Andy Grove: How America Can Create Jobs
July 12, 2011 6:57 PM   Subscribe

Andy Grove: How America Can Create Jobs "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."
posted by shivohum (12 comments total)

This post was deleted for the following reason: previously -- jessamyn



 
Problem: Downstream jobs resulting from American innovations get outsourced. This leads to downstream innovation happening outside America, because American companies no longer participate in the downstream processes. After a point, the original innovation stops paying, and by that time, the innovations are all happening outside America. Goodbye jobs.

Solution: "Levy an extra tax on the product of offshored labor. (If the result is a trade war, treat it like other wars—fight to win.) Keep that money separate. Deposit it in the coffers of what we might call the Scaling Bank of the U.S. and make these sums available to companies that will scale their American operations."
posted by vidur at 7:12 PM on July 12, 2011 [2 favorites]


Who can make a startup when they can't get health insurance?
posted by asockpuppet at 7:16 PM on July 12, 2011 [2 favorites]


I mean who can possibly leave their current job to start a business when current job us their only marginally affordable source of coverage? Universal coverage would source this sort of growth.
posted by asockpuppet at 7:19 PM on July 12, 2011 [3 favorites]


s/us/us
s/source/spur
damn you, autocorrect
posted by asockpuppet at 7:21 PM on July 12, 2011


Solution: "Levy an extra tax on the product of offshored labor. (If the result is a trade war, treat it like other wars—fight to win.) Keep that money separate. Deposit it in the coffers of what we might call the Scaling Bank of the U.S. and make these sums available to companies that will scale their American operations."

Absolutely, positively this. Don't dictate. American companies are free to do business where they wish. But if they offshore jobs to make a product that they bring back here to sell, then levy an import tariff and a punitive tax. The import tariff because they've chosen to be an importer and a punitive tax because they are implementing an end-run around paying their fair share as an American beneficiary.

Cheaper prices at the cost of losing jobs is not a sustainable proposition.
posted by Benny Andajetz at 7:26 PM on July 12, 2011 [6 favorites]


Perhaps our own tax system has something to do with things. We have lost jobs to Switzerland and other low tax, but high labor cost, countries. We create a great incentive to offshore jobs. This is of course not the whole problem.
posted by caddis at 7:34 PM on July 12, 2011


Perhaps our own tax system has something to do with things. We have lost jobs to Switzerland and other low tax, but high labor cost, countries. We create a great incentive to offshore jobs. This is of course not the whole problem.

The tax system has a lot to do with our present situation. An desk and a single phone on an island is enough to qualify as an offshore subsidiary where profits can be booked tax-free - just ask Dick Cheney how that works.

And today I learned something crazy that I didn't know before: Just because a company has profits booked offshore, doesn't mean that their bank account is actually offshore. The offshore bank can "own" the account while the actual funds are deposited stateside in a correspondent bank. So, no taxes and much less physical worry. Why not take things offshore?
posted by Benny Andajetz at 7:44 PM on July 12, 2011 [2 favorites]


double
posted by indubitable at 7:44 PM on July 12, 2011


I think Grove is actually partially right and partially wrong in his assessment.

The US has significant advantages that should make it a good place for creating tech workers. We have a good deal of technical know-how, a pretty decent research complex in our universities, a reasonably well educated and productive work force and plenty of capital. European and Japanese corporations have been building factories in the US because we still offer significant competitive advantages in several fields.

Some of the problem is that it presents tech companies a significant competitive advantage to outsource their manufacturing costs to companies like foxconn. It's cheaper than building a factory here and comes with less liabilities. Even if you want to build a factory here you are at a competitive disadvantage in comparison to your competitors who can outsource their operation to a low cost location.

This creates a system where we have a small number of high end employees but only limited numbers of secondary employees. From a micro level this is really good for the firm and it's shareholders but bad on the macro level as a lot of potential income (and thus demand) is lost to overseas markets.

Arguably this is where government should step in to ensure that it's a good idea for tech companies to invest in local production capacity rather than overseas capacity. One solution would be to bring about a single payer health care system which would reduce the relative cost of US workers. It would also be possible to increase the cost of overseas workers by instituting tariffs, etc. Combined with all sorts of popular items like tax expenditures on building up manufacturing jobs and you could reverse the long process of deindustrialization in this country.

But that's not free market capitalism and it might reduce shareholder profits so we brand it as "socialism" and we keep condoning a process where the gap between the haves and have nots continues to increase.
posted by vuron at 7:52 PM on July 12, 2011


it presents tech companies a significant competitive advantage to outsource their manufacturing costs to companies like foxconn.

Event this so-called advantage is at best a short-term gain. What happens in the long run is that the companies you outsource to become competitors as they gain technical competency. US companies pour a great deal of know-how into foreign manufacturing which then spreads in the companies abroad instead of at home.
posted by CheeseDigestsAll at 7:58 PM on July 12, 2011


Yoi guys realize that countries with single payer healthcare in western europe have also lost their manufacturing jobs to Asia, with the exception of Germany but that's very specialized manufacturing they do there, not consumer goods.

So while single payer healthcare sounds nice and all, it doesnt solve all problems.
posted by falameufilho at 7:59 PM on July 12, 2011


Very, true outsourcing manufacturing jobs is a very good way to give foreign competitors insight into your manufacturing process, which is liable to come back and haunt you down the road.

The problem is that shareholders don't seem to care. They want the maximum return on investment in the shortest time horizon. Growing the long term value of a company is a goal as well but it seems like too many companies feel like they can ride the precipice for a long time without falling victim to an upstart.

So it's important for governments to step in when a company's self interest conflict with the national self interest. In some cases that could be limiting the export of critical technology but that can only get you so far. It might help keep aircraft manufacturing in the US but seems unlikely to force computer manufacturers to relocate production lines into the US.

Tariffs could possibly work but it seems unlikely to be implemented in our current political environment. It seems the only real workable solution is to increase the value of the American worker vis-a-vis his competitor.
posted by vuron at 8:15 PM on July 12, 2011 [1 favorite]


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