I do believe we may have reached peak employment, as discussed in the comments here recently, and as my partner Albert has been discussing on his blog over the past several months. Any serious and intellectually honest jobs agenda must deal with that reality.
But I also believe stagnating wages here in the US vs escalating wages around the world presents an opportunity for the US that we are not, as yet, doing much with. This was in the WSJ today (or maybe yesterday):
While wage costs in the U.S. have been about flat in recent years, they have been rising 20% a year in China, a trend Mr. McNamara expects to continue for at least five years. He said labor costs for Flextronics rose about 30% last year in Malaysia and 40% in Indonesia.
The WSJ post was about high tech manufacturing but I think the same is true of outsourcing of back office, customer support, and programming jobs to India and elsewhere.
There are parts of the industrialized midwest, like Detroit, Cleveland, and Buffalo, where you have well educated workforces stuck in regions where housing prices have declined for more than a decade and wages have declined as well, where jobless rates are at catastrophic levels. A house that would cost $500,000 in the NY metro area can be had for less than $100,000 in these regions.
This is both a problem and an opportunity. It is time to bring these jobs back that we have moved elsewhere. Although I have not done any sort of analysis here, I would be shocked if one could not make a strong cost based economic argument to do so.
I am certain that there are plenty of reasons why it is not happening, or happening at scale. Clearly there are a bunch of one time costs, for facilities, for job training, for other stuff. And then there are the regulatory burdens that we in the US throw at our job creators. Again, from the WSJ post:
The difference in labor costs is narrowing and local officials in America have been giving more financial incentives to companies setting up plants in the U.S., Mike McNamara, chief executive of Flextronics, said in an interview Friday. Mr. McNamara said he could even imagine some smartphones being made in the U.S. eventually. But he cautioned that the return of manufacturing to the U.S. is likely to be a "slow and evolving process" rather than a flood. Many obstacles remain, including relatively high U.S. taxes, health-care expenses and regulatory costs, he said.
If jobs is our number one economic issue in the US (I believe it is), then policy makers at the federal, state, and local levels need to be all over this stuff. We can reverse the outsourcing & offshoring trends of the past thirty years. The era of gloabal wage arbitrage is over or will soon be over. But we need to make a bunch of smart investments and we need to make them now.
Broadband infrastructure investments could bring call center jobs to places where people could actually live on the wages. (I’m thinking the rural midwest…)
Call centers come to mind as low hanging fruit. Outsourcing them never really worked very well.
There was a cover story in last month’s Atlantic making the same argument. Rising energy costs (in addition to rising wages) have cut into Asia’s competitiveness.http://www.theatlantic.com/…
It’s a large opportunity. Especially in communities that had strong specialized industries because you have those traces/semblances of infrastructure already in place as well as a workforce that is already used to certain type of work. South is a great example, in addition to great weather, different pace of life and beautiful charming towns, it has a pre-existing sense of community that took a long time to nurture in other cities, especially in the startup communities. Some great examples are Chattanooga, Charlotte, Columbia, even Charleston with a handful of startups. It’s very exciting.
The Southeast is where we are starting to build out our advanced manufacturing network for the reasons you mentioned, and in the cities you mentioned. These places have the human capital, culture, and environments we feel are under-served innovation networks waiting to be built.
It is interesting that all we are talking about is approximately 4 million jobs to tip the balance to a more “positive” economic environment (i.e. to go from 8% unemployment to 5%).Yes, these jobs have to be created creatively , but I’m not sure that that’s the main thing that would help the US economy.Will 4 million new jobs help to erase the deficit? Will that fix the banking system that’s still taking the same risks that could bring it down? Will it lower consumer debt? I’m not sure.
The problem is much deeper than the official unemployment (U3) rate. That only includes people who we are still paying UI benefits to. Millions have been unemployed for longer than the 73 weeks (used to be 99 weeks until Sept of last year). In fact, much of the supposed drop in unemployment occurred starting in September of last year (coincidentally, just in time to make it look like Obama wasn’t failing so badly) when we stopped counting those who had been unemployed between 73 and 99 weeks. The U6 rate hasn’t budged from 14.7%. To get back to the levels we had 15 years ago (and the levels of tax receipts that are needed to make serious progress on debt retirement) would require more like 12M new full-time, good paying jobs.
Interesting clarification. thanks. yes, 12 million new jobs would move the needle then more than 4 million.
as someone who has worked with offshore people extensively for over a decade i think this could be right.. its quite fascinating
A lifetime ago, while at Creative, we decided to keep customer support in country rather than move it offshore to Asia where the company roots were. We bought an old 5 and 10c store in a small college town in Oklahoma and did it there.Huge success. Just made sense for all the right reasons.
.The infrastructure of the Old South in places like Natchez, Waco, Mobile, Brunswick is an untapped jewel.Good hard working people and dirt cheap real estate.Internet service will be the key..
I bet.Honestly don’t know the south well, but my experiences building this org in Oklahoma and working with some talented teams scattered throughout the country just works wonders.And…when it comes to support, people want to be able to get on the phone when they want to and they don’t want to go offshore. Human nature.
I have been loud and on the record since 1999 that outsourcing jobs and then importing those products back into the U.S. with a giant tax benefit is crazy.I don’t care how you implement it, but there is no way GM should pay the same tax rate (actually more because of carry interest loophole) than a hedge fund manager.Those 200,000 employees (versus a couple) all are not on food stamps, aid etc, but more importantly are paying social security match, medicare, healthcare, retirement.The same goes for Dell’s U.S. employees versus outsourced machines.Same goes for me who has never outsourced a single job.I literally was pounding the table on this at a technology roundtable with Jeff Immelt and Senator Tom Carper (who I was glad to see voted against the budget fiasco saying we needed to bring spending down to Clinton era rates)
But some of these jobs are old & dying types of jobs caused by shifts like cloud computing (in the IT sector). Let them have those jobs & let the US keep moving up with newer jobs.
.We have to have a limited supply of jobs which mirrors the talent pool of the US even when those jobs are archaic. Otherwise we will continue to wrestle with enormous unemployment costs.There is a bit of paternalism at play here.There are folks who cannot be retrained but who will otherwise burden the social safety net.The ultimate test here may be — are we creating taxpayers or are we creating dependencies..
I was commenting from the context of traditional IT jobs primarily. I don’t think those that were outsourced will come back as is. There’s a fallacy about outsourcing that if you outsource a job, you’ve displaced one. That’s not always a 1:1. For example, suppose 100 jobs are lost. 40 may go overseas to replace them & 10 new ones stay to manage them. Then a year later, the company hires 10 entirely new jobs with other skill sets because of the savings they incurred & new innovations they were able to fund. And it grows from there. Unlearn. Re-learn. Keep Learning.
.The learn, unlearn, re-learn cycle is real life and it is quite insightful.Well played..
Why did we implement it that way in the first place?
How do you propose keeping spending at Clinton era rates when nearly 10 million additional Americans have turned 65 and become eligible for social security?
we’ve exported not just manufacturing, but innovation around manufacturing because one can only (mostly) solve problems at their source. It’s also amazing the investment in infrastructure and STEM China seems to have compared to the US.
I’ve made this point numerous times on Albert’s blog, but through the lens of manufacturing; we can fix our jobs problem by sending fewer “maker” jobs to asia and do them in poorer parts of our own country.Albert has disagreed that this will do much to help us in the long run, because the number of manufacturing/maker jobs are not growing as a whole because computers do more of it now, and the computers will continue to increase their share of that labor force. Its a hard argument to debunk long term, but in the short term — i.e. well within our lifetimes — I can’t see how shifting the construction of computer chips and plastic toys to Cleveland instead of Chengdu won’t drastically help our country’s job issues. As you’ve pointed out, the opportunity is sitting right under our nose.I’m more than curious to see Albert’s response to this post…
The two big components of the unemployment issue is 1) Labor Liquidity and 2) Housing. When you can change investments in a nanosecond, it is hard for people that need to change their job skills catch up. Construction workers after the housing bubble had a real hard time finding other jobs as their skills were not easily transferable. The outsource jobs of today are typically jobs soon to be replaced by automation, so that may not be a great area to focus on. We need to focus on labor liquidity. Our unemployment system is still designed around the 1900’s factory. How many brochures are in the unemployment office for Code Academy or MOOCs?
Call centers, support etc. Are all software from the infrastructure. Do we have the hardware infrastructure to handle manufacturing?
Power grid infrastructure improvements also important for all industries. The good news is that “hardening” infrastructure also creates jobs.
i am a passionate disbeliever in peak employment. human desire is infinite and so there will always be more and more demand. i would argue desire for status is also infinite and thus desire for scarcity/personalization of some kind is also infinite. moreover, employment is a statistic that is increasingly useless, and that no one can agree on anyway because they keep changing how it is calculated. intuitively people know there is some type of problem related to people finding a livelihood, which is of course true enough.as a broken record i must repeat what i always say, especially because it is so frequently ignored or de-emphasized: the entire economic problem boils down to debt. to ignore this is to ignore the entire problem. any idea at creating a long-term fix that does not address debt is destined to serve only as a profoundly embarrassing failure. debt is the keystone. fix debt and everything else gets fixed automatically by the market. the market itself is trying to fix debt, and would have already done so were it not for policymakers and the ignorant and apathetic populace that repeatedly elects/tolerates them.jobs will come back to the states naturally once the US dollar’s depreciation is complete. the return of these jobs will run parallel with a decline in the standard of living for most people and thus is not really worth celebrating. fixing debt is the only way to get prosperity back. prosperity is the goal, not dead end jobs that no one wants in the first place.
Absolutely. And if you support people in surviving and give them the basic tools to be healthy, then they will be as productive as they can be – whether that’s having a bunch of children or starting a bunch of companies, developing products, being a good supportive mentor or counselor or friend to hundreads of people. And as you said regarding status – there’s enough pressure to be attractive and interesting enough to hold good friends/people to learn from or grow with, and to find someone who’s compatible with you for life-long partnerships.
I like the Dynamic Analysis.
I agree with you on peak employment. The other “peak” theories, such as peak oil, are all based on fixed and finite factors – a finite amount of oil in the ground, a finite number of oilfields, and a fixed capacity for extraction. Humans and employment do not have these same limitations.
why would having low/no debt mean standard of living goes up? Couldn’t the same jobs flee because of COL being high even if the US carried little debt?
cost of living would fall because so much money goes to service debt. if you remove the debt everyone has to pay, you reduce the amount of money they need to earn, and thus reduce the cost of living. i’m talking about all debt — public government debt as well as household debt, i.e. mortgages, credit cards, student loans, etc
I hear this approach but it makes no sense to me. You are rewarding inefficient spenders/ debtors and penalizing savers/creditors. Think dynamically, who would ever lend in such an economy and who wouldn’t borrow.
the problem has been fraudulently created. these loans are not backed by savings, banks are loaning money into existence. that is why the debt should be cancelled and reform should be implemented to prevent the practice of loaning money into existence.
Ok, even if there is nonetheless loss to the creditor (which if youve ever looked at the balance sheet of a bank just doesnt fly) but what about the borrower? The system breaks down as soon as you reward behavior that does not allow the lubricating fluids of the free market to circulate (borrowing 800k to buy a home with a salary of 50k).
right, but there is only the money to make that type of loan at a low interest rate when the money is loaned into existence. it is counterfeit money, basically. i am not saying the borrower is without blame, but only that the best solution in a world of imperfections involves debt cancellation. the borrower can never repay the loan anyway, and the lender shouldn’t have made it in the first place since the borrower was clearly unworthy of it. the borrower only has the incentive to make such a loan when they did not have to work for the money they are loaning but are rather creating it and loaning it at interest.
Lets talk specifics: when Teva borrows 26 million dollars to buy the rights to a drug from a startup. Can you see how this concept of arbitrarily forgiving the debt is an intellectual nonstarter. What If the lender was the teachers union? Nothing wrong with floating ideas, but just understand until each is vetted, its a fiction.
technological disruption is the problem, debt is the false solution
On the contrary — disruption is necessary for forward progress and solving both the debt problem and the jobs problem. If we don’t change the game, and keep changing it, then the peak employment theory will become self-fulfilling.btw, I believe that Albert and Fred are wrong about the idea of peak employment — we’ve had this same Luddite argument going on 200 years, and we have more people today globally who are productively employed with higher standards of living than at any time in history. The US has lost some jobs due to global adjustments, but those losses represent a tiny fraction of the gains in China, India, Indonesia and Africa. When we speak of job losses, we speak of a local effect due to wage arbitrage, as Fred has described it, but there are hundreds of millions of former peasants in other countries who now have decent and growing middle class incomes. (And, I’m happy that they are learning the joys of capitalism and earning a better life rather than looking to the US and enviously begging for handouts.) And, a correction is coming.Is there a single one of us who doesn’t desire to do something we can’t do today? As long as humans need and want things, there will be new jobs being imagined, created and filled. Does that mean 40 hour work weeks needed to earn a living wage? Probably not. But hopefully it implies that we can create more enriching arts, experiences, family lives, and interesting things to do.I’d happily spend a larger fraction of my time doing things for myself, and to help others, for which I’m not formally compensated, but for which I’m all the richer. That should be at least one outcome of higher automation levels.
Agreed. Peak employment is a ruse. What matters at this point of the game is the ratio of private debt to GDP.
It’s possible.Look at Nissan and Toyota, they build plants here in the US before this even occurred. They worked closely with the States who bid hard to get the jobs.It will both US and probably foreign companies like Lenovo that lead the way. Lenovo is building a PC plant in the US.http://online.wsj.com/artic…
Fred, first of all, I love that you and Albert, as people, are interested in these questions — which I see as closing the loop between enabling innovation in your everyday jobs (and creating jobs hopefully) and also from a macro level in seeing what is happening to labor markets generally in the economy.One of the forces in our favor vis a vis China is demography.China rode the demography wave on the way up, drawing its large workforce from the country into urban factories, providing historical capacity to make shoes, toys, iPads, and what have you for the world. Because its one-child policy is catching up to it, its rapidly aging population is not being replaced by enough younger workers, either to support the costs of caring for the old or to replace the former pools of cheap labor. From now to 2050, the share of the Chinese population that is of working age will fall drastically, while the number of elderly dependents is rising, creating a potentially economically destructive imbalance.This will have profound internal societal, as well as global economic effects. In terms of the latter, the Chinese workforce that builds and assembles for the rest of the world will not be as flexible, whether in terms of price, skill, or availability, as it is today.
The Economist last year wrote about the effect of this demographic change on China’s role as the world factory, and how America’s historical, at least strengths in welcoming immigration would help it cope and benefit:”The shift spells the end of China as the world’s factory. The apparently endless stream of cheap labour is starting to run dry. Despite pools of underemployed country-dwellers, China already faces shortages of manual workers. As the workforce starts to shrink after 2013, these problems will worsen. Sarah Harper of the Oxford Institute of Population Ageing points out that China has mapped out the age structure of its jobs, and knows for each occupation when the skills shortage will hit. It is likely to try to offset the impact by looking for workers abroad. Manpower, a business-recruitment firm, says that by 2030 China will be importing workers from outside, rather than exporting them.Large-scale immigration poses problems of its own. America is one of the rare examples of a country that has managed to use mass immigration to build a skilled labour force. But America is an open, multi-ethnic society with a long history of immigration and strong legal and political institutions. China has none of these features.”
politically, china will take a hit. They’ve never been good at integrating non Han (see: Tibet). They could go the way of Japan, which still has integration problems, but at least had the wealth to keep up.
.There a number of different Chinas.There is the China of Hong Kong and Macau.There is the China within 100 miles of the coast which still remembers a stock exchange in Shanghai.There is the China of the million person populations — all of which are growing. There are almost 200 such cities.There is the China of the hinterlands which are not even reachable by roads.China will continue to have at least one “China” which supplies cheap labor as its only unique selling proposition.More importantly, China is still led by men in their 90s — who have a first hand connection to Mao, WWII and the Korean War — and will continue to be lead by old men until they slowly but surely die off.I listened to Jon Hunstman — Mandarin speaker and former US Ambassador to China — describe the layers of entrenched leadership in China. It will take 50 years to get to where 50 year olds will have a shot at the leadership..
You might be interested in reading Ruchir Sharma’s Breakout nations book http://www.amazon.com/Break…. He has a differing viewpoint that the mainstream media on where China and India are heading. Part of his thesis is that the last 10 years (prior to 2008) have been an exceptional time for these countries (and the global economy) and the data don’t support a continuation of this trend.
.I will definitely get that book. Thanks, Abdallah..
the demographics problem is global. humorously, people all around the world really need to start f****** like rabbits. this is related to the economic iissues (gotta be able to afford all these expensive kids) which goes back to my favorite issue to ruin every conversation with: debt, and the need for debt cancellation and debt reform.technologically, robots and stem cells are going to be huge players. stem cells should extend human life and the ability for women to reproduce safely at an older age. how long we are going to keep reproduction dependent on sexual intercourse is also an issue.i believe there is hope that technology will help us solve the demographics problems within 30 years. stem cell and robotics are the enabling technologies here. but we’ll see.
haha. Kid – do you have a go-to piece that you have written (or would recommend written by someone else) on your views on debt?
Problem is it’s not the safest world to bring a bunch of kids into. It takes a community to raise a child, however most of our communities are currently broken and disconnected. The infrastructure and human resource support just isn’t there. This along with a fair amount of waste and inefficiencies and inflexibilities causes problems.
I rather like the world I am in, I think it is safer for me that it was for my parents at the same age.
speak for yourself. I have five siblings and am raising my own large family in a community which is safe, with abundant infrastructure and resources. So please spare me the gloomy over-generalizations on this being a safe world to bring kids in to.
Right, so I think you’re likely projecting your own bias here of having access to abundant infrastructure and resources. And you don’t state what your socio-economic status is, or that of the neighbourhood you live in, what local groups or organizations you’re apart of, what your family background or culture is, etc.. all of which, and more, affect how safe a community feels. Also, having five siblings is probably a lot safer feeling than being a sole child or having just one other.. etc.. And you also seem to have a strong head on your shoulders – not everyone naturally has that, and so some people a bit more support than others, initially and perhaps long-term.
so you want to take my job here, eh, while I go get knocked up? 😛 (this is totally a joke)It isn’t going to happen. I mean I love kids, but reality is that having lots of kids isn’t economically helpful to me at all. Kids are super expensive, and I don’t see the productivity gains/monetary gains to myself (though I see them for mass society). The problem is that my personal sacrifice will come at a very high cost to me even if it is good for society overall
Ok, we definitely have to do the debt thing, but rabbits? There are too many of us already. Maybe we need a WW3, or global epidemic to ween out the weak ones before embarking on your suggestion.Either that, or we need to make Mars livable in a hurry. Hey, jobs problem solved!
there are not too many people at all. if anything there aren’t enough. there is only a distribution problem, not a capacity problem.
Local in China, it’s believed that population numbers are actually 50% higher than published. Probably should take this into account for analysis.You have to understand too that in China the family unit is much stronger, and grandparents still live with parents, still live with children, still live with grandchildren. Sure, there are professional couples – though it’s still cheaper to live with others.
Jobs are already coming back because of both rising wages and stricter environmental protections overseas AND lower energy costs here in the US. All other things being closer to equal, there is an advantage to having your design and manufacturing collocated and having both near your largest market. Dishwashers are being made in the US now for the first time in years at Appliance City which GE had all but abandoned.Automation has lowered the labor component of manufacturing costs and raised the energy component. So it is a good decision for manufacturers to pay well-trained workers enough to recruit them in order to keep quality up and other costs down.It is no longer a race to the bottom as far as wages are concerned.Government needs to invest in infrastructure like roads and bridges – and deliver on quality education (more accountability and no necessarily more money is the answer here in IMHO). There is also plenty of private money available for investment. Government can liberate this by reforming the regulatory process so that it is effective and swift rather than ineffectual and subject to capture by the opponents of growth – including intrenched companies who don’t want competitors. A straightened out tax code which allows decision making based on economics rather than chasing loopholes would also help.We really have a very bright future – if we can cease it.
I agree completely tom
.Energy cost is a huge consideration.Can you imagine if we had a rational energy policy in place?.
Strongly agree with the reversal of outsourcing. Regardless of peak employment dynamics, the wage arbitrage from outsourcing, especially in the context of startups, has largely reversed. And, just focusing on wage arbitrage is short sided – anyone who has done a lot of outsourcing of high end engineering roles understands the challenge of managing a remote part of the development team, IP control, and resource turnover.I rarely support any outsourcing in startups anymore. I’ve always been negative on it, but there are cases where it has worked really well. But these aren’t really outsourcing – these are “owning a remote foreign development group in Minsk or Bangalore or Brazil.”As long as we focus on the right kind of eduction and training in the US, we’ll have a massive medium term (next 20 years) advantage. It’s one of the reasons I’m so optimistic about the US long term, especially in the context of startups and innovation.
Lots of bulls on the US in this thread today!
Better to be an optimist than a pessimist. I’m wired to be an optimist. I heard a great phrase from Tom Friedman recently – “paranoid optimist.” That what I’ve always been.
That’s excellent. I read this quote in an interview in the NYTimes right before the New Year about becoming a “Zen Master of Optimism”:”I’ve translated it into a rule that I try to get people to follow, and I’m still working on this. When someone gives you an idea, try to wait just 24 seconds before criticizing it. If you can do that, wait 24 minutes. Then if you become a Zen master of optimism, you could wait a day, and spend that time thinking about why something actually might work.”
I like that approach a lot. I also think there is a huge difference between criticizing an idea and challenging an idea to make it better. I always try to challenge, not criticize.
love that distinction.So easy to figure out when you talk with someone about ideas who is interested in one and who is interested in the other!
Me too. That’s another thing that can get ya’ unnecessary black eyes. 🙂
I am a conservative optimist. I hope and expect the best but prepare for the worst
My father raised all of us with this motto. What I find interesting (in a good way) is how both of you ended up with a similar belief because I am guessing both of you couldn’t have had a more different experience. That’s what so fascinating about this place and continues to bring me back for the past two years.
I prefer being bullish on the US. never got the negativity about the US, ever.
It’s the start of a new year!
Damn Straight. We can do it. And we will do it. For the country, and the free world.
Well… I always try to be positive when possible. But, it’s gonna’ take getting some real destroyers out of the way first! That’s a big task..I’ve tried talking to people about becoming makers and many in this country know how difficult it is to get funding to do things. I know that we get many examples of “some” getting funded after they’ve build a business. But, so many more don’t have savings to live on to build something. That’s why I’ve been preaching “business” instead of “software project”. If people could get funding to “start”, I mean start not save the product, then we could create many jobs and all that money would go right into the US economy!
I agree with you. Once i am done stabilizing the advanced mfg start up i helped found, we intend to use that network to grow local innovation hubs for the co creation of things and businesses.I mentioned this in an earlier post and you just hit on it:Primary system level isssue is common innovator access to tools and capital for more than just 0 & 1 opportunities.Im not a socialist, but a New Industrialist. I believe we can build, make, and hack our way toward a better future. By doing, not by talking.
+10 million upvotes
See, I just knew these fed policies wouldn’t help employment and posed a huge risk of upvoting hyperinflation…
It’s in your hands Aaron. If you want jobs in the US you have to buy US. I’m not saying you should. I’m not saying you have to. What I’m saying is that’s the way to rebuild America.
I agree that the right kind of education and training forward is the way of the future. One can’t try to reclaim the past, but recapturing the future is the better path.
I’ve been screaming free internet based education for a few years now. I have the black eyes to prove it..All the unemployed could be at home *right now* “working” at gettting re-educated “for” receiving an unemployement check! But noooooooo! (<— SNL reference) we can’t do that.
The management of the remote management team is crucial to success and very difficult to maintain at a high level. There is a great advantage to having someone nearby so that you can strangle them periodically.
And a level of shared culture is also cuts back on friction.
strangling travels well
One of the biggest challenges I’ve run into is a cultural one. I’ll use outsourcing to India as an example. If this person on the leadership team responsible for managing the Bangalorian outsourcer is a white guy born in Dallas, even if he is educated at MIT, if he hasn’t spent time living in Bangalore, he’ll have no real idea how to interact, manage, or lead the people in Bangalore. However, if the person responsible grew up in Mumbai, went to ITT, and then moved to the bay area, he (or she) will be very effective. However, give THAT person a remote development group in Minsk and they’ll be totally lost.
True even when working between US and Europe.When working for a large global firm some years ago, I accidentally won points on a first business trip to the Netherlands: I asked my Dutch colleagues how to take public transportation to/from the office. (Instead of the 100 euro black car ride I had been instructed to take by colleagues back home — which, it turns out, the Dutch saw as wasteful.)My relationships with my Dutch colleagues instantly changed for the better. I think about this every time I speak with an “unsympathetic” customer service rep who’s obviously not in the US.
So true. It’s one of the reasons I only invest in US-based companies. I did a half-dozen investments in Europe (primary HQs in UK and Germany) between 1999 and 2001 and got completely slaughtered. Much of the pain came from the cultural dynamics and the total mismatch with how I understood business to work in those countries. As a result, while I have lots of business around the world through the companies I’m an investor in, I’ve focused only on investing in US-based companies since I don’t have the energy or bandwidth to figure out the cultural dynamics in each country.
We have felt that pain in our European investments. About half of them have moved their CEO and/or all of their operations to the US. The rest have not. We are doing well with our European portfolio but the cultural differences are real and take hard work on both sides to overcome.
I think it’s the unspoken things that are even more difficult.Large companies like the one I worked for did all kinds of culture training. Nobody told me, “Don’t be an Ugly American,” probably because it was politically incorrect. Yet I watched people scuttle opportunities because they played into the stereotype in any number of ways. (And I didn’t see it myself, until I accidentally stumbled into it.)
.It all depends on the direction of the capital flows and market.For a long time I had a couple of relationships with some English investment operations and English pension funds.They were previously getting their heads handed to them and then I was able to gain their trust and show them that they were using left handed hammers.I got paid to, in essence, be their translator..
As I live a maxed out life, I had to make a decision. I’m constantly making tradeoffs about things I can’t do because I can’t invest the time in them. An example is programming. I love to write software and did it a lot between 1983 and 1991. By 1991 I was having trouble doing it in any sustainable way because of all of my other responsibilities. I’ve always dabbled in stuff, learning a new programming language every few years (PHP, Ruby/Rails, Python), but I’ve never had enough time to focus on doing anything in a production sense, and as a result don’t actually do anything beyond dabbling.A few years ago I realized my writing had replaced my desire to program. Since the English language wasn’t changing on me regularly, my “programming language”, environment, and context was relatively static. That let me work on the expression of my ideas – namely the actual writing, without having to stay current on the rapidly evolving tools and technologies.This has become an extremely central part of my work and my life. And it’s incredibly satisfying to me. It’s once again a reminder of the value of continually re-prioritizing, saying no to things that you just can’t get enough time against to be any good at them, and then going deep on the stuff you love as you try to master it.
.There is a rhythm and cycle to our lives which flows in some recognizable wavelength at some recognizable amplitude. Your antenna has to be tuned to hear it speaking to you.We all have 5-7 careers — maybe more — within ourselves which are blocked at times by the necessity of having to make a living and raise a family.Folks who are unconstrained by geography (they can live anywhere), money, language, regulation — can avail themselves of these myriad opportunities.Add to that the physical mobility provided by normal transportation or the ability to fly an airplane and the world is your dozen oysters on the half shell.I have at least 5 such notches on my pistol (resistant to gun regulation am I both figuratively and literally) and think I still have at least 3 more.And the best thing is that you can use the prior careers as the spring board for the next ones.Couple that with the amazing networking opportunities and access to the entire world simultaneously through technology and the communication mechanism of the Internet. Wow.The channeling of your personal creativity from software to writing is a natural one and is quite interesting in that the Internet is both a user and a marketplace for the same creativity packaged in a different wrapper.Is this a great time to be alive or what?.
yes — what an amazing time to be alive for a polymath!
what do you think of David McClure’s apparent strategy to increase investments in non-US startups. I think most of his investments are still in the US but he seems willing to bet a small percentage of it towards international startups. cc @bfeld:disqus
I like it
Cultural differences are great! But, not if it’s at the cost of putting people on the unemployment line. Off-shoring to other countries causes much to be lost all around. We (people) want as much variety as we can get and that means have people in every country creating things that can be sold in any other country. That’s a great world!
Re: ” not if it’s at the cost of putting people on the unemployment line” – huh? That’s a political statement, not an economic statement. I don’t understand why it has any relevance at all in this discussion, especially given Fred’s framing of the overall dynamic.
I’m saying let’s not *use* cultural differences to harm. If you can save a buck because some country is willing to enslaved children let’s not take advantage of that. But, let’s also not villianize cultural differences becuase they cause communication or other business harming issues.
We are back to the political statement – “willing to enslaved children”. The software engineering team I work with on Minsk isn’t a group of enslaved children.
It’s also easy to hide when you’re half way around the world.
I know a guy who got so fed up with working off hours to communicate with the dev team he resigned. What a horrible thing to destroy a person’s home life just to save a buck on labor when it becomes more expensive in the long run anyway.
This is exactly right. And yet it is still not well understood thirty years into outsourcing revolution
Actually not Fred. The people in software development understand these things. But, the people in control don’t care how many Americans are out of work or worse. We (developers) know other developers around the world and we know what we all go through with these issues. We know the proper course is local outsourcing or having an in-house development team. We also know how to leverage lower labor costs. We’re know but noone listens.
I have looked at the multicultural makeup of the US and Canada as an advantage for startups but not so much as for outsourcing but rather for building presence in international and sometimes inaccessible markets. For example, a startup in Toronto that has a product or a service that has a market in another region (eg. Arab-speaking world) will benefit from connecting with local Canadian-Arab individuals. The challenge is to make these connections and then the extended networks in both regions can work together to promote the product or the service. This type of notion seems to be more accepted and practiced with startups in export-oriented small countries as Finland but much more difficult to breakthrough to Canadian and US startups. Part of the reason being that the US market was for most of the past century the most lucrative market to enter but this is starting to change with the re-arrangement of economic global wealth.
“…However, give THAT person a remote development group in Minsk and they’ll be totally lost…”.Yes! Now you get it. That’s why off-shoring is a big no-no. Especially in a software startup. It sounds great at first because of the low labor costs. But, there are many many reasons not to it and the low cost doesn’t offset all the problems. Time zone differences. Laws in other countries that don’t always support IP like America. Language and cultural barriers. I’ve known of projects that failed because developers couldn’t understand how US accouting worked.
Except for I’ve had positive offshoring experiences when the leader of the offshore team is culturally aligned. So saying it’s a “big no-no” isn’t something I agree with. Saying you need to be very aware of the differences and manage accordingly is definitely true.
“So saying it’s a “big no-no” isn’t something I agree with.”.I don’t see why. With the cost decrease in the US that Fred is explaining the only reason to off-shore would be if you can get higher quality. Or if you *can’t* get something done here in the US. What other reason would a company have to put obsticales (timezone, legal, and cultural differences) in front of theirself on purpose?
I would assert strongly that there are still plenty of cases where you can get lower cost. And – there are definitely plenty of higher quality and unique skill set situations. So dismissing offshoring out of hand isn’t logical.
My partner and I founded and run and Advanced Manufacturing Start-up. We formed it in 2011. We make medical devices and aerospace components, the type of stuff that is too sensitive from an IP standpoint or too tough from a tolerance standpoint to make overseas.We are closer to the system level issues with repatriating manufacturing jobs than 99% of the people writing articles in NYT, WSJ, the Atlantic Journal, CNBC, etc. The articles are well meaning and come out about every other week.The problem in America is that people are doing a lot of talking about restoring manufacturing, but very little doing.We live the issues every day. Manufacturing has a policy problem, a branding problem, a funding problem, and an aging workforce/talent gap that is preventing us from tooling America back up.U.S. Manufacturing could use some Hacker mentality, and some high technology style, and some venture funding, along with obvious policy rationalization pointed out by so many on this blog.The problem with not trying to do something to help in-source is that we are hurtling toward an America not worth having. A low innovation eco-system with the core manufacturing technologies and craft expertise in the hands of other countries. Historically in America, Manufacturing is the driver for over 72% of U.S. patent submissions and a disproportionate share of GDP.In one very brief example of how hard it is to get anyone excited about U.S. manufacturing: In the first 9 months of operations we grew revenue to over 100K a month, put 30 people to work and built or co-designed over 150 prototype components for everything from medical robots to implantable medical devices and surgical tools. We generated 10 recurring OEM customers and thought that a follow on investment to go behind our angel round would be in the bag. We approached over 189 various Private Equity, Venture Capital, Angel groups, etc with investment banking quality presentation materials and written plans for our Advanced Manufacturing Network.But no one was interested. And the reason they were not is because they can make more money, with less risk by investing that same capital in everything but the space that stands the highest best chance of restoring a balanced society where anyone with some drive and determination can contribute and make things, and doesn’t need $100k in student debt to be considered relevant.And the funniest thing about it all is that Multi-Axis machining and Additive Manufacturing is ground zero of where Bits meet Atoms. And it is so high technology, and sexy and cool that I cant even describe it. And so few heavy hitters in the Tech world except maybe Elon Musk seems to get that.
ooof. So we’re still not culturally there. it is funny how pattern recognition can make you blind to the pattern in front of you.
Sam – I’m having a different experience than you are.I agree that there are major policy, branding, funding, and talent problems around manufacturing. Entire cities – like Detroit – have been totally destroyed and part of the problem is policy / branding (e.g. “Detroit is a union town” – no entrepreneurial company is going to set up manufacturing there until that policy / branding recedes.)However, I don’t think Elon is the only guy who has vision around this. I know lots of VCs investing in hardware / manufacturing related stuff. True Ventures and OATV just funded Chris Anderson’s new Drone company. I’ve listed plenty of the ones I’ve funded (MakerBot, Orbotix, Fitbit, Sifteo, ModRobotics). And I could easily give you 20 other examples.The maker movement is democratizing manufacturing at an incredible rate, and a new generation of young adults are engaging in the actual manufacturing process.This is a long-term dynamic. The fact that approached 189 investors just means either (a) they don’t have the vision for what you are doing or (b) you aren’t communicating it effectively.I’d be happy to look at your investment quality presentation and give you feedback on your advanced manufacturing network. Just email me – [email protected]
🙂 I agree, they don’t have the vision…hmm what did Blake masters jot down about Peter T’s core 0 to 1 question: “What important business are you building that nobody gets?” I will send the stuff and of course apologize for over-generalizing irt Mr. Musk.
Shoot, one other observation. The Maker Movement revolves around one systemic issue that has plagued both the first and second industrial revolution….and now we are at the dawn of the third industrial revolution and I am not convinced the system level issue is trending toward being fixed.The central question is not one about distributed innovation, but rather distributed access…..who gets to have direct access to the tools of Industrial Production? It is how the industrialists, using access to capital, disintermediated the masses to begin with.We will be heading in the right direction when Mark Hatch of Tech Shop has the type of machine tools that i have in our Advanced Manufacturing Plant. So that anyone or any team of people with an idea for a sophisticated object can innovate, iterate, and enter full rate production not just with chess pieces and widgets, but with super strength alloys like Inconel, and titanium powdered 3D printing.That is when we will be trending toward solving the industrial access issue.
The mere fact that TechShop exists is an important indicator that we are moving in that directly.Remember the 1980 dot-matrix printer vs. industrial laser printer that cost $100k and lived in a special building? Fast forward to 1995.We are on the same trajectory – probably in 1984 or so.
Agree totally. We are on right path. Risk capital, time, and mentorship from tech innovators not expecting american mfg entreprenuers to meet a 10x FV hurdle to recieve the love will help quicken the pace., put americans to work, and rebuild a society worth having.
Amen. US has the opportunity to lead the next industrial revolution by innovating in this space.
We are in the Apple I one days of this industry. It is now the realm of hobbyists and tinkerers. Watch out when everyone can make things at their homes. This takes innovation not just in printers but also the creation tools. But it is happening..watch this space.
Extending the the Apple I days analogy – Techshop etc are like homebrew clubs of this industry.
Yup – totally agree.
Thank you Sam! I’m glad to see people who are vested in the US. Out there doing it! We need to pull together and stop the destruction of America!..It’s not about wanting others to fail. It’s about wanting everyone to succeed.
What is do you mean by “IP Control” and what’ the challenge?
IP Control – I’ve had a number of outsourced relationships where even though the company I was the investor in contractually owned the IP (specifically, source code), some of it travelled with members of the outsourcing team. I’ve only had one really awful experience, but plenty of minor / annoying ones. And the awful one was really awful.
One thing to keep in mind is that outsourcing doesn’t always equate to off-shoring. You can outsource to a company in your own building..Outsourcing, in my opinion, is the greatest advantage a startup can have! Building a coherent and effective engineering team is not something a startup should be taking on. Also, with outsourcing you don’t have to give away ownership to get something engineered. One issue is, if you don’t have the money to outsource. You can maybe get some engineers by offering stock which is usually worthless at the time. But, that opens up a whole other can of worms because engineers usually aren’t entrepreneurs. They can’t live longterm without a salary and lives can be damaged and relationships destroyed..I don’t know how a startup will afford to “own” a remote development group. If a startup is contracting work then it’s outsourcing. If the startup owns a business where the development group is at then it’s owning a development team..Those are some of the issues that have destroyed the software development industry in the US. People say outsourcing when they mean off-shoring. People don’t undestand the difficulties of developing software with a team that resides on the other side of the earth..When a startup is going to offer a software product they shouldn’t even consider building an internal development team until the product is proven. It can be a mess! The startup has no development process at all. Let alone a proven one or one that can support continuous feedback for improvement..This all falls under knowing your core business. A business needs to know if they are a software development company or something else. A comparison would be car dealerships. They sell cars but they don’t build them. What is their core business?.I know for investing and IPOing etc. a company is better off when they can say they have a team in place. That way they can sell the talent as well as their product. But, imagining that a newly founded company should try to build a software development team before they even have a product proven goes against the VC montra of gaining traction first..Look around the US is waaaay behind and we need to realize that what we’ve been doing for the past few decades doesn’t work anymore. We need to stop letting people confuse us and focus on building a great America!
I understand the distinction between outsourcing and offshoring. I also understand that many people confuse the two.However, I completely disagree with one of your statements. “Building a coherent and effective engineering team is not something a startup should be taking on.” That is completely incorrect if you are a tech (software / Internet) company. You need to build engineering competence into the company from the very beginning.
Let me explain a bit more I think we’re just off slightly but your blanket “startups shouldn’t outsource” statement makes us sounds way off..Startups should most definitely outsource whenever they need to. If three people who are software engineers do a startup software development company then they *should* have the needed software engineering expertise in-house already..But, they still should outsource accounting, legal, banking, etc. “expertise”. They are a startup they should not try to be a jack of all trades and master of none! They should master their core business and outsource the expertise needed until they have grown enough to have an in-house accounting department etc..If they are three people who don’t have any software engineering expertise and they are starting a software engineering business (because they feel it would be lucrative) then they sould *most definitely* outsource that expertise or they risk harming the customer..Outsourcing, contrary to what many think, isn’t all about saving a buck. Outsourcing is about filling in gaps in a company. It’s about putting a company in a better position. It’s about pulling together various forms of expert skills to get something done..Startups and vertern businesses alike outsource all day every day. Accounting, legal, banking, cement work, steel work, marketing, advertising, and tons more things that one business doesn’t have and shouldn’t try to become experts in because it’s not their core business!.The startup failure rate is so high because people don’t know what their core business is so they focus on too many *wrong* things. Just because a company “uses” software doesn’t mean they are a software business and doesn’t mean they should build a software development team in-house. Software, although everywhere today, isn’t what *all* businesses are about..An accouting firm uses software but they don’t need an in-house software development team. There are plenty of accounting software packages on the market that can fulfill their needs.
I agree with your broad definition of outsourcing.I was concentrating on software engineering. I don’t think any software / Internet company should outsource software engineering. If there are three non-technical founders, they need to go find a fourth technical founder. Outsourcing software / product at the early stage doesn’t work in my opinion.Re: all the other functions – startups should build muscle around them quickly. When you are four people you don’t need a finance person. You can use a part-time person or a service. But when you are 10, you should add a finance person full time to the team, especially if you believe you are going to scale the business.Customer care is another common outsourcing miss. I’ve been involved in lots of companies who outsourced this early. That’s stupid – customer care / customer service / whatever you want to call it is a critical feedback loop between product and customer. You have to have this person full time in the business.This is a totally different line of reasoning / argument than the one about offshoring. Your early comment that they are different is correct. But we diverged quickly in agreement from there.
“I was concentrating on software engineering.”.OK, well an uneeded but great discussion happened. That’s a good thing..”Internet company”.Wow! That’s a big brush. This could spark a week long discussion. But, I think, startups should be a bit more specific when deciding what their core business is..”Re: all the other functions”.Now you get it. Thx, I feel much better now..Since I firmly believe everyone in a company is in sales and customer care is so close to sales. I think you are wholely correct on that one.
Depends on what jobs we’re talking about.Manufacturing was gutted by policies that enabled large multi-national corporations with loyalty to profit over people and not the country that enabled their wealth; by failure to enforce trade laws when violated by China (currency manipulation, deep subsidies, etc), and our acceptance that the profitability is more important than a strong local/national economy.And the the “insourcing” happened in the IT industry, where Tata, D&T, Infosys and others abused the VISA system and used the L-1 VISA to import programmers at homeland wages, putting them up 15 to a house with sleeping bags and computers, undercutting US-based IT services firms and putting tens of thousands of US tech workers out of work.The L-1 (back in 2003 anyway) enables companies to “hire” workers in India, Indonesia, etc, transfer them to work on site if they have “specialized knowledge (Visual Basic was not specialized knowledge by any stretch), yet pay them the going rate in the home country, so $10/hr or so, while at the same time pay no employment taxes on them, etc. Insult to injury.So no, the local firms got their asses handed to them by these practices, and created a class of under-employed tech workers. Central PA’s tech economy was gutted by this.Result?-abused imported workers (terrible living conditions, fast-food wages)-gutted tech services economy-underemployed techies-lower local tax revenues-and insulting arguments that local companies weren’t competitive. They were shafted.Moving on–it’s time to raise the minimum wage to a regionally adjusted LIVING wage, keep a lower wage for teens, enforce trade laws, slap a tariff on China and companies that leverage its abuses (and yes, start the damn trade war. It’s about time), and remove whatever the obstacles are on US companies holding capital off shore–in fact, tax them for it anyway. Carry a big stick and use it.
As we’ve discussed I totally support having to pay more for things due to a living wage. That is a tax I can support. My thought has always been to set a high tax and allow companies to credit (not deduct) all of the taxes that their workers pay in the U.S, if you pay so low they get a earned income tax credit, you pay that, offshore workers zero.On the other side, I do not like having my wealth redistributed to those that do not want to work. That is the unpopular elephant in the room that nobody wants to discuss. We need to acknowledge and separate the two classes of disadvantaged: those that want to work and better themselves and those that don’t. By not acknowledging the latter class you make a huge resistance from people like me who do not want to support both.
We’re in agreement. I don’t know how to handle the latter. Most of our students are growing up in or close to poverty, and I wonder how to handle that in the case there’s unwillingness to work.I’d rather see something like Harkin’s workfare for the able-bodied–keeping streets and parks clean, gardens growing–something that contributes instead of welfare.Food stamps/food card is another issue that bugs me. I helped design/develop one of NYC’s food stamp eligibility screening software about 10 years ago, and it helped increase enrollment from 50% of those eligible to about 80%. That’s a good thing–federal dollars spent locally, more kids get better nutrition, helps fill in the living wage gap in NYC.BUTThe corporate “food” industry has control over the standards. To me it should only be used on staples (eggs, mile, OJ), fruit and veggies, vegetables, and raw or cooked meat–maybe deli. No soft drinks, ice cream, snack foods, crap food, etc.It’s an important program (hunger is a terrible thing) but has been corrupted by the food giants.
“food stamp cards” I put that in quotes because now they make them look just like a debit card bother me hugely. I think there should just be a place where you can get staples. Obesity is a bigger problem among the poor versus starvation.Do you know how much it bothers a waterman here on the Chesapeake when he sees he is waking up before dawn, busting his butt to catch crabs, paying a ridiculous price for fuel, is hounded by the extra government employees and taxes imposed on him, to see that the place he sells his crabs to has a huge sign accepting EBT?? He can’t get that person to come out and help him do the hard work but they are willing to pay a big premium to sit and eat his catch. (and I use he here because us men are the only ones dumb enough to love this life to do it)
+100. We are unwittingly creating reverse Randians who finally decide to shrug by accepting the same check.
I think there are other reasons going into this (overfishing).
Wrong. Record Crabs last year, record Oysters this year.
really, then maybe I should make oysters for dinner.
that system needs to be reformed. Not eliminated, but reformed.
Survival, taking care of Maslow’s Hierarchy of Needs is important.Do you define a line between not willing to work vs. not willing to work but capable? There is the issue that can arise of people becoming counter-productive to society, whereby spending some money on this section of the population would at least bring things back to par – but without the added negative effects of the counter-productivity affecting society.Part of this issue that isn’t simple is the question of why is a person not in the state of wanting to better themselves? It’s usually from the environment, their past, their role models that structured how the world should work – or is. Is it not a good idea to support systems that allows them to see a different reality, under a different / new light, whereby seeing and feeling reward of trying to improve yourself? It’s almost like they’re in a depressed state – which I imagine many are who aren’t motivated to improve; I find the first step in helping people start to improve themselves is initiating a regular practice of increasing self-awareness, which is involved with self-reflection, etc..Would you support these systems? Or do you think tough shit and they need to find their own way if they are raised in an unsupported environment whereby they’re not motivated to live, to try, to expand, to create?
This is the attitude that makes me want to help nobody. You must realize and acknowledge that there are people that want to go on SS disability and take pain killers and watch TV all day. Why? Because they can. I don’t care why and I don’t care to have my tax dollars fix, I just don’t want to pay. Its not a race issue, its not a upbringing issue (although it might be because we encourage people that are on assistance to have kids), I just want it acknowledged and stopped.
I guess I see it differently that you can incentivize these people to do more.Perhaps what is needed though is creating the support systems, and just waiting for those who truly have given up on life to die off – but you can’t ignore what happens if you just stop supporting them though:a) It might be a bit cruel unless perhaps you’re somehow using it to incentivize them / directing them towards improving themselves / their situation,b) They will likely move towards crime which is counter-productive to society, including the increased cost of prisons, worsened helpful productivity for all, etc..
people keep forgetting that you can’t convince people to do something by being cruel. Being nice often works better.
Agreed. Similar thinking fits with forceful and dismissive attitudes. They forget that that causes a person’s guard to go up, which is actually a feeling of not feeling safe – and then triggers a ‘child-like rebellion’ that we all have inside of us — which is a sign something is wrong; When your guard is up your body and mind don’t integrate change, you’re not open to it. You have to eliminate people’s fears, fear of survival, so they can start being trusting, feel safe, and even then want to be productive and help others, be involved with others.It takes patience, patience comes with understanding. Being nice and patience equates to compassion / being compassionate. Sure, the current systems in place have allowed people to “mooch” – though we’ve mostly not really fully helped those people that get out of that position; You can’t go half-way and expect a person to be changed, and then get angry that they didn’t change.
I know. In order to pull yourself up by your bootstraps, you better know how to use bootstraps and have them first. and that requires an investment
Here’s to being nice 🙂
.I want to agree with you but the reunification of Germany tells a completely difference tale.When the West Germans reclaimed factories and other engines of commerce unlawfully seized from them at the end of WWII, they could NOT get the workers who had been raised under Communism to work effectively even when led by West German management and supervision.Once a generation had been passed through — new workers who had never worked under Communism, they were able to get productivity rates to match their West German brethren.Hard but very real lesson..
I don’t know enough of that situation and what other societal support structures were likely missing during that time. And comparing communism then to what a supported system now could be wouldn’t be honest/fair comparison IMHO.Also, not sure that productivity, likely in the GDP sense that you’re using, is the best metric to be using — as in negative activity can be occurring and be a positive to GDP, whereas something like GPI (Genuine Progress Index) is a much better metric, if you care about the health and sustainability of a society anyway.
“its not a upbringing issue”I believe it’s primarily an upbringing issue. A brainwashing issue.I’ve experienced this with women that I’ve dated whose parents were union members (teachers) who have masters and how they look at the world. I’ve experienced it by a wide range of interactions with all sorts of people and getting into how they think.I never forget once visiting a business which was owned by two former union members who had decided to start their own thing. (I’ve told this story before on AVC.)I arrived while they were still eating lunch. They sat on the floor in the “factory” with their lunch pails and continued to eat while I stood there right in front of them. When the clock struck 1pm (maybe 10 minutes later) they both got up (these are the owners) and they then were ready to start the meeting.If you don’t pick this up at home from your parents, your neighbors, your friends, you pick it up when you are young and impressionable from your co-workers. It gets brainwashed into you.How are you going to reverse all that brainwashing that says the man is responsible for you and your needs?
By not paying a dime for it.
But you’re willing to pay for prisons then? And the other side effects of violence? The instability that comes from it, the disruption to life, etc?. Honest question.
Don’t know you, but I invite you to stay with me for a week.
Well thank you – though what’s that have to do with having to pay for prisons, and dealing with the negative effects and costs when not taking care of people?
We disagree strongly on cause and effect. I think that providing people that don’t want to work the ability to achieve that goal through the abuse of: unemployment, welfare, food stamps, social security disability benefits. Is the root cause of the very problems you talk about.And instead of helicoptering in and only seeing staged events that many of my liberal friends do, I actually don’t live in the sanitized suburbs or hipster areas of cities.
It’s a case of providing and incentivizing good role modelling and then inherent passive peer pressure.
Yes. What is so hard for people to understand that paying people not to work means that there will be fewer who work?
But, nothing is perfect. No system is perfect. This issue you describe is not the majority of people on assistance. So why turn your back on the rest?
What do you base that on? Please tell me what fact you base that on.I know that you think I am one that clings to my guns and religion.But today I got up at four because it was the start of winter deer season.I went hunting with god fearing men that rather than go on assistance, the way they put meat on the table is hunt.Yes the butcher “owed me a favor” so they did not have to split the meat in the usual 50-50 fashion. The favor was I gave him a couple of stone last night.Have you spent six figures for veterans that have pain issues??? I have.CCCVS: Compassionate Care Clinic for Veterans and Serviceman that is my wife and funded by me.Do you know what she turns away????? No you don’t.
I didn’t think you were one who clung to your guns and religion, until you just put it here. I actually didn’t have any particular impression about you (except positive because I think you said something nice about a recent comment of mine).I was just responding to your statement that one of the comments made you “want to help nobody.” I mean, all I have to go on here is what you write. You don’t know anything about me either. Maybe I’m on welfare ;-)I think your work with CCCVS is wonderful. We’ve screwed our veterans in this country. It’s appalling. If I HAD six figures to spend on anything, that’s definitely something I would consider strongly (though starving children are always a high priority to me). When I did have some extra green, I sent some to help treat children maimed by U.S. bombings in Iraq.Per your request: Washington Post, November 5 – “Nearly 47 million Americans rely on federal food assistance benefits, a 12-year high attributed to the weak U.S. economy and high rates of unemployment over the last five years. Lesser known is that college students are among the increasing numbers of people relying on food stamps. As tuition rates have risen and financial aid has fallen — and parents who were once a source of financial support have lost jobs or homes and become ineligible for college loans for their children — students have had to fend for themselves.”College students aside, are you going to tell me that 47 million people are just too lazy to work? That would indicate a seriously cynical view of your fellow human, in my opinion.Now, since you brought God into it, I just can’t resist asking this: is “I don’t want to pay for it” a quote from Jesus that I can’t find in the Bible?
What is sad as you say is when you bring up that some, certainly not all take advantage of the system, you say: “it’s a really sad commentary that so many people seem to see all unemployed people as lazy and as choosing their situation”When that couldn’t be farther from the truth. Charlie and I agree on more than we disagree because we both don’t live in the sanitized suburbs or hipster cities. We live and help among in areas that those people like to helicopter into and see a staged event.
You asked me to support my claim that not all people on assistance were abusing the system. So I made a genuine effort to do so. I don’t think it was crazy of me to infer that you doubted my claim, as a result.I don’t think there’s really a truth/non-truth issue to my statement. I said, “… so many people,” not “you.” What do you believe, exactly?It’s just a bummer to see you write things like “those people” referring to suburbanites and city dwellers. Do you want to be lumped in with some generalized idea of country folk? I’d be so interested in your considered thoughts, but it’s a lot of work to see past being called “those people.” I, myself, grew up in the middle of Wyoming.I do believe that almost all of us agree on what’s really important. We just have to get past the straw men that our two political parties have put between us to see it.
“those that want to work and better themselves and those that don’t”I remember my father telling me in the 70’s how it wasn’t always good that an employee asked for and received a raise with him. He said the people who got the raise and made more money were the people to get laid off first when business was bad. The people who were attractively priced he kept around and found something for them to do.What we have is a bunch of people now who have been essentially overpaid and have developed a lifestyle based on wages that don’t exist anymore for, most importantly, what they are capable of doing. People who used a formula of “30% of your wages can go toward your housing costs” and spend money that they have no way of knowing they will always have in a wage. How do you deal with that?I will take a guess and say that the house you live in you didn’t use that formula to determine if you should buy the house or not (although the mortgage company probably did).Next, people don’t find something attractive to do that they wouldn’t normally do unless they have suffered a bit with a worse situation or are confronted with a seemingly worse alternative . Then all the sudden they are willing to do everything and anything and feel privileged no matter what that thing is and gladly embrace it. That’s why prisoners love to go out and pick up trash on the highway. It’s the contrast to sitting in prison that makes that job desirable. How do you setup that contrast if you are keeping people in their homes and giving them food?Because we support people (and in fact have to do this I guess) there is little way to setup this contrast. When my first child was born my ex wife wanted to get someone to help her around the house. I didn’t want a stranger in the house I like my privacy. It quickly became apparent though that the extra work load would fall on me if we didn’t get the “someone to help”. All the sudden my attitude changed and I quickly embraced and actually liked having the person at the house. Because they relieved a worse alternative for me.
Most people that I know who are unemployed want to work. They just want to work for living wages.
Define “living wages” please. Your comment implies it is a rate higher than what said unemployed people see willing to work for. Of course we all want to receive higher wages now don’t we? But what if ones skills/value creation to b employer are below to-be-defined “living wage”?
Then you have perverse incentives. it pays more to be unemployed than to lose unemployment. It means you eat better when unemployed. It becomes a truer when you have kids
If you can’t earn enough to pay for childcare while you’re at work, that’s a problem.The skills and value creation issue is kind of funny to me. What kinds of skills are required to be a garbage collector? Yet, don’t you think they deserve good pay, considering what they do? Teachers are paid sh*t, yet I don’t know anyone who wouldn’t say they do a very important job. Are we, as a society, saying the value they create is less than equal to a living wage??? Not every job can be ground through the meat grinder of value creation and return on investment.Let’s face it. There are businesses that could not exist if they couldn’t pay their employees sub-sufficient wages. I don’t know the answer to it. But we have to understand that issue from a societal perspective first.I think it’s a really sad commentary that so many people seem to see all unemployed people as lazy and as choosing their situation.
My point is that there are people presently unemployed, and who are willing to work, but are not able to because their skills are not worth the prevailing minimum wage. Teens, for example. Particularly minority teens — always hit hardest by the minimum wage. How do you define “sub-sufficient” wages in the face of someone who says, yes, I am WILLING to work for less than the minimum wage. Do you know better than they?
I think I misunderstood your comment, then. I’m not really picking up what you’re putting down now, either, to be honest :)Don’t most minimum wage jobs come with training (fast food, Starbucks, retail)? I didn’t need any skills for my first teen job. Or, are you referring to the basic skills it takes to just hold a job (like, showing up on time, personal hygiene, courtesy, etc.)?
Kyle–you published your phone number on an earlier post (guessing it was inadvertent).
eh, whoops! definitely inadvertent. no calls yet, though. thanks 🙂
got it (different AVC post entirely!)
that’s what I meant… it’s also showing up in google results, which is apparently indexing Engagio too. search on your name and number…
good thing I am not famous, haha.
not yet 😉
I hope not for fame but rather a well-spent life, for which the memory of is eternal (channeling Cicero).:-)
I know people that aren’t going to look for a job until their unemployment runs out. I know people that just want to get on Social Security Disability. Several show up to my wife’s clinic every day. I know employers (one owns a water tower construction company) that can’t get workers at over $15hr because the work is “too hard”From the National Bureau of Economic Research: “The most important factor (in the drastic increase of SSDI) is the liberalization of the DI screening process that occurred due to a 1984 law. This law directed the Social Security Administration to place more weight on ap-plicants’ reported pain and discomfort” http://www.nber.org/bah/fal…
I think a general rule that you must pay your fair dues if you want to “make money from people in my country” is reasonable, and would lead to most problems of imbalances and abuse being fixed.Globalization and money re-distribution wouldn’t of happened as quickly, so perhaps it played a positive role in some instances; Perhaps the same cycle will have to, or perhaps should happen, to bring say bring the continent of Africa the same resources directed towards it – or perhaps we know enough now to do it in a better and more humane way. The problem being that the monetary re-distribution didn’t keep enough resources at home, at least, didn’t force them to be directed towards things that allow a country to maintain its infrastructure and the health of the environment and its population. You can only abuse / overwork systems so long before they collapse and/or have no remaining value (or diminish their returns over long-term). China is starting to hit the same wall in regards to the pollution they create and the sickness it causes in their population. As those costs go up and the population demand health and safety, then the costs of production of doing it at home start to become equalized. I don’t think we should allow, say Africa, or other nations to be allowed to harm their population or environment in order to compete to more rapidly draw resources and human knowledge / mental energy their way; We need to direct education and knowledge though, so they can implement healthy systems that will be self-sustaining, and sustainable for each country based on their available resources – renewable or other.Final thought on raising minimal wage: Whenever something becomes subsidized by the government, for-profit businesses start to adjust their cost to take advantage. If the goal of minimum wage is to improve the quality of life of people to a base minimum, as long as they are working / working towards being productive (and perhaps just not counter-productive), then you need to define what dictates that minimum quality of life and then create or define systems / subsidizes that allow those minimums to be fully met for everyone; Putting these things in place and seeing how everything else cascades from it is the only way to do this – different isn’t necessarily bad, bad instances isn’t necessarily a problem if the holistic picture improves, where the gains in other systems are more positive than they could otherwise be. This of course will cause disruption in many big industries. Disruption online is praised, and demanded for by investors – however disruption by government is feared, because government and politicians fear businesses who have profits to protect, and profits to use to prevent re-election or other lobbying efforts. This is backwards, and terrible.”Carry a big stick and use it” is all about taking a stance for what is right and fair, and holding your ground. If you don’t mind people being abused then you’ll take one stance, vs. if you care about people – you’ll take the other stance.
.What you give voice to is old fashioned protectionist philosophy.I am a huge fan of old fashioned protectionism.Particularly when the US continues to underwrite the whole freakin’ world’s security..
For not much obvious gain.
.At huge cost in blood, treasure and opportunity.We are just about to realize that all of our efforts in Iraq and A’stan have gone for naught. We are losing those efforts.Big time.There is a great book “The Fourth Star” which deals with the careers of Abizaid, Chicarelli, Petreaus, Casey.It is ostensibly a book about how these guys ended up on the top of the heap but the back story is how totally screwed up our efforts have truly been.You cannot rebuild a country if your foundation is non-existent, corrupt, a narco state or tribal.It cannot be done and the sooner we realize that the better..
We need to look inwards and see how to palliate our own increasingly “tribal” tendencies…
.We do not know anything about tribes in this country.When we first realized that a Pakistani Pashtun who was a member of that country’s intelligence corp has no problem telling that nation’s most highly safeguarded secrets to a fellow Pashtun who just happened to be an Afghani, only then did we get an inkling of how powerful this tribal stuff really could be..
Hence my quote marks around the word…
does protectionism really work?
The US chose to be the world’s cop, but the world doesn’t want or appreciate it. “Underwriting world security” and protectionism aren’t related, except that they both make the US look bad from the outside.Protectionism does nothing but protect inefficient businesses and business models. Correct wage arbitrage and currency manipulation. Aim at the problem, not the symptom, and you won’t impose barriers that retard innovation and self-inflict unnecessarily high costs.
.Perhaps destiny chose America to be the world’s cop and while there are certainly those who do not appreciate it, find someone of the Marshall Plan era and they are quite appreciative.When the Straits of Hormuz are closed to traffic and Iran is raining rockets down on people’s heads, the world will not be calling the United Nations or the ACLU for assistance.In the context in which I use protectionism I am intending to imply “fair” trade — equal labor standards, fair currency exchange rates, fair pricing no dumping, equal environmental standards, equal safety standards.We have national interests which are driven by the realities of the dangerous world we live in and if we protect our own interests — the root of the very word “protectionism” — we will benefit whether.As opposed to retarding innovation, we will actually reward innovation because countries like China will not be able to shoplift the work and intellectual property of Americans.We need to fight to ensure fairness..
Nobody other than us, destiny included, chose the US to be the world cop. And on balance, I’d say it is not to our benefit to act that way either from an engagement perspective, or financially. We spend more than 40% of the entire amount spent globally on defense, and more than half a trillion more per year than the 2nd biggest spender (China). Looking for an easy cut from the federal budget deficit? Hard to think of one that would benefit us more.When the Straits of Hormuz are closed, the US will be the primary loser, so it stands to reason that they would want to police such things. Although, that said, it would be much more sensible and less costly to have a sensible energy policy that got away from dependency on those who are least friendly towards us.The Marshall Plan was in the US best interests as well. We’d have been headed straight for round 3 had we not helped the countries decimated by the war rebuild. Ostensibly, the excuse was to prevent the spread of communism (Russian influence), but that was truly a fear-based excuse, not the reason. Helping to rebuild and being a world cop are not the same thing, and the Plan was for a fixed term, not a perpetual position as top cop.China is strengthening IP protection as it becomes in their interest to do so (i.e. as their economy grows to be a world power, and they develop their own IP). The US was exactly the same when it was getting started, “shoplifting” from England primarily. The more dangerous and insidious shoplifting which we’ve enabled ourselves is that China has been educated in the processes while we’ve allowed our own knowledge of how to make things to dwindle.There is a huge difference between protecting your interests by ensuring currencies are valued fairly and not manipulated, having anti-dumping laws, etc, and protectionism. Protectionism is the act of erecting artificial barriers and tariffs to specifically benefit your industries — it is anti fair play, and takes away any moral high ground you’d have in trade negotiations.I don’t want to quibble about where the line is drawn — there are legitimate differences of opinion between countries about pollution standards that are acceptable, safety, labor and other things, and no country should be in the position of dictating to all others what those should be, especially a country that is 100 years ahead in developing standards that it grew into as it got wealthier. I think it’s reasonable to have a negotiated lowest common denominator of core standards that has to be met. The important thing that we’d agree is that there is a line. Just don’t use the word “protectionism” to describe it.So fairness, yes. Protectionism, no.
.”Nobody other than us, destiny included, chose the US to be the world cop.”Really? I think you could get a pretty good argument on that score.Japs at Pearl Harbor cast a fairly decisive ballot. Manifest destiny. Arsenal of Democracy. WWI, WWII, Korean War, fall of communism. Pirates. Arab Spring.America should not shrink from nor shirk its responsibilities or capabilities. Or opportunities. Being the world’s cop is not a bad thing.As to the Straits, 85% of all the oil goes to India, Japan, S Korea, China — so American interests as it relates to crude are really not the driver other than the financial disruption of markets and the impact on oil prices.We are the only Navy and Air Force that could handle that nasty little chore and I fear we may get a crack at it unless the situation with Iran improves a bit.The Marshall Plan (the brainchild of VMI graduate George Catlett Marshall, Churchill’s “Architect of Victory”) was only ended because its limited objectives were accomplished and in its prop wash came NATO which stood up the military alliance which had defeated Hitler.A generation of Englishmen hate Brussel Sprouts and were only ransomed by seed packets distributed by the Marshall Plan.American leadership whether militarily or economically has served the world well and in its wake the potential for war has been greatly reduced.Protectionism — or fairness if you prefer — is always in our own interest even when others might find it unfair to boot. I think that we are actually saying the same thing though I prefer not to candy coat the descriptors.We need fair trade and a pretty damn hard edge because the prize is access to the American markets — the biggest prize that exists.The US gov’t has failed to use this leverage adequately for some considerable time..
Yes, when it comes to fairness, we’re mostly saying the same thing, although I’d draw the line differently than you about how to be fair. But, protectionism is a well-defined term and the way you were using it will raise hackles and confuse many. (Similar to your objection to the words “gun control” which seems be a code phrase with a different meaning to the NRA than to anyone else.) Protecting Americans is the primary job of the government. “Protectionism” should be avoided at all cost. Totally agree about a hard line (and strong enforcement) on free trade, as long as the hard line is fair to all. We don’t even adequately enforce reciprocal access, let alone any of the other stuff.I can assure you that while some may like it for the short term when they need a referee, no one outside the US likes that the US plays world cop, and in most countries it contributes to a negative perception of us as bullies. Cops don’t self appoint. The mafia self appoints. Besides, whether we agree that it’s right or wrong to be world cop (we won’t), we can’t afford it. It’s time to pull back, and fix ourselves. If others want and need US help, let them pay for it.
And who are you or anyone else to tell me what my “minimum quality of life” is? What if I am happy on the life that $6 an hour get me? Will you tell me you know better?
.Of course not. YOU are the one who decides everything in a free country..
Well, in a free country, yes. In the USA, no. I can’t go out and find an employer and tell them that I am willing to work for $5 per hour and be hired without the employer breaking the law.I guess we all know that this is not truly a free country. Minimum wage being but one of many examples of where I can be denied honest work merely on basis of my willingness to work at a certain rate.Heck I can’t even buy an incandescent light bulb of certain wattage because they were regulated out of existence.
As a community and on a holistic level there are some very specific metrics that can be followed to know what minimum foundational structures would be required to support the average needs. Of course not everyone is the same. The question comes down to if you care about others or not, and if you care if their needs are met or not. You mention having five siblings in a different comment. Depending on your relationships with them – you’d probably do anything for any them, right? But they perhaps don’t need 100% of your energy (any individual one anyway) 100% of the time, right? Why can’t and shouldn’t this extend to everyone in your community? Your neighbours, etc? “Love thy neighbour” as the bible says – not that I have ever read or follow the bible. It’s really following the idea of compassion.
.I agree more with you than you agree with yourself.Well played..
we’re an odd pair
.Not really?We are what makes America great — linked in some ways and holding our own counsel in others. Willing to consider and learn from each other. Disagreeing without being disagreeable.Dirt farmers at our cores. Respect for out mutual experiences. A few bruises acquired along the way.That is what makes AVC.com — Freddy’s Place — so wonderful.The problem in America today is that everyone is reaching for the knife when they should be reaching for the soldering iron..
i need a picture of the two of you together before I can guarantee that statement
I’m just not into wars, including trade wars with our largest bondholder. Granted, if we did it, we could pay back the bonds. Yes to regionally adjusted living wages. I don’t know why that isn’t more normal. I don’t know why we avoid it.
Ironic, isn’t it? Call it a trade conflict or developing backbone, but if we don’t do something the middle class decline will continue and China will own both the means of production and our debt (i.e., our political class)
Just be careful to do the right thing for the right reasons. Protectionism is like shooting yourself because you let a burglar walk in your wide open door and rob you. And, not only was the door wide open, you posted a billboard in your front yard that said “Please rob us. We’ll pay you to do it.”Access to our markets isn’t what’s broken, although ensuring reciprocal access is a problem. Imbalanced (and manipulated) currencies, policies that encourage jobs and investment to happen elsewhere (e.g. highest business tax rates of any industrial country in the world), lack of trained resources for the jobs of tomorrow instead of the jobs of yesterday, structural resistance to change by unions, refusing immigration visas to highly qualified engineers who want to stay after being trained here, having immigration quotas that are too low to sustain our growth needs, government overspending and debt accumulation — there are lots of things we’ve done wrong to get here, but free trade isn’t one of them. It’s just inconsistent with all the other dumb things we did.Fix what’s broken, and American ingenuity and entrepreneurialism will take care of the rest. Fortunately, the loss of housing value, falling dollar and continuing unemployment, are having the effect of making the US an economical place to set up shop again.No trend continues forever (including China), and there are lots of reasons to expect their bubble to pop in the near future.
It’s not protectionism. China agreed to rules when it joined the WTO. It consistently breaks those rules, and we consistently ignore it–and I’ll guess that there are powerful corporate interests behind that in our little plutocracy here. The parties rent the White House. Wall Street owns it.
I agree that China breaks rules that were agreed to. But, what you’re talking about is not rules enforcement (which the US is incredibly lax at in most spheres), but a personal agenda of things you don’t like which you’d like to see stopped. That is protectionism. Enforcement of agreed rules is perfectly legitimate. Trying to change the game after it’s agreed is not.The VISA system sucks. Totally. We should be actively encouraging millions more qualified people who want to come to the US legally to do so, rather than slowing the process to the speed of frozen molasses and tamping down the quota to ridiculously low levels. It’s bad for the US, bad for companies that need talent, bad for the individuals — it’s just bad. And, I’m not surprised that there are abuses, because a) the official rules are wrong, b) enforcement of legal status is non-existent, c) companies desperately need certain types of people, d) the government doesn’t keep up its end of the bargain by efficiently processing legitimate applicants.Canada’s program to encourage qualified immigrants who invest in the country and create jobs has been a huge success, and my bet is that many of those entrepreneurs are people that wanted to come to the US but were refused by stupid bureaucracy, and grandstanding politicians who haven’t a clue what they’re doing.btw, one of the problems with the continuing slump in the housing market is over-supply (too many houses built for people that couldn’t afford to pay for them). Increasing and expediting legal immigration would help soak up that excess inventory and re-invigorate a big piece of the economy, and create lots of corollary jobs in other industries.So, while I agree that some Indian IT services companies stretched and abused the rules, and that we had 15 million “undocumented” Mexicans in the country, the solution lies much more in fixing ourselves than in criminalizing them.
It’s not a personal agenda–it didn’t effect me personally in any direct way. It’s just a clear set of problems inadequately addressed and frankly deliberately neglected, at a great cost to US communities.I agree we should be encouraging immigration and making it easier. Got that? Nothing I’ve said implies otherwise.You’re making good points but oddly framing this discussion as an argument.
I have been told I tend toward polemic, though not on purpose. I’m very against protectionism, very for free trade, very in favor of enforcing agreed rules to keep the game honest.For the record, I think Fred’s points are correct, except that none of it has anything to do with “peak employment”, which I believe is a load of tripe (or maybe just a red herring).I also don’t think we can count on the government to make any smart investments, but we may, with focused effort, get them to step out of the way of private investors.
true that to some degree. As debt owers, us walking away from China on a productive downswing means we have leverage.
Only if they’re afraid of what happens next. As debt owers, we also need to worry what happens if they retaliate by flooding world markets with US debt, crushing our dollar, causing incredible inflation almost overnight, and scaring others from holding US debt. It would mean we’d pay cash for everything after that, which isn’t a bad thing philosophically, but would cause massive and immediate disruption to our economy (e.g. no more oil deliveries unless paid cash in advance).
It is well established that Mininum wage let alone “living wage” (a vague term I see thrown around in the spirit of compassion I guess) results in greater unemployment. Let me ask you this – if I am willing to work for $6 per hour and an employer ouis willing to pay me that, then who are you or anyone else to prevent me from doing this?
Where and by whom is this established? Link?So would you say that since 8 year olds were “willing” to work for slave wages in the U.S. at one time, and employers were willing to pay them that, it wasn’t anyone’s business?I know you’ll say we aren’t talking about child labor, but the point I’m making is that “willing” is a very very relative term. Were West Virginia coal miners “willing” to work under the slavery conditions they did during the early 20th century?Am I “willing” to pay $1100/month for bare minimum (really, less than bare minimum) health insurance? No, I’m not. But I do.
My simple and summary point is this: the minimum wage causes fewer jobs to exist than would be the case without it. Evidence from a large number of academic studies suggests that minimum wage increases don’t reduce poverty levels.This is well established by myriad economic studies (see: 50 years of research on the minimum wage: web.archive.org/web/2011062…More practically, you can start informing yourself on the matter here, where CATO has an excellent and recent (Sept 12) report (readable but also empirical and deeply sourced) on the matter here: http://www.downsizinggovern…As an aside to minimum wage, you contradict yourself on the matter of free will. Are you “willing” to pay $1100 mo for health insurance? You say ‘no’, but obviously you are indeed willing because if you were not then you wouldn’t (no one is forcing you, are they?). What you seem to mean is that despite not being happy about the cost/benefit ratio of your health insurance, you still see it as more worthwhile to pay for it than not. So yes you are willing.To close — and to bring this full circle to Fred’s belief that jobs should be is our number one economic issue in the US — I will say that the Feds should focus on policies that generate faster economic growth, which would generate rising wages and more opportunities for all workers. The minimum wage is part of the problem, and raising it will only render more people (who need jobs the most) unemployable.
I appreciate the links. Not sure something named “downsizing government” is unbiased, but I’ll give it a look.I think that coal miners in the early 20th century felt they had no choice. Just as I now feel I have no choice but to pay protection money to the insurance companies. Just as lots of people I know feel they have no choice but to work at Starbucks (instead of paint houses or sell their craftworks) because they need the health insurance.
.The Cato Institute article is a very good read. Thank you..
My pleasure. If you would like some further insights and discussion re: the “counterpoints” to the argument:http://www.avc.com/a_vc/201…
Also reform the US corporate tax code. We have one of the highest “on paper” corporate tax rates in the world and one of the lowest “actual” corporate tax rates. The difference is loopholes, lobbied-for credits and offshore haven shenanigans.For example, the recent “fiscal deal” included an extension of: “An arcane provision of corporate tax law, called active financing income, that lets U.S. corporations defer taxes on some income they earn from their overseas subsidiaries. That provision will cost the U.S. Treasury more than $9 billion this year and $1.8 billion next year.”http://usnews.nbcnews.com/_…
The tax amounts that you note won’t move the needle on debt reduction / treasury receipts. That’s barely enough to pay for one day of government. But, encouraging more businesses to set up shop here by lowering real rates and eliminating loopholes would have a significant impact.Also, don’t forget the “tax avoidance cost” that we all bear because of the complexity of the US tax code. Between 2006 and 2010, the code expanded from 16,845 pages to 71,684 pages, and continues to grow by about 17% a year. Which means that since no one can understand it, no one can properly follow it. Personally, I have trouble remembering the gist of a book that is more than 200 pages, let alone every salient detail in it.Throwing the whole thing out and writing a new pre-law that says the tax code has to be simple enough to fit in less than 200 pages would solve a lot of problems. Would put 10s of thousands of lawyers and accountants on the street, but they’re smart people — they’d figure out something else to do.
I’m not talking about debt reduction, I’m talking about employment.
I was too, although in a roundabout way. My point is that tax law discourages businesses from setting up shop in the US, and encourages profits earned overseas never to be repatriated and reinvested here. Complexity is part of the enemy (and a tax in itself).Also, the news reports always frame this as businesses cheating and the treasury losing something, but the $10B over 2 years that you reference is practically meaningless, and businesses are doing what they’re supposed to be doing — avoiding tax and maximizing shareholder return. The problem is our lawmakers actively encourage the wrong behaviors, whose real impact is lost jobs for Americans (not lost money to the treasury).We really would be better off scrapping everything except the basic “thou shall not steal, kill, or drive too fast” and start over. Having no rules for a while would be preferable to the unintended consequences of the mess we’ve created.
I’m one of those programmers who came into the US on an L1 visa. And I think part of this argument is an exaggeration. Here is why.LivingNeither I nor any of the friends I know live with 15 in a house. If you have seen such houses its most probably these kids are socializing. I say kids because they’re mostly 25 or less.SkillsetI came to the US because my client couldn’t hire someone with my skillset. They couldn’t for another 5 years while I was there. They tried though. Skill shortage is for real. What is abused is the L1 visa rule that someone with a L1 visa cannot look for another job in US. H1B is pathetic on a different scale. The dependents cannot work.SalariesThe low salaries of foreign programmers have largely been taken care of in recent years thanks to law amendments. Programmers make above average salaries in most of the companies you mentioned. And I think that is how it should be. Programming is a skill anyone can learn and only the best should make high-end income. Not everyone who knows Java. Most companies don’t need the best Java programmers.StrengthsWhat I’ve seen as the strength of these ‘imported’ programmers is that they are very flexible. In learning. In working extended hours. In helping each other. In doing what the company needs. These things come naturally to them. May be because it is the opportunity of a lifetime. If the US wants to insource the companies needs to groom their people.If I sound biased, may be I am. But no outsider knows what it’s to be an insider.
Like I said, 2003, and in Central PA. I don’t know about the rest of the country but I suspect this was a systemic thing. And I witnessed–I was an insider of a different sort, and it was a real problem then (10 years ago; I haven’t tracked it since). Where did you work? Did you pay local and US income taxes?And Java, C++ I could see, but Visual Basic? That’s not specialized.I’m not arguing that there aren’t valuable people in the program, I’m arguing that it has been abused to the detriment of the IT industry around here.The entire Visa program is screwed up–as you know–as is immigration. I have no problem with expanding H1B, speeding up immigration and citizenship, etc. It’s the abuse of the programs.
I worked in CA and AZ. I paid US taxes only. I was paid like any other US worker. I was not compensated outside the US.I’d agree to the abuse. Every law that has clauses in them tend to be abused. The L1 visa itself makes sense. However the clauses they’ve added are doing more harm.The abuse starts because the hired worker cannot move between jobs due to Law or employer sponsored Green card. And when they cannot change jobs, the employer has an upper hand.And frankly, I’d think seriously about buying a house here in the US if I had a Green card.
what years? Looks like the L1 laws were changed since I was active about it.
why don’t you get a green card?
The current green card queue has a 11 year wait time. This is in addition to the 4.5 years I’ve already spent in the queue.
that’s a bit crazy. sorry
Yes, yes. Plus 10…..
While I appreciate your specific case, I can say, as someone whose job was outsourced and now manages a global team, there is lots of abuse. Many companies lay off skilled, experienced workers and hire folks right out of school from another country, simply because of their country, and into jobs that previously required at least 10 plus years experience. They then expect the experienced domestic developers, now managers, to pick up the slack.I am not saying this is your case, it does not sound like it. That said, I’ve sat in the budget meetings and this article is correct, there is a good argument to bring jobs back. In Tech and Engineering, the raping of the entry level jobs has left us with nobody to back fill those of us who helped build the current industry in the late 80’s and early 90’s. Which is why they can’t find U.S. workers. The whole system has become very short sighted resulting in our steady decline as a technology leader.
“I came to the US because my client couldn’t hire someone with my skillset.”I bet they could have, if they offered a high enough salary. It’s amazing how many people believe that the laws of supply and demand don’t work in the labor market for some reason.
They did offer a high salary. Twice the average wage in that part of country.There is one thing that you miss. High enough salary is not the only reason for people to take a job. The best programmers are looking for more than salary.
You should blog more on this first hand knowledge!
Define “living wage” please. Why must teens be “kept” at a lower wage? How about we pay people according to their skills as valued and determined by the labor market?
market? because people are often screwed and abused by their employers.living wage–can someone (single or with a family) can live on $7.25 an hour in say, New York. Housing, food, clothing–just the basics.
Not sure what you mean by “screwed” or “abused” vis-a-vis a minimum wage. No one forces anyone to go to work. So if they don’t like the wage they are getting they are more than free to quite or find another job. Or be unemployed. But what about someone whose skills are not worth the “living wage” you are yet to cogently define? a teen or minimally competent worker, for example. Getting artificially priced out of the job market seems like the people getting screwed to me.housing, food, clothing — of what condition quality and quantity? or the basics are according to you, I guess?
If by “you” you mean the country, then yes. And no, people aren’t inherently free to find another job, or a job at all, and yes some are forced (by circumstances) to work in jobs where they’re abused. You can choose to recognize it or not–it’s sadly abundant.
I’m having a really hard time understanding what you’re driving at.
Point: The minimum wage causes fewer jobs to exist than would be the case without it. And we need more jobs, not fewer, in this country right now.See more lengthy comment above, and please do take the opportunity to inform yourself with my citations above — the Cato report is quite insightful.
actually, there has been consistent data that the minimum wage does not cause fewer jobs to exist.http://www.npr.org/template…
because there is no quality signaling. just like in linked or odesk in everyone has positive reviews and looks like a rockstar, you will not be able to sort the wheat from the caff, creating a lemons market (http://en.wikipedia.org/wik… where the lowest price wins. hence we need a minimum wage.In Australia minimum wage is around $16 AUD (vs $6 in the US) and they sport a lower unemployment rate than the US (5.2% vs 9%).
It is not about the lowest price “winning”. it is about individuals having the right to work for the wages they would agree to, even be they below an artificial “minimum wage.” most people have skills that place them above the prevailaing min wage (US $7.25/hr, by the way), but some do not. And thus they are artifically priced out of the labor market, despite perhaps their willingness to work for a lower wage.
please help me understand how “lemon market” applies to minimum wage.
“Manufacturing was gutted by policies that enabled large multi-national corporations with loyalty to profit over people…”Businesses are supposed to maximize profits, within the legal framework (including regulations, tariffs, taxes, tax incentives, etc.) set by governments. If profit maximization under the current framework results in unacceptably high unemployment, the logical response is to make some changes to that framework.
Yes–within the legal framework, which has lax enforcement, and yes, there should be some changes.But I’d argue that maximizing profits at the expense of say, clean air in your town, clean water in our rivers, or the freedoms of others isn’t what businesses are supposed to do. It’s a choice. #bcorp
“Businesses are supposed to maximize profits, within the legal framework (including regulations, tariffs, taxes, tax incentives, etc.) set by governments. If profit maximization under the current framework results in unacceptably high unemployment, the logical response is to make some changes to that framework.”Nice job of zooming out to frame the big picture!Still as usual the devil is in the details.I agree, in theory a democratic government should operate in a way that focuses the will and needs of the citizens in order to shape an industrial/financial policy that serve the larger national interests.The problem is those democratic control mechanisms have long since been bought and sold to the highest national and international bidders.At this point industrial/financial policy has become so globally interdependent, so organically interlinked, that no one nation can effectively implement such industrial/financial policy frameworks in isolation.That leaves large international production and financial entities(both public & private) to carry on with that time tested oligarchic tradition of “divide and conquer” by leveraging different jurisdictional rule-sets against one another.Solving economic problems so layered in international political complexity will be a very tough nut to crack!Surely it will require a new set of narratives, metaphors and language that revolve around the dynamics of complex interdependence, narratives and metaphors that demystify political-economy into the reusable themes inherent in all “complex adaptive systems”.Without establish a new perceptual beachhead for framing the dynamics of modern political-economy it will be impossible to re-architect the 19th century institutions that presently choke off any real progress toward an organically-functional political-economies based on social interdependent.OR to paraphrase McLuhan:If you push any solution-framework far enough into a changing environment it will become so dysfunctionally obsolete, so mismatched with the newly emergent environmental challenges, as to flip from being a tool into becoming an impediment.Technological acceleration has catapulted modern political-economy into a quintessential instantiation of a “complex-adaptive-system” and we are all being swept up into that organic cyclone. We have already been subsumed and are now living inside that dynamic, a dynamic for which we have not yet developed an adequate language of mass appreciation.Without adequate tools for collaboratively framing how these new abstract organic dynamics will impose themselves on us as economic interdependencies we fine ourselves metaphorically rudderless. We are without the basic tools to collectively frame a meaningful debate regarding the pivotal interdependencies that define modern political-economies.Without establishing a new organic-narratives around political-economy we simply become part of a permanent flat-earth debate.Like the alchemists of old we have become captive to a narrative-language-set that does not reflect the underlying atonic table of valiance dynamics required to master our new organically interdependent environment. You can’t build transistors or plastic speaking the language of alchemy.The mediumof collaborative organic visualizationis the messagethat controls organic social progressTHOUGHT EXPERIMENT:What are the minimal homeostatic dynamic-attributes required to generate:Organically Sustainable Profit NetworksThat exploratory dialog require a seriously different narrative/metaphor language-set than the 19th century one we presently use to visualize isolated profit-maximizing entities. That unruly army of self-serving entities, each with its own hidden-hand fighting for control over the market-force cookie jar surly undermine any real statistical magic of the marketplace.We need organic narratives that can effectively expose those myopic old-school corporate-money-changers and eject them from the magical hidden-hand-church of true market organics.
I knew I liked you.
I wonder if the world’s luxury market has some lessons in drawing jobs back to the US, by nurturing and using the association with something made or invested in America.In a nutshell, China drives in many sense the demand for luxury goods today.What is interesting is that many Chinese owners (increasingly buying the world’s luxury brands) and Chinese entrepreneurs (increasingly starting homegrown brands) plan to use Europe as their manufacturing base.The FT reported last year that:”For boats, as for boutique garb, European manufacturing credentials are considered as important to attracting China’s newly minted rich as the lure of the foreign brand.”Contrast this to the more typical paradigm where production moved from West to East, while consumption was centered in the West. The latter model — China as the world’s factories — has both played a role in resentment in the West over the loss of jobs, as well as dangerous trade imbalances where the West consumed and China lent, but its consumers did not spend.Is this example from luxury relevant to tech, such that even when Chinese or Indian entrepreneurs are building a site for the Chinese or Indian market, their customers would be attracted to sites that were created and designed in Silicon Valley or New York, because of the Internet credibility attached to those places?I wonder?
i don’t think branding is going to stop being important. This includes country branding. French clothing will always have a level of cache by virtue of being french. Same to some degree with american manufacturing (except maybe cars, but they did that to themselves)
This is a very important argument. The comments on the debt, etc, are valid, but people at work are the bedrock of the economy, and increasing good employment will dramatically improve millions of lives, and improve the short-run deficit picture, perhaps giving us clarity to focus on the structural entitlement problems.
Over at Silas Capital, we pay a lot of attention to Made in America as a broad consumer trend. It used to be the purview of union folks and right-leaning voters (politics makes strange bedfellows I suppose). Not anymore. The same people who care deeply about where and how their beef was raised care a lot about where and how their clothing, electronics, etc. are made. Two brands to watch that are capitalizing on the broader appeal of Made in America are School House (based in NC) and Maker’s Row (based right here in Brooklyn). I’m not an investor in either, but I think what they’re doing is very interesting, especially in light of today’s post.
And Etsy and Kickstarter, both of which will be Brooklyn based by mid year
Where in Brooklyn are they moving to? I live in Park Slope. Office is in SoHo. Considering moving the office to Brooklyn. As an aside, I think office space development in Gowanus area is a must and I’m looking in to doing some.
Greenpoint. They bought an abandoned pencil factory on the Greenpoint waterfront a block from the water taxi and a block from the subway and have been renovating it for the past year.The one concern I have with Gowanus is mass transit. How good is the subway access there?
I would say Mass transit in Gowanus is as good or better than in Greenpoint. In Greenpoint you basically have the L and the G (which comes rarely). The 7 is kind of a hike to get to. If you live in Williamsburg or LIC, you can walk to Greenpoint without too much pain. But if you live in Prospect Heights, Brooklyn Heights, Caroll Gardens, Park Slope, Sunset Park, etc. it’s challenging to get to Greenpoint as you likely have to go through Manhattan via the L or 7. In Gowanus you have the F (and G) and N/R depending on which specific part of Gowanus. Both the F and the N/R are excellent. Gowanus is walking and train accessible to Park Slope, Prospect Heights, Caroll Gardens, Cobble Hill, Brooklyn Heights, Lower Manhattan (20 minutes from Union square by subway) I have some ideas here. Let’s discuss. It can and should be to NYC what SoMa and the Mission has become for the SF bay area.
The Gotham Gal does our real estate investing. It is one of three asset classes we believe in (cash, real estate, startups)Send me an email and I will connect you two
Who could have guessed Disqus might become a transactional platform? 😉
Please add me to your Gowanus conversation! I completely agree with you. We live in the neighborhood and my wife has an art studio here and I see a lot of potential.
Happy to. email me at elie at oyster dot com
really, that means astoria for gowanus is actually a good place to move
Excellent mass transit, much better than Greenpoint, which only has the G train. I live near the MakerBot factory, which is just outside the Gowanus boundaries (depending on who you ask).I can be in Union Square in 15-20 minutes.
“The one concern I have with Gowanus”I see much potential with Manhattan/Brooklyn for company starting and the earliest years.I don’t see much benefit long term as the workforce for these companies ages, has children, and becomes grown up. Can’t see how that is going to be a cost effective location other than for a very limited amount of core people who can afford to live there or wish to commute. As you said $500k NYC = $100k Other places. Maybe as with McDonalds the labor if constrained by pay will simply refresh (McDonalds wants you to quit) and they will always have hipsters.The surrounding metro NYC area is expensive. Otoh, when I was located in Old City Philly years ago the subway stopped a short block away, there were buses, and there was a ready stream of all sorts of labor which could easily travel from very low cost areas (Fishtown, lower NE Philly, West Philly, Upper Darby) very cheaply and very quickly into the city. I’m not seeing in NYC metro the same situation. It can take hours to get in and even Staten Island is way to expensive. For what Oyster (as an example) is doing I can understand why Ellie wants to be there. I just can’t say it is the best thing for Oyster.com business cost wise.I definitely understand the bias and how the founders want to locate in NYC and how it is a benefit for all sorts of businesses (fashion, banking, media) long term. But for other types I’m not so sure that it’s the best decision business wise though any more than being located in any place which someone personally has an affinity for (ski/shore/mountains) is the best business decision.
Makers Row is fascinating.It is essentially nicely designed web 2.0 directory of places that exist previously buried in the business yellow pages, google, and most importantly the thomas directory. Info was out there but hard to find for newbies.But it really is lipstick on the same pig and seems to mainly appeal to people who are starting out and looking to source their kickstarter, Shark Tank, or small project. Any existing manufacturer already has most of this figured out and has the legacy directories and sources for things. I grew up with this type of thing and when you’re in it you figure out who the best sources are for things even by looking at the boxes in your competitors trash (harder now because stuff comees from China of course.) Or you spy on people at trade shows or social engineer their employees by phone to find out what you need to know. I’ve done this myself many times.I’m not knocking Makers Row it’s a nice site. But I’m also noting also that the existing directory system (remember when Yahoo first came out?) won’t really scale that well without some feedback and vetting system in place so you know which screen printer (when there ends up being 1500 on the site) is the right one for you to use.
I believe reviews are going to be big part of what the folks at Makers Row are building.
Maker’s row is among the cooler things I have seen
The wage gap is still wide in the traditional IT sector, and has about 20 years to go before it is closed. But these are old and dying jobs. They will not come back as is. The cloud dynamics have disrupted IT permanently.But i’m more hopeful that the complete turnaround will come from the generational wave that is coming. Increasing the skills and availability of these skills in the software and technology areas is key to making the US grow again. So it’s things like the Academy for Software Engineering high schools, more startups innovation and growth that really change the world and disrupt existing industries.You cannot reclaim the past, but you can regain the future.
I read an article last week — driving me nuts that I can’t find it — the the wage benefits when everything is factored in for China over the US is now only about 7%. The article was discussing the reasons why GE and Apple are choosing to manufacture again in the US. Some of the factors included rising wages and transportation costs. As the costs to manufacture stabilize worldwide, companies will decide to manufacture closer to their best markets. We could see a virtuous cycle approaching.
Yes, manufacturing outsourcing because it started a long time ago will be the first to equalize globally. The Mexican outsourcing phase gave us a hint of us a few years ago, when the cost of outsourcing manufacturing to Mexico wasn’t as competitive anymore and factories closed there.
Ella – I read this article a few weeks ago in The Atlantic echoing a similar message. It mainly focuses on GE’s Appliance unit and the reopening of an essentially mothballed production facility in Kentcuky.It’s fascinating that GE and others are finally bringing manufacturing back to the US. I particularly like Immelt’s quote, “Outsourcing is quickly becoming outdated as a business model for GE Appliances”.
Thanks. That’s not the one I saw but similar. Great quote:”GE wasn’t just able to hold the retail sticker to the ‘China price.’ It beat that price by nearly 20 percent. The China-made GeoSpring retailed for $1,599. The Louisville-made GeoSpring retails for $1,299.” Oh, and here’s a link: http://www.theatlantic.com/…
The base salary in Foxconn’s Chinese manufacturing bases will be ($700) per month by the end of 2013. I question the 7% number.
This may also be tied to the issue of repatriating offshore funds for those organizations with offshore operations/sales. Making it easier and more tax friendly may be a win in many ways including reducing the offshore resources that can be used to fund offshore operations and hence those jobs. Bringing the money here seems like an obvious way to enable funding of facilities and jobs here, but the barriers have to be reduced. Heading a little off-topic, isn’t there also a point at which lower taxes/hurdles on repatriating funds can lead to more companies doing it and overall greater tax revenue for our government? As long as the “new” money is not just returned to shareholders, and used for business growth, this can be a win on multiple fronts. What am I missing?
Yes. That too.
Strongly agreed. I think we’ve all had the experience of dealing with a US call center vs an off-shore call center. The American Airlines call center I deal with (I’m Platinum) is light years ahead of the off-shore call-centers I deal (Citibank and Dell back in the day).
Interesting to ponder what the opportunities are for startups here. I 1000% agree that the labor cost arbitrage game is over. This will be a huge trend over the coming years. Higher energy prices (higher transportation costs) + lower wage differentials + increasing automation (reduction in labor demand) + public policy/tax changes (because public policy of past has not exactly worked out so well) = a massive trend. Probably the same 30 year trend as the off-shoring trend has been.
A major factor in this happening is the change in our energy position to an exporter. Natural gas abundance and cheap transport can make the US a place to be for manufacturing.
This is a very important argument. The comments on the debt, etc, are valid, but people at work are the bedrock of the economy, and increasing good employment will dramatically improve millions of lives, and improve the short-run deficit picture, perhaps giving us clarity to focus on the structural entitlement problems.
I’ve heard directly from people who have imported for years from china (giftware items not electronics) how China is jacking up prices and becoming more independent. These are people who have dealt with the chinese since the 80’s.I wouldn’t count China out though. They’ve got a billion people and enough poor people that they could easily continue to provide low costs to knock out anything we put together here.This situation reminds me a little of what happened with petroleum. The Saudis used to jack us around with OPEC. So we countered with conserving energy and T. Boon Pickens type things and oil discoveries elsewhere in the world. So the Saudis just lowered prices so they still made money and made it not cost effective for many alternative energy schemes and discoveries. The chinese have a great untapped resource in all these peasants who they could educate and put into their factory system. These aren’t millenials either.
I am not bearish on China. Just bullish on the US
Before we talk about the debatable issue of the costs and benefits of global market place on the US workforce, let’s focus on the easy stuff that we can all agree on, eliminating outsourced “exploited” child labor and those in debt servitude.Want an example. How about the shrimp many ate last night at their favorite restaurant. For 1/3 of you it was harvested in the muddy waters of south Bangladesh, by a child. Then it is shipped to a farm and raised by someone in debt bondage. Pick an industry and study its production /supply chain. (Note: at $4/hr the iphone manufacturers will not rank very high on this list).There is space for new leadership in this area via crowdsourcing. We need to redeploy some of the energies of entrepreneurs toward this end. The payoff will be enormous.
you make me depressed. that being said, I do want their families to be able to make money, especially if they are in areas where you’d be making even less.
“let’s focus on the easy stuff that we can all agree on, eliminating outsourced “exploited” child labor and those in debt servitude.”Can’t agree with you on that one. First devil is in the details. If someone wants to do a comprehensive peer reviewed research that considers all angles to this issue (as Shanac points out) then maybe there is something to be had here and buying habits can be adjusted. Or maybe if the price of the shrimp dish is to high I just won’t buy that and maybe if all the ingredients are exploited (or the waiters and waitresses or dishwashers that work at the restaurant) I just won’t go out to eat and I will grow my own food. (Guess what that’s not going to happen I want to enjoy myself and I’m not really concerned with what is happening elsewhere actually. There is so many “elsewheres” and this year taxes are increasing. I’ve got enough to “worry” about. )And you never are making buying choices based on having clear indicators of the source of the goods with rock solid data anyway. And I don’t like lynchings either. Some guy with a hidden camera and some footage (whether it be kids or chickens) is not scientific enough for me.
So am I in the long term. Unfortunately there’s another 20 years in the wilderness to punch through first.
Like airplanes? Peasants cant do the trigonometry required to hold a tolerance of one thousanth of an inch on a 9 axis machine tool while cutting a super alloy like waspalloy. And it it werent for taking apart and reverse engineering the design of a Boeing 737 there would be no COMAC C 919. Because God knows they dont have the innovation to design it themselves. But here in america we keep loading our lives with cheap chinese junk we dont need using money 99pcters dont have instead of focusing on how to build a fair vice free trade world. There is a reason airbus is opening a plant in mobile alabama and not shenzhen china.
“will code for food” … many one page american websites hosted on blogger
I can give two specific manufacturing examples from our portfolio – Makerbot and Modular Robotics.Makerbot makes 100% of their product in Brooklyn. We explored manufacturing in China but ultimately shut down that effort and decided to commit to long-term manufacturing in the US.Modular Robotics does most of it’s manufacturing in Boulder. They have a facility which is an awesome example of entrepreneurial hustle – lots of fantastic used equipment purchased for pennies on the dollar, refurbished by the team, and put together in an effective manufacturing line. It’s pretty cool to see old machines cranking stuff out while running SCO Unix.We’ve got other investments that manufacture in China, including Orbotix, Sifteo, and Fitbit. But 100% of their R&D and early prototype development is now done in the US.
You are braver than me. I can’t bring myself to invest in atoms when it comes to startups. I am just talking. You are putting your money where your mouth is. Bravo.
I only invest in software wrapped in plastic <g>.
My track record in doing that is worse than your European investments
I remember a few of those from 2000. I can’t remember Seth’s company anymore but there was some mobile thingy that blew up. I’d put it in the “ahead of it’s time” category.
“ahead of it’s time”.That’s been my life. I’ve always had to wait for years before people would see how what I wanted to do could work. It really really SUCKS!
Or in the case of Makerbot, plastic wrapped by software 🙂
Touche 🙂 Seriously that is where a lot of innovation is happening right now and Brad has all this for himself – though some are catching on.
Nah – I don’t have this all for myself – there are plenty of others already playing here.
But you were doing it when it wasn’t as fashionable and in it for the long haul.
That’s why you will be the first one we will ping when we want to talk to VCs. Built some fundamental tech based on cutting edge award winning R&D from a top US engineering university that democratizes making. We have done a lot of customer development this past year by letting people play with our tech and are about to release some reference products based on our tech platform. This is a long term play funded by NSF so not yet reached out to VCs. But you will be the first one we will talk to when we do.
Will do. Thanks.
it just doesn’t seem that manufacturing jobs can come back to the US – we’re < 5% of world population and getting relatively smaller and poorer. Macro trends still are not in our favor – even as Asian wages rise. There are too many genuinely poor people in this world that can provide the next pool of low-cost labor, and too much mobility of manufacturing and supply chain expertise.But, there clearly seems to be opportunity to get IP/communication-based jobs moving here. I have a tiny bootstrapped startup with several offshore development resources. Let’s say I pay $20/hour per developer and let’s say they operate at a 60% level of local productivity given communication issues. That’s nearly $35/hour. Would I pay $35/hour to have someone 2 time zones away and to avoid having to ask people to repeat themselves? Yup. Back out health care and taxes and you’re probably closer to $25/hour or $50K in annual income to a retrained engineer working in Detroit. Want to earn $75K, then work 60 hours. I tried finding US resources and really couldn’t find anybody competent for < $75/hour.I don’t really follow this, but I’ve got to believe there are tons of people working on incubators/retraining/etc. – what is their experience over the past couple years?
.We are way over thinking this issue. It is like a forest fire. The conditions are dry and dangerous but it still takes one nut with a cigarette or an arsonist to set the country ablaze.The issue of re-sourcing is complex while the issue of creating jobs is very, very easy.Fully fund the Small Business Administration. And remember this is a loan “guaranty” program not a lending program. The gov’t guaranties and the bank lends.Every SBA lender runs out of gov’t guaranties in Q1 (CY Q4, gov’t Q1). Only a very few deals get done. And then everyone puts all the applications in a file and says: “Well, wait until next year.”What we need is GM type money.1. Take the top 25% of lenders as measured by their historic default rates and allow them to have virtually unlimited money.2. Funnel applications to these lenders and provide a 100% gov’t guaranty v the 85% guaranty.3. Make loans — remembering that it is the bank’s money not the gov’t’s money. The gov’t — that’s YOU and ME really — is providing a guaranty only.Then let the good times roll. Roll jobs!This is like becoming an arsonist to set a forest fire of jobs.Roll jobs!It would also have the salutary effect of getting the bank’s loans to assets ratios where they should be at about 85%.Roll jobs! Hook ‘Em, jobs!.
SBA also needs to get into the 21st century. A young veteran I know has started a service business. He approached me excited about a new SBA program for veterans.Great effort, but I’m not thinking that a service business is going to be “bankable” via SBA, veteran or not — what do you think?(Other SBA resources like training and SCORE will probably be useful, though.)
.The problem with the SBA’s Veterans programs is that they are all cheerleading and no real money. There may be something new on the horizon but nothing I have stumbled on has any real money available.I have mixed views about the efficacy of Veteran’s financial assistance programs.A Veteran owned small business does enjoy some set aside advantages when contracting with governmental entities. This is borderline corruption as the same advantages are enjoyed by some very suspect distinctions.As a Vet, I want the same advantage as any other “group” but not more..
Exactly what I thought/feared. Sigh.
that’s a little crazy about how the SBA works
Not completely.To my knowledge, they mostly back lending when the loan can be secured. This means that the borrower signs a personal guarantee (puts up their house or other assets) and/or the business has assets like equipment or real estate. This ups the odds of being paid back. Old fashioned banking.This may have changed since I last had a connection to someone seeking SBA funding (lower Manhattan business for post 9/11 recovery, another “program.”) But I’m not sure why it would have.What’s crazy, though, is putting out PR about programs that raise a lot of hope, unless you put out equal information about program boundaries. 10 bullet points about who qualifies and who won’t — and to @JLM’s point elsewhere in the thread, how much money is actually available — would save a lot of time and heart.
misinformation doesn’t help anyone. bad marketing if anything
And at worst, it’s a painful waste of time and heart for some people.
It boils down to transaction costs. We have a systemic problem now; legislators have created layers and layers of red tape and costs – capital moves where it is treated best. We need to wrap our heads around that, stop blaming other nations, it’s self-inflicted.Jobs will return when we get this right…
.Regulation does matter.Duh!.
Some strong opinions and great comments today (as always). Would love to see some book recommendations for learning more on how we’ve gotten to where we are today in the US and/or strategies for the future.
The post american world by fareed zakaria
Into the Kindle queue it goes! Thanks!
Sex Trafficking, Inside the Market of Modern slavery.
Haven’t heard of this one. Will check it out, thanks!
Michael Sekoras work at the Defense Intelligence Agency around PROJECT SOCRATES. china following technology based based planning strategy, US following economic planning strategy, US model in post bretton woods world leads to short term NPV only thinking. 8 year DIA top secret study isolated exact sources of all US competitive advantage. Provides thesis for 95pct of symptoms being discussed on this blog subject. Look up On wikipedia. See also ray kurzweill and vinge on the singularity prediction as it relates to automation and how technology consumes human capital input requirement
.Where the Hell were all you Republican fair traders on election day?The fix we find ourselves in is the realization that a steady diet of crack will have long term consequences. Guess what, the freakin’ long term just blew into town and is putting down roots. We let it happen.Why have we allowed a system to evolve that allows an American company to manufacture overseas where they can tap into unconscionably cheap labor, prison labor, exploited labor, lax or non-existent environmental laws and a myriad of other abuses?Simple answer — look to K Street and the American Congress and Executive.While these same companies and company Boards and CEOs want:1. American capital markets for their company’s and personal securities holdings:2. American stock exchanges;3. American securities laws;4. American banking;5. American banking laws;6. American headquarters locations;7. American law enforcement and physical safety;8. American quality of life; and,9. AMERICAN CUSTOMERS.If you want to sell your products in the US and enjoy the benefits of the preceding elements, then you are going to have to employ Americans.Tell me what kind of car you drive and I will tell you whether you are full of shit or not. But you can change that..
I don’t own a car!
the new economy
me either, and I have no desire to, unless it drives itself. And even then, probably not
A 1966 Impala of course 🙂
.Guilty! And loving it..
What if all US Exports were also shut down. You can’t have it both ways.
.Of course you can. I am only talking about American companies producing for the American market.If you are an American company manufacturing for the foreign market — such as Caterpillar’s recent announcements of adding Chinese manufacturing plants to sell into China itself — have at it.The American market is the biggest and most powerful market in the world.We need to leverage that reality.It is nuts that an American company like GE effectively pays no US taxes while the administration is pontificating about “fairness”.Time to cut the crap and get serious..
I was there on election day, but when I cast my vote it was for peace over economics.
.Hopefully you got the peace you were looking for because we damn sure did not get the economics I was looking for..
I don’t think I got anything I was looking for. JLM, how would you feel about a congress with 50 members instead of 500, and no senate.
.Less expensive to rent?.
“Tell me what kind of car you drive and I will tell you whether you are full of shit or not”I drive a german sports car. And the last 5 cars that I’ve driven have been German for that matter. Luckily I’m not full of shit because I never claimed to care about anything other than getting the thing that I like and want to drive for the money I want to spend.Likewise some of the custom software we use is sourced from India (with a contact in Virginia that is the conduit here) and they have been exceedingly accommodating and responsive for going on almost 7 years. As opposed to some of the local (in the entire US) bids I’ve requested which can’t even handle a sales inquiry well and have quoted way inflated prices. (And this isn’t for competitive super fancy stuff either, just meat and potatoes projects).
Speaking from the other side of the aisle, I don’t think republicans are the only source of the fair trade views. I personally strongly believe in things made in the US, and will personally look to US talent first as I hire for my company. I think it is just good business, and plenty of other democrats believe this as well. I think the basic problem is how we measure company progress as a society. We have been bound for a long time to the quarter as a reporting period, and we have a fiduciary duty to our stockholders to maximize value in this quarter. Our problem really is we forget the long view, and that is where things are interesting.Unfortunately based on the structures that got put in place, this meant we moved production where it was cheapest traditionally. If we took the long view we would know doing this would eventually bankrupt the people who will buy our products, so we would have never done it. Profits now and profits later are two sides of the same coin. We need to push this ideology into our markets, investments and how we run companies.Unfortunately as we move many of these jobs back home we have another demon that I have alluded to before. Much of our previous industrial capacity is dismantled, and when we move it back home we need to invest in new means of production. The reality is now that a factory built today employs a lot less people then ever before, and it is only getting worse. The real problem we need to fix is that factory jobs will not be the panacea to our problems, we need a well educated populace with marketable high tech skills. Low wage and low skilled jobs are going the way of the dodo, and we need to take the long view and figure out how to not let this fact wreck our society. I don’t think that it will kill us, on the contrary I think this is a big part of what will make us great again. We just need to be properly prepared and meet the problem head on.
From our experience, I completely agree with your post Fred. We (Ticket River and TicketPrinting.com) are a small event ecommerce company based in Bozeman, Montana, with customers across the US and with wholly-owned subsidiaries in the UK, Australia, and Canada.First, we virtualize our customer service team throughout rural Montana. This enables us to hire smart, hardworking, exceptionally nice, and underutilized people. This customer service team provides frontline customer service for the US and Canada operations, and support to our fulfillment partners’ customer service operations in the UK and Australia. Our costs are much lower, but most important our outcomes — customer sat — are very high.Second, we offer custom design for event collateral, and we execute this custom design for all markets here in Montana. The regional university, Montana State, has a solid four-year graphic design program and we are able to tap into this talent pool. Again, costs are much lower than we would pay either abroad, and our outcomes are excellent.Lastly, like many internet companies, our software engineering team is spread across the continents — from Nova Scotia to LA to Montana to Argentina. Top talent is still hard to find and when we find it, we hire no matter the location.From our experience (thus far), we believe the following. First, we can globalize some functions across our geographic markets and service from the US. When we do, we find the cost, skillset, and outcomes are very good. Second, we believe there is a large pool of exceptional underutilized talent in rural areas in the US. These people are extremely hard working, care about the customer, and are eager to learn.Third, the smart investments that need to be made are: (1) broadband, it is still woefully inadequate throughout the US, but especially in rural areas, and (2) education, we need a better mix of soft skills training (e.g., teamwork, communication), ‘tools’ skills (e.g. office apps), and analytical problem solving in high school. We can train the functional, but these skills are foundational.
Yes, yes, yes.And to your point on education — teamwork and communications skills are learned in practically, and can be transmitted through programs we don’t invest in across the board.Sports and music come to mind…
I got inspired to research and write about this after reading Boston Consulting Group’s reports on the shift of manufacturing BACK to the USA (reshoring).Made in America, Again (August 2011): https://www.bcgperspectives…U.S. Manufacturing Nears the Tipping Point (March 2012): https://www.bcgperspectives…
Why didn’t you?
The evidence is largely anecdotal at this point, because it is a trend that is currently happening; those reports are predictive. I can point you in the direction of Airbus in Alabama, for example, or the way that Caterpillar and Texas Instruments have set up manufacturing facilities in America. But the BCG reports say that cost parity between China and the US will happen in 2015, so there is not a lot of hard data yet.
and you need hard data to do a thesis?
Yes. Initially, I was writing about the decline in the attractiveness of manufacturing in China and the new rise of American manufacturing as a result. However, my advisor and I have now refocused my thesis on the first half, because there is a lot of tangible and clear evidence for problems in China and much less nonspeculative evidence on the rise of American manufacturing, since it is about to happen. He also cut it to size because my thesis was enormous in scope, since I had also put in policy recommendations to address American unemployment. Vivek Wadhwa made it clear his Forbes article “The End of Chinese Manufacturing and Rebirth of US Industry” http://www.forbes.com/sites… that manufacturing, though coming back to the US, was not going to solve our shortage of jobs. Because automated production and 3D printing have radically changed how we make things, we have to find another way to employ our citizens.
“Because automated production and 3D printing have radically changed how we make things”I’m not sure automated production (extremely mature if you’ve ever seen robot driven factories) and 3D printing (trivial and will be for a long time) can be considered in the same thought. That stuff is years away and has all sorts of dependencies.(The link to the Wadhwa article is broken so I couldn’t read the source.)
Those two things are what Wadhwa said would be disruptive, although I agree that automated production is probably ahead of 3D printing. My dad worked for Ford for most of my childhood and we’ve talked about the major changes in the way that Ford produces cars over the past two decades.I fixed the link. It was broken because I put the link in parentheses and when you clicked through, Forbes had the close parenthesis in the URL.
Thanks I will read it.You have to be careful what futurists say the future will hold though and how they extrapolate inventions in the pipeline. There was a time when it was thought we’d all fly around in cars instead of driving them. (Airplanes for everyone). While technically that has been possible for quite some time other forces (human nature) prevent it from happening.Video telephones came out a long long time ago and could have easily been introduced after technology advances way before now with video chat and facetime skype etc.. But people liked not having to look good in order to speak over the phone so it never took off (forget even the cost for a second). Several things came together which took quite some time (new generations that weren’t so formal, the internet, drop in electronic costs just to name a few so this has finally happened and is widespread and ubiquitous.)http://en.wikipedia.org/wik…Note the timeline for this.This is why multiple bets have to be made in investing. Even ideas that seem possible and sure can take a long long time if they are ahead of their time or some other factor hasn’t come into play yet.
Your point that the future is hard to predict is valid, though I really think that the problem with videocalling by the 1960s was accessibility, in price and geographic location (because the Picturephone was only in 3 metropolitan areas and cost ~$200 in today’s dollars for a 3 minute phone call).My overall point was that many manufacturing jobs have been permanently eliminated, regardless of the cause, which means we still have to figure out a viable way to combat unemployment.
i agree with all of this. what kind of degree is your thesis for?
My senior thesis is part of getting through the business honors program. I’m still an undergraduate.
i was taught for something like what @twitter-52516341:disqus is doing, you probably would want the hard data, otherwise it would be a weak thesis.
should the US consider replacing the dollar with several regional currencies?
the regional disparities are too great. coastal economies are generally wealthier than their hinterlands. ‘Shenzen’ Ohio as an economic special case. .
Fred, I applaud your willingness to be a start for a dialog publicly, not something I see many venture capitalist prepared to do. I think the direction of finding ways to transfer economic opportunity to the middle regions of the country is an interesting topic I’m wondering if there is a way to focus the dialog that resulting into something that is more collaborative, focused and constructive toward finding solutions. Is there a way that dialog rules can be applied to tap into the collective knowledge of your network, away from the soap-box ego contest that many such popular discussions become?
I think we may be missing a deeper point here, which is that these trends are only just getting going. The fact is that as more of the world gets eaten by software these jobs are just going to go permanently away. What’s happening is that the worlds best creators can distribute their creations to virtually the whole world for free via the internet. Education, with sites like Coursera or Udacity, is the best example to understand: the best teacher can distribute their classes to millions of students instead of the hundreds previously. Once all the issues with this have been worked out our need for teachers will drop dramatically. Technologies like 3D printing, robotics etc are only going to extend these trends. So I think peak employment is a reality, and I’m not sure in 50 years that there will be many jobs to go around at all… how we deal with this from a social perspective is one of the greatest challenges facing today’s millennial generation.
“This is both a problem and an opportunity. It is time to bring these jobs back that we have moved elsewhere. Although I have not done any sort of analysis here, I would be shocked if one could not make a strong cost based economic argument to do so.”.I’ve offered contract software development services for the past 18 years. I love being involved with designing the next great thing for companies. I’m not big on writing code but do it when needed. I would love to have enough work to bring on some programmers..If anyone here believes in what Fred is saying, I know I sure do, and would like to help employ some software developers in the US they can contact me by visiting my website ObjectMethodology.com..Also, if you are a programmer looking for work you can contact me at that some site. Thank you for your consideration.
“A house that would cost $500,000 in the NY metro area can be had for less than $100,000 in these regions.”So those workers could be hired for lower wages in dollar terms and still make good livings, due to their lower costs of living: a win-win for companies hiring them and the workers themselves. This raises a question that should be obvious: since lower housing costs are a potential boon to employment, why has the federal government done so much for so long to inflate housing costs?Having the FHA and government-sponsored entities such as Fannie Mae subsidize low-down payment mortgages makes housing more expensive, because it adds leverage to the system: if you only have to put down 7.5%, you can afford to bid on more expensive houses than if you had to put down 20%, so sellers can raise their prices accordingly. If everyone had to put 20% down, that would ultimately make housing more affordable, since non-cash buyers wouldn’t be able to bid as much for the houses. And it would make the economy more stable and less crash-prone. All good things, no?You could ask the same thing about higher education, as the federal government has helped inflate those costs in a similar way for years. That President Obama continues to advocate these policies suggests to me that he really doesn’t grok the fundamental problems in our economy.
well, housing is tied to other local sectors, so propping up housing props up those jobs.
Not speaking for the government here (and I’m not an economist obviously) or why they do it, but inflation in housing prices helps the economy by making people feel rich who don’t sell. As a result they have more confidence and spend more money and improve their property and buy other goods and services believing they will get it back if the property is more desirable when they have to sell (and ignoring the fact that a replacement property will likewise have increased in value). Unless of course they move to a lower priced area (which they probably won’t unless Florida/Arizona to retire). This is what we experienced during the run up in housing prices. Everyone was salivating and comparing the latest price increase in the neighborhood/condo/coop.”If everyone had to put 20% down”Would also hurt the liquidity in the market and drive prices down (which would hurt confidence) because of the limited amount of buyers that have savings. Not claiming the right number is “x”% either. (Where x = pick some %). But let’s say everyone had to put 100% down (no mortgages). What would happen to prices then? They would collapse? So why is 20% the right number?If they want to “heat up” the market you lower the % that you need down. If you want to cool it off you raise the % and/or interest rates.Obama is being advised by an economics team. But there are different schools of economics and it’s an art not a science anyway. And something that works at one point (remember Greenspan and how people parsed his every voice inflection?) might not always work.
the Obama administration has pissed off the entire higher ed industry because they are making it much harder to take out student loans. and rightly so. student loans should be made based on the expected earning power of the student upon graduation.
If that’s the case, it’s a step in the right direction. And FWIW, Obama’s predecessor did plenty to inflate housing.
I also think this is a great thing. We need to make student loans much harder to get, since they are a continual burden after graduation and a heavy one if you make on the low end of the pay scale.What I really would love for us to tackle and fix though is this:Talented physicists, chemists, molecular biologists and all manner of engineers should be compensated like NBA players when they are awesome. We should have a US technology dream team, and pay them accordingly. Help get their message out, invest in their companies and ideas, and generally make being a scientist a sexy thing. Put them on Mtv, show them living the good life, and in general treat them like the gems they really are for our society. We need to get the kids to want to be them, and treating those well in those positions is a powerful way to make this change as a culture and society.I really love Richard Feynman, I think he was the closest thing to the rock star scientist we have really had in our past. Imagine how awesome things could have been if he had more funding early in his life, before he could write his own ticket. Imagine if he didn’t have to play politics to get the funding he did have. Perhaps he wouldn’t have been as great, but I think he would have had exponentially more impact.
The skillset problem persists. I talked to an entrepreneur this year who wanted to manufacture something here, even though it cost 2x as much (his margins were so high, it didn’t really matter), but he couldn’t find enough expertise in the plastic extrusion that was necessary to make the part.Steelcase, the furniture manufacturer, moved operations from NC to Mexico in an effort to cut costs. Turned out the North Carolina folks knew all sorts of things that no one ever bothered to write down. Quality suffered, and it cost the company millions. They tried to bring it back–but those workers had dispersed/retired/etc.Who is teaching people how to build things on new equipment these days?
companies outsourced learning to community colleges. Also wasn’t a smart move, because processes can sometimes be one of those “in house” sort of things
this is one of the one time costs i outlined, training or retraining
“The era of gloabal wage arbitrage is over or will soon be over.”bullish for american real estate? 😉
not sure. there are other forced at work, many of them outlined in albert’s blog posts i linked to which may mean we have seen peak employment even though the offshore jobs may be coming back
in my opinion it’s very bearish. houses are bought for the local job market
The talent crunch in Tech – peak talent – is been well documented. Studies like this (4.6 jobs for every dev http://venturebeat.com/2012… are becoming the norm.What has been missing in the conversation is a view about finding developers right here in the US. Many of them in are SF or NY – where the ratio of job openings to devs is even higher. These developers are available, but they will work on their own terms – freelance first – full time later. Surprisingly similar to dating. However, many more are in Minnesota, North Carolina, Oklahoma, Maine, etc. They are every bit as competent as their compatriots in the main tech hubs, they are easier to enamor, and they are looking!What we have is a discovery problem and unwillingness to look in places where talent would not normally come from. Most recruiters insist in finding relevant talent where they live and are recalcitrant about matching local demand with local talent. Large savvy tech companies are catching wind of this shift and setting shop wherever they can 3 or 4 good engineers (from Github work from wherever to Google opening dev centers wherever talent lives). American companies would do well by broadening their scope for talent and continuing investing in the US – but they need to fish where the fish are not where the fisherman are standing.At GroupTalent (and sorry for the plug) we have been very busy matching talent to demand across the US. And it is not a hard sale. Talent in middle of America is eager to work in problems being solved by companies in San Francisco. As long as they find each other, everyone wins.
plugs are fine, you are right about matching talent. People still get nervous about people who don’t want to be in their offices though. Bothers the hell out of me
“The talent crunch in Tech – peak talent – is been well documented.”.You have anyone looking for tech people get in touch with me. I’m not a recruiter. I bet I know someone for them to hire. See my name for my website to contact me.
Here’s another great recent article on the topic from The Atlantic. “The Insourcing Boom.” – http://www.theatlantic.com/…
enjoyed that. thanks for sharing.
the one thing that disturbs me in all of this – we’re not spending enough on infrastructure to support the return to manufacturing. Factories and people need to be more accessible to each other, not less. And they are becoming less and less as our roads and bridges become crappy, as our mass transit systems become old (if they were newer and more broadly used, that would be extremely interesting). Moving people so that they are available to these jobs is a critical problem that we’re also ignoring.*sigh*
i am not so sure its over. its not just a cost gap – which i agree is closing (love the line of “the era of global wage arbitrage……”) – there is a capability gap. We’ve done a horrible job of re-training people to better align with the job needs of the future – while these countries have leveraged the arbitrage you speak of to train the masses in skills that represent future industries for us. We are still niche tech – they aren’t.We need to get out of being Niche tech, in the way we think about the skills our future peeps need – and get to mass tech – and quick.
Raising taxes, adding regulations, and vilifying success is not going to bring back jobs to the US, and that’s what this administration is doing.
I haven’t waded through all 240 comments and 102 reactions, so forgive me if I missed it, but it seems a fundamental issue is missing in this discussion. In my experience, 60% of innovation occurs in the process of scaling production from core dev to mass scale and in the feedback loop going through customer support. I believe it is often a misconception that the short term profit gains of outsourcing outweigh the long term gains of an integrated end-to-end team working to develop, scale, incorporate user feedback, re-develop as one process. By excluding such vital parts of the product dev cycle from your company, or your country for that matter, you are cooking up a recipe for disaster. Finally, in Denmark, companies are realising the value gained by having highly-educated employees in the production and customer roles that are integrated in the full dev cycle, and it is paying off for the companies, and the country. In addition, the fact of the matter is that you cannot expect more than 40% of the population to have the intellect and education required for R&D work, and if you outsource all jobs suitable for less educated people, you still need to find a way to keep them in employment (unless you feel letting them all starve to death is a reasonable solution).
or sell buffalo and detroit and put the proceeds in $GOOG
Outsourcing is the primary reason why were able to shed the domain-utility jobs to other countries while focusing on innovation internally. Isn’t this one of the reason why the go-to-market strategies have become more aggressive, especially in the technology sector ?
Need new pies, as nothing changes table manners more than a smaller pie.
I think the elephant in the room, to some extent, is health insurance. I know SO many people who would not need to work at Starbucks or some other job if they could get access to affordable health insurance. As it is, they are health insurance slaves.And – this is the important part for they people who only care about numbers – they are *taking up a job that someone else would genuinely like to have for more than just the insurance.*This, I believe, is throwing our system and economy out of whack as much as many other factors. There are artists, artisans, freelancers, etc., who could live on their skills and wares if they weren’t burdened by outrageous health insurance costs (that barely cover their basic healthcare costs anyway).I could make my startup’s funding go SO much farther if my own health insurance didn’t cost $1100/mo (for the bare minimum package that still does not cover all the meds we’re prescribed by our doctors).
.It is really the cost of health care as insurance is only a payment conduit to access health care.The problem with Obamacare is it not only did nothing to reduce costs, it increased costs while institutionalizing the cost model..
I agree that Obamacare is not perfect. However, it has helped a lot of people whom I know. But a lot of it is a love letter to the HMO’s, which pisses me off. I have direct experience with the waste of that aspect of it.I think skyrocketing healthcare costs and the emergence of the HMO are a two-headed beast. It all started when Nixon paved the way for HMO’s.
The problem IS health insurance. We shouldn’t have insurance for things that are routine, like wellness visits, tests, etc. Insurance should be only for things that are catastrophic and improbable, but for which the risk of a loss could bankrupt you. The way it was before unions made health insurance a standard benefit and introduced a middleman who now calls the tune for everyone.Insurance companies impose a minimum 15-25% premium on health costs while either denying coverage or making decisions for you that you should make yourself. All doctors and hospitals have inflated their prices to ridiculous levels, simply so that they can give back the discounts that insurers demand. Costs would be lower (tremendously) and affordable if we hadn’t institutionalized healthcare via insurance companies. If my doctor had to justify to me why a 10 minute visit (with only 3 minutes of it being with the doctor present) is worth $200, the current cost structure couldn’t survive. (Or, there’d be entrepreneurs lined up with solutions to fix it.)The other piece of this is getting ambulance chasing lawyers out of the system. No contingency suits. Caps on awards. Loser pays. Too much of every dollar paid into the system actually goes to cover medical malpractice insurance, rather than actual care.Obamacare doesn’t fix either of these issues. Rather, it imposes a further “government inefficiency” premium, institutionalizes everything that was wrong with the present system, and will lead to the kind of queue management and wait times and lack of access that are now standard in Canada.
It’s not unusual these days to see a senior manager at a tech company in Bangalore making $100,000 USD. That’s insane amounts of money for India.
I know this is looking a little further out, but I am deeply concerned with the people who are in low wage jobs that are increasingly being automated. Stocking food at Walmart is something a robot in a generation or two will be able to do easily. Why have a person push a broom or a mop when you can have a Roomba like device? For years my job description was to automate production environments so my employer at the time could fire more people from their low wage jobs. I was to replace them with automated production systems and software. I’m sure there are plenty of other software developers on this blog that have the same experience. Each year that passes we need less and less as far as worker input. As computers and machines become more capable removing the worker from the equation will only happen more and more often. Imagine what would happen if within a span of 4-5 years all these jobs disappeared, it would be absolutely shocking to our economy. I looked at some statistics on this once, and it was frightening how much of our GDP is in these workers hands. I’ll have to look for my notes tomorrow and I’ll follow up with the exact details if I find them.Stop for a second, can you imagine what 30-40% unemployment would look like? This is the sort of impact I’m talking about. Look at what is happening to warehouse pickers due to Kiva systems, or retail workers due to Amazon automating the buying experience. We soon won’t need taxi drivers or long haul truckers due to technology like the Google car. Will we need so many libraries when we can have the whole of the worlds knowledge accessible from our Nexus 7 or Kindle Fire? How about lecturers now that Coursera and Khan Academy can scale one lecturer over tens of thousands of students? We are deluding ourselves and ignoring what is going on if we think we will can come out of this without having a period of time of extremely high unemployment. When the cost of an automated system dips below the cost of a worker, each corporation will do its fiduciary duty to its shareholders and will eliminate the position and invest in the automated system. In aggregate this will make for a brutal mess.I really consider this the next industrial revolution type step for our species. I’m sure I’m not unique in calling this the automation revolution, but that is what it is and it has some scary implications. I think we could come out better though if we focus on educating our populace, not just young people but make educating all people a priority. Unemployment should come with a grant for continuing education, and we should make sure the skills that are marketable are really encouraged as fields of study. Perhaps as the machines take many of our day to day activities it will free us up to do more creative, meaningful and artistic work. I think we totally need to plan this out though, or its going to be a nightmare.
That’s what I was referring to at the start of the post when i talked about peak employment
We’re moving towards a knowledge based economy.What does that really look like though?
People in Europe used to talk about the Easy hire and fire culture of the US being so great for entrepreneurialism – They don’t anymore.What we do notice is deeply embedded and often ill-informed “buy american patriotism” from the US work-force.It seems a little out of sync with reality and actually temporarily buffers inefficient industries against beneficial competitive threats that force them to evolve. So eventually they simply collapse.Protecting the UK Steel Industry destroyed it (and mining).Protecting National fishing fleets destroys efficiency (a factory ship can catch a years quota in a few hours or less and all that capital equipment lies dormant).Either a country is a land of opportunity, or one of protectionism, of disruptive technology or sleeping giants – mixtures of the two don’t make much sense.Similarly a highly litigious society may be kicking a can down the street to avoid the cost of social education and personal responsibilities. Eventually instead of universal healthcare you get massive insurance premiums and legal costs. Heads up – excessive regulatory frameworks whether encoded in statute or case law ultimately turn local occasional protection into systematic widespread overhead.
GE is planning to bring jobs back. I’ve read number of article recently that a trend to “reshore” is starting to emerge. http://www.ft.com/cms/s/0/2…
Great article in a recent issue of The Atlantic about the return of some (not all) manufacturing jobs to the U.S.. Interesting insight into GE (I think it was GE) reactivating some of their long dormant production lines in their main plant.
Every IT company need to outsourcing for their development..
As a resident of the Metro Detroit suburbs I truly enjoy your outlook and opinion Fred. For years now close friends and family that have graduated from top schools and are leaders in their professions have left the region, or the country, to purse more lucrative opportunities. There is little to retain them here. Its depressing.
This article provides one of the most cogent explanations for the system-level issues we have been discussing under this thread. I thought I would share it with you all:http://www.mauldineconomics…
It depends on how permanent the economic conditions are,
Definitely agree, we’ve been watching salaries for software developers in Easter Europe quadruple over the past 3 years. With government subsidies offered in Ontario it becomes more and more attractive to add local R&D team and have the benefits of both.
I totally agree with the statistics regarding the labor costs been increasing in the south asian countries and I wish the obstacles like high U.S. taxes health-care expenses and regulatory costs go down.
MODS, I think this is spam
caught it. have bad head cold.
Feel better @ShanaC:disqus !
Get better soon Shana!