"Supply Chains Win Wars": Rare Earth Magnets with John Maslin, CEO Vulcan Elements

Lauren Bedula 0:01 Welcome back to Building the Base. Hondo Geurts and Lauren Bedula here with today's guest, John Maslin, who's Co-founder and CEO of Vulcan Elements, and here to talk to us about rare earths. Thanks so much for joining us. John Maslin 0:14 Yeah, thanks for having me. Hondo Geurts 0:16 So John, we usually kick these off with like, a little background before we get into magnets and all that. What? What kind of got you involved in national security? Where'd you come from? And how does somebody become a CEO of a rare magnets company? John Maslin 0:31 Yeah. So my background is, I grew up in Colorado, small town in the eastern half of the state. Went to the University of Colorado Boulder for undergrad. I always tell people, pre Deion days so had fun. Could have had more fun. Joined the Navy after school, went through officer candidate school and became a Supply Corps officer and got stationed at Naval Reactors, the Navy's Nuclear Propulsion Program. I like to call it the Navy's nuclear energy program. Had several jobs, but I left as the financial manager for the Columbia class ballistic missile submarine program. My job, functionally, was working with Congress or congressional teams to take appropriations or taxpayer dollars and basically work with the industrial base to finance and procure components and materials to build nuclear reactors, put them into submarines, get them out to the fleet. Got out a couple years ago, attended Harvard Business School, and as I was transitioning out of the Navy into business school, I was just I was utterly convicted that the United States really only needed to manufacture three things domestically over the next five years, semiconductors, batteries and rare earth magnets. Those are the three critical components in virtually every electronic device, and the way I personally like to think about it is, if you think about your own body, a semiconductor is like your brain, a battery is like your heart, a rare earth magnet is like your spine. It converts electricity into motion. Rare earth magnets are in virtually every electronic device, but they're invisible, building blocks for our entire economy. When your iPhone vibrates, that's a rare earth magnet. When you get an MRI, that's basically just a giant magnet, cars, drones, data centers, as well as well as virtually every military application you can think of, from satellites to submarines and everything in between. The reason why I kind of moved into that space is I wanted to do some homework. You know, we realized that over 90% of the global supply of earth magnets today are manufactured in China, and less than 1% was manufactured in the United States. The demand for these magnets is absolutely exploding, and the implications for national security are becoming even stronger. So I can keep going, if you want. I have a lot to say, but I'll maybe stop there. Lauren Bedula 2:52 I have a lot of questions. So thank you, and I've already learned a lot, and I know you hear a lot about semiconductors, a lot about batteries, but maybe not as much about this issue as it relates to national security. You helped me understand some of the supply chain risks. Talk to me about what it was like to start a business in this space, like speaking to investors. Or is this an issue folks are educated on? What was that like? John Maslin 3:16 It was phenomenally challenging. We were talking about a hardware company and we were talking about a magnet. What's the first thing you think of when you think of when you think of a magnet? Probably a refrigerator, right? So trying to educate people on what a rare earth magnet was, why they mattered, how a rare earth element in a magnet has a special property, and why it was fundamentally important to do this correctly in the United States. It was, it was difficult. But, I mean, we found really smart investors across both commercial and national security who get it, and it's gone really well to date. Hondo Geurts 3:53 Alright, so for the dumb guy in the room, the big neck, let's say, help me a little bit on rare earth magnet versus refrigerator magnet, what's the rare part of the rare earth magnet? John Maslin 4:05 So it might be even better to even zoom out farther and just talk about critical minerals, right? That's been in the news a lot. So what is a critical mineral? A critical mineral is an element on the periodic table that has broad implications across our economy or national security, and its supply chain can be easily disrupted. If you look right now, there are over 60 critical minerals across the entire periodic table. If you look at rare earth specifically, rare earth elements are a subset of critical minerals. So go back to 10th grade chemistry with me for a second. Think about a periodic table. The part that's detached those two lines below that, your chemistry teacher probably told you to ignore that first line. Those are the rare earths, so we probably shouldn't be ignoring them. But there are 17 rare earth elements, the lanthanide series, and then scandium and yttrium. Of those 17 rare earth elements, there are only four that represent over 90% of the economic value for the entire rare earth supply chain, neodymium, praseodymium, terbium and Dysprosium. I'm not gonna ask you to spell them, but those four, their main use is for a rare earth magnet. So that's how critical minerals and rares are. Fundamentally, it's really about the component. Hondo Geurts 5:25 And is the issue that we don't have the access to the minerals domestically, or we've chosen that to go after that domestically? Was this a always problem for the US, or just a problem over the last, say, 40 or50 years? John Maslin 5:40 Yeah, so that's a great question. So rare earth magnets were invented in the 1980s the United States was the premier magnet manufacturer up until around the 1990s or the early 2000s right around early 2002 things happened. One, you had mass globalization, tailwinds. China was the world's manufacturer. They were the cheapest. They had the lowest environmental regulations. But the second and personally more interesting thing that happened is the former president of China, Deng Xiaoping, has a very famous quote, and it goes, the Middle East has the oil, China will have the rare earths. And what they did is they basically made a strategic bet, and we and they said, We think that critical minerals and rare earth elements, really the components, batteries and magnets, will be fundamental to a high technology economy. And whether they were geniuses or lucky, they were right. So they further subsidized everything. Hondo Geurts 6:32 But from the is it the access to the raw ore itself, or is it the processing or all the above? John Maslin 6:39 It's mainly the processing and manufacturing. So today, China produces about they mine about 55% of the rare earth material. They manufacture over 90% of the magnets. So there's availability of rare earths all around the world, and there are rare earth mines that are scaling today. It's really in the refining and the processing. And the other thing that I would just mention is rare earths aren't that rare. You can go outside and we could take a handful of dirt, and there are probably some rare earth elements in there right now. The issue is it's very hard to find deposits with enough concentration of rare earths to profitably mine. Lauren Bedula 7:17 And I only recently learned the difference between critical minerals and critical materials. Can you talk a little bit about that, or how the government thinks about energy versus the material, like more metal, or any thoughts on the difference between the two? John Maslin 7:30 So the way that I think about it is, it's really about processing, right? So if I give you a handful of critical minerals, you can't put that into an F-35 you actually have to process it. You have to separate it, you have to purify it. You have to turn it into a pure metal, or an alloy. That is the gap that's currently missing, not just in the US, but in North America and Europe that we're trying to solve. Lauren Bedula 7:55 Okay, got it. And how are you thinking as a business leader, about approaching the commercial sector versus approaching the US government as a customer? John Maslin 8:04 Yeah, so this is a question I get from investors all the time. So there are two distinct markets, right? There's the defense market, where you have defense Federal Acquisition Regulations. They can't procure materials from a foreign entity of concern. There are a lot of regulations around that. On the commercial side, what we're finding is that there's a real big push for diversity of supply chains, of resilience in supply chains. In 2021 the US auto industry lost about a quarter trillion dollars in sales because they couldn't get a chip. There's some nuance behind why. But if you can't get a couple $100 of magnets in a hybrid car you can't sell an $80,000 Tesla. So what we're seeing is companies almost want that insurance. They want the resiliency. Some companies want China plus one strategies. Others are saying we want as many magnets as you can make here in the United States as soon as possible. Hondo Geurts 8:59 Wow. So, so walk, walk me through. I always love the sitting in Harvard. You know, taking it easy classes are okay because you made it through the nuclear energy program. Walk me through. Like, when did the idea hit you? And kind of, how, how did you formulate that into the Okay, I'm gonna bet everything I got after this and eat Cheetos for dinner for a couple of weeks while I go, put this company together. John Maslin 9:28 So it was in my first year at HBS, and I was really looking into the rare earth element supply chain. And frankly, part of me was thinking, Maybe I should just go and, you know, try to be a VC, and I'm going to be really creative, and I'm going to find a next generation rare earth magnet company that's doing something differently, that has solved the issue, that can actually do this in the United States profitably, and do it for the right reasons. And I spent eight months researching I was. I went to conferences in Canada, and I was talking to 75 year old rare earth, you know, executives or people who were retired because I just thought I was wrong. I couldn't find a company that, you know, I thought was doing all the right things for all the right reasons. And so I got to a point where I said, I think that we should go and build a rare earth magnet company. Let's make sure that we've kind of covered all of the exits. And I was, I became the weird magnet guy in business school that everyone wanted to grab beers with, but one of my classmates said, Hey, you should come and meet my undergrad roommate. He has a PhD in magnets. And I went, I don't think you can get a PhD in magnets. He said, Just meet him. So I met my co founder through a classmate. He has a PhD in electrical engineering with a focus on magnetics, and actually opened one of the first rare earth magnetics labs in the United States in the last two decades. And I kind of gave my spiel. He told me about what he was doing. It was like going on a date. And we just kind of locked eyes and said, There's an attraction. Let's go on a second date and see what happens. And we got to the point where we just said, Hey, this is one of those missions that regardless of what happens, it's too it's too important not to try. And it's gone really well since Lauren Bedula 11:22 That's awesome, at least you were the guy that they wanted to grab beers with, John Maslin 11:26 Yeah, just the PhD in magnetics. Lauren Bedula 11:30 Now talk to me a little bit about the just environment around manufacturing, how you're thinking about that, how you've been working to build the business, or challenges you're seeing on that front. Because, you know, there's so much focus right now from the US government to bring manufacturing home as a business leader, like any lessons learned or advice on that front in terms of best practices. John Maslin 11:49 Yeah, I think the the two biggest lessons that I've learned are everything boils down to first principles. You can't just scale something if you don't understand the basic science, if you don't understand each independent variable. So you need to make sure that when you're you're scaling, you understand how everything is affected in a lab environment and then at a small scale commercial facility. Because if you go and build, say, you know, 1000 tons for us, and you turn everything on and it doesn't work, that's not responsible to your investors. If you're working with the government, you're not being a good steward of taxpayer dollars, and you're just going to kill time. So it's understand first principles and do it the right way. I think the second thing, and this is not going to be novel, it's you need really smart people with really good subject matter expertise, domain expertise, and I can't replicate 10 John maslins and say we're going to go and build a rare earth magnet company, we need to find exceptional chemical engineers and mechanical engineers and really good technicians, smart PhDs, people who understand public policy, and that's something that we've been able to do really well, but it's workforce, and it's understand first principles. Lauren Bedula 13:03 That's awesome. And how about the partnership environment? It sounds like you fit into a supply chain. How are you thinking about partnerships in the ecosystem? In that sense? John Maslin 13:13 It's going to take a village to get this right. There's not one, you know, one company, I think that can do it by itself to meet the entire demand of the United States, we need several partners across the supply chain coming together. So I'm open to talking to any US company, any Allied company, who has the raw materials that we need, who have who are first principles based, who are urgent and serious about getting this right, and then on the customer side, we want to work with customers who, again, are aligned with the mission, who need a lot of magnets, and want to ensure that they have diversity across their supply chains. Hondo Geurts 13:53 So before we started, we were talking about, you know, you've had busy two weeks, you know, big opening, you got a, you know, a bunch of other things going on, give us a little insight into those last two weeks, what's been giving you busy and then maybe some lessons learned for other you know, founders, who were, you know, it's hard work. You got to grind on this things that maybe are helping you stay resilient and energetic as you're as you're working your way through all these challenges of starting up and scaling. John Maslin 14:23 Let me answer that first, and then we can talk a little bit about the last two weeks. I mean, at the end of the day, and I've told investors this, I've told our team this, I've told customers this, the economic opportunity is great. It's there. I'm not doing this so I can buy a boat. I'm not doing this so I can be a LinkedIn influencer. He says on a podcast. I'm doing this because it's a mission. If you think about that body. Example, the magnet is the spine. If we get into a conflict with China or any adversary, and we got cut off on the rare supply chain, we're fighting AI enabled drones from a wheelchair. I don't want to look at my grandkids. In 30 years, and say, Man, I really wish I'd have done more. So it's easy to get out of bed and you know, work hard every day. The last two weeks been exceptionally busy. We officially had the grand opening of our pilot facility in North Carolina, you know. And it was attended by partners in the rare earth industry, folks in government, private capital partners. You know, our entire team had a lot of pride in being able to show off what we've done. When we took $1 from an investor, we said, by q1 2025, we will have a fully operational pilot facility for rare earth magnets online. We did it on time, on budget. And so I think the biggest maybe lesson that I've learned, and we can talk about what's happened after that pilot facility opening, is expectation management is really important. And if you just do what you say you're going to do, if you put your money where your mouth is, good, things are going to happen. I think a lot of times you want to build hype. You want to get everyone kind of scrambling to give you a check or come work at your company. But if you just simply say, this is what we're going to do, this is our deadline, we'll communicate if we don't hit it, and we'll give you the exact answer to why we didn't get it and how we're going to fix it. Good things happen, but it's relentlessly executing and managing expectations. Lauren Bedula 16:26 Here, here, huge congrats on reaching that milestone. That's very exciting. I want to go back to your path to date. So you spent time on the government side, working at DOD. Now you're on the industry side. We love to see examples of cross pollination between the two, or collaboration between the two. Is there anything you know now on the industry side that you wish you knew while you were serving in government, or has it changed how you think about industry now you're on now that you're on this side? John Maslin 16:57 I would say that the way that my thinking has changed, and I felt this way in the Navy, but I think I've had to go deeper into it, is really understanding your supply chains. Is make or break. If you don't understand whether it's a missile or a drone, if you can't backtrack to say this is the mine where something, an element, was mined, or the landfill where it was recycled. You don't have resiliency in your supply chains. And that's really complex when you think about DOD, right? There are 1000s of components on major systems and platforms. It requires, in some cases, 10 or 12 different layers, and I think it's something that DOD is focused on. I think it was something that we were we did an okay job of in the Navy. But if we're going to continue being the leader of the real world and have the strongest military, we need to really understand our supply chains. Because, and again, this is not a novel comment, supply chains win wars. And I think Marco Rubio actually said it really well during his confirmation hearing. If the United States can't start manufacturing the critical components, the basic components that we need, the things that allow us to make cars and drones and data centers and robots, we're gonna have to ask China what we're allowed, what we're allowed to build and buy in five years, and that's unacceptable. Lauren Bedula 18:26 And what I'm hearing from you too is you can really serve mission on the industry side too. You're so passionate about the mission, you're so passionate about national security and this issue, so it's really neat to see you tackle it from the industry side and building this business? Hondo Geurts 18:43 Yeah, maybe John, maybe I'll look at it a different way. I think there's a little bit of a myth for a lot of folks, and we have a lot of listeners who are kind of early in their careers, that there's a set path, and if you want to be a startup CEO, you need to do this, and then you need to do this, you know, you took a kind of unconventional approach of spend a couple of years in the Navy, learn that, and move here. Well, what have, what's helped you, kind of having that diverse approach versus, I'm just gonna, I'm safely focused, and I'm just gonna go down, you know, I've got my next 15 years planned out, and because we've seen a lot of veterans who have been really successful founder or founder CEOs, and kind of maybe what from your service gave you a unique perspective, or something that helps you now as a CEO? John Maslin 19:37 Yeah, I mean, it's, it's a couple of things. The less sexy answer is domain expertise, actually understanding how DoD works, understanding what goes into different systems and subsystems. I think on the other side, when you're in the military, you are surrounded by people with a mission, people who want to go and do something that is bigger than themselves, that's protecting their families, that is around the idea of what the United States stands for. And so being able to you're an average of who you spend your time with, and so being able to be an average of who I spend time with in the Navy, and then go to business school and kind of get that additional skill set bolted on, it makes it really easy, because, you know, it's very hard to do a startup. They're very long hours. It's very complex. You're dealing with a fire every two hours, right? And it's easy to burn out. And if you don't, kind of have that North Star that is ingrained when you're serving, I think it can be really difficult, and so I'm genuinely thankful for, you know, being able to serve and serve in the right type of command that allowed me to be surrounded by senior officers and mentors who said, This is why we're doing what we're doing, and we've been able to ingrain that in the culture of Vulcan Elements. Lauren Bedula 20:59 So on the topic of burnout, as a founder, busy executive. How do you stay fresh? Like, how do you keep up this excitement around the issue you're working? John Maslin 21:07 Oh, I'm having way too much fun doing this that hasn't even remotely been an issue. Like, I'm having a great time. You know, there's the mission piece, and we're gonna get it right, because it's too important to fail. But I love what I do. I like talking to investors and customers and building a kick ass team that's every or is pointed in the same direction. So, you know, maybe ask me in a couple of years, but my answer right now is, I'm having a blast. Hondo Geurts 21:37 And you know, as you're scaling, the country is focused on bringing manufacturing back. Where can you get help? Like, where are still obstacles that need to be better mitigated that would allow you and other versions of you that are trying to bring back manufacturing? What are the hard points and where do we need to continue focus effort as a country so we can do this at scale, and not just have one successful new manufacturing startup, but a whole generation of them. John Maslin 22:12 I think it's three things. The first is workforce. The lifeblood of any manufacturing company are technicians. You do not need. You should not need a PhD to get a good job in this country. You should not need a PhD to go and work at a great manufacturing company. You might need some, we need some. We have them. But being able to work with community colleges, technical colleges, and build up workforces, maybe put that into high schools, bring back shop class, so that people understand, again, the first principles of how to build things, even if it's automated. If you don't understand how it's being done, that's a long term problem, especially as you're scaling I think the second time is permitting. If it takes you five years to get a permit, you need to be responsible, right? You need to be a steward of the community that you're in. But if you can't get a permit for several years, that's a major problem, and being into being able to scale up and potentially running out of cash. And then the third thing is, I think you need champions, manufacturing, champions in different verticals, who are focused on actually buying equipment from the United States and its allies and creating an entire ecosystem that can stand on its own. That's, I would say, in the critical component space. That's an issue. If over 90% of the magnets are made in China, where do you think all of the equipment to make magnets comes from? So being able to build that ecosystem over time, creating direct and indirect jobs, if you couple that with the workforce and permitting reform, we're going to be in for a good time. Lauren Bedula 23:50 How are you thinking about international business or international partnerships? Like very focused on the US, or what's your take on the international side? John Maslin 23:58 It's the US and its allies. We want to work with Europe. We want to work with Australia. We want to work with Canada. This is kind of a hey, you need to make sure you put your mask on first, and we're providing the materials that we need for national security and economic resiliency. But this doesn't just stop at the US. Lauren Bedula 24:21 Well, thank you so much, John. We know you've certainly had a busy couple weeks, but that's no different, I'm sure, from from the normal cadence you're keeping up. So thank you for taking the time to come on and tell our listeners about what you're working on. It's so important. We appreciate it. John Maslin 24:33 Thanks for having me on. Transcribed by https://otter.ai