Outsourcing problem...
 

While I like W in general, I have made no secret of my differences with his economic polic(ies) or lack thereof.

Kerry has taken a stand against companies that outsource American jobs overseas. Bush apparently is using free trade rhetoric to justify rewarding his wealthy corporate buddies with "all-you-can-eat" outsourcing.

In addition, he has cheerfully accepted close to half a million campaign dollars from a number of companies on Lou Dobbs list of the 25 most eggregious outsourcers not to mention that he owns or shares in minority stakes valued at close to $9,000,000 in companies identified as big outsourcers. Lastly and perhaps most insulting is the majority stake in a manufacturing company (not oil related) that has over three quarters of its 75 factories on foreign soil.

I'm not a big Kerry fan but at least he is taking a hard line stand on the issue.

Here's a link to Lou Dobb's response to some of his critics:

Commentary: The Dobbs Report

That will also have a link with the list of companies that are confirmed outsourcers (click on the "Exporting America" link).

I'm going to try to tune in tonight for this report:

'Middle Class Squeeze: Health Care in America'

"Monday, March 22, 2004
Join us for our series of special reports "Middle Class Squeeze: Health Care in America." The greatest decline in health care coverage is among the middle class. We take a look at the professionals, employees of small businesses, civil servants, single working mothers, freelancers and others in the middle class who can't afford health insurance. "

Sounds right up my alley, because I sure as hell can't afford it. This is where I feel the qualifications for state insurance should change...it's not just the poor that needs affordable (or even free) healthcare.

Thanks Beestie for posting the outsourcing story.

What the hel lis he going to do? Punish companies that outsource and reward those that keep jobs onshore? Good work, you just made your economy ineffecient and stagnate, wasted masses of government money and thereby increasing your already insustainable deficit and gave overseas companies an edge.

Just don't seem to get it you can't stop it. You can at best slow it a little by shooting yourselves in the foot. Welcome to globalisation. I bet 98% of the people whining about outsourcing now didn't shed a tear when all the blue-collar jobs went overseas and the prices went down.

Ironic: Link at the bottom to the India times.

That's my whole point, jag. I find Kerry's outsourcing criticisms both wrong AND hypocritical. The irony in the link was intentional.

Interesting look at outsourcing by Rory L. Terry:

Answers on Outsourcing

"The costs of the decision to outsource are not borne by the decision maker. As a society and as a country, we experience many costs from outsourcing, including the loss of jobs, social costs, higher costs of raw materials and loss of national sovereignty. Loss of jobs reduces the tax base, creates high unemployment benefit costs, and raises the cost of government retraining programs. Displaced, unemployed workers have higher rates of child and spousal abuse, alcoholism, bankruptcy, divorce, etc. As China and India and other large populations grow, they demand huge quantities of oil, gas, steel and other basic raw materials. These costs are born by all of us -- every time we fill our gas tanks, for example. And as a nation, we lose our ability to make independent decisions that are in our best interest when we are dependent on foreign debt and foreign manufacturing. This is a classic externality. "

Don't bet on it. Where I grew up in NC well-paying furniture and textile manufacturing jobs have turned into retail jobs at Walmart and Best Buy.

Copyright (C) 2004 The Economist; Source: World Reporter (TM) - FT McCarthy

Welding torches glow orange through the smog. A tangle of silver pipes and concrete structures cover the rutted ground from which the central naphtha cracker is starting to rise. Workers clamber everywhere. Here, near Nanjing in Jiangsu province, BASF is building China's most modern integrated petrochemical complex, the first to be partly funded by foreign money and kitted out with foreign technology. If the plant starts on schedule in 2005, says Bernd Blumenberg, president of BASF-YPC (the German chemical group's joint venture with a subsidiary of China's oil giant, Sinopec), 12,000 workers will have spent 72m hours using 150,000 tonnes of steel in one of the largest industrial construction projects in the world.

Yet this $3.7 billion monster is only the first--and not even the biggest--of six being planned in China. It seems that every multinational in the world is either in China already or declaring that it "cannot afford not to be". Last year, despite SARS and the Iraq war, China attracted a record $57 billion of foreign direct investment. Contracted FDI, an indicator of future investment, soared 39% to $115 billion.

Unfortunately, few foreign companies have had much to show for their enthusiasm since Deng Xiaoping re-opened the country to the world in 1992 after the Tiananmen Square clampdown. In China, first-mover advantage has often turned into first-mover curse. Early entrants, seduced by quick successes among affluent consumers in one or two cities, decided to tackle the mass market, only to encounter lower prices, fragmented customer bases, haphazard distribution and vicious domestic competition. Most responded by pouring in more resources, becoming ensnared in what Hubert Hsu and Jim Hemerling of the Boston Consulting Group call the "value trap"--the more they invested, the more money they lost.

The world's top brewers squandered hundreds of millions of dollars in China in the 1990s. The average net profit margin of China's 400 brewers (including foreign ventures) now is just 0.5%. Losses are common for companies in packaged food, food retailing, household goods and personal care.The only
foreigners to have consistently done well have ignored the domestic market and concentrated on China as a cheap base for manufacturing and export processing.

Most of these are ethnic Chinese, mainly from Taiwan, whose companies have invested more than $100 billion on the mainland, and from Hong Kong. A 2002 study by the Federation of Hong Kong
Industries found 59,000 Hong Kong-owned factories in China, mainly just across the border in Guangdong province, making everything from toys to clothes and employing 11m people. These small exporters are probably the most profitable outside investors in China. One reason, notes Gordon Redding, professor of Asian business at INSEAD, a business school near Paris, is that Chinese business people understand better than western ones how to manage uncertainty and line up long-term political support.

Connections have certainly worked for Vincent Lo, a Hong Kong property developer whose Shui On group is now one of the largest cement makers in China. Dubbed the "king of guanxi" (connections), Mr Lo made his first big splash redeveloping Shanghai's run-down Xintiandi district, to the delight of city
officials. He then took his cue from the government's "Go west" policy, moving from coastal cities to backward inland ones such as Chongqing in central China. There he won permission to buy dilapidated cement plants by promising local bureaucrats not to lay off a single worker. Mr Lo's flexibility and patience have allowed him to cash in on an infrastructure boom around Chongqing. He laughs at "Americans [who] always want to bring in whole teams of lawyers and negotiate contracts--they will be
there forever."

Even the Americans, however, seem to have learned a thing or two. In a survey of its members by the American Chamber of Commerce in China in 2002, three-quarters claimed to be profitable, and nearly 40% said their margins in China were higher than their global margins (see chart 3). "There is no doubt that companies are doing better than they were," says the chamber's then chairman, Chris Murck.

Do it yourself

Rapid economic growth has lifted the China operations of most foreign companies. But the multinationals have also learned a lot. Flexibility, as Mr Lo found, is critical. Danone, a French food group, has won plaudits in China by switching from an organic-growth strategy for its dairy products to buying up local rivals in the late 1990s. By contrast, Procter & Gamble failed to adapt, according to A.T. Kearney, a management consultancy. Its focus on shampoo worked well initially, but it confused customers with too many brands and found itself undercut by local rivals, which meant that its market share dropped from over 50% in 1998 to 30% in 2002. Now it plans to attack rural markets, a tough call.

At least P&G chose a weak joint-venture partner it could control. By contrast, Unilever invested in a host of categories it failed to dominate and chose a strong partner, leading to a string of disagreements. Unilever's Mr Gunning admits: "A Chinese joint venture is incredibly difficult." Even Kevin McCann, the former boss of Audi China, says: "No joint venture is ever good," although VW's partnership with Sanghai Automotive (SAIC) has been one of the most profitable.

Examples abound. An American businessman in north-eastern Shenyang tells of boxes of car parts piled outside a warehouse run by Jinbei GM, GM's joint-venture partner there. The warehouse manager had apparently been stealing the equivalent of five cars a night for years, "with the implicit approval of GM's partner". Confronted with the tale, GM's Mr Murtaugh concedes that: "We've had some problems with that joint venture." Such stories explain why multinationals are opting for wholly foreign-owned enterprises, or "Woofies", wherever possible.

The foreigners with the best chance of success in the difficult domestic market are those selling goods and services that local firms need, such as iron, cement and steel, or that will take years to develop. The international investment banks make around $500m a year in underwriting, equity sales and advisory fees. Lawyers, advertising agencies and accountants have strategic expertise to offer, and educational services,
especially English-language materials, are a booming niche.

Similarly, as demand for air travel soars, China's airlines need more planes, and with domestic firms decades away from being able to make big aircraft, the two global suppliers, Airbus and Boeing, are in a sweet spot. Though a late entrant, Airbus is winning orders for relatively little investment. Laurence Barron, president of Airbus China, says it will be "politically correct" for the company to quadruple the $15m of manufacturing contracts it currently awards to Chinese firms by 2007. But that should also lower its costs.

The product does not even have to be sophisticated. With 1,000 outlets on the mainland, Kentucky Fried Chicken is China's leading fast-food chain. Samuel Su, China president for its American parent, Yum! Brands, says it has been successful because it offers the Chinese a rare combination of safe, tasty food in clean surroundings with American cachet, all at a reasonable price.

For those who have to battle against local, often unfairly subsidised competition, success usually requires a dash of unorthodoxy. Honda entered China late but cheaply, snapping up Peugeot's Guangzhou plant for $250m in 1998 when the French retreated. Counter-intuitively, Honda then sold its Accord as a
luxury sedan to businessmen, rather than betting on a cheap family car like its rivals. Production and profits have soared ever since.

Carrefour, a French hypermarket retailer, has built up China's second-largest chain of stores by ignoring the requirement for central-government approval of retail joint ventures. Instead, it signed deals with local city governments, in the expectation that once the stores were open, the central government would not shut them down. It worked.

But in absolute terms the earnings of foreign firms in China are almost certainly still small. A study of American Commerce Department data conducted by a research publication, China Economic Quarterly, showed that direct and indirect profits made by American affiliates in China amounted to $2.8 billion in 2001--less than the $4.4 billion made in Mexico, with a population of just 100m.

Although profitability has undoubtedly improved, many companies are not even covering their cost of capital, much less getting a proper return on their investment. Norman Villamin at Morgan Stanley says that some multinationals deliberately lower the required rates of return for their China operations to wave
through projects that would not usually qualify, and charge costs to head office to make the China arm seem more profitable than it is.

Foreign investors that concentrate on exports or use China as a source of goods, such as Wal-Mart, will definitely benefit from the mainland's cheap labor. "Businessmen should take the low-hanging fruit and limit their investment," argues Kenneth Lieberthal, a China expert at the University of Michigan Business School. A few large multinationals, notably General Electric, are planning to go much further, moving advanced production lines and research facilities there in order to transform their entire corporate cost base. But many of those lured to China for the domestic market will struggle to generate sustainable profits. And all foreign companies have to face the fact that China is still not a rational place to do business.

Well, the question is really not about foreign corporations making a killing in Chinese domestic markets, now is it? Our British cousins already did that one better than anyone before or since with the introduction of opium from what was then the British colony of India. Lets talk about the impact on the domestic economy of the U.S. here and now.

Wally World deserves far more than a brief sentence here. A trip to the local Walmart can be an extremely disturbing experience for one who looks at the labels and considers their implications. Do you know that at Walmart you can no longer buy a pair of shoes made anywhere but in China? And its not just shoes. Check out the electronics department. Look at the TV's and VCR's. Go look at the lamps and the towels and the hardware - all made in China. The industrial/manufactoring base of the US is vanishing more rapidly than an endangered species in the rain forest.

The US economy is becoming one which is agrarian and service based - rather like that of the South prior to the Civil War. It was nice for a brief while for the plantation owners, but when Sherman decided to make his march to the sea, there was no stopping him.

Our own government and corporate interests have sold the US down the river, and, I for one, do not appreciate being reduced to the hard life of a cotton or tobacco farmer. Corporate America has short sightly given away this nation's manufactoring jobs for the sake of a brief profit fix. Consumers are in and producers are anywhere but here.

The whole thing is a house of cards which ultimately will collapse upon itself. A telemarketer cannot command the salary of a steel worker, nor can we rebuild the World Trade Center upon imported steel girders - not without inviting a second and even more profound collapse.

Welcome to the Cellar, marichiko.:) It's always nice to have a new member that has their head on straight.
Thompson (RCA) is closing their last two TV picture tube plants in the US because they are moving their entire manufacturing operation to China. They say it makes economic sense because that's where the market is and not just because it's cheaper to make them there and ship them here. I guess they can see there won't be any market here with all the jobs gone.:(

Perfect example of what I'm talking about. Take away US jobs and you take away the US market. It doesn't take a rocket scientist to figure out that someone with no job or one in the low paying service industry can no longer consume the products corporate America needs us to buy so their profit margins will continue to look good. (and thank you for your gracious welcome)

Because it's my job to mention the other side of this, a couple of weeks ago I bought a TV. Flat-screen CRT-type 17" Philips (NL) at Best Buy. What do you think I paid.

$179.

I don't need a great job to buy that TV.

I do not think we should make these things in the US if they are going to be such a low profit margin. We should be making the big screen ones that cost thousands.

If they don't make the high volume line here, they won't make any here.
There are a lot of people (and growing) that can't afford $179. A guy with a wife and kids, mortgage, car payments and debts, that suddenly loses his $15/hr job and has to take an $8/hr job will never recover. The thing that made America great was the middle class. They spread the wealth around and kept the service industry and retail suppliers alive. One person with a million doesn't spread it aroud like 10 people with $100k do.
There is no guaranty the guy with the million is going to invest in growth either, so save your breath,...er, ink....er, electrons. :p

The Economist had a massive special on China this week, made for interesting reading but nothing groundbreaking or that people who work on the ground did't know - China is a funny place to do business and the domestic market is a flighty bitch to deal with. As one of the articles stated 'companies should go for the low hanging fruit - cheap labour'.

History does not agree with you. When jobs disappear, then we run up debt to keep buying those things. However you completely miss the villian's identity.

Honda Accord and Civic were the two best selling cars in America. Where did the Honda CVCC engine come from? Ford Motor company where the technology (stratefied charge engine) was stifled for almost 20 years by Henry Ford - a man who did not even know how to drive a car. Where did the Sony Trinitron come from? Philadelphia. Top management saw big bonuses if they sold the technology to Sony. Where was the VCR developed. Top and greedy Ampex management (as a result of their MBA training) realized big bonuses by selling the technology to Japan rather then empower American innovators.

How long do your wiper blades last? If less than one year, then you are probably buying them from companies such as Trico who sell only on costs. Wiper blades every three months - because you keep telling the enemies of American industry to make things cheaper rather than better. A smart Trico executive would have used the long lasting rubber that comes standard on most new cars.

Jobs going overseas is only a symptom - of bad domestic management who cannot even take a risk - innovate. Why is AT&T now nothing more than a circuit switch provider? Why did they abandon virtually every new or innovative part of the communicaton industry? Top mangement was so MBA trained as to only see short term profits. This is the mentality that causes jobs going overseas. Top management that does not come from where the work gets done. Top management who gets there by purchasing politicians (First Energy) rather than innnovate better and new products. The only source of American jobs - innovation. Innovation means top management must come from where the work gets done rather than legally grease the palms of greedy politicians.

Top management is hired/fired by the Board of Directors and the Board is voted in/out by the stockholders. Now that very large chunks of that stock is purchased by Mutual Funds, who votes that stock? The Fund managers whos job depends on the stocks showing a gain every year?:confused:

More stuff related to outsourcing:

Outsourcing and its effects on new CS undergrads

and

Our school system sucks

These articles are fairly general but as a future computer science grad it has me worried. Why hire an American programmer for $35 dollars an hour when you can get an equally capable Russian one for one-third the cost? Even the computer gaming industry is starting to outsource.

Also as said earlier by tw, the selling of our innovation to foreign competitors for short term gain is not helping the situation at all. Makes me wish I understood economics a little better, although it seems the financial analysts of the world don't have a clue either.

I suggest you study history. Consider the case of Germany after the First World War. That nation was saddled with huge reparations to pay the victors of the war and also suffered from the world wide economic depression of the 30's along with everyone else. There were no jobs. The economy was a shambles and Germany ran up so much debt that their currency became worthless, and if you look through the history books you'll find pictures of German people with wheel barrels full of worthless money.

What was the result? Hitler.

The US is not paying massive reparations to other nations. However this economic situation you have defined occurred previously in the 1970s. No reparations. Just job loss compensated for by massive debt and a president whose solution was to have both 'guns and butter'. People kept working. But to punish an economy that was basically printing money, economics too appropriate revenge. Therefore we got something that should not happen - stagflation. And then even jobs were disappearing.

The prolem was solved when interest rates were run up approaching 20%. Only then was inflation eliminated. Ironic how many events of the 1960s are being repeated today. Hopefully someone remembers those lessons of history; we don't repeat the economic stagnation called he 70s.

In the meantime, post WWI Germany teaches us nothing.

Selling or stifling innovation is one one factor of a larger problem. The point is that there is no simple magic solution. To be for outsourcing or against outsourcing means both sides are ignorant.

For example, as the article implies, about 50% of our technical people come from immigration. Not so much because our school system sucks. Mostly because so many Americans would rather say "Math is Hard" (a direct quote from 'Barbie') rather than do the hard work. Many people think trivial courses for an MBA are hard.

Previously I asked how many knew what a Karnaugh map was. Only one out of ten posters could answer. IOW what - maybe 10% or 20% of the technical people here even knew a basic and important logic tool. Much like a math major not able to factor a polynomial. Yes there is another problem. But we solve that problem, in part, by massive immigration. The rest is solved by outsourcing.

How many build computers? If so, then how many of those power supply specs do you builders first study? IOW most computer builders (who talk as if they were experts) don't even know basic functions in a power supply. They purchase only on price - the only specification they understand. As a result, failures that should never happen are too common in clone (home built) machines. Those PSU functions are so trivial and yet in a high tech nation, even computer repairmen often don't know what those PSU functions are, why they exist, and why they are so important.

So yes. We have another problem. Every year since 1990, America has graduated less engineers. Not less engineers by percentage. Less engineers by numbers. So much a problem that Leigh U, once known as The Engineers, is now called Mountain Hawks as their engineering schools are being replaced by business schools. IOW people who know how to enrich their own pocket but who cannot see an innovation if it was stuck up their nose. People so corrupt as to think the purpose of a business was to make money.

So yes, another reason for outsourcing is a nationwide attitude that we are technically knowledgeable but do not have to do the hard work to first learn. Too many computer experts who know about as much about computers as truck drivers know how to design a truck.

A third reason for the problem was specifically cited in another post. We spend big bucks on ISS - that does no science. We killed the Super Collider that was necessary to advance America's potentially future products, markets, and jobs. IOW with an MBA for president, how do we create new jobs? Promote a boondoogle to Mars? Why not just pay everyone to replant their lawns and call it a tax cut. Or give more money to the rich. That certainly will make more jobs...... To create new jobs, top management must not play money games with Mars missions while innovative science is quashed. Just another reference to the Union for Concern Scientists multi-year study on how George Jr even perverts science for his own political agenda. Just another reason why outsourcing of *low tech* jobs hurts more.

Stifled new innovations means less jobs as China, et al figure out how to do the stuff many of us currently do in Philly. How many will be working on jobs based upon Quantum Mechanics in ten years? That means one understands principle of Quantum Mechanics today.

Plenty of reasons why outsourcing occurs. But none of the political remedies about being for or against outsourcing fix anything. That rhetoric is for the same minds who call themselves computer savvy but don't even know how electricity works. Plenty of reasons why outsourcing is a problem. And none of those political soundbytes provides a solution - let alone really identifies reasons why outsourcing can be a problem.

Why tw is completely wrong, part n
 

On the racial inferiority of Americans ("Math is hard"):

1) Our primary and secondary school systems do mostly suck. Badly. Particularly in mathematics.

2) The immigrants we see in the technical fields are not representative of their populations as a whole; there's a sampling artifact. Bright people in foreign countries often come here for post-secondary education because we DO have a good post-secondary system. And they come here to work, because this IS still a relatively good place for technical people to work. Personally, I'd like to see that continue; I'd much rather compete with an Indian here than that same Indian in India, for what should be obvious reasons.

On what sort of technical education is necessary:

A technical person not knowing what a Karnaugh map is does not reflect much on them; Karnaugh maps are almost never needed in either academic computer science or in programming. They have more application in Electrical Engineering, actually -- but even there, logic reduction is more easily automated than done via Karnaugh map, for problems of the size a Karnaugh map can handle.

In any case, a Karnaugh map is a specific tool, not a basic concept. If you want to go to a math analogy, it's more like synthetic division than factoring a polynomial.

On building computers:

"Building computers" nowadays is like Lego for adults.

On engineering majors being replaced by business majors:

Engineering can be and is being outsourced. It's only rational to pick a major which is more likely to avoid that pitfall. That was a point of the article. You're putting the effect before the course.

On abstraction violation:

You don't NEED to know a thing about electricity to program a computer. There is absolutely no benefit to the programmer in knowing how a transistor works, or a voice coil, or a power supply. Or quantum mechanics, for that matter, which underlies them all. A future computer which ran entirely on photonics would not affect programming or theoretical computer science in the least. For the same reason, you don't need to know x86 assembly language to understand how Windows works, nor do you need to know programming at all to understand how to use Word or Photoshop. All different layers of abstraction, and -- if the people doing the abstraction have done their job well enough -- knowledge of lower layers is not necessary for expertise in the upper layers.

I was looking at It courses. I looked at the market. yea bloody right. Unless you're some kinda of uberteach you're an idiot to do a CS degree today. Same applier to engineering. R&D will go overseas next. Personally I'm going for industries that aren't vunerable and getting myself out of the whole joke ASAP.

Re: Why tw is completely wrong, part n
 

Rightly so. But the computer expert that only knows how to program is called a technician. Technicians are support personel. Designers must have sufficient knowledge of related technologies. They must know more than just programming to even be considered computer experts - to be able to effectively innnovate.

A computer repairman who only 'shotguns' need not know anything about electricity. (Shotgunners are not good repairman anyway.) But a desiger to build a reliable machine - even if only 'rack and stacking' the machine (buying motherboard, power supply, disk drive etc) - must even understand basic electrical parameters to appreciate what does and does not makes a machine reliable.

Just because someone can program - knows nothing about hardware or electricity - does not make a computer expert. Such people with so limited technical knowledge are called technicians - or technical support people. A productive economy needs people who can innovate - know more than a technician so the innovator can employ (make jobs for) technicians.

Discussion is about outsourcing. Why do the job here if top management does not have sufficient knowledge to 'innovate' a new product? It is easier to outsource - let them foreigners do the hard work. Then the domestic MBA can reap $millions - and not have to get his fingers dirty with innovation. That is but one problem in America. A many faceted problem called outsourcing. Many companies find it easier to drop the 'dirty innovation' on foreign designers rather than *risk* doing the design at home.

Why would a domestic design be so risky? Because the bean counting manager could not understand how to support or effectively employ innovators. Simpler and safer for an MBA to let foreigners do the hard part. Just one of many different reasons why outsourcing exists - technical incompetance in top management.

How can these engineers operate without understanding basic microeconomics? It's the principles by which most of the business world around them operates. Without a complete understanding of it, they are not even capable of making the decisions of middle managers.

Economically, perhaps...but politically, well...I really don't need to go there, do I?

All over China, parents tell their children to stop complaining and to finish their quadratic equations and trigonometric functions because there are sixty-five million American kids going to bed with no math at all.
;)

Originally posted by tw:

Not to hijack the thread but this is definitely a good point. Its easy to make an unstable system by doing things like say, putting too many devices on a voltage rail that isn't rated to handle it. I've seen it happen before.

Originally posted by russotto:

Not true. Technically, any idiot can build a computer but can he make it stable, fast, and cheap? There are a lot of places a person can screw up because they don't understand how all of the components interact with each other and what parts are TRUELY compatible with each other. Granted, building a computer is far from the hardest thing to do in in computer science but its certainly not legos.

A person does not need to know the nitty gritty to be a programmer or a network specialist but it helps. When you understand things on theri most basic level it allows to to make the abstract upper layers much better. It scares me that I meet future IT people at school that have no idea how the internet works.

MBA thinking needs to change and the government should be regulating this. Tariffs and business retrictions happen when American jobs are at a serious risk but where are they? In the past it was foreign competition but know its American companies that are hurting our workforce.

Re: Re: Why tw is completely wrong, part n
 

No, he's called a programmer. A technician is someone else -- someone for whom knowledge of electricity is actually more important, not less.

And knowing something about hardware or electricity does not make -- or contribute to making -- a computer expert, at least not an expert in designing useful software systems. It's important for such a person to know how much a drive holds; it's not important for him to know how much power it takes up. It is not necessary for the system designer to know everything at every layer of abstraction; it's not even possible.

You keep using that word, but I do not think you know what it means. In any case, "outsourcing" isn't supposed to be about outsourcing innovation. The idea behind outsourcing in programming is supposed to be that top management keeps the architects and the top engineers who do the innovative work, and hand off to the cheap labor the supposedly noncreative grunt work of actually coding (or designing and coding) the system.

Why russotto want to start an emotional arguement
 

Outsourcing involves the many reasons that jobs go overseas. There is no simple reasons as both Democrats and Republicans would have us think. Some outsourcing is just to manufacturer components - as General Instruments did so aggressively. Other outsourcing even takes the designing overseas - as is done even with most every laptop computer. Some outsourcing because the work is better performed by lower skilled employees - makes the domestic nation wealthier. Some outsourcing because top management is so technically naive (so trained by his business school) as to find the safest way to make money- only makes the other nation an eventual market leader.

Some outsourcing such as capacitors, resistors, MOs, and transistors is now best done overseas where people are quite well skilled at making and advancing those components. But one common reason why those jobs were not done here - the domestic industry feared to innovate for so many decades.

Classic example of why we must outsource steel making - the domestic steel industry stifled innovation for 40 years - meaning foreigners are better at making common grades of steel. Outsourciing made necessary because executives of US Steel, Bethlehem Steel, etc were classic examples of anti-Americans - people who fear to innovate. Best thing now for America is to outsource that steel manufacturing.

A programmer who only knows how to program is only a technician. A software technician if it makes you feel better. An electronics technician only knows basic electronics to build or repair a known design. They both still are only technicians.

But the expert must be versatile - widely trained. The expert is where new products, jobs, and markets come from. These are the people who make domestic jobs so productive as to not be outsourced. These are the people who create the new American jobs by making new products and industries. These are the people from which corporate leadership must be found - else we get outsourcing.

Someone who is only a programmer is not (yet) a computer expert. He is the classic definition of a technician. Any computer expert who does not even understand simple electrical and hardware principles is no expert. Typically he might be called a power user - just another word for technician.

So how big need a power supply be in most every ATX computer today? So many have suffered failures. They had no idea why the failures happened. So they use a Tim Allen concept of "More Power". That result alone is sufficient (to them) to prove that ATX computers need 400 or 500 watt power supplies. They need not even know what the original problem was.

What do engineers put in their (equivalent) computers. Brand name computers do same with only 200 and 300 watt supplies. So why the 400+ watt solutions? So many computer experts cannot even first do the numbers or even make basic measurements. They have insufficient knowledge to know why failure happens. Furthermore, without basic knowledge, then that 'expert' doesn't even demand specifications. Many of those 400 watt power supplies cannot even output 400 watts. Of course. Manufacturer didn't provide written specs for good reason. He is not selling to computer 'experts'. He is selling to someone without sufficient background information. A power user who calls himself an 'expert' only because he can replace a power supply - and not know what the problem really is.

Shortage of basic computer knowledge is rampant where domestic computer builders select power supplies. Urban myth rather than basic technical knowledge often decides. Then when those supplies cause problem (fail, damage motherboard, cause intermittent crashes, permit surge damage, etc), then the ill trained builder solves the problem with a bigger supply - "More Power".

It is a shortage of basic knowledge even among computer power users that demonstartes only one reason why even computer technical support jobs are better performed overseas. Just one of many reasons for outsourcing. Again, we graduated less engineers every year since 1990. Who then will do the innovating? More reasons to outsource - or why we need more immigrants. A problem commonly demonstrated by so many domestic computer 'experts'.

Most builders I've known or heard about have extensively used reviews to determine which components to use. They aren't counting on their own knowledge, they're building based on people with a great deal more knowledge. They include tricked-out power supplies because their entire systems are tricked-out with lights and RAIDs and other items that suck up a lot of power.

So they are using hearsay as a replacement for engineering facts. Returning again to power supplies as example. If a power supply is undersized, then the load (computer) will damage the supply? That myth is common among such reviews.

Reality. No properly built supply is ever damaged by too much load. Moreso, all outputs from a power supply can be shorted together ... and still a power supply cannot be damaged.

I asked how many computer 'experts' even knew what a karanaugh map was. Only one knew this fundamental tool. How many computer builders know a that all power supply outputs can be shorted together - and power supply must never be damaged?

I am using something as simple as a power supply to demonstrate that we have so many computer 'experts' that don't even know basic functions. Instead they read 'urban myth' reviews from magazines. Reviews without any engineering numbers? Authors without any basic technical knowledge. Then those computer builders **feel** a computer needs a 400 or 500 watt supply becuse the reviews promote bigger supplies? Where is the technical competence so necessary to keep jobs in America?

How many of those reviews forget to mention that power supply had no overvoltage protection? Most if not all fail to mention another critical fact. OVP is essential to any acceptable power supply. And yet those reviews never mention that an essential function is missing! But again, too many computer builders read articles written by English majors rather than technical facts from the technically educated.

Most of those "feel good" reviews could have been replaced by a two page spec sheet - that reports far more about the product. Most of those reviews never even ask, let alone note, that many clone power supplies are missing essential functions. A computer
'expert' should know an undersized power supply cannot be damaged. He should know a shorted out power supply is not damaged. His review should mention an essential OVP was missing. He reads that review because he does not even have basic knowledge - does not see how technically pathetic so many reviews really are.

Just another reason why America needs less engineers every year? Just anther reason why more jobs will be outsourced?

NOTE: this is not at all trying to patronize you tw. Its to show a point.

True, power supplies are designed so they don't blow, much like the power circuits in a house. However a lack of power is still a major problem. Devices consume different amounts of power at different levels of activity and having more power than neccesary is not always a bad thing. Computer manufacturers often make power supplies that are perfectly balanced with their systems to avoid overkill as well as excess cost (i.e. 300 watts worth of components=300 power supply).

It is also true that manufacturers often inflate the peak power output rating for better marketing. In practice less knowledgable people will use these numbers as a justification for purchase (most commonly: first time builders and kids who never bothered to find the true meaning of the numbers). This of course is a bad thing but the stereotype of ignorance should not be placed on all people who choose to build custom computers.

Yes its true there are some poor reviews out there but its up to a competant reader to use discretion. Reviews for products provide people with something that technical knowledge can't provide: opinions from someone who is intentionally scrutenizing the product. Its also always important to know the methods the reviewer used to judge the product. If the review stresses numbers too much its obviously faulty and shoud be passed over. But to discount all reviews as poor is not good either.

If it was up to me I would look at just the manufacturers TRUE spec sheet to determine the quality of the product, but how often to we get to see these sheets? This justifies the existance of tech reviews. I don't have the capacity to scientifically test all products I'm browsing so I aid my search by reading reviews written by people who have that capacity (to certain degree that is).

When making a hardware purchase a balance of tech knowledge and review hunting is needed. Do people buy products blindly? Yes. But I don't believe these people should be used to stereotype the entire class of custom computer builders.

BACK TO OUTSOURCING:

I think part of the problem may be just how difficult it is to compete with people in non-democratic, newly industrialized nations. Many countries do not possess minimum wage laws and in countries with low employment rates people will work for anything. MBA thinking: "Well if we have the work outsourced it will cost much less and the results will be the same as work done here". This may not always be the case but when businesses are given high quality work for cheap they can't resist.

I don't believe programmers in other countries are hundreds of times smarter than us but they have shown us they can do work equivalant to us. Rather than have them competing against us why not have the work for us? This is MBA thinking.

Just another of the so many reasons why outsourcing becomes a problem. As demonstrated by PC power supply, outsourcing can be a solution to a shortage of better educated Americans. Technical knowledge of a trivial device (power supply) so missing that foreign manufacturers can use that technical naivity to sell inferior products in North America for even higher profits.

In some cases, outsourcing is directly traceable to the MBA who seeks to lower costs - since costs are only what he understands. And so, about 10 years ago, was a front page WSJ article about a CT plumbing manufacturer who moved to Mexico where the wages were only 1/5th. Two years later, he was back in CT trying to rehire his old employees - to save his company. He foolish made decisions only based upon costs.

On the other hand we also have outsourcing because equivalent educated workers cost less. This is important and desireable for world 'free market' economics to work properly.

Now where does the Democratic and Republican rhetoric properly describe why outsourcing happens? In the meantime, what about in-sourcing? At minimum, the discussion of outsourcing is irrelevant without corresponding numbers about in-sourcing. Moreso - where are the numbers? How many jobs are being outsourced verses in-sourced?

Many reasons exist for outsourcing. Does not mean outsourcing, overall, is good or bad. Does mean that political hacks are using public ignorance and emotion to promote their agenda. First symptom - they don't provide lots of boring numbers which is always a first indication that they are probably doing what Rush Limbaugh does best - lie by telling half truths.

I'll add 2 things:

First of all, I worked for a dodgy computer parts importing company for a while. We provided cases and PSUs for a serious portion of the Aussie market for a while. Over time a penis-size war broke out amongst the wholesalers of PSU wattage rating. Solution was standard chinese stuff, every time a new container of the pieces of shit came in, the sticker would have a higher number. PSU was identical. We were selling 200W PSUs (i tested and checked with the factory) rated as 500W, so was everyone else. Stupid shops didn't seem to realize. It's worth checking the model number with these thing next time you buy and it isn't TopPower or someone else reputable. If the model number is something like XYZ-200, it's a 200W, all the factories do it.

These guys could churn out a PSU for around $4USD (this was a year or two ago now), pity half the safety electronics were not present (we got piles of them back, blown, didn't dent profits).

The second is that outsourcing is well known to be fraught with risks, working with Chinese businesses or anywhere in the 3rd world is a funny game, real wild-west stuff, I've had extensive experiences dealing with vietnamese political system over time, I can tell you, anything is possible. It means businesses are best working with someone who already has an established operation on the ground and being aware of these risks when they go in.

While I don't think making the inner workings of a PSU part of the school curriculum is the answer, the entire western world's education system needs a massive overhaul with much stricter and higher standards in place. The fact of the matter is there are a shitload of kids in the first world who have no right to be at a territory institution, they should be out working because they simply aren't particularly bright.

I just read something like this in Fortune magazine. Volkswagen outsourced their parts manufacturer to China. Not only did they have to bribe local officals to get the plant where they wanted it but they found out four years later that their plant manager had been stealing an entire car worth of parts almost every night since the beggining.

Outsourcing=lack of proper supervision. Hopefully business people will catch on to this.

and you know they still probably saved money ;)

Okay, I've been pondering this for a few weeks. I'm going to throw it out here, see what the general audience thinks. (And I went through the thread looking for something similar and failed - if this was discussed already, my apologies)

For years now, we've been hearing over and over how the economy is going worldwide, the globalization of the economy, et cetera, et cetera. What struck me the most about outsourcing was how familiar it sounded. In a discussion with a friend, I finally put my finger on it - outsourcing seems akin to a 21st century version of pre-Labor America, when factory bosses could hire and fire workers at will to keep costs down without fear of repercussion.

As Razor said, I heard this and things like it and thought "Son of a bitch...white-collar scabs."

I know the concept of a programmers' union probably promotes a chuckle if not outright laughter (hell, maybe even anger), but this is the new and dominating industry, in the process of supplanting Big Industry. If you think about it, picture yourself a farmer 104-110 years ago: up before dawn seven days a week, 365 days a year, working solid from sunup to sundown - in some cases, beyond then. Now, you start hearing about these people, these factory workers in the cities who get paid to do just one or a few things over and over for a fraction of the time you put in out in the fields. To hear that they want to strike and demand better treatment, wages, benefits, so on and so forth would probably promote a chuckle if not outright laughter (hell, maybe even anger).

I could be just talking nuts of course, but every time I think of this, I can't help but see this smudge on the wall...looks like someone wrote something there...

Once again, I get a bit of a chuckle.

All the white collars who bitch every time a union goes on strike suddenly have the big fat cushion pull out from under them and are subject to the same pressure as big industry and suddenly.....

If I was a laid off factory working I'd be pissing myself every time I saw another IT/White Collar layoff.

Yeah, you bet. To me this has been such an obvious subtext to what is going on. Now that white collar jobs are beginning to go, people are finally starting to feel concerned. I was upset when this whole thing started with blue collar jobs and manufactoring years ago. I have always made it a practice to check tags and buy American whenever I possibly can. All too often, I no longer have this option, nor does any other American.

For example, this weekend I needed to go buy a new steam iron. I went down to Wally World (AMERICA'S store) and surveyed the offerings. Uncle Wally offers steam irons ranging in price from $9.00 - $40.00. I was willing to pay more even though my budget is limited, to buy an iron made anywhere but China. No such luck. EVERYTHING these days is Chinese.

People speak of the global economy with no understanding of the true impact it will have. You want a global economy, you're going to have to accept a global standard of living. Go visit Mexico or Brazil and ask yourself if that's the standard of living you want because its the one you're going to be getting. Maybe sooner than you think.

You make a pretty good point here. I felt concerned when I heard that a lot of steel workers and even factory workers in my area where being laid off, but honestly, the feeling was subdued by the fact that it didn't effect me very much. This outsourcing issue really concerns me because it has a direct impact on my future as well as other people I know working in fields such as programming and IT. It bothers me that I'm currently working hard in school and facing the prospect that my once prosperous field may one day be very difficult to hold or even find a job in.

The last few comments have done a pretty good job of showing me something pretty common in human nature: We generally don't care unless it effects us directly. Sad but true.

But maybe the impact won't be as bad as I thought. Looks like to get a job in the technology field of the future you will truly have to stand out from our technology workers overseas. All people not cut out for the field will fade away and the best will be left. Hopefully business people will see the trend. Too bad I can't say the same about our fellow Americans formerly working in the manufacturing industry.

I hope for your sake, Razorfish, that you happen to be one of those "best and brightest" who is able to obtain employment in your field. But even if you do, your troubles, and those of our nation, will be far from over.

Look at what is happening. We are loosing our ability to be a producer nation. Whether its steel girders or good programming language, we no longer will create it. A skilled work force, once lost, can't be re-trained over night. People will have to be trained how to work in a steel manufactoring plant, people have to spend years studying to become proficient as programmers, and students will quit majoring in computer science if there are no jobs in it.

How can anyone be so naive as to believe that it is in the best interest of the US to have programming code for vital tasks be written by the Chinese? How can we think that its a good idea to have the steel girders for our bridges and buildings be made in Mexico or Taiwan? How is it in the best intersts of national security to have the electrical components for EVERYTHING made in Asia?

Even if the US were to wake up tomorrow to the terrible harm it is doing itself, it would take literally years to rebuild our capacities as a producer nation. What if we have an enemy who doesn't give us those years?

A nation that can't make steel, can't manufactor industrial items, can't produce electronic components or write good programming code is going to be a second rate nation. If you don't know something about auto mechanics, you are at the mercy of your repairman. If you can't take apart the back of your computer and put in a new drive, you are going to pay top price for upgrades. On the wages McDonald's pays, you may as well forget the whole thing. Nations are no different than people in this regard. CEO's and politicians who are making these choices won't be hurt. They've got their off-shore banking accounts safely stashed away.

It is you and I who will be standing in the breadlines (if there is any bread to be had). The work that we so much want to do will all be overseas and foreign nations, especially those of the 3rd world, have no special reason to show us any mercy.

Steel is a perfect example of both what is wrong in some American industries and why 'buy American' only makes it worse.

The PBS show called Skyscraper followed construction of a Manhatten building from planning to occupancy. Once NYC was built on steel from Bethlehem Steel in Bethlehem PA and US Steel in Fairless Hills PA. But it was now cheaper to have the steel made in Luxembourg, shipped to Houston for cutting, then shipped to NYC; rather than to have all work done in either eastern PA town. Why? Both US Steel and Bethlehem Steel were long dominated by the MBAs. They had stifled electric arc furnaces (and so many other technologies) because that is what MBA managers do - cost controls. They kept goning to the government for protection. Skyscraper was an early 1990s building. But even in 2000s, both companies still would not use a 1964 technology. 40 years later and we still did not remove the problem.

So what did we do? We foolishly provide government protection for anti-American industries. As a result, in 2003, the George Jr administration hurt productive (patriotic) American businesses again by raising steel tarriffs. Promote the anti-free market and anti-American concept called 'Buy American'. Don't force them to eliminate THE problem. Instead punish productive Americans to save those grossly overpaid MBA mentalities who created the problem. Same people who then make those big campaign contributions.

The airlines called United, American, Delta, and US Air, etc are classic anti-Americans. So what did George Jr do? Gave them $1billion+ with no strings attached. As a result, and due to classic anti-American management, those same airlines lost $7.4billion last year. We put them on welfare which only protected the problem - the enemies of America - top management - who are also big campaign contributors.

How did we save Chrylser? We refused to protect them. As a result Chrysler removed the enemy of America. Replaced its MBA trained top management Townsend and Richardo (who did not even have a driver's license) with a car guy named Lee Iacocca. Threat of bankruptcy will only fix the real problem - and save jobs.

NYC was on the verge of bankruptcy under Mayor A Beam. In response to federal government protection, instead, the front page of the NY tabloid was "Ford to NYC Drop Dead". Pres Ford therefore saved NYC. NYC elected Ed Koch - eliminated the problem. NYC created a finance oversight board that forced city council to be fiscally responsible - ie. no more free stadiums for the Yankees, etc.

If jobs are being lost, well, that problem existed four and more years ago. Job loss is a lagging indicator of more serious problems. Problems are directly traceable to top management - the real anti-Americans. (Anti-Americans are those who stifle innovation - the only source of American jobs, growth, strength, markets, and advancement of mankind). If the problem is not removed today, then jobs must be lost four years later. The sooner we threaten those companies with bankruptcy, etc, then the sooner all American workers will be wealthier; will have jobs.

Lately, those anti-Americans found new ways to gouge themselves on America - the 'big 5' fraudulent accounting fiirms - KPMG, Aruthur Andersen, etc. And they got Republican congressman to starve the SEC for funds. Permit accounting fraud to protect top management's income and bonuses while not fixing the company's only problem. Do you think Tyco, Enron, Ivan Boseky and Waste Management did not enrich top management at your expense - and job losses?

Trying to save jobs is too little too late. If making a bad product, then buy the Chinese product. It is the only way to fix the problem in America. Alternative will only be more GM cars so bad and so expensive as to not be exportable. Patriots bought Hondas and Toyota in 1981 and therefore saved Ford Motor - kicked out the anti-American Henry Ford. Anti-Americans said "Buy American"; keep that anti-American management in power to make more inferior products.

Its called free market economics. To make American industries profitable, the consumer must always buy nothing but the best - regardless of where it is made. If not made in America, then top management (people who don't come from where the work gets done) is a major reason. Buy American only means job losses will occur later with even more devestating consequences. Attack the reason for those job losses - anti-American management who (by definintion) stifle what made America great.

The PBS show Skyscraper 10 years ago demonstrates why America no ranks top 5 (and maybe not in the top ten) in making steel.

tw, you bring up some good points. I bought a Japanese car in the early 80's because Detroit's product was so inferior. I won't dispute for a moment that healthy competition is vital to ensure that companies put out good products at reasonable prices. There were any number of reasons why Japan over took Detroit in the 80's - more efficient, stream-lined production lines, more competant CEO's, workers who took pride in what they did, etc, etc. However, low end wages and government subsidies were not important factors (if they factored at all) in Japan's success.

Japan had a better product. China does not. What China has is a massive cheap labor pool, a banking system which gives its domestic industries capitalization loans for lower rates of interest, and a government which subsidizes labor expenses. This is not healthy competition. It is competition bases on unfair labor practices and government subsidies.

You can still buy an American-made car. I dare you to find an American made TV or VCR or even steam iron. This is not because China makes better products. It is because China is still, bottom line, a communist country where workers get a very small hourly wage and the government takes care of company retirement benefits and subsidizes industry loans. It is NOT free market competition.

Lets not forget where the Sony Trinitron was developed. In Philadelphia. The bean counter manager saw fast profits by selling this American creation to Japan. Who got the bonus and who got all the jobs?

Let's not forget where the VCR was developed. Ampex corporation in CA. Again, the bean counter could not understand how innovation would make a $20,000 VCR profitable at $200. So again, this anti-American sold the technology to Japan. Who got the bonus? Who got the 1 million jobs?

In the meantime, to save Zenith, et al, we created a standard for HDTV that is incompatible with the world. A standard so inferior that American HDTV cannot be received in a moving vehicle or where the antenna might receive 'ghosts' (not to be confused with Casper or surreal visions). So where is Zenith? We protected the problem. Therefore we still have no American made TVs. Protecting Zenith is classic anti-American - and why Zenith does not exist. In free market economies, either the US company dominates OR the company if full of management who meet the definition of anti-American.

China is making some damn good products. But it is the wild west as The Ecomomist (cited by Bruce in another thread) notes. For example that Honda is making good Accords in China after Renault failed in the same factory. Most every small electric motor comes out of China even before Hong Kong became part of the mainland - in part because those small motors are so reliable. Don't fall into the same mentality of 1970 Americans who would badmouth the Japanese rather than business school graduates. It only makes America a weaker and ignorant nation.

Patriots always buy the best. In makes a stronger America AND a stronger world. It also makes the world love Americans - no matter how much George Jr tries to undermine the world's admiration and friendship to Americans.

The primary reason why Japan dominated the automotive industry is found in just so many American innovations that were stifled by anti-Americans such as Henry Ford. William Edward Deming is a classic example of stifled American innovation. Also the Honda CVCC engine that made Honda Accord #1 in America and Honda Civic #2 was called the stratefied charge engine developed in Ford in the 1960s. A technology kept out of America why Henry Ford who neither had a driver's license nor knew anything about cars. H Ford was the classic bean counter who even refused to install a $2 part that would keep Pintos from exploding (first exploding Pinto was on a Ford test track before any Pintos were ever sold - the problem known that well in advance).

There is only one reason why Japan dominated the American car industry. 85% of all problems was directly traceable to top management - especially when none were "car guys". How did Ford go from being the worlds worst manufacturer to becoming average? Among the reasons - 48 layers of Ford management was eliminated down to 5. That's right. They solved a major problem - too many bosses. Suddenly their union problems began disappearing. They fired so many white collar bean counter workers so that innovation could happen. Cost of employees, for example, was the lie promoted by spin doctors and Rush Limbaugh's predecessors. Just that too many consumers knew unions were the problem without first learning facts. Many Americans don't even know who Deming was - but know why Japan makes the world's benchmark vehicles.

tw, my main point is that China is not playing by the same rules we are. The Chinese government shoulders labor costs as ours does not. Chinese banks with government bacikng offer Chinese businesses loans at lower interest rates than the ones available to US companies. Many Chinese industries are still protected by restrictions against the import of foreign goods. Our industries lack equivalent protections. It is NOT a level playing field where China is concerned.

And the massive George Jr money to GM and Ford to build hybrid automobiles does not constitute government subsidies? The massive government money to the sugar industry is somehow different? The massive tarrifs on imported steel is only an exception? And massive support payments to American rocket launching companies from the Defense Dept (they outrightly said it was because those launching companies are losing commerical business) is somehow different from what China does? (China is a direct competitor in the satellite launching business.)

So you think China is an unfair trader because companies get money at low interest rates? Let's see which government has lowered short term interest rates lowest? On 3 month money market rates: Australia 5.57%; Britian 4.06%; Canada 2.24%; Denmark 2.15%; Sweden 2.55%; and Euro area 2.08%. In the meantime, US interest rates are at 1.00%. Short term interest rates are manipulated by governments. So who is the unfair trader by keeping interest rates so low?

In the meantime, makes no difference whether the money comes from government or company books. In the end, it is still a cost carried by that nation that effects overall trade balances. It still ends up costing them as much. That lower interest means they must make up the difference on world capital markets. Tit for Tat in the world of economics.

You should have cited China's minimal respect for intellictual property rights. That is a serious trade problem. But in the meantime, don't throw rocks when inside a glass house. They are getting much new business because they do simple jobs better - meaning a overall sum of various parameters that include price, quality, originality, etc.

BTW, I have personal observations of Chinese trophies verse their more expensive American versions. The Chinese are equal or in some cases superior to those being made in America at higher price. We do have some legitimate complaints against China. But lately, they and other nations tends to win more against the US - and justifiably so. Steel is just one example of how America lately has become a more unfair trader. If you really want to see a complete picture, then review what the US (George Jr) did in the WTO conference in Cancun Mexico last September 2003. Again, arguements from within a glass house probably without perspectives such as an example in Cancun. Both sides have been distorting or outright violating the rules in their own favor. This has not caused major outsourcing of jobs.