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Why Amazon Can't Make A Kindle In the USA (forbes.com)
161 points by DanielRibeiro on Aug 20, 2011 | hide | past | web | favorite | 184 comments



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.


"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.


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.


> 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.


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


Agricultural workers do not get paid substantially more than $13.00/hr gasket inspectors, they get paid substantially less and they work in the sun. A nursing job is a very high skilled job that is very well paid that you go to college for. Shit cleaners are not nurses, they are people who also make less than gasket inspectors. Don't assure people of things you're not sure about.

The pay might be shit, but we'll make it up in overtime:)


In the UK: agricultural workers either get minimum wage or are exploited migrant workers getting illegally low wages and illegal working conditions. People who look after the elderly are "care assistants" not nurses they are unskilled workers at minimum wage. The amount of abuse in the care industry (as well as the high churn rate) suggests that a substantial number of those workers do not get much satisfaction from 'contributing to humanity'.

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.


I don't think you are 100% wrong, but I can't let this one slide:

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.


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]"


That is utter nonsense. Maybe in the Bay Area that's true, but not in Florida.

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.


If you're paying $20 an hour and you can't find a decent Java programmer, I'm not sure if it's a failure of the market. I wouldn't program for $20 an hour no matter where I lived, unless life sucked or I wasn't very good. And if pushed by desperation to take that job, I would be constantly trying to find another one.


The $20 he mentioned is for cablers and phone techs, not for programmers, if I understood correctly.


@idiopathic: You're right, I read it badly. Sorry, crag.


If you are having trouble finding staff than you are by definition not paying market rates. If $20/hr gets you crap, then you need to raise your rates. This is capitalism, people don't owe you their labour for what you consider good money.


Indeed. There was a post a month or two ago on HN that captured this fallacy beautifully and I wish I could find it again and/or credit its author:

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?"


Sometimes you can't find what you need, no matter how much you want to pay. I have enormous difficulty to find good programmers here in São Paulo. Even bad programmers are hard to hire.

I can hire PHP and Java programmers rather easily, but both groups would have a lot to unlearn.


You can always hire people for anywhere, it all depends on your requirements and your compensation. If you can't find them, then you need to change either requirements or compensation.

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


You are right, of course. I guess I'll have to help people unlearn.


Wow,

I was writing from the Bay Area. I suppose I should realize how different the rest of the country is.


And that many parents are more concerned about their kids learning evolution than math.

Can you elaborate on that?


First time I read it I got that many parents do not like it that their kids are learning evolution (they probably want them to learn creationism instead) when instead they should be worrying that their kids are not learning enough math. I re-read it again and I still think that's what he meant.


That's right.


How about nursing? The starting pay averages three to four times minimum wage, but there is still a shortage. It is easy to underestimate the mismatch between the skills required today, and the typical skills of the unemployed. However, your example does ring true to me in the engineering world.


Nursing is a highly skilled job that requires college education, like programming, except that it requires college education.


The entry level positions I am talking (Licensed Practical Nurse) about don't require a college degree, just a 6 month certification. There are also tiers of nursing available via an AA program. Regardless, they are decent paying jobs, and they are hard to fill.


There isn't a shortage of LPNs. In a lot of places there are an excess of LPNs.


That doesn't make sense. Either they need workers, or they don't. If they need them, why should they refuse to take them on if they don't fulfill some outlandish specification? Unless the job REALLY is that complicated.

But otherwise if a worker makes the more money, why not go for it?


"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 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.


I'm totally flying past you here. That's not a bad job, that's a good job. I worked a Xerox Cheshire (for addressing junk mail) for $10.50/hr around the turn of the millenium for between 40 and 76 hours a week. It financed a really comfortable lifestyle at the time (I didn't have kids.) My quota was around 10,000 per hour IIRC, and my hands got a bit chewed up, but I almost always hit quota (if the machine was on my side.)

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.


Back when my insomnia was really bad, I'd be up most of the night watching generally dull television. One of the most interesting shows was "How It's Made", which is an entirely narrated view following a camera through various production facilities for common(ish) products.

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.


That's exactly what I did - loaded the machine with some odd shaped component, again and again, as fast as I could. And somebody looked at what came out for quality control, then that was packed onto a pallet, and forklifted to somebody who loaded that stuff into another machine, or to a truck. Otherwise, robots (or dumb machines) have always done the lot.


Mattresses and incandescent light bulbs seemed to require a bit of human intervention for manufacturing, according to How It's Made.


Mattresses especially fall into the 'dangerous' category from what I recall; the sewing machines would be extremely easy to run a hand or finger into if you make a mistake.

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.


Related to nothing, I worked one of these bastards too: http://www.mailmarketplace.com/inserters/5250_001IN.htm. It shoves mail into envelopes so I can swamp you with useless credit card offers, retirement fund statements, and solicitations from nonprofits. Notorious hand mangler. At the time, this was the best job I had ever had.

P.S. Looking for a picture of the Cheshire brought back memories: http://i.ebayimg.com/00/$%28KGrHqF,!g0E1fPtSCr7BNeqtoSh0w~~_...


It is easily the worst legal job I've heard of in a first-world nation. That doesn't sound so bad. You should see the hell that is a tire factory in the US. Minimal automation, lots of poor work environment.


There are a ton of people in the US that would love to be making $13 an hour like that - if the job also came with free health insurance.


I'm pretty sure the patio11 did not mean that they where paid 13 dollars an hour to pluck and approve one thousand gaskets. He probably meant 13 bucks a day. A half inch gasket costs around 8 to 10 cents a piece (retail), around 5 or 6 cents in bulk by the hundred thousand or millions, which are the quantities phone manufacturers buy. At 5 cents a piece you would be making 50 bucks for each 1,000 gaskets, which you need to manufacture, box/package, and ship. You also need to pay utilities, management, equipment, marketing, and probably a whole bunch of other jobs not directly linked to actually plucking and approving gaskets. If you're paying more than one fifth of your earnings before taxes in people that pluck and approve your gaskets you're probably making no money, and most likely are loosing a crapton of dough on each shipment. Not only that, but if you're earning 13 bucks an hour, that's 2080/2496 bucks a month if you go by 8 hour days and 5 or 6 day workweeks. That's 24 to 30 THOUSAND dollars a year, which I'm pretty sure is FAR from being a poor persons salary. In some countries, that's a middle class working person's salary. Hell if they where working 16 hours a day for 6 days a week, they would be making close to 5K a month. That is so far from the reality of the actual japanese worker in a gasket manufacturing manufacturing plant, that it's no close to even being remotely amusing. In truth, it's extremely depressing.


That's an awful lot of thinking going on there, but are you saying you think they are paying 13 dollars a day? No, a bare minimum wage in Japan is (depending on the exchange rate) pretty close to $10 an hour.


According to Wikipedia, "As of 2010, regional minimum wages range from ¥642 (~US$7.75) to ¥821 (~US$9.90) per hour for all workers."


> It is easily the worst legal job I've heard of in a first-world nation.

I've had worse, and I've had it pretty good.


My first legal job was in a callcenter doing inbound collection calls for 450 bucks (I live in Central America, so that's was about 200 bucks more then minimum wage at the time). It sucked. But I wasn't reprimanded or fired at the first minuscule mistake, I was being payed more money (86 bucks actually), than what the gasket person would make IF he/she worked all days of the week, and I could at least use my head to fix some of the customers problems in comparison to mindlessly shoving gaskets into a box.

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 one that comes to mind was feeding trays to a conveyor belt in a food processing plant. The trays came on a stack that was from 8 inches off the ground to 6 feet, so each tray came from a different height.

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.


So... that's a job that could be done by robots. Some day soon it will be.

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?


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.)


Interestingly, Japan has spent loads of time on manufacturing robots and personal service robots of dubious utility (see Asimo, Toyotashi and others), while the U.S. has dumped military money at robots and ended up with drones, bomb disposal robots, exoskeletons, etc. etc.

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.

http://www.youtube.com/watch?v=3wwB43D0FG8


Human-form robots : robots :: Space Shuttle: ICBMs. It's just a media-friendly way of demonstrating that you have the capability to produce something of use. Most robots look nothing like a human. The overwhelming majority are in industry.

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.)


Interesting you mentioned exoskeletons. The US is 5 to 10 years away of getting them on a battlefield.

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.


It's more of a technical issue, isn't it? They need to figure out how to power it— that's a lot easier in a hospital than in a war zone.


For reference, when Japan's Fukushima number 1 NPP reactors started going pear-shaped, there was no robot in Japan that they could use to enter the facility.

They had to turn to either a US or French robot to enter the reactor.


The bulk of the work was done by low-wage laborers wandering polluted water in sneakers. Asimo was out busy playing football.


I'm not whether this serves as a proof of problems with Japanese robotics.

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.


Where are we at with robots per human?

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."


If we are going to talk about "how can we replace every American job with a robot", we'll have to talk about how replace humans can live ennobling lives of leisures rather than either pushing shopping carts or experiencing empty hedonism.

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.


I think it's way late to start talking about that. In America, we have this puritanical ideal that working leads to happiness— or that working is, itself, happiness. Scientifically speaking, that's bollocks. To take the classic case study, people who win the lottery aren't any happier or unhappier than their workaday peers. They are exactly as happy.

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.


Forgive me if I've misread, but I think what you're putting forth as acknowledged fact here is in fact controversial. You seem to be referencing the 1978 study "Lottery Winners and Accident Victims: Is Happiness Relative?" as well as, perhaps, the idea of the Hedonic Treadmill. Brickman's ideas are considered outdated.

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.


My guess is that people with low skills will still find work but not as much (part-time) and consequently their pay will be lower. However, if robots are doing all the work then production becomes cheaper which means products become cheaper which again means that people can buy more with less money. So in reality people will not become poorer. The economic level will stay the same or probably increase. The purchase power will probably increase. Question is, what do you do with all that extra time?

Well, this is only one scenario of the things that can happen.


However, if robots are doing all the work then production becomes cheaper which means products become cheaper which again means that people can buy more with less money.

That's a big assumption there. More likely, companies will experience higher profit margins rather than pass along the entirety of the cost savings.


True,but it only takes a startup with nothing to lose to enter the market and undercut everybody.


Where are we at with robots per human?

What exactly is that a measure of?


It's a measure of the ability of automation to replace human labor.

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.


I wonder how many of us will be building platforms that build robots one hundred years from now?


A hundred years from now, I only hope the robots will feed me on time and keep my cage clean.


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.


> 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.


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.


> this argument comes dangerously close to suggesting that we should further impoverish

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.


I just think you have to be careful not to conflate. Americans are willing to work in manufacturing; that's obviously easy to see. They are not willing to work for Chinese manufacturing compensation, even after you correct for environmental impact and shipping costs.

If manufacturing simply can't pay what an American worker needs to make, their willingness to work in factories isn't relevant, is it?


> 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.


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.


When you visit a factory, it is easy to see that this is not the case. Yeah, the work sucks, but workers are happy to have the chance in general - they save money to build businesses, give to their families, etc. Factory work is better than starving, and better than farmwork.


There is a group of Americans that would like a semi-skilled labor job that affords them a middle class lifestyle

What job is that? Because it's apparently not (US) manufacturing


Oh, certainly it is. There are a lot of union jobs that pay well, though admittedly the better-paying ones require quite a bit of skill. My brother is a pipefitter, and while he makes more than many software developers, he is also qualified to handle pipe work (layout, welding, testing, etc.) in hospitals, hazardous chemicals and treatment plants, etc.

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.


> Our citizens don't want to work in manufacturing.

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.


For a lot of people, making actual stuff is very satisfying

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.


I might be wrong, but I actually don't think it is as simple as that. Yes, it is detrimental with a too strong us-vs-them sentiment. But it is also true that the world is better off when every individual state is in good shape.

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.


But, then, why would they need you? All you end up with are companies that can't make stuff competing against companies that can.


As China and India make more money, their workers will start demanding a bigger piece of the pie (we're already seeing this). Their prices will go up, meaning that, by comparison, U.S. workers will start to be a bit more competitive.

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.


China is making 'stuff' but they're not developing ideas or creating the software. Our strength is in management, finance, design and software development. I don't think we should shed any tears for a lost manufacturing industry-- hopefully it'll encourage more people to pursue these more intellectual careers.


> China is making 'stuff' but they're not developing ideas or creating the software.

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.


> Our strength is in management, finance, design and software development.

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.


Our strength is in management, finance, design and software development.

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.


So, you're assuming that in our country everyone wants to work in one of these industries... but what if you don't want to pursue an intellectual career?

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?



They will need genomic, health research that target their populations anyway. That's enough to occupy them for a while. What I don't seen in these discussion is the fact that I feel soon, Asia will want things for itself and that's a huge amount of people to serve. They will be busy making goods for them and that should drive up labor costs and help make the US labor look cheaper for US companies.


To look at the loss of manufacturing as an American industry while pretending that is was solely populated by those who chose less intellectual careers on the plant floor is to overlook the fact that manufacturing, coupled with our great land expanse and growing population, was the prime enabler for the pursuit of intellectual careers since the 1930's.

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.


On the whole, the people who lost the American factory jobs are still vastly better off than the significantly larger cohort of Chinese rural poor that ended up with those jobs.

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.


You have to find another way to generate value. That can end up being hard if the research attached to the manufacturing operation gets behind the competition.


How are they vastly better off? Please visit any city in the Rust Belt. Get out of the house and ask how any service sector employees are making ends meet. They went from having honest, well-paying jobs that enabled them to build lives, families and communities to watching their source of income shipped overseas by the very people they worked their asses off to send to college all because the manufacturing industry's market efficiencies didn't match those they taught at business schools.

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.


The median household income in Youngstown, OH is $25,000. The average salary in Shenzhen is ~$6000, implying a "household income" of $12,000. People in the rust belt are better off than Chinese factory workers, and Chinese factory workers are better off than the Chinese rural poor.

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.


Are those PPP dollars, or exchange rate dollars?


I think you should look into additional graphs; they may help you understand income correlation. And I don't mean to be insulting, but just by looking at the figures, it's clear that the workers in Shenzhen are in the middle of economic growth, while the residents of Youngstown, OH, have ceilinged out at slightly above the poverty level. The income per capita in Shenzhen is ~$14K, growing at +10%. Their per capita income is 200% that of the average rest of China's. Youngstown's per capita is ~$31K and in decline, having never reached higher than ~$32K in 2007. That's 65% of the American average of $47K.

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.


I'm not sure I see what the trendlines have to do with quality of life in either locale. Either Chinese factory workers are better off now than autoworkers in Youngstown, or they're not. Either Chinese factory workers are better of than Chinese subsistence farmers, or they're not.

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.


I understand your point but you can't give people what amounts to a handout while reminding them that they're better off than the Chinese.


What?

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.


- It dehumanizes the spirit and makes the receiver a dependent of the state; later to be vilified by an ignorant society at large when it suits them.

- 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.


honest, well-paying jobs

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.


I disagree. When I think about the mention of honest, well-paying jobs, I visualize jobs where a person is hired on the merits of their experience and character, where their efforts go towards progressing, learning, teaching and helping while growing along their peers with the security of full time long-term work earning a wage that affords for savings after expenses, advancement and the freedom to lobby for change in the workplace. An honest job is provided by the employer with the responsibilities of paying taxes and benefits shared with the employee. It has nothing to do with being menial or even manual for that matter.

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.


The argument of "jobs America doesn't want" is completely false. You are assuming that all jobs in manufacturing are $10/day jobs that only poor Chinese people may want.

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.


==> Is it implied that since the average American doesn't like some work, America is being afforded a chance to uplift "Chinese farmers" and whole bunch of other poor people? Is it?

==> 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?


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?


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.


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.


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.


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://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.


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.


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.


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


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


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.


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.


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.


I don't at all disagree with you that disruptive innovations happen but, the problem as I see it is that you've simply _described_ some past innovations of such a sort without hitting the sticky problem of quantifying such a thing. How do you 'call' a 'match' and on what authority?

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.


If I could quantify it, I would probably be able to accurately predict it. The chess analogy was only to point out how optimizing for short outcomes can be against your best interests.


No, the end of the game is whatever you decide gives you an outcome that makes you happy. If you don't want to have to start another match, you optimize for making your current match a big enough win so you can bow out afterwards. That may or may not be in the best interests of the other players involved.


But you very likely will if your rewards for playing chess are only based on the results of your next ten moves.

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.


yep, public companies have report cards every three months and need to show "progress".


All depends on how you measure progress. If someone starts asking "what's the next-gen product" at board meetings you may see some real progress.


After listening to Apple's and HP's earnings calls, I think progress other than margin or revenue is lost on people who matter in the financial world.


The other important measures are also more falsifiable, and more changeable between companies and industries. Every company has margins and revenues. You could argue that investors ought to understand the businesses they own, but that doesn't mean they will.


Let's hope this behaviour is self-limiting.


"Doublethink" is a bit harsh. It's probably diplomacy on the part of the author, rather than active self-deception.


I don't think it's either, actually.

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.


His overall criticism fairly explicitly targets the common MBA value of maximizing short-term profit. That's what he's being diplomatic about.


Yes, but I think that's a bad analogy because winning a chess game is good for you, but preserving a national infrastructure of innovation and manufacturing is good for everyone.

It can be difficult to make choices that preserve the common good at the expense of one's own short term good.


preserving a national infrastructure of innovation and manufacturing is good for everyone.

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?


Whether one is focusing on national or global wellbeing, the point is the same-- the incentives work against either.


"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.


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?


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.


The manufacturing comparative advantage sits with ASUSTEK, so you ought to ask that question the other way around: Could ASUSTEK have acquired Dell (on a shorter time horizon, that it). And the answer could be yes, with some sort of leverage AKA loan involved.


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.


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

I work for one.


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.


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."


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.


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


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?


> What outcome would be preferable?

A sustainable one. What happens when manufacturing moves from China to someplace even cheaper with harsher labor laws?


Millions more are lifted out of poverty


What if their country has no respect for human life?

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.


You know that there is some point you are no longer lifting people out of poverty, but forcing them to work for less, right?


No, because that is not necessarily true. The world economy isn't a zero sum game.


Not necessarily doesn't mean it doesn't happen. Right now the gap between rich and poor is widening just about everywhere.


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.


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


Monopoly backed by government regulations.


Even the East India Company fell eventually.


Funeral homes


The system doesn't self-destruct. This is simply diffusion on a geo-socio-economic gradient.


This is definitely more than diffusion. If it were only that, then we'd expect to see manufacturing become more evenly distributed. What we're seeing here instead is going from one strong concentration (lots of manufacturing here) to another (almost no manufacturing here).

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.


Manufacturing output in the USA hasn't shrunk. Productivity gains mean there are fewer people employed in the sector. So I don't believe your scary statement is backed up by the facts.



Yeah, I saw some things like that. I couldn't find the original sources, but CPI dollars doesn't seem like the right way to view it. Instead, I think the right approach would be versus GDP, or versus dollar value of manufactured goods consumed.

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.


1) Manufacturing output is dropping relative to GDP, but that isn't a bad thing; it just means that GDP in services is surging. The versus consumed is basically the trade deficit. I would accept per capita manufacturing output over time as a more fair comparison though.

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


I look forward to seeing the data that back your assertions.


Then look for it; it's all over the web.

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.


> Then look for it; it's all over the web.

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.


If you do a GIS for "US manufacturing output" you'll see what the GP is talking about. Worker productivity has shot up over time, as has output. In return, far fewer workers are needed.

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.


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.

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.


Huh. I'll have to run this by some other libertarian pals. Interesting.


This reminds me of the story of Roman conquerors' celebratory parades, with the slave saying "all glory is fleeting." It seems as if you must consciously intervene to prevent erosion; otherwise that story wouldn't be passed down as much as it has been.


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..


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.


"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.


> 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.


> 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.


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.


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.


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


> Why is it that an honest-to-God investor in productive enterprises like Warren Buffet can call for higher taxes on the super-rich

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....


>...GE is one of the more successful rent-seekers. Care to provide any examples of it whipping up an anti-govt mob?

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.


Do you really think that some exec at GE had any role in that?

Note that the tea party has been specifically negative towards GE's rent-seeking.


"Of course, government spending is neither inherently good nor bad."

True, but it tilts heavily toward waste. You're never as careful with someone else's money as you are with your own.


Corporations also have executives that drive companies to the ground and yet get handsome bonuses for it. Both government and private enterprise can fall prey to problems of corruption and incompetence.


That problem is self-correcting as long as it's possible for the company to actually die. It's the governments, heavily entrenched mega-companies, and companies that are "too big to fail" that I'm more worried about.


It's self correcting in the individual company, but does it at a systematic level? It seems (although this is a case where data would be a lot better than a 'gut feeling') that there are more, and more egregious cases of "executives gone wild" in recent history as compared to, say, the 50ies.

In economics, "other people's money" is called the principal-agent problem, and it's an interesting one.

http://en.wikipedia.org/wiki/Principal-agent_problem


Corporations (other than large investment banks) aren't able to force taxpayers at gunpoint to continue to finance them when they are corrupt or incompetent, so it seems like that might be a less severe problem.

ooh, ninja downvotes!


Of course they can. They just have to lobby to remove all the restrictions and oversight that keeps them from being big enough to use themselves as a hostage.


How is it reasonable for Buffet or anyone else to talk about raising taxes on anyone, when those taxes are used for things like flying twenty C130 Hercules cargo planes, stuffed to the rafters with $100 bills, to Iraq?

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.


I think you're missing the part where the government spends the same amount on defense regardless of the tax level. The question being batted back and forth between Democrats and Republicans is "raise taxes or print money?"

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.


I think you're missing the part where the government spends the same amount on defense regardless of the tax level.

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.


"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."

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.


> Yeah, like the Wright brothers, Edison, Tesla and Ford discoveries.

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).


Regarding tax cuts, I recommending taking another look at the history of American innovation and taxes. When I overview American history I see great innovation and economic growth from 1800 to 1930's, a period of low taxes. I see 1940's to 2010's as beneficiaries of earlier innovations and incremental improvements (but less innovation and growth compared to earlier period) and a time of high taxes.




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