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The Digital Skeptic: Maker Movement Makes No Money

NEW YORK ( TheStreet) -- Joseph Hotchkiss figures there won't be much to make in the so-called Maker Movement.

Hotchkiss knows something about making things. He is director of the Michigan State University School of Packaging in East Lansing. There he trains the world's best and brightest in the fine art of turning a mere Apple (AAPL) iPhone, Google (GOOG) Droid or Amazon (AMZN) Kindle into a retail unboxing experience worthy of major investor love.

Business at his school is brisk, and for a very good reason.

"Pretty much everybody who gets through our program," he tells me over the phone, "gets a job."

So what is Hotchkiss dying to tell investors after training generations to do the heavy lifting in packaging -- one of the largest sectors in the U.S. economy, by the by?

"As fast-moving and high-tech as our as our industry is," he explains, "I would be very skeptical about the fundamentals of large, industrialized operations following the path of the Internet towards decentralization and mass deployment."

What Hotchkiss is talking about, of course, is the oh-so-hip digital-age notion of the Maker Movement, the burning hot trend that a generation of free or low-cost desktop design and manufacturing tools will dramatically lower the cost to make finished goods.

And therefore what happened in the information economy will happen in the manufacturing economy.

"What you can now see emerging are several vertically integrated 'making chains,' which go from authoring tools to design houses to service bureaus to communities to 3-D printers," Chris Anderson, editor at Wired and author of Makers: The New Industrial Revolution, says in a blog post. These chains, he explains, will combine into an integrated supply infrastructure similar to those in large, centralized, capital-intensive manufacturing firms, but at a fraction of the cost and created by just about anybody.

And, no question, democratized industrial systems appear to obey all the rules of digital disruption.

San Rafael, Calif.-based industrial design giant Autodesk (ADSK - Get Report) has bet heavily on new, free-to-use tools such as the 123D design apps, which offer serious computer-assisted designs for nada. Cheap 3-D printers, including the Dimension 3D unit from Eden Prairie, Minn.-based Stratasys (SSYS - Get Report), can fab just about anything in essentially real time. There are flurries of start-ups such as Long Island-based Shapeways, which just opened a printing facility that can create 5 million on-demand objects a year.

Big DYI even has a poster child: one Limor Fried.

This MIT-trained engineer, known as Lady Ada, made the cover of Wired magazine for her New York-based shop, Adafruit Industries. She makes, designs and ships kits for making cool things such as Drawdio, an electronic pencil that makes music based on what you draw.

Indeed, when we chatted via email I found her worthy of all the media attention. She is a bright, young entrepreneur.

Industries stay industrial
Hotchkiss enjoys the innovation as much as anybody. But his message about the limits of the Maker Movement should not be ignored by investors.

First off, he points out that as cheap as tools such as Autodesk's 123D might appear, they are simply not up to the task of designing packaging for the heavily catered to world consumer.

"The tools you really need start at $3 million," he explains patiently to me. (My sense is that he gets this question all the time.) "And they are never going to get cheaper."

He used a system from Belgium-based Esko to explain why. The software is a seven-figure investment and can easily take six months of intense training for engineers to start to learn how use, never mind master. Then the evolution of packaging design never stops. Next year's package and next year's packaging tools must do more than last year's.

"What we do is like Hollywood in the sense where major investment must be made year in and year out to keep the experience of shopping, opening and using something competitive globally," he says.

Next, Hotchkiss points out that products -- especially those sold via decentralized Web channels -- must work ever better in an ever-leaner retail environment. There is no margin for returns, customer service or time lost teaching people how to use something fresh out of a box.

And then there is real killer of the Marker Movement: the U.S. Interstate Highway system.

"At the end of the day, whatever you make has to get shipped in a container," he says.

Hotchkiss reminds me that all highways are a standard size and require standard-sized containers, pallets and boxes -- which require pricey engineering to maximize for shipping. Any shop that does not maximize the space in a container will probably not survive.

"Merely wrapping an item in bubble wrap and tossing it in a shipping box will not work," he says.

Worse, the players in the Maker Movement seem unaware of Hotchkiss' concerns. When I ask Fried about the limits of decentralized manufacturing, all I get is a polite non-answer.

"Very interesting points of view and insights, " she writes. "Thank you for sharing them."

Makers will make no money
So yet again investors are up against a firestorm of digital unthink. Desperate to keep the start-up party going, the usual troika of vested media parties, investors and entrepreneurs took an interesting little idea -- being able to make cool stuff with cool new tools -- and turned it into a much bigger trend than it really is.

Now, sure, interesting new ideas will spin out of next-gen fab. I personally cannot wait to have a pen that thinks. But at the end of the day, very few of these Big DIY operations stand much of a chance, which puts them on the ever-growing list of good-sounding ideas that never make money.

"This is just too tightly run a sector for amateurs," Hotchkiss says. "Reality just doesn't work that way."

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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