Remembering Intel’s Andrew Grove, who sounded alarm against offshoring (2016) | Hacker News Reader

Remembering Intel’s Andrew Grove, who sounded alarm against offshoring (2016)

americanmanufacturing.org

77 pointswalterbell33 comments

> On July 1, 2010, Grove wrote:

> "The first task is to rebuild our industrial commons. We should develop a system of financial incentives: Levy an extra tax on the product of offshored labor. (If the result is a trade war, treat it like other wars—fight to win.) Keep that money separate. Deposit it in the coffers of what we might call the Scaling Bank of the U.S. and make these sums available to companies that will scale their American operations. Such a system would be a daily reminder that while pursuing our company goals, all of us in business have a responsibility to maintain the industrial base on which we depend and the society whose adaptability — and stability — we may have taken for granted. Unemployment is corrosive. If what I'm suggesting sounds protectionist, so be it."

I expected to read something novel around increasing public investment in education, investing in infrastructure etc. but the advice seems to be plain old protectionism, which has been shown to not work and only lead to domestic companies not remaining competitive.

> expected to read something novel around increasing public investment in education

Funding for education has gone up for decades (even when accounting for inflation) and results have been flat.

> but the advice seems to be plain old protectionism, which has been shown to not work and only lead to domestic companies not remaining competitive.

In a truly free market, sure, but that is not the reality of our current order. If nothing else, America-based labor and corporations must compete at a disadvantage relative to their offshored counterparts because of the regulatory and tax burden our government places on them. Perhaps you think those burdens are warranted, but if so it is only fair that the scales be balanced so that Americans can actually compete. To do otherwise is simply to incentivize offshoring to companies that do not provide the level of labor protections we expect here in the West (e.g. Apple using Foxconn as a manufacturing partner).

There are other benefits to tariffs, including that they are far less intrusive to the freedoms of the ordinary citizen (the income tax leading to the IRS is one of the most invasive aspects of the the modern state).

Lastly, some level of protectionism may be warranted if only to preserve domestic supply chains for critical industries, at least in a regulatory environment that otherwise favors offshoring.

The only fair way is that whenever you make regulations to protect workers, those regulations need to apply to workers from any country whose goods are imported or are competitive.

The only fair way to do that is for us to adopt all the labor regulations of say France, in order to export anything into that country (plus all the other labor regulations of all the other countries, many of which will inevitably conflict with each other).

That ends (quite quickly I think) in isolation of trade, an inability to pass new labor laws, or a single world government.

Or just give tariff discounts to those places that treat their workers (and the environment) better.

>Funding for education has gone up for decades (even when accounting for inflation) and results have been flat.

Throwing money around in the wrong directions doesn't magically return better results. You need to make sure the money goes to where the pain points are, otherwise it will just get chewed up by the bureaucratic machine and nothing will come out of it.

Hence why there is no need to throw more money into education. If there are better interventions, then simply have the educational institutions redirect the extra money we are already giving towards things that actually work.

That said, there has been much research on educational interventions, and little (if any) of it shows meaningful long term impact.

Who in America has the fortitude to say we should cut funding to liberal arts and social studies because China sure as heck isn’t wasting money on those.

You made your career in a social studies field.

Law is a high IQ version of a service trade, like being a Disney vacation agent.

OK, but that's orthogonal to whether it's rooted in social studies, math, or English.

Law is a self-contained field that predates and doesn’t rely on any of the fields that contemporary universities call social studies, e.g. https://fas.yale.edu/division-social-science.

In medieval times law was categorized alongside medicine and divinity as one of the three learned professions: https://link.springer.com/chapter/10.1007/978-1-349-03199-3_.... It’s not an academic field at all really, much closer to a trade.

Last time I checked --- this is a couple years ago --- the #1 feeder undergrad degree for law was English.

What does that have to do with what the field is rooted in?

(Proto-) Fascists and other reactionary types? They've been calling for this for decades...

Oh please. Not everyone to the left of a DSA cultural studies major is a “reactionary fascist.” Back in college my buddies (all engineers) mocked our industrial engineering friend for majoring in “imaginary engineering.” You can guess what we said about the underwater basket weaving majors. But we were all democrats (with a few libertarians mixed in).

I mentioned "(Proto-) fascists and other reactionary types" because that's one obvious answer to your question. I'm not implying that everyone who supports cutting liberal arts funding fits within that category.

> I expected to read something novel around increasing public investment in education, investing in infrastructure etc.

If that's what you expected, would it really have been novel?

Globalization has clearly done wonders for social stability and wealth generation. Yea let’s keep our heads in the sand that’ll work.

What’s the basis of the assertion that protectionism doesn’t work?

From the linked Bloomberg editorial by Andy Grove, https://archive.is/OQLuP

> The story comes to mind of an engineer who was to be executed by guillotine. The guillotine was stuck, and custom required that if the blade didn't drop, the condemned man was set free. Before this could happen, the engineer pointed with excitement to a rusty pulley, and told the executioner to apply some oil there. Off went his head.

> We got to our current state as a consequence of many of us taking actions focused on our own companies' next milestones. An example: Five years ago a friend joined a large VC firm as a partner. His responsibility was to make sure that all the startups they funded had a "China strategy," meaning a plan to move what jobs they could to China. He was going around with an oil can, applying drops to the guillotine in case it was stuck. We should put away our oil cans. VCs should have a partner in charge of every startup's "U.S. strategy."

Thread rank graph: https://hnrankings.info/34386813/

I have had cause to cite this far too many times for my liking with reference to the strategy employed by the west during the past 20+ years.

I am a big fan of that old Bloomberg column by Grove referenced in this article. I don't think his proposed policy mechanism is either the focus or necessarily a good idea, but in context, it's for illustrative purposes: not the main course.

As I read it, I think a better summary is that Grove felt that the importance of tacit knowledge was not given enough weight in the assumptions seen in the Washington Consensus (in the IMF sense of the term), the general underpinnings which the United States followed to some degree. Some more modern development economics, seeking to explain the failings of the Washington Consensus, more apparent by 2010 than in 1991 or 2000, develops thinking along these lines.

For example: https://www.imf.org/en/Publications/WP/Issues/2019/03/26/The...

Grove also points out that there's a collective action problem that prevents private entities from making progress on the issue, and government is the agent in the right place to experiment with adjustments.

FWIW, while in memory lane an obligatory shout-out to Irwin Feest, saying basically before the 1990s: If you outsource the manufacuting, the engineering will follow.

That is easy to understand but unless there is a government policy to discourage outsourcing, companies who do not outsource would lose to companies who do. I do not trust any governments to come up with such policy.

I somewhat recall he was warning working engineers, who had not yet learned to anticipate the inevitable, and were not, he felt, being given representation by the IEEE.

As wild as this may seem to some, I believe that stopping US offshoring is the best for the world.

1. It will help keep US manufacturing in US, as desired by political parties in the US. Not sure how the US will find the labor force (since the US is closed to immigration in any meaningful way and fertility rates keep declining), but it will keep the population happy.

2. Other countries will stop using US dollar for as much trade because the dollar will stop being widely available in the world. Most countries in the world would love nothing but to stop being affected by US foreign policy and US monetary policies. Today, the only reason why other countries are continuing to trade in US dollars is because there is no alternative. But if the US withdraws supply of dollars from the world by reducing imports, the US Dollar will cease to become the currency of trade (at the scale it is used in today).

Sure, the average American will become poorer by global standards because of the decline in ability to export inflation via printed money, but that is exactly what people in America appear to be asking for.

If the US did not offshore manufacturing, is the suggestion that countries like China will not compete by knocking off US products and making them cheaper anyways? For tech stuff I mostly agree but manufacturing is a lot more than that.

Tech or not, much of the world can't afford US pricing and even if they can, you need precious dollars before you can buy from the US. Even im Europe, it isn't realistic to buy only from the US or locally.

Along with population growth there is a natural explosion in consumer demand. Someone has to meet that need. The only way you can protect US companies from such competition is isolationism. For "post-WW2" reasons, the west has elected to be against that since the 1940s. If you want to sell US good to say China for example, you need to let them sell to US consumers with competitive pricing.

The fact of the matter is, the US has continued to develop and get richer. This means US workers can't compete with lower wage workers globally unless they have better skills that make them provide higher value.

The real problem in my opinion is the cruelty and animosity with which middle-class america had seen the working class and even each other. In many countries, college is free so long as you study something in demand. There is a ton of untapped human potential in america wasting away simply because older people can't accept change. They can't let someone have free college or debt forgiveness because in their time when global competition was not there they had it rough. There is also a lot of other social hostilities like the war on drugs, poorly funded public schools, crime infested areas because the police is militarized war om drugs made much of inner cities a war zone. Not enough public school spending, bit even if there is education is politicized.

The US could have competed, just not by cheap labor. All the immigrants coming into the US are a competitive advantage. Why do we desparately need H1-B migrants? It's not because offshoring I can tell you that.

> There is also a lot of other social hostilities like the war on drugs, poorly funded public schools, crime infested areas because the police is militarized war om drugs made much of inner cities a war zone. Not enough public school spending, bit even if there is education is politicized.

> The US could have competed, just not by cheap labor. All the immigrants coming into the US are a competitive advantage. Why do we desparately need H1-B migrants? It's not because offshoring I can tell you that.

Your first paragraph and your second paragraph are at war with each other. Those immigrants come from places with far less education funding—but a much stronger focus on math and science and useful knowledge instead of individual self actualization.

It also so happens those immigrants come from societies that deal very aggressively with criminals, drug dealers and users, and other anti-social people: https://www.reuters.com/article/us-bangladesh-drugs-killings.... Even as Americans are trying to normalize drug use—to the point where the capital city smells like a sewer from all the weed—they are insisting they need to import people from cultures where parents will beat their kids for using drugs.

As one of those immigrants, it seems to me that the reason America thinks it needs immigration is that it screwed up its kids and young adults and needs to import kids and young adults from places that didn’t.

To get anything useful out of Andy Grove, don't expect a unicorn hero. Look at the management team he put together and what they accomplished. And look further back, to Drucker, for progenitors of those ideas.

Grove's capitalism was an older model than the current neoliberalism. He, again like Drucker, saw the value of a long-lived company in its relationships with its customers, its workers, and even with the citizens where the company was located instead of only seeing value in stock evaluations and quarterly profits.

I would also recommend his book: high output management. It holds true, even as it was written before email

On the same vein of globalisation, outsourcing, jobs, protectionism, and the purpose of having an economy, I think some of you might appreciate this interview with Sir James Goldsmith. Like Grove, a warning from the past. http://www.sirjamesgoldsmith.com/the-walden-interview/

I'd identify as a capitalist and was all in on free trade in the 90's and onwards. However, I think it's pretty clear that free trade as it's been implemented has only seen to benefit the Middle classes and up.

Of course, if you're going to prevent off-shoring of jobs, you need to prevent in-shoring too. Immigration (both legal and illicit) is used as a method to suppress wages and increase profits in the name of fictional worker shortages.

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