Contrarian View About Jobs

2012-12-22 01:00:00

It seems like everyone is talking about jobs these days, especially in the US during this election season. CBA has always been the contrarian in the room – the one in the back when Groupthink threatens to take over, that jumps up and says, ‘Wait a minute, not so fast!’ So in this situation, again we feel we must protest the current narrative that’s unfolding in what passes for thinking in terms of the global workforce. Here’s what we’ve been hearing: companies are sitting on piles of cash, and have job openings that go unfilled because managers can’t find people with the right skills to hire. So they post jobs on their websites, and collect resumes for months and months, but never hire anyone. Why is this? Here is the narrative:

  • We need more math and science taught better at an earlier age, and the schools and universities aren’t producing enough American citizen graduates. We need people that know how to develop the future high tech products that unborn prospective customers of companies like Microsoft want so Microsoft will be innovative and competitive again and C-suite stock options will be worth what they used to be. And they need to be willing to work for $40,000/year on contract.
  • It’s the government’s fault. We need more H-1 visas so we can hire the mythical PhD/MBA/MSEE 20-year old Einsteins from Asia that are getting educated in the US and are willing to work for $40,000/year on contract.
  • Our workforce is too old. The engineers we have keep complaining about stupid things like, R&D funding cuts; having to work with teams that are located seven time zones away at 3 am; reaching the boundaries of the laws of physics.
  • The new hires are lazy and spoiled. They want to be millionaires by the time they are 25 and complain because we don’t have free beer available at 10 am.

The alleged talent shortage issue was addressed recently in a Wall Street Journal op-ed recently by Brad Smith who is general counsel at Microsoft. He outlines ways he thinks we need to improve the education and immigration policies to address the talent shortage in high tech. What all this doesn’t address is the fact that compared to 25 years ago, it’s more likely that the really smart kids graduating from advanced math and science programs will get sucked into the financial industry to design the latest robo-trade app and make millions, a fraction of a cent at a time. Whose fault is that? I have news for you, Mr. Smith. It’s not the fault of the workers or the universities. It’s the C-suite leadership and the calcification and financialization of the high-tech sector. We have to start investing in people again. And by doing so, re-spark the sense of purpose and excitement that drove the high tech industry in its youth. People aren't just an entry on the balance sheet -- a potential source of improved margin. In the old days, high tech companies did a lot more training than they do now. There was a budget for workers to go to industry training seminars, attend trade shows, informal and formal mentoring programs, join associations. There is precious little of that type of activity going on now as people are working harder for less money, doing the job of the three colleagues that were laid off in the last round of cut-backs. This is especially true in high tech hardware manufacturing, which has become an undervalued commodity. Innovation isn’t something that can be taught. It must be identified and then nurtured over time, and that’s the role of management. However, these days, whenever big companies get in trouble, they start firing people, many times a LOT of people, e.g. Hewlett-Packard’s 35,000. This is in spite of constant annual report bromides saying people are a company’s most important asset. C-suite managers have no concept of how crippling quarter after quarter of layoff threats are to morale in a corporate culture. Once the RIF process starts, all productive work stops cold across the board. It’s a fact that is rarely mentioned in earnings calls. And you can forget about innovation in that environment. Everyone is working on their resumes, not next generation technology. Corporations have an evolutionary cycle that is currently out of synch with the innovation cycle. It’s very difficult to create a start-up culture within a company that has had as many top level management missteps as Hewlett Packard. Volumes of business journal articles have been written about innovation, but in our industry, it comes down to this: people will rise to the challenge. If you create a corporate culture where innovative people are nurtured and rewarded, the organization will innovate. Currently, people are devalued as corporate accountant wonks chase ‘low cost labor’ across the globe for a few more slivers of margin. But that strategy is increasingly seen as a loser, even on Wall St. Here’s some news: Asian workers are looking more and more like your college-aged neighbor living in his or her parents’ basement. As we’ve been saying for several years, the Foxconn model is unsustainable: Terry Gou is allowing news to leak about iPhone 5 production schedules that are being blown up by worker dissatisfaction. I especially like this quote: An iPhone 5 back-plate runs through in front of me almost every 3 seconds. I have to pickup the back-plate and marked 4 position points using the oil-based paint pen and put it back on the running belt swiftly within 3 seconds with no errors. After such repeat action for several hours, I have terrible neckache and muscle pain on my arm. A new worker who sat opposite of me gone exhausted and laid down for a short while. The supervisor has noticed him and punished him by asking him to stand at one corner for 10 minutes like the old school days. We worked non-stop from midnight to the next morning 6 a.m but were still asked to keep on working as the production line is based on running belt and no one is allowed to stop. I’m so starving and fully exhausted. By my own calculations, I have to mark five iPhone plates every minute, at least. For every 10 hours, I have to accomplish 3,000 iPhone 5 back plates. There are total 4 production lines in charge of this process, 12 workers in every line. Each line can produce 36,000 iPhone 5 back plates in half a day, this is scary … I finally stopped working at 7 a.m. We were asked to gather again after work. The supervisor shout out loud in front of us: “Who wants to rest early at 5 a.m !? We are all here to earn money ! Let’s work harder !” I was thinking who on earth wants to work two extra hours overtime for only mere 27 yuan (USD$4) !? Who thinks Apple is going to continue to meet the financial world’s increasingly unrealistic expectations when their hardware supply chain implodes? Terry Gou has already announced he is going to build an inland manufacturing fortress in China staffed by robots. And the fact that Foxconn is leaking stories like the one above means they expect Apple to pay for it, holding the brand hostage to the bad publicity about human rights abuses, which customers are beginning to hold Tim Cook responsible for. So, why doesn’t Apple build a 21st century Green robot factory in North Carolina instead? Another secret that has been leaked recently is the detail about Google’s regional server farms strategy, born in the US and Western Europe, and currently being exported to Asia. Who says hardware can’t be a competitive advantage? The stripped down designs by-pass traditional OEMs like Hewlett Packard or Dell, using $1500 of components. How this hardware is utilized within Google’s overall corporate objectives, including energy efficiency and speed, are what make this the kind of innovation story the industry should embrace and emulate.

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