The Manufacturing Crisis in the Tech Industry
Edition #041
Introduction
Welcome to The ContraMind Code.
The ContraMind Code provides you with a system of principles, signals, and ideas to aid you in your pursuit of excellence.
The Newsletter shares the source code, through quick snapshots, for a systems thinking approach to be the best in what you do.
The Code helps you reboot and reimagine your thinking by learning from the best and enables you to draw a blueprint on what it takes to get extraordinary things done.
Take a journey to www.contraminds.com. Listen and watch some great minds talking to us about their journey of discovery of what went into making them craftsmen of their profession to drive peak performance.
Who killed US manufacturing?
In this very informative and insightful article, Ruth Strachan and Sebastian Shehadi trace back the reasons for the decline of US manufacturing over the last 50 years.
Here’s a quick summary; you can read the entire article.
By the turn of the millennium, USA’s global domination in mass-scale industrial production, technology and efficiency was lost. Long-standing issues culminated between 2000 and 2010, when the US lost one-third of its manufacturing jobs. The US remains the second-largest manufacturing country in the world, but its global dominance has been well and truly lost.
Over the last five years, or so is a growing awareness of the problem and the relationship between production and R&D. Both are very creative stages and are better done together.
It is becoming increasingly common for US companies to move from ‘innovate in the US and produce abroad’ to ‘do both abroad’. If this shift accelerates, it is a significant risk to the US’s innovation capability.
Reagan’s presidency saw a more significant focus put on the success of the financial and business services sectors.
The increased use of information technology exacerbated the globalisation of manufacturing. Alongside this, the race to the bottom added pressure to manufacture cheaply, which pushed wages down. This fed into the desire to outsource manufacturing.
Another deep-rooted issue for US manufacturing has been the growing stigma and prejudice about its value. The result: a gaping skills gap.
Science-Based Tools for Increasing Happiness
by Huberman Lab
Andrew Huberman, PhD, is a neuroscientist and tenured Professor in the Department of Neurobiology at the Stanford University School of Medicine. Prof. Huberman explains the science of happiness, including the different types of happiness and how our actions, circumstances and mindset control them.
Here are some key topics Prof. Huberman covers in the conversation:
The importance of light exposure and its impact on happiness.
The effect of neuromodulators and neurotransmitters on happiness.
Shares some exciting findings from The Harvard Happiness Project
Correlation between income and happiness
Relationship between smoking, alcohol and happiness
Shares a Happiness toolkit for us to adopt and use.
Carl Icahn and the Story of ACF: “I Fired 12 floors of People.”
Carl Icahn is a well-known American financier known not only for buying large stakes in companies but also for stripping company assets and selling them off. But, in this video, he makes a telling statement about how the companies are run and here talks especially about one company that he took over - ACF( American Car and Foundry).
He narrates a funny story of ACF having an office with 12 floors full of people, many of whom do not have anything to do or make no difference to the business. Even if you discount what he says totally, companies need to watch out for how they can quickly build fat before anybody realises it, and it puts many people’s careers and lives at risk. It’s for the individuals who work there to assess honestly what they do, and sometimes sanity is lost when income and effort don’t match.
The Manufacturing Crisis in the Tech Industry
One can see a considerable hue and cry around massive layoffs. Job losses that are happening in tech firms in the US and have serious ramifications for the Indian IT industry. There is a bloodbath, and many careers and families have been affected, which is pretty severe and sad. In a piece of shocking news, a tech company like Twitter announced that nearly 75% of people were being asked to leave. This led us to go back to history to check what the manufacturing job loss crisis was like and if there were any learnings to take from there. While there is still a lot of research to be done, one thing was quite clear. There was a seismic shift in factories moving out of the US to locations where they could be produced more cheaply. But that is not the actual problem. The deeper problem was the increase in the wage cost of workers in the US, which made manufacturing not competitive in the US. If you were working today in IT, there are several critical data points to look at and take learnings out of this:
Is there a positive upward movement between the skills sought and the cost of employing them? When this shows a negative downward trend, it is time to look out for an impending crisis and take corrective action as an individual.
Is there a positive correlation between pay and effort? Often, like in the manufacturing era, the salary increased disproportionately to the effort over time. It became a job in two production shifts, with limited time per shift, an assembly line focus etc. It was good till it lasted, but it was too good to be true. It is always good to have a negative correlation between effort and pay if you are working. If there is more effort to be done and relatively lesser pay, you may be in a zone of safety.
Productivity crisis - If there is another country or another individual who is more productive for the same cost, then it is a red flag. The manufacturing industry hit a productivity crisis as per capita output decreased as costs increased. This led to manufacturing depletion in the US.
Commodity Crisis - Is there a positive correlation between skill and value delivery? Is your skill increasingly becoming a commodity? In the manufacturing era, a lathe worker, machinist etc., over time became a commodity skill, replicable, and the value output showed diminishing returns. Hence, the need to constantly evaluate the ‘value’ of skill to any business or firm.
Innovation Vacuum: If there is minimal innovation mix in your skill, you cannot remain competitive and relevant in the labour market. Skills with an innovation vacuum are risky. Scarcity of people and Growth-led jobs follow cycles. Still, during downturns, the chances of maintaining premium value in the labour market and relevance are high when you have an innovation skill in your mix. This is why Korea is not as vulnerable as China, as they have innovative companies other than world-class manufacturing processes like Samsung and LG fighting the likes of Apple.
The tech industry is amid a manufacturing crisis, as in the 80s. The truth is companies move, adapt and transform their business models, leaving a gaping hole in a person's career. It is up to the individual to reassess value and skills and keep sharpening them continuously.
Some of the lessons we learnt from this week’s mission:
Manufacturing is going through a transition. There is a lot to learn from the manufacturing crisis of the past - both in the US and Britain. There is a strong positive relationship between Production and R&D. They add value to each when they are together. Don’t decouple them.
Happiness is a mindset that requires control of multiple variables. Know them and make them a part of your toolkit to remain happy.
Always look for skills, effort, value, outcome and pay gaps. If one of them shows a lag indicator, it is to reassess and recalibrate them.