
Why Amazon Can't Make A Kindle In the USA - DanielRibeiro
http://www.forbes.com/sites/stevedenning/2011/08/17/why-amazon-cant-make-a-kindle-in-the-usa/
======
patio11
I live in central Japan's manufacturing hub. If you ever come visit me, and
_really_ want to return depressed, I'll arrange for us to take a tour of the
company which produces most of the world's cell phone camera gaskets. (A
little ring of rubber around the cell phone lens.) You very well might have
one in the Japanese cellphone which came in the Chinese paper box and got
stamped "Made in China" that you have in your pocket.

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.

~~~
Klinky
_"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."_

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.

~~~
sp4rki
All the jobs you mention make substantially more money and I can assure you
have better work conditions than a gasket manufacturing plant located in
Japan's manufacturing hub. I'd rather be earning a living by means of a
nursing job that pays at least 5 times (more like 10 times in the US) what a
Japanese gasket plucker makes. And I get the bonus that I can feel great
because even though I have to clean shit, I make someone's life more bearable
and get to take care of human beings that appreciate that I'm contributing to
humanity instead of rotting away any chance of developing my intellect by
spending 12 hours plucking gaskets.

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.

~~~
stevenbedrick
> I'd rather be earning a living by means of a nursing job that pays at least
> 5 times (more like 10 times in the US) what a Japanese gasket plucker makes.

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.

~~~
0x0x0x
And coming from a medical family, I don't think most CNAs are thinking of the
greater good when they're wiping those asses.

------
civilian
I hate this "America is losing greatness from losing manufacturing" argument.
Our citizens don't want to work in manufacturing, and the Chinese (and other
foreign citizens) are willing to do it for less. Sure, why not, they deserve
it!

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.

~~~
larsberg
> Our citizens don't want to work in manufacturing

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.

~~~
tptacek
Those people don't want the lifestyle afforded to Chinese factory workers, but
the fact is that this lifestyle is an improvement for the vast rural Chinese
underclass; this argument comes dangerously close to suggesting that we should
further impoverish millions of people to improve the lot of tens of thousands
of Americans.

It seems to be a simple fact that the US is structurally disadvantaged in
electronics manufacturing.

~~~
coliveira
> Those people don't want the lifestyle afforded to Chinese factory workers
> but the fact is that this lifestyle is an improvement for the vast rural
> Chinese underclass

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.

~~~
tptacek
No, you've misread me. I'm comparing Chinese factory workers to (more
numerous) Chinese rural poor, who make _four to five times less_ than the
factory workers, and whose poverty cannot be attributed to greedy factory
owners.

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.

------
cjy
I think it is important to keep in mind that manufacturing output has actually
been increasing over the last 50 years. It is just manufacturing employment
that has fallen. That is a natural consequence of becoming more productive.
See: <http://mercatus.org/publication/us-manufacturing-output-vs-j>

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?

~~~
coliveira
The problem is not decentralization, but that all manufacturing is outside the
US. The part of the process left here is the design. But what if the design is
done by somebody else tomorrow? Then companies in this country will have no
role to play.

~~~
derobert
When you say "all manufacturing is outside the US", you have a very
interesting definition of _all_. You may want to check UNIDO's industrial
statistics, for then you'd find that the largest manufacturer country is not
China, Japan, Taiwan, etc… it's the US.

~~~
bzbarsky
The US does different sorts of manufacturing from China/Japan/Taiwan. There is
not that much electronics manufacturing in the US.

But yes, by value of output, the US is a major manufacturer; we especially
specialize in manufacturing large expensive stuff.

------
tokenadult
I just used CTRL-F to search this whole thread for keywords. I can't believe
that no one has mentioned comparative advantage yet.

<http://www.wto.org/english/res_e/reser_e/cadv_e.htm>

[http://www.econlib.org/library/Topics/Details/comparativeadv...](http://www.econlib.org/library/Topics/Details/comparativeadvantage.html)

<http://iang.org/free_banking/david.html>

[http://www.unc.edu/depts/econ/byrns_web/Economicae/Essays/AB...](http://www.unc.edu/depts/econ/byrns_web/Economicae/Essays/ABS_Comp_Adv.htm)

[http://www.commonsenseeconomics.com/Readings/Comparative%20A...](http://www.commonsenseeconomics.com/Readings/Comparative%20Advantage.CSE.pdf)

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.

------
rbanffy
I loved the doublethink involved in "There’s no stupidity in the story. The
managers in both companies did exactly what business school professors and the
best management consultants would tell them to do".

When you play chess, you shouldn't optimize your strategy for short-term
capture of your opponent's pieces.

~~~
dmethvin
But the analogy to chess is another sign of short-term thinking. There is no
end of the game if the _company_ is to survive.

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.

~~~
rbanffy
The end of the game is beating your competition to the next disruption. Then,
you start another match.

~~~
troutwine
Forgive me, but that seems vague. The ending of chess is easily decidable, but
how do you quantify 'disruption'?

~~~
rbanffy
The first example that comes to my mind is Apple. When audio compression and
bandwidth allowed music to be transfered trough internet connections and P2P
networks threatened to disrupt the music market, they had iTunes ready and
quickly cut deals with record labels. Now they pretty much own the legal music
market.

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.

~~~
nitrogen
_they had iTunes ready and quickly cut deals with record labels_

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.

~~~
rbanffy
You are rigtht. I mixed the events up. The iPod was launched shortly after
Napster became mainstream, but, still, Jobs played his cards skillfully and
cornered the market before others realized what was happening.

------
cppsnob
"An exception is Apple [AAPL], which “has been able to preserve a first-rate
design capability in the States so far by remaining deeply involved in the
selection of components, in industrial design, in software development, and in
the articulation of the concept of its products and how they address users’
needs.”"

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.

------
tptacek
A tangent: when ASUSTEK first demonstrated their manufacturing prowess to
Dell, long before they offered to take over Dell's supply chain, could Dell
have acquired them?

~~~
marshray
I can't think of many examples of corporations in Asia being successfully
purchased and operated by non-Asians. Maybe it happens, but it seems like
you'd hear about it more if it were practical.

------
ansy
Technically, Amazon could make the Kindle in the USA out of parts shipped in
from various Asian countries even though it could not make each of those
components in the USA as well.

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.

------
pnathan
For the record, out of the public (consumer) eye, there are still electronic
device manufacturers in the USA.

I work for one.

------
mckoss
If you remove the nationalistic bias, this story sounds like exactly the
"right thing" happened to Dell and Amazon. Work migrated to where it can be
performed most efficiently. This is exactly what we want an economy to do.

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.

------
aspir
The Dell anecdote at the beginning was particularly surprising. Hindsight is
always clearer, and the author is intentionally summarizing to strengthen a
point, but I was blown away at how calculating ASUS's actions were. The whole
time I read that section I was thinking to myself, "Wow, so this is how
empires fall: one ill-formed relationship at a time."

~~~
v21
it's worth noticing that ASUS didn't have to be scheming for the end result
for that to happen - each stage involved them acquiring a bit more business,
and making a bit more money. Their actions needn't have been the result of
long-term thinking.

~~~
rbanffy
Which is even more perverse. The system self-destructs unless we consciously
intervene.

~~~
v21
But who says the system self-destructs? The market has worked in this case -
computers are yet cheaper, without a loss in quality. What outcome would be
preferable?

~~~
aspir
In this instance, I assumed that "system" referred to Dell's business model,
which did in fact suffer. From a consumer perspective, as you're referring to,
it was preferable.

~~~
v21
Ah yeah, that perspective makes sense. But on the other hand - what business
model doesn't degrade over time? What magic that would be!

~~~
meric
Monopoly backed by government regulations.

~~~
v21
Even the East India Company fell eventually.

------
minikomi
As an aside, I found it interesting reading through te comments here how
little bio-industries are mentioned as a possible way out. I got my degree in
biotechnology and I must admit, there are far fewer "jobs" it leads to than
being handy with, say, Photoshop or Ruby.. I wonder I it's something which
will change..

------
fredBuddemeyer
if it is the zero sum game that is suggested (itself unlikely) why is this
outcome bad? is it something to do with race, geography? i dont understand why
anyone should be rooting for a team here instead of appreciating the synthesis
that this represents.

------
logjam
"In the long term, then, an economy that lacks an infrastructure for advanced
process engineering and manufacturing will lose its ability to innovate.”

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.

~~~
anamax
> 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.

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.

~~~
joe_the_user
_The existence of good govt spending does not imply that govt spending is
good._

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_.

~~~
nitrogen
_Why is it that an honest-to-God investor in productive enterprises like
Warren Buffet can call for higher taxes on the super-rich..._

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.

~~~
chopsueyar
No, but they should be in a higher tax bracket than you and me.

