America's advanced manufacturing problem and how to fix it
americanaffairsjournal.orgI work in one of the last remaining large industrial manufacturing labs in the US. Some of my colleagues worked at Bell before that was shuttered.
My sense from talking to the previous generation is that financialization of the US has started (finally) failing the American people.
The previous generation cashed in on major profits by off shoring (Kodak), but we overdid it.
In a round about way our company is run by pension funds, and I work on projects that would get 8-9 figure investments if we were doing this in APEC, but we would rather have stock buybacks, so we end up getting 6 figures and puttering along.
Meanwhile the higher ups wonder ‘what happened to R&D?!’
Yeah, "financialization" is absolutely the answer and the articles' claim of lack institutional integration (or whatever) seems wrong.
You can look at how Boeing gutted it's highly skilled Pacific North West operations to move lower skilled, lower paid areas elsewhere and generalize this to a multitude of similar industries.
I think that’s only half right… the financialization is driven via a priority of short term profits that are incentivized by the market to executives. They play the BS game to just get rich and then dip, company be damned in the long run.
This is the closest thing to an answer.
The economy has essentially been ruined by looting. People finding ways to strip out assets from companies.
Variations on this include private equity racking up debt and bankrupting companies. Executives doing stock buybacks to boost their options while hollowing out the company's resources. Hedge fund management fees. It's everywhere.
Everyone incentivized by percentage of money changing hands ends up looting whatever asset they have access to, esp if the resource they are burning isn't on the books somewhere.
PMs loot products by throwing in needless features to game some metric, or cutting features that users want but are "too expensive".
Engineers loot by burning resilience and multi-dimensional reliability to eek out 5% more straight line speed.
Sales folks loot by offering huge discounts to get huge deals signed, etc.
They look like heros, then they move on, leaving the place worse than they found it.
That's a good insight - the whole article is deep food for though thansk
It's way worse than that: there's also deliberate cellar boxing (bankrupting) of companies on a large scale.
Hedge funds working with consultant buddies (BCG) to take over the board/leadership of a victim company.
The consultants then deliberately destroy the company from the inside while their hedge-fund buddies (naked) short it into literal bankruptcy.
It's a very easy game, it's tax-free (because the short position is technically never closed? or something) and it only very very rarely fails and backfires (GME).
https://edition.cnn.com/2018/10/16/investing/retail-sears-pr...
Hard to imagine the delightful people involved leaving money on the table by missing an opportunity to profit from shorting.
Do you have an example (incl. evidence) of such coordinated and deliberate action between consultants and hedge funds?
He doesn’t because it’s conspiracy bullshit. There are some valuable points in this thread but the OP above is not one of them.
Is the looting behavior just a response to US industrial policy? US policy has made US manufacturing tenuous for decades. Meanwhile US policy has also provided the means and mechanisms to ship manufacturing abroad.
Given the above, isn’t the optimal strategy to maximize profit extraction in order to invest in new industries?
It's a response to a planetary economy incentivised to reward resource extraction, rent seeking, and individual greed over collective intelligence and creative strategy.
The US corporate right evangelised this culture as "freedom", and now it's being eaten from the inside out by it.
Its likely that if many things were made in the US, they would be too expensive for most people to afford, a smartphone might cost $5000. The US could re-industrialize but it takes a lot of robotics due to high labor costs in the US.
My understanding is that robotics were being heavily developed in the US in the 80s/90s to improve costs. Then outsourcing took the wind out of the sails for robotics.
Maybe the tech was to far out, or maybe we would have had vastly more advanced industrial robots.
Private equity really makes life miserable for regular investors and the general economy. I think stronger provisions against buyouts of public companies preventing a single investor from buying more than say 10% of a company and preventing public companies from therefore being gobbled up by private companies would go a long way to solving these problems. Its also vitally important that rules for fiduciary responsibility to a companies shareholders have teeth and also the INDEX act to prevent companies from being subverted .
I think China deciding to dig itself out of poverty is a big factor with both good and bad effects (and absolutely staggeringly big effects).
Can you imagine the magnitude of the humanitarian and environmental crisis China would be if they had not industrialized and joined the global market? A country that size full of uneducated farmers and first generation coal power plants would be a nightmare for everyone, not just China.
Well, the planet would be better off without Chinese middle class and elite flying around and buying stuff. Countries that are full of poor "uneducated farmers" tend to have much lower carbon footprint than richer ones, even with the higher birth rates. Despite its admirable investments in reneweable tech, China still keeps building new coal plants as well.
Would your comment read any differently if you replaced "Chinese" with "United States", or "France", or any other Western civilized nation?
I'm curious to understand why China is to be blamed, exclusively? Correct me if I am misunderstanding your premise.
Carbon isn’t the only pressing environmental damage though. For example, Madagascar is an island full of poor “uneducated farmers”, and it is precisely their farming that has been deforesting the island through slash-and-burn agriculture, a practice that has accelerated over the centuries due to the high birthrates.
started by jack welch at GE, the first corporate raider - https://www.iheart.com/podcast/105-behind-the-bastards-29236...
Was Welch a raider? I thought he worked his way up internally.
My understanding, possibly biased by my Britishness, is that Jim Goldsmith was one of the earliest raiders who took over companies and asset-stripped them.
> People finding ways to strip out assets from companies.
If those people don't own the company, what is the owner doing by allowing this to happen?
If those people _are_ the owners, then there shouldn't be a problem, since it's their own company, and they ought to be allowed to do anything they wish. Including short term reward for long term loss (if it is worth it in their eyes).
So i dont think it's "looting" (implying it's being stolen without knowledge of the owner).
Just because a behavior may end up profitable for its owners doesn’t mean we should be just accepting it as a society.
Also viewing a company as just a collection of assets owned by capital can be somewhat limiting. Companies are generally made up of human employees, and many schools of thought treat employees as one of several stakeholders in a company and assign various rights to them and various responsibilities to the company for them.
Looking at it this way, the “owner” of a company can easily be described as looting the company if they are destroying a lot of value in the company for marginal benefit for themselves.
> we should be just accepting it as a society.
This problem is solved using the court system, and then legislation system. Things which _should_ be unacceptable needs to be made illegal. And over time, this has indeed been the case. Things like environmental regulations etc are the examples.
> various responsibilities to the company for them
i think the employees are reading too much into this responsibility, because the only responsibility the company has for the employees are the legals ones: such as OSHA, timely payment of wages, safety from harassment etc.
Longevity of the job, social responsibilities (such as improving the community etc), are all secondary to the financial success for the shareholders.
> Longevity of the job, social responsibilities (such as improving the community etc), are all secondary to the financial success for the shareholders.
I think you're describing the way things are, while dwalling is talking about how things ought to be. There's no law of nature saying that companies can't or shouldn't behave socially responsibly.
Edit: I'm not advocating for socialism, not at all. There's a wide spectrum between pure laissez-faire capitalism and nationalization of all private property.
companies behaving badly is bad for society as a whole, so allowing the "owners" ie shareholders to make a quick short term buck at the cost of employees or a local factory that supports the town because "it doesn't make ENOUGH" money chips away at society and drags down the country all so a couple people can make a quick buck destroying 1000s or 10,000s of lives and/or entire towns.
putting financial success for the shareholders above all is the reason for so many things wrong right now,
Just because a behavior may end up profitable for its owners doesn’t mean we should be just accepting it as a society
I 100% agree with you, but isn’t this how capitalism works?
I do notice similar sentiments to use more frequently on HN lately. Feels like people are actually aware there are problems now but unsure what’s to be done?
Random thought, but perhaps trying to enshrine "customer or consumer rights" and "employee rights" as seriously as "shareholder rights" would be a good step.
What we have now is quite literally economic apartheid. Poor people are not allowed into the same spaces, not given the same legal and ethical privileges, denied adequate education and healthcare, increasingly barred from owning property (because "markets")... among many other challenges.
The model is that you can buy your way out of this slavery if you're talented (ruthless) and well-connected enough.
Otherwise you die, and no one - at least no one who matters - cares.
> but unsure what’s to be done?
Can feel Lenin spinning in his tomb from here.
Ah yes, Communism! So successful at delivering productive happy societies that they needed walls around their countries to keep people in. Great idea.
Sorry, was a 1/2 hearted attempt at a joke about his pamphlet titled "What is to be done?", similar to the wording used in parents comment. No need to alert the inquisition here just yet.
Probably Chernyshevsky can spin a bit better, Lenin seems a bit tied down.
Apologies, I'm afraid that one was lost on me!
Capitalism! So successful at delivering productive happy societies that they need to stage coups worldwide to keep people from attempting to try alternatives and fund death squads to secure profits. Great idea.
https://en.wikipedia.org/wiki/United_States_involvement_in_r...
Stronger national cultural and industrial policies.
I think you have a sort of 1920s view of companies that there are 'owners' instead of investors who don't exercise nearly as much control as the people who are brought in and do the looting.
anyway in this case the term "looting" is meant to do things that will be of benefit to the people to the company that will in the short term maybe benefit the company but in the long term destroy it. The short term benefit often aligns with what benefits the looter, but this alignment is not hard and fast.
Trying to introspect the "That's Wrong" feeling... I think it happens when people feel that employees/founders have some kind of vested interest in the company's persistence that is being violated... But that thingamajig is something our legal and financial systems do not adequately capture and model, or else it could be but people aren't aware/proactive about it.
I think fiduciary duties get way more nuanced. You can’t always do anything you wish to a company, even if you own it outright.
> fiduciary duties
only agents acting on behalf of the owners have fiduciary duty. Of course, if you are a majority owner, but there exists minority owners, you cannot screw the minority owners to profit yourself - i guess this is a form of fiduciary duty.
But if you own it outright 100%, then you don't have such a fiduciary duty to yourself.
You’re missing the concept of foreseeable injury.
It is not an injury to an employee to sell the company's operations overseas and close shop in the US. Forseeable injury is applicable to negligence suits, and it is not negligent to change the business model resulting in the employee being out of work.
A company has no legal responsibility to maintain the livelihood of their employees at the cost of the business' profit margins.
Livelihood of employees is also a false start, unionization and the accompanying high wages are also a significant factor in the disparity between Western industry and China.
The big issue on that comes down to minority vs majority rights. If the majority puts in a board that destroys the value of the company because the majority also owns another company that wants to buy it at a bargain price, it destroys the investment of the minority. Some people suspect that could be happening with Disney.
You know this is debunked trope don't you?
Not quite. As GGP mentioned, the necessity of keeping stock prices (and property values, and anything else securitized) high so as to not impoverish pension funds, 401Ks, IRAs, etc., is real. That is, if you care about Silent, Boomer, and Gen X retirees - who invested, but didn't save - being able to cover their myriad outlays. Millennials and younger need not apply, of course; we're just never going to be able to retire (Or afford a house. Or...). You are right about one thing: "get rich and then dip" is the mantra. Not just for executives, but for the elder half-ish of Americans in general.
>As GGP mentioned, the necessity of keeping stock prices (and property values, and anything else securitized) high so as to not impoverish pension funds, 401Ks, IRAs, etc., is real.
I'm confused about how your model of the economy works. It sounds like you believe CEOs are selfish and greedy when it comes to workers, but when it comes to pension funds, they keep stock prices high out of the goodness of their hearts?
If liquidpele's thesis is true, and executives are looking to "get rich and dip", "company be damned in the long run", then we would expect this to be reflected in the company's stock price in the long run. The stock price is essentially the fair market value of the company. And the American stock market has been performing very well for a good long while.
This entire comment thread strikes me as populist pitchfork-waving with little grounding in economic reality. Here's a question: If you're truly pessimistic about American companies, do you hold any short positions or put options? At the very least, are you overweighting non-American countries in your portfolio? And if so, which ones?
Institutional shareholders with large portfolios care about stock performance for their market plays, not about the company.
And they happen to have large influence on choice of CEO and who said CEO is going to try to please.
CEOs are employed by the board, the board is made of major stockholders, those are pensions funds and other investors mainly interested in stock prices. No need for conspiracy theories or pitchfork waving, it's just all working exactly how it's openly designed to.
You guys keep saying pension funds. Where are the sources that financialisation sucking us dry is because pension funds need to get seeded? We’re living in a time of record profits and ceo to worker pay ratio through the roof and you guys are implying pension funds, the little to last thing workers have, as the issue?
Gee I’m wondering what we should all be thinking and doing about those pension funds and who that would actually serve.
Y’all get that most of us don’t have pension funds, right? They’ve been gutted long time ago. Defined benefit to defined contribution ring any bells?
But yes, let’s fight against the other plebs that have things we don’t, let’s blame pension funds and not the plethora of other issues.
I tell ya, we’re funding pensions alright but it ain’t the teachers kind.
You aren't wrong, but it's not reasonable to hold such a strong opinion without experience. I spent 15 years working in high-tech manufacturing, at Sanmina, which - like many peers - also offshored the majority of capacity. What remains in the US is mostly manufacturing for regulated industry (military, medical).
Take a look at this, re institutional ownership: https://money.cnn.com/quote/shareholders/shareholders.html?s.... 95% of outstanding stock is owned institutionally, which is pretty normal in manufacturing. For decades, this has been a core investment sector for pensions and other institutional funds, and remains so, even if it's just to balance investments in tech, biotech/pharma, retail/CPG, financial services, the military industrial complex and transportation. Moreover, if you attend quarterly results calls, you typically end up with a few analysts from banks and at least one from some pension fund, who ask questions. We young people may not care about pensions as almost none of us will have one, but they still exist and still influence large pieces of our economy.
CEO pay is certainly way too high, I agree.
But look at any big corporation, take the CEO's total compensation and divide it by the number of employees. The CEO of IBM earns an obscene $16.5 million per year - but divide that by IBM's 288,300 employees and it's $60 per employee per year. Wal-mart's CEO makes $25.31 million, but it's only $12 per employee per year.
Even if we redistributed the CEO's entire salary to workers, $60/year isn't going to do much to close the gap between rich and poor.
This is quite an arbitrary metric.
I find GP's metric useful.
It helps address the question: wouldn't the company perform better if we did other things with that excess money?
>wouldn't the company perform better if we did other things with that excess money?
Of course. That's not what CEO pay/employee does, though; it trivializes the massive (over)compensation by putting it in seemingly-small terms. What we need to be analyzing CEO pay in terms of is 1) How much a person needs in order to live decently and with dignity in one's particular area, and 2) How much better than the "average" CEO any give one performs (to determine incentive pay). Certain entities, institutions, and groups have cartel-ized executive positions as a class and bid up their compensation, decoupled from real value.
Another view: $60/employee doesn't seem like a lot, but if you remove the employees making over the median, or $100k, or some other resaonable cut-off, something tells me that the lowest-paid employees would see a meaningful increase in their take-home. GGP is purposely being reductive in a way that makes rethinking the issue more silly than it actually is.
Pension funds is shorthand for pension funds and other bulk investments for other people vehicles like BlackRock and Vanguard. A common complaint from people is that there's under ten entities that owns almost all of the major public firms. Matt Levine has very funny and informed takes on this sort of thing, ZeroHedge et al have conspiratorial ones, but it's a real thing.
Nope. CEO's tend to be on the board of each others companies, making sure that there is never any argument over CEO compensation.
If you were a major shareholder in a company, would you favor a CEO who ran it into the ground?
If I am a faceless pension fund that is going to earn short term on this much better, and be free to walk away and do the same thing to another company?
Sure.
This is exactly the same playbook as with private equity - the point is to make the shareholders richer as fast as possible, and long-term strategies do not pay out as fast while possibly introducing longer term risks.
For short term profit that I can walk away with? That is very different from building long term value. Both are profit. One profits from creation and has long term recurring benefits, the other profits from extraction, which only happens once. Both building a fire and building a house profit from a supply of wood. But they are pretty different in terms of long term pay off.
Please see the story of Jack Welch CEO of GE.
Can you elaborate? Wikipedia says Welch took GE from a market cap of $12 billion to $410 billion over the course of 20 years.
He destroyed the Company in the long run.
https://www.npr.org/2022/06/01/1101505691/short-term-profits...
If I am a major shareholder, I would prefer a quick profit because I can then invest it somewhere else and have higher overall profits.
> The stock price is essentially the fair market value of the company
That is something some people choose to believe to be true. The same way some people choose to believe that God (or a number of Gods) exist.
While there is a spike at buy-out it is still more or less true. Try to buy a company for far less than the stock market price and tell me how that works out for you.
you think the stock market works well? look up the fail to deliver rate, infinite liquidity of market makers, and how the SEC said themselves that 95% of retail trades are happening off lit markets in dark pool. Price discovery has been broken for a long time and without, there is no legitimate market.
IMO it's top vs bottom, not generation vs generation.
The vast majority of us are working class.
Intersectionality.
Saving is futile with a 3% loss on your money each year. Unless you invest it you are losing it.
Investments come with risks. The trade-off of cash losing its value over time is that it’s relatively less risky. You split your assets into cash and investments to achieve an overall combined risk profile. In that sense, cash is just another investment with a certain risk-return ratio (even when the return is negative).
Your cash over time is guaranteed to lose almost all its value. While, if you invest in something, it could be even gold or silver, could be a house, could be a global market cap index fund, it holds more of its value than a fiat currency does. So no, fiat currencies lose everything and even with risks involved with other investments, the risks are still less than cash. Cash over time is one of the worst investments.
It depends on your time horizon. Over a period of say ten years, cash is unlikely to lose almost all of its value, whereas for stocks the likelihood can be higher. The stock market may crash (like it has in the past) at an inconvenient moment where you’ll then be happy to have some cash on hand.
In 10 years, at 3% inflation, cash loses about 26% of its value, and at 5% inflation, about 40% of its value.
Not "almost all", but that bucket is quite leaky.
It's precisely those investments which cause those losses. Those investments are nothing but roundabout ways to provide loans to people and businesses. Loans inject massive amounts of money into the economy. Massive money injections directly cause inflation by increasing the amount of money in circulation, inflating the money supply and devaluing the currency of anyone who didn't participate in the scam by saving money instead of investing it.
FYI, your account might be shadow banned. I vouched for this comment, but most of yours are dead.
2001 Boeing paper, Out-Sourced Profits: The Cornerstone of Successful Subcontracting, is a required reading. This article gives a good introduction.
Yep. This started when “elite” schools started validating guys like Jack Welch.
Prioritizing next quarter’s growth at all costs really did a number on our long-term stability
>American financial markets favor a capital-light production model, or one of no production at all. Jack Welch was well aware of this in his transformation of GE from an engineering company—one cofounded by Thomas Edison—to a financial engineering company. In 1985, during his early years as CEO, he canceled the company’s “factory of the future” initiative consisting of automation systems, robotics, and advanced machine tools, which would have allowed GE to catch up with Siemens and Japanese competitors in its offerings. Instead, that same year he acquired RCA, parent company of the television broadcaster NBC. Eventually, 60 percent of company profits came from GE capital. Welch’s strategy worked, at least for a while: in 1993, GE became the world’s most valuable company, before the stock price collapsed during the great financial crisis and GE was broken up.
>The assessment of author David Gelles, in his critical biography of Welch, The Man Who Broke Capitalism, is that “instead of trying to fix American manufacturing, he effectively abandoned it, and would soon start shuttering factories around the country and shipping jobs overseas.” Welch once stated, “Ideally, you’d have every plant you own on a barge to move with currencies and changes in the economy.”
Arguably, the article discusses financialization as a cause.
You should see GE factory floors now. Totally left behind by the rest of the world. When I left they were getting into LEAN and the big suggestion was organizing tools on a cart for better efficiency. Jack Welch nuked GE.
Yes, I think the correlation between MBA popularity as a degree and failing of US industry is fairly causal.
It's the same in universities, where more and more time and money is spent on "management" (extracting value) and less and less is spent on actually teaching stuff (creating value).
Unsurprisingly, when a (somewhat large) portion of the population in a high productivity society realizes they can just skim off the top without doing any actually useful work, bad things happen.
An important point is that the recent wave of globalization has been very good for poor people in developing countries outside of the US. From the perspective of US workers, outsourcing looks greedy. From the perspective of foreign workers, outsourcing looks altruistic.
https://ourworldindata.org/extreme-poverty-in-brief
Even with recent globalization, Americans are still far richer than most people in other countries. I believe those people matter just as much as Americans do.
The motivation was greed and the means were treacherous. If someone was helped along the way, great, but don’t be naive enough to think that there is any altruism. Saying that all people matter just as much as any other is an absurd platitude. In some abstract sense, maybe, but your obligations to your family, friends and community obviously supersede any obligations to some hypothetical person with whom you share no relation. Moreover every society of earth maintains this preemption and considers this attitude to be immoral.
Something tells me factory workers in Taiwan do not see their employer as altruistic. :-) That is perhaps a over-extension of the word.
that being said, there are ways this could be beneficial both ways instead of one way.
I’d also argue that it’s perfectly fine for the US and any other nation to think in terms of putting their domestic economy first, regardless of anything else
As I stated elsewhere, America's median income, adjusted for cost of living, is one of the world's highest. Americans benefit from cheap goods from other countries.
It might be socially acceptable to put the domestic economy first, but that doesn't mean it is right. Ultimately, it's basically the same as the "looking out for #1" philosophy that rich people allegedly have, which is being condemned in this thread -- but at the rich country level rather than the rich individual level.
Try this calculator: https://howrichami.givingwhatwecan.org/how-rich-am-i
It is beneficial. I generally believe in free trade as long as both sides have agreements in place that follows laws and policies mutual to both parties
However not every situation is like this. For instance, offshoring was used to artificially suppress wages of IT workers. That’s not mutually beneficial in the slightest. It’s abusing one cost advantage over another without a clear benefit to both sides, it only served to enrich shareholders
To top this all off, our ability to "put the domestic economy first" through policy is non-existent. Any attempt to fix this "problem", that you accurately described as a problem only because it's socially unacceptable, would end up harming us in some way. There is a mountain of evidence over the last century to back this up, we just refuse to listen.
It's also important to not that China has lost more jobs to automation than the US has lost to China.
An incredibly important point that gets missed very often
The other point that’s often forgotten is that labor costs have risen, and shipping has gotten cheaper. This is just how economics plays out. Protectionism can be great for national security and employment, but people would have to stop expecting things to be cheap.
That people don’t care about those in developing countries does not mean they missed it.
Are the apac equivalents of those projects generating returns commensurate with the extra investment? Or is it a strategic choice that they typically focus more on advanced manufacturing while the US focuses more on software? I'm just wondering what the right way to think about this is.I work on projects that would get 8-9 figure investments if we were doing this in APECBoth. They get high returns and there is high social benefit.
Because the US thinks of industry as ‘dirty’ we’ve lost touch with how valuable these jobs can be. In the US the returns would have longer duration and would not be viewed as ‘important’ bc the business isn’t suitable for a FANG exit.
Correct. The problem with "America's manufacturating problem" is it's oligarchic class rise. The rich control the US through favorable laws and protection. You need to remove the scabs at the top to have a healthy economic comeback.
The answer is always greed from the top. The concentration of wealth.
This is an anecdote. R&D as a percent of US GDP has never been higher than it has been in the 2020s. Even more than back in the 60s. The source of the R&D has changed (less federal government) but it’s not financialization. https://ncses.nsf.gov/pubs/nsf23339#:~:text=The%20ratio%20of....
https://blog.redpathcpas.com/research-and-development-tax-cr...
It would be interesting if there was a breakdown by technology sector. Ie manufacturing R&D vs. software development R&D.
All I will add is...
You are close to realising the problem. Financialization is a consequence not a cause.
The cause is demographic. Why and how did pension funds grew so much need to own everything and get money?
Spoiler: this happened in steps with Boomers investing in their retirement. Because they were so numerous it flooded everything.
Second Spoiler: they also had (and still have) the political power by sheer number, which warped the regulatory environment.
The production of physical goods - physical capitalism - no longer had anywhere to go really when most people employed started having a decent standard of living, so we looked for ways to continue infinite GDP growth and we found it in financialisation. It worked but only by destroying/rotting away everything else.
This explanation doesn't quite convince me, because if this really were the primary issue, USA could have globalized its consumer base not just for low quality products and pop culture, but high quality development.
I think the root problem is political: recognizing that USA's extraordinarily successful mid-century economic model was the result of a compromise by the ruling capitalists to avoid facing a European-style revolution (e.g. Bolshevism) at home.
As the Cold War reached its heights in the early 60s, that delicate equilibrium was destroyed, and the capitalists had a new mandate. State regulation, labor unions went from "necessary evil to avoid revolution" to "evil", and the robber barons could return to their early 20th century form. Thus we got the 70s and endless financialization.
The US economic model has been quite successful recently as well.
https://ourworldindata.org/grapher/daily-median-income?tab=t...
As of ~2019, the US had the world's 4th highest median income, even adjusted for cost of living -- easily the highest median income of any large country.
And the median income in the United States has been growing rapidly. Sort the table by "Absolute Change" and you'll see that in absolute terms, the US median income grew the 5th most over the period from 2009-2019. Again, the US is comfortably ahead of other large countries when measured according to this statistic. (For example, US workers saw over 2x as much wage growth as Canadian workers did over the same time period.)
Speaking as an American here, it frustrates me when Americans fail to realize how good they have it compared with people from developing countries. Americans are some of the world's richest people, yet they still insist on hoarding as many good jobs for themselves as possible. When Americans talk of "reducing inequality" it often seems hypocritical.
I genuinely don't understand why it is that the people who are best off also complain the loudest.
Americans have among the highest incomes, yes, but we also have ridiculous cost of living amid a highly predatory financial system.
Housing, healthcare, education and other living expenses are astronomical. We can't just look at the high incomes.
Successful for the elite, yes. Not for the median American.
The stats I linked are adjusted for cost of living. As stated on the "Chart" tab: "This data is adjusted for inflation and for differences in the cost of living between countries."
People who earn the median income are hardly elite.
The data you linked only goes to 2019. That's cherry-picking, if anything. Bad economics.
Median income earners will never own a home in current conditions. That's a significant downgrade from past generations. We are not better off.
If you toggle the year to 2021, you'll see that US data on that page ends in 2019. No cherry-picking, I just chose 10 most recent years which had US data easily available.
House prices in the US are high, but not remarkably so. (E.g. Canada's house prices are higher.) I'd argue that expensive US houses have more to do with NIMBYism than the overall health of the US economy.
Focusing on housing in particular is itself a form of cherry-picking a single statistic. The median income data I linked is adjusted for cost of living, which includes housing and other stuff.
It's like saying the US economy is doing great in 2010 by using data that ends in 2006.
The last 3-4 years have been awful for the median American. The "prosperity" of 201X-2019 was funded by loose financial conditions: it's basically just debt. Purely debt-driven "growth" should not be mistaken for a healthy economy. And we are feeling the consequences of that debt-driven growth now, with high inflation, recession conditions, and a global sidle away from the dollar.
When their current car dies they won't own one of those either. Shit storm is brewing for the poors in America. Hardly anyone is taking advantage of our very inexpensive training programs that train in the trades (easily transitionable to engineering). Half the people who do show up are having it paid by their employer and barely put in any effort. Apartment complexes are looking good as an investment.
>Americans are some of the world's richest people
Taking national wealth or GDP and implying it's shared equally amongst its citizens would be an absurdly disingenuous argument.
You're not doing that, are you?
This is correct, well-documented, and not talked about much.
There really was a vast right-wing conspiracy. It started with this memo.[1]
Here's the background: [2]
Understand that, before this, businesses rarely had lobbyists or engaged in political action. That totally changed in the 1970s.
[1] https://www.greenpeace.org/usa/wp-content/uploads/2021/08/Po...
[2] https://billmoyers.com/content/the-powell-memo-a-call-to-arm...
> I think the root problem is political: recognizing that USA's extraordinarily successful mid-century economic model was the result of a compromise by the ruling capitalists to avoid facing a European-style revolution (e.g. Bolshevism) at home.
Yes. Communism was a competitor which kept capitalism from acting like a monopoly. Once communism was no longer taken seriously, capitalism was unrestrained. When the USSR finally ran down, there was no stopping the push to plutocracy.
It's not that communism was a better system. It was that the existence of an alternative kept capitalism from getting out of control.
I think that’s also fairly accurate. I always had a weird feeling on how the Scandinavian countries were in close contact with the Soviet Union and that might have influenced them to follow a more hybrid societal model than other Western countries. I haven’t done enough research to explain it either way.
I do think physical capitalism exhausted itself, but it was more in the 90s and 00s that we see more psychological capitalism arriving with the first internet products that have no physicality associated with them - social media and networks. Then we have a real (or apparent) exhaustion of physical capitalism.
It is fairly typical for poor, undeveloped countries to use a more centrally planned economy. The sheer lack of capital, as well as business and industrial know-how dictates that. Socialism and Communist parties were relevant in the 70s and 80s in Western Europe but later on were rejected as they were no longer relevant to their developed economies.
It makes me recall one of my favorite cars that was never built, the Norwegian Troll. The government decided not to expend their limited capital to the company as they could trade fish for Ladas to get cars.
Yes. Economics being at least partially directed by the state is actually a fairly sustainable route to parity with other rich countries (maybe the only one, according to the book How Asia Works).
Note the absence of tax policy changes that favor manufacturing. Here are a few:
* A tax on financial transactions. This is sometimes called a "Tobin tax". The US financial services sector has doubled in size as a fraction of the economy. It's currently around 12%. That's an overhead cost, and a big one. Could be half that.
* A tax on advertising. The tax deductiblity of advertising as a business expense should be limited. No more than a few percent of the cost of a good or service should be advertising. Domestic US advertising is almost zero sum, anyway, because Americans are spent out. All advertising does is move consumption around a bit.
* Standards for imports. If it plugs into AC power, it has to have UL certification. No more fires from power supplies, including small electric vehicles. Anything medical has to be sample tested after import. Criminalize willful violations. Hold resellers (i.e. Amazon) criminally responsible.
Big agree on UL certification of electronics imports. So much dangerous stuff is coming in and getting sold in places like gas stations where customers probably won’t suspect safety issues.
Is it currently legal to just sell your DIY power supply to US consumers? Or is there still like FCC certification required? Assuming, say, a USB-C charger.
"It depends" mostly on how DIY it is. PCB + parts kit is usually fine for most things that would have FCC or UL requirements, but selling something that's "assembled in USA" like tractors (wheels bolted on here, everything else done there) would probably still need certified.
The problem is design and tech companies and cloning resellers sling stuff direct to consumers via ungodly amounts of facebook ads. Because they’re direct shipments so many of those products are not safe or certified and many clones are labeled as certified but aren’t because they’re cheap knock offs made to look like the originals.
Even at the small end, it's hard to produce something that's even a bit popular and not have it cloned/ripped off/your chosen license violated. We have that issue with a number of our products, both open-source hobbyist stuff and non open source.
>A tax on financial transactions. This is sometimes called a "Tobin tax". The US financial services sector has doubled in size as a fraction of the economy. It's currently around 12%. That's an overhead cost, and a big one. Could be half that.
What reason is there to believe that this is an overhead cost?
As I mentioned in another comment, over the past ~10 years or so, US median earnings have grown remarkably fast compared with other large countries: https://news.ycombinator.com/threads?id=0xDEAFBEAD Hard to argue with results.
Taxing financial transactions intuitively seems like the sort of thing which would put a drag on economic growth. And manufacturers need to transact just like any other sort of business; I don't see how taxing transactions encourages manufacturers relative to other firms.
I like the tax on advertising though. I would tweak it so the tax only kicks in once your spending on ads exceeds, say, $10 million per year. That way innovative new products can advertise to customers tax-free. This method also encourages big monopolies to spin-off individual product lines, which could reduce monopoly power.
Capping tax deductions for advertising and progressively taxing it is a good one. Indeed, most advertising past a certain budget seems to be a zero-sum game and should be discouraged, not encouraged.
I don't see that taxing financial transactions would cause a phase change. Each financial transaction already has an associated cost of the people employed to create it, and yet complexity still grows. The real problem is that the financial industry has access to extreme amounts of cheap leverage, which forces everyone to play (aka the "everything bubble"). Witness all of the crying about interest rates having gone up a modest amount. Interest rates need to be held at least where they are long term, which is still lower than they were before they were dropped to distract from the needless and destructive conquering of Iraq.
I would say that eliminating tax deduction for advertising expenses is the wrong way to go about things as well. Adverting is a bona fide business expense, so it makes sense as a deduction. Rather, a direct tax should be levied on advertising, to account for the externalities of us all having to suffer the cacophony. This could even be done state-by-state rather than federally (a la sales tax).
Wholeheartedly agree on the certification. It blows my mind how cavalier people are about plugging Amazon's gensym branded products into mains power - especially given how shoddy even NRTL-tested products seem to be built!
A financial transaction tax is a terrible idea.
I own a 100 shares of Apple. Tim Cook goes on CNBC and says he’s all in on printers. So I want to sell my Apple shares and buy Microsoft, where Satya Nadella is pushing Cloud and AI.
I’m being a smart investor, moving a small bit of capital allocation intelligently.
Taxing this decision discourages making it—even if only marginally—and makes capital markets dumber and less efficient.
> I own 100 shares of Apple… Tim Cook goes on CNBC and says he’s all in on printers. So I want to sell my Apple shares and buy Microsoft. I’m being a smart investor.
No, you’re being a schmuck.
The market moved on that information well before you saw it on the news, loaded up your web browser, and executed the transaction.
Time and time and time again it has been demonstrated that actively trading is negatively correlated with performance. The more frequent you trade, the statistically worse you do.
Besides being empirically true, it makes intuitive sense. Every time you trade you’re engaging with a counter party on the other side of the transaction. With overwhelming likelihood, that counterparty has disproportionately greater (and timelier) access to information and market analysis than you. So every time you trade, you do so at a steep disadvantage.
Invest in the market. Buy and hold. Sell to finance your retirement. Save the gambling for your Vegas fund, not your life savings.
Sorry a colorful example seems to have gone over your head: A financial transaction tax dulls the market response to new information. The primary purpose of markets is to translate information into prices.
Markets that are less efficient in that task hurt long-term retirement investors and day-traders alike.
> Markets that are less efficient in that task hurt long-term retirement investors and day-traders alike.
On some level this is true, but the insane quantities being siphoned out of the economy through the financial system is wildly disproportionate to the increasingly-infinitesimal gains in “price efficiency”.
As a long-term investor in the market as a whole, whether Apple’s true per-share value today is 175.01 and not 175.07 is almost completely irrelevant. Even less so the difference between 175.008913 and 175.008916.
We have long since passed a point where there is sufficient liquidity and sufficient price discovery for the purpose of buy-and-hold investment, and every extra dollar that goes to financial services in the name of more accurately determining prices is just a transfer of money from people who provide value to the economy to a class of leeches who provide nearly nothing.
The money is not siphoned out of the economy (unless it all leaves the US/World). The money made in finance is just as any other money, i.e., it is used to consume, invest, save etc.
Btw., no-one is forced to trade incessantly, either.
The money technically being “in the economy” is cold comfort to the workers whose COL has steadily increased while wages have remained flat.
I would caution you against assuming disagreement is misunderstanding,
A spring only suspension system responds quickly to a bump in the road. If that’s your only metric, it’s good. But a car without a damper is going to be hella uncomfortable. The shock makes it respond slower - it doesn’t mean it doesn’t respond.
Uuuu, While the analogy is nice, I doubt that taxes are decided upon like an engineer deciding on damping coefficients. An engineer has a specification and tries to hit that spec. I have a hard time believing that’s how taxes are set. I would like carbon taxs/credits to be decided upon that way. But if you look at the real systems it’s obvious they weren’t designed that way. Finally, you are correct that you need to be careful in choosing the metric. I think I would also question the desirability of dampinh, which it seems like the other poster was trying to say. The market being dumber is a slower response in your analogy. They want a sports car, not a rolls.
I wanted a sports car as a teenagers and my parents gave me a minivan. It wasn’t what I wanted but it’s likely the reason I’m alive today.
The point of governance to some extent is dealing with the tension between what competing groups of people say they want and actually need
> The market moved on that information well before you saw it on the news, loaded up your web browser, and executed the transaction.
Sounds like insider trading to me.
So for starters, insider trading exists and while it would be great to live in a world where it doesn’t, we live in this world where it certainly does.
Second, even in a magical world where this doesn’t happen, institutional investors have literal teams of analysts working for them. They have bots responding to news reports and public filings, and the lowest latency possible connections to trading platforms.
You have none of this.
> Taxing this decision discourages making it—even if only marginally—and makes capital markets dumber and less efficient.
Or it encourages making longer term investment decisions rather than trading like a jittery cocaine addict (which by no small amount of irony a nonnegligible number of traders are already.)
What you’re suggesting is that markets are more efficient when they’re less liquid. That’s both intuitively and empirically wrong.
Why? We already have regulations such as circuit breakers in our markets because unlike what you are claiming, absolute liquidity is not the god you think it is. There can absolutely be such a thing as over-optimization.
They are likely suggesting that incremental, hypothetical increases in market efficiency appear to come at increasingly steep costs which primarily borne by the rest of society at large.
And the evidence for this is … ?
Front-running is an easy example.
Front running is illegal.
So place a limit order.
Do you also preach everyone to learn self-defense when they propose making mugging illegal?
No, in the best world we do both.
Clicking radio button on a website is not at all comparable to learning self defense.
Also, front running is already illegal.
> Clicking radio button on a website is not at all comparable to learning self defense.
However, stealing money is still stealing money.
> Also, front running is already illegal.
Great! Which means there are sometimes legitimate reasons to clamp down on "hyper-efficient" but socially negative actors.
Finance is 12% of the entire US economy.
What’s the right %?
Clearly less than 12%.
Well, I’m convinced.
What extra liquidity is there for executing trades every microsecond instead of batching them up for thrice a minute trades?
You can have transaction taxes without penalizing small/micro investors.
It’s criminal how the people who trade stocks for a living get away with paying less taxes as a percentage than their janitors.
This could be solved in part by eliminating the carried interest loophole
The drag on efficient capital allocation doesn’t get better if it only applies to large investors, if anything probably the reverse.
You already are taxed for this decision via capital gains taxes.
Not really. I can make a million trades or one to gain $X and pay the same capital gains tax.
A financial transaction tax makes me much worse off in the former case. It disincentivizes trading volume by raising transaction costs, which have been on a long-term trend downward as markets have adopted technology and brokers have engaged in cutthroat competition. I believe that trend has been positive for markets, investors, and the economy as a whole.
Only within one calendar year. In your original AAPL / MSFT example, you’d need to pay taxes at the end of the year on any gains from your AAPL sale assuming that’s as your only trading activity in the year.
> tax on financial transactions
This is a tax on the middle class. Plenty of countries have stamp taxes on trades, for example. The wealthy structure to avoid a books-and-records trade. The average person can’t do that and so pays.
If you’re upset about the size of finance, just tax that directly.
> Domestic US advertising is almost zero sum, anyway, because Americans are spent out. All advertising does is move consumption around a bit.
This is only true when productivity between firms is constant. Advertising helps direct consumption toward more productive firms.
No one said ban advertising, just penalize excessive spending on them.
Here are the key points the article suggests (it spends quite a long time explaining how we got here):
1) Improve the [government sponsored] Manufacturing Institutes
2) [federally] Back R&D for manufacturing technologies
3) Provide scale-up financing [by the government]
4) Use government procurement power to promote new manufacturing technologies
5) Direct production support [to sectors deemed critical]
6) Provide both “top-down” [gov picks a tech and supports development of it] and “bottom-up” [broad incentives like IRA] support
7) Build a manufacturing focus into existing industrial policy programs
8) Map and fill gaps in supply chains
9) Fix workforce education [by refocusing on legitimate vocational tracks]
10) Put someone in charge [of coordinating agencies, budgets, and efforts]
This is all effectively trying to copy large segments of the China playbook, but in my opinion it misses some rather important points. Namely, protectionism and implicit incentives. On the first point, you can't really compete with China when it is actively hostile to foreign companies and de facto encourages outright theft of knowledge and expertise in exchange for access to its market. As long as we have a significant portion of people yelling about "trade wars don't solve anything" any time someone proposes leveling the playing field, competition is a nonstarter.
On the second point, the elephant in the room is that smart people in the US can make 2-3X as much in software or finance as they can in manufacturing, so what do you think they're going to pick? Which company is private investment going to fund - the SaaS co. with 40% margins and rapid growth or the manufacturing co. scraping 10% margins and 5% CAGR? It's hard to see where the skilled labor and private investment side of the equation is supposed to come from when the incentives are so mismatched - you almost have to find a way to decrease incentives in the currently lucrative pools first.
The Triffin Dilemma plays a big role here. Debt substitutes exports in the balance of trade; running the reserve currency pumps assets and dump exports. If you want to export from the US, you have to compete with a literal money printer for access to talent and resources.
https://en.wikipedia.org/wiki/Triffin_dilemma
This is going to be hella difficult to unwind, especially given the current state of macro awareness in the US: if I had a penny for every time someone in an export industry panicked over the possibility of a declining dollar, even though this would be in their best interest, I'd have too many to carry. Arguably worse, we have an otherwise respectable top 10 list that doesn't include macro anywhere, which is like teleporting onto the Titanic only to hear that the conversation is all about how to best duct-tape the doors. Sigh.
“Which company is private investment going to fund - the SaaS co. with 40% margins and rapid growth or the manufacturing co. scraping 10% margins and 5% CAGR?”
2 of the most valuable companies started in the last 20 years in the US are SpaceX and Tesla. You can still build a huge amount of value with non-SaaS margins.
I think part of the problem here is how structurally unfit VCs are to fund such companies (ie investment horizon and fund lifecycle is 5-7 yrs). THat’s where scale-up financing by the government can make a huge impact.
These are great examples. SpaceX is an aerospace company and Tesla's price and hype are based on not being a manufacturing company (Elon touted it as a transportation tech company and not a car company from the beginning). If either were valued as manufacturing companies, their valuations would be in line with traditional peers.
My point is, if you want manufacturing to return, we need American FoxConns, and that means literally 2% margins [1]. We can't rebuild onshore manufacturing with overhyped companies alone.
[1] https://www.foxconn.com/en-us/investor-relations/financial-i...
The price and hype are based in part on not being a manufacturing company but the business model is certainly based on being a manufacturing company. And the manufacturing segment of both that is expanding. Just because the stock price is ridiculous does not mean the business models are unsound. They are a great example of bringing manufacturing and vertical integration back. They have made their factories work in California, Beijing, and Berlin.
Going off of the stock Tesla looks incredible but the price is insane and driven by factors other than their actual production outputs. They had a huge lead at the start but the old giants aren't that far behind them any more and aren't hampered by over promised and underspecced self driving claims and the... Muskness of their leadership.
Check out the Mach E review by Scotty on YouTube. Ford certainly is not behind Tesla at all. That Mach E is oders of magnitude more exciting than any Tesla I have ever seen.
The main thing Tesla still has over their competitors is the charging network. I've watched a couple X vs Tesla roadtrips and the biggest issue in the non-Tesla is there's way worse information about the chargers you'll find at a particular spot. These were a bit ago so maybe they've gotten better but there were a lot of "oh this charger doesn't work hopefully we have the range to get to the next one" where the Tesla chargers provide pretty good information about the number of people already charging there etc.
It's a gap they're losing a bit by other companies adopting their plug choice but there's still the integration to the car infotainment system.
Yes!
I oversee a portfolio of industrial products that no VC would touch. Now, some long view PE groups do things like this - the margins can be great, growth can be fast.
> On the second point, the elephant in the room is that smart people in the US can make 2-3X as much in software or finance as they can in manufacturing, so what do you think they're going to pick?
Make unions stronger and kill off all of Wall Street finance shenanigans that's purely devoted to creating money out of thin air or skimming (especially HFT). That house of cards is going to crash hard anyway, so best tear it down in a controlled fashion than risk yet another 2008-style uncontrolled implosion.
"We've gotta destroy the economy to prevent the economy destroying itself!" isn't a rallying cry that is likely to garner much support.
Do you have any favored proposals for preventing "finance shenanigans"? Given the amount of money involved, I expect any government-driven reformation will be corrupted to serve private interests.
The economy of Wall Streeters is divorced from many natural economies these days. Perhaps they have already rendered their desires irrelevant and countervailing to mine and those of others.
> "We've gotta destroy the economy to prevent the economy destroying itself!" isn't a rallying cry that is likely to garner much support.
That is exactly what you need to do though, blow up the dam now and release the water instead of waiting for it to build up and destroy the entire city. They do that small scale by increasing interest rates already, but sometimes you maybe need to do more.
> especially HFT
People deciding to kill things in domains they haven’t the vaguest conception about is how we wound up in this situation. (Killing HFTs would be a major boon to Wall Street. You’re mandating an increase in transaction costs.)
We wound up in the situation we are because we let the forces of the free market have free reign in creating all possible sorts of quackery and bullshit.
> Wall Street finance shenanigans that's purely devoted to creating money out of thin air
Creating money out of thin air has literally been the primary economic function of banks since the Renaissance. You have some people willing to provide useful goods and services, but there aren't enough standardized IOUs to pay them, so you issue new standardized IOUs.
Perhaps there is no saving it via a soft landing and the smartest move is to crash it now instead of letting more pile up for a bigger crash later.
>Wall Street finance shenanigans that's purely devoted to creating money out of thin air or skimming (especially HFT)
Society is so damn lucky that techbros are politically irrelevant.
>On the second point, the elephant in the room is that smart people in the US can make 2-3X as much in software or finance as they can in manufacturing, so what do you think they're going to pick? Which company is private investment going to fund - the SaaS co. with 40% margins and rapid growth or the manufacturing co. scraping 10% margins and 5% CAGR?
Ooh, this one's easy. Make software companies give back some of the money they make data-brokering and administering platforms where the vast majority of the advertiser-attracting content is provided, for free, by users. That's where the margin is coming from: users being scammed out of the true value of their contributions. Tax or regulation, pick your poison.
Someone brought up Tesla and SpaceX in another reply. The Tesla whose market share growth was driven largely by EV tax incentives, of course. The SpaceX that built heavily on gifted NASA research and expertise, of course.
> users being scammed out of the true value of their contributions
is it a scam? Or are the users willingly trade their data for features?
> The SpaceX that built heavily on gifted NASA research and expertise
i think you're discounting their own hardwork. NASA research is available to any other company - it isn't an exclusive transfer.
>is it a scam?
Is it a scam if I buy a $1 million painting off you for $50, knowing that I'm aware of its value and that you aren't? It's at best unfair and disingenuous. But what's more important to consider is how the scale of this imbalance has warped our economy: as mentioned above, a large portion of our most educated workers are getting paid to build addictive social media platforms instead of things that are useful and sellable, because tech companies are capitalizing on an arbitrage opportunity that is so massive as to probably be unfair, if not criminal, somehow.
>NASA research is available to any other company
But not NASA grants and personnel contacts.
I mean they could simply weaken the dollar and then US manufacturing (and other) exports would become attractive again.
And then everything that the us imports would be more expensive in the next day, fueling inflation...
Yes, inflation on imports. Investing in the domestic manufacturing sector isn't free.
This, there ain't no free lunch.
When did China ever rely on protectionism? I'm sure they have bouts of it here and there but the overt part of their strategy has been a willingness to work hard for low wages combined with refusing to let Chinese land or companies be sold to overseas buyers. But I claim no expertise. There should be a more serious effort to figure out what China's strategy was before there is a conversation about how best to copy it. Focusing on why China succeeded is more interesting and harder to get good information about.
> ... smart people in the US can make 2-3X as much in software or finance as they can in manufacturing...
Sounds like the price of manufactured goods is unsustainably low. Prices will need to go up or a new source of cheap labour be found outside the US.
> Focusing on why China succeeded is more interesting and harder to get good information about.
It isn't that hard, really. They had a massive population in relative destitute poverty that was willing to work very hard for a small, but significant, increase in their quality of life, starting with Deng Xiaoping's market reforms through fairly recently.
The surplus of cheap labor is shrinking, and the current "made in China 2025" plan is intended to drive the growth further by shifting more portions of their economy away from foreign services and goods.
The tactics are largely the same, though: massive subsidies to local companies that disadvantages foreign ones, tacit acceptance if not outright approval of theft of trade secrets from those foreign companies that do business in China, and until recently anyway, kept the yuan pegged to the USD, meaning that it is far cheaper to buy Chinese goods than elsewhere. Now, it is tied to a basket of currencies, but held in a fixed range, so it remains intentionally undervalued.
All of this put together ensures that foreign countries will buy Chinese goods and services, and that Chinese people will also prefer to buy locally.
Think of it as a "cold" trade war. Why they were allowed in the WTO with such policies I'll never know.
It is that hard - you just handwaved all the hard parts. Most of the world is effectively destitute, making <$10k/annum [0]. The vast majority are willing to work very hard for small opportunities to benefit themselves. We're only seeing pockets of economic success in Asia as people copy their neighbors policies. And Deng's reforms ... you handwaved them. What were they? How many good 50 page reports are floating around that actually go in to them? We're talking 50+ years of economic policy between Deng and today, I expect a bit more than just a few Wikipedia links on this one. Even a decade of economic policy across China is a complex subject, China is huge and diverse.
And these massive subsidies - what evidence do we really have? Massive subsidies have not worked well outside of China. What magic is happening in there that makes them effective? Pre-1970 we had a series of superpowers that were effective because they avoided massive subsidies and let failures fail. China can't even afford massive subsidies for most of the period that mattered. The US government's spending might have been bigger than the Chinese economy for a lot of that period, and the companies the US has been subsidising aren't showing any of the vigour that the Chinese ones are.
> ... theft of trade secrets...
People have been screaming from the rooftops for years that the IP edifice is going to reduce innovation in the West. The question is why we subject ourselves to that madness. The amount of cultural destruction in not allowing 1900s works to spread freely is a tragedy, let alone the impact on science and technology. So certainly in theory I agree that the Chinese are getting a leg up here, but it'd be nice to see some analysis. And the problem isn't the Chinese attitudes to IP; that is the solution.
But to emphasis "it isn't that hard" to gloss over decades of highly successful economic policy is just not true. It isn't a serious attitude. If people in leadership positions hold that attitude the situation will worsen.
[0] China's average wage is above the world average, by the way. It crossed the line recently to much rejoycing. I think that is PPP adjusted. https://ourworldindata.org/grapher/gdp-per-capita-worldbank?...
Production in China has included benefit from the opposite side of protectionism for some time now; when most countries abide by trade laws, those that don't gain increased exposure to international markets by virtue of offering cheaper goods via production-sans-design.
China itself may not, but the production groups within China have a pretty exhaustive recent history of largely ignoring IP regulations whenever profitable, and the market response has been widely happy-to-consume.
For a single example look at the history of composite bicycle manufacturing from the 60s onward, with specific detail on the emergence of China produced composite bicycles in the 90s -- it wouldn't have gotten off the ground at all without blatant IP theft spurring the first half.
The main problem with this take is that the US and China simply have different standards and rules for IP.
China is not "ignoring IP regulations"; they have different regulations. Both the US and China are parties to the WTO and Berne Convention and cases can and have been tried. The US has won many cases against China in the WTO; it hasn't done as well making cases for IP theft and protectionism, which is notable as this is a (relatively) neutral forum.
The main problem with this take is that it fails to explain the differences and their consequences.
If the differences and consequences are the same as if China was outright ignoring IP ownership*, why does it matter that you call the ignoring "different standards"?
*- not that they aren't already
Can you point to a case that breaks both US and Chinese law? Otherwise, this conversation will be about vague generalizations.
The issue is that IP is a legal creation, so it can only be stolen if it is recognized in the first place. That said, it does not seem like differences in IP law are usually what people are referring to when talking about IP theft. That is why I brought up the WTO, which is a forum in which the US has sued China for encouraging IP theft--but most of these cases have not been won.
> The issue is that IP is a legal creation, so it can only be stolen if it is recognized in the first place
The same is true of all crimes, they are all legal creations. And from what I can tell, China has the concept of IP. They're protective of their own, for example.
It sounds, then, like you're now agreeing that the IP is being ignored, just saying it's okay because China don't want to recognize it.
If not, I will ask again:
Suppose we have 2 IP owners, and 1 has their IP ignored by China and copied, the other has their IP "considered a different standard/not recognized" by China and copied.
_What differences do the two IP owners experience?_
This is the key question I asked before, and I am asking now. What's the difference for the IP owner? I ask because it seems like you're playing with words, not substance.
I'm not sure what you are trying to argue. US law is not the same thing as international law. Of course US law, including IP standards, will not necessarily be recognized outside the US unless part of a treaty. It's similar to how the US doesn't recognize mainland China's claim over Taiwan.
That said, there are treaties covering IP that both the US and China are a party to which require certain mutual recognition. The US has sued China in the WTO for violating the IP provisions, but has not won most of those cases (AFAIK).
US companies can also sue Chinese companies in China for IP infringement and some of those cases have been won. Chinese courts tend to award much more limited damages than US courts, so US companies don't find this satisfactory. But again, that is a difference of law.
> I'm not sure what you are trying to argue.
I'm not arguing anything, I'm asking you a simple question. I'm not sure why you are trying to avoid answering. Here is that question again, I highlighted it below:
Suppose we have 2 different IP owners. 1 has their IP ignored by China and copied, and the other has their IP "considered a different standard/not recognized" by China and copied.
---> _What differences do the two IP owners experience?_ <---
You are trying to argue that "not recognizing" IP and thus ignoring it, or "having different standards for IP" that lets you ignore it, is somehow different from just ignoring it. You have not explained how that makes a difference in outcome. Why should business owners care what excuse is given for ignoring IP? If it wasn't one excuse, it would be another, and ignored is ignored.
The difference between the two cases you outlined is that if a US business has its IP copied by a Chinese business and that IP is recognized in China then the US company can sue the Chinese company in China for damages resulting from infringement.
If there is no mutual recognition then the US business must sue in the US, and the judgement may not be recognized in China, making it difficult for the US business to collect.
The other difference is that if IP is recognized in both the US and China as a matter of treaty (like the WTO or Berne Convention) and a Chinese company copies the IP of a US company then the US can sue China in the WTO to enforce compliance.
It's no secret how export-driven development works. Trade surplus/deficits are controlled at a policy level by debt issuance/purchase. Run a surplus and your export economy will thrive. Run a deficit and your export economy will die.
Running the reserve currency requires running a deficit (others want to export their savings, so you need to import their savings). This pumps assets and dumps exports.
The article raises and goes fairly deep into explaining many important issues, but I find it's naive belief the numbers China presents quite surprising.
Take this for example: >China dominates the production of full electric vehicles
And put it in context with the recent revelations of hectares of abandoned new EVs rotting in many locations in China. Why? The financial policy gave incentives to making more EVs, some enterprising individuals managed to manufacture very low quality cars while funding it with "shared car startup model". Then when these car sharing schemes went bankrupt (because many cars wouldn't complete a single trip without malfunction) they had enormous profits regardless. How? The cost of manufacturing was funded by investors in these startups(a third party, or a client from the manufacturer's point of view). After they went bankrupt there would be no warranty claims etc. While the per car gov subsidy was pure profit.
I cannot understand why anyone in the West would believe any economic statistic or number coming out of China. The country is known for fudging numbers at all levels. The corruption is endemic to the point one actually pays for government positions with cash (as a bribe to higher ups) and considers it an investment to recoup in own bribes in future.
It's Soviet Union all over again. Back then The West to the last moment had many prominent authors praising Soviet advancements in many fields until the very end and the collapse that was a complete surprise to many.
> Back then The West to the last moment had many prominent authors praising Soviet advancements in many fields until the very end and the collapse that was a complete surprise to many.
I hear you. But I am not worried about whatever economic modellers say, or what prominent authors write. What I am worried is when huge companies, predominantly preceived as western ones, spread their arms and swear there is no way they can make their gizmos in the USA.
Look at Apple for example, most valuable company on the whole world and 44-47% of their production sites is in china. Did we had anything like that in the Soviet block?
>I hear you. But I am not worried about whatever economic modellers say, or what prominent authors write. What I am worried is when huge companies, predominantly preceived as western ones, spread their arms and swear there is no way they can make their gizmos in the USA.
Yes, you make a very valid point.
>Look at Apple for example, most valuable company on the whole world and 44-47% of their production sites is in china. Did we had anything like that in the Soviet block?
No, definitely not, there is a difference in how Soviets couldn't overtly accept western investments without it looking like a failure of their central planning. Also the relationship between both blocks(USSR vs the West) was much more openly antagonistic. China is different in these ways. One could write a book about the differences and similarities of both countries.
As for large companies doing that I blame the lawmakers (and people voting for them). A share based company is supposed to act in the best interest of shareholders. How long or short the time horizon to prioritise is decided by the shareholders when they hire the board of directors. It is not a surprise a bunch of shareholders will want to prioritize short term gains. It is the lawmakers job to ensure its citizens don't fund enemy regimes. That leads to another point, for a life of me I do not understand how the Chinese Communist Party regime is not officially considered an enemy of the USA and all other deocratic countries. For some countries with very corrupt political scene (like Germany, Austria etc) it is obvious why, but the US? Perhaps the political elite in US has awoken to the fact current China is their biggest enemy, they just don't see any benefit in communicating it clearly at this stage.
The CPC under Deng, unlike the CPSU, paid attention to the materialism part of Marxism, recognized that the business of America is business, and realized that the Western ruling classes stood to earn trillions from cooperation. In the west, still fresh from remembering WW2, bankers felt that trade linkages could prevent WW3. In hindsight, it was an obvious and brilliant strategy.
Good luck with that. :(
Rent seeking behaviour is so deeply entrenched in US-led business culture, that any time potential advances are figured out they are viewed through the lens of "can we patent this?".
If the answer is "No", then funds for developing that potential advance - eg concept dev, prototyping, potential field testing - just don't exist.
It's not about being able to improve manufacturing. It's become "what's the greatest ROI on spending these dollars? Can we lock in a monopoly around it somehow too?".
While that short sighted foot gun approach remains prevalent, "fixing" the advanced manufacturing problem is going to proceed pretty damn slowly.
Outright abolishing all patents might get things going in the right direction, but the heart attacks that would cause in business circles makes that impractical. ;)
This is simply because the American elites have chosen a different way to prosper. They have chosen, to reach the top of the world, and then ripe the easier and larger pies. The might of the US military protects the interests of the financial institutions (and some other oligarchs), and this can go on as long as the US military is strong enough. It is thus NOT the interest of the American elites to promote manufacturing. Not only that, even the American people are getting used to it too, they too do not want to work in manufacturing, tiring and non-prestigious.
I don't really see a way to reverse everything. It is not about investing more in education or patching up policies. We are talking about a whole generation, maybe two, of elites and (some of the) people who profit from globalization. You simply cannot rely on the hands to chop themselves off. This is going to be a violent, bloody process because changing tides in politics is always bloody, literally. This is also going to touch the cake of numerous upper-middle class interest groups: landlords, bankers, you name it, anyone who prosper from the last 40 or so years, especially last 10 years since the first QE. Why? Because you are basically saying, OK I'm going to create a new group of middle class people but hey the cake is just that big so I need to cut someone else's piece.
Of course, everything has a cheat. The cheat, which I believe was already chosen by the American elites, is to instill conflicts globally and create mass exodus of highly skilled workers from other countries to the United of States.
Non-union manufacturing work is nearly suicide. Horrid safety, abusive work mandates, random hours, barely any PTO. The list goes on. I wouldn't wish it on anyone.
My son joined a non-union shop last year, recruited by his instructor while in a training program for machinists. They had an "assembly department" that was under extremely arbitrary and shifty requirement metrics. They had long time machinists who worked there and if they got hurt (after getting back from medical leave) they were thrown into the assembly department until they quit.
That was the tip of the iceberg in that place. Asking for PPE to mitigate cancerous fumes from various chemicals got my son fired. He suffered chemical burns during his short time there and witnessed several serious random safety events involving 400amp 220v live electrical wires making contact with carts and shelving.
This was not a small rinky dink shop. They have multiple large facilities in the US.
He should contact OSHA.
>>The Department of Defense’s (DoD) mission has traditionally been one of military security rather than economic security and assuring a strong American industrial base. Yet economic security and military security are now inseparable.
I think a big, poorly understood part of these stories is "advanced games" or "long term degeneration."
Take government procurement, like fighter jets or new hospitals. Post-war, the way this worked was "cost-plus." Companies accounted for their costs and were promised a fixed profit. The obvious flaw is that companies lose interest in efficiency. But... it did work during the war and resulted in more tanks, ships and jets than anyone thought possible. It also worked post war.
But, such games mature. Under "cost-plus" a company increases profits by spending. That's an incentive that will bite eventually. So... they move to competitive bidding. This degenerates into a lawyers-only game, etc.
That's the administrative layer, but game maturation also exists at the political layer. Rooseveltism was a thing for a while, and then anti-rooseveltism became it's competition. During the neoliberal era, industrial policy was the devil. Half the international institutions (trade deals, imf, wb) exist mostly to enforce bans and limits on industrial policy.
During this era, when governments' job was to "get out of the way," the alternative to (now evil) industrial policy was either big trade deals, or tax policies. Tax breaks and tax complexity counted as "getting out of the way" while trade deals structured markets (eg auto-manufacturing) with more detailed rules than a Soviet five year plan.
Anyway.... the statement about making economics a defence job... it feels like an attempt to declare bankruptcy on the "trade-deals and tax breaks" era, and move to an weirder and more awkward model. A bad idea that hasn't played out might be better than a better one that has.
"America" is so hideously crippled by the heavy duty ethnic cleansing and regimes of social control baked into land use laws and transportation/mobility networks that 'advanced' problems are not even eligible to be solved.
Sorta a 'do not pass go, do not collect $200, until {x} is solved' situation.
If a city still has parking minimums on the books, I evaluate all involved parties as utterly unserious, pseudo-scientific religious zealots.
Do you think the American south, in the era of chattel slavery, could solve 'advanced manufacturing problems'? NO! of course not! So why does anyone think 'america' could solve an advanced problem?
Meh. I shouldn't be surprised by the article, though. The authors probably think the USA isn't a backwater country that is 'on top' only via a willingness to use economic and actual violence to achieve all aims.
> If a city still has parking minimums on the books, I evaluate all involved parties as utterly unserious, pseudo-scientific religious zealots.
You speak the truth here...
The rest I could take or leave. It's not completely wrong but I think it's a more nuanced situation. I'd summarize it more along the lines of "America has become too classist to respect manufacturing. See Britain."
You say willingness as if the rest of the world didn’t try to use violence first, and lost.
when two people are playing a game, and one of them is willing to use violence, it's quite a bit harder for the other person to not use violence as well.
The US uses violence and coercion as a matter of fact, continuously, in every way, shape, and form.
If you tried to 'play' with the US from a position of mutuality and co-creation... you get colonized and cleansed and westernized.
Exactly. If England would have left the colonies alone, not imported enslaved people, not attacked when we declared independence, then they wouldn’t have seen violence from us.
Insert list of subsequent wars.
> Insert list of subsequent wars.
Like the Mexican–American War? OP's explanation of why US is the top-dog can't be whole story, but there's something to it. For example, it's hard to imagine the US would be half as powerful without the territorial gains made as a result of the conflicts surrounding the Mexican–American War (for example, by far the most economically important states are California & Texas!), yet at the same time virtually everyone agrees that the War was completely indefensible (Grant in a diary called it "one of the most unjust [war] ever waged by a stronger against a weaker nation").
It’s not fair to call that a war of aggression on our part. Mexico claiming to own vast swaths of land including California and Texas in the 1840s was about as legitimate as Spain’s prior claim over the same “New Spain” which Mexico merely inherited… again by violence.
It’d be as if the US claimed to own Antartica, the moon, or mars. Perhaps there may have been a few people there, but it was never a serious enough population that anyone could think their claim of ownership was competitive. I mean, they had a stronger claim than Spain, but that’s not saying much.
But this is not the point. The issue is, the US has become what it is now by attacking other people and taking their land. It has never really stopped. They did it later to Hawaii and other islands. And then it was fighting wars to submit entire countries to their will until the present.
Mexico inherited that land from Spain. Why did Spain have a rightful claim to it? They didn't live there.
The only people who had a legitimate claim to any of the land taken by the US in that war were the natives, but they weren't a party to it.
As for Hawaii, that wasn't attacked; that was basically swindled by business interests.
I’d argue Hawaii was attacked by the British via Kamehameha I, who just so coincidentally conquered the various islands immediately after Cook landed.
Then 50 years later they stopped giving the British the influence they wanted and the British openly exerted their rule for a few years…
The domestic population - then a mix of narives and others - overthrew the British and invited the US.
No wrongdoing by the US, with the possible exception of a few random individuals.
Much of this is about the dirty part of the supply chain. Take solar panels, china makes like ~90% of the worlds supply, yes there is the high end research, but then there is the poly silicon mining and refining/ingots, wafer, cells, and modules. You can’t just reshore some it - you have to do all of it, otherwise it doesn’t make a ton of sense, and that means mines and refineries which we’ve rightly or wrongly stopped building here in the US.
It's more than factories that are missing today in the US. It's the millions of workers that have the skill-sets to work those factories.
In the 40 years that the US has offshored manufacturing, all of those guys that used to know what's what have retired or died. There's nobody left. It's going to take another 30-40 years to replace them. The US doesn't have the luxury of having those 30-40 years.
The market has spoken, US labor is to expensive, until the quality of life here normalizes into the old normal of landed lords and peasants.
Almost there.
The key topics missing from this article are management and culture. Manufacturing companies by and large are stubborn with outdated practices that haven’t kept up with the times. The number of mechanical engineers who switched to web development, for instance, because of poor pay and improper management is insane. And during the pandemic, even more either fled or were pushed out from lack of opportunity. It’s easy to blame these policies and say that industries aren’t connected, but when these firms are refusing to embrace new technologies and take calculated risks, they do this to themselves all by themselves.
They commonly keep employees using the simplest heuristics that someone at some point in the past developed which worked then, so why break it? And they push this mediocrity throughout the entire organization and industry. Then they swap out one failed CEO for the same person with a different name like a pair of gloves, wondering what ever happened as there was nothing more that could be done. Meanwhile their ageist management policies block out the insights of the young, all but ensuring that no new ideas are brought into the mix—all until it’s time for another bailout.
OK, but this was also true of many software companies in the past. What is keeping manufacturing companies from experiencing the same kind of disruption?
If I had to guess it would be higher amount of capital investment as a requirement and its impact on scaling - physical things can't just explode in-a-good-way the same way software can. This means both more time and more capital is required to scale up.
Incumbents benefit from economies of scale and newcomers face dis-economies of scale. Which we know takes time from the economies Growing new competitors becomes hard and requires some cleverness to get around. Just look at electric cars and how they choose luxury/sports cars as their first models for a reason, so that the higher costs can be hidden in the high luxury margins. They need to be able to grow past that awkward point.
The same economies of scale which made the industrial revolution possible essentially props up "gigantic idiots" (companies which perform poorly but are sizable enough that their economies of scale made up for bad habits) until their "stupidity" (bad decisions) becomes great enough a disadvantage that others can compete with them.
The type of disruption that the manufacturing companies seem to engender is funding outsourcing to some remote cheap locale, and then wake up wondering where all of their competitors came from after they taught people enmasse how to build their product.
I really don't see Chinese-style whole government response with state-owned-enterprises and all happening in the US. That may not even work if it were possible. A viable domestic manufacturing sector is just not a goal of US decision makers (donors and kingmakers). At this point, career administration staff have been so fanatically selected for ideological loyalty that I don't think Washington can accomplish much of anything outside of accounting gimmicks.
In my very opinionated view, the concept of new company towns is missing. All the current efforts are around bringing jobs to people. Jobs are a side effect, things shouldn't be done for the sake of jobs.
The plains of nebraska for example are an excellent place (again, opinionated) for an assembly plant like foxconn but american. Mainly because a crapton of freight via railways passes through there and plenty of undeveloped cheap land. Such factories have high shipping/receiving volume and new towns with new cheap housing for potential workers is feasible.
Yuma is another great location because of it's stable (sunniest in US) climate, proximity to mexico boarder and like with TSMC and Tuscon it is very disaster safe, right on I10 and close to CA (the US might starve if Yuma was destroyed! A lot of food processing there for these reasons).
Manufacturing at old towns and factories will have minimal competitive advantage.
Lastly, the US does not have a "success at any cost" mindset towards manufacturing as the fuel for economic success. It is very much an afterthought. A lot of this and many other issues are a result of political divisions.
PE firms and Opiate Addiction gutted the US manufacturing industry over the last 30 years. It’s not hard to see, but since a significant portion of these workers are white men, no one blinks an eye.
"Injustice anywhere is a threat to justice everywhere." - MLK jr
Advanced manufacturing, R&D, and high quality STEM education are three sides of the same coin. Shenzhen is the manufacturing capital of world because all three is tightly integrated.
Has anyone asked Elon how to fix manufacturing in the U.S? Has he given anyone any ideas. The guy probably does as good or better job at manufacturing in the U.S than anyone else, and he has plenty of plants in foreign countries, so he can compare and contrast. Alas, the current administration hates the guy, and you can't have a guy who's clearly on the wrong team get to take credit for anything these days.
Edit: He did have something interesting to say about the "idiot index" which is the price of a component over the cost of the raw materials. If that's very high, it means there are serious problems at that manufacturing organization.
https://officechai.com/stories/elon-musk-idiot-index/
There's so much inefficiency in American manufacturing. It cost SF $1 billion a mile to extend the subway for example.
Building a subway is infrastructure, not manufacturing. Elon recently said the sheet metal in the cyber truck needed to be machined to the precision of a red blood cell. This is not somebody who understands manufacturing.
The Elon stans need to read up on his history. He claims to have significant engineering experience but in reality he does not, he mostly got lucky a couple times early on and hired well. There are millions of people much more capable than him but will never have their chance because they don't have the resources to make their ideas actionable.
I'm no Elon stan, but I think telling others to "read up" is ironic.
https://www.astralcodexten.com/p/book-review-elon-musk#%C2%A...
Feel free to point me to people actually around him that thinks he doesn't know physics or engineering.
"What's really remarkable to me is the breadth of his knowledge. I mean I've met a lot of super super smart people but they're usually super super smart on one thing and he's able to have conversations with our top engineers about the software, and the most arcane aspects of that and then he'll turn to our manufacturing engineers and have discussions about some really esoteric welding process for some crazy alloy and he'll just go back and forth and his ability to do that across the different technologies that go into rockets cars and everything else he does." - Garret Reisman, former SpaceX director and USC Professor
That's a "rationalist" blog, an inherently unreliable source in this area, and they're literally only quoting people who have a relationship with him and stand to gain financially from his success.
Objectively, at present he's stoking a fire comprised of $44 billion dollars, committing anti trust crimes, and endangering a besieged foreign nation.
Judge him by his actions, not by what his blowhards say about him.
There are similar reports from people like Jim Cantrell, Robert Meuller, and Jim Keller. They aren't blowhards and don't need to kiss anyone's ass.
>Objectively, at present he's stoking a fire comprised of $44 billion dollars, committing anti trust crimes, and endangering a besieged foreign nation.
What do any of those have to do with his engineering skills? Do you think good engineers can't make bad investments, or are inherently moral people incapable of antitrust violations?
Even reading up on his history is difficult given how credulous tech media is in general. With tech media basically turning the smoke machines on all around something, I can't blame people from assuming there is fire somewhere. I've often said that the most reliable way to get "rich rich" is to watch where money is flowing from point A to point B, stand in the middle and stick your hand out. Elon has certainly mastered that, but I don't have to ascribe "genius" to it.
> I've often said that the most reliable way to get "rich rich" is to watch where money is flowing from point A to point B, stand in the middle and stick your hand out.
Oh come on. If it were this simple, everyone would be doing it. Why aren't you "watching where the money is flowing and sticking your hand out"?
> Elon has certainly mastered that, but I don't have to ascribe "genius" to it.
Musk is vastly overhyped by some, but that's really selling him short. SpaceX and Tesla have real products providing real value, they aren't just leeching off money flows.
I'm content with being rich. Most people are content with less than that. Maybe I'm reading the guy wrong, but he doesn't seem happy or content. So why would I do something I don't want to do to achieve something that I don't need.
As for the real value of SpaceX and Tesla. I think there is value there, but probably less than most and I don't buy into "great man theory", so I would probably ascribe the success to the actual engineers and designers that did a majority of the work. He is a good leader for what he is trying to accomplish with those two companies as far as I can tell.
Are you saying Jeff Bezos and Boeing/ULA had less resources than Elon did? They had far more resources. And SpaceX hires from the same pool of talent as they do.
we literally got reusable rockets because of him.
no one says he is a great engineer, but oh boy he sure does well in finding those great engineers and funding them to work on large scale projects.
he hires people greater than him in other fields, no doubt.
Hate seems like a strong word for a person with multiple dod contracts (and a new one recently for military starlink) and one of the most obviously already qualifying companies for the administration's most touted achievement (US made cars + whole home battery systems)
I agree that you shouldn’t discount what Elon does or says. He’s clearly one of the most important individuals of our time. Doesn’t mean whatever he says is gold though. Same standards should apply.
I agree that his naysayers are making a grave mistake of calling him universally stupid. He’s a vile selfish person, who makes a lot of bigoted stupid statements and actions, but ignoring him would be the end of us.
A Tamil saying I like translates (by ChatGPT) in English as, “Regardless of the speaker’s guise, Seek the truth that in the statement lies.”
>ignoring him would be the end of us.
How so? That's an extraordinary claim that you haven't remotely justified.
While it's possible for anyone to say something smart, Elon Musk is no more likely to have clever insight than the average janitor.
He makes a bunch of insightful-sounding claims that only make sense if you don't have a clue on the subject he's talking about - like when he stack-ranked by lines of code, at Twitter.
He hasn’t made a single smart decision in Twitter, agreed. But in every other venture that’s not true.
Neuralink, Boring, Solarcity? These are basically worthless when you take a closer look:
Neuralink is at best replicating decades-old research, all while horrifically violating scientific codes of ethics,
Boring is just a tunnel digging company (tunnel-boring is a very often unavoidable construction technique and thus is a very mature technology, he's not going to magically find an order-of-magnitude technical breakthrough) whose basic premise is that you can increase throughput per dollar by digging lots of slightly-smaller tunnels for cars instead of a single subway-sized car; a premise that is objectively false.
Solarcity might have been an interesting idea but was handled poorly and went bankrupt, at which point Musk forced Tesla to buy it so he personally could avoid the bad PR of "Musk's company goes bankrupt!", which is quite illegal and an abuse of his power as CEO of Tesla.
Starlink flat-out makes a loss per satellite launched, and scaling its userbase up won't fix that; it's dead once it runs out of investor money.
There's this weird situation were Musk has N different ventures, and each venture looks alright on the surface but is rotten when you take a closer look - but everyone thinks "well sure, but the other (N-1) ventures are doing fine, so maybe I'm missing something about this one?", not realizing that all the other ventures are just the same.
Please, please do the following exercise: ignore all the PR you've heard about Musk, and pick one of his companies that's not Tesla and look closely at it. Evaluate if that company makes sense on its own merits, without Musk.
The idiomatic translation to English would be: “A broken clock is right twice a day.”
This is again implying that he’s nothing but an idiot. I don’t know why people are incapable of acknowledging he’s an insightful but crazy and evil person.
The negative implications from the message deliverer come from you, not me. You are probably correct about him being an idiot, but the phrase being translated specifies that the message delivered is not relevant to the message, in the same way that I would not call a clock an idiot for being low on battery power.
Well said. I just sped through his new bio and while the author seemed overly-apologetic about his assholish tendencies(like in the Thai cave diving incident), his ability to inspire his engineers and get things built is undeniable.
Marc Andressen mentioned in the Lex podcast that Larry Page mentioned his plan for “funding humanity’s future” would just be to give all his money to Elon and let him do whatever.
I wonder if he will still say that, after learning Brin divorced his wife for likely cheating with Musk.
This seems like a perfect encapsulation of this person (and the snobbery of everyone involved of course).
>his ability to inspire his engineers and get things built is undeniable.
I deny this. He provides money and hype, and hires the best engineers in the industry who then get results. In some cases things gets things built, but that doesn't mean Elon Musk was personally useful to any given project besides providing hype and money.
“All he does is organize everything and choose what he focuses on” sounds like you say this is easy and simple. I really don’t want to be a Musk defender so I’m gonna stop here.
I didn't say he organizes everything, I said he provides money and hype. I also accidentally implied that he was picking the best engineers, which I didn't mean to do.
His "choices on what to focus on" are at best extremely vague and at worst extremely wrong - when he insisted the Tesla Roadster be made out of carbon fibre, resulting in the car costing over $100k, that was the wrong thing to focus on. When he focused on "let's bore small underground tunnels for cars", that was still wrong. When he decided "let's build electric cars" (and then bought a preexisting electric car company, whose starters presumably were also focused on electric cars), that isn't all that impressive.
So in case it wasn't clear: I'm calling Musk a celebrity figurehead, whose personal talent is fully displayed in his management of X.com.
In this case it’s more like the clock was always right until it was broken.
I think this thread encapsulates the politicization of society, basically determining all credibility and worth based on who is on what political team. This reality has been causing a lot of problems with getting productive work done in the U.S as everything becomes about power and giving out favors vs. a meritocraticly organized society. We need to become more of a society where people don't change their opinions on someone's ability to do rocket engineering based on whether they think their tweets are mean or not.
For the most part Musk (and his businesses) and the administration, as well as US auto manufacturers, are playing nice now and realize they need to work together. The sniping between them has decreased a lot and is mostly coming from elsewhere while their collaboration has increased. Mostly because the economics of EVs have shown resistance is futile and SpaceX' capabilities are so useful.
Honestly we need more strong figures like Musk if we have any chance of pulling this off (preferably the pre insane Musk because that Musk seemed way more capable and productive). Bureaucratic, ladder climbers are not going to be able to pull something hard like this off.
This is a truly hilarious comment when you consider the manufacturing capacity of China vs. the US.
Some of this isn't as bad as it looks due to the way the accounting works. Take Apple products. They basically lead the world in laptops and phones, designed in America but because the manufacturing is done abroad it appears as a trade deficit even though most of the design and profit accrue to Apple shareholders.
It looks this bad: the rich get richer and the middle class slide toward poverty.
> Currency manipulation by the Japanese government further aided its exports, and the oil shock of 1973 was helpful to Japanese automakers given that they specialized in smaller, more efficient cars while the United States produced gas-guzzlers. Japan’s exports to the United States soared. U.S. automakers, in contrast, took too long to understand and then adjust their manufacturing technologies and techniques to the quality revolution.
This ushered the era of Japan (where Japan almost "overtook" the US as the first economy). You can draw lots of parallels to what's happening with China now.
I am afraid, given the size of China, that it'll not "just" reach US GDP but will skyrocket beyond it to the stars. The era of Western/US dominance might be over and it's inevitable.
It can’t be fixed with the current form of government and financial system, and no amount of central planning within the confines of the current system will fix this.
DC politicians redistributing money to advanced manufacturing will generate wealth for transnational corporations that siphon wealth out of the source economy. It will serve as a grift for those with political connections more than it will repair our industries. The playing field is not level because of regulatory capture and inefficient regulation, and the talent pool that can fill the roles has both dwindled in number and chosen other career paths.
The authors state that the US "is not a global leader in the advanced manufacturing of the twenty-first century" but don't actually support that claim; we're kind of supposed to take it for granted.
I don't think this is a problem.
A piece like this is not a self contained textbook. It's a hot topic with 100 years of history near the centre of political and economic discourse. Contentious claims are inevitable.
The reverse claim also gets made, and whether or not the claim is "supported," it's never sufficiently supported. The reality is that there's a whole debate with vountermoves behind either claim.
One side looks at employment, tonnage, plant construction, anecdote and common sense. The other looks at accounting.
Accounting says that "manufacturing" has increased. Skeptics consider this an accounting fiction. The reality is that "manufacturing" in 2023 is not quantifiable in the way that it was in 1923. Accounting semantics are abstract and past a point turn into a matter of accountants' naming convention.
A 1923 ford factory represented most of the "manufacturing" represented by the cars that they produced. As the industry splits into OEMs, T1s, T2s, toolers and whatnot^ we move into more abstract definitions. Has one of Ford's industrial engineering teams ceased to be "manufacturing," because they now design processes for a Mexican subsidiary? How about the US-based management/overherheads for the subsidiary? Irl, accountants can represent these any way that the tax man, board or market prefers. The same physical change can represent 20% or 5% decrease in manufacturing.
There's just a point where quantifications fail, and can't be used to decide such debates conclusively.
Where we're at now, imo, requires us to keep purpose in mind, and forget about a single, neutral quantification. If you're quantifying manufacturing for maximum military potential, employment or resilience to trade problems... You probably need different definitions/quantifications of "manufacturing."
^These specific conventions were created to structure trade deals and regulate tarrifs.
I think the more objective measure might be the holes in the domestic supply chain that represent vulnerability and a lack of robustness.
The problem is larger than Advanced Manufacturing. https://ad-aspi.s3.ap-southeast-2.amazonaws.com/2023-03/PB69...
Where does this come from? It looks like BS to me. The idea that China has the most advanced aircraft engine manufacturing is truly insane: that belongs to the US and UK. China can't even fully build their own commercial aircraft because of this; they have to buy engines. For their military planes, they get engines from Russia.
I think that the American manufacturing problems are beyond fixing at this point. Between higher energy costs, higher regulatory/legal costs as well as numerous labor problems, it's just not realistic to imagine that American manufacturing could be competitive.
Is forming State Owned Enterprises in the desired industries with attached R&D Labs and apprenticeships impossible in the US?
The US had for most purposes a system of quasi-owned state enterprises after WW2. The US gov had zero equity, but was a partner providing research, funding, and diplomatic backing. The list included companies like IBM, GE, Exxon, AT&T/Bell Labs, Boeing, etc. All these companies had large R&D departments financed directly or indirectly by the gov.
Most of this was dismantled after the Raegan era, when they decided to move all production to other countries with the goal of running everything from Wall Street, through the power of dollar-based financialization. They wanted to control everybody else as modern colonies, where developing countries would perform the role of workers and the US the role of a business owner. It just happened that some countries never really wanted to play by these rules, that's why the US is threatening to dismantle the globalization system.
Seems like a no brainer in the current environment though right? At least temporarily in sectors underserved by the market but still crucial to the national interest? Can always privatise them again down the track if they're ideologically unacceptable for whatever reason?
Obvious Solution: Re-establish the military draft, but with a far smaller pool of potential draftees - and make sure the families of current & recent members of Congress, Wall Street big-shots, Fortune 500 CxO's, McKinsey consultants, and such are all assigned to serve in front-line "meat shield" battalions on the western shores of Taiwan, just south of Korea's DMZ, etc.
Do it ancient Rome style. Send the Senate with the troops
How does this make US manufacturing more competitive?
Is the real problem that US manufacturing is "uncompetitive"? Or is it that actual US-based capability to manufacture advanced and military products at scale is a non-priority for the folks making all the decisions?
Having seen US and Chinese manufacturing side-by-side, I'm quite confident that there is a substantial competency gap.
You should remember that the US military is a two-tier system: there are the officers who rarely see real battle, and the rank and file who effectively die. In the case of war, if the rich ever serve they will be officers, they will only command other less fortunate to battle.
Ignoring the combat-duty service records of President Theodore Roosevelt and his sons, President George Bush Sr., President John F. Kennedy and his brothers, etc., etc. - did you notice that I specified service in front-line ground combat battalions, in places where major wars seems all too likely to start?
Major wars might be far less likely if America's ruling classes felt that they had some real skin in the game, and people they cared about could easily get killed.
Junior officers had a higher death rate than enlisted in Vietnam. Junior officers lead their men and suffer the same risks. It is the senior officers that command behind the lines.
That might be changing with smart weapons. 15 Russian generals have died in Ukraine, enough to have Wikipedia page.
15 was the claim from Ukraine, but only 6 deaths have been verified.
Or maybe just treat blue collar workers better? And enshrine such treatment into law so this doesn’t happen again.
That would seem to be simpler
While "treat blue collar workers better" sounds like a nice goal in itself...I fail to see how that would do anything at all to address the problem which the article is about.
In other news - treating your oxen wonderfully will not transmute a wooden moldboard into an iron plow.
The root of the problem is exactly that America never wanted to treat blue collar workers in a decent way. That's why they sent all manufacturing jobs overseas: it was getting very expensive to pay for these unionized workers. The goal of destroying unions of blue collar workers was the main reason for deindustrialization.
I don’t think it was the goal as much as a biproduct. This article hits the same cultural problem…all this discussion of actions by the capitalist and ruling classes, by companies and governments. The simple solutions of respecting people are so incomprehensible as to be not even discussed.
because what they are talking about is the workforce. Treat your workforce like cogs, like oxen, and guess what thats what you get even when you find out quite some time later that you actually need something else. The contrast of these two quotes in the article makes the point
> "Mass production technologies and the division of labor created a workforce consisting of relatively unskilled employees on the line combined with a smaller group of highly skilled workers and the engineering teams that designed it."
> "Japanese producers pursued precision production, just-in-time production, quality built into all production stages (not just at the end), continuous improvements by the entire workforce, and collaborative labor practices, all of which led to dramatically increased efficiencies and quality."
One (Ford) seeks to deskill its workforce in the name of efficiency because they see their opinions as irrelevant because they are not the capital class. One (Toyota) seeks their input as valuable specifically because they are the ones doing the work.
I've worked in both types of factories as an engineer. BOTH sought to apply the principles of lean manufacturing to build efficiency. It only worked in one of them, the one with a culture of treating factory staff with respect. In the one where management and engineering looked down on the employees they didn't listen for efficiency opportunities they only looked for them themselves, they presumed the unskilled workforce provided nothing. Funny enough - that plant couldn't attract better quality employees.
The articles has an entire section dedicated to workforce education...great! but as with all post secondary education in our modern society, the participants are (in large part) motivated by the economic potential of that pursuit. If I can make the same working at starbucks (with benefits because employer scale) as I can as an electrical tradesperson (yes, there are levels but not all are union) why would I pick the one that destroys my body? Why bother with workforce education if your leaders don't respect their work and will seek to Taylorize them instead of partner with them. Apprenticeship and training works in Germany and Japan because the jobs are not awful. It works because of the culture of work. I would argue this is actually the same reason we lag in another marker the article talks about - robots per worker.
I would like to apologize on behalf of other ycombo users for your top comment being downvoted, and also for people calling workers "oxen".
I feel I seldom hear in tech circles (on the internet at least) the empirical evidence around the Toyota Production System. Maybe I didn't either until I read "The machine that changed the world" by Womack, Jones, and Roos.
It is a historical fact that Toyota produced higher quality with lower cost all through the 1980s vs their American competitors. In the same era at General Motors, CEO Roger Smith said he would build a lights-out factory 100% run by robots. It never worked and they had to abandoned the concept.
When I listen to those Toyota people talk about their system, the concept of mutual respect is the basic foundation. The engineers at Toyota have to spend time working on the line. Exactly what you are describing, partnership vs Taylorization.
Sometimes I feel like this explains Tesla quality issues. When I look at how some people at Tesla think about line workers, they literally call them "Button Pushers" or even use racial slurs. Elon when he described the "machine that makes the machine" was echoing what Roger Smith said in the 80s about a "lights out factory". And here we are ten years later and Tesla does not have a lights out factory and their quality is still very low.
Where I work in the US, it is a service business but some of the concepts still apply. Some of our tools and processes were built from the top down with little user input. It is a struggle to do Poke Yoke or Kaizen, and part of that I think may be the grapevine knowledge to "keep your head down and your mouth shut".
> I would like to apologize on behalf of other ycombo users for your top comment being downvoted, and also for people calling workers "oxen".
I appreciate it but no need - the people doing that (typically) are as much victims of this propaganda. They aren't malicious, they have been learned the same culture we're talking about.
Funny enough, the first place I ever interned had attempted to do a lights out factory in the 1980s. Short term, it was a disaster - in part because they literally had not installed sufficient lighting to trouble shoot problems, push automated transfer vehicles back onto control strips, and pry parts apart. The machining centers of the era could do the quality but required experts to operate, monitor, and adjust. When things went wrong they weren't small anymore, they were destructive and shut down production for 12+ hours. The shift had been made in part to leverage concessions from the workforce, and (IMHO) as a result it disregarded all the tacit skills those employees used to keep the place running. Long term, They ended up with higher quality, faster throughput, but more employees. But, it cost them a lot and they needed more employees to move stuff around the factory because they had built this huge space to do lights out and the irredeemable piece of lights out was material movement and handling. What I learned was that robots and machines can't tell you what went wrong - no matter how much you log.
I've got a ton of other examples. Every factory I've worked in I've learned how much of a myth 'low skilled labor' is. On the floor, in every factory, new hires were useless - which is a pretty definitive marker of 'skilled labor'. Same thing in the military - senior NCOs are often critical mentors to new LTs. As an engineer I've typically learned as much from the technicians and operators as from the other engineers. At each, I've also worked with really smart engineers who were terrible at their job because they had been socialized that their intelligence was all they needed and there was no need to learn from the 'floor guys'. Roger Smith (and Elon) thought engineers could make the transition to lights out with their knowledge alone because they had bought into the same narrative about blue collar work be low skill and low intelligence. The result was concerns about air friction on robots but not tolerance stack up of stampings or repairable castings.
The problem is, until you really engage with it, the narrative descriptions of certain work we get from the media and economists become a lens for making sense of reality. I'm not immune from that, I just had it beaten out of me. Oxen aren't stupid either, they're still really useful in situations where tractors struggle.
dude i could listen to you talk for hours.. do you have a book?
i really feel like alot of this same stuff could apply to jobs inside service / data processing industry. It reminds me of "Gladys the L6", the person six levels down in a bureaucracy who is the only one who actually knows how things are actually working with the spaghetti of multiple legacy systems and arcane rules. Michael Lewis wrote about this case at Athena Health
An anecdote I remember was that during the 2008 recession German precision manufacturers did not lay off their workers. They reduced hours, sent a bunch to continuing education programs, and retooled for even more high tech manufacturing. When the recession eventually ended, they had retooled foctories with highly trained workers while US companies had to rehire and retrain their work force. Which again brings the focus back to long term versus short term profits.
Laws are so easily changed. Nothing is enshrined in law that can be nullified by the next court case or a hidden rider clause on a 'must pass' spending bill.
Personally I see this as a better option than the one from the dead comment below. We can argue about rules begetting culture or culture begetting rules, I think there is some back and forth and one set of changes is concrete.