Electrical contracting in California

September 15, 2023

About six months ago, I decided to get into electrical contracting. Long story short, I'm seeing a lot more Teslas on the road these days, but hardly anyone knows how to do routine electrical work, like bending conduit. I decided to buy (not build) a firm—day-1 revenue is nice, and lots of owners are looking to sell as they hit retirement age.

And so, a couple hundred hours in, meeting dozens of owners, poring over tax returns, and spending countless afternoons on the phone with banks, business brokers, and regulatory agencies, here's a bit of what I've figured out.


  • Electrical contracting has dozens of submarkets.
    • Residential/small business "service work": EV chargers, deck lighting
    • Retail T.I. (tenancy improvement): prepping a "shell" for a Jimmy John's / KFC / Supercuts
    • New construction: single-family, multifamily (apartments), high-rise
    • Low-voltage specialties: cameras, locks, networking
    • Public/municipal: schools, post office, outdoor city lighting
  • The customers and sales processes in each submarket are unique; firms typically specialize on just 1-2.
    • It's the same wire nuts, sold a completely different way. I'm reminded of software: There is virtually no difference in the mechanics of work done between $100 an hour, $200 an hour, and $30k a week — all of the leveling up there is in sophistication on who you go after, what engagements you propose and deliver, and how you package things for clients.
  • Broadly, markets are "all or nothing" union, or non-union.
    • Large "prevailing wage" and "project labor agreement" projects tend to be union.
    • Homeowners, small business owners, and other price-sensitive customers typically don't buy union.
    • Since markets are all-or-nothing, and shops tend to specialize in 1-2 markets, contractors (at the level of the LLC/corporation/entity) tend to be all-or-nothing union, too. This gets complicated with companies (e.g. national contractors) that operate across many union jurisdictions.
  • Markets also split on:
    • How much presales work is required to win a job? Detailed proposals with design work and estimates (public utilities), or just showing up at the door when the call comes?
    • Do buyers care about licensure? How about insurance/bonding? (Public agencies: definitely, homeowners: maybe not).
    • Capitalization: Can the firm float $250k in wages before getting paid? How about $500k? Is waiting 90 days to get paid catastrophic?


  • The most popular union for electricians in California is the International Brotherhood of Electrical Workers (IBEW).
    • Unions divide the world into numbered territories called "locals" (sometimes "jurisdictions"); I live in Local 595
    • IBEW operates an apprentice program. It lasts five years, everyone who wants to be an electrician in an IBEW shop has to do it, and apprentices earn fast food wages ($18/hr). I can kind of see both sides to this; it's very long, but the union sees it as an alternative to college where, rather than paying for it, they pay you. However, the program is over-enrolled, so admissions are competitive and "pre-apprenticeship" programs are taking hold, extending the overall commitment to timeframes approaching a Ph.D. (6+ years). Reddit discussion
  • Here in the Bay Area, non-union journeymen cost shops about $80/hr to employ ($45-50/hr W2 plus tax, benefits, and vacation); IBEW 595 journeyman cost is about $120 ($75/hr plus $45-50 in benefits). Union benefits are indeed better; the question is whether customers accept the $220/hr bill rate required to pay them ($250+ for service work).
  • Unions specify the terms they'll work under in a collective bargaining agreement (CBA—here's IBEW 595's)
    • Big employers (e.g. airlines, school districts) typically have their own CBAs, negotiated 1:1 with the union.
    • Most electrical contractors are too small for their own CBA, so rely on trade associations (e.g. NECA) to negotiate on their behalf. What comes out of this negotiation is a "take-it-or-leave-it" offer for all smaller firms in the Local's jurisdiction. Firms contractually commit to the CBA using a "Letter of Assent"
  • Key terms of the CBA:
    • Which of the firm's employees does it apply to? e.g. an IBEW 595 CBA wouldn't apply to a truck driver, or an electrician in Los Angeles.
    • Employers must fire any employee who won't join the union after a set number of days (e.g. 8); this is known as a "post-entry closed shop provision" (it applies after a person is hired and starts working), and in right-to-work states, may be partly or entirely illegal (note: this area of the law is quite complex)
    • Wage and benefit levels (typically given as a minimum)
    • Frequency of pay: typically weekly
    • Work rules: overtime, minimum shift lengths, requirement to pay when driving to/from the job, hazard pay for doing dangerous things (e.g. climbing tall ladders)
  • The union sees itself as:
    • Ensuring the workforce is property trained, particularly regarding safety
    • A staffing agency, moving members between firms as projects start and end
    • A standard provider of a great benefit package (health, pensions) that's portable between contractors
    • A "cop" that enforces good behavior by contractors (fighting wage theft, unsafe practices)


  • Anyone holding themselves out as an independent contractor, for most types of construction work $500 or more, must, by law, hold a government-issued contracting license, to operate in the State of California
    • This does not apply to employees, either of contractors, or firms that would otherwise require regulation (e.g. electrical work at a power plant)
  • The California Contractor State Licensing Board ("CSLB") administers licensing.
  • There are dozens of license types, falling into three general categories
    • General Contractor, Class A (so-called "General A"), the "public works" category for pavement, dams, and other "civil engineering"-type work
    • General Contractor, Class B ("General B"), for buildings
    • Class C "specialty contractors": electrical, pool, HVAC, plumbing, 20+ others
  • "C-10" is the main license type for electrical contractors. This is a large, general, comprehensive license that allows solar installation, indoor and outdoor high-voltage (90 volts or higher) power wiring, and low-voltage signaling/telecom lines (Ethernet, CCTV).
    • Some of these are separately licensed, e.g. C-7 low voltage systems contractor—the C-10 lets you do it all.
  • CSLB licensing requirements: (California): (a) 18 years old, (b) pass one or more exams, and (c) document 8,000 hours of journeyman-level work experience.
    • Per the CSLB (phone call), work is certified using an affadavit-like certification of work from an: (a) employer, (b) journeyman (unlicensed), (c) licensed contractor (General-B/General-A/C-xx), (d) fellow employee, (e) union representative (foreman), (f) business associate, or (g) client (certification of work experience).
      • CSLB will waive (a) two years (4,000 hours) for completion of a two-year college degree, (b) three years (6,000 hours) for completion of certain degrees, or a union apprenticeship program.
  • California additionally requires anyone working for a C-10 contractor, to be further certified by the Department of Industrial Relations, as a certified party or, barring that, a "trainee" which requires enrolling at an educational institution, in addition to work experience.

Your inefficiency is my profit

February 03, 2021

People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.

It's remarkable that Adam Smith was writing in the 1770s, some 250 years ago; the quote above is from An Inquiry into the Nature and Causes of the Wealth of Nations. And it's as true now as it was then.

If you want to understand why healthcare is so expensive, why Illinois is teetering on the edge of fiscal ruin, or why housing is so unaffordable in the Bay Area, that quote will get you pretty far. The issue is competition, and regulatory capture.

Right-thinking individuals never want to hurt others; they just want what's best for themselves. And even their clients.

Medicine has a long history of quackery—miracle cures, bloodletting, all kinds of crazy stuff. Perhaps it made sense at the time. But as science advanced, it became clear that some things worked, and others didn't. And so today, every facet of healthcare is regulated—who can practice, what they can charge, whether drugs can be sold, and to whom, even whether hospitals can be built, and what equipment they can contain.

As this thicket of regulation developed, by politicians with input from the doctors, drug companies, and insurers, they made sure to get a seat at the table. Until what emerged, year by year, compromise after compromise, was something everyone could live with; the output of a political process that let politicians "get something done", ostensibly for the benefit of their constituents, that the regulated parties could live with.

That the regulated parties could live with—that's the rub. Competition—the bane of the successful. When you've made it, sales are up and to the right, and politicians are calling on you, asking your input on major legislation, there's only one direction you can go: down. Who wants that?

So the predictable result is that competition suffers. Not because anyone wanted to kill it, it just wasn't a priority—we decided we wanted other things more.

Nobody says "I want to be fat", they'd just rather eat dessert every night, than carefully watch their weight.

Nobody says "I don't want competition", they just enact rules like:

  • State-by-state occupational licensing. Why hire a $350/hr lawyer in California when you can get one who knows the law just as well for half the cost in Nevada, or even Mexico or India? Does orthopedics, dentistry, massage therapy, or psychiatry work differently one state over? But: who's going to make it "their thing" to make it possible?
  • A drug safety process that takes a decade, costs billions of dollars, and ensures the only route to market runs through gatekeepers such as Pfizer, Merck, or Genentech, who get a cut of the action
  • Banking regulation that have led to—count them—five new banks in the United States from 2013 to 2017. Five!
  • Want to open a new hospital? Many states have lengthy review processes—sometimes they even tell you you can't close.
  • Charter school bans, ensuring everyone, not just the poor, can experience terrible, one-size-fits-all solutions that would make Soviet bureaucrats happy

I don't know how to ensure regulatory processes maintain, or increase, competition. But I do know that, if you give business a seat at the table, they're going to do what's best for them—not necessarily consumers, and definitely not competitors, especially the most deadly and innovative ones out there—the ones that don't yet exist.

I think this is why, in my heart, I still lean toward small-government libertarianism. It's not perfect, but the surface for regulatory capture seems smaller. A compromise might be making every rule expire in some fixed period of time—if it's still relevant, we can renew it when it comes up.

Tepper and Hearn wrote a book on this topic. Early signs are that the Biden Administration is going to be tougher on antitrust; that's at least a sign they acknowledge that concentration is a problem, which is promising.

Two other things I've realized thinking about competition and regulation:

  • I used to be suspicious of the conceot of "systemic racism". As I thought about it, I realized competition is basically its economic equivalent: something possible not because anyone's evil, they just want things other than "promoting competition" or "racial equity" more. Also, if you're on top, you definitely aren't taking steps to lose that position.
  • There's no substitute for effective lobbying—maybe the activists got that right. It doesn't matter whether you're the National Education Association (teacher's union), AFL/CIO, NRA, or American Medical Association. People who engage in the process get what they want—period. Maybe the federal government should have a smaller role in peoples' lives, but that's not the world we live in, today, in 2021. If you want a voice, show up.


December 14, 2020

I wrote before how one consequence of getting old is being less surprised. It's comforting to think I'm getting better at seeing the patterns, and I think there's some truth to it.

But I also think seeing the patterns—predicting where things are headed—is getting more difficult. Perhaps, as Ray Dalio says, I'm just an ant, too zoomed in to see the larger trends. Perhaps with a different lens—more distance, greater abstraction—things would be more predictable.

I'm still not convinced that's true, though. Sitting here in the last month of the decade, there have been a lot of surprises:

(1) Facebook purchased Instagram in 2012 for $1 billion. I'd just arrived in Silicon Valley, and it seemed unthinkable to plop down $1 billion for a social networking site with no tangible assets, only a handful of employees (JD above says it was 13), 30 million users and no revenue. People called it "the Youtube deal of the 2010s", recalling Google's $1.65 billion purchase of Youtube in 2006. Just two years later, in 2014, Instagram looked impossibly cheap when Facebook upped the ante to $19 billion, later increased to $22 billion, for nascent social networking app WhatsApp. For comparative purposes, that price was the entire market value of Kellogg's—Raisin Bran and Corn Flakes—for no tangible assets, 70 employees, and $20 million in 2013 revenue.

(2) At around the same time (2012), I remember wondering whether Facebook itself, the big growth story, would come back from $20 after falling almost 50% from their IPO price around $38. Eight years later, with stock testing $300/share, I think we can consider that one answered—$1 billion in sales by 2012, today, $70 billion in sales after 15 years in business. Nothing, ever, in the history of capitalism, has grown this fast.

(3) Also around 2012/2013, I remember getting recruited by some upstart ride-sharing company, with sloppy engineering practices and a legally questionable business model. That company was Uber. I sure didn't think they could overcome the taxi raj.

(4) Intel, the preeminent semiconductor company and pillar of Silicon Valley, was Apple's first port of call to manufacture the iPhone's chipset. Failing to see how the engineering investment could work—$20 CPUs inside $200 iPhones, when you're used to making $150 CPUs in $1500 PCs, in a "niche market" (high-end phones) no less—Intel said no.

Apple shipped 218 million iPhones in 2018.

(5) Along the way, Apple became the first trillion-dollar company in 2018. But why stop there? In mid-2020, they became the first $2 trillion market cap company.

(6) "The young don't vote". Until Barack Obama showed up in 2008 with "Hope and change"—and a sophisticated understanding of how the Internet was reshaping campaigning, and fundraising. Then Donald Trump picked up the torch, sailing to victory on "Make America Great Again"—and being a rare member of the over-70 set who's great at Twitter. Alexandria Ocasio-Cortez wasn't "supposed" to beat Joe Crawley any more than Donald Trump was "supposed" to beat Jeb Bush or Marco Rubio, but like him, she's very good at using modern media tools, particularly Instagram and Twitter.

(7) Throughout the 2000s, the fed funds target rate hovered around 4-5%. Today, sovereign rates are negative all over Europe, the 10-year treasury is yielding 0.89%, and asset prices are in the stratosphere across the whole economy.

Here's what I take from all this:

(1) Communication is an essential human activity and whoever mediates/controls it is enormously powerful. Looking back, it's not hard to see how Facebook, then WhatsApp and Instagram—would be so powerful, as communication platforms. I think the effect size took people by surprise, though.

(2) I wanted to think there were some folks at Facebook in BD or Corp Dev who saw the potential of Instagram. Like, maybe there were some insiders who had this all figured out? Go where the best are?

I guess not:


Strategy vs customer focus

December 03, 2020

When building a new business, focusing on strategy will guide you toward building a business that's valuable, and defensible.

Markets, competition, network effects. There's a big-picture, first-principles quality to strategy that reminds me of math, or physics. dy/dx. F=ma. I think technical people gravitate toward strategy because it feels like math; it's intellectually comfortable, something we know how to reason about, and manipulate.

But what strategy misses is customers—the human element—with all our quirks, our short attention spans, credit card balances, and proclivity to eat things we shouldn't.

Go ahead, build that perfect work of strategy—infinitely defensible, hugely valuable—in theory. Too bad nobody actually wants it.

If you want to keep customers front-and-center, follow Y Combinator's advice: make something people want. Get that right, and worry about the rest later.

(Sidenote: I think this is related to #14 and #15 from Slava's 57 startup lessons: Most investor advice [Ed note: strategy] is very good for optimizing and scaling a working business. Listen to it. Most investor advice isn’t very good for building a magical product. Nobody can help you build a magical product — that’s your job.)



September 23, 2020

Economic geography fascinates me. It's something I've written about a lot over the years—industry clusters, what's made where—and since COVID, it's top-of-mind for an even greater number of people.

Probably because of how unequal the pandemic's effects have been. Stadiums, hotels, restaurants—all closed. Whereas those working in software, media, and a lot of manufacturing might be excused for forgetting there's even a pandemic.

The industries getting ahead are largely those engaged in producing intangibles—thinking wealth into existence—realized as code, books, movies, electronic schematics, whatever.

The double-whammy: the folks working in restaurants, casinos, and malls were never paid much to begin with, and now they're out of work, even as their higher-paid peers are still at it, many from home.

But more than anything, I've been thinking about how few people in the economy actually do this kind of work (produce intangibles). You can drive hundreds of miles down I-80 and probably not see a single software company—they're clustered, packed into office buildings, in maybe 20-30 US cities.

The US has Disney, Google, and Boeing. The sixth-biggest company in Italy? Poste italiane, the post office.

Richard Florida was right all along: 21st-century wealth has a lot more to do with battery-control software on EVs, and video games, than stadiums or casinos.


News in the UK

July 15, 2020

The concept of "paper of record"—a single place to get the news—is relatively new. Speaking for the United States, many publishers got started with the explicit aim of promoting a particular political view; historians call it the party press era, from about 1780-1830, where editors openly endorsed a political platform.

I'm not sure whether that tradition came from the UK, but something like it lives on. In the UK, The Guardian was always understood as the paper of labor/working class, The Financial Times for businesspeople (similar to the WSJ), and the Daily Mail a sort of regional semi-tabloid, a bit like Chicago's Sun Times.

The difference is that, whereas in the US, you expected to get "fair and balanced" from a professional paper, the UK never had that expectation. News was well-reported, but written from a particular viewpoint.

I'm hopeful the future of news in the US can become more like the UK. Maybe you have your paper and I have mine, but we both agree that one source is never "the whole story".

Before you call me a conspiracy theorist, yes, I realize not all papers are created equal. I might prefer the editorial view of The Economist over the New York Times, but I'd never suggest the Times isn't a great paper, employing many responsible journalists doing their best to report the news. They just have a point of view, like any human would.

I had this thought myself but saw another guy with the same idea yesterday on Twitter:


Seek them out

July 14, 2020

Most people aren't early adopters. Super-important lesson for early-stage product management.

Even if you deliver something really good, late adopters will do their usual thing: wait. Wait for their friends, their neighbors, kids, even people at their church. They just don't want to be first.

The bad news: it can be very discouraging pitching a new idea to late adopters. They just won't get it.

The good news: after the early adopters have moved on, the late adopters will still be around. They'll let you grow, and grow. For decades.

There are still people, today in 2020, who primarily use desktop software to do accounting—Sage 50 or Peachtree. They aren't moving to Xero or Quickbooks Online—they don't see the point. What they have works well enough.

My friend just sold his cloud devops consulting company for $10-20 million. They're helping companies—software companies—move their application delivery to public clouds.

There are still millions of computers running Windows XP. It will probably take another 10-20 years for the majority of cars sold to be electric.

The challenge, when doing customer development, is to figure out whether someone is an early adopter in this type of product, and keep that in mind while speaking to them. My dad, for instance, would happily buy a new hand tool from a hardware store, but won't buy an electric car anytime before 2025. Maybe 2030.

I think it's best to bias a little toward early adopters when doing customer development. After all, you want to be where things are going, not just where they are today.


Don't sink to their level

June 08, 2020

It is so tempting, when someone curses you out, to yell right back. To scream, get in their face, to react.


The moral high ground is too important.

When you disapprove something someone does, the basic choice is like-for-like—to fight fire with fire—or to draw a line, and say, that behavior might be good enough for them, but it's not good enough for me.

You want to be better—to control the terms of the debate. Not let the other person drag you down, to have to fight them the way they want to be fought. Also, there's always someone who can yell louder.

Dianne Feinstein doesn't yell. Kamala Harris, California's other senator, loves making scenes, getting in peoples' faces, and playing the "tough prosecutor" role. Feinstein knows that with only 100 members of the chamber and a six-year term, today's opponent is tomorrow's ally. If you want to last 28 years as a Senator—the longest-serving woman in the chamber—that's the only way to play it.

What I take from Feinstein, Gandhi, and others, is that toughness and results don't have to come at the cost of bad behavior. Not everyone has to like you, but you don't score points being disagreeable, bad-tempered, yelling, or using foul language.

Another group who understands the power of good behavior is Black Americans of the Civil Rights Era. Rosa Parks didn't curse anyone out—she just sat there, knowing that said enough.


To serve and protect

June 01, 2020

The standard you walk past is the standard you accept. Pick a small set of non-negotiable rules that matter to you most and enforce them ruthlessly. — Slava Akhmechet

People being people, any group of hundreds will have a few bad apples. Beyond that, people aren't angels—we get mad, and hungry, and say things we don't mean, and come to regret.

That much is a given. So the question I can't help but ask, when a police officer steps on someone's neck to the point of strangulation, is what the other officers on the scene did? What went through the other officers' heads, standing there while their coworker strangled a fellow human? Was that OK? Or was there some reason—rank, personal loyalty, fear of ostracism—that the other officer couldn't say, "You might want to let him breathe; you're killing him".

Firsthand experience has taught me that accountability and a sense of mission—key building blocks of organizational culture—don't happen by themselves. They are intentionally-created things, shaped every day by strong leaders who reinforce good behavior, and speak up when people do things they shouldn't. Over years, sometimes decades.

Without oversight, organizations turn inward. In business, that means forgetting your customers, letting expenses go, and putting your own career/agenda first. In my condo building, that meant a manager who ignored board directives and played favorites, until he sent us a "resignation letter" hoping we'd beg him back—we showed him the door. At the DMV, organizational rot is what causes five-minute conversations about your kids with coworkers, when the line is out the door.

My own views on police accountability have changed. It might be because I'm living in deep blue America, or maybe I've just seen enough organizational dysfunction to understand how things go wrong. But I see now how "serve and protect" might not match on-the-ground reality. "Serve and protecet" certainly wasn't the mantra in my 800-person condo building, why would it be for the police? Doubly so given a historically strong union, muscular political organization, and norms that include going after "cop killers" much harder than others, and letting friends and family walk free from speeding tickets?

I wonder what it will take for these norms to change. The wanton destruction of life and property we've seen this week are a terrible price to pay. (I know the protesters might not be doing the looting, a complex issue in itself.) The price we'll pay for this is hard any time, doubly so during a combination economic meltdown/public health crisis. What scares me is that it might be working. If I was a cop, I'd definitely be thinking twice about how I act after this week.  



May 22, 2020

"Avoid others' germs. Like getting sick? I don't." Kind of funny, looking back. I wrote The Future is Distributed 18 months ago, long before anyone was talking about COVID or pandemics. These days, the grinding monotony of shelter-in-place has been a real test of my patience; it's shown the cracks in remote-first, or remote-only.

There are indeed advantages of working away from the office. But it's not without cost. Even the Buffers and Basecamps of the world, acolytes as they are of remote-first, gather together from time to time. Surely not for naught?

Now I'm reading everywhere that cities are over. Nice flashy headlines, but these things always take longer than you think. I think we might have reached the 90s dream of "paperless office" now, in 2020, but nobody's even paying attention anymore, and it didn't happen exactly as we thought. What resulted was a synthesis of old and new.

Thesis, antithesis, synthesis? I think regions will loom large in the future of work.

Living far enough away not to be forced into a telephone booth-sized apartment. Somewhere with a good school district and quality of life, away from the noise, smash-and-grabs, and casual crack smoking of the big city. None of those are hypotheticals to me. But close enough in to make the occasional in-person conference, investor meeting, or dinner when you need to.

Regionalism has gradations. I live in Oakland, far enough not to drive to Sunnyvale every day, though I'd consider a job down there. Housing costs about half as much here. Farther afield, one could choose Sacramento, or even Tahoe or Reno.

I saw some chatter about the tech scene in Wyoming on Twitter. That seems a little far-fetched.