S2 E74: How to Rebuild the Rare Earth Supply Chain: 5 Key Strategies from Larry Kennedy

Dustin Olsen (00:41)
Hi everyone, welcome to the Rare Earth Exchanges Podcast. I'm your host, Dustin, joined by Daniel, and today our special guest is Larry Kennedy, who is the CEO and founder of a company called Quality Management Institute and a systems engineer who's begun his career in the Apollo spacecraft operations and flight crew training. Larry, welcome to the show. How are you doing?

Larry Kennedy (01:04)
Well it's great to be here, Dustin. Looking forward to the discussion.

Dustin Olsen (01:08)
Absolutely. So just for some quick context, why don't you tell us what Quality Management Institute specializes in?

Larry Kennedy (01:16)
we deal with quality cultures and systems culture.

⁓ quality systems are based on ⁓ the determinant most often is qualified people who have what we call vocational certainty. And the right heart attitude, a zero defects heart attitude, which comes out of the industries of aerospace and manufacturing, but it takes it a little farther because it makes ⁓ a distinction in the heart that cares and the actions that support that kind of an attitude. So we've been doing that for about 20 years. Prior to that I was doing consulting.

⁓ in a lot of different fields as a result of my work in aerospace.

Daniel O'Connor (01:57)
Excellent. And ⁓ Dustin, I would just ⁓ jump in that Larry and I have known each other for several years now and Larry is the ⁓ executive director of ⁓ the world's first accreditation standard for trial sites in the clinical trial process, so in the biopharmaceutical life science world and it's called Site Accreditation Standards Institute. I'm on the board and Larry's been working on that for

Dustin Olsen (01:57)
That's awesome.

Daniel O'Connor (02:24)
handful of years now and it's really starting to take off. So that's been very exciting. Now the the goal here today is gonna be a little bit different than our typical format. It's gonna be more conversational around the topic of quality and standards in in the rare earth and by extension ⁓ critical mineral supply chain. I I want to just set the the tu the frame things here in that first of all China controls about ninety percent of the rare earth

element supply chain about ninety percent of the refining and about ninety-eight percent of of the refining for heavy rare earths which are very important for defense applicability and then about ninety to ninety five percent of the rare earth magnets you these are the vitamins for high tech industry and ⁓ what China's been doing Larry is very important. I first want to convey to you they're establishing a broad and increasingly sophisticated framework

Of technical standards, testing protocols, sis ⁓ traceability systems, environmental controls, and the like. and it's their standard and it's for the world. And we have to follow. Now, if you look at rare earth supply chain, it's not governed by a single standard outside of China. There's a hodgepodge of of of of standards like ISO 9001.

Larry Kennedy (03:33)
Mm-hmm.

Daniel O'Connor (03:47)
ISO fourteen thousand one, IATF one sixty nine forty nine, AS nine one hundred, and a number of others. And then when you get into the industry like automobile, ⁓ defense, there's very sophisticated accept acceptance criteria. It could take years. And so, you know, we started having a discussion about a a quality culture standards.

And how we can help our country and its supply chains as we try to reindustrialize. Now and and and the first thing I want to ask you, given the dominance, overwhelming dominance that the Chinese have today, and the fact that they are well on their way to establishing s r a range of standards, is it too late for us?

Larry Kennedy (04:35)
by no means. It's a difficult thing to overcome. It reminds me of the original space race. You know, Sputnik went up and we panicked, but we we blazed by Russia and the rest of the world. and it's because we have a different kind of an economy. we have what's supposed to be a free market capitalist economy.

And we have educational systems to support that. And ⁓ so I I I got to participate in the fear side, the furious side, getting in in sync and trying to get ahead of them, and then the overwhelming victory of it because it lifted from us during those years that we were in the space race a sort of fear of the tyranny of the space race. And I see the exact same thing in this as a parallel in this rare earth element.

Daniel O'Connor (05:20)
Right.

Okay, so that's just how

Larry Kennedy (05:26)
⁓

Sort of race because so much strategically depends on our success and our willingness to set our own standards. You know, standards they evolve out of practice. When we did the site accreditation and standards institute for the global standard for clinical research sites, it wasn't about the pharma or this or that. It was what's what happens on the sites and what do the people want as an end product. And that's always the case. So we have we have the opportunity.

Daniel O'Connor (05:53)
Right.

Larry Kennedy (05:55)
Opportunity through collaboration and the kind of work that you're all trying to do to bring different parts of this process together to evolve our own superior standards. Anyone who looks seriously at the kinds of standards that China has applied to their manufacturing businesses has to wonder, it's the standard or is it the people or what? Because they're not consistent.

Daniel O'Connor (06:18)
Interesting. So if we look at ⁓ the current situation, again, you know, China the last thirty years, it's important to set the context, Larry, we have been hollowing out our industrial base. Okay. And that's due to financialization,

Larry Kennedy (06:31)
Yes.

Daniel O'Connor (06:35)
an ideology of globalization as the right thing to do, just out outsource and offshore things. And I I think overregulation too. I think that, you know, we we we had an aversion to things like mining. So let's look at the rare earth element supply chain. You have upstream, which is the mining, and all that goes along with that. And there's a lot of issues there, like you know, some of the rare earth element ore has radioactive elements. So there's a lot of ⁓ issues with that kind of

Larry Kennedy (06:44)
yeah.

Daniel O'Connor (07:04)
Then there's midstream, which is the separation and ⁓ metalization. So you're taking it, you get, you get the ore, and then you take or the a carbonate, and then the the ⁓ refining is you turn that into oxides. So you separate out the rare earth elements into oxides. And only China can do that today at scale. And then you go from oxides to metals.

Larry Kennedy (07:08)
Mm-hmm.

Daniel O'Connor (07:29)
so whether it's terbium or dystrobium or what have you, and then from metals, then magnet makers and other manufacturers will use those metals to make components like rare earth magnets. So when you look at a a a fairly extensive supply chain like that, you know what how do we start thinking about quality systems

And all importantly the culture that you're talking about so that different industries can have ⁓ we can be more efficient as we try to rebuild this this whole industry.

Larry Kennedy (08:01)
The key to accelerating systems like this to compete is to bring together all these disparate profit motives and proprietary technologies and science. And to get them to join around one common vision, we have the opportunity to do that by reigniting the space race kind of ⁓ motivation.

And the real important keys to making these people work together, and we saw it in Apollo, because I don't think there's ever been a more complex supply line.

⁓ than that coming from all r all parts of the world was ⁓ first of all commit to the kinds of ⁓ principles for quality systems starting with the vision, the kind of methodology one to approach, what our goal is, what we're trying to overcome, so on and so forth. But put under that a culture that will support reliable handoffs. Think of the thousands of handoffs that were involved in the Apollo program. And all of the other things of ⁓ the

During that period of time we were involved in Polaris and Poseidon and Atlas Agena and the Titan programs and all these things. So the sub supply chains were enormously stressed. And we were trying to overcome these things and still keep our technology at a high level.

Keep our science growing because we were growing from the science. This is we practice things. And under that is the handoff. So you think about a sports metaphor, a quarterback handing off to a running back. In soccer, a player running down the field and with precision, kicking the ball from one place to another, and it's it arrives there just in time for that other player to make a goal, so on and so forth. The handoffs are going to be essential. And the players that hand off to each other have to be working.

Working

by the same values, the same principles, the same pressures, and the same desire to deliver what was needed in the handoff. That's going to be essential. Under that comes process ethics, which are individual to the corporations and even to departments within corporations. So it's doable because it's been done many times since my first experience way back there in the Apollo program. Business has routinely done these things and they've done

them well. I was so stunned in the 90s when we started giving away all of our our you know ⁓ manufacturing and all of these ⁓ knowledge bases to China but I think we're starting to w wise up and realize they're not just a competitor. In many ways they're a strategic enemy.

Daniel O'Connor (10:34)
Yeah. No, that's clear, Larry. Right now, just for some context, it's not just rare earth elements, it's a dozen or more of the most critical minerals. China has methodically and systematically used state state sponsored socialism with capitalism to control these.

So that they can control the industries that come out of those and they can control they can monetize and generate the lion's share of revenue of any industry. So if we look at this, and one thing that's evolved, and this is important, Larry, the for rare earth elements

A a a large percentage of the outcomes equate to or manifest as rare earth magnets. These are small devices that are made that are inserted in motors and actuators and and they're the they are really the the little engines of the high tech economy, especially for defense. Now what's fascinating is there's no standardization of these rare earth magnets in China.

Every one of them is custom. It blows my mind. And it's the same over here. So how do you in if you have an industry where every output is I mean they have classes of magnet, so there are s there's some categorization, but then the specific product is bespoke to that customer. So how how can you scale quality with that kind of situation?

Larry Kennedy (12:05)
Well, one of the great advantages we have is we're the biggest customer. So we have more opportunities to test our production methods and to test our quality standards. we have a lot more opportunities to create variables and requirements and fulfill them too. I don't know that there will ever be a homogenous kind of standard, but there will be standards that will be required and the and Dan, they'll look like ethical standards because process ethics are what's really

important here and that is are you going to be satisfied with an acceptable quality level which we know will reduce quality outputs and increase defects and returns and failures and and these in products that are being used and the con the large I would say a majority at least if not a larger portion than that of these products are going into very important strategic products. I mean it's not just the airplanes anymore it's missiles and

Daniel O'Connor (12:36)
Thanks.

Larry Kennedy (13:02)
drones and all kinds of other things, not not even counting the AI competition, not even counting those kinds of things. But anything that's got a motor in it or needs that kind of magnetization ⁓ to to function, we're the biggest customer. So we pivot off of that into joint ⁓ participation, partnerships, tri tri-levels, all kinds of conglomerates or collaborations. And one thing that we have in the United States that you don't see

Daniel O'Connor (13:04)
All kinds of stuff.

That's right.

Larry Kennedy (13:32)
many other places, like if France were going to get in this and compete, or Spain or some other European country, they would start to build vertically and integrate vertically with government intervention and so on and so forth. The real way to do it is to integrate laterally around values, around principle, and around the common goals. And even if it's just money, if your common goal is money, if you want your product to go into this marketplace, you have to compete. So we've got just

Just exactly the right kind of pressure is in place to cause people to reconsider their policies, their procedures, their standards for quality. And as we get more production practice, there's gonna be a lot of early failures. When you look at this supply chain, there's gonna be all kinds of spectacular explosions of failure. And those are really great things. That's how, in after-action reports and analysis, that's how you start to assess.

establish ethical standards, process standards, not individual process standards, and you start to understand why what the China says is good may not be, or what China says might be something to exceed. Until we get into that h hard competition, it won't be able to evolve. That's what I like about your approach is bringing people together and trying to get them organized. Because if they can come together around this kind of process,

It's it's a doable deal. I don't think j 2027's doable, but it won't be long after that. People don't realize that we went from total collapse of fear under Sputnik to putting somebody on the moon in nineteen sixty-nine.

Daniel O'Connor (15:04)
Well look

Amazing. That and that was a an amazing accomplishment and

Incredible that you got to be part of that. Now, Larry, ⁓ an important point, we're gonna get to DFAR, which is the defense rules that no product can be come from China in the supply chain by January first, 2027. But I want to share with you some of the contradictory dynamics with China. Now they have they are establishing ⁓ a a bunch of standards, including green standards, and they're using solar and a bunch of things, and and so they're gonna try to use that to dominate.

The next chapter. Now, but here's the contradiction. The heavy the the one place in the world that China gets its most of its heavy rare earths is from Myanmar, Burma. In the mountains of northern Burma on the ⁓ the Chinese border. It is the most environmental cataclysmic situation you can imagine. It's it's a it's like a scene out of hell.

Larry Kennedy (15:57)
Mm-hmm.

Daniel O'Connor (16:11)
there's fire, there's t toxins, villagers are are are getting poisoned and there's a there's a civil war over this. Now China's environmental until it crosses their borders. And then it's so it's you wanna talk about that for a minute, values? Yeah.

Larry Kennedy (16:27)
I'd love to. I'm

glad you brought this up because it is such entirely rich hypocrisy. and this this guise that they have of operating in a green format is a complete trap.

But they're losing their ability to find to ⁓ influence the rest of the world. If you notice a lot of scientific reports in the recent year, in the last year, last 12 months, are saying, my gosh, it really wasn't what we thought it was. this method really doesn't work. The the various you know green methods for energy and and development. And they've been using that because people have been blindly believing that. I talked to somebody in one of the well, somebody in government who knows and

Deals with the Chinese on a regular basis. And I said, on a scale of one to ten, one being ⁓ not so good, and ten being wonderfully reliable, how reliable is the information that we have coming out of China on this technology and this approach that you're dealing with? And he'd say, I would say somewhere around minus 5,000.

Daniel O'Connor (17:30)
Yeah.

Larry Kennedy (17:31)
And because it's it's a hypocrisy, it's a deception, and our our manufacturing base was given away for greed purposes. But we've got the we've we've got the basic culture here to recover and overcome this because it's a paper tiger over there. It's the it's not the year of the tiger, it's the year of the of the collapse of this this phony thing that they're hanging over ahead. It really is, because

Daniel O'Connor (17:41)
That's right.

Larry Kennedy (17:58)
Our confidence level has been proven here over and over again. And you know, I know very well all of the defects in our educational system and our culture that are out there that we're overcoming.

But I see really, really good things happening among some of the Z, a generation Z and other. But you know what? When people get to to be seriously concerned about their survival and about how real the threats are, but it's funny how they get rid of the unimportant things and get focused again on what's really needed.

Daniel O'Connor (18:31)
So and and that's a really beautiful point. So let's talk about D far. So starting January first, two thousand twenty seven

By rule of Department of War, you will not be it there there can be no Chinese inputs in the value chain. There's just one problem. Ninety percent of the product today comes from Chinese value chain from China. And there's no way we're gonna change that in s in a half a year. So there's a series of ex exceptions and and waivers and this and that. Now we we're gonna partner with one company that's building a blockchain authentication so they can track.

Larry Kennedy (18:55)
You're right.

Daniel O'Connor (19:10)
Where something comes from, where it's going, the provenance of that. So, you know, we're open to partnering as we build this marketplace. But can you talk a little bit about political timelines versus industry timelines and how quality culture, because think about it, you have a political timeline, we're gonna be independent by January 1st, 2027. Then you have an actual industry real-world timeline, which is, well, that might be 2032.

Larry Kennedy (19:23)
Yeah.

Daniel O'Connor (19:36)
You can't build a quality culture on on a political timeline, can you?

Larry Kennedy (19:41)
No, it can't be done. It I think it's something similar and I keep making these references back to my youth, but I remember John Kennedy when he said we're gonna put some guys on the moon and return them safely. And when I teach quality, I use this example a lot because the key issue there is return them safely. I mean you can shoot a BB gun and hit hit a target, but whether you can recover that BB and bring it back, that's another thing.

And politically, I think that's what they're trying to do is motivate the nation to see how important this issue is and make it sound as treacherous as it is without saying it out loud.

Daniel O'Connor (20:08)
Right.

So we're not seeing

Right. Right.

Larry Kennedy (20:20)
And the politics

will align because there's there's so much money going to be put in this. The politics will align because the politicians want to be in the food chain in this in this whole system of supply chain, you're gonna see the politicians feeding in there. You're gonna and and that's always the case. So it will turn to the market, and that's why, if we can have some influence where we say these process ethics have to be honored at some point. I mean, you can even get the

Mafia to do things right when they know they don't make money if they don't.

Daniel O'Connor (20:54)
Right. Well i this is an important question for you and I've really grappled with this since I've learned this industry. The Chinese over the last three to four decades have created a extremely sophisticated state and private capital integrated system. The the companies there's three giant companies that are the result of many mergers and they are owned by the state administrator in China which owns trillions of dollars worth of businesses. They're the there's two branches

There's the state, which w in enforces their discipline of business, and then there's the party, which ensures that they're aligned with the Communist Party. Now, they are designed to flood the market. So as we start to build capability, and this has happened before, the Chinese will unleash or unload on the markets enormous amounts of cheap product to to wipe out

the ex what we call ex-China competition, then they come in and they buy the assets. This has already happened, Larry. What's different this time? It how can you beat a group that is using capitalism and socialism to beat you? How how can you beat that?

Larry Kennedy (22:04)
Because yeah, it's a

it's a perverted system of of capitalism. And and the thing is it would work if they were following the right handoffs and process ethics. And one of the things that really concerns me, Daniel, is that they start feeding us with

outputs that are gonna fail. During World War II, the Jews who were forced into labor in the manufacturing ⁓ chain for the military in Germany started slowly undermining ball bearings and this and that so that they failed.

At the worst possible time. That's one of my biggest concerns because I w I was in my doctor's office here a year or so ago and he and I've I've been going there twenty, thirty years, get my annual physicals. He put his hand on my shoulder, he said, I need to ask you a serious question. He said, Do you think the Chinese are capable of allowing a hundred and thousand people in their own country to die of the COVID thing just to get to us? I said, Without a doubt. I don't know if that's what happened, but I know they could. Doesn't doesn't I don't question that at all. They consider that just a cost.

Daniel O'Connor (23:03)
Right. Right.

Larry Kennedy (23:07)
To doing business because they're they're covert and they're in that mode, and so they're they're capable of doing anything. I think when it comes down to just competition, if we get ignited here in this country, and I think we are going to be, ⁓ that's we'll close that gap very, very quickly.

Daniel O'Connor (23:27)
Well, we're gonna have to because ⁓ we're not quite there yet, Larry. It's we're starting to get some activity. I wanna talk to you about

Industrial policy versus pure market forces. under to to Trump President Trump's credit, to his credit and his administration's credit, they have taken this matter very seriously, more serious than any previous administration. And they have embraced some industrial policy. And we have been advocates of that. And some free market.

Larry Kennedy (23:50)
Yeah.

Daniel O'Connor (24:02)
ideological think tanks on the East Coast have been critical of President Trump saying you're embracing too much state socialism or you're getting too close to it. And we've been defensive of President Trump saying no, you're going to have to do something. I want you to think about the Apollo. You know, you had the state involvement. It wasn't just private sector. Now, on the other hand, we're seeing some misallocation of capital here in this country.

Larry Kennedy (24:14)
Right.

That's right.

Daniel O'Connor (24:30)
And and so how do you how do we and how do we use quality systems and and and standards and and and values to right size and to get projects that may have some state support but also have fundamental business integrity that will sustain over time.

Larry Kennedy (24:48)
Yeah, you know, I live in Florida and every time there's a hurricane down here, the thing that happens next right after the hurricane is the new industry of home repairs, roof repairs, and so on. And all the scoundrels from all over the earth come to Florida to make a little money. In the middle of that, because it's a very inefficient, very wasteful process that insurance companies dump a lot of money, FEMA dumps a lot of money, there's all this money falling from the sky. In the middle of that, there are people that emerge.

And what Trump is doing is essential to overcome the Chinese. But it's very inefficient, it's very wasteful, it's gonna have frauds in it, it's gonna have failures in it. But there's enough money moving around that if you pull together a system or a group of people and their companies that understand these fundamental principles and will agree, you can get ⁓ people to agree on principle and process ethics and say, hey, you know, you we don't even have to have a

contract with each other to agree on these basic things here, then we'll sort it out as individuals. That's why lateral and collaborative collaboration, you know, with these groups is better than vertical integration. Vertical integration has too much centralized control. And so I think we've got all the parts and pieces, it just needs to be ignited and we're going to use 20 tons of money to get it done because there's no other way to get it done. It's an unfortunate truth.

Daniel O'Connor (25:53)
Yeah.

Right. So you're you're basically what I hear you saying is that you need some state sponsored catalyst and and at the same time you need to be evolving pretty quickly the right culture, the right practices, ⁓

Larry Kennedy (26:21)
yeah.

Yeah. And and

you're going to find governments coming together around this, state governments, you're going to find NGOs and nonprofits, you're going to find all kinds of commercial entities, academic institutions, they'll all get in. And there has to be a sorting out of that. There has to be a sort of survival of the fittest. And and what's going to change it is who wants to have the best handoffs.

Daniel O'Connor (26:48)
So

And and it's really interesting you're saying that 'cause in China, I mean, we study this and we report on it like unlike any other group, I think. You know, you have the national level, which again is both the state and the communist party and the the military to some extent. But then you have provincial and then you have municipal. And and they have so they have three layers, but it the in their society, Larry, the clo the party will say

Larry Kennedy (27:10)
That's right.

Daniel O'Connor (27:19)
You are going to do this. And then it's still decentralized, but so each province and municipality scramble to meet the party's edict and and imperative. Okay? And now the downside I see with that, we're starting to see overcapacity. They don't have signals, Larry, to turn the they don't know when to stop. They make too much of stuff.

Larry Kennedy (27:21)
That's right.

Yeah.

Right.

That's right.

Daniel O'Connor (27:48)
And we're seeing they're in crisis right now. So now how long can they hide that? How long can they pad that? How long can they, you know, protect themselves from that? They've they've got a lot of money for those trade surpluses, Larry. Any comments on that?

Larry Kennedy (27:52)
Yeah.

Well, it it's always the th falls back to this, who can deliver? ⁓ and and no matter how idealistic of an organization and how much central control they have, you know, I spent nine years going back and forth to Russia and I was sitting with one of their leading historians one night and he says, Do you know why communism failed? I said, No, but I think you're gonna tell me. He said, Yeah, it because they tried to ignore the nature of man. And the nature of man is to do dirty stuff if it's not controlled.

Daniel O'Connor (28:14)
Yeah.

Larry Kennedy (28:31)
By cooperatives, not by government down. Government empowers it, gives it strength, helps finance it, but it's the people at the organizational and the invention level that make the real difference.

Daniel O'Connor (28:31)
Right.

Yeah. So on that note, Larry, and and this is gonna be a layered question, but again I go I've learned a lot from you by the way over the last decade, you know, as we we work in clinical trials and ⁓ quality culture, learned a lot. You the the term vocational ⁓ certainty I find myself using all the time and we even use it in the in the writing, okay? Now do we have

a culture, our education, our values. I mean, where are we at in that process? How teachable are people? And let's say we want to train. So one of the biggest gaps we have in industrial policy now is we do not have workforce development. We have some of it happening at the local level, you know, like a university in in a county or in a state. Some of that's going on. But we're woefully we don't have the talent there yet.

to reindustrialize. So what's your take on that? Is that just an educational matter? What

Larry Kennedy (29:41)
Interesting, the science and the technologies of this process and this supply chain, this whole endeavor, are known already by a lot of people. And the easiest part to teach is the process ethics and the handoffs. And that's the most vulnerable part.

We do have problems with quality culture and by educational culture. People have given up following Bloom's taxonomy where you have to learn facts and learn how to apply them and work your way up into analysis and that kind of thing. They want to jump and make leaps and bridge across these things. And those where the failures come in. But we have a real opportunity because particularly the last two generations, what they lack in knowledge base, they have a zeal and enthusiasm, and we can teach them.

Daniel O'Connor (30:06)
Top leave.

Sure.

Yeah.

Larry Kennedy (30:28)
going to have to be sub-academic level or extra academic level.

Daniel O'Connor (30:32)
What what do you mean what do you mean what do you what what

do you what do you mean by that?

Larry Kennedy (30:36)
The the academic institutions don't know how to deliver on ethics. They don't know how to deliver on the process ethics and things like that. It takes them years and years and years to agree on one word in a sent in a sentence. And this when we when we went through Apollo, when we went through ⁓ back to you can go back to World War II, where they would take a a napkin and r and and s and style out an airplane and six months later they were flying in the thousands. And it's because the people didn't over

Overeducate

and over-emphasize things that really weren't that important. You could teach a lot of people how to do process ethics and handoffs and show them the target and say, if you don't hit this target, this thing's going to get you over here. And that's really where we're that's where we are. I think there's an army of people out there that want to be employed, that want to overcome the losses that AI threatens them with in terms of job probabilities. So there's some interesting reciprocal things going on right now.

Daniel O'Connor (31:30)
For sure.

No, I think you're raising some really, really fascinating points, Larry. Some fascinating points. A little bit more into that. The so again, whether it's mining or midstream refining or downstream magnet, the mining we have maybe several universities. We still don't have a lot of expertise. We've lost it, but there's some.

Larry Kennedy (31:57)
Yeah.

Daniel O'Connor (31:58)
But when when it comes to refining, like the separation of the elements into oxide and then the metalization of the oxide into the metals and then the making of the magnets, we don't have much, Larry. So we we almost we I don't even know if we have one university, there may be one or two that touch on this. There are ⁓ Virginia Tech is one. ⁓ but but is that like like in Germany they have the concept which we don't have of you know, when you go to high school

Larry Kennedy (32:17)
Right. Right. Right.

Daniel O'Connor (32:27)
you can either go into university or you can go into a trade and they have you know an apprentice kind of approach. We don't really have that German approach in the United States. Maybe we should embrace it more, I don't know. So when you say ⁓ sub academic, like what are some of the forums or you know institutions that this kind of learning has to th it's knowledge is key in this this situation. So

Larry Kennedy (32:51)
Yeah, that's right.

Th this is ripe for state colleges and two-year two-year colleges. This is ripe for this. Yes. They they react quickly. They change their curriculums to respond to these kind of things because their primary emphasis is getting people jobs. And one thing one thing we have is the basic raw talent in in the human being. I'm reminded of this s so-called argument that once took place between Satan and God. And Satan said, Well, you know, you say you're the creator and all this. Well, I could do

Daniel O'Connor (32:57)
Community colleges. Okay.

Dustin Olsen (33:00)
But

Daniel O'Connor (33:06)
Yeah. So

Larry Kennedy (33:22)
that if you'd let me you don't let me and and God says to him fine you can do that but you got to use your own dirt. We got plenty of dirt. We just need to apply it in the right ways.

Daniel O'Connor (33:30)
Right. ⁓

Right, right. So Larry, you know, as we sort of this has been a fascinating conversation. I'm so happy that we're having this. And if you let's say there are a handful of companies right now in the United States, MP materials, re element technologies, ⁓ USA Rare Earth, ⁓ Acclera, a couple more out there that are trying to build

Larry Kennedy (33:54)
Mm-hmm.

Daniel O'Connor (34:02)
Sep ⁓ rare earth refining capabilities, separation, metalization. and most of the knowledge is in China. some of the folks d are getting old, you met one of in a call we had that are here. So ha what's when when the when you have this asymmetric situation where you know ninety five percent of the talent pool is in China and you need to develop it over here quickly, like

Like can what are some ideas that you have about that kind of situation?

Larry Kennedy (34:30)
Well you make a good point. You have to bring some of these older guys out that know how to how and where to hit the pipe in an industrial situation.

And and let them provide the kind of knowledge base, process knowledge, and ⁓ that's required to be become part of the training and the education of this middle sector. The industrial base, the manufacturing base, they'll always respond around one thing. Phil Crosby and I talked about this at length when I was being mentored by him. And one of the things was he said to me, you know, they're only in it for the money most of these companies I deal with. But guess what? If they follow the principles I give them, they're gonna make money, but it'll

work too. And so, you know, that's the important thing. You have to let some of these variables of inefficiency and waste feed at the trough while you build this relationship of those that have the higher sense of calling about this. And want to go to sleep at night and and and have a clear conscience, so to speak, about the work they did. And so you see the same thing right now in the recruitment for the military.

Daniel O'Connor (35:10)
Yeah.

Larry Kennedy (35:36)
The the guys that weren't there for a period of time are there now. They're ready to sign up because if they if you're gonna go to war, go to war. If you've got to fight an industrial battle, fight it. And we've got a president right now, for whatever argument you can make, is willing to push the investment. And he and he says, let everybody else sort out the details. And it scares people, but it's that's the way all of the big things were won: Apollo, World War II, and on and on.

Daniel O'Connor (35:54)
Yes, hundred percent. No, hundred percent.

Yes. yes. So on that note, Larry, I would like to just ⁓ if you could just take a minute, we're getting close to the end. Phil who is Phil Crosby? Why was he important in your life and why has he been impactful on our society?

Larry Kennedy (36:21)
Well, I started work in aerospace and I fell into a great job because I came from a family of quality managers and systems engineers. And I worked for the twelve scientists slash systems engineers that ran the Apollo spacecraft program.

The first job they gave me to do was to aggregate the systems checkout and launch document, the requirements document, which had to be perfect, literally. And I a lot of collaboration. So I came out of aerospace, I mean out of flight crew ⁓ flight operations and went into flight crew training and came out of that experience with QM ingrained in my mind, but I didn't understand the teaching of it, the importance of the culture. I just grew up.

In the culture. I didn't know how what an oddball I was and what an advantage I have. So when I met Phil, he embraced me because he knew that I sort of inherently somehow had a fire in my belly to do what was necessary. And so he took me under his wing and mentored me. And you know, he was one of the three, he, Jaran, and W. Edwards Deming are known as the three top, they call them gurus of quality management. And what Phil did that was really special.

He took it to the common man. See, Deming came in and took it to manufacturing. He got thrown out of the United States by the American Management Association, like I don't know what they were thinking. Went to Japan.

Daniel O'Connor (37:40)
Right. That's right.

The J the the Japanese, that's

right. Right.

Larry Kennedy (37:47)
Went to

Japan and did his proof of concept and then took over the world. Phil came along with him. But you know, Phil and James Halperon actually published first when they were at at Martin, Martin Company back then, and they were u producing the Pershing missile. And Halpern came to to Phil and said, you know, about three out of ten ⁓ Pershing missiles that we're sending over for testing are failing. We got to get better than that. A 30% failure weight won't make it. And out of that

Daniel O'Connor (38:15)
Right.

Larry Kennedy (38:16)
discussion came the absolutes of quality that Phil wrote and so on and so forth. So what I got to do is sit down with one of the guys, so to speak, and walk into his office freely and say, what about this, Phil? So it it solidified all of my experience and all those things I'd learned and practiced in business because I had to leave aerospace to go into business because I didn't want to leave Florida. 18,000 people were laid off at one time at the Cape. It it made a huge difference.

Daniel O'Connor (38:43)
Mm.

Larry Kennedy (38:46)
in my being able to speak to someone who I knew that I knew that knew. You know, there wasn't any guessing going on there. And so my theories and practices that I was honing, I was able to be coached up in those more directly. So I I couldn't put a value on that.

Daniel O'Connor (39:01)
No, it's incredible. And I think it's important as we get close to the end here, Larry, that for everybody watching this again, we want to bring transparency to the rare earth element supply chain.

We want to bring cohesion in in in the context of a market society and and that the some of the approaches that you've developed are absolutely key for that. Now, the difference between a quality management system ⁓ as a checklist and quality. Can you just real you know briefly describe the difference? A lot of people think quality is you just walk around with a little, you know, check board and tick the box.

Larry Kennedy (39:40)
A checklist is ⁓ external to the human being. quality culture is internal, it's self-governing, it's self-motivated, and it's built on principles, ethics, ⁓ and good process. In other words, how do you do things, protocols, and so on and so forth. And so, checklist is a way of trying to control what you didn't do right the first time.

Daniel O'Connor (40:03)
Mm. That's that's that's profound, Larry. And the I I wanna s ⁓ share, may perhaps you could share if anybody in the supply chain, whether upstream, midstream, or downstream, is interested in this topic, ⁓ quality management institute, could you share just ⁓ maybe your website or email?

Larry Kennedy (40:24)
So you can go to the Quality Management Institute.com. We have publicly displayed the various certifications. We have systems engineering certifications, and that's an important part to this. The International Council of Systems Engineering has adopted our eight attributes as the standard for quality for systems engineering. So that's separate and apart from ISO. That is the 18,000 or so systems engineers that come together.

We

Daniel O'Connor (40:52)
Amazing.

Larry Kennedy (40:52)
have certifications in systems engineering and IT and business, but we also do accreditation so we can accredit a company to collaborate in this chain, but we also certify the individuals required. So we've developed this over a number of years, and I think we're in a position to put some leverage to this and help out a little bit in developing what you have in mind.

Daniel O'Connor (41:07)
Yes, yes.

I I believe so, Larry, and ⁓ you know, obviously we consider you a partner and as rare earth exchanges grows and the marketplace evolves, we're gonna be keeping in touch and looking for ways that we can bring people together, like you discussed, to look at importantly how people do those handoffs, for example, and what's in their hearts and their minds and their spirit when they're doing it. Because this is a matter this is a matter of national security. People do not understand, Larry, how

how dire the situation is. thoughts, Dustin? I know we I did all the talking.

Larry Kennedy (41:52)
Yeah.

Dustin Olsen (41:53)
you guys agree. Honestly the conversation was great to listen to this time around, but I would if I were just to comment on something that seemed seems like a recurring theme is we've seen this before, right? The the behaviors, the the mentality. it there's nothing new about it. And if we've been through it before we can get through it again. And if we're just smart, learn from our mistakes, we might actually come out on top like

Larry Kennedy (42:10)
Mm-hmm.

Dustin Olsen (42:20)
We hope to. Or at least find a cohesive arrangement.

Larry Kennedy (42:24)
Well said, Dustin.

Dustin Olsen (42:26)
So

but Larry, thank you so much for being on the show, sharing your knowledge, your expertise, your insights into something that's in and around everything that we do. So th thanks for being here.

Larry Kennedy (42:39)
My pleasure.