US Jobs
Read a thought provoking article written by “Only the Paranoid Survive” Andy Grove in the recent issue of Business Week ( July 5th, 2010) on “How to make an American Job”. http://www.businessweek.com/magazine/content/10_28/b4186048358596.htm?chan=magazine+channel_top+stories
I must say, it’s an intense depiction of a very core issue that US is dealing with currently, and with the June 2010 unemployment at 9.5% with 6.8 M people as long term unemployed ; the issue certainly needs a fundamental shift not only in thinking but a timely implementation for it to have any meaningful impact over next decade. Over the last 20+ years US has virtually transferred the responsibilities of Manufacturing to Asia and particularly China and Mr. Grove argues that there is an extremely strategic connection between Innovation and Scaling of business that ultimately creates job, which the US so badly needs now more than ever before.
The view that only core innovation will be able to sustain US economy and someone else can do the execution will ultimately also ensure that most of the jobs are created elsewhere, which is what has happened in the last two plus decades. The center of gravity of innovation will also shift to locations which have the scale of execution / manufacturing available. There has to be a balance that US has to drive between pushing all of manufacturing to emerging economies v/s having them in the country. Keeping them in country in US will also mean driving overall cost of operations significantly down to ensure global competitiveness. US Govt. policies are critical to drive the investments towards creating a massive manufacturing environment that will help to create large scale employment in country. Many US companies – Large and Small Medium Businesses – have global presence and have created their own operations in multiple countries to take advantage of the local talent and also local subsidies. Companies treat the world as one – interconnected ; yet, Countries need to ensure that they have policies, environment, talent and infrastructure for them to be considered by companies in local job creation. Inspite of infrastructure and capital environment US has lagged significantly in job creation because of both lack of local talent and favorable manufacturing policies.
One of the suggestions that the US Govt must consider is to allow all the overseas funds from US companies to be brought in-country tax-free and match them with equal grant as long as they are used by these companies in creating massive manufacturing factories for products and services that will ensure significant job creations locally. Its not about having a protectionism environment ; its about ensuring that structures are in place to ensure constant and dynamic global competitiveness. Connection of free market with job creation is key, it’s as much a social responsibility as its economic, as ultimately that’s the only long term sustainable way to ensure continuous prosperity of the country.
(Views expressed in the blogs are author’s personal views only and do not represent the view of his company)
I would like to take a step back and think about it. Since this phenomenon described in this article has not started yesterday, where was Andy Grove on this point when he was running Intel? Although what he suggests about scaling up on new ideas is noble, but methinks that this article is written out of some compulsion.
From another perspective, if one thinks of USA as an organization being run by the executive offices in the White House, the change in the nature of its “business” has not been recognized so far. The value zone has moved from the manufacturing economy of the early 1900’s through the 1970’s to a services based economy from the 1980’s through to the present days. What USA should do now to regain its “competitive advantage” is to enable and promote this value zone, which is creativity, innovation, patents, etc, in different parts of the country. USA has missed the bus on building a manufacturing base to our economy decades ago to China and other parts of Asia, and Mexico. To try and rebuild that base back here would not be – according to me – an intelligent choice for anyone, including the government.
What is the next best thing to do, given our options and the limitations? If the start up environment – as we have seen in the Silicon Valley Bay Area – is spread in several parts of the country, then the US Dollar will again be on its way to be the strongest currency in the world, because people will start realizing that it is the USD that promotes innovation, and not the Yuans or Euros. Countries would then have to invest in USD to get any advantage of this creative talent.
What Andy suggests is to promote this creativity and also take care of the scaling up to ensure that “manufacturing” of those creations also happen in the USA. By that he suggests that US jobs will be protected. This argument is something like – let us keep inventing the personal computers / notebooks / iPhones etc to keep the creative / innovative edge of the US economy and also keep those creations within the US so that the jobs are not lost!! Is that the right way to look at / solve the current problem? I am not sure….any comments??
Andy suggests that a key part of innovation is the ability to scale-up the invention – I do not see anything wrong with this contention.
Trying to keep “knowledge work” in the US while shipping out “commodity manufacturing” to lower wage countries assumes that everyone in the US is capable of being a “knowledge worker”. Any society is a blend of all types of people with countries needing to provide mechanisms that can provide jobs for all types of people in a nation. I agree with Andy on this point also.
Andy’s example of Photo Voltaic cells, which were invented in the US but being manufactured in China is a good example. If those factories were situated in the US would the cells be much more expensive? Would the factories have spent time and money trying to invent new ways of manufacturing which will depress those manufacturing costs? I believe that Andy is talking about these types of innovations and inventions that are now being shipped overseas.
Is it too late to get on that bus? May be so!
Solution? Massive investments in a chosen field of research and technology just as investments made to go to the moon in the 60’s and to best Soviet Union during the cold war, kept the invention machine well oiled in the States.
My two cents!