
Is the U.S. tech industry oiling its own guillotine? - dfox
http://blogs.techrepublic.com.com/hiner/?cat=641
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skowmunk
I would agree with Grove's anslysis of the problem and that loss of
manufacturing technology leadership will give lead to eventual loss of
technology leadership itself, because manufacturing technology is a critical
component of high end technology. Its like giving off potential competitors
some of your chips, not realizing that those chips might enable your
competitors to get more chips in the future, enough to give you more serious
competition.

But at the same time, the solution he suggests could backfire very badly. If
it were a case where the US was the only technology leader, then protectionism
could have been possibly used to re-establish local manufacturing. But thats
not the case, there are competitiors there too, japan, Korea, Taiwan, not to
mention China.

If the US does resort to protectionism, it would put at stake the massive
revenues that american companies are getting from foreign markets. For many of
the top American companies, the foreign markets are the fastest growing
markets and in many, they have started being more than 50% of revenues.

The moment American companies start being 'idealistic' or the government
starts protectionistic, that would set american companies at a massive
disadvantage in foreigh markets. Japanese, Korean, Taiwanese and Chinese
companies would be more than willing to take advantage of those disadvantages
that American companies would face.

The evntual losers would be the investors in American companeis, that includes
the multitudes of Americans who invest in them through pension funds, mutual
funds, 401s, etc. Of course, they will lose in other wasy if they keep losing
the manufacturing jobs too.

This is like a highly complex Game theory scenario with multiple players,
multiple possible strategic moves, with gains and losses for each move. A
simplistic or idealistic answer would not solve it

I think what the Gates foundation is doing, spending on education to increase
the supply of more highly qualified people within the US, in the future, is
definitely a move in the right direction.

As for Grove, I think he is just doing his best to serve his masters the best.
Earlier his masters were the investors in Intel, so he was making sure that it
was profitable and keeps surviving. Now, that he no longer has to serve those
previous masters, he has decided to serve his primary master, the USA of which
he is a citizen

(Please note, my use of the words 'masters' and 'serving' is not meant to be
derogatory, he is just doing his patriotic duty now that there is no conflict
with his corporate duties. I am not going to judge him based on that, life is
not black and white, and he still remains very high in my list of idols.)

~~~
Tamerlin
"will give lead to eventual loss of technology leadership itself"

I'm not convinced that you're using the correct tense here.

Consider -- what technology do we develop here in the US now?

Most of the world's major high-tech fabrication is now in Taiwan and Korea --
including AMD's. Most of our manufactured products, from tents to designer
clothing, are made overseas. It's gotten to the point where "made in America"
is unique enough to be a selling point!

"I think what the Gates foundation is doing, spending on education to increase
the supply of more highly qualified people within the US, in the future, is
definitely a move in the right direction."

I agree. We've been dumbing down our education system, and ever since the tech
bubble burst, there's been less interest in technology related education. Andy
Grove among others started the H1b thing, and it backfired badly -- the PR
that it generated when combined with the bubble bursting discouraged a lot of
people from pursuing the tech industry in general, which reinforced the talent
deficit problem. Some might argue that it CREATED the talent deficit.

~~~
skowmunk
Don't shortchange the US. US is still the world's largest generator of
patents.

A123, Tesla, SpaceX, Amgen, Google, Microsoft, Apple, Medtronic all these are
in the US, not to mention most of the biggest companies in the world.

The problem is all those patents are definitely turning into profits, quite a
lot of which does get distributed to Americans directly or indirectly, but
definitely not by generating enough jobs to keep everybody employed.

May be the number of patents that are being produced has to be increased, to
generate enough jobs to overcome the producctivty gains caused by new
technology?

Of course, for that to happen, there should be the ability to produce still
more patents, for which in turn the bottlneck is people, that is, qualified
people.

~~~
Tamerlin
"May be the number of patents that are being produced has to be increased, to
generate enough jobs to overcome the producctivty gains caused by new
technology?"

What productivity gains? So far as I can tell, it doesn't take any less time
to get anything done, yet people spend more time not doing it. Especially in
IT, where it seems that the primary goal of the next generation of developers
is to find ways to create as much accidental complexity as possible so as to
keep their seats warm as long as possible...

~~~
skowmunk
hmm, somehow it seems, your view is based on a blind skepticism of new
technology than facts. I could be wrong, and wouldn't mind being proven wrong
if its based on reason, lets see.

Can you list some things that take more time now than before? Things that take
more effort now than before?

------
dasil003
Look at the factors that made America prosperous in the post-war period: most
industrialized nations in ruins, huge land and natural resources, long-term
instability in latin america, big demand for semi-skilled labor, etc.

We were living in a fairy tale scenario. No wonder a factory worker could buy
a nice house in the 'burbs for his wife and 3 kids and drink scotch every
night.

All this hand-wringing about how to get back to that is fundamentally
misguided. We're not slipping, it's just that our most significant advantages
have evaporated, and we are used to a certain standard of living that is an
order of magnitude above what the developing world expects. We still have
cards to play, but eventually we _will_ have to compete with developing
countries and accept the devaluation of our work.

------
dmethvin
> In that speech [Andy Grove] decried the U.S. patent system, explaining that
> in the early days of the transistor there was much more cross-licensing of
> patents and a greater spirit of companies building upon the same
> technologies -- even among fierce competitors.

At the time, however, the largest consumer of electronics was the U.S.
government. They _required_ second-sourcing of just about every electronic
component they purchased. Intel had to share its technology to get that
business. Do you think Intel would have licensed x86 to AMD otherwise? Once
Intel got powerful enough they tried to go back on that deal, but the courts
ruled for AMD. Even back then it was about money.

------
davidw
Here's economist Tyler Cowen's response, which was a good one:

[http://www.marginalrevolution.com/marginalrevolution/2010/07...](http://www.marginalrevolution.com/marginalrevolution/2010/07/the-
andy-grove-essay.html)

~~~
dfa
I know economists still have soft spots in their hearts for Smith and Ricardo,
but how, in 2010, could anyone honestly cite comparative advantage in support
of free trade when the markets for land, labor, and capital have gone global?
No nation has an inherent advantage over any other in producing a particular
good or service. The idea that we should specialize in producing what we're
best at producing and trade for everything else makes less sense in a world
where raw materials can be mined in Africa, refined in India, and assembled
into a finished product by workers in China to be sold abroad at a 98% markup
by a multinational corporation. All too often the primary "comparative
advantage" other nations have over us is their lax labor and environmental
regulation. And even if we were to follow the tenets of free trade and
specialize in what we're best at, what, again, would that be? Economists told
us that high-tech jobs would replace the outgoing manufacturing ones. What
will replace the high-tech jobs?

I also thought it was amusing to see Tyler suggest that we could learn
something from those countries in East Asia eating our lunch. Apparently he is
unaware that those countries all have neomercantilist systems that favor
exports over imports, encourage personal saving, and discourage consumption.

As for the original article, the claim that no nation ever got rich by
engaging in protectionism is ridiculous. The US pursued a protectionist trade
policy from its inception (The American System) up until Smoot-Hawley and even
then continued to and still continues to in certain sectors (see the US Sugar
Program as a prime example). Great Britain became the most powerful empire on
Earth while engaging in protectionism, starting with the infamous Navigation
Acts. This is not to say that America and Britain became prosperous because of
protectionism, only that it is not as absolutely fatal to an economy as some
suggest. Thriving European countries today engage in protectionism against us
by putting a VAT on American exports.

Lastly, though this post may have seemed like a defense of protectionism, it
isn't. The problem with protectionism is that its antonym is not "free trade"
but "free markets." Doctors, lawyers, dentists, and many other white collar
professionals enjoy immense economic protection in our system. Rather than
adding even more, on behalf of engineers, why not reduce the protection of
other professions? If people stopped seeing society throw engineers to the
wolves of the market while guaranteeing doctors, lawyers and others
comfortable, upper-middle class lifestyles, more people might go into
engineering.

~~~
davidw
You make some good points. However:

> No nation has an inherent advantage over any other in producing a particular
> good or service.

Which is why we drink so much Norwegian wine here in Italy lately.

I think your claim is overly broad.

------
lefstathiou
I've had this nacent idea percilating in my mind that in our lifetime we are
going to see the (economic) separation of American industry from the American
homeland. If we look at it from a nationalistic perspective (ie America versus
the world) then yes, America has much to lose if it cant get it's shit
together and thus has to resort to protectionism (which ultimately will fail).
If we look at it from the corporate perspective, American companies have
everything to gain from continued globalization, assuming they have free
access to these markets. What's the big deal of Intel engineers in California
design chips manufactured by Intel engineers in Vietnam? At the end of the day
this is still Intel.

We see this phenomenon playing out more dramatically as many of America's
leading firms (in Finance, Energy, Tech) are pulling in tremendous amounts of
money while the Nation is engaging in historic trade deficits. Long term, this
has fairly dangerous implications because the interests of your nation should
coincide with the long term interests of its corporations. When this fails, I
can see some of these super multi-jurisdictional firms making a case for why
they should no longer be "American" corporations. Coming from the Finance
industry, there really is no reason why I have to be in NYC to do what i do. I
could do it in Hong Kong where there is 15% income tax or Dubai where I hear
it's even less. In that case, I win, America loses.

These are dark times...

------
supahfly_remix
Manufacturing is bad for the environment, and I think US environmental
regulation is partly to blame for the decline of manufacturing in the US. I,
for one, am happy with this tradeoff, but I think any discussion about
manufacturing should acknowledge this.

