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Sat Jul 03, 2010 at 14:18:00 PM MST
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( - promoted by Fong)
Intel's co-founder, Andy Grove has written an opinion piece in Bloomberg pointing out the failure of technology firms to continue producing jobs.
He points out that Tom Freidman's A Gift for Grads: Start-Ups
The underlying problem isn't simply lower Asian costs. It's our own misplaced faith in the power of startups to create U.S. jobs. Americans love the idea of the guys in the garage inventing something that changes the world. New York Times columnist Thomas L. Friedman recently encapsulated this view in a piece called "Start-Ups, Not Bailouts." His argument: Let tired old companies that do commodity manufacturing die if they have to. If Washington really wants to create jobs, he wrote, it should back startups.
Mythical Moment
Friedman is wrong. Startups are a wonderful thing, but they cannot by themselves increase tech employment. Equally important is what comes after that mythical moment of creation in the garage, as technology goes from prototype to mass production. This is the phase where companies scale up. They work out design details, figure out how to make things affordably, build factories, and hire people by the thousands. Scaling is hard work but necessary to make innovation matter.
The scaling process is no longer happening in the U.S. And as long as that's the case, plowing capital into young companies that build their factories elsewhere will continue to yield a bad return in terms of American jobs.
What Grove means here is that the major portion of the wealth created by new businesses, especially technology businesses, including machinery, aircraft, other precision devices, as well as semiconductors, photonics, medical devices, advanced materials and some kinds of software, will not grow American jobs without their production remaining in the United States. |
| saindenver :: Andy Grove: We Don't Need Startups, We Need Jobs |
| This is because the "breakthroughs" only are part of the means of bettering the world. Edison's 99% perspiration remains in place: most improvements are incremental and associated with the production and sourcing components and products. We in North America have lost much of this, from the metallurgy to enable wind turbine bearings to advanced batteries for electronic and electrical advances, including cars and trucks. The research remains here, the knowledge goes elsewhere. In the Eighteenth Century, Holland was the center of engineering and productivity in Europe, but it was more profitable to work with financial instruments and over the next two hundred years, Dutch technology became German and British, in time for the industrial revolution.
Grove goes on to say
Today, manufacturing employment in the U.S. computer industry is about 166,000 -- lower than it was before the first personal computer, the MITS Altair 2800, was assembled in 1975. Meanwhile, a very effective computer-manufacturing industry has emerged in Asia, employing about 1.5 million workers -- factory employees, engineers and managers.
The largest of these companies is Hon Hai Precision Industry Co., also known as Foxconn. The company has grown at an astounding rate, first in Taiwan and later in China. Its revenue last year was $62 billion, larger than Apple Inc., Microsoft Corp., Dell Inc. or Intel. Foxconn employs more than 800,000 people, more than the combined worldwide head count of Apple, Dell, Microsoft, Hewlett-Packard Co., Intel and Sony Corp.
and You could say, as many do, that shipping jobs overseas is no big deal because the high-value work -- and much of the profits -- remain in the U.S. That may well be so. But what kind of a society are we going to have if it consists of highly paid people doing high-value-added work -- and masses of unemployed?
Since the early days of Silicon Valley, the money invested in companies has increased dramatically, only to produce fewer jobs. Simply put, the U.S. has become wildly inefficient at creating American tech jobs. We may be less aware of this growing inefficiency, however, because our history of creating jobs over the past few decades has been spectacular -- masking our greater and greater spending to create each position.
Tragic Mistake
Should we wait and not act on the basis of early indicators? I think that would be a tragic mistake because the only chance we have to reverse the deterioration is if we act early and decisively.
Already the decline has been marked. It may be measured by way of a simple calculation: an estimate of the employment cost- effectiveness of a company. First, take the initial investment plus the investment during a company's IPO. Then divide that by the number of employees working in that company 10 years later. For Intel, this worked out to be about $650 per job -- $3,600 adjusted for inflation. National Semiconductor Corp., another chip company, was even more efficient at $2,000 per job.
He is not alone in this. Jeffrey Immelt, General Electric's CEO, has been saying this for over a year.
There is a lot to be done, and Andy Grove and Jeff Immelt was right, we made a mistake when we used an industry policy supporting a service economy over one which makes things and performs services.
Happy Independence Day. |
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