15 ms·

Why Amazon Can't Make A Kindle In the USA

161 points by DanielRibeiro 15y ago

rbanffy 15y ago
I loved the doublethink involved in "There’s no stupidity in the story. The managers in both companies did exactly what business school professors and the best management consultants would tell them to do". When you play chess, you shouldn't optimize your strategy for short-term capture of your opponent's pieces.
- aaronbrethorst 15y ago
  But you very likely will if your rewards for playing chess are only based on the results of your next ten moves. That's one of the key issues here: almost everyone optimizes for the short term win, because that's how they maximize their compensation. By the time the long-term consequences of their decisions are known they've moved onwards and upwards.
  - protomyth 15y ago
    yep, public companies have report cards every three months and need to show "progress".
    - rbanffy 15y ago
      All depends on how you measure progress. If someone starts asking "what's the next-gen product" at board meetings you may see some real progress.
      - protomyth 15y ago
        After listening to Apple's and HP's earnings calls, I think progress other than margin or revenue is lost on people who matter in the financial world.
        rbanffy 15y ago
        Let's hope this behaviour is self-limiting.
        v21 15y ago
        The other important measures are also more falsifiable, and more changeable between companies and industries. Every company has margins and revenues. You could argue that investors ought to understand the businesses they own, but that doesn't mean they will.
- dmethvin 15y ago
  But the analogy to chess is another sign of short-term thinking. There is no end of the game if the company is to survive. Company execs are optimizing for their own good. They won't be around forever, so they need an exit strategy (end game) that works out for them. If it takes the company down, well so be it. Was it a good idea for Groupon investors to take a bunch of money out of the pool in the last round of financing? You can bet they see an end to the game.
  - rbanffy 15y ago
    The end of the game is beating your competition to the next disruption. Then, you start another match.
    - troutwine 15y ago
      Forgive me, but that seems vague. The ending of chess is easily decidable, but how do you quantify 'disruption'?
      - rbanffy 15y ago
        The first example that comes to my mind is Apple. When audio compression and bandwidth allowed music to be transfered trough internet connections and P2P networks threatened to disrupt the music market, they had iTunes ready and quickly cut deals with record labels. Now they pretty much own the legal music market. The second one is the HP pocket calculator. Before it existed, nobody knew how bad slide-rules were. HP disrupted their own market for desktop calculators (but did it before someone disrupted it for them) Apple is also playing this post-PC game with their mobile platforms. They are fighting against Android for a better position on the next round. It looks like the next match won't take long to start.
        troutwine 15y ago
        I don't at all disagree with you that disruptive innovations happen but, the problem as I see it is that you've simply _described_ some past innovations of such a sort without hitting the sticky problem of quantifying such a thing. How do you 'call' a 'match' and on what authority? The analogy to chess, I assert, rather breaks down quickly, as most analogies tend to, when examined closely. A two-agent zero-sum game is mathematically unlike an n-agent non-zero-sum game with non-total knowledge.
- Estragon 15y ago
  "Doublethink" is a bit harsh. It's probably diplomacy on the part of the author, rather than active self-deception.
  - commandar 15y ago
    I don't think it's either, actually. He's saying that, according to the MBA playbook, the executives of both companies did exactly what they were "supposed" to. The ultimate outcome was negative for Dell, and it isn't because the Dell executives were straying from current conventional managerial wisdom but because they adhered to it. Saying "you can do exactly what the MBAs tell you to and still end up screwed" isn't doublespeak or diplomacy; it's getting straight to the heart of his overall criticism.
    - Estragon 15y ago
      His overall criticism fairly explicitly targets the common MBA value of maximizing short-term profit. That's what he's being diplomatic about.
- icarus_drowning 15y ago
  Yes, but I think that's a bad analogy because winning a chess game is good for you, but preserving a national infrastructure of innovation and manufacturing is good for everyone. It can be difficult to make choices that preserve the common good at the expense of one's own short term good.
  - nitrogen 15y ago
    preserving a national infrastructure of innovation and manufacturing is good for everyone. I don't think this is self evident (at least for manufacturing). Why should the focus be on national, as opposed to global welfare? How long before humanity reaches the point where it cares about the fates of all people rather than just a subset defined by national borders?
    - icarus_drowning 15y ago
      Whether one is focusing on national or global wellbeing, the point is the same-- the incentives work against either.
aspir 15y ago
The Dell anecdote at the beginning was particularly surprising. Hindsight is always clearer, and the author is intentionally summarizing to strengthen a point, but I was blown away at how calculating ASUS's actions were. The whole time I read that section I was thinking to myself, "Wow, so this is how empires fall: one ill-formed relationship at a time."
- v21 15y ago
  it's worth noticing that ASUS didn't have to be scheming for the end result for that to happen - each stage involved them acquiring a bit more business, and making a bit more money. Their actions needn't have been the result of long-term thinking.
  - rbanffy 15y ago
    Which is even more perverse. The system self-destructs unless we consciously intervene.
    - aspir 15y ago
      This reminds me of the story of Roman conquerors' celebratory parades, with the slave saying "all glory is fleeting." It seems as if you must consciously intervene to prevent erosion; otherwise that story wouldn't be passed down as much as it has been.
    - v21 15y ago
      But who says the system self-destructs? The market has worked in this case - computers are yet cheaper, without a loss in quality. What outcome would be preferable?
      - rbanffy 15y ago
        > What outcome would be preferable? A sustainable one. What happens when manufacturing moves from China to someplace even cheaper with harsher labor laws?
logjam 15y ago
"In the long term, then, an economy that lacks an infrastructure for advanced process engineering and manufacturing will lose its ability to innovate.” Yeah, lack of infrastructure. In my opinion that's true of every facet of the worthwhile goals of our national (U.S.) life, from good healthcare to cutting edge science to excellence in education. Somewhere along the way that same short-sightedness the author discusses of mis-emphasizing short-term profit (e.g. "tax cuts") started bankrupting our future. Now we're reaping what we sowed. Practically every revolutionary advantage we gained over the last century at least (e.g., public health initiatives and sanitation, public education in the early 20th century; establishment of publicly funded research; the space program, the internet) were all collectively funded programs by government - by us - the collective will of a people not held hostage by short-sighted "anti-government" rhetoric.
- anamax 15y ago
  > Somewhere along the way that same short-sightedness the author discusses of mis-emphasizing short-term profit (e.g. "tax cuts") started bankrupting our future. Now we're reaping what we sowed. Practically every revolutionary advantage we gained over the last century at least (e.g., public health initiatives and sanitation, public education in the early 20th century; establishment of publicly funded research; the space program, the internet) were all collectively funded programs by government - by us - the collective will of a people not held hostage by short-sighted "anti-government" rhetoric. The existence of good govt spending does not imply that govt spending is good. Right now, the potential good spending is being crowded out by a lot of dumb spending. (That's nothing new - we blew hundreds of billions on Carter's synfuels project.) That's why public employee pension reform in San Francisco is being driven by folks who like govt. They realize that you can't do good govt spending when 20% of your budget goes to pensions. The same is true of SS (which is bigger) and ordinary healthcare.
  - joe_the_user 15y ago
    The existence of good govt spending does not imply that govt spending is good. Of course, government spending is neither inherently good nor bad. But the thing to watch is how same cable of rent-seeking corporations that suck-up a good portion of what you aptly-label bad government spending also whips-up the "anti-government" mob when threatened (or simply greedy). Why is it that an honest-to-God investor in productive enterprises like Warren Buffet can call for higher taxes on the super-rich but the criminal Koch brothers bend all their effort to oppose this? Well, lower taxes for these new American oligarchs is just one piece of their entire campaign of state capture.
civilian 15y ago
I hate this "America is losing greatness from losing manufacturing" argument. Our citizens don't want to work in manufacturing, and the Chinese (and other foreign citizens) are willing to do it for less. Sure, why not, they deserve it! The world would improve if we stopped thinking in a "us-vs-them" nationalist way. Think in a global way!: * We're helping Chinese farmers get out of abject poverty into a slightly better situation. * We're improving their economy * We're making cheaper goods for Americans & other developed countries, which means that it will be accessible to poorer people (which is a good thing!) * The company will gain more profit and be able to make more innovative toys for us! If we want to go down the nationalist root, then why don't we just outlaw imports all together? Or at least pass some protectionist tariffs? If we did that, with the foolish misconception that it would help our economy, we would goad other countries into passing tariffs, and the whole world economy would hurt. http://en.wikipedia.org/wiki/Smoot%E2%80%93Hawley_Tariff_Act http://en.wikipedia.org/wiki/Smoot%E2%80%93Hawley_Tariff_Act The Smoot-Hawley Tariff provoked that kind of response and was a key factor in creating the Great Depression.
- rbanffy 15y ago
  But, then, why would they need you? All you end up with are companies that can't make stuff competing against companies that can.
  - civilian 15y ago
    China is making 'stuff' but they're not developing ideas or creating the software. Our strength is in management, finance, design and software development. I don't think we should shed any tears for a lost manufacturing industry-- hopefully it'll encourage more people to pursue these more intellectual careers.
    - rbanffy 15y ago
      > Our strength is in management, finance, design and software development. Why do you think it would be hard for them to develop those strengths? What if those strengths derive from having a strong manufacturing base? As their own consumption rises, local companies have a much better chance to design products tailored to the needs of their own expanding markets, effectively expanding them further. And, as for software development, you'd be surprised by how much is developed outside the US.
pnathan 15y ago
For the record, out of the public (consumer) eye, there are still electronic device manufacturers in the USA. I work for one.
tptacek 15y ago
A tangent: when ASUSTEK first demonstrated their manufacturing prowess to Dell, long before they offered to take over Dell's supply chain, could Dell have acquired them?
- marshray 15y ago
  I can't think of many examples of corporations in Asia being successfully purchased and operated by non-Asians. Maybe it happens, but it seems like you'd hear about it more if it were practical.
- hammock 15y ago
  The manufacturing comparative advantage sits with ASUSTEK, so you ought to ask that question the other way around: Could ASUSTEK have acquired Dell (on a shorter time horizon, that it). And the answer could be yes, with some sort of leverage AKA loan involved.
cjy 15y ago
I think it is important to keep in mind that manufacturing output has actually been increasing over the last 50 years. It is just manufacturing employment that has fallen. That is a natural consequence of becoming more productive. See: http://mercatus.org/publication/us-manufacturing-output-vs-j http://mercatus.org/publication/us-manufacturing-output-vs-j The Forbes author is arguing that it is hard to innovate when all the manufacturing expertise leaves. To support this he argues that some Kindle parts are made in China, others Taiwan, others South Korea. To me this is evidence that innovation occurs at a decentralized level. Innovation occurs when companies specialize and focus on a better battery, or screen, or lens instead of a better device. Most people on HN seem to believe that small decentralized start-ups are more innovative than bigger companies. Why is decentralization good for software innovation, but bad for hardware innovation?
- coliveira 15y ago
  The problem is not decentralization, but that all manufacturing is outside the US. The part of the process left here is the design. But what if the design is done by somebody else tomorrow? Then companies in this country will have no role to play.
  - derobert 15y ago
    When you say "all manufacturing is outside the US", you have a very interesting definition of all. You may want to check UNIDO's industrial statistics, for then you'd find that the largest manufacturer country is not China, Japan, Taiwan, etc… it's the US.
    - bzbarsky 15y ago
      The US does different sorts of manufacturing from China/Japan/Taiwan. There is not that much electronics manufacturing in the US. But yes, by value of output, the US is a major manufacturer; we especially specialize in manufacturing large expensive stuff.
patio11 15y ago
I live in central Japan's manufacturing hub. If you ever come visit me, and really want to return depressed, I'll arrange for us to take a tour of the company which produces most of the world's cell phone camera gaskets. (A little ring of rubber around the cell phone lens.) You very well might have one in the Japanese cellphone which came in the Chinese paper box and got stamped "Made in China" that you have in your pocket. Every day, a couple hundred workers report to the factory. The most labor-intensive step in the process is taking a sheet of approximately 1,000 gaskets, manually removing them with a tweezer, inspecting them under a jeweler's loupe, and depositing the passes into the waiting outgoing package. When you fill it, it gets wheeled away for shipping. Your quota is 1,000 passed gaskets per hour, for which you are paid approximately 1,000 yen (at least, that was the pre-crash wage), or about $13 at today's prices. When you say "We want our manufacturing jobs back", this is the kind of job you really want. It is easily the worst legal job I've heard of in a first-world nation. There's also practically a clock on the wall saying Time Until Robotic Arms Are Sensitive Enough To Do This Without Damaging An Unacceptable Portion Of Gaskets. One reason that (pre-crash, anyhow) this neighborhood had a lot of immigrants is that the typical worker at this sort of factory 30~50 years ago was a Japanese woman in her twenties and that these days the job is a job Japanese women mostly won't do.
- Cushman 15y ago
  So... that's a job that could be done by robots. Some day soon it will be. The robots will be paid the same thing whether they run in Japan, Vietnam, Toledo, or downtown Manhattan. Call me crazy, but why are we arguing about "manufacturing jobs" instead of building robots?
  - patio11 15y ago
    why are we arguing about "manufacturing jobs" instead of building robots? If I recall my stats correctly, the US is #2 in robots, which isn't exactly bad. (Lagging Japan, as a result of 30 years of policy decisions. Japanese government/industry put their chips down on "robots win the future" many years ago and this was not a disastrously stupid decision.)
tokenadult 15y ago
I just used CTRL-F to search this whole thread for keywords. I can't believe that no one has mentioned comparative advantage yet. http://www.wto.org/english/res_e/reser_e/cadv_e.htm http://www.wto.org/english/res_e/reser_e/cadv_e.htm http://www.econlib.org/library/Topics/Details/comparativeadvantage.html http://www.econlib.org/library/Topics/Details/comparativeadv... http://iang.org/free_banking/david.html http://iang.org/free_banking/david.html http://www.unc.edu/depts/econ/byrns_web/Economicae/Essays/ABS_Comp_Adv.htm http://www.unc.edu/depts/econ/byrns_web/Economicae/Essays/AB... http://www.commonsenseeconomics.com/Readings/Comparative%20Advantage.CSE.pdf http://www.commonsenseeconomics.com/Readings/Comparative%20A... David Ricardo made an underappreciated contribution to the prosperity of all humankind when he developed the explanation of the law of comparative advantage not quite 200 years ago. As long as manufacturers want to have large markets, they will sell to people who desire manufactured goods. And as long as we (whoever "we" are) have something to trade with the manufacturers, we will not lack for any manufactured good that has been invented. The United States of America is full of affordable Kindles, and people with all kinds of occupations can afford to buy Kindles if they like Kindles.
minikomi 15y ago
As an aside, I found it interesting reading through te comments here how little bio-industries are mentioned as a possible way out. I got my degree in biotechnology and I must admit, there are far fewer "jobs" it leads to than being handy with, say, Photoshop or Ruby.. I wonder I it's something which will change..
cppsnob 15y ago
"An exception is Apple [AAPL], which “has been able to preserve a first-rate design capability in the States so far by remaining deeply involved in the selection of components, in industrial design, in software development, and in the articulation of the concept of its products and how they address users’ needs.”" This guy is very confused. Other US-based companies selling hardware operate in this same way. To boot, he never shows that anything listed here for Apple WASN'T done in the US for the Kindle. The same laundry list of components he describes for the Kindle goes for every Apple product, every Motorola product, every Xbox 360, etc. Yet the design and software is usually done in the same way Apple does.
ansy 15y ago
Technically, Amazon could make the Kindle in the USA out of parts shipped in from various Asian countries even though it could not make each of those components in the USA as well. But then, what really could be made entirely in one country? Especially when you consider each component, the raw materials, the machinery used, and so on down the line for each of those. I don't necessarily disagree with the author that there is value to keeping a process "in house" which needs to be including in any cost savings calculations and that American companies are prone to discounting that value when making decisions. But at some point some components or steps in the manufacturing process might be necessary or optimal to leave in the hands of others whether foreign or domestic.
fredBuddemeyer 15y ago
if it is the zero sum game that is suggested (itself unlikely) why is this outcome bad? is it something to do with race, geography? i dont understand why anyone should be rooting for a team here instead of appreciating the synthesis that this represents.
mckoss 15y ago
If you remove the nationalistic bias, this story sounds like exactly the "right thing" happened to Dell and Amazon. Work migrated to where it can be performed most efficiently. This is exactly what we want an economy to do. It's true that Dell did not increase it's ability to design and manufacture circuit boards. But that was never their core strength. I think a firm's managers should be thoughtful about what skills they want to develop internally, and freely outsource as much as they can of the rest. This article would have managers adopt a destructive NIH attitude, greatly reducing their firm's efficiency and competitiveness.

161 points by DanielRibeiro 15y ago

I loved the doublethink involved in "There’s no stupidity in the story. The managers in both companies did exactly what business school professors and the best management consultants would tell them to do". When you play chess, you shouldn't optimize your strategy for short-term capture of your opponent's pieces.

aaronbrethorst 15y ago
But you very likely will if your rewards for playing chess are only based on the results of your next ten moves. That's one of the key issues here: almost everyone optimizes for the short term win, because that's how they maximize their compensation. By the time the long-term consequences of their decisions are known they've moved onwards and upwards.
- protomyth 15y ago
  yep, public companies have report cards every three months and need to show "progress".
  - rbanffy 15y ago
    All depends on how you measure progress. If someone starts asking "what's the next-gen product" at board meetings you may see some real progress.
    - protomyth 15y ago
      After listening to Apple's and HP's earnings calls, I think progress other than margin or revenue is lost on people who matter in the financial world.
      - rbanffy 15y ago
        Let's hope this behaviour is self-limiting.
      - v21 15y ago
        The other important measures are also more falsifiable, and more changeable between companies and industries. Every company has margins and revenues. You could argue that investors ought to understand the businesses they own, but that doesn't mean they will.
dmethvin 15y ago
But the analogy to chess is another sign of short-term thinking. There is no end of the game if the company is to survive. Company execs are optimizing for their own good. They won't be around forever, so they need an exit strategy (end game) that works out for them. If it takes the company down, well so be it. Was it a good idea for Groupon investors to take a bunch of money out of the pool in the last round of financing? You can bet they see an end to the game.
- rbanffy 15y ago
  The end of the game is beating your competition to the next disruption. Then, you start another match.
  - troutwine 15y ago
    Forgive me, but that seems vague. The ending of chess is easily decidable, but how do you quantify 'disruption'?
    - rbanffy 15y ago
      The first example that comes to my mind is Apple. When audio compression and bandwidth allowed music to be transfered trough internet connections and P2P networks threatened to disrupt the music market, they had iTunes ready and quickly cut deals with record labels. Now they pretty much own the legal music market. The second one is the HP pocket calculator. Before it existed, nobody knew how bad slide-rules were. HP disrupted their own market for desktop calculators (but did it before someone disrupted it for them) Apple is also playing this post-PC game with their mobile platforms. They are fighting against Android for a better position on the next round. It looks like the next match won't take long to start.
      - troutwine 15y ago
        I don't at all disagree with you that disruptive innovations happen but, the problem as I see it is that you've simply _described_ some past innovations of such a sort without hitting the sticky problem of quantifying such a thing. How do you 'call' a 'match' and on what authority? The analogy to chess, I assert, rather breaks down quickly, as most analogies tend to, when examined closely. A two-agent zero-sum game is mathematically unlike an n-agent non-zero-sum game with non-total knowledge.
Estragon 15y ago
"Doublethink" is a bit harsh. It's probably diplomacy on the part of the author, rather than active self-deception.
- commandar 15y ago
  I don't think it's either, actually. He's saying that, according to the MBA playbook, the executives of both companies did exactly what they were "supposed" to. The ultimate outcome was negative for Dell, and it isn't because the Dell executives were straying from current conventional managerial wisdom but because they adhered to it. Saying "you can do exactly what the MBAs tell you to and still end up screwed" isn't doublespeak or diplomacy; it's getting straight to the heart of his overall criticism.
  - Estragon 15y ago
    His overall criticism fairly explicitly targets the common MBA value of maximizing short-term profit. That's what he's being diplomatic about.
icarus_drowning 15y ago
Yes, but I think that's a bad analogy because winning a chess game is good for you, but preserving a national infrastructure of innovation and manufacturing is good for everyone. It can be difficult to make choices that preserve the common good at the expense of one's own short term good.
- nitrogen 15y ago
  preserving a national infrastructure of innovation and manufacturing is good for everyone. I don't think this is self evident (at least for manufacturing). Why should the focus be on national, as opposed to global welfare? How long before humanity reaches the point where it cares about the fates of all people rather than just a subset defined by national borders?
  - icarus_drowning 15y ago
    Whether one is focusing on national or global wellbeing, the point is the same-- the incentives work against either.

aspir 15y ago

The Dell anecdote at the beginning was particularly surprising. Hindsight is always clearer, and the author is intentionally summarizing to strengthen a point, but I was blown away at how calculating ASUS's actions were. The whole time I read that section I was thinking to myself, "Wow, so this is how empires fall: one ill-formed relationship at a time."

v21 15y ago
it's worth noticing that ASUS didn't have to be scheming for the end result for that to happen - each stage involved them acquiring a bit more business, and making a bit more money. Their actions needn't have been the result of long-term thinking.
- rbanffy 15y ago
  Which is even more perverse. The system self-destructs unless we consciously intervene.
  - aspir 15y ago
    This reminds me of the story of Roman conquerors' celebratory parades, with the slave saying "all glory is fleeting." It seems as if you must consciously intervene to prevent erosion; otherwise that story wouldn't be passed down as much as it has been.
  - v21 15y ago
    But who says the system self-destructs? The market has worked in this case - computers are yet cheaper, without a loss in quality. What outcome would be preferable?
    - rbanffy 15y ago
      > What outcome would be preferable? A sustainable one. What happens when manufacturing moves from China to someplace even cheaper with harsher labor laws?

logjam 15y ago

"In the long term, then, an economy that lacks an infrastructure for advanced process engineering and manufacturing will lose its ability to innovate.” Yeah, lack of infrastructure. In my opinion that's true of every facet of the worthwhile goals of our national (U.S.) life, from good healthcare to cutting edge science to excellence in education. Somewhere along the way that same short-sightedness the author discusses of mis-emphasizing short-term profit (e.g. "tax cuts") started bankrupting our future. Now we're reaping what we sowed. Practically every revolutionary advantage we gained over the last century at least (e.g., public health initiatives and sanitation, public education in the early 20th century; establishment of publicly funded research; the space program, the internet) were all collectively funded programs by government - by us - the collective will of a people not held hostage by short-sighted "anti-government" rhetoric.

anamax 15y ago
> Somewhere along the way that same short-sightedness the author discusses of mis-emphasizing short-term profit (e.g. "tax cuts") started bankrupting our future. Now we're reaping what we sowed. Practically every revolutionary advantage we gained over the last century at least (e.g., public health initiatives and sanitation, public education in the early 20th century; establishment of publicly funded research; the space program, the internet) were all collectively funded programs by government - by us - the collective will of a people not held hostage by short-sighted "anti-government" rhetoric. The existence of good govt spending does not imply that govt spending is good. Right now, the potential good spending is being crowded out by a lot of dumb spending. (That's nothing new - we blew hundreds of billions on Carter's synfuels project.) That's why public employee pension reform in San Francisco is being driven by folks who like govt. They realize that you can't do good govt spending when 20% of your budget goes to pensions. The same is true of SS (which is bigger) and ordinary healthcare.
- joe_the_user 15y ago
  The existence of good govt spending does not imply that govt spending is good. Of course, government spending is neither inherently good nor bad. But the thing to watch is how same cable of rent-seeking corporations that suck-up a good portion of what you aptly-label bad government spending also whips-up the "anti-government" mob when threatened (or simply greedy). Why is it that an honest-to-God investor in productive enterprises like Warren Buffet can call for higher taxes on the super-rich but the criminal Koch brothers bend all their effort to oppose this? Well, lower taxes for these new American oligarchs is just one piece of their entire campaign of state capture.

civilian 15y ago

I hate this "America is losing greatness from losing manufacturing" argument. Our citizens don't want to work in manufacturing, and the Chinese (and other foreign citizens) are willing to do it for less. Sure, why not, they deserve it! The world would improve if we stopped thinking in a "us-vs-them" nationalist way. Think in a global way!: * We're helping Chinese farmers get out of abject poverty into a slightly better situation. * We're improving their economy * We're making cheaper goods for Americans & other developed countries, which means that it will be accessible to poorer people (which is a good thing!) * The company will gain more profit and be able to make more innovative toys for us! If we want to go down the nationalist root, then why don't we just outlaw imports all together? Or at least pass some protectionist tariffs? If we did that, with the foolish misconception that it would help our economy, we would goad other countries into passing tariffs, and the whole world economy would hurt. http://en.wikipedia.org/wiki/Smoot%E2%80%93Hawley_Tariff_Act http://en.wikipedia.org/wiki/Smoot%E2%80%93Hawley_Tariff_Act The Smoot-Hawley Tariff provoked that kind of response and was a key factor in creating the Great Depression.

rbanffy 15y ago
But, then, why would they need you? All you end up with are companies that can't make stuff competing against companies that can.
- civilian 15y ago
  China is making 'stuff' but they're not developing ideas or creating the software. Our strength is in management, finance, design and software development. I don't think we should shed any tears for a lost manufacturing industry-- hopefully it'll encourage more people to pursue these more intellectual careers.
  - rbanffy 15y ago
    > Our strength is in management, finance, design and software development. Why do you think it would be hard for them to develop those strengths? What if those strengths derive from having a strong manufacturing base? As their own consumption rises, local companies have a much better chance to design products tailored to the needs of their own expanding markets, effectively expanding them further. And, as for software development, you'd be surprised by how much is developed outside the US.

pnathan 15y ago

For the record, out of the public (consumer) eye, there are still electronic device manufacturers in the USA. I work for one.

tptacek 15y ago

A tangent: when ASUSTEK first demonstrated their manufacturing prowess to Dell, long before they offered to take over Dell's supply chain, could Dell have acquired them?

marshray 15y ago
I can't think of many examples of corporations in Asia being successfully purchased and operated by non-Asians. Maybe it happens, but it seems like you'd hear about it more if it were practical.
hammock 15y ago
The manufacturing comparative advantage sits with ASUSTEK, so you ought to ask that question the other way around: Could ASUSTEK have acquired Dell (on a shorter time horizon, that it). And the answer could be yes, with some sort of leverage AKA loan involved.

cjy 15y ago

I think it is important to keep in mind that manufacturing output has actually been increasing over the last 50 years. It is just manufacturing employment that has fallen. That is a natural consequence of becoming more productive. See: http://mercatus.org/publication/us-manufacturing-output-vs-j http://mercatus.org/publication/us-manufacturing-output-vs-j The Forbes author is arguing that it is hard to innovate when all the manufacturing expertise leaves. To support this he argues that some Kindle parts are made in China, others Taiwan, others South Korea. To me this is evidence that innovation occurs at a decentralized level. Innovation occurs when companies specialize and focus on a better battery, or screen, or lens instead of a better device. Most people on HN seem to believe that small decentralized start-ups are more innovative than bigger companies. Why is decentralization good for software innovation, but bad for hardware innovation?

coliveira 15y ago
The problem is not decentralization, but that all manufacturing is outside the US. The part of the process left here is the design. But what if the design is done by somebody else tomorrow? Then companies in this country will have no role to play.
- derobert 15y ago
  When you say "all manufacturing is outside the US", you have a very interesting definition of all. You may want to check UNIDO's industrial statistics, for then you'd find that the largest manufacturer country is not China, Japan, Taiwan, etc… it's the US.
  - bzbarsky 15y ago
    The US does different sorts of manufacturing from China/Japan/Taiwan. There is not that much electronics manufacturing in the US. But yes, by value of output, the US is a major manufacturer; we especially specialize in manufacturing large expensive stuff.

patio11 15y ago

I live in central Japan's manufacturing hub. If you ever come visit me, and really want to return depressed, I'll arrange for us to take a tour of the company which produces most of the world's cell phone camera gaskets. (A little ring of rubber around the cell phone lens.) You very well might have one in the Japanese cellphone which came in the Chinese paper box and got stamped "Made in China" that you have in your pocket. Every day, a couple hundred workers report to the factory. The most labor-intensive step in the process is taking a sheet of approximately 1,000 gaskets, manually removing them with a tweezer, inspecting them under a jeweler's loupe, and depositing the passes into the waiting outgoing package. When you fill it, it gets wheeled away for shipping. Your quota is 1,000 passed gaskets per hour, for which you are paid approximately 1,000 yen (at least, that was the pre-crash wage), or about $13 at today's prices. When you say "We want our manufacturing jobs back", this is the kind of job you really want. It is easily the worst legal job I've heard of in a first-world nation. There's also practically a clock on the wall saying Time Until Robotic Arms Are Sensitive Enough To Do This Without Damaging An Unacceptable Portion Of Gaskets. One reason that (pre-crash, anyhow) this neighborhood had a lot of immigrants is that the typical worker at this sort of factory 30~50 years ago was a Japanese woman in her twenties and that these days the job is a job Japanese women mostly won't do.

Cushman 15y ago
So... that's a job that could be done by robots. Some day soon it will be. The robots will be paid the same thing whether they run in Japan, Vietnam, Toledo, or downtown Manhattan. Call me crazy, but why are we arguing about "manufacturing jobs" instead of building robots?
- patio11 15y ago
  why are we arguing about "manufacturing jobs" instead of building robots? If I recall my stats correctly, the US is #2 in robots, which isn't exactly bad. (Lagging Japan, as a result of 30 years of policy decisions. Japanese government/industry put their chips down on "robots win the future" many years ago and this was not a disastrously stupid decision.)

tokenadult 15y ago

I just used CTRL-F to search this whole thread for keywords. I can't believe that no one has mentioned comparative advantage yet. http://www.wto.org/english/res_e/reser_e/cadv_e.htm http://www.wto.org/english/res_e/reser_e/cadv_e.htm http://www.econlib.org/library/Topics/Details/comparativeadvantage.html http://www.econlib.org/library/Topics/Details/comparativeadv... http://iang.org/free_banking/david.html http://iang.org/free_banking/david.html http://www.unc.edu/depts/econ/byrns_web/Economicae/Essays/ABS_Comp_Adv.htm http://www.unc.edu/depts/econ/byrns_web/Economicae/Essays/AB... http://www.commonsenseeconomics.com/Readings/Comparative%20Advantage.CSE.pdf http://www.commonsenseeconomics.com/Readings/Comparative%20A... David Ricardo made an underappreciated contribution to the prosperity of all humankind when he developed the explanation of the law of comparative advantage not quite 200 years ago. As long as manufacturers want to have large markets, they will sell to people who desire manufactured goods. And as long as we (whoever "we" are) have something to trade with the manufacturers, we will not lack for any manufactured good that has been invented. The United States of America is full of affordable Kindles, and people with all kinds of occupations can afford to buy Kindles if they like Kindles.

minikomi 15y ago

As an aside, I found it interesting reading through te comments here how little bio-industries are mentioned as a possible way out. I got my degree in biotechnology and I must admit, there are far fewer "jobs" it leads to than being handy with, say, Photoshop or Ruby.. I wonder I it's something which will change..

cppsnob 15y ago

"An exception is Apple [AAPL], which “has been able to preserve a first-rate design capability in the States so far by remaining deeply involved in the selection of components, in industrial design, in software development, and in the articulation of the concept of its products and how they address users’ needs.”" This guy is very confused. Other US-based companies selling hardware operate in this same way. To boot, he never shows that anything listed here for Apple WASN'T done in the US for the Kindle. The same laundry list of components he describes for the Kindle goes for every Apple product, every Motorola product, every Xbox 360, etc. Yet the design and software is usually done in the same way Apple does.

ansy 15y ago

Technically, Amazon could make the Kindle in the USA out of parts shipped in from various Asian countries even though it could not make each of those components in the USA as well. But then, what really could be made entirely in one country? Especially when you consider each component, the raw materials, the machinery used, and so on down the line for each of those. I don't necessarily disagree with the author that there is value to keeping a process "in house" which needs to be including in any cost savings calculations and that American companies are prone to discounting that value when making decisions. But at some point some components or steps in the manufacturing process might be necessary or optimal to leave in the hands of others whether foreign or domestic.

fredBuddemeyer 15y ago

if it is the zero sum game that is suggested (itself unlikely) why is this outcome bad? is it something to do with race, geography? i dont understand why anyone should be rooting for a team here instead of appreciating the synthesis that this represents.

mckoss 15y ago

If you remove the nationalistic bias, this story sounds like exactly the "right thing" happened to Dell and Amazon. Work migrated to where it can be performed most efficiently. This is exactly what we want an economy to do. It's true that Dell did not increase it's ability to design and manufacture circuit boards. But that was never their core strength. I think a firm's managers should be thoughtful about what skills they want to develop internally, and freely outsource as much as they can of the rest. This article would have managers adopt a destructive NIH attitude, greatly reducing their firm's efficiency and competitiveness.