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Is Manufacturing the Key to Job Creation--A 2010 Op Ed by Andy Grove

Uploaded: Mar 28, 2016
Andy Grove, a pioneer in Silicon Valley, dies last week. The New York Times as part of a tribute reprinted an op ed he wrote in 2010 for Business Week.

web link

From the article

"According to Mr. Grove, Silicon Valley was squandering its competitive edge in innovation by failing to propel strong job growth in the United States."

Much of the article warned against overemphasis on start ups versus large scaling up of job creation activities and got into issues of offshoring and the free market versus government policies. You need to read the article to get the full flavor.

The part that interested me was the emphasis on manufacturing. "And yet, an all-out commitment to American-based manufacturing has not been on the business agenda of Silicon Valley or the political agenda of the United States."

I do support an emphasis on job creation but do not think manufacturing jobs are the right target.

My initial perspective on the article is that manufacturing has acquired an auora/mystic that is popular but not helpful in designing policy to help people.

Let’s get a couple of facts out. One, manufacturing output in the U.S. is rising, not falling. Two, manufacturing job levels are declining virtually everywhere. Three, the reason for one and two is that manufacturing productivity gains outpace the rise in demand so companies can produce more with fewer workers.

With regard to Silicon Valley and the nation, Grove wrote at a time of great economic distress. Since then the peninsula, the heart of Silicon Valley had added jobs at twice the national rate and seen the unemployment rate fall to 3.9% from 9.6%. Between 2010 and 2015 the peninsula added about 10,000 manufacturing jobs (recovering about half the recession losses) while adding more than 50,000 in the Information sector and more than 130,000 in Professional and Business Services.

I think manufacturing has an auora that far outweighs what is important and possible. Any manufacturing job revival in the U.S. would be in new niche markets (therefore small for job creation) and require a set of skills akin to or close to the high tech world.

Moreover, as the present presidential campaign shows, the rhetoric is of blame, forgetting that most job losses are from productivity/automation, forgets the gains to consumers from cheaper prices (do you really want Apple to compete against Samsung by producing IPhones in the U.S.) and, finally, is everyone ready for a major trade war?

The “job centric” theme and building an economy with middle wage job opportunities IS important and if that is what folks take away from the Grove article, bravo!!

It is not just total job growth that is important, it is also jobs that pay good wages and do not require a four year degree but do require different kinds of post-secondary school training. Here are three ideas that work toward both goals:

1) Build lots of stuff. Of course the projects should pencil out but policies that support housing and infrastructure would help aggregate employment and GDP and help the middle class. And there are lots of opportunities from housing to retrofitting buildings to many forms of transportation, energy and water investment

2) Have fiscal policy focused on productive investments in people, infrastructure and capital is correct in my opinion.

3) If you really wanted to help job creation and upward mobility without spending a dime (well maybe a nickel or two) bring unauthorized immigrants into the mainstream—free to learn and earn. Many have skills that are underutilized and many more have potential. This is, of course controversial as the presidential campaign shows. But in practical terms this would do more to increase upward mobility, especially at a time when experienced baby boomers are retiring in greater and greater numbers, than any policy focused on increasing manufacturing job growth at a time when manufacturing job levels are falling around the world in response to productivity growth.

But if the third idea is not your political favorite go with the first two for a job centric policy focus in our American economic system.

Please respond regarding Grove's emphasis on manufacturing and ideas about a "job centric" policy.

What is it worth to you?


Posted by Curmudgeon, a resident of Downtown North,
on Mar 29, 2016 at 5:30 pm

"Is Manufacturing the Key to Job Creation...?"

Evidently not. Most of the current crop of Valley big hitters--Google, Facebook, Instagram, Twitter, Palantir(?)--manufacture nothing tangible, yet their Wall Street valuations and payrolls are through the roof. Yestercentury's superstars Sun and SGI were heavily into manufacturing, and they're dead. Apple is the notable exception, but it depends heavily on a cultlike mystique that could evaporate at any time.

Reviled in the Old Valley, vaporware rules in the New Valley. Bubbles are our most important product (apologies, GE).

Andy Grove's perspective is understandable. He got rich manufacturing first transistors and then ICs. But even Intel makes most of its stuff elsewhere today.

Posted by Jamie, a resident of Greater Miranda,
on Mar 30, 2016 at 4:16 am

I would say that manufacturing is not the key at this point, but it depends a lot on the company.

Deleted link to promotional website

Posted by Sea Reddy, a resident of College Terrace,
on Apr 1, 2016 at 5:42 am

Yes. We need manufacturing here where the innovation is.

When I worked for Northrop Electronics and Hughes, I came with a team of leaders to visit HP factories in Roseville and Palo Alto.

Since development is iterative process, we do need that capability. Every time we need to improve the design we cant fly to Malaysia or wherever to get the next innovation.

Lets not lose capability we had; let's reenergize and innovate.

Ro Khanna wrote a book on it.


Posted by stephen levy, a resident of University South,
on Apr 1, 2016 at 12:09 pm

stephen levy is a registered user.

I think manufacturing innovation is and should be alive and vibrant in Silicon Valley. I just do not think this is a focus for job growth here--especially for middle wage jobs.

Today's national jobs report is another example--good job growth, more people rejoining the workforce and a loss of 29,000 manufacturing jobs but a gain of even more construction jobs.

Since Grove was worried about job growth, I would focus on infrastructure, energy efficiency and housing.

yes to manufacturing innovation, but many new products will be manufactured elsewhere.

Posted by Rachel Kauffman, a resident of Duveneck/St. Francis,
on Apr 1, 2016 at 12:47 pm

Steve: You don't address one of Andy Grove's most trenchant points in his original 2010 Bloomberg op-ed, which was referenced by the NY Times piece to which you linked.

Here's the Bloomberg link: Web Link

Andy pointed out that manufacturing is a part of the "chain of experience", which encompasses both the original innovation (which Valley startups are still good at) and the scaling of a business to full market size (of which manufacturing is a part, and which many American companies have ceded to other countries.)

His claim was that when we give up manufacturing, we give up an important part of the seedbed of future innovation.

Nothing that you've stated here addresses this matter or counters the logic of Andy's position which was based on his substantial experience with Intel and this country's high-tech sector.

Posted by stephen levy, a resident of University South,
on Apr 1, 2016 at 2:37 pm

stephen levy is a registered user.

I defer to Grove re Rachel's post above but do not see evidence of a lack of innovation because manufacturing jobs are declining worldwide and was responding to his focus on job creation.

Posted by Red Queen, a resident of another community,
on Apr 1, 2016 at 6:38 pm

"...manufacturing productivity gains outpace the rise in demand so companies can produce more with fewer workers."

Let's see if I got that right. Manufacturers will make more goods, with fewer workers, because fewer buyers want their goods.

Maybe I should mull that one before breakfast a few times and get back to you.

Posted by stephen levy, a resident of University South,
on Apr 4, 2016 at 12:21 pm

stephen levy is a registered user.

@ red queen

You have misinterpreted the analysis.

We produce MORE manufacturing goods, not fewer

but fewer workers are needed to produce the larger output, same as in China and Germany.

It is not true that fewer buyers want manufactured products here or around the world.

Posted by Auntie Sophiste, a resident of Midtown,
on Apr 4, 2016 at 5:41 pm

"We produce MORE manufacturing goods, not fewer"

Critical distinctions:

MORE in terms of $$$, or MORE in terms of numbers of individual production units?

Is there intangible IP in that MORE?

Posted by Red Queen, a resident of another community,
on Apr 4, 2016 at 7:11 pm

That's better.

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