a political screed. This is the description of a decision regarding business practices in light of local requirements. I thought it relevant to share here, since it’s instructive for other manufacturers, or persons looking to start a manufacturing business. If you start jumping in with wacky tin-hat conspiracy theories from either side of the political spectrum, the more powerful moderators may decide to squash this chapter dead. So let’s continue the story, and consider both the manufacturers’ and the regulators’ sides impartially.

    “Oh myyyyy gawwwddddd, it’s a conspiracy!” some will immediately shout. “You’re moving everything offshore, you greedy bastards!”

    Well, no. In fact, nothing at all has changed. And by “nothing at all has changed,” I mean:
    1. The vast majority of production cost of our products still goes to US-based companies manufacturing in the USA.
    2. Our chassis guys are still in Chatsworth or Valencia, literally minutes from our office—and yes, they manufacture there, not overseas.
    3. Our board guys are still either in Simi Valley or Pleasanton, and, again, they manufacture there, not overseas.
    4. Our transformer guys are still in Willits.
    5. We still design, assemble, and test all of our stuff in Valencia.
    6. Tony’s videos on how we make our stuff are still 100% accurate.
    In short, nothing has changed at all.

    Furthermore, this isn’t a sneaky way to start moving things offshore. Each product on our site will still have a clear paragraph describing what’s made in the USA and what isn’t, Tony will continue shooting videos showing how we make the products, and we’re going to continue using USA subcontractors that are making things in the USA, just like we always have.

    So what’s really changed? The label.

    We are, simply, “Made” no more. Now, we’re “Designed and Assembled in the USA” or just “Assembled in USA.”

    Not “Made.”

    Not even “Engineered.”

    “Why?” you might cry. “Why not fight the good fight, go toe to toe with The Man, and prevail for Truth and Justice?”

    Sounds great. Sounds noble. Sounds wonderful. It’s what you’d do, if life was a movie.

    But there’s one small catch: the FTC has no definition for “Made in USA” other than, “every single part is made here, and traceable here, down to the smallest resistor,” and they have the power to shut us downif we argue with them.

    So we caved. Sometimes life isn’t a movie.


    Denial

    Let’s go back to that first phone call with Bob. Because my mind was in a whirl. Bob couldn’t possibly be right. So much of our stuff was made here, it had to be OK to claim “Made in USA!”

    “But Bob, we’re like ninety-plus percent made-in-USA by BOM cost, no matter the product. Even the $99 products!”

    Bob chuckled. “But that’s not 100% , right?”

    “Well, no, but—”

    “And, of that ninety-X percent, how much of it really comes from overseas?”

    I frowned. “None of it, we use US manufacturers actually making stuff in the USA.”

    “So you know your metal vendors are using sheet that comes from the USA, and not from Taiwan or Korea or China?”

    “Well, they haven’t raised prices because of the tariffs—”

    Bob barked out a harsh laugh. “So you don’t know.”

    “Well, do you have to go that deep into how it’s made?” I asked, my growing unease already telling me the answer.

    “Of course you do!” Bob said. “Are your transformer guys using Chinese lams or good old Ohio steel? Is your knob stock from Sri Lanka or Alcoa? Are your boards straight from Shenzen, or grown in free-range organic FR4 farms in Montana?”

    I said nothing. I could see that it would matter to the FTC.

    “And even if they all are doing their best in foundry-to-table local manufacturing, do you know if they change their metal or board suppliers?”

    I sighed. “So you have to track that too?”

    “You have to prove that, too,” Bob said. “For everything.”

    “Everything?”

    “Everything down to your 0402 resistors.”

    The enormity of it started to sink in. “But…damn, I mean, nobody makes chip resistors in the USA!”

    “So? Not the FTC’s problem.”

    “But they’re a tiny part of the total cost!”

    “But can your product run without them?” Bob shot back.

    Of course not. I couldn’t argue with that, so I changed the subject: “I thought they wanted us making stuff in the USA, isn’t ninety percent enough?”

    It was Bob’s turn to laugh. “They want us not misleading customers,” he said. “That’s the whole thing. If you claim ‘made in USA’ and it really isn’t, then you’re potentially misleading customers.”

    “Even with our paragraph about how we make things?”

    “Yep.”

    “Even with Tony’s videos showing how we make things?”

    “Yep.”

    “But…that’s not fair!” I protested. “Ninety percent should be plenty!”

    “Yes,” Bob said. “It should be. But it isn’t. Bottom line, there’s only one way to slap a ‘Made in USA’ tag on your product and not get hung, and that’s if it is 100% made in right here from parts sourced right here.”

    “What the hell qualifies for that?” I asked.

    Bob snorted. “Hell, I don’t know. Corn? Maybe.”

    “There’s got to be another definition.”

    “There really isn’t, unless you want to prove that your foreign parts, ahem, I’m quoting ‘make up a negligible portion of the product’s total manufacturing costs and are insignificant parts of the final product,’ by tracing them back to their sources, making sure the sources don’t change, and are willing to stand up and say that your SMD resistors and capacitors are insignificant.”

    “Insignificant in cost,” I told him.

    “They didn’t say that—they said insignificant.”

    “Ah hell.”

    “And remember, you get to do this for every product.”

    “Ah hell squared.”

    Bob laughed. “You’re beginning to get the picture.”

    I sat there for a long time, saying nothing. We really did make things here. I mean, we really did. I knew this. I truly, truly believed this. But proving it to a federal agency…for each product…

    “So what are you going to do?” I asked Bob.

    “What do you think?” he asked.

    “You’re gonna give in?”

    “Of course.”

    I said nothing.

    “You’re not thinking of doing something dumb, are you?” Bob asked. “Trust me, this isn’t a fight you’re going to win. All it takes is someone dropping a dime and you’re going to get the same letter.”

    “But…this isn’t right!”

    Bob sighed and said nothing for a long while. Eventually, he said, “I don’t know how they do it in Japan or Germany. Maybe it’s the same. Or maybe you put the last screw in and all is hunky-dory. But this is how we do it here.”

    “Maybe it needs to change, then.”

    “Maybe,” Bob said. “Or maybe we need to grow up a bit and realize maybe they have a point, maybe we should worry a bit about misleading people.”

    “I don’t think what we’re doing is misleading.”

    “Nor do I,” Bob said. “Believe me, when I first got the letter I wanted to say, fine, **** you, I’ll just make everything in China and screen on the back ‘proudly made in China because it’s too hard to prove we made it in the USA.’ But that’s kid’s response. I’m not a kid anymore.”

    I said nothing.


    Anger

    Best not to get into this in detail. But it is part of the process. Yes, I was angry for a while. I fantasized about all the stupid things you think about when something important is taken away from you—appealing to the people, going to court, running it all the way up to the top, Dying On This Hill.

    But I didn’t.

    Instead, I do what I sometimes do very well: I ignored it.


    Bargaining

    A couple of months passed, and Bob came out for a visit. Yes, competing manufacturers do visit each other, and indeed are usually quite cordial; this ain’t a zero-sum game, and (as Bob noted above) we shouldn’t behave like children in a schoolyard fight.

    Bob was happy. “The FTC thing is pretty much settled,” he told me. “Our lawyers and their lawyers worked it out.”

    “You really think we still need to worry?”

    “Man, I’d be crapping my shorts if I were you and I hadn’t done anything,” Bob exclaimed, looking shocked. “You haven’t started re-labeling stuff?”

    I crossed my arms. “Nope.”

    “I’d re-think that.”

    “Why?”

    “Because what they did with us, that’s a courtesy. They came in nice, with a letter, and let us work with them because they didn’t think we were intentionally trying to mislead customers.”

    “That’s nice?”

    “Not nice is you get a letter that says, ‘stop selling everything—for as long as we want you to.’”

    “Erg.” I went a little pale.

    “Exactly. As it is, we still had to pull stuff out of boxes to re-label. I figured, ‘Hey, we can roll this in with the next run.’ They said, ‘ah, no, how about you roll that in right now?’”

    “So it’s ‘Assembled in USA,’ now?” I asked, feeling my guts go all greasy again. “That’s all you can say?”

    “Talk to your lawyers,” Bob said. “Assembled in USA, Assembled in USA of US and Global Components, Designed and Assembled in USA, stuff like that is OK. ‘Made’ and ‘Engineered,’ are no-goes, unless you can prove the supply chain, and in the case of ‘Engineered,’ there are also specifics.”

    “Not even ‘Engineered?’ You’ve got tons of engineers!”

    Bob chuckled. “Yeah, I told them how much we spent on engineering. Still doesn’t qualify for some reason.”

    I sighed. I didn’t care about ‘Engineered’ so much. That is kind of a specific claim, and there isn’t a lot of space on the back of our products to screen that anyway.

    But I did start having a sinking feeling that Bob was right.

    Even if we were certain that we were 100% totally, morally justified in using a Made In USA claim, maybe that simply wasn’t enough. If we got up on our high horse and got shut down for it, that wouldn’t help anyone. Not me, not Mike, not any of our employees.

    “Maybe ‘Designed and Assembled in the USA,’ isn’t so bad,” I said.

    Bob nodded. “You’re starting to get it.”

    “Or just ‘Assembled in USA’ on the small stuff.”

    “That’s probably fine, too.”

    “Or we could abbreviate it, you know, ‘ASSY IN USA,’ you know, like ASS-Y, I mean, we’re Schiit and all.”

    Bob just looked at me and shook his head.

    But, in that moment, I was OK with it. We could still do our paragraphs explaining how we make our products and where we get our parts. We could still do the videos showing people how we make stuff, and how our subcontractors make things. I would just write a chapter about what happened and let everyone know nothing had really changed.

    And that might be just fine.

    “Ah hell,” I said, finally.

    Bob laughed. “Welcome to the adult world.”


    Depression

    I don’t really remember being depressed about the decision, but I’m including this section so we go fully through the stages of grief.

    Or maybe I was in a bit of a funk about not Fighting the Good Fight. I mean, I know there are other companies that claim ‘Made in the USA’ and are really no different than us. And I know that we have a very, very good case that our products are made in the USA.

    But…
    • If we had to add the staff to fully trace the origins of all of our metal, boards, transformers, and such, it would be a huge burden
    • If we had to make sure the origins never changed, that’s an ongoing burden—prices might have to go up
    • If we had to spend hours and hours quantifying every little thing, Schiit would suddenly become a whole lot less fun—we would be in danger of destroying our zeroth thing
    On the other hand, if we just changed the screens, and explained what everything meant, and didn’t change one thing about how we did business…we could continue doing what we were doing, secure in our approach…and secure in knowing we weren’t misleading anyone, knowingly or unknowingly.


    Acceptance


    Once we made the decision, we went about it in the same way we addressed the California Prop 65 thing—as thoroughly as we could. Prop 65 is covered in Chapter 9 from 2018, if you’re interested. Though this time around we were a lot less snarky about it.

    I mean, once I made the decision, things moved fast.

    The day I let everyone know we had to make some labeling changes, we edited literally every product page and the bottom footer on the website. A couple of hours of work, and we had an explanation of what “Designed and Assembled in the USA” meant. It read completely like our old explanation.

    From there, it was simply a matter of changing the screens on every product. That was a bit less fun, but again, a few hours of work and it was done.

    Aside: again, guys, this is not political. Don’t start going into full conspiracy mode or yelling about how things are unfair. These are the rules. We’re following them. Other businesses should know about the rules, and our experience with them. Please stay civil so we can keep this chapter up for their sake.

    I sent my first batch of new “Assembled in USA” screens out about the same time Bob called again.

    “So you staying out of trouble?” he asked.

    “I’m changing our Made in USA labeling.”

    Bob laughed. “Well, I was asking in general, but good for you.”

    “I’m still not too thrilled about it.”

    Bob was silent for a long time. “I get it. But sometimes you have to stand up straight, comb your hair, and wear that suit.”

    “I don’t even own a suit.”

    Bob laughed. “Of course. LA guys are all kids.”

    I said nothing.

    “Look, I know, it might feel like you’re wearing one of those ugly hats all the Empire guys wear in Star Wars right now, but what you did is right.”

    “I still…I mean, this should be fun.”

    “And Schiit should be the rebel,” Bob added.

    “Right.”

    That got a long laugh. “Well, kid, I don’t think you have to worry about that. Even if your products are now just a bit more, ah, ass-y.”

    “Heh heh,” I said, feeling both satisfied and very, very tired at the same time.

    And that, friends, is the story of how we became “Made” no more.
     
    Last edited: Jan 23, 2019
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