State of the Media

We're in this boat together. Start acting like it.

Harry the ASIC Guy got into the outsourcing discussion that has been going on in EE Times, starting with the "secret" IBM layoffs, and now with revelations that Chinese engineers will work for a fifth of the salary of a comparable American engineer.  He asked fro responses but as I started getting into this I realized it was too long for a comment, so I'm putting it here today.

As usual, American corporations take it on the chin. The main excuse the corporations make is that they are beholding to their stockholders and have to maximize profits in a down economy.  Unemployed engineers, union workers and politicians say they are disloyal to America.

The truth is that everyone has a hand at sending jobs overseas.

Let's take a look at the unions and engineers first.  The largest single stockholding group in the US is retirement funds... for unions.  The pressure to maximize profits, that is causing corporations to look for offshore answers comes directly from those being pressured by the rank and file to make sure that retirement fund is healthy.  So the workers being laid off, teachers, government employees.  And if those funds start to dip because the stock market is on the skids ... like it is now ... the union pressure the corporations to up their contributions to the fund.

Second, US workers, including engineers, had a competitive advantage for many years because they had unbridled greed, superior technical competence and lofty ambition.  But they have left the field by exchanging ambition for complacency.  The attitude is, "we are the best so we must be compensated."  As I have pointed out earlier this week, low cost trumps quality in today's electronics world.  Outsourcing centers have adopted good old American greed and have come close enough to matching US competence to make the choice comparable.  They have also adopted the long-term attitude that was once the hallmark of American business.  They are willing to sacrifice monetarily in the immediate to establish dominance later.  The attitude of entitlement of American workers is making them a poor choice in today's economy. That attitude is not nationwide.  Many workers are taking huge salary cuts in order to stay competitive.  That willingness to sacrifice is not, however, taking hold within the electronics world.

Third, government still seems to think that the big stick is a carrot and can't figure out why US companies are leaving the US for other countries.  At a talk in Monterey a couple of years ago, former Seagate CEO Bill Watkins said, "If I get approached by a country that tells me if I move my corporate headquarters to their island, they will give me office space and eliminate my taxes as long as I hire locally, I'd be crazy not to take them up on it."  Watkins pointed out, even before the crash in '08, that US government makes no effort to keep US companies in the US.

Fourth, corporate management in the tech sector is lead by sheep.  They see a competitor do something and they go do it too, often at the prodding of the board and investors.  That's what got everyone excited about off-shoring in the first place.  There was little research done regarding the long term benefits.  Now we're seeing some of the early adopters of the practice rethink their decision.  Offshore jobs increased job mobility in India, so companies had to increase the amount of training for workers that might last only 6 months.  IP theft in China has cost the electronics industry billions of dollars.  The financial justification of going overseas is a lot less viable now than it was 10 years ago, especially when you factor in the significant drop in quality.

Finally, US consumers want things cheap even if they are poorly made.  That's the magic of Walmart.  It's hard to blame them in these times, but we got into that mindset long before things crashed.  I have noticed in my trips to Europe that the cheap crap for sale is only available where American tourists show up.  If you shop where the locals go, you find quality and you pay for it.  When you buy a car in Europe, you can expect to keep if for at least 10 years.  In the US, we want a new one every three.  Same with computers.  And we want a new cell phone every year.  But we can't afford that anymore.

So what are the answers to losing jobs?

1. Institutional investors -- yes, I mean unions -- need to instruct their fund managers to pressure companies to keep jobs in the US, even at the cost of higher dividends.  I've already taken that position individually with my investment manager.  I dump stock on companies that go far to deep, in my opinion, in offshoring knowing that it's going to bite them in the end.
2. Unions need to be as concerned about corporate profitability as they are about job security, and union members need to tell their leadership that.  Workers need to care about their company if they want the company to care about them.
3. American workers need to get back their competitive attitude, even at the cost of salaries and benefits.  The unusually high cost of increasing mobility and IP theft is making the wage benefits of offshoring look less attractive.  Workers would not have to lose half of what they would normally get, but 10 percent reductions are not enough.  We need to go deeper.
4. American business leaders need to grow a pair and realize that just because the investors or board wants them to jump on the latest trend doesn't mean they have to.  A CEO is hired to start trends, not follow them. One company in the UK has figured that out and is using it to their advantage.  TT Electronics has recently reorganized to locate manufacturing where demand for products is.  Their US facility is concentrating heavily on medical devices, aerospace products and military development, because that's what is hot in the US.  But they are not limited to those arenas. They key is reducing cost by reducing shipping.  The expense of moving product from an offshore facility to the actual market is becoming untenable.  By locating manufacturing near the demand, they more than make up the extra cost of higher wages.
5. For cryin' out loud Washington, start thinking about incentives to stay in the US.  Real ones.
6. We need to start thinking long-term as consumers and demand products that provide long-term service.  It's time to stop being cheap and start being smart.

Reminder on courage

A few months ago I did a post on having courage in down economies.  Today, an essay popped up in CNN on the same subject.  It was a good reminder.

Anyone who starts a business in this time is a hero.  

Anyone who funds one of these businesses is a hero.  

It doesn't even matter if the idea for the business is a brilliant one or a mediocre one.  What matters is that someone is making an effort to overcome fear.

There were too many companies that should never have been funded in the 1990s.  That's a given.  There are too few companies being funded and founded now.  And it's all based on fear.  

We really need a few heros right now.

This is interesting. Google advertises

News yesterday in the SF Chronic that Google is buying billboard space to sell it's apps.  Just wondering if that means everyone is going to start advertising now that Google is.

Haven't gone away

Just in case you were wondering, I haven't given up on blogging.  It's just that the economic recovery is well underway and I have been up to my eyeballs talking with companies about how to communicate with their markets.  In the past three weeks I've talked with representatives from three European RDAs, Peruvian entrepreneurs, a company making technology for super efficient light fixtures, green building contractors, solar power technology developers, and a revolutionary semiconductor test technology that could kill a third of the EDA verification market.

I'm also meeting with realtors and mortgage bankers about how to use social media to expand business, helping launch a catering business, counseling politicians on how to use Youtube and setting up a social network for Silicon Valley VCs.

If your business is not picking up right now, you're just not paying attention.

Hope, part 2: Hope is our responsibility, not someone else's.

"If Not Us, Who? If Not Now, When?"—Rabbi Hillel (Ronald Reagan only quoted him)

Hope requires faith, and as the Bible says, faith is not faith if you can see with your eyes what it is you are hoping for.  But for faith to live, someone's gotta have hope.

Hope is not wishful thinking.  That's because most wishful thinking is being wistful to a return to the "good old days" before you lost hope.  Hope is looking forward.  There are some people doing just that and that's what we need right now, real leaders with hope.

I've met several over the past few months that are hopeful about the immediate future.  People like former Synopsys exec Sanjiv Kaul,  Morgenthaler's Drew Lanza, and two guys forming a huge fund called NEOS that you will be hearing about over the next year.  Corporations like nVidia, Virgin, Siemens and  SAP are launching major investment funds this year and are looking all over the world.  Intel announced this week plans to invest $7 billion in manufacturing.  Government trade groups all over Europe are making plans to expand worldwide.  This is not wishful thinking.  This is hope.

I made a resolution in 2008 to expand my circle; to go beyond what I knew and who I knew so I could get a different perspective.  And boy, did my circle expand.  I was swept up a major local political campaign.  I started meeting investors and entrepreneurs from around the world.  I started getting a bigger picture of what was going on in the world.  For a while I tried to encourage others in my old circle to get their heads off their chests and look up.  I wasn't too successful.  I paid a significant financial price in waiting for a few of them to come around.  (In fact, all the people getting behind social media -- like me-- are not yet enjoying great success)  The problem was that those old business relationships were waiting for someone else to make a move before they did.

Then I remembered Ronald Reagan's inaugural address when he quoted Rabbi Hillel:  If not us, who?  If not now, when?  Hope and faith require an action on our part.  When I decided to step out and do something, I found there were a lot of people out there who wanted to do something as well. 

The horizon is clear and the opportunities are plentiful.  But not if you sit on your butt and wait for the good old days to come back.  There's plenty of room for the rest of you, but those of us moving forward don't want to hear why it can't be done.  We want to focus on how to get something done. 

A series on Hope, part one

A few weeks ago, I got an email from Dylan McGrath at EE Times asking me if I knew of any companies doing well, because he wanted to write some good news.  I told him that there was a lot of hope out there, but nothing that can be reported publicly right now.

I thought about that email for a while and decided I should talk about what is going on in the world from a larger perspective.  So Dylan, this was inspired by you.  

Bobby Kennedy said during his bid for the Democratic presidential nomination that, "Only those who dare to fail greatly can ever achieve greatly."  A lot of people may think that the US economy indicates too many people have failed greatly already and are wondering when the great achievement is going to begin.  But in this first message of hope, I want to start by saying that what we have been daring to do in the past decade is mostly hold on to what we have.  We really haven't been doing much to reach for the stars.

The first web boom that went bust was based mostly on the belief that a business could make money without a plan.  All you had to do was rely on advertising.  At least Web 2.0 is based on building relationship, although that's an indication of the loneliness of our society.  The semi industry and establishment of the internet began with the goal of democratizing the world through electronic communication and, by and large, that goal has been accomplished.  But the industry and the net lapsed into a pursuit of status and profit, rather than improving the quality of life for all people.  And the media fell into the same trap as the dotcom-mers when it stopped realizing it was a communication vehicle and started seeing itself as a sales vehicle for industry…again for great profit.

We've all forgotten the lessons of Adam Smith, i.e. that capitalistic endeavor is for the improvement of society, and that personal wealth comes as a byproduct of that endeavor.

But here’s the hope for you all:  There are a lot of people all over the world who believe that America, deep down in its gut, knows it's off the track, and they are willing to bet the farm on our ability to get our mojo back.

I've learned over the past few months that foreign governments are more than willing to help their entrepreneurs set up shop in the US to do business here, to buy and sell products and services, the hire employees, and lease office space.  I've learned these same governments are will to invest in US start-ups to move headquarters to foreign shores to hire their engineers directly.  And I've learned that there is a significant group of US investors more than willing to consider investing in foreign technology startups.

The last two Mondays I've attended seminars on European entrepreneurs and met leaders in REALLLY BIG venture funds from overseas looking to invest in US companies. There is a lot of hope out there, it just may not be where you've always looked for it. And in the next couple of posts, I want to encourage you get a piece of that hope by opening your horizons.