U.S. Competitiveness: It's Not All Doom and Gloom
I've chosen to do a separate post here simply because 200 words are inadequate to the task.
I am the owner of a small business - we just celebrated our 10th anniversary. Now much of what I have to relate here is anecdotal, so make of it what you will, but it is based on 10 years of practice and experience. My business is a small manufacturer of electronics for a niche branch of a major US industry. We're not part of the main and most visible sector, but we can see pretty well what they're doing there and have a lot of insider knowledge. I can't speak for the service or retail sectors as our products are strictly sold B2B.
1. Technology - High quality automation equipment is now within reach for small US businesses, and the inside scoop I'm hearing is that the "outsource boom" is ending. US businesses can't trust the quality or delivery times of Chinese factories, or risk the theft of intellectual property. These last few years the smarter companies have been investing in capital equipment here.
Most electronics assembly today consists of surface-mounted electronics. If you open your computer or cell phone and look closely at the parts, the lead wires of the parts do not go through the board, with the exception of some large capacitors or connectors. Look at a computer motherboard from 1993 and you'll see something different - lots of "through-hole" parts. Surface Mount Technology (SMT) was developed during the 1970's and 80's, but was cost-prohibitive for most until fairly recently. You need very precise and very fast robots to put these parts down, and these are large capital investments. In the 1990's a business of my size could not afford this kind of equipment. Now we can, but I only need to hire one very-skilled person to run the line, where in the 1990s I would have needed 6-8 people to populate boards. But that 1 person can produce in one day what my 6-8 people would have needed a week to build.
A startup with decent capital can set up an entire line for $200K to $500K. There are a number of US-based contract-manufacturers (job shops) that will do the work too if you want to hold on to your capital.
From a manufacturing standpoint, unless you're making a million pieces of something, you can absolutely stay local, and based on my conversations with our contractors, business is up big time. If you've got an idea for a product, you've got more tools than ever to bring it to fruition, if you know where to find them. And it is still a truism that America dreams for the entire world. The Chinese can build mass quantities on the cheap, but they don't design anything. American designers are still very powerful, and now the equipment is affordable enough to build it here, even when the wage gap is huge.
2. Worker Skill (and motivation) - Here's the bad news. Skilled and motivated workers are darn hard to find, but they actually always have been.
The problem is that due to our expanding welfare state, they're a lot less hungry now for work, and they've been weaned on self-esteem [nonsense] and "workplace diversity," and can lawyer up faster than you can say "Ricochet". 20 years ago it was easier to fire someone when you suspected them of theft or sabotage, or for plain laziness or redundancy, so we could treat hiring as more of a gamble. Now you've got to build a case file 1/2 inch thick or else catch 'em on camera to sack them cleanly. Workers have always been a mixed bag of the motivated and lazy, it's just a lot easier to be lazy today - even if you get fired you'll not starve. But they sure know their "rights." We'll work until our hands bleed before we consider adding even a single person, and nepotism is the new way to find that worker. Can't rely on strangers.
Oh, and too many folks want to be a managers. The last two generations have been brought up to believe that actual work is somehow beneath them. They don't want to get their hands dirty, or work extra hours during crunch times.
Three things are needed to fix this: Break the fed/teacher-union monopoly on education, lower the minimum wage, and gut the "safety nets." When Americans are hungry for work again, when they NEED work, they'll come grumbling back.
3. American Business Acumen - Claire's foreign friend does hit at a truth: Too many American businesses are run by idiots and accountants. You've got companies that don't pay on time, companies that abuse both their customers and their suppliers, and companies that are just coasting on their reputations. But those companies are starting to die rapidly, even in my industry where we have a natural protection against foreign competition. As these old companies fail, new ones are springing up, and they "get it." They're not run by the "old-timers" who rely on corruption, old brands, and buddy networks. I'm pretty hopeful here, but these guys need a good decade (as we did) to get up to speed (and the Fed can't bail out the sclerotic old companies). When they hit their stride, watch out.
As for inventory, we maintain a 52-week supply on key parts, and we know we are unique in this. Yes, this is a huge capital tie-up, but we no longer have to pay property taxes on the parts. Many of these parts have 52-week lead times, and we can't stop shipping product on account of earthquakes, tsunamis, cyclones, or tornados. Our customers are still wedded to "just-in-time" delivery, which may make their short-term books look good, but we do factor this into our prices. "Lean Manufacturing" sounds good to managers and accountants, but you pay for it elsewhere. Our suppliers love us too because we're not constantly pestering them with pull-in orders and push-out orders. Oh, and we pay our bills on time. You don't know how critical that is. When you need to call in a favor, people will bend over backward to help knowing that you'll actually pay the bill. But this is a model unique to our type of business.
All told, businesses here may be in a funk, but it's a generational funk. Our predecessors outsourced and out-promoted themselves out of work, but younger companies are rising up to fill the vacancies. They can afford the high tech gear to make their own products, and they watched as their older competition let the accountants sink 'em. There are serious problems in the labor force to be sure, and don't get me started on taxes (I need a bumper sticker that says "I pay YOUR taxes") and regulations, but "the bones are still good." It's not all doom and gloom.
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Dec '11
Re: U.S. Competitiveness: It's Not All Doom and Gloom
So many excellent points here, but do have to italicize my favorite:
Oh, and we pay our bills on time. You don't know how critical that is.
May '10
Re: U.S. Competitiveness: It's Not All Doom and Gloom
Fantastic post; thank you.
And yes indeed, surface mount devices are an enormous manufacturing win.
Apr '11
Re: U.S. Competitiveness: It's Not All Doom and Gloom
Great post. Creative destruction trumps again. Rising wages and costs in other countries present an enormous opportunity to build industry here on a new and better foundation.The most prevalent theme in your post seems to be discipline. Discipline and teamwork from both labor and management required to produce a fine product in a timely manner.
You did not mention regulation. Has the trend in increased regulation - federal, state and municipal affected you?
Mar '11
Re: U.S. Competitiveness: It's Not All Doom and Gloom
Viator: Great post. Creative destruction trumps again. Rising wages and costs in other countries present an enormous opportunity to build industry here on a new and better foundation.The most prevalent theme in your post seems to be discipline. Discipline and teamwork from both labor and management required to produce a fine product in a timely manner.
You did not mention regulation. Has the trend in increased regulation - federal, state and municipal affected you? · 21 minutes ago
Yes and no. I'm planning a follow-up piece (tonight hopefully) on some very serious issues regarding taxation and regulation. Short word on regulation, however, is:
If you're small enough (in terms of employees, not sales), the Federal regulators consider you small fry and leave you alone. As for local regulators, the phrase "blood from a stone" comes to mind.
Re: U.S. Competitiveness: It's Not All Doom and Gloom
Echoing everyone else: a great post.
"Nepotism is the new way to find that worker" is a point that really needs stress.
Nov '11
Re: U.S. Competitiveness: It's Not All Doom and Gloom
Not to whine, but I am glad you brought up the theft of intellectual property and delivery times. We had a major innovation stolen from us and used by a Chinese mfg who competes on our low end (it is a very obvious part). We could not sue, and did not complain because it's such a waste of time and doesn't really change people's minds who would buy the product anyway. We have stopped going to trade shows and this is one of the reasons- roving 'copiers'. I also mentioned in another post the inability to get a key part on time (our only thing made in China), but didn't mention the rudeness of their US wholesalers even though we have to be one of their biggest customers although in a niche market. I actually offered to take over from our young office person as she couldn't handle it. They know there is nowhere else to go for a comparable part- yet. We see an opening. Not sure if we'll jump in, but we hope some one does.
Nov '11
Re: U.S. Competitiveness: It's Not All Doom and Gloom
skipsul
Viator: Great post. Creative destruction trumps again. Rising wages and costs in other countries present an enormous opportunity to build industry here on a new and better foundation.The most prevalent theme in your post seems to be discipline. Discipline and teamwork from both labor and management required to produce a fine product in a timely manner.
You did not mention regulation. Has the trend in increased regulation - federal, state and municipal affected you? · 21 minutes ago
Yes and no. I'm planning a follow-up piece (tonight hopefully) on some very serious issues regarding taxation and regulation. Short word on regulation, however, is:
If you're small enough (in terms of employees, not sales), the Federal regulators consider you small fry and leave you alone. As for local regulators, the phrase "blood from a stone" comes to mind.· 40 minutes ago
The 'arbitrary' nature of the punishment.
Mar '11
Re: U.S. Competitiveness: It's Not All Doom and Gloom
I want to work for you. What skills do you need?
Mar '11
Re: U.S. Competitiveness: It's Not All Doom and Gloom
You're not related to me, I can't hire you :')
Feb '12
Re: U.S. Competitiveness: It's Not All Doom and Gloom
I completely understand this attitude from a company's perspective, but words fail to describe how frustrating it is from the job seeker's perspective.
Eighteen months of job searching have taught me that law firms only come in two types: so big you need great credentials and so small you need prior experience. Nobody seems willing to take a chance on a new face and train them to do a job.
Forget the American dream of "you can make your own way"; in this America, you better have family members able to grease your skids to find a job.
Mar '11
Re: U.S. Competitiveness: It's Not All Doom and Gloom
Amy Schley
I completely understand this attitude from a company's perspective, but words fail to describe how frustrating it is from the job seeker's perspective.
Eighteen months of job searching have taught me that law firms only come in two types: so big you need great credentials and so small you need prior experience. Nobody seems willing to take a chance on a new face and train them to do a job.
Forget the American dream of "you can make your own way"; in this America, you better have family members able to grease your skids to find a job. · 8 minutes ago
My wife has had the same complaint regarding law firms.
Oct '10
Re: U.S. Competitiveness: It's Not All Doom and Gloom
This is an encouraging post, particularly "...I'm hearing is that the 'outsource boom' is ending", and especially as you are addressing manufacturing. I've never understood how our economic base could be service industries for the long-term.
I have a small bit of additional anecdotal evidence. A friend with a surfboard company imports surfboards made in China to his specs. Despite the healthy profit margin and the fact that his frequent flights there are free--wife is a stewardess--he's moving his manufacturing to the States. He's tired of the quality control headaches. Now that surfboards are machine-shaped, labor costs are less of a factor, but he won't enjoy the margin he now does. He's going ahead with it nonetheless.
He's a modest part of a small industry, but as P.G.Wodehouse's characters frequently point out, "Every little bit added to what you've got makes a little bit more".
Feb '12
Re: U.S. Competitiveness: It's Not All Doom and Gloom
skipsul
My wife has had the same complaint regarding law firms. · 38 minutes ago
Beg your pardon, but why are you embracing a policy of nepotism-only hires when you know from personal experience that there *are* people out there willing to work -- people who would be valuable additions to the company but are held back by the normal "gatekeepers"?
Nov '10
Re: U.S. Competitiveness: It's Not All Doom and Gloom
skipsul:
2. Worker Skill (and motivation) - Here's the bad news. Skilled and motivated workers are darn hard to find, but they actually always have been.
The problem is that due to our expanding welfare state, they're a lot less hungry now for work, and they've been weaned on self-esteem [nonsense] and "workplace diversity," and can lawyer up faster than you can say "Ricochet". 20 years ago it was easier to fire someone when you suspected them of theft or sabotage, or for plain laziness or redundancy, so we could treat hiring as more of a gamble.
. . .
Oh, and too many folks want to be a managers. The last two generations have been brought up to believe that actual work is somehow beneath them.
Is it just my prejudice, or is some of this regional? I work with residents from all over the country, and the northeastern ones and those from California tend to have this kind of entitled attitude. The ones from the Midwest, from Texas and its surrounding states, and from the South are generally harder workers who are always trying to see how they can help, rather than what they are owed.
Mar '11
Re: U.S. Competitiveness: It's Not All Doom and Gloom
Amy Schley
skipsul
My wife has had the same complaint regarding law firms. · 38 minutes ago
Beg your pardon, but why are you embracing a policy of nepotism-only hires when you know from personal experience that there *are* people out there willing to work -- people who would be valuable additions to the company but are held back by the normal "gatekeepers"? · 4 minutes ago
Amy, I'm not endorsing this, I'm just saying how it is. I've hired outsiders, but this is a riskier proposition than formerly. Companies (especially small ones) are terrified of lawsuits that would bankrupt them, so they avoid hiring. It's a bad situation, but the solution is to get the govt. to stop treating all employers as criminals, and to respect traditional employment contracts. If you make hiring less of a risky gamble, employers will hire more. If you make it harder to fire people, you also make it harder to hire people.
It's not at all fair to you, the honest job seeker, but it's the net result of the government meddling. 1 bad employee, well lawyered, can cost the salary of many many honest workers.
Feb '11
Re: U.S. Competitiveness: It's Not All Doom and Gloom
You mentioned that you held 52 weeks of inventory and did not have to pay property taxes on the items. That's a huge competitive advantage for that location at least in your business. Where are you located? It sounds like something that is pretty unusual -- it certainly is where I live. There's a pretty large inventory tax that is dependent on what you have in inventory on a date in early January.
Are there upstream sales taxes [from your suppliers] that you have to pay on the items that you keep in inventory? B-2-B sales taxes to me are a huge problem and lead to all kinds of pricing distortion.
Governments always stress the amount of employment being generated, and I think that is a huge mistake. It should be economic activity and productivity increases that should be emphasized. Clearly you are doing this. And great post.
Apr '11
Re: U.S. Competitiveness: It's Not All Doom and Gloom
I find the need for nepotism slightly problematic. While I'm sure you can always get a lot of help and support from family for your business I would hate to have America become a nation where the only jobs people can get are those given to them by a family member. Would that not just calcify classes in America along the lines of Murphy's new book.
The greatness of America came from our ability to promote upward mobility, based on a persons own drive and ability. A business structure that depends on family to me seems a through back to Medieval times.
Feb '11
Re: U.S. Competitiveness: It's Not All Doom and Gloom
Re: nepotism in hiring: It is a big time and money commitment for a small business to seek for a new employee. It is a risk they take hiring someone who could turn out to be a bad employee.
No business has any sort of moral obligation to hire someone. Businesses have a moral obligation to make money, not conduct outreach in the name of fairness or equality of opportunity.
skipsul is not endorsing hiring some schlub who will goof off and take long lunches just because he is his brother-in-law, he is endorsing finding qualified people from qualified people he knows and trusts. That's the kind of nepotism I endorse.
Papa Toad and I run his business, and we have had experience working with independent architectural contractors, not employees. It has never saved us time, money, or trouble. Right now, he works alone. He'd rather work all night and part of the weekend than deal with the bureaucratic hassle of accounting, taxes, benefits, etc.
Mar '12
Re: U.S. Competitiveness: It's Not All Doom and Gloom
I don't think nepotism means strictly hiring family members. For instance, I would say my husband got his current job through nepotism. He isn't related to anyone there, but the head of his team used to work with one of my husband's professors and he put out work that he was looking for people with my husband's skill set. My husband had recently gone to his professor asking for help in his post-graduate job search, and she vouched for him to his current boss. New grads are a fairly blank slate; we credit his hiring to that recommendation.
I can tell you that of my entering "class" of five new hires this summer at my company, two have left for new jobs, one is gone (I am not privy to whether she quit or was fired) and two of us still work here. So 60% of them are gone, and all of us were extensively trained. When they left, new people had to be hired or duties reshuffled. This is a big cost for employers. I am sympathetic if they want to find ways to economize.
Jun '11
Re: U.S. Competitiveness: It's Not All Doom and Gloom
We just had our first job opening in three years at my tiny company. The first thing we all did was check with each other to see who we knew - through family, church, or other associations. Even publicly posting job openings can be a little bit tricky, as everyone wants a job, but few want to work.
Even the Queen of England got her job through nepotism.....