Why Amazon Can't Make A Kindle In the USA
forbes.com
forbes.com
Every day, a couple hundred workers report to the factory. The most labor-intensive step in the process is taking a sheet of approximately 1,000 gaskets, manually removing them with a tweezer, inspecting them under a jeweler's loupe, and depositing the passes into the waiting outgoing package. When you fill it, it gets wheeled away for shipping. Your quota is 1,000 passed gaskets per hour, for which you are paid approximately 1,000 yen (at least, that was the pre-crash wage), or about $13 at today's prices.
When you say "We want our manufacturing jobs back", this is the kind of job you really want. It is easily the worst legal job I've heard of in a first-world nation. There's also practically a clock on the wall saying Time Until Robotic Arms Are Sensitive Enough To Do This Without Damaging An Unacceptable Portion Of Gaskets.
One reason that (pre-crash, anyhow) this neighborhood had a lot of immigrants is that the typical worker at this sort of factory 30~50 years ago was a Japanese woman in her twenties and that these days the job is a job Japanese women mostly won't do.
How about cleaning up after old people when they mess themselves? How about any of the DVD sorting facilities at Netflix, which is practically the exact job you described? How about the massive amount of call centers we have in the US? How about almost any low level job in agriculture? I don't think your imagination is deep enough to fathom how bad a job can really be, even in a first world nation.
There are plenty of people who are willing to work or already work a monotonous or difficult job for low pay here in the US.
More investment should go into automation, but given that the world labor market makes humans so cheap(mainly due to not having the care about the workers health or safety), human labor usually wins out.
Once all these jobs go to automation, what do you do with the workers? That is then societies problem really, we'll need to figure out if there should be a social net that guides people into higher education so we have people building/repairing robots instead of doing what the robots are actually doing. Given the vested interests in the status quo, this is probably not too likely to happen in the near future.
Also, the solution to the automation problem is not higher education, the solution is the return of the skilled laborer. You can't automate a robot to drive to a customer's house, cut open some drywall, fix a plumbing leak, restructure some electric piping to a new section of the wall, install a socket, make a report and get it signed by the customer, get payed, drive back to the company hub, and finally give you the money. Hell you can't automate a robot to make custom dragon blood forged steel swords, which we'll probably need for the zombie apocalypse. Bachelor and masters degrees are currently too easy to get to the point even a monkey could get a bachelors these days, specially if it's a wealthy monkey. The result is that GOOD plumbers, electricians, or dragon blood forged steel sword making blacksmiths are so hard to get this days because all the offspring of skilled laborers want to go to a fancy school to be doctors, lawyers, or architects, because it's all the rage to get a university degree this days.
For what it's worth, most people actually doing the "cleaning up after the elderly" job are certified nursing assistants, who often earn basically a notch or two above minimum wage.
The pay might be shit, but we'll make it up in overtime:)
1000 yen per hour is about £7.90; the UK minimum wage is £5.93 ((if you're over 21) but there are some tax breaks and benefits available to some low paid workers). There are plenty of jobs at that minimum wage, and many of those jobs will be as dull as checking gaskets.
How about cleaning up after old people when they mess themselves?
You know, some people actually appreciate what their parents have done and take pride (or at least sympathy) paying back that debt when the time comes.
I'm not sure that you grasp the working conditions in some parts of Asia (i live in Hong Kong). People would be willing to take the job, but they'd ask for benefits that wouldn't even compare. I don't think there are, as you say, plenty of people willing to take on these types of jobs in their present state. In fact, there are already sectors in the US that are having a hard time finding people because people have generally become too prideful. Just look at the skilled trade problem, which is way better work than what patio11 is talking about.
Any company in the US that pays significantly more than minimum wage and which claims "we can't find workers" is basically lying.
When they say "we can't find workers to do X" what they meaning is "we can't worker to do X [low-voice-over]between the ages of 23 and 27 who graduated in the top 15% of their class, with six+ year of experience in X and who have strong willingness to work 100 hours/week and able to start yesterday[/low-voice-over]"
We've been looking for technical employees (cable'ers, phone techs, etc, etc) for a while (in Florida) and usually come up with crap. We start at $20hr, with full benefits, and a strict 40 hour work week (we like to avoid overtime). That is a very high starting salary in Florida. And we've hired and fired 6 different people for the same position over the last 2 years.
And I can't even tell you how hard it is to find a decent programmer here. Sure there are tons of guys who (barely) write Java or VB. None are remotely qualified to write code for my sister let alone the company. Either I end up writing it or I outsource to NYC. And when you do find someone good, there's a bidding war. I lost a programmer I wanted to hire to one of my customers (a hospital). They offered us a fee if we'd send him over. I sent him him over. They're a good customer so we turned down the fee. :)
These are common complaints down here in Florida; the 4th biggest state in the country by the way. It's not helping that our school system down here is a fucking mess. And that many parents are more concerned about their kids learning evolution than math.
There is one ray of hope for us: the military. I just hired our 3rd vet (I'm a vet by the way too) from a job fair held at the Palm Beach VA.
Q: "We pay salaries competitive with the market average, why can't we find good experienced programmers or engineers?"
A: "So you want top talent for average wages? See the discrepancy here?"
I can hire PHP and Java programmers rather easily, but both groups would have a lot to unlearn.
Have you considered trying to hire from abroad? You may need a high salary by USA standards to hire USA workers to work in São Paulo, but tis doable. You have now found the market rate for programmers in São Paulo
I was writing from the Bay Area. I suppose I should realize how different the rest of the country is.
Can you elaborate on that?
But otherwise if a worker makes the more money, why not go for it?
I was speaking more about people who work in assisted living facilities or nursing homes who do not know the people they clean up after personally. Often these people are probably lucky to be making $13/hr an a hour. Just like there are those who don't mind such a job, I am sure there are those who don't mind sorting gaskets either.
"I'm not sure that you grasp the working conditions in some parts of Asia (i live in Hong Kong)."
Are you suggesting they're good or bad? There are some decent places to work in Asia if you're on top. Job conditions are slowly improving, but often you'll still hear about workers living in boarding houses provided by the company so they can work 12 - 16 hours days 6 days a week. Additionally patio11 was talking about first world countries...
"I don't think there are, as you say, plenty of people willing to take on these types of jobs in their present state. In fact, there are already sectors in the US that are having a hard time finding people because people have generally become too prideful."
You probably aren't looking too hard then. In the current economy you have people with masters & PhDs applying at McDonalds or other low wage/low skill jobs. Often these employers do not hire these people because of "over-qualifications". I also don't think that a lack of skilled tradesmen is due to pride, but perhaps due to a refocusing towards service sector jobs & the deterioration of our education system. The US does not have a standardized vocational education path & often many "vocational colleges" here are scammy for profit colleges that offer little benefit & a lot of debt to their students.
My hands are keyboard-smooth these days, but I'm always suprised when people are suprised that people make things with their hands, when they spend all day surrounded with things made with someone's hands.
About automation: That robot clock has been running since Henry Ford. Most manufacturing jobs (if not all) are a human loading a machine with material, monitoring the machine so it doesn't jam, tear itself apart on, or shred the material, then pulling the finished product which is being ejected as quickly as a humn can keep up, wrapping it, and getting it to the next machine. Every hour the machine breaks down, and the operator figures out how to bring it back up quickly, or a mechanic has to come and do a medium to full scale repair depending on the damage.
I'm not sure how magic robot arms can change that, until they can figure out how to load themselves with rubber from the truck, and how to fix themselves really quickly.
http://science.discovery.com/tv/how-its-made/ and https://secure.wikimedia.org/wikipedia/en/wiki/How_It%27s_Ma...
Most of the production is heavily automated, but there are always a few humans in the loop somewhere. In a lot of cases, it is exclusively loading the machine with some odd-shaped component, again and again as fast as they can.
Sometimes there's a bit of excitement (poorly designed safety guards or practices), just waiting to trip someone up after they zone out midway through their 12-hour shift.
I don't know what the failure figures would be like, but it's quite possible you do need that engineer on call, with his lateral-thinking brain and dexterous monkey-fingers, but otherwise, robots can do the lot, it's just a question of cost.
See https://secure.wikimedia.org/wikipedia/en/wiki/Lights_out_%2... for examples.
Lightbulbs are probably similar to Pato11's original story; robots which can handle the glass and construct the filament supports require extremely delicate and precise control, so it's cheaper to use people. For now.
P.S. Looking for a picture of the Cheshire brought back memories: http://i.ebayimg.com/00/$%28KGrHqF,!g0E1fPtSCr7BNeqtoSh0w~~_...
I've had worse, and I've had it pretty good.
I'd say my first job was shit, but it's a thousand times better than being a drone in a Japanese gasket factory. I'm not trying to be antagonistic, I'm just curious... What jobs have you had that where so bad?
The wood was so rough that I went through a pair of leather gloves in less than a day. (I eventually figured out to wrap them in duct tape while still new, and keep wrapping them whenever I got a chance.)
At least the weather was reasonable. There are comparable jobs in much hotter and much colder weather.
And then there are jobs where it's easy to lose limbs or lives.
That's not counting the gross jobs, like picking up road kill, or the emotionally draining jobs, like putting abandoned pets to sleep.
The robots will be paid the same thing whether they run in Japan, Vietnam, Toledo, or downtown Manhattan.
Call me crazy, but why are we arguing about "manufacturing jobs" instead of building robots?
If I recall my stats correctly, the US is #2 in robots, which isn't exactly bad. (Lagging Japan, as a result of 30 years of policy decisions. Japanese government/industry put their chips down on "robots win the future" many years ago and this was not a disastrously stupid decision.)
While I agree that the level of technology and packaging in Japanese robots in generally higher than U.S. counterparts, to take a rather cheap shot, it was U.S. drones and robots that were first on the scene.
Due to the pedigree of mobile robotics, the U.S. needed systems that worked now and not the future...resulting in a variety of heavy duty operable robots capable of working in difficult environments.
Here's arguably the most advanced robot in the world handling perfectly normal stairs
http://www.youtube.com/watch?v=ASoCJTYgYB0
http://www.youtube.com/watch?v=ASoCJTYgYB0
Conclusion? Make the robot more like a crappy old American robot. http://www.autoguide.com/auto-news/2011/08/hondas-asimo-to-a...
It's critically important PR for the Japanese robotics industry to respond to Fukushima with something of utility. Otherwise these decades of work and millions of Yen in R&D haven't amounted to much more than an interesting series of public demonstrations.
Interesting you mentioned exoskeletons. The US is 5 to 10 years away of getting them on a battlefield. They're commercially available in Japan for medical use. (I'm not making a value judgement on that, except to the extent that "You could actually buy this" is superior to not being able to buy it.)
Actually that's a very good point, and a fascinating demonstration of the differences in commercial funding for a technology vs military funding and the similar but completely different kind of tech that comes out of that.
They had to turn to either a US or French robot to enter the reactor.
If Japan builds robots for the factory and the US builds robots for the battle field, it seem logical that US robots would be more useful in nuclear disaster. An power plant leaking hard radiation after a hydrogen explosion does resemble a battle field more than a factory floor, after all.
That aside, it's a fair point— lots of people are working on robots. But we should be building more robots. We shouldn't be talking about "how can we create American jobs," we should be talking about "how can we replace every American job with a robot."
It would be a good conversation. I don't hear it starting. In fact, there was discussion of these issues in the 1960's and 1970's. By now, with the various crises on our heals, no one wants to consider the problems in this fashion.
Real happiness seems to come from something like the Buddhist ideas of mindfulness and acceptance, and that's true whether you're a poverty-sworn monk, a janitor, a CEO, or a pot-smoking layabout.
The idea of "rewarding work" vs. "empty hedonism" is an arbitrary Western construct with little basis in reality.
http://www.ncbi.nlm.nih.gov/pubmed/690806 http://en.wikipedia.org/wiki/Hedonic_treadmill
That's not to say that working, alone, producing happiness is a correct idea, but it might make sense that accomplishment does. And these levels of accomplishment - cleaning the floor well for a janitor, for instance - can differ. Most people desire to "make a difference," another way of saying the same thing. If you're talking about deathbed wishes when looking back on a life, the more positive impact your life visited on others, the better.
Well, this is only one scenario of the things that can happen.
That's a big assumption there. More likely, companies will experience higher profit margins rather than pass along the entirety of the cost savings.
What exactly is that a measure of?
Let's say that, as a middle-class American, I consume enough to employ ten manual laborers full-time. If we have ten robots for every person, then everyone can live like me and no one has to do the physical labor.
The world would improve if we stopped thinking in a "us-vs-them" nationalist way. Think in a global way!:
* We're helping Chinese farmers get out of abject poverty into a slightly better situation.
* We're improving their economy
* We're making cheaper goods for Americans & other developed countries, which means that it will be accessible to poorer people (which is a good thing!)
* The company will gain more profit and be able to make more innovative toys for us!
If we want to go down the nationalist root, then why don't we just outlaw imports all together? Or at least pass some protectionist tariffs?
If we did that, with the foolish misconception that it would help our economy, we would goad other countries into passing tariffs, and the whole world economy would hurt. http://en.wikipedia.org/wiki/Smoot%E2%80%93Hawley_Tariff_Act The Smoot-Hawley Tariff provoked that kind of response and was a key factor in creating the Great Depression.
Not true among those to whom college is not attractive. There is a group of Americans that would like a semi-skilled labor job that affords them a middle class lifestyle.
I grew up in an area primarily populated with people like that, and while all of my friends are now of the BS/MS/PhD crowd, there is a huge set of people who now go on to college not because they want to but because they don't know what else they can do. Unless they are lucky enough to know somebody who can get them in as an apprentice at a union.
It seems to be a simple fact that the US is structurally disadvantaged in electronics manufacturing.
I apologize if my comment came across as suggesting a course of action. I'm merely commenting on the original commenter's assertion that Americans do not want manufacturing jobs. I have personally found that to be untrue, even if the job that they wish to have might not be possible here because of economic and/or regulatory reasons.
If manufacturing simply can't pay what an American worker needs to make, their willingness to work in factories isn't relevant, is it?
Why do you think this might be true? The only reason Chinese workers are poor is that they government let companies treat them as slaves. I don't think we should even consider that taking part on this is fair to Chinese people. On the opposite, agreeing with the practices of the Chinese government is exporting poverty to other parts of the world.
If you think that the advantage is that Western countries get cheaper products, this is wrong again: we could get cheap products anyway, but just using more machines instead of semi-slave labor.
In objective terms, however exploited you think technology manufacturing "slave laborers" are by companies in the west, the west has done those workers a favor. The status quo ante was a poverty so grinding as to make the comparison to unemployed US auto workers laughable.
What job is that? Because it's apparently not (US) manufacturing
My father also runs one of the few remaining foundries and employs some semi-skilled, decently paid labor.
But, nether of those industries current employ enough people to make up for all of the folks who would want them. Or at least, until our infrastructure bill comes due -- a significant portion of the 50s and 60s era suburb/exurb buildout will soon require substantial investments just to have water/power/roads continue to function.
Bullshit. Just a couple weeks ago I was talking with some people who have a family manufacturing business. They love it. Their employees love it. Their son wants to keep the business going.
Further, even if a lot of people wouldn't ask for a manufacturing job as their first choice, quite a lot of them would prefer it to unemployment, or a minimum wage customer service job, or cleaning executives' houses.
For a lot of people, making actual stuff is very satisfying. I really enjoyed my summer factory jobs, and I'm lucky that I happened to love making software more.
Yes but "manufacturing" can mean all kinds of work, and you've not elaborated as to what your friend's family manufacturing business actually makes.
With the type of high-tech electronics manufacturing the original article is talking about no one actually 'makes' anything - it's watching lines of machinery print circuit boards and solder chips onto them.
That's very different to, say, a mom-n-pop US-based hand-made toy manufacturer where people are genuinely crafting something.
The author of the article argues that the ability to innovate within an industry niche disappears with the manufacturing. Correct or not, the problem they are pointing out is not that manufacturing is disappearing but that all capacity for intellectual development goes with it.
I'm all for balance, but I don't think the right way to achieve it is to cripple the stronger side of the scale.
I've also seen reports that offshoring customers have been bringing back some of their work to the U.S., sometimes because of poor quality but also for tighter coupling and shorter response times.
For now.
Innovation requires two sorts of deep understanding: what people need, and what one can create. We are losing the latter, because much of the creation has gone elsewhere. A lot of Apple's design power comes because they're still deeply involved with the million physical details most companies now ignore.
Software for the US market may be a defensible competency, because we understand both medium and need. But there's little reason to expect that most of China's software will come from the US; they're developing the capability, and understand their needs much better.
Remember, to get China to send us the stuff, we need to send them something in exchange. Right now for every $1 of goods we send them, they give us $3.5 back. That's not sustainable.
Why do you think it would be hard for them to develop those strengths? What if those strengths derive from having a strong manufacturing base?
As their own consumption rises, local companies have a much better chance to design products tailored to the needs of their own expanding markets, effectively expanding them further.
And, as for software development, you'd be surprised by how much is developed outside the US.
So that means that the 90% of the population that doesn't work in these fields is going to be out of luck? Well, looking around I suppose it does. Uh, and there's plenty of software and finance back-office moving to India.
A policy that plays primarily to a "strength" which encompasses only a small portion of the population ... well obviously primarily going to benefit that portion.
More interesting, what if you don't have the education for pursuing such career paths? This is the biggest problem for Americans today. Most Americans have low quality schools that cannot prepare for career paths in Engineering and Science. Most of the Engineering labor in the US comes from abroad, either via American universities of the H1B Visa program. What is left for most US citizens educated in this country?
Not developing ideas, you say?
Most, if not all of the business practices you'll learn today in a renowned university were conceived in the laboratories of American industry. Universities were founded with the whole purpose of providing trained managers and researchers to the manufacturing industries. Unfortunately, those highly educated and trained managers failed to see that the American success story was industry itself, not their ability to make manufacturing cheaper overseas.
The consequences are more than apparent. Managers have to slave to meet Wall Street's predictions and goals, hard working people have to choose a career between writing software, selling financial products, providing healthcare services or working in a derivative position of such in order to make a decent living, and those who choose the higher intellectual pursuits, well, they get to choose whether to offer you paper or plastic at the checkout counter.
Sadly, those who lack a strong educational background or the finances to improve upon it will be further sidelined and alienated from the growth economy and be forced to compete for continuously devaluated and scarcer positions while being forced to hand their pay over to the few companies that can compete in a global economy. And allowing them to buy cheap flatscreens at a super warehouse is not going to vent their frustration.
There's probably a lot of worthwhile policy steps we can take to help American ex-factory workers, but reclaiming the factories needn't be one of them. Factories may be a dead end.
Policy steps? Open more fast food franchises? What do you do when you terminally impoverish a large swath of your population after exploiting them for sixty years in order to achieve some financial utopia that they didn't need anyway? You can't sell them on owning a house while they make a marginal wage. You can't sell them on seeking out intellectual knowledge while the cost of education soars. You can't keep bombarding them with mainstream images of prosperity when they're worried about making rent. They're going to turn to anyone with a message of hope, no matter how ludicrous. It happens all the time. And then you've lost them.
Reopening factories may not be the panacea, but you cannot innovate across the board when you don't build anything. You cannot innovate while locking a segment of the population out of the process just because they don't have a degree or know the secret handshake. It's the same reason why you can't lock women or minorities out of the process. Otherwise we'd just be a bunch of white guys building apps that address white guy, first world problems and the world would be a shitty place.
This is the point where the new CEO, Mr. Obama, has the honor of addressing the company to tell everyone that we hired way too many people for a product that nobody wants and we'll be retaining the software patents and letting everyone else go. A task he's understandably reluctant to perform.
Increased government spending, entitlement and tax reform, forcing the Chinese to change their monetary policy, investing in nenewable energies, nuking Pyongyang, ok maybe not nuking but really doing something about Mr. Kim would be nice; these are all hard steps that need to be taken but they can only be taken once the leadership comes forward and admits that we have some hard times ahead and that we need to scale back the American Dream a notch and get real.
Unfortunately, one half of the leadership has spent the past twenty years stoking fear and bigotry into a frothy mass with a mixture of penis and religion while the other half has been betting on the kitten at the dog fight, all coaxed on by sources of information that wish the free drama to keep playing itself out. It's time to take a long ,hard look at the landscape and realize that we have a problem and that we need to close the gap before we're in true banana republic territory.
I don't have 5 additional grafs of politics to give you after this observation, but do note before you get irritated with my comment that our politics are probably very similar; I just think opening more factories is the wrong intervention.
The people of Shenzhen have opportunity on demand. The people of Youngstown have no future. Please explain that to them the next time they max out a warehouse credit card on that 48" plasma they needed to have in order to feel better about themselves.
It's not a political problem, it's an economic crisis and we need those jobs back. Costs will go up and we'll have to hang on to that laptop for a year longer than we planned to, but all boats rise when the tide comes in.
Similarly, I understand the psychological importance of one's income relative to the community median, but I don't see how being worse off than the average American makes a Youngstown factory worker worse off than the average Chinese person.
You seem to think I'm saying "auto workers in Youngstown will be fine". I don't think that.
We can't just make up new facts to make political priorities we both hold more compelling.
Finally, by making the cost of laptops increase to create what are, in effect, make-work jobs in on-shore technology manufacturing, we also depress demand and penetration of laptops everywhere. Who's better off in this scenario? If we're going to pay a subsidy to people who would otherwise be assembling our laptops in (say) Youngstown, we should do it directly; taking it out of the entire market for laptops is regressive.
What's wrong with receiving a handout?
What's wrong with being better off than citizens of another country?
If you don't like the former, go work another job in another city.
If you don't like the latter, go work another job in another country.
- Comparing apples to oranges is patronizing at best. Being better off is contextual and you cannot compare a child who won't eat broccoli to a Biafran baby.
- A vast majority of people live, work and die within a relatively short distance of where they're born and outside of famine and conflict, you're not going to get them to move away from of their family and/or community networks. The chance that they're even able to do so severely declines with the absence of solid education or an established, dependable contact in another city. Yes, there are plenty of people who do it, but there are usually mitigating factors that affect the decision-making process outside of those who have chosen a career that requires a move. We'd like to think that we're a society on the move but the reality is quiet the opposite.
- That's an even worse suggestion than moving to another city or out of state. Outside of high-skills, training and education protected jobs, there isn't much need for labor in other countries. As a matter of fact, most countries have a surplus of labor, not to mention a wage differential that would basically wipe out any future earnings potential. The suggestion is so ludicrous that I won't even address legal, language, cultural or distance problems that would turn away most people who even dream of doing it. And I say that as someone who spent ten years in a foreign country where English isn't spoken. That's asking the impossible and has very few benefits for anyone involved.
In conclusion, the "love it or leave it" crowd can stuff it.
There's something that bugs me about the phrase "honest work". It implies you need to do (usually) manual menial labour in order to be fulfilled as a person. It seems like the kind of meme the rich robber baron factory owner tells to the poor serfs in order to keep them happy with their lot. The hell with 'honest work'.
If work was so great, the rich would have kept it to themselves.
A dishonest job is where an employer takes advantage of the employees or market conditions to offer insecure, low-paying wages where the employee is subjected to conditions designed to restrict their wage-earning ability, restrict their freedom of advancement and deny them their legal rights while simultaneously trying to avoid paying proper employment taxation or offering benefits to the employee. An example of this type of employer would be WalMart.
==> Isn't such a thought ridiculous? Such a thought, I think implies that the global economy is a kind of a neo-socialist+charitable-capitalistic kitchen whose main aim is to feed the poor and in the process fatten some of them more than the others. Is it?
==> I think that the right question to ask is not if - Amazon Can Make A Kindle In the USA? The right question should be - Is the Amazon Kindle manufacturing ecosystem truly balanced? - If not, then in the long run some parts of the ecosystem will be eliminated, so that the ecosystem finds a balance.
==> Different regions have different geographic/social/economic environments and will be better suited for some kind of work than other regions. One can not ignore these facts.
But, does amazon have a real stake in the companies that make the Kindle China/Korea? I think not. Isn't there an imbalance between what these companies gain, in terms of ability, from this ecosystem and what the rest of the ecosystem (Amazon/American) gets back?
I dont think american companies have a stake in the Chinese/Korean companies/economies that they outsource to. In return they give you low cost electronics - in process building the largest reserves of dollars in the world and building the ability to innovate themselves in the long run.
==> I wonder how digium works though? http://www.digium.com
==> There is no point in being crazy nationalist. But I don't understand why a nation with such a huge continent can't find a place where it can build a manufacturing hub that can participate in the global manufacturing industry.
The country has enough people to enable a volunteer military, but for some reason can't find people who can build a manufacturing hub? even if this was the case - haven't immigrants signed up before?
While there are many under payed workers, attached to these industries are thousands of high paying jobs that become part of the manufacturing environment: managers, engineers, service people, and entrepreneurs that participate in the supply chain.
For China, while it is convenient to have a large population base that works on $10/day, the goal is to create a middle class that manages these people and eventually creates new companies, while at the same time making way much more money.
The Forbes author is arguing that it is hard to innovate when all the manufacturing expertise leaves. To support this he argues that some Kindle parts are made in China, others Taiwan, others South Korea. To me this is evidence that innovation occurs at a decentralized level. Innovation occurs when companies specialize and focus on a better battery, or screen, or lens instead of a better device. Most people on HN seem to believe that small decentralized start-ups are more innovative than bigger companies. Why is decentralization good for software innovation, but bad for hardware innovation?
But yes, by value of output, the US is a major manufacturer; we especially specialize in manufacturing large expensive stuff.
http://www.wto.org/english/res_e/reser_e/cadv_e.htm
http://www.econlib.org/library/Topics/Details/comparativeadv...
http://iang.org/free_banking/david.html
http://www.unc.edu/depts/econ/byrns_web/Economicae/Essays/AB...
http://www.commonsenseeconomics.com/Readings/Comparative%20A...
David Ricardo made an underappreciated contribution to the prosperity of all humankind when he developed the explanation of the law of comparative advantage not quite 200 years ago. As long as manufacturers want to have large markets, they will sell to people who desire manufactured goods. And as long as we (whoever "we" are) have something to trade with the manufacturers, we will not lack for any manufactured good that has been invented. The United States of America is full of affordable Kindles, and people with all kinds of occupations can afford to buy Kindles if they like Kindles.
When you play chess, you shouldn't optimize your strategy for short-term capture of your opponent's pieces.
Company execs are optimizing for their own good. They won't be around forever, so they need an exit strategy (end game) that works out for them. If it takes the company down, well so be it. Was it a good idea for Groupon investors to take a bunch of money out of the pool in the last round of financing? You can bet they see an end to the game.
The second one is the HP pocket calculator. Before it existed, nobody knew how bad slide-rules were. HP disrupted their own market for desktop calculators (but did it before someone disrupted it for them)
Apple is also playing this post-PC game with their mobile platforms. They are fighting against Android for a better position on the next round. It looks like the next match won't take long to start.
For the record, Apple didn't have iTunes "ready," and the deals with record labels didn't come quickly. Napster was released in 1999. iTunes started life as SoundJam, and wasn't released until 2001. The iTunes store didn't come until 2003.
Apple dominated the legal music market because of the marketing and UX superiority of the iPod over its MP3-playing predecessors, not because they were first at anything.
The analogy to chess, I assert, rather breaks down quickly, as most analogies tend to, when examined closely. A two-agent zero-sum game is mathematically unlike an n-agent non-zero-sum game with non-total knowledge.
That's one of the key issues here: almost everyone optimizes for the short term win, because that's how they maximize their compensation. By the time the long-term consequences of their decisions are known they've moved onwards and upwards.
He's saying that, according to the MBA playbook, the executives of both companies did exactly what they were "supposed" to. The ultimate outcome was negative for Dell, and it isn't because the Dell executives were straying from current conventional managerial wisdom but because they adhered to it.
Saying "you can do exactly what the MBAs tell you to and still end up screwed" isn't doublespeak or diplomacy; it's getting straight to the heart of his overall criticism.
It can be difficult to make choices that preserve the common good at the expense of one's own short term good.
I don't think this is self evident (at least for manufacturing). Why should the focus be on national, as opposed to global welfare? How long before humanity reaches the point where it cares about the fates of all people rather than just a subset defined by national borders?
This guy is very confused. Other US-based companies selling hardware operate in this same way. To boot, he never shows that anything listed here for Apple WASN'T done in the US for the Kindle. The same laundry list of components he describes for the Kindle goes for every Apple product, every Motorola product, every Xbox 360, etc. Yet the design and software is usually done in the same way Apple does.
But then, what really could be made entirely in one country? Especially when you consider each component, the raw materials, the machinery used, and so on down the line for each of those.
I don't necessarily disagree with the author that there is value to keeping a process "in house" which needs to be including in any cost savings calculations and that American companies are prone to discounting that value when making decisions. But at some point some components or steps in the manufacturing process might be necessary or optimal to leave in the hands of others whether foreign or domestic.
I work for one.
It's true that Dell did not increase it's ability to design and manufacture circuit boards. But that was never their core strength. I think a firm's managers should be thoughtful about what skills they want to develop internally, and freely outsource as much as they can of the rest. This article would have managers adopt a destructive NIH attitude, greatly reducing their firm's efficiency and competitiveness.
A sustainable one. What happens when manufacturing moves from China to someplace even cheaper with harsher labor laws?
What if, instead of our liberal economic policies lifting Chinese people out of poverty, our liberal economic policies are allowing Chinese people to pull us down to poverty?
Everyone assumes that the future will have wealthy Chinese and never considers that maybe it will just have poor Americans.
Global neo-feudalism is the way the economy is going.
Of course, the system itself may be fine. But that doesn't mean that 30 years from now we'll like our place in it.
It's also not clear whether that number is gross manufacturing output or net of imported parts. With cars, for example, a lot of what is nominally made here is put together out of imported pieces.
I spent a while looking for useful numbers, but couldn't find anything.
2) It does seem they aren't subtracting imports. The world bank has good value added numbers: http://data.worldbank.org/indicator/NV.IND.MANF.CD
Looking at the data, the US is still the biggest in the world by these metrics. Per capita it is easily in the top 5 large countries. Maybe 20% below Germany and Japan
The computers and software we celebrate make the one-man machine shop of today orders of magnitude more productive than it was even 20 years ago. To the point where every time someone pops up on a manufacturing forum asking if he can start a business with a few manually operated machines, he's immediately told not to waste his time. A couple of guys cranking handles on even the best manual machinery is no match for even a low-end CNC machining center.
My SW dev. desk is directly above the manufacturing floor of the company I work for. No, we don't make cheap, shiny consumer products, but as I look at the complexity of the machines that my software controls, I find it hard to believe anyone who says we've lost manufacturing strength.
I did look. I didn't find, and it's not my job to prove somebody else's assertions.
Since you've seen it all over the web, I'm sure you'll be able to find it for me quickly, though. In particular I'm looking for time series data showing value added via manufacturing for the last 50 years or so, plus similar data on consumption of manufactured goods. Ideally in actual dollars of the day. Or if it's inflation-corrected, then it will be documented well enough that I can subtract that effect.
> I find it hard to believe anyone who says we've lost manufacturing strength.
I recommend starting with the blog "Evolving Excellence", written by a manufacturer and a manufacturing consultant. They're pretty clear on it.
I see this as a simple truth: We have arrived at a time where we have far fewer jobs than workers, and this won't be getting better any time soon. Either we decide to become a country of wildly disparate classes being the norm (think the favelas of larger Brazilian cities), or we need to find a way to spread the wealth, as our current economic model isn't doing it.
And I don't necessarily think some socialist fantasy will save us; I don't know the answer. I just know what we have isn't getting people who want to work, paid. Maybe eliminating the minimum wage will encourage employment. Maybe we do need to bite the socialism bullet, and instead of Social Security, give everyone a guaranteed minimum income with a negative income tax. Maybe we just need to make the legal work week 32 hours. (Or more strictly enforce 40.)
I'm not claiming to have an answer. But the jobs are leaving, both our nation, and existence due to increased productivity and increased automation. Wealth is concentrating, and becoming idle. This is bad for us all.
I'm a small-l libertarian and I support that in principle, because it's no more socialist than what we have today. We've already decided that we aren't going to let people starve, or die due to lack of basic health care. So given that, it's more efficient to just give everybody enough money for survival than to have hundreds of government agencies trying to fulfill specific needs, or to impose protectionist policies for the purpose of keeping inefficient jobs. That would also get rid of the perverse incentives that the working poor often face, where it's possible to get a raise and end up worse off because your benefits go to zero.
Yeah, lack of infrastructure. In my opinion that's true of every facet of the worthwhile goals of our national (U.S.) life, from good healthcare to cutting edge science to excellence in education.
Somewhere along the way that same short-sightedness the author discusses of mis-emphasizing short-term profit (e.g. "tax cuts") started bankrupting our future. Now we're reaping what we sowed. Practically every revolutionary advantage we gained over the last century at least (e.g., public health initiatives and sanitation, public education in the early 20th century; establishment of publicly funded research; the space program, the internet) were all collectively funded programs by government - by us - the collective will of a people not held hostage by short-sighted "anti-government" rhetoric.
I think that's part of it, but it's not all of it.
There is a business philosophy in America, so pervasive that most people aren't even aware that there are alternatives. It's the reigning dogma of every MBA program, and the Dell story is a fine example of it.
Another example is the decades-long failure of American car companies. Bob Lutz, who spent decades in the auto industry, tells of fixing a manufacturing defect that was causing a lot of cars to break spectacularly right after the warranty (then 12,000 miles). Not only did he get in trouble for spending a lot on fixing the problem, people were furious that he blew a $50m hole in their expected revenue forecast. Almost any engineer could tell what's wrong with profiting from fixing a problem that you have created. But apparently, surprisingly few American executives can.
The existence of good govt spending does not imply that govt spending is good.
Right now, the potential good spending is being crowded out by a lot of dumb spending. (That's nothing new - we blew hundreds of billions on Carter's synfuels project.)
That's why public employee pension reform in San Francisco is being driven by folks who like govt. They realize that you can't do good govt spending when 20% of your budget goes to pensions.
The same is true of SS (which is bigger) and ordinary healthcare.
Of course, government spending is neither inherently good nor bad.
But the thing to watch is how same cable of rent-seeking corporations that suck-up a good portion of what you aptly-label bad government spending also whips-up the "anti-government" mob when threatened (or simply greedy).
Why is it that an honest-to-God investor in productive enterprises like Warren Buffet can call for higher taxes on the super-rich but the criminal Koch brothers bend all their effort to oppose this? Well, lower taxes for these new American oligarchs is just one piece of their entire campaign of state capture.
I believe it is unfair to assume that all wealthy people must share the same philosophy as Warren Buffet, just as it's unfair to assume that all members of any other economic class should or do think alike.
Careful. Buffet advocates govt policy that puts money in his pocket. (He makes a lot of money off estate taxes, which his estate will never pay.)
> But the thing to watch is how same cable of rent-seeking corporations that suck-up a good portion of what you aptly-label bad government spending also whips-up the "anti-government" mob when threatened (or simply greedy).
Some actual examples would be nice. For example, GE is one of the more successful rent-seekers. Care to provide any examples of it whipping up an anti-govt mob?
Some argue that defense contractors and/or banks are very successful rent-seekers. How about some examples of them whipping up anti-govt mobs?
And no, the Koch brothers have not whipped-up mobs.
BTW - what crimes[1], other than disagreeing with you and having more money, have the Koch's committed? (Yes, I've googled them and read what I found. It's nothing but accusations by political opponents.)
[1] I don't consider violating campaign finance laws as a crime because I believe that the first amendment applies to political speech. And, they're not doing anything wrt politics that Soros didn't do before them so unless you regard him as a criminal....
From the Wikipedia page for Rick Santelli (http://en.wikipedia.org/wiki/Rick_Santelli):
"Tea Party Patriots wishes to extend a special thank you to Rick Santelli for his rant on February 19, 2009, which started this entire movement. Without Rick's rant, this movement would never have started. Many others will try to take credit but don't be fooled. He was the spark that began this fire."
Santelli was, and is, an editor for CNBC, which in 2009 was owned by General Electric. So an employee of GE, while acting in his capacity as an employee of GE, basically kicked off the Tea Party movement.
Note that the tea party has been specifically negative towards GE's rent-seeking.
True, but it tilts heavily toward waste. You're never as careful with someone else's money as you are with your own.
In economics, "other people's money" is called the principal-agent problem, and it's an interesting one.
ooh, ninja downvotes!
Right now, we don't have a tax problem in America. We have a stupidity problem. Stop spending money on stupid shit, and maybe those evil Koch brothers will fall into line with your views on taxation.
Still, I agree we need a movement which will kick-out rent-seeking entities out of the spending loop. I wasn't so much agreeing with Buffet as using him as an example.
Also, I have no desire for that Koch brothers to agree with me. I would like them to go to jail but the odds look long.
And you, in turn, may be missing the point that this is ridiculous.
The question being batted back and forth between Democrats and Republicans is "raise taxes or print money?"
This is called a "false dichotomy." It's an indication that neither "side" has your interests in mind.
Yeah, like the Wright brothers, Edison, Tesla and Ford discoveries. Public health has nothing to do with some specific men that wanted to put filters on water pipes, like the space program has nothing to do with people that started playing with rockets when they were kids like Von Braun.
The same could be said about education, no private institution has made US better, everything of value has been created from central planning.
And never ever consider Ethernet invention having ANY role whatsoever over Internet.
Let say it clear: Everything of value is created by central planning and monopoly and despotic power over economy!!
The economy is failing because of the evil, the private and evil corporations, because the gov spending near 60% of the money that exist on developed countries, the central banks having a monopoly over the money and gov spending more money on killing that in public services has nothing to do with that.
Because we know politicians have not short term profit mindset like winning elections on a four years basis, they only have our best interest in mind.
Amusingly enough (or sadly, depending on your perspective), the Wright brothers and Edison are particularly known for their counter-productive attempts at locking their respective markets by unfair practices that badly harmed their businesses in the long term (airplanes, DC power, cinema...).
You're pushing forward the false idea that progress depends on some great spirits. Fortunately this is untrue; weren't it for the Wright brothers and Edison, someone else would have made the very same discoveries at about the same time. In fact it's exactly what actually happened; the airplane, the phonograph, etc. were all invented independently at several places around the world at about the same time (give or leave a few months).