Andy Grove’s Warning to Silicon Valley

http://www.nytimes.com/2016/03/26/opinion/andy-groves-warning-to-silicon-valley.html?action=click&pgtype=Homepage&clickSource=story-heading&module=opinion-c-col-left-region&region=opinion-c-col-left-region&WT.nav=opinion-c-col-left-region&_r=0

by hvo • 10 years ago

376 257 10 years ago

nytimes.com

kelukelugames• 10 years ago

I majored in circuits because back then that's where the money and talent went in Silicon valley. Many of my classmates have since switched to software. The few remaining IC and fab people make pennies compare to the programmers. They also have PhDs to our BS and Master degrees.

Software seems more robust but I don't trust myself to make predictions.

Cyph0n3• 10 years ago

I'm starting a PhD in circuit design this Fall. What I've read and noticed is that there will be a shortage in strong hardware researchers in a few years due to the rising popularity of AI and ML. What do you think about this?

However I also have working experience in software dev, just in case this prediction doesn't pan out in the long run.

I'm actually going to work on a small business idea (likely SaaS) before my PhD starts, with the aim of scoring a modest source of income.

Chronic51• 10 years ago

The demand for AI and ML is increasing faster than the number of qualified graduates and workers. This is not true for semiconductors.

tcbawo• 10 years ago

My advice is to find something you enjoy doing, rather than what you think is marketable. You might guess incorrectly and have neither money or job satisfaction. But, don't stress too much about choosing a path. Your career will evolve over the years.

matchagaucho2• 10 years ago

If the AI algorithms can only be optimized by pushing them into silicon, then a HW background could be valuable.

However, many software architectures have yet to embrace the pipelining and parallel capabilities of today's CPUs... meaning the need for application-specific ICs could be many year away.

graycat2• 10 years ago

IMHO: Deliver products/services can get paid for. For this, move to new areas with no competition, that is, move products/services forward. For this, use new, powerful, valuable technology.

For that, broadly, supply new, valuable information. For that, take in available data, manipulate it, and report the new information as the results.

So, with all this data, find where some new, valuable information will make a good, new product/service. Then to have the first good or a much better offering, do use much more powerful data manipulations. For that, the secret is, and the candidates are, object oriented programming, processors with 1000+ cores, processors with clocks at 50 GHz+, new programming languages, new computer architectures exploiting, say, solid state disks addresses as a slower version of main memory, processors communicating with optical instead of electrical signals, quantum processors, massive parallelism of the cloud, original derivations with theorems and proofs in applied math exploiting appropriate advanced prerequisites, and may I have the envelope please [drum roll], and the winner is -- applied math!

Sorry 'bout that. Here the applied math is replacing the current ubiquitous elementary techniques, intuitive heuristics, fitting to large data sets, and copying what was long done manually.

This answer will not serve everyone or please everyone, but IMHO it is the most promising, single path forward.

botw• 10 years ago

are you majoring in applied math? can it replace ML and AI?

borvo5• 10 years ago

Hardware needs that complete ecosystem that Grove is talking about. Software doesn't need that quite so much, at least in terms of the comparable capital intensive activities.

awakeasleep• 10 years ago

“All of us in business,” Mr. Grove wrote, “have a responsibility to maintain the industrial base on which we depend and the society whose adaptability — and stability — we may have taken for granted.”

Thats the money quote to me, and so much of what is overlooked when talking about industry and to a large extent, social welfare programs. I wish the overton window included the concept of the costs required to maintain a useful, stable society.

HillaryBriss2• 10 years ago

Yes. And not only business leaders, but also the economists who've been giving these business leaders intellectual cover (and advising presidents) for decades now.

It seems that today's high ranking economists, who are highly influential and defend their intellectual turf aggressively, rely on models which ignore/omit Mr. Grove's industrial policy insights.

US consumers get cheaper manufactured goods if the US economy just simply outsources all orders for these goods to factories in East Asia. And that seems to be about as deep as these economic analyses go.

But where is the economic analysis that recognizes and quantifies the cost of losing so much domestic manufacturing capability?

When I see how long it takes Indiegogo and Kickstarter hardware makers to actually create their finished products -- because they have to travel to China to meet with part suppliers and manufacturers -- I wonder how much US innovation has been crippled by the policies top US economists have confidently articulated and defended for the last 30 or 40 years.

eli_gottlieb3• 10 years ago

When I see how long it takes Indiegogo and Kickstarter hardware makers to actually create their finished products -- because they have to travel to China to meet with part suppliers and manufacturers -- I wonder how much US innovation has been crippled by the policies top US economists have confidently articulated and defended for the last 30 or 40 years.

Yeah, it's actually a bit vexing when we lose one of the members of my team periodically for trips to China or Taiwan to deal with new hardware.

x5n1• 10 years ago

No one cares. People with capital looking to make profit see employees as interchangeable machines and as a cost center. They don't want to pay for training, i.e. 2 years experience for a junior position. They don't even want to employ people, i.e. contract work forever. They don't care if there is a loss of skills in the local market, they only care about what they have to pay now to get where they are going in the next 6-12 months. After that is anyone's guess. Don't expect them to do anything but increase their own well-being at the cost of everyone else.

luso_brazilian2• 10 years ago

"There was room for improvement, he argued, for what he called “job-centric” economics and politics. In a job-centric system, job creation would be the nation’s No. 1 objective, with the government setting priorities and arraying the forces necessary to achieve the goal, and with businesses operating not only in their immediate profit interest but also in the interests of “employees, and employees yet to be hired.”"

Although a valid concern putting "job creation" as a goal for governments can (and in a lot of occurrences in recent history, did) backfire spectacularly.

In the most reductive analogy it creates incentive for the government to create "hole diggers" and "hole fillers" type of jobs that, in aggregate, generate very few useful work while fulfilling this basic goal of job creation.

I believe this "job creation as priority" approach is inferior to both the "laissez-faire" capitalist alternative and the "basic income" social democratic one.

As an example of its dangers it suffices to see the kafkaesque process of fund allocation (and sourcing) for the public funded aerospace industry, both the military procurement (fighter jets, bombers) and the civilian NASA one.

bubbleRefuge2• 10 years ago

It can also be spectacularly successful . Although it wasn't a jobs program, WWII and its aftermath, driven by the state and centrally planned, resulted in great economic prosperity -perhaps unprecedented prosperity. Why can't we have a WWII on infrastructure, green energy, science funding, pollution cleanup, transportation, hyper-loops ?

smaddox3• 10 years ago

Those are phrased too positively. Politicians need to phrase objectives in the negative in order to scare up support.

"The War on Infrastructure Decay" doesn't have quite the same ring to it as "The War on Drugs" or "The War on Terror".

twoodfin• 10 years ago

Prosperity for whom? Certainly not Western Europe. And yeah, when you're the only major industrialized power not to be horrifically bombed, you may enjoy "unprecedented" economic activity in the following decades.

krrrh• 10 years ago

It has been argued by many that WWII was not an economic high point in the lived experiences of most citizens. Even in America which faced almost no destruction of its territory and infrastructure there was severe rationing of basic commodities, durables, and food. For a large number of people, the war years were a downgrade in lifestyle from even late depression standards.

The economy did do well after the war, but you could also attribute that to delayed purchases as spending money on new homes, automobiles, and all sorts of goods was finally possible. This combined with a much larger labour pool as some women remained in the workforce, while many families who had delayed child-rearing started families and needed to earn and spend to support that. The post-war boom years were marked by a huge reduction of central planning and government spending. Most Keynesians at the time were actually predicting a return to deep recession because of this, and the opposite happened.

zardo• 10 years ago

Although it wasn't a jobs program.

Exactly, it's not that big investments are bad, it's that doing them for the sake of providing jobs could mean employing people for the sole purpose of giving them a handout and wasting their time. You might as well just send them a check and let them have their time to raise their kids or... whatever.

luso_brazilian2• 10 years ago

> WWII and its aftermath (...) resulted in great economic prosperity -perhaps unprecedented prosperity

I don't think that applies to any other country except the U.S. England, for instance, almost went bankrupt and had to ask for an enormous loan from the U.S [1].

The entirety of the Mashall plan [2], if you only consider the western part of the iron curtain, is definite proof that WWII not only didn't benefit those countries but put those former colonial powers in a position of extreme weakness and external dependency.

Basically the only reason for the U.S. rise from an isolationist country to the superpower it became was due to the distance from the actual fighting and the fact that it had the only intact industry, infrastructure and transportation network of the whole western world.

Wars are great tools for prosperity redistribution from the losers to the winners, and from the parties not involved to the (Eisenhower coined) military industrial complex, but very lousy tools for actual prosperity creation for the same reason the proverbial "broken window" is a fallacy.

[1] https://en.wikipedia.org/wiki/Postwar_Britain#Austerity.2C_1...

[2] https://en.wikipedia.org/wiki/Marshall_Plan

borvo5• 10 years ago

WW II didn't cause that, it was the effects of the war including the subsequent dismantling of the British Empire and its trade barriers. In other words, a precursor to globalization.

zanny10• 10 years ago

I think there is a significant confluence among those who find prosperity and purpose through jobs to conflate the concepts of employment and purpose. That to not have a job is to not have a purpose, and vice versa. If we had a planned economy built around peak employment, we would have many fewer entrepreneurs and many more, as you say, hole diggers.

Socially we already do that. We have created a gargantuan advertising industry that has zero net material gain for society, whose sole purpose is to redirect dollars already in circulation to their employers. We have dramatically expanded bureaucracy in almost every industry to micromanage risk at the cost of tremendous overhead in the time of human beings spent on it. We maintain many institutions in the service industry more-so because the marginal cost of having all the participants unemployed (and thus hungry, destitute, and dangerous) is worse than just paying them do to work nobody practically would need done if not for the negative impacts of simply dropping people out of the workforce.

But this is entirely the wrong way to approach economics. It is absolutely antithetical to the human condition to start from the presumption that people need to do something for someone else for their life to have meaning. That is where entrepreneurism comes from, and we need more of it going forward, not less, as we systemically eliminate the repetitious work in our lives through technological advancement. To aspire for peak employment is to aspire for the death of aspiration. Rather than seeing a "problem" of unemployment, when the practical cause is derived from the lack of anyone willing to pay people for their time considering the skills that they have, see it as an opportunity. If we have unemployment it means everything worth doing is being done, and we should be trying to enable those who are not needed to keep society running to improve that society through innovation than to fabricate busywork for them to do to keep all the cogs in the machine in tune with one another, even if a large segment of said cogs are redundant.

And probably the best example is how I imagine most people would read that previous sentence - but there is a ton of things I want done! But practically, capitalism does not care what you want, it cares about only what those with the dollars to make their voices heard want. The unemployed should be those free to listen to the wants of people rather than money, rather than those who society condemns to poverty.

smaddox3• 10 years ago

Indeed. I think this is a strong argument in favor of basic income. If the risk of an enterprise failing were separated from the risk of not being able to eat next week, then we would have far more entrepreneurs.

ArkyBeagle9• 10 years ago

I'm not sure it's an ... axiomatic ( meaning just made up out of whole cloth ) assumption that doing meaningful things for other people is part of a path to happiness.

It may have the advantage of being true.

It does not mean that it's the only condition for happiness ( it is necessary but not sufficient ) , but I know of no good assault on this idea. Adam Smith's "to be loved and to be lovely" exists, and is deeply imbedded.

The advertising/media industrial complex problem is much more profound. But in order to propagate criticisms of it you'd sort of need the advertising/media industrial complex to get those ideas out. Still, Adam Curtis documentaries exist, the work of Marshall MacLuhan and Vance Packard and others exist.

Of these, Adam Curtis seems to have taken the thing on most directly. And it was very funny watching "Mad Men" pull its punches.

kiba• 10 years ago

The advertising industrial complex is paradoxically what employers are willing to pay for, but we humans don't need.

hitekker• 10 years ago

I am reminded of what George Orwelles wrote in "Down and out in Paris and London":

Beggars do not work, it is said; but then, what is work? A navvy works by swinging a pick. An accountant works by adding up figures. A beggar works by standing out of doors in all weathers and getting varicose veins, bronchitis etc. It is a trade like any other; quite useless, of course — but, then, many reputable trades are quite useless. And as a social type a beggar compares well with scores of others. He is honest compared with the sellers of most patent medicines, high-minded compared with a Sunday newspaper proprietor, amiable compared with a hire-purchase tout-in short, a parasite, but a fairly harmless parasite. He seldom extracts more than a bare living from the community, and, what should justify him according to our ethical ideas, he pays for it over and over in suffering.

EDIT: On a side note, I agreed halfway with what you're writing but the second half of your comment seems a bit more unclear/I'm not sure what you're discussing there. Could you clarify what you mean?

mozumder8• 10 years ago

We have created a gargantuan advertising industry that has zero net material gain for society

Why do people say this, when they know full well that advertising drives people to buy things, and therefore, drive the economy?

Balgair• 10 years ago

Wow! Fantastic comment that I woefully can only upvote once. This is why I come to HN, for thinking like this.

That said, I think you are totally wrong about this. Just look at surnames: Baker, Smith, Shoemaker, etc. The actual names of people and their families were completely centered around their employment, or more generally, what it was they did all day long. Yes, this was medieval Europe, and conditionals abound, but the same is true in many other cultures too. The surnames of Mehta or Poddar in India relate to accountants.

More generally, you mention that people needing to do something for someone else is not what humans should do. I think this is totally false. Maybe not just 1 person/baron/emperor, but I certainly think people want to be useful to other people in their community. Ok, yes, this is a gaussian curve here, like so many other things, but I would like to think that at 1 std south people still want to help others as a natural condition for mankind.

However, I do agree with you and Adam Smith that people should be mostly doing 'nothing' all day. Most of the work to feed and house people in 1st world countries is 'done.' We can easily give out the bare essentials for life, the issue is distribution, as is claimed by Minimum income folks. Though I agree with you in a mechanical sort of way, that is not the issues. The issue is emotions. Giving people free stuff is not 'fair' for most folk. And that emotional issue of fairness, something I think drives a lot of the reasons behind laws and politics, is the elephant in the room. The question quickly come out of 'why should I work if she gets free stuff all the same?' Do not underestimate the ability for people to 'game the system' either for simply the want to appear more well off than their noisy neighbors. Keeping up on the Jones's is why you see so many new iPhones in very poor areas.

Overall, I think people exist on the bell-curve between selflessness and selfishness. Most folk are 1 std north or south of the average. The real questions are where is that mean relative to Jesus and the Devil and how wide is that std relative to that?

Note: Also, time and again we are told that the standard of living here in the US is far too high for the whole planet to be able to live like us. Nearly all scientists worth listening to say that climate change is real and we have to do something about it. Weather we like it or not, the average living condition here in the US must fall to a level our planet can sustain. Possibly we are seeing this in action already.

bedhead• 10 years ago

Well put. Job creation as a goal is sort of like when public company CEO's have revenue as a goal. Look, if all you want is revenue, that's easy - we can buy companies, underprice business, do all sorts of uneconomic stuff, etc. Same goes for jobs...if all you want is someone working, we can do that pretty easily. While I understand the noble impulse to target job creation, unfortunately it leads to a lot of incentive misalignment. The real goal is creating value, or wealth.

zmmmmm2• 10 years ago

The real goal is creating value, or wealth

By itself that isn't sufficient though. The distribution of wealth is important. If you create more wealth by allocating it all to one individual and none to anybody else then that is not superior to creating a bit less total but having the median wealth across individuals be higher.

roymurdock• 10 years ago

You are invoking the famous, often-misunderstood fiscal policy outlined by Keynes. Here is the often-paraphrased text from The General Theory of Employment, Interest, and Money Book 3 Ch.10 Section VI [1]:

"Pyramid-building, earthquakes, even wars may serve to increase wealth, if the education of our statesmen on the principles of the classical economics stands in the way of anything better...If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coalmines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again (the right to do so being obtained, of course, by tendering for leases of the note-bearing territory), there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is. It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing."

Keynes was specifically referring to a community in which the aggregate propensity to consume (spend) is much closer to 1 (spend 100% of wages) than 0 (save 100% of wages):

In actual fact the marginal propensity to consume seems to lie somewhere between these two extremes, though much nearer to unity than to zero; with the result that we have, in a sense, the worst of both worlds, fluctuations in employment being considerable and, at the same time, the increment in investment required to produce full employment being too great to be easily handled.

If Keynes were observing the situation today in the US, he would probably posit that the marginal propensity to consume is closer to 0 for the US as a whole, as "the increase of employment will tend, owing to the effect of diminishing-returns in the short period, to increase the proportion of aggregate income which accrues to the entrepreneurs, whose individual marginal propensity to consume is probably less than the average for the community as a whole." I.e. the rich have a much lower marginal propensity to consume than the poor, so when wealth accretes at the top, the velocity of money slows, and the economy slows.

He would also argue that because we are at the "natural rate of unemployment" of 5%, that government public works "may become a more doubtful proposition as a state of full employment is approached. Furthermore, if our assumption is correct that the marginal propensity to consume falls off steadily as we approach full employment, it follows that it will become more and more troublesome to secure a further given increase of employment by further increasing investment."

The point? We shouldn't be afraid to take a "job creation" stance when necessary - in times of widespread unemployment, when wealth is distributed more equally and the average propensity to consume is closer to parity. But it should be viewed as a tool that needs to be properly used WRT fluctuating economic and political circumstances.

[1] https://www.marxists.org/reference/subject/economics/keynes/...

Spooky235• 10 years ago

I don't think a 1940s economist would recognize our 5% number as real. By "reforming" welfare in the 90s, we dumped millions on the disability rolls and our of the workforce permanently.

mistermann6• 10 years ago

I don't understand how the example of burying money in mines and then covering it in garbage in order that people would dig them up increases wealth - if anything that is negative wealth creation.

HillaryBriss2• 10 years ago

It would, indeed, be more sensible to build houses and the like;

This is the branch of thinking that should be extended. What exactly should fiscal stimulus _actually_ be building? THAT is the interesting discussion.

We've ruled out burying bottles with banknotes. So, seriously now, what is a truly productive thing for the government to buy?

New water systems? Repaved and widened highways? A super fat information backbone which reaches into every city and town in the nation? What?

Is there ANY category of spending -- ANYTHING AT ALL -- that can put American workers back into a position of global competitiveness?

ThomPete4• 10 years ago

The problem with a job-centric economy is that it's based on the need of humans rather than the needs of the economy.

In reality technology makes it possible for less and less people to increase their output and span of what they can control via technology.

Some day a few people will be running large systems that requires only drones, AI's and access to resources to create what today takes millions.

By insisting on keeping humans where technology is much better suited for the job we are damaging our own economy because we are creating an artificial reliance on human capital where it's not needed and thus increasing the price for everyone.

This is obviously a huge problem as more and more people will be making less and less income. The only way to mitigate this is by products being increasingly cheaper something that a job-centric economy is hindering.

We should be honest and admit that the Uber economy is a mirror into this reality where the competition heats up, driving prices down and incomes down until self-driving cars is completely removing incomes for working people.

And if you claim like many do that technology creates more jobs than it produces then you are not only wrong you also need to show what new areas you are expecting the millions of people who are already made obsolete to the job market because of technology.

Spooky235• 10 years ago

The problem with a job-centric economy is that it's based on the need of humans rather than the needs of the economy.

Society is made up of humans. The economy in your case is the tail wagging the dog.

The problem with your train of thought is that it isn't sustainable. When people get fed up and start burning ubers, the folks betting against people will be the ones finding their backs on he wall.

vram22• 10 years ago

Although a valid concern putting "job creation" as a goal for governments can (and in a lot of occurrences in recent history, did) backfire spectacularly.
In the most reductive analogy it creates incentive for the government to create "hole diggers" and "hole fillers" type of jobs that, in aggregate, generate very few useful work while fulfilling this basic goal of job creation.
I believe this "job creation as priority" approach is inferior to both the "laissez-faire" capitalist alternative and the "basic income" social democratic one.

There may be another way, that is not mutually exclusive with the other approaches. It may take longer to have an effect but could be also more permanent or effective: supporting and encouraging much more local and small self-employment and small business. (And by encouraging I mean by concrete methods, not just hand waving and "moral support" kind of stuff).

It has the effect of giving the dignity and money you get from work, without the artificial hole-digging-and-filling provided by the government (which method doesn't have the dignity if you know the work is made up just for you).

Gandhi and E. F. Schumacher (Small is Beautiful) were talking about and doing this decades ago.

There are many ways in which it can be done.

alanwatts• 10 years ago

In principle the war effort is always so planned as to eat up any surplus that might exist after meeting the bare needs of the population. In practice the needs of the population are always underestimated, with the result being that there is a chronic shortage of half the necessities of life; but this is looked upon as an advantage. It is deliberate policy to keep even the favored groups somewhere near the brink of hardship, because a general state of scarcity increases the importance of small privileges and thus magnifies the distinction between one group and another. War, it will be seen, not only accomplishes the necessary destruction, but accomplishes it in a psychologically acceptable way. In principle it would be quite simple to waste the surplus labour of the world by building temples and pyramids, by digging holes and filling them up again, or even by producing vast quantities of goods and then setting fire to them. But this would provide only the economic and not the emotional basis for a hierarchical society.

-G. Orwell

tw042• 10 years ago

Given the absolutely embarrassing state of our country, hole diggers are exactly what we need. Legitimately go pay someone to dig holes all day and lay single-mode fiber to every home. Pay them to turn a wrench replacing support brackets on a bridge.

The Works program was the single most successful employer in this country's history and we replaced it with welfare because "unemployment is low and we don't need it anymore". Stupidity. The US is a prime example of exactly how a government focused on job creation can be a raving success!

atom-morgan• 10 years ago

And when they're done? What about the jobs!

lgieron• 10 years ago

Today, the ditch digging s done with small excavators, not with hordes of guys with shovels...

billions• 10 years ago

Hong Kong is a prime example of the government improving quality of life by staying out of the way of business. http://triblive.com/mobile/6727056-96/hong-kong-free

hhw2• 10 years ago

Hong Kong's prosperity in the 80's and 90's had more to do with being the gateway between China and the West as trade started to open up, and less to do with policy or entrepreneurship, as much as some people would like to take credit for such.

WalterBright• 10 years ago

But what can be done is to re-examine tax policy and regulation that discourages hiring people.

id• 10 years ago

You know that the "laissez-faire" capitalist alternative in this situation would mean that people starve?

tim3334• 10 years ago

I'm not sure there's been perfect laissez-fair but if you define it thus:

"an economic system in which transactions between private parties are free from government interference such as regulations, privileges, tariffs, and subsidies. "

Then the best implementation I've seen was probably Hong Kong under UK governance. They had pretty much zero tariffs, light regulation, no industrial subsidy. The result was one of the fastest growing countries in the world with zero starvation.

(16% of US GDP/capita in 1960, 76% in 2016

"According to Index of Economic Freedom, Hong Kong has had the highest degree of economic freedom in the world since the inception of the Index in 1995.")

jernfrost4• 10 years ago

Not sure if those are fair analogies, nor an accurate representation of the choices. I live in a social democratic country and low unemployment has always been the cornerstone of social democratic policy. I associate basic income more with liberal politicians.

There are a lot ways in which a job centric approach would affect economic policy which doesn't necessarily mean hole diggers. E.g. in my home country Norway it was seen by the social democrats that maintain an industrial base and the jobs that came with that was crucial. That is why strict rules on usage of oil money in budgets were devised to hinder deindustrialization due to inflation and loss of industrial jobs.

When the oil was found, the conservatives in Norway were ready to hand all the work over to foreign companies. Norway had no expertise at all on oil drilling at the time. But the social democratic government decided that we should have our own oil industry and companies. They established schools, research and a state oil company to reach those goals. Some of the rules had similarities to what China has done to build up their industry with e.g. partnership rules. In fact the Chinese came to Norway decades ago to learn about our policies on this area (undoubtedly they went many other places as well). The previous Chinese experience was that foreign companies owned all the industry, knowledge and took all the profits.

The free market reforms in China has undoubtedly produced much prosperity. But it also seem clear to me that China including every other successful country has had some form of industrial policy. None of the successful asian tigers really follow a laissez-faire system. Pundits will argue they could have been more successful if they did, but I am not convinced.

ElysianEagle• 10 years ago

None of the successful asian tigers really follow a laissez-faire system. Pundits will argue they could have been more successful if they did, but I am not convinced.

Great post. I'm reminded of the book "Bad Samaritans" by Ha-Joon Chang.

knight17• 10 years ago

Congrats to the Norwegian people for making better use of their oil money. I read this article about how an Iraqi engineer named Farouk al Kasim helped them get their priorities straight [1] :

After growing up watching the benefits of Iraqi oil elude the Iraqi people, a young executive insisted that Norway do things differently.

For initial expansion of industry, I always felt that command and control economy works to an extend. Even the early soviet union was an example of rapid modernisation of an agrarian country to an industrialised one [2]. There are also examples of South Korea and how its government helped make them one of the best in the ship building [3].

To kickstart an industry government involvement is good to keep the pace and for the introduction of interlinked systems necessary for production where none had existed earlier, but there is no question the human cost soviet people had to pay and there is no justification to it. To keep people and companies from becoming complacent, the accountability and the skin-in-the—game feeling that capitalism brings is equally good. Little bit of both is what is good for developing economies and developing industrial sectors but we are still learning on where to draw the line on how much is too much but there is a lot to be learned yet.

[1] http://www.psmag.com/nature-and-technology/iraqi-vikings-far...

[2] http://www.voxeu.org/article/stalin-and-soviet-industrialisa...

[3] http://english.hani.co.kr/arti/english_edition/e_business/72...

Avner7• 10 years ago

Well said. India would be a good example of hole diggers.

If software engineers were oil, India produces the most but unlike China you don't see them producing a Baidu, Alibaba, HTC, Lenovo, Tencent etc. Like you say they have given away their oil to the West by being laissez-faire in IT. It's why there are no Jack Ma, Pony Ma type recognizable names out of India. Instead you see a Nadella and Pichai emerge in the US.

But the same country has done the opposite with its pharma/generic drug sector by being pragmatically protectionist. It's no surprise that some of the richest people in India are now from the pharma sector, which is producing much more sustainable jobs than its IT sector is.

knieveltech3• 10 years ago

"I believe this "job creation as priority" approach is inferior to both the "laissez-faire" capitalist alternative and the "basic income" social democratic one."

Maybe. My grandfather has a 6th grade education, worked semi-skilled trade labor jobs his entire life, and was able to amass a multi-million dollar fortune through nothing more complicated than buying unused land and occasionally parking cash in certificates of deposit. Admittedly something of an outlier. I mention it only to highlight what was reasonably possible for a working man 50 years ago. This being the case I question the need for new, untried solutions to problems we, as a nation, did not have 50 years ago and that we already know the cause of. Occam's Razor would have me believe the correct course of action would be to incentivize rebooting the manufacturing sector in this country while reinstating the trade tariffs that protected our industries up until the early 90's.

maxxxxx• 10 years ago

Why do we always have only extreme choices? All these approaches can work if you continue improving on things that don't work. It's like having only C++, PHP or JavaScript as choices for your system. They all can work but you have to do them right. They also can be a complete mess if you do them wrong.

mathattack• 10 years ago

I saw this a lot in Japan. Construction just to keep people employed. Large event centers that would never be filled. Roads torn up and then repaved in March just to use up budget and keep the money flowing.

The US can be just as bad - it was just easier to see as an outsider abroad.

tmptmp3• 10 years ago

I believe this "job creation as priority" approach is inferior to both the "laissez-faire" capitalist alternative and the "basic income" social democratic one.

How exactly is "basic income" superior to "hole" digging/filling type of jobs? I believe they are one and the same as far as their fundamentals are concerned, i.e. both do not create/add any value on their own to the society/economy.

Actually, I think "hole" digging/filling is superior to "basic income" as it, at least, keeps the person occupied and thus takes care of problems due to "empty mind is devil's workshop". Please correct me if I am wrong.

newjersey2• 10 years ago

Basic income is not a complete solution. It is a start. We'd still need ways to motivate people. I think basic income would be great. We could have smaller class sizes in our elementary schools. I'd like to imagine some people volunteering to take care of kids for a few hours after school because they don't have to worry about starving for not making any money.

In short, I think people will do useful work if we just give them the ability to do so. We'd still need schools and such (preferably at no cost to the students) but I think not having to worry about starving would be great for humanity as a whole.

YokoZar2• 10 years ago

Hole digging is a waste of labor. Basic income allows the person to do other valuable things, such as work a job part time and care for children or go to school. Or they work a non-hole-digging job full time.

e0• 10 years ago

Here's a direct link to the Andy Grove's opinion piece referenced in the article: http://www.bloomberg.com/news/articles/2010-07-01/andy-grove...

_yosefk• 10 years ago

From that piece: " 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.)"

I don't claim to have good/better ideas on this issue, but starting a trade war and fighting it to win does not sound very promising, especially since trade wars can develop into, well, plain wars (the decade from 1929 to 1939 had its fair share of protectionism and ended pretty badly.)

Theoretically (very theoretically), a better approach for any two countries, and eventually it might become the only workable approach, is to act to maximize the benefits for the citizens of both countries. How to get there I don't know.

lisper• 10 years ago

fight to win

What exactly does victory in a trade war look like?

Alex3917• 10 years ago

If the U.S. really had a shortage of prosperity then this would make sense. The problem is that the U.S. already has more wealth than it knows what to do with, it's just that it's completely misallocated.

And given the fact that sending our designs to China to get manufactured is basically the only thing stopping them from going to war with us, I'm not convinced it really makes sense to give up this benefit in order to 'fix' domestic problems that don't really have anything to do with globalization.

Certainly there could be more domestic manufacturing than there is currently, but just because the current system is causing some problems doesn't mean we should discount the benefits.

ctvo• 10 years ago

The article IS about the misallocation of wealth?

The concern is there will be a class of highly paid individuals in the US and a class of unemployed (replace with underemployed, low income) because we're sending all our manufacturing jobs overseas.

Grove's argument is whatever benefits you're getting for sending jobs overseas, there's a societal cost (increase inequality), as well as unforeseen future costs when innovation and technical excellence is located elsewhere.

No idea about the rest of your views.

ArkyBeagle9• 10 years ago

To some epsilon, the Pareto Distribution describes income. There's only one parameter to a Pareto Distribution - the alpha.

In at least US income distribution, we have also a curious "bump" up the food chain in addition to what a pareto distribution would predict. Isn't that the entire nail on which income inequality hangs?

"Bump" at around $250 k in this chart: https://commons.wikimedia.org/wiki/File:Distribution_of_Annu...

Other have also said that in terms of real, physical , tangible wealth there is no disparity - that all of the stock options and bonus plans have less physical referent than even a paycheck.

That seems to doom us to this state of affairs. Er, it would if the map was the territory, but the fact that this distribution exists implies the existence of forces that cause it. Are we then repeating the error of the Levellers with this?

jakelarkin• 10 years ago

Consumers will pick the best cheap gadget regardless of origin. Investors want maximal profits in a 1-3 years time frame. The system unfortunately does not afford much wiggle room for ethical and national duty when working with those constraints.

Grove's outlook also colored by difficulties of semiconductor industry. Asia in addition to having cheap labor, governments would prop up barely profitable fabrication companies as national champions, give them subsidized loans and regulatory favors. American investors & management, perhaps rightly, balked at trying to compete on that front.

ethbro• 10 years ago

The system unfortunately does not afford much wiggle room for ethical and national duty when working with those constraints.

This is strictly true, which is one of the reasons I think the onus of long-term thinking has sadly but rightly shifted to regulation over altruism.

Whereas in the past you might have had a titan of industry decide that dumping chemical byproducts of manufacture into the water supply of surrounding farms was "wrong", now the CEO will be voted out if he or she fails to make the profitable choice.

redwood• 10 years ago

Germany sets a great example here with its local industrial production base and culture.

ArkyBeagle9• 10 years ago

I have to wonder what other price is paid for that state of affairs. Is that the result of some sort of ... rigged game?

DasIch3• 10 years ago

Not at all. However Germany has a massive trade imbalance because it's exporting all these products. There are only so many countries this can work for.

Recently-ish Germany is also aided by the fact that the rest of the eurozone isn't doing so well economically keeping the euro lower in value than a German currency would be.

borvo5• 10 years ago

Yes it is: Germany controls the ECB.

spitfire• 10 years ago

Was hoping someone would mention the mittelstand.

afarrell• 10 years ago

There is a conflict of values to consider here: Do we we place a higher value on preventing relative poverty in the United States or extreme poverty around the world?

"""Poverty rates started to collapse towards the end of the 20th century largely because developing-country growth accelerated, from an average annual rate of 4.3% in 1960-2000 to 6% in 2000-10... China is responsible for three-quarters of the achievement."""[1]

[1] http://www.economist.com/news/leaders/21578665-nearly-1-bill...

ArkyBeagle9• 10 years ago

I think that Americans place a higher value on preventing extreme poverty around the world.

When faced with picky eaters, before around 1970, parents all over the USA would use the cliche that "children are starving in China."

rgbrenner2• 10 years ago

"before around 1970"

You know what happened shortly before 1970? The Great Chinese Famine--where up to 45 million people starved in the span of 3 years.

https://en.wikipedia.org/wiki/Great_Chinese_Famine

I'm not sure how saying facts out loud indicates a value preference.

jernfrost4• 10 years ago

While that is a fair consideration, for practical reasons there are very real dangers to ignoring inequality within the borders of a country. With great inequality history has given us many examples of sever political instability leading to violent revolutions and sometimes wars.

It will not benefit the rest of the world if say the US, collapsed due to severe internal conflict. There has been studies showing that high inequality actually hampers economic growth. Thus inequality in the US is not necessarily to the benefit of poor people elsewhere.

p_monk• 10 years ago

Adam Smith was making this same argument the only time he ever used the term "invisible hand." Smith assumed (incorrectly) that capitalists would always prefer their own domestic markets. For Smith, his conception of capitalism was good because it offered the best chance at achieving equality. However, globalization of capital has proven that his underlying assumptions were incorrect, so it may very well be that Smith today would have been seen alternatives to capitalism as better suited to provide equality. I believe Smith's beliefs would have led him to be something like what we call a "market socialist" these days.

The original passage from Wealth of Nations:

"He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention."

Spooky235• 10 years ago

Another issue is the scale that modern business can operate at. A free market with two players isn't really "free" in a meaningful sense of the word.

ArkyBeagle9• 10 years ago

I strongly suspect that Smith was right and that the rise of global capitalism has more in common with Mercantilism than actual Capitalism.

Then again, Smith may well be my One True Scotsman :) Isn;t there a baby in that bathwater?

I do recommend the bookTv ( CSPAN anyway ) presentation of Peter Whybrow on his book "The Well-Tuned Brain".

boreas• 10 years ago

I think you may be wrong in your interpretation of the present situation. Instead of concluding that, because modern capitalists are happy to invest abroad, Smith was wrong about their preferences, you could conclude that the world is becoming so integrated that the difference between foreign and domestic is less relevant than ever. In other words, the entire world is "domestic".

I think this could be a reasonable conclusion given the increase in the strength of property rights for foreigners ("he intends his own security") and the decrease in transportation costs and time, the two things I assume Smith was reasoning about.

matchagaucho2• 10 years ago

I love Andy, but it can be difficult to reconcile this article with the pro-globalization message in his book "High Output Management".

Had Intel outsourced the manufacturing of their memory chips during their "scale-up" phase, it's conceivable that they may have established more "partners" and less "competitors"... similar to what Apple has accomplished today with iPhone manufacturing.

majewsky5• 10 years ago

"High Output Management" was released in 1983. The article referenced here is from 2010. Maybe he has just changed his opinion.

Negative1• 10 years ago

Truly an inspiring man.

Jobs for the uneducated are disappearing and saying "well lets just educate everyone" is not enough. I'm racking my brain trying to come up with ways that tech can solve that problem but it seems like an upward battle (e.g. Uber makes anyone a cab driver, but in a few years, will fire all those people when automated cabs hit the road).

rchaud• 10 years ago

In my mind, this isn't a problem requiring a complicated tech-based solution, but one that requires a mindset change. Community colleges have long offered the sort of "job-ready" technical skills related to using machine tools, auto and home repair, electric, HVAC, aka the types of services that cannot be offshored.

But at least in America, public consciousness is still fixated around this Cold War illusion of the American Dream that necessitates a 4-year college education. America seems to prize entrepreneurialism, only when it's the white-collar, Mark Zuckerberg variety because of the promise of fantastic wealth; people running their own businesses in plumbing, home repairs etc. don't get anywhere close to that level of respect.

To some extent, technology-based solutions are already in play, with hundreds of thousands of people using online resources to learn web development and other skills. The vast majority however are learning these skills to simply keep up with the needs of their job or the job market, as with shorter average job stints these days, employers won't find it worth their while to provide or pay for that type of training.

rorykoehler• 10 years ago

It's not a tech problem, it's a social and political one. The first issue to deal with is to ask; what is the purpose of the job? If the purpose of the job is to provide a stable society then we can look at other solutions to providing a stable society too. The job does not necessarily have anything to do with the problem. It is only lifelong conditioning that would lead anyone to start from the premise that we must have jobs in order to solve the problem of maintaining social stability.

cleandreams• 10 years ago

I think the rise of Trump reflects the reality of a declining middle class and the overall problem of political stability in the face of declining opportunity and economic security for most people. In business it is easier to focus on the short term win. Corporations have profited from being stateless, from offshoring and outsourcing. But it remains to be seen what the long term cost will be. I suspect the backlash will be strong because when people have their backs to the wall they lash out.

MicroBerto2• 10 years ago

We already HAVE seen what the long term cost is. It's great for corporations, shareholders, and board members, yet terrible for the middle class, and thus a net negative on the country as a whole.

It will only continue. That is the "long term effect".

This guy is basically telling everyone from the grave to vote Trump, or Trump-like economic policies... but never utter such a thing around these parts!

eli_gottlieb3• 10 years ago

This guy is basically telling everyone from the grave to vote Trump, or Trump-like economic policies... but never utter such a thing around these parts!

I know this is going to sound tiring, but: why not Sanders?

* He's not as blatantly evil as Trump.

* He's not at all a bourgeois globalist.

* He's constantly banging on about what trouble the working class and middle class are in.

I don't see why everyone's supposed to consider Trump the default vote for people who care about class issues, since he's actually an objectively terrible candidate.

dmritard96• 10 years ago

There is supposedly some reshoring in the US but I don't really see it from hardware startups unless they have something bulky/specialized/low volume. The bigger question is not whether we should employ in one taxation region or another to concentrate wealth as we see fit, but rather how quickly generalized arms, machine vision and new manufacturing processes will impact our ability to rely on labor as a source of societal stability.

look_lookatme• 10 years ago

The concept of a revival of American manufacturing is a myth promulgated, for the most part, by one company: Boston Consulting Group.

(pdf warning)

http://www2.itif.org/2015-myth-american-manufacturing-renais...

YokoZar2• 10 years ago

Questionable revival or not, the fact remains the US manufactures more in terms of dollars than it ever has -- it just does it with dramatically fewer people.

tim3334• 10 years ago

Lithium batteries are perhaps an example. Grove had:

The U.S. lost its lead in batteries 30 years ago when it stopped making consumer electronics devices.
Unlike with microprocessors, the U.S. share of lithium-ion battery production is tiny

But now the cutting edge seems to be Tesla's Gigafactory https://en.wikipedia.org/wiki/Gigafactory_1

paulpauper• 10 years ago

The lump of labor fallacy is a pervasive one

Despite all the hype over outsourcing, the number of Silicon Valley jobs is close to the 2000 highs

http://www.spur.org/sites/default/files/wysiwyg/u168/Screen%...

Silcon Valley job growth has pretty much tracked the rest of the nation https://upload.wikimedia.org/wikipedia/en/8/8e/US_Labor_Forc...

Job creation and destruction is an inescapable part of a dynamic economy.

sbardle• 10 years ago

Manufacturing isn't coming back. Do you think your average American would put up with the conditions in a Chinese iPhone factory?

marshray• 10 years ago

When I was 20, I worked washing dishes in restaurants. I applied for a job at a semiconductor manufacturer but didn't get it. I jumped at the opportunity when it came to work with electronics at a small shop. I would have tried manufacturing. But I don't know what "conditions" you're referring to.

rleigh• 10 years ago

That's the wrong question. Would they put up with the conditions in a US factory?

It's common to see negative opinions of manufacturing jobs here and on other tech sites. I've worked in one the UK, doing 12 hour long day and night shifts (as a lab tech; I now have a PhD). It was long and hard work, being on your feet around a huge complex collecting samples from all the stages in production and then analysing them to strict deadlines. But you know what, I had greater job satisfaction from doing that than any other job to date, including the position I have now at a university. When I left the factory gates at the end of a shift, I was done, and could head home and relax in the knowledge that I'd done a good job, done my bit to keep the site and production running, and made a small but net positive contribution to the world. And got paid a decent wage for it. And working on a site with a big workforce can be very friendly environment with a lots of camaraderie with everyone working to the same goal to keep production running. You can have a lot of fun while on the job, while also working hard. As a software developer in acadaemia, and I suspect for many software developers in general, work never ends. When I leave work, the unfinished problems and backlog of untackled problems don't go away, which when coupled with deadlines and team communication, admin etc., can lead to significant amounts of stress and unhappiness and depression which I never encountered before. I suspect the lack of physical activity also contributes. And working in an open plan office with everyone plugged into headphones and on IM all day is much less social; at times I think it's like working with zombies!

In the UK, factory workers have strong legal requirements for safe working conditions, limits on hours, union representation if desired, and a host of other protections. The US has less strong employment protections, but I understand health and safety rules and maximum work hours etc. are decent. But would people want to work in a modern purpose-built manufacturing facility in the US? Hell, yes. Working on something like that can give real meaning and purpose to one's life, to be doing something real that actually contributes something physical to the world. Even if you're a small cog in a giant machine. As you head out of the factory gates and see the stream of lorries heading out loaded with product, you know that without your work that shift, they wouldn't be going, and that can give you genuine satisfaction. Ask the millions of people who lost their factory jobs to offshoring if they would go back for an answer with real meaning. I strongly suspect you'd have a majority vote yes.

I know this might not be a popular opinion, but I'll say it anyway. Manufacturing is what made the UK and the US into industrial powerhouses, which lead directly to the prosperity and quality of life we have enjoyed for decades, and its rapid decline has lead to a steep decline of both for many people, and a whole host of social problems. While the idea that a service economy will take over has been strongly pushed on both sides of the pond, it's obvious to anyone with an ounce of common sense that this isn't self sustaining; these are not wealth-creating industries since unlike manufacturing, they only transfer existing wealth around.

kwhitefoot2• 10 years ago

Well said. I wish I could give you more than one upvote.

blackguardx• 10 years ago

Have you been in one? I have. It is not something I would want to do, but it is not as bad some low paying jobs in the US.

Sweatshops exist in China, but the top electronics manufacturers (mostly Taiwan-owned) have relatively good conditions.

yasky• 10 years ago

Dear Hacker News - after scrolling 3 pages I still haven't seen the 2nd comment. Can you please implement collapsable comments? Please!?

DanBC• 10 years ago

There are a bunch of plugins that provide collapsable comment threads.

dredmorbius3• 10 years ago

They don't work on numerous browser options, including Chrome on Android (which AFAIU doesn't support extensions), or, last I checked, Android.

It's a badly needed basic function.

kwhitefoot2• 10 years ago

This one works well on FF 45 on Linux: https://github.com/tomkel/hn-collapse.

But surely a GreaseMonkey script should be able to do the job too?

hyperpallium• 10 years ago

Well, most people need employment, so of course that should be a priority of a government for/by/of the people.

The article skipped what he meant by "priorities" and "forces". Presumbly, it's not forcing companies to make up jobs, but by things like lowering employment transaction costs and making the people more valuable.

Education is the obvious one, but it needs to be education that actually does make one more valuable. Also make sure the people are healthy. Better infrastructure - pretty much all those "government" things.

jboydyhacker• 10 years ago

Another way to view what Andy Grove was saying was we neither have capitalism, socialism, or central planning. Rather we have a toxic mix in many industries like Health Care, Defense, Drug Development etc. i.e the comment that what we have is inferior to "lasssez-faire" or free market.

China has used central buying/orders to drive up artificial demand/buying and as a result has a massive over capacity and debt problem that appears to actually be stickier and worse than ours.

I think the best learning is it's better to make a clear choice on the system to allocate resources rather than hybridize it. US Example? Healthcare-- Either go completely public like those in Europe which spend 4-6% of their GDP to cover health or go 100% provide and move government out of it . These hybrid systems have us spending 20% of our income on healthcare so we get the worst of both worlds.

kushti• 10 years ago

“that the free market is the best of all economic systems — the freer the better.” - the US is following this principle only until "too big to fail" guys have problems.

ilaksh• 10 years ago

Technology can help us to make the fundamental economic structures more sophisticated in order to handle more complex goals.

The problem with running everything with simple money is that it is like running a body on doped water alone. I can't even say blood because money is one dimensional and blood has many useful components.

I think something like Ethereum is going in the right decentralized and high-tech direction. If we can have a common information platform then we can wire up our systems to be more decentralized and also have the capability to do holistic calculation and goals as well as evolve the system.

So I think having society integrate common information platform is key to turning this from a bunch of monopoly games into more like a wired game of Eve Online, or at least something where we can keep track of more than one stat ($) per entity.

nolepointer• 10 years ago

Make America great again.

hbt• 10 years ago

Note he didn't provide a solution to scaling companies domestically other than taxing offshore products.

That type of protectionism may work domestically but it means that American companies cannot compete overseas if they are being undercut on price.

It looks like technology will fix the problem in time. American companies will start manufacturing in the US but there will be no jobs, just automation.

The focus should really be: how can we increase the intelligence of the average worker so they can compete in the new economy and not just "live life on basic income" or "get an overseas job waiting to be automated".

narrator5• 10 years ago

The mystery at the center of all this is "Why is it so astronomically cheap to do the x in Asia vs the U.S?". Not just cheap as in low wage, but cheap as in finished goods costing less than the cost of materials delivered to the American factory. It's not just manufacturing.

In Thailand you can live in a high rise condo with a gym and maid service and eat out every day and do some traveling for $2000/month. That life style is 8x more expensive in San Francisco. In Argentina before the 2002 crash, the country was very expensive, but it wasn't some luxurious paradise, so it's not just that it's a developing country. AFter the 2002 crash the prices were absurdly cheap. Something just doesn't make sense, and there's an enormous amount of denial that anything's amiss. Prices are a mystical sacred phenomenon it would seem. American companies don't care why prices are cheap, they just build stuff where the prices are cheap and sell it where they are high. They couldn't care less about the mystery, neither could the politicians. It's just the magical mysterious market.

Health care prices are also a mystical sacred phenomenon. Why are they 10x in the U.S what they are in other countries? Other people get sick and die there and are willing to pay whatever money they have to get better. Prices don't necessarily scale with income per capita either. I am sick of pat answers to this question and "just-so" stories. Someone should take some cost accountants and figure out where all the money is actually going for these kinds of things and write some journal articles. It would probably reveal a lot of bizarre and interesting rough edges on the economy and maybe a fair amount of business opportunity.

Some researcher should go look at the cost to build an Intel fab in Taiwan vs the U.S and start asking why. Start with why is it 1/5 the price to build the fab in Taiwan: 1. Because the construction company charges that much. Why? 2. Because the labor is 1/2 and the materials are 1/3. Why? Because the labor's rent is 1/5? Why? Because the land for the apartment building was 1/10 the price? Why? Because there are no mortgages and the land had to be bought with savings from an export business, etc, and follow it all the way down for everything. Depth first search! Piles of fascinating economic nuggets are just sitting there untouched.

littletimmy2• 10 years ago

Can you elaborate on your last paragraph please? What is the fundamental cause in your opinion? Or are you saying it's like turtles all the way down?

narrator5• 10 years ago

The last paragraph is just speculation as to what they might find based on some investment research I've done while traveling in various developing countries. My speculation is that land prices in America are vastly inflated because there is so much credit available to buy them while in developing countries there is very little credit available for borrowing against land.

In Argentina and most of Latin America for example, most real estate purchases are done with cash. Thus, in order to buy land you have to save for years till you have the full purchase price. The cost of renting is much higher vs the land value. Less credit = lower prices. Profits and savings from productive businesses and wages have much more power in the economy than bank loans.

It's a bit like what happened to higher education in the U.S. We rapidly increased the amount of loans available and the costs skyrocketed. Same goes for the housing bubble. You increase the credit available for houses, the price goes up. You decrease it, the price goes down. This is the game we play with money in this country because everyone will always take our dollars and we can QE as many as we want.

There's a lot of arbitrage of this via buying real estate in foreign countries. Lots of retirees sell their inflated home and buy in Costa Rica and all that money drives up the prices there. We've got the dollar spigot in this country and everyone else in the world has to drink off what leaks out the trade deficit.

It's a global game and the people who have made tons of money off that game go and manufacture stuff in China for impossibly cheap where the leaky dollar spigot has not deluged and import it back to the U.S. This is where the whole export led economy thing comes from. If you are a publicly traded company in the U.S, you get to benefit from the enormous amounts of dollar spigot that floods into the S&P 500 via the banks diversifying after they receiving money from the Fed's purchase of MBSs from the banks, that then get parsimoniously dolled out to factories in Asia and elsewhere by these big companies.

tim3334• 10 years ago

Any source on "1/5 the price to build the fab in Taiwan"

Googling I found:

"Taiwan Semiconductor, the world’s biggest custom-chipmaker, plans record spending on plants and equipment this year. It’s lavishing $12 billion on factories -- more than Intel Corp. has ever spent in a year"

Which looks more like Taiwan being enthusiastic for building tech stuff rather than dirt cheap. I'm recently back from Taiwan and I'm not sure the costs are much lower than rural USA.

narrator5• 10 years ago

As I said in my other reply, that's just speculation to provide an example as to what they might find. I would really like someone to do some scholarly work on the subject to get to the real answers.

ThrustVectoring• 10 years ago

The short answer for why it's cheaper is that the west industrializing first is basically a historical accident. From of the perspective of a "make things and give them to people" optimizer, if you don't have a better reason to put things places, you'll want to put manufacturing close to people to cut down on transport waste. So, it's cheaper in Asia because prices convey information, and the information is "more things should be built in Asia because Asia has much more population than thing-making".

Another angle is asking why people are willing to spend so much money to put manufacturing in the US. Skilled workers is part of it. Another is having a low-corruption society, and all the advantages that social capital in general brings. Yet another is having convenient access to the other capital that your company needs to do business with in order to function. Like, if all the sub-components are built in the US, and your sub-component is being sold to US manufacturers, moving your facility offshore means a lot of shipping costs and delays.

dredmorbius3• 10 years ago

I think you're right to focus on prices. It turns out that there's a tremendous amount of economics that concerns itself with prices (7 chapters of Wealth of Nations are devoted to it, many other writers as well).

A crucial function of markets is in "price discovery". And there are numerous ways in which this can fail. I'm concerned that this is among the more fundamental flaws in market operations as a whole.

Keep digging at this.

I'm active at G+ ("Edward Morbius") and on reddit (https://reddit.com/r/dredmorbius), where I've been thinking about and musing on price, cost, value, and money. Somewhat frightening ground to cover, but fascinating.

Ericson2314• 10 years ago

Very simple, in the short turn as others have mentioned, the US's infra is absolutely shit and we need to poor money into that. In the long term, automation will break the Keynesian feedback loops that underlie such new-deal programs, and we should switch to basic income instead.

Nutmog3• 10 years ago

This makes no sense from a global perspective. Why was Andy keen to reduce job growth in Asia and also reduce technology growth in the whole world? Did he think Americans were more deserving than Asians? That should have been clearly unethical from a humanitarian point of view considering the higher poverty levels that are still present in Asia.

If local=better then perhaps he should have focused on job growth in California and worried about companies that export their growth phase jobs and expertise to other parts of the US - especially underdeveloped parts which won't contribute much back except cheap labor. That's also costing Californians their jobs. What makes Iowa or Arkansas more important than a booming megacity in China?

jmspring• 10 years ago

Maybe I've been around Silicon Valley too long (born here), but the key paragraph of the whole story really is this --

Mr. Grove acknowledged that it was cheaper and thus more profitable for companies to hire workers and build factories in Asia than in the United States. But in his view, those lower Asian costs masked the high price of offshoring as measured by lost jobs and lost expertise. Silicon Valley misjudged the severity of those losses, he wrote, because of a “misplaced faith in the power of start-ups to create U.S. jobs.”

MBAs and money people look at immediate costs, managers look at engineering costs, lost in the off-shoring debacle is...you actually aren't saving money in the long term.

There are specific exceptions in the case of leveraging specific expertise -- for me, looking for a WinMo optimized two way DH key handshake in assembler, send the code and email Dec 23, receive the results Dec 25, was great. But most outsourcing isn't targeting specifics, it's the generalities and that is a big issue. Costs are masked.

nxzero• 10 years ago

Often find it troubling that people find it so easy to cast an opinion on a topic they so poorly understand. Yes, this topic is important, no, I don't understand it. What is the best way to understand the current situation?

wahsd• 10 years ago

It is the biggest flaw of the existing instantiation of Capitalism in the USA, that major non-financial factors are simply left out, ignored, or simply unrealized in the calculation of value. There is massive damage being done to the USA by not just Silicon Valley, even though it plays a major roll, that is very short sighted and trades of massive profits and gains and power in the future for short term gains that are primarily financial. It's very much a kind of monopolistic system that is leading to and not many people realize the astronomical cost of the deadweight loss to the American people. To put it in other terms that Silicon Valley types may understand, we have nothing even close to market fit and are operating at negative gross margins if you take all factors into account. It is easy to fool oneself that all things are well when you cherry pick your parameters and measures.

Andy Grove’s Warning to Silicon Valley

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