A few weeks ago, BusinessWeek ran a piece by Intel founder Andy Grove about how to create more jobs in the US. I held off reading it; I wasn’t interested in another diatribe about how we need to cut taxes on big business, create more “labor flexibility” by destroying unions, and general give Corporate America everything they want.
But it turns out that Grove is not your average CEO.
the great Silicon Valley innovation machine hasn’t been creating many jobs of late—unless you’re counting Asia, where American tech companies have been adding jobs like mad for years.The underlying problem isn’t simply lower Asian costs. It’s our own misplaced faith in the power of startups to create U.S. jobs…
Startups are a wonderful thing, but they cannot by themselves increase tech employment. Equally important is what comes after that mythical moment of creation in the garage, as technology goes from prototype to mass production. This is the phase where companies scale up. They work out design details, figure out how to make things affordably, build factories, and hire people by the thousands. Scaling is hard work but necessary to make innovation matter.
The scaling process is no longer happening in the U.S. And as long as that’s the case, plowing capital into young companies that build their factories elsewhere will continue to yield a bad return in terms of American jobs.
The underlying problem: the rules are stacked in favor of off shoring manufacturing jobs.
Each company, ruggedly individualistic, does its best to expand efficiently and improve its own profitability. However, our pursuit of our individual businesses, which often involves transferring manufacturing and a great deal of engineering out of the country, has hindered our ability to bring innovations to scale at home. Without scaling, we don’t just lose jobs—we lose our hold on new technologies. Losing the ability to scale will ultimately damage our capacity to innovate…We got to our current state as a consequence of many of us taking actions focused on our own companies’ next milestones. An example: Five years ago a friend joined a large VC firm as a partner. His responsibility was to make sure that all the startups they funded had a “China strategy,” meaning a plan to move what jobs they could to China.
How do we get out of this mess? Not by big corporate tax cuts but by rebuilding “our industrial commons.”
We should develop a system of financial incentives: Levy an extra tax on the product of offshored labor. (If the result is a trade war, treat it like other wars—fight to win.) Keep that money separate. Deposit it in the coffers of what we might call the Scaling Bank of the U.S. and make these sums available to companies that will scale their American operations. Such a system would be a daily reminder that while pursuing our company goals, all of us in business have a responsibility to maintain the industrial base on which we depend and the society whose adaptability—and stability—we may have taken for granted.
Grove’s strategy doesn’t address how we could at the same time ensure our brothers and sisters in China also get good jobs . But it’s still a pretty amazing statement from the head of one of the most successful US manufacturing companies in the last 25 years.
