The U.S. computer industry is dying
cringely.com
cringely.com
The tech industry is only expanding. Not only in terms of total revenues, but also total employment. In fact its one of the few sectors where employment is increasing.
This guy is not educated in what he is talking about. His narrative about American manufacturing is wrong too. American manufacturing has only increased almost every decade since WWII. There has not been a decrease. What HAS decreased is employment in manufacturing. But that decrease has happened because of automation. Is that a bad thing?
You know, we used to be 70% employed in agriculture, but then we figured out how to use machines to reduce the people required by an order of magnitude. That's how we had enough people available to become a manufacturing power.
Now we are a service/tech power because people are slowly not needed in robot factories.
Employment isn't the goal of an economy. Production is. We can give people a basic income if necessary, if robots are doing everything. But we shouldn't artificially boost employment where it isn't needed.
This guy is supposed to be a tech author and he's talking like a Luddite. In the end I think this guy is just warm in his pants because he doesn't like so many foreign looking people in the industry he covers.
Well, its too bad. The cat is out of the bag. Everyone knows how to program and make tech now. You either bring them here, or they'll go work for tech conglomerates in China, India, and Europe. All the colored faces in Google and Facebook aren't there because they are accepting less money than American graduates--they are getting paid a lot more than most graduates would get in their random IT jobs around the country. We are hiring the best of the best for our tech sector. That's good for America, and keeps America ahead of the competition.
>All the colored faces in Google and Facebook aren't there because they are accepting less money than American graduates
No they are definitely not, but they ARE at Verizon, Disney and ExxonMobil.
I've observed Chinese companies paying Chinese speaking workers and Indian founded companies paying Indian nationals less than they paid Americans (of varying ethnicities). On my limited observation, this practice is not uncommon. And, as we know, small and medium sized biz employ more people than do large firms. This wage variance is little mentioned but quite prevalent. Same as the hole in the wall taco joint run by foreign nationals, they tend to exploit their own the most taking advantage of national affinity or whatever.
In terms of inputs to generate national wealth, there is not much technical distinction between cheap raw materials and cheap labor--although possibly there is an effect on human beings.
Cato Institute's studies would suggest that immigration--especially H1B immigration has not had an appreciable effect on American wages.
But lets say that Cato is wrong .... even so ... the problem that must be solved is making sure that the gains from cheap inputs for growth are spread across everyone, and not concentrated only amongst a few. We should discuss things basic income. Not cutting off cheap inputs. Making more for less is not inherently bad.
Ultimately tariffs and labor controls are all along a sliding scale towards closed borders. The ones that make the most noise are insulated the most from external competition. But the insulation is not good for the rest of consumers in America ... only for the noise makers. And even for them, I don't think its good ... as auto unions in Detroit will tell you ... eventually reality catches up no matter how much Washington does to insulate you from the world.
I don't think a country is better off with closed borders. Various countries have tried that in history (Tokugawa Japan, China before the Opium wars, etc.) I think if everyone is trading and competing, and you isolate yourself behind tall walls, the world leaves you behind.
On a small scale that happened to our auto industry. Too much insulation from hot competition is bad in the long run. You might wake up from your Rip Van Winkle nap and find that decades later your technology and society are woefully outdated.
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He says HP and IBM half a dozen times, and uses the Airline industry as an analogy, so then why would the reader draw the conclusion that he means Google and Facebook? Does that comparison even make sense?
I doubt Googlers refer themselves as "IT Professionals." I'd even go so far as to think they may consider the title a bit insulting and at the very least wince a bit, at being referred to as such.
Per the Fed, total US manufacturing output has gone from $1.5 trillion in 1975, to about $3.5 trillion today (in adjusted dollars). It's up somewhere between 50% and 70% since 1992, depending on how you calculate it.
The US is the #2 manufacturer globally, China finally overtook the US just a couple of years ago.
Output per manufacturing worker has gone from $80k in 1980, to nearly $250,000 today.
That is more or less a tautology; it's also not a particularly useful observation - the economy only of metrics by which to judge a society. Pretending that only the economy (via wages, stock prices, GDP, or other measurements) is one of the more damaging things to happen to the world over the last ~50 year or so.
Which bring me to my main point - did you even read the article?
This article wasn't about employment, nor was it about some sort of neo-ludditie anti-technology crusade. It also wasn't claiming anything about the current size of the tech industry.
This article was about the popular fallacy - propaganda, really - that the only thing that should matter to a business is "maximizing shareholder value". This has never been any sort of legal requirement, and - as described in the article - since the 70s. Regardless of what anybody's wishful thinking about what the effects of focusing on "maximizing shareholder value ought to be, the de facto results are to allow owners and high-level management to basically steal the wages of most of their workers. It's nothing more than a cheap excuse to justify greed.
As the article shows with examples like the old airline industry, extravagant waste can lead to lead very rapid changes when a new competitor notices what's going on and decides to exploit the money being left on the table by the traditional industry by being more efficient (what the tech industry likes to call "disruption").
You may notice that this about a management problem, and is not specific to the software, electronics, manufacturing, IT, or any other industry. The main prediction made in the article is all about how basing your business on such an obvious fallacy is bad business. The airlines were a good example, and like the old airlines, the big IBM-type businesses had better start paying attention to things like customer service (stop treating disrespecting customers) and making high-quality products people actually want to pay for. Failure to do so will simply leave a vacuum where a competor (asia?) will race them to the bottom.
The bottom doesn't have much profit in it, when modern technology keeps reducing costs to almost nothing.
Now, you do bring up a useful point: there wil always be IT work. Not that this does not necessarily extend to any other kinds of tech work (i.e. software). This is because IT is a trade, and will will always need it for the same reason we will always need plubers. While an interesting topic, the article was about the likely fall of the big industry player.
On the other hand Warren Buffett who has a reputation as one of the smartest guys in business is buying more IBM stock than any other stock at the moment, over $13bn worth, his largest ever position by purchase cost. I'd put my money on it doing OK rather than dying just based on the above. I'm not sure Cringely's assertions such as:
>IBM and HP (my go-to examples lately) are failing to recognize that a big part of their business has become a commodity.
>IBM ignores 99 percent of its workforce
>Do you think IBM respects its customers? They don’t.
edit:
There's an interview here with the IBM CEO which contradicts most of Cringely's points https://www.youtube.com/watch?v=B9brTt_eLPo
etc are actually based on evidence rather than him just assuming that.
How would you say that fits with the whole fake jobs in europe?[0] Would you classify it as artificially boosted employment (or at least the allocation of resources for tasks where the production value is arguably zero for any individual beyond the person doing the task, than say, allocating resources for construction of CSP plants to bring down costs of electricity for everyone in the medium-long term)? If so, it seems some nation states might differ in what they think the goal of the economy is for.
[0] http://www.nytimes.com/2015/05/31/business/international/in-...
I would highly disagree with this. And the later assertion that we could use basic income, especially given the political climate in the US.
Though you have a point that the word's history has unpleasant connotations. I might have paused and looked hard for perhaps a different word to convey the same meaning.... say, "multihued" or "heterogenous" or something.
There was nothing wrong with the wording.
I also see a link to politics. In politics we have a similar situation: Most politicians (at least in our country) are planning for one or two terms of office. After that, they are eligible for a pension big enough for them. And when this is not enough, they also can get money from corporations just by being a consultant after their time in office. So, the plan is just short term: Get into the parliament, get a big seat as secretary if possible or other good job and after just a few years you don't have any trouble in live any more, money-wise. This can be best reached, by short-term thinking. Be helpful to the right people, be a "party soldier" (as it is called in Germany) that does what the party top wants from you.
Own thinking, or long-term success or even thinking, what is best for the people, is counter-productive in this scheme.
So what we more and more get, are short-term solutions, that only make you popular for a short-term but does not help with the long-term problems. Troublesome decisions are shifted into the future, when you are out of office, even when the troubles will increase meanwhile.
The same short-term thinking is produced in CEOs today. A CEO just has to get the job and be there, for 4-8 years to earn enough money, most people don't have in a lifetime. So what does he do? Make troublesome decisions, or decisions, that cost money for the next 3-5 years and will pay maybe in 6 years, maybe later??
You know the answer.
I think, this short-term thinking and the greed, that is injected in many of us today, are the reason of the most problems we face today.
IT unemployment has been 2% in my region for nearly a decade. That means everyone with any skills who wants a job has a job.
I can hardly imagine how you could try to screw over IT workers any harder than is being done by the corporate big wigs and yet IT is still one of the best places to be. And if it gets bad? God help us, we can just unionize. But it's hard to convince people to organize and complain when they're making more money and enjoying more benefits than most people on the planet.
Where are you located?
It is only a matter of time until a company emerges that truly understands the value of IT service, because that need isn’t going away."
Not a single company but their business is being eaten by all these thousands of new small SaaS businesses that cost a fraction of what they charge for their terrible enterprise software.
We are only focused on a niche but we do it amazingly and we have customers from virtually all big businesses. These companies don't need IBM any more, because employees in these companies can now do their forms on JotForm, their CRM on Salesforce, their communication over Slack, their emails on google apps and hundreds of other products that focus on only one thing but do it amazingly well.
That's actually why I tossed this in the submissions queue. I hadn't seen before the shareholder value / CEO compensation tuple connected to an academic paper:
"[...] dating back to 1976 [...] when Michael Jensen and William Meckling of the University of Rochester published in the Journal of Financial Economics their paper Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure."
• 'Our goal is to solve more of our customers problems everyday. So that they can do things that add value in the world.'
• (Separately) How Microsoft is on the right track.
• How you've viewed Apple (minus the past two years)
Point 1: " revealing the company’s new, official mission statement: To “empower every person and every organization on the planet to achieve more.”" Source: http://www.geekwire.com/2015/exclusive-satya-nadella-reveals...
Point 2: Microsoft is shifting to create scaled services that solve various problems (Azure, CRM, mobile first campaign, etc).
Point 3: I've viewed Apple that simplified the users' experience with computers and made it easier for their users to 'do more' as Nadella has been saying in the press. Apple did a solid job but unless they find other ways to add value to their users lives, their competition will squeeze most of the market share. *Note: I understand that Apple has a monopoly on the premium smartphone sales (~75% last time I checked) but this can all easily changed due to Moore's Law. Ie., most desktops and laptops sucked 10 years ago but now, they all are fairly solid products.
There's medium to high quality workers in India that only cost companies ~$15k / year? Nothing I've ever read indicates that. Always seen $25-$30k/year cited, with the number steadily increasing every year.
I'm guessing the benefits we in the USA get are much better than in India.
1/10th of that is ~$15k
In 1993, Section 162(m) of the U.S. Internal Revenue Code was passed into law. The intent of this law was to reign in outsized executive compensation by eliminating the tax-deductibility of executive compensation above $1 million unless the excess compensation was performance-based.
(http://papers.ssrn.com/sol3/papers.cfm?abstract_id=942667).
I'll also note that those running companies are, by definition in the US, responsible for providing good returns to the owners, AKA stockholders. And it's been noted since 1941 or so, in James Burnham's The Managerial Revolution, that there's a divergence between the interests of managers and owners, so efforts like Section 162(m) are understandable.
I believe the opposite is true. The US computer industry would have been dead out of cost and competition if it did not embrace offshoring. Instead what it is doing now is taking a bit of hit and staying in control. It has generated more leaders than just workers. I can only wonder what country would be the leader in the computer industry within a decade of the US banning offshoring or H1Bs.
on the other hand i actually agree with a lot of what he is saying so there is that...
Sounds like a valuable opportunity to practice Bayesian reasoning. One thing I like to do in situations like this is see if I can figure out any data that contradict my emotional response, so I can build a data-driven case that makes what seems to be emotionally right as implausible as possible.
If you're a Bayesian, you've got to go with what is most plausible according to the data. Your emotions are data about you, which may be really relevant in some cases, but probably not in the case of international trade...
Technology is not necessary.
Enjoy.
;-)