US Competitiveness: An Anecdote
Here's the bigger picture--blandly described as "pessimism about US competitiveness."
I had a depressing conversation recently with someone in a retail business that's been successfully expanding into southern Europe and Africa. He's just about had it with trying to do business in the United States.
He was hesitant to explain why--he didn't want to be rude to me or insult me, he said. I told him not to worry, I wouldn't take it personally. Was it the regulatory environment, I asked? The tax code?
Not so much, he said. It was that Americans didn't work that hard and didn't understand business. They hadn't yet grasped that they were facing competition from people who were a lot hungrier to make money than they were.
They didn't pick up the phone promptly when he called. They didn't seem to be able to do anything quickly. They were strangely passive and resistant to new ideas. They were hopeless at coming up with good marketing strategies. "They still think that people will want to do business with them just because they're American and they exist."
They didn't seem to understand the importance of evaluating whether what they were doing made economic sense. He kept hearing, "Well, we've always done it this way," or "You don't understand, the economy is really bad right now." And he's thinking--bad economy? The people I work with where per capita GDP is $3,000 dollars a year aren't giving me that line.
I'm thinking about that and wondering what it means. I haven't spent enough time in his line of work really to be able to appraise it. He may be sensing something very real--or he may be rationalizing his failure to break into the US market.
It's considered pretty much a truism around here that America's superpower days are over. Whether that's reality or fantasy, I couldn't say, but I can say that I'd get this impression from reading American newspapers. Increasingly, it just sounds Third World.
I have a lot of experience, though, of discovering that things are not the way you'd think they'd be from reading local newspapers. So who knows.
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May '11
Re: US Competitiveness: An Anecdote
david foster:
One common cause of this is top management so focused on mergers/acquisitions/etc that they give inadequate attention to operations management. Another is the misuse of information technology to remove authority and meaningful responsibility from lower-level management--especially it seems in the retail industry--resulting in inability to respond quickly to local conditions.
I ran a well known brand electronics store for 10 years. The pay structure was such that the store manager could make a 6 figure income if he was profitable. It was all in his hands. Win--win big. Lose--you're gone. Most stores were very profitable and the company stock reflected it.
A Harvard MBA took over the President/CEO position. He instituted many changes that took control from the store level to the corp. level. He changed the pay plans for store managers. Now, the top pay for a manager is about $35,000. Profit is down, market share is down and the company stock has floundered ever since.
There's a lesson here for keeping local control whether it's a business or a government.
Jun '10
Re: US Competitiveness: An Anecdote
If socialist tyrants, like Barack Obama and his leftist supporters, can't take away enough of an individual's financial independence, with taxes, they'll do their best to make that individual's assets illiquid, with regulation. They understand, liquid assets are the toolbox of freedom. The socialist's goal isn't to depress the economy, but you can't tie up an individual's assets without depressing the economy. It's the natural byproduct of moving towards socialism. There's no conservative War on Women, but there is definitely a leftist War on the 1%. The 1% still have "too much freedom." It's not the money they hate. It's the freedom.
Sep '10
Re: US Competitiveness: An Anecdote
I've certainly noticed this as a worker. This whole process thing does very little but hide the poor efforts of most and deny the best efforts of a few—all in the name of the team (which mostly fumbles the ball). I happen to work at a university, i.e., the state, and the sense of entitlement—that you can work only when you want to, when your personal life does not intervene—is mind numbingly depressing. The Peter principle is alive and well, and any voicing of opposition to that, no matter how valid and helpful the input, is hugely frowned upon. It truly is masochistic to work hard and to care about your work. ... I also freelance on the side, mostly with India-based multinationals, and those folks are much more interested in me as a worker than are the chinchy corporate cut-outs who engage them. The bottom line IMHO: our recent fixation on the group (read community) with its inherent mistreatment of the individual. This will change, but not before the hard truth wins out. I expect to feel even more alienated by the time that happens, should I live that long.
May '10
Re: US Competitiveness: An Anecdote
Great point. It reminds me of what Steyn has said about technology giving modern politicians the ability to micromanage citizens to an extent that medieval kings could not.
It's not surprising that the rise of the bureaucratic mindset in politics (including at the regional and local levels) has been accompanied by the same in business. Business in America is increasingly a top-down affair with little flexibility. It's a cultural trend toward central planning.
But there is still a hands-on, unbureaucratic culture in much of America, particularly in less urban areas.
Jan '11
Re: US Competitiveness: An Anecdote
Claire Berlinski, Ed.
A good post, and a disturbing one. · 3 hours ago
I second Claire. For all the management-speak about 'horizontal' organizations where decisions & worker autonomy are made at the lowest level, artificial phrases like those noted are indications that there's little being decided at that lowest level.
I've been working for an employeer for the last three years where the shadow of Human Resources & corporate management is almost non-existent compared with my employer before that - so much better, not even close. We're given a much more autonomy with periodic audits. The vast majority of the work is focused 'on the work' vs. internal/infernal compliance.
'It's the best of times & the worst of times' - the more free the market & less onerous the regulations, the faster we can all get back to making money, making it happen and the faster those less nimble can fail.
Re: US Competitiveness: An Anecdote
The tendency in any large organization is toward bureaucracy and sloth. Fear of being Schumpetered provides the necessary corrective tendency. Or did before Obama.
Consider, from the 80s until recently regulations were manageable and personal tax rates relatively light. Risk capital for new-business formation and scale-up abounded. Dinosaur company in your industry? No problem. Create a competing start-up, raise scale-up capital in the public markets and clean clock. Or skip the start-up process and launch a takeover bid targeting the poorly managed incumbent.
Not so today. Regulations are proliferating and tax rates are rising. Sarbanes Oxley, Dodd-Frank and tight banking controls have obliterated public risk capital for all but Faceb0ok-sized success stories. Incumbents need not fear undercapitalized upstarts, no matter how smartly managed.
Worse still, a hostile external environment paradoxically favors an inefficient corporate structure. Remember the conglomerates of the 70s that Michael Milken and other takeover specialists dismantled in the 80s? They're back. The reason? The overwhelming importance of political clout. If your company is big, you have influence; if the corporate structure is complex, there are lots of places to shift money to avoid crippling taxation.
Edited on April 7, 2012 at 5:30pmSep '11
Re: US Competitiveness: An Anecdote
There are some significant barriers to entry into the U.S. marketplace that are not regulatory per se, but can drive foreign manufacturers nuts.
The first is metrics vs. English measurements. The U.S. market, for many products, still depends upon the English measurement system. Even if the marketplace has adopted a metric measurement, it is still just a substitution of a metric value that is similar to an English size--it does not match European package sizes or packaging equipment.
The second is labeling: The federal government and state governments all feel empowered to demand specific labeling.
The third is U.S. accounting rules regarding inventory, particularly for a distributor. Distributors in the U.S. focus on "inventory turn" and want to keep practically no inventory on hand, depending upon rapid re-supply. If your friend wants to ship 40' containers twice a year, a potential distributor may not be terribly interested. The distributor wants to "turn" his inventory 10 to 50 times per year.
It's also possible that what he's experiencing is American politeness. People just don't want to buy what he's selling--but it's rude to say so in so many words.
Feb '11
Re: US Competitiveness: An Anecdote
John Murdoch...."The third is U.S. accounting rules regarding inventory, particularly for a distributor. Distributors in the U.S. focus on "inventory turn" and want to keep practically no inventory on hand, depending upon rapid re-supply."
This isn't just a matter of accounting rules...keeping a lot of inventory on hand (a)ties up cash, which does have a real cost (b)takes up warehouse space, and (c)exposes you to the danger of imbalance or obsolescence as fashions and technologies change.
Mar '11
Re: US Competitiveness: An Anecdote
Claire, There is a gentleman named Peter Diamandis who arranged for the money contained in the "X Prize." That is the prize won by the team that launched "Space Ship One" into near space -- as I recall that is 50 miles in altitude. PD co-authored a book named Abundance laying out the case that another renaissance is coming at us like the headlight on a freight train.
I completely accept that you are seeing and hearing the signs of low motivation that you mention. PD gives a pretty good account of the other evidence.
I think you asked which side will prevail. Please understand that we are discussing a societal movement involving North America, Europe (western & eastern) Australia and New Zealand. The phase change moves with almost glacial slowness so we will not know for awhile.
As far as we know China, India, Africa and South Ameerica are not part of the malaise.
Ron
Oct '11
Re: US Competitiveness: An Anecdote
This inventory thing is the opposite of what Claire described. She said the businessman she talked to complained that his American counterparts wanted a large inventory and that he wanted a smaller inventory. Or did I misread that?
david foster: John Murdoch...."The third is U.S. accounting rules regarding inventory, particularly for a distributor. Distributors in the U.S. focus on "inventory turn" and want to keep practically no inventory on hand, depending upon rapid re-supply."
This isn't just a matter of accounting rules...keeping a lot of inventory on hand (a)ties up cash, which does have a real cost (b)takes up warehouse space, and (c)exposes you to the danger of imbalance or obsolescence as fashions and technologies change. · 1 hour ago
Oct '11
Re: US Competitiveness: An Anecdote
Claire Berlinski, Ed.
One example he gave was an unwillingness to discuss whether it made sense to keep inventory levels as high as they were given warehousing costs. He was very frustrated to be told, "That's just the way we do it."
Feb '11
Re: US Competitiveness: An Anecdote
Albert Arthur...I was responding to John Murdoch's statement that US distributor desire to maintain low inventory levels is driven by accounting standards: my view is that minimizing inventory (to the extent feasible given customer service goals) is an entirely rational economic thing to do independent of any particular accounting standards.
Transportation delays are an important aspect of inventory policy: if your goods are going to be on the Chinese road system and then the high seas for a month, then keeping low inventory levels in the face of uncertain demand is far more difficult than with a closer source. Which point some of the people making "offshoring" decisions seem to have missed.
Jul '11
Re: US Competitiveness: An Anecdote
david foster: John Murdoch...."The third is U.S. accounting rules regarding inventory, particularly for a distributor. Distributors in the U.S. focus on "inventory turn" and want to keep practically no inventory on hand, depending upon rapid re-supply."
This isn't just a matter of accounting rules...keeping a lot of inventory on hand (a)ties up cash, which does have a real cost (b)takes up warehouse space, and (c)exposes you to the danger of imbalance or obsolescence as fashions and technologies change.
Inventory is a direct debit on net income, too - which is why Dell has its component suppliers set up logistics warehouses right by Dell's manufacturing center,and Dell only buys the inventory out of these warehouses the day it needs it.
Given the state of logistics these days,you don't need to warehouse inventory at the manufacturing site-in fact, it's crazy to operate that model. Generally speaking, firms avoid carrying inventory like they avoid stepping into open manholes-there's not a lot of upside.You can still fill demand and be able to turn your inventory,and you don't need to build a warehouse to do it.
Jun '11
Re: US Competitiveness: An Anecdote
Claire, the more I read through this the more I believe he's been on the wrong path:
Claire Berlinski, Ed.
It could be. It's definitely part of a larger impression of what it's like to do business in the US right now, which may be accurate--or may be a product of immense American public self-flagellation, which affects how the world perceives it.
Re: US Competitiveness: An Anecdote
No, you read it right--but it's completely possible I misunderstood what he was saying.
Oct '10
Re: US Competitiveness: An Anecdote
I'm sure all good Ricochet readers keep up on the PBS Newshour, but for those who missed yesterday's, here's a fairly good clip about employers who can't find decent American workers. (Of course, PBS gives the last word to a union flack).
Dec '10
Re: US Competitiveness: An Anecdote
From my experience, this is very true.
If you cannot do it yourself ("in-house" is the term), you cannot count on it getting done anymore.
It's gotten to the point that I don't even bother sending out RFQ's anymore for things that are even remotely possible to do in-house.
It just seems like nobody want to work anymore, and it's not like these places are just busy as hell either.
When your machines and people are setting idle and your quoting staff won't reply to an email or return calls (or even produce a damned quote), I don't see another explanation except for laziness or stupidity.
It's as if everyone who knows how to work and wants to work has simply disappeared or been replaced by podpeople who look human but function exactly like a potted plant.
I keep telling myself that I'm fighting the good fight, but of late it increasingly seems as thought I am fighting it alone.
And, of course, if I do by some miracle get something built and sold, the damned govt will be right there waiting for me with its claw extended.
Edited on April 8, 2012 at 10:54amNov '11
Re: US Competitiveness: An Anecdote
Concerning inventory another thing (for small businesses anyway) is that after the recession hit there is no way to keep a good inventory (of parts, raw materials) on hand. The cash goes to the most pressing items (payroll mostly-fixed costs). You order when you have to, and the supplier is doing the same thing (it's out of stock, thus late) so you are always behind. My saying is it is so inefficient to be broke. It is a bit better now, though. Even our local UPS pitches in and lets us hold off shipments for awhile (we love these guys : ) Another thought is many are really shy on employees these days and things just don't get done as fast as they used to.
Apr '11
Re: US Competitiveness: An Anecdote
Claire,
I see some of that in my work. Strangely, in my organization, it's worse at the higher levels, and non-existant at the lower levels ie; new ideas are almost impossible to sell to senior mgmt, but easily accepted/implemented intra-departmentally.
I chalk it up to leadership (lack of vision & entrepreneurialism). You just don't see decent leadership in business much anymore.
Also, regarding US competitiveness; unless I'm forgetting something big, it still seems like qualitatively everything happens in the US.