The Great Andy Grove Addresses the Problem of Job Creation in America – Can Anything Be Done About the Millions of Jobs That Have Left America For Asia? – No, and That Means We Have to Fundamentally Change Our Country or We Will Be Looking At Millions of Americans in the Coming Years That Will Not Have Any Chance to Get Good Paying Jobs – We Must Start With Education and Eliminate All the Politically-Correct Crapola in the American Education System – Where Is Harry Truman When WE Need Him? – Difference Between Piano-Player in a Whorehouse and a Politician? – No Difference, AND THAT’S THE PROBLEM IN AMERICA!
The Great Andy Grove, former Chairman CEO of Intel Corporation, has written a fascinating article in Business Week, How America Can Create Jobs, that lays out the problems that America is now having in creating new jobs in the technology sector and the role that China and Asia play in where tech jobs end up being created in the world.
Andy Grove: How America Can Create Jobs
Andy Grove makes a very compelling case that the lower cost of doing business in China is one of the major factors for so many American tech jobs moving overseas which is a fundamental fact that our political leaders need to recognize if we are going to address the problem of job creation of the United States:
“Scaling used to work well in Silicon Valley. Entrepreneurs came up with an invention. Investors gave them money to build their business. If the founders and their investors were lucky, the company grew and had an initial public offering, which brought in money that financed further growth.
I am fortunate to have lived through one such example. In 1968 two well-known technologists and their investor friends anted up $3 million to start Intel (INTC), making memory chips for the computer industry. From the beginning we had to figure out how to make our chips in volume. We had to build factories, hire, train, and retain employees, establish relationships with suppliers, and sort out a million other things before Intel could become a billion-dollar company. Three years later the company went public and grew to be one of the biggest technology companies in the world. By 1980, 10 years after our IPO, about 13,000 people worked for Intel in the U.S.
Not far from Intel’s headquarters in Santa Clara, Calif., other companies developed. Tandem Computers went through a similar process, then Sun Microsystems, Cisco (CSCO), Netscape, and on and on. Some companies died along the way or were absorbed by others, but each survivor added to the complex technological ecosystem that came to be called Silicon Valley.
As time passed, wages and health-care costs rose in the U.S. China opened up. American companies discovered that they could have their manufacturing and even their engineering done more cheaply overseas. When they did so, margins improved. Management was happy, and so were stockholders. Growth continued, even more profitably. But the job machine began sputtering.”
Andy Grove is certainly dead-on about the very simple reasons that so many tech jobs were moved from America to China and Asia in the last 20 years, namely the amount of $$$$$$$ that American companies can save by outsourcing everything from engineering to assembly jobs overseas, but he then produces some stunning numbers on how increasing amount of money are being invested into tech start-ups but those companies are creating less jobs.
“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. 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 (NSM), another chip company, was even more efficient at $2,000 per job. Making the same calculations for a number of Silicon Valley companies shows that the cost of creating U.S. jobs grew from a few thousand dollars per position in the early years to a hundred thousand dollars today (figure-A). The obvious reason: Companies simply hire fewer employees as more work is done by outside contractors, usually in Asia.”
Figure A – Business Week Bloomberg
What then can be done to create high-paying jobs in America again? Andy Grove’s proposal here goes right to one of the most serious problems we have in America today, namely the disconnect between the elites in Corporate America, Wall Street and most importantly in Government that are often very well-educated and very well-paid, but that do not understand that the vast majority of Americans do not hold bachelor’s degrees and thus cannot easily function in the “knowledge economy” that often require advanced education. With America no longer creating good paying jobs for Americans without bachelor’s degrees, we end up with an economy of the “Haves” and “Have-Nots” with the “Haves” sitting On High spinning theories and ideas with little understanding that many Americans are being pummeled by the economic forces the world economy has unleashed on them.
Andy Grove continues…
“My point isn’t that Intel was brilliant. The company was founded at a time when it was easier to scale domestically. For one thing, China wasn’t yet open for business. More importantly, the U.S. had not yet forgotten that scaling was crucial to its economic future.
How could the U.S. have forgotten? I believe the answer has to do with a general undervaluing of manufacturing—the idea that as long as “knowledge work” stays in the U.S., it doesn’t matter what happens to factory jobs. It’s not just newspaper commentators who spread this idea. Consider this passage by Princeton University economist Alan S. Blinder: “The TV manufacturing industry really started here, and at one point employed many workers. But as TV sets became ‘just a commodity,’ their production moved offshore to locations with much lower wages. And nowadays the number of television sets manufactured in the U.S. is zero. A failure? No, a success.”
I disagree. Not only did we lose an untold number of jobs, we broke the chain of experience that is so important in technological evolution. As happened with batteries, abandoning today’s “commodity” manufacturing can lock you out of tomorrow’s emerging industry.”
Amen to that Mr. Grove, but is anyone in a position of power listening? We will leave you to read the rest of Andy Grove’s column and his proposals to solve the problem of not enough good paying jobs being created in the United States, including more investments by Corporate America and Government into America’s “industrial commons.”
Andy Grove: How America Can Create Jobs
While we here at Mad As Hell And… agree with Mr. Grove that American tech jobs have been moved to China and Asia because of the amount of $$$$$$ that can be saved which then goes right to the bottom-line of any company making such a move, we believe that there is something deeper going on in American society that must be addressed if we are to remain the world’s leading country.
We rather doubt that American business is going to start again start creating new jobs and hiring Americans no matter what public policies the United States adopts, because businesses are rightfully driven by generating the highest amount of return on capital and there is just no way that companies can hire Americans for the wages that they are paying to their partners and employees in Asia. Beyond just the difference in wages, we have another huge problem in the United States, and that is our failed educational system that is doing a decent job of educating the top 20 percent or so of students but is falling on its face for the 75 to 80 percent of American kids that are just not being prepared to work in the 21 st century.
At the heart of the problems in American education is that K-12 education is often little more than a glorified daycare where mediocre performance by a big percentage of students is accepted by both educators and parents with only a very small number of students leaving high school as well-educated citizens that are ready to do battle in the world economy that we all now live in. There is only one way to change the Politically-Correct Namby-Pamby Crapola that is so prevalent in American K-12 schools (and is even in many of our colleges and universities) and that is for someone to take the American educational system by the shoulders and shake its foundation to the core and if that means pissing off a lot of educators and parents in the process then so be it. The first thing that would have to happen if the schools in America were to make a dramatic change for the better would be to start really holding students, parents and teachers accountable for performance which would mean bringing back of the letter grade “F” to the classroom with any students not performing at an acceptable level being failed and forced to repeat the course and entire grade if necessary.
Please, no one should be claiming that we need to spend more money on education in America, because we are right now spending more than $1 Trillion Dollars on K-College education in the United States and we are not getting the bang for the buck for all that $$$$$$, because most of these kids coming out of high school don’t know up from down and many college graduates are not performing anywhere near the level of their counterparts in Asia.
This is all very simple. Andy Grove is right. The United States of America is in a world of hurt right now, with Hundreds of Billions of Taxpayer Dollars being wasted and spent in ways that does nothing to address the very serious infrastructure and educational problems we have in our country and we have millions of jobs that have left the U.S. in recent years and guess what? Those jobs are never coming back. In fact, the U.S. is facing a generation or two that will probably have to deal with a lack of good paying jobs and also massive debts and deficits that have been run up by these geniuses in Washington DC that will require both spending cuts and new taxes at the very moment when the country cannot really afford higher taxes on companies and individuals.
Let’s end all of this Politically-Correct BS in the American Educational System and in our Society in general, because as Andy Grove points out in his column, we have some very serious problems in our country and we have to deal with them in a very straight-forward and direct way or face what will be terrible consequences in the coming years.
Where in the Hell is Harry Truman when you need him?
A few quotes from our 33 rd President of the United States: Harry S. Truman
“A president either is constantly on top of events or, if he hesitates, events will soon be on top of him. I never felt that I could let up for a moment.
All the president is, is a glorified public relations man who spends his time flattering, kissing, and kicking people to get them to do what they are supposed to do anyway.
Carry the battle to them. Don’t let them bring it to you. Put them on the defensive and don’t ever apologize for anything.
I never did give anybody hell. I just told the truth and they thought it was hell.
I remember when I first came to Washington. For the first six months you wonder how the hell you ever got here. For the next six months you wonder how the hell the rest of them ever got here.
Men make history and not the other way around. In periods where there is no leadership, society stands still. Progress occurs when courageous, skillful leaders seize the opportunity to change things for the better
My choice early in life was either to be a piano-player in a whorehouse or a politician. And to tell the truth, there’s hardly any difference.
The President is always abused. If he isn’t, he isn’t doing anything.
Those who want the Government to regulate matters of the mind and spirit are like men who are so afraid of being murdered that they commit suicide to avoid assassination.
Washington is a very easy city for you to forget where you came from and why you got there in the first place.
When even one American – who has done nothing wrong – is forced by fear to shut his mind and close his mouth – then all Americans are in peril.
You know that being an American is more than a matter of where your parents came from. It is a belief that all men are created free and equal and that everyone deserves an even break.”
Yes, where the Hell is Harry Truman when the United States really needs him? Certainly, there are no Harry Trumans in Washington DC today, or in any state for that matter…..
