Abbott and Costello Meet the iPhone2012-01-30
Last week, when I read the seminal NY Times piece “How The U.S. Lost Out on IPhone Work,” it immediately brought to mind the vicious circle of Abbott and Costello’s “Who’s On First?” routine--not because Americans generations from now will be laughing at it--but because the article embodies the frustration of our time and the unasked and unanswered question of our economy: Who comes first, the worker or the consumer?
While the leitmotif of the piece was Steve Jobs’ Apple, whose reputation grows larger in death as the eponymous name of innovation, the real question was one that has plagued our nation since the dawn of globalization and the Information Age--who deserves primacy in our economy when global forces pit neighbor and against neighbor and divides our national interest in the quest to stay afloat.
Take the iPhone for example--I own one; in fact, I’ve owned several--and an iPad--and I love them because they make me more productive (and cool). As a loyal (their term) AT&T customer, my last iPhone cost me less than $100--also good for my business bottom line.
Now the rub.
When a company like Apple that is viewed as the pinnacle of success moves 1/3 of its employee base to China so that I can have my affordable iPhone, it sends an unmistakeable signal to every other manufacturer in every sector of our economy that American consumers want fast and cheap. There’s no longer a price to be paid for outsourcing to other countries. It’s how things work in the Age of Globalization. Apple’s response is that the innovation jobs in Cupertino and the sales jobs in Apple stores and call centers make up 2/3rds of the company workforce, which is true, so Apple has given me exactly what I want by cutting out the middle man, or in this case the middle class manufacturing jobs.
Since I’m not in the business of manufacturing, why should I care? (Full disclosure: I can barely put Legos together, let alone build an iPhone.)
Here’s why: I run a strategic communications and advocacy firm that focuses on sustainable companies and clean-tech causes. Our primary clients aren’t global--at least not yet. During the Great Recession and subsequent slow recovery, this sector has increasingly split into two camps: those who are still searching for public and private financing to scale their ideas to commercialization, and those who’ve received investment from Europe or Asia and who need a PR company with global offices. Like those mid-sized companies with a great business plan and some funding, I’m squeezed between the haves and hope-to-haves for a laundry list of reasons: domestic credit is tight, future uncertainty of government grants, loans and tax policy, workers with the right skills, flexible supply chains that don’t break child welfare laws, cheaper products from overseas and the Internet, etc.
Regardless of why, the result for me is still the same: less hiring, less spending on office equipment and fewer dollars to local, state and federal governments to pay for basic services like schools to provide the next generation with the necessary skills to compete.
This vicious spiral is long, but the question remains: am I working against my own self interest by purchasing that cheap iPhone now made in China, or should I adapt more quickly to changing global trends and pitch my award-winning wares overseas to companies that are experiencing faster rates of growth and need to know how to communicate with an American audience so they can sell more of their cheaper products?
As we enter into another Presidential election year, the airwaves will be filled with bromides brought forth by our major political parties about the nature of work in America: who’s for it; who’s against it; who should be rewarded for it; and who cares most about the people who do it. Momentarily dispensing with the rhetoric designed to attract the First Tuesday allegiance of the low-information voter, I would argue that neither political party is putting forth the right question, let alone giving the right answer.
We’ve had three consecutive wave elections in this country (2006, 2008 & 2010). The last time that happened was 1910-1914, during which we saw mass migrations (especially of minorities) to the industrial North, commercialization and adoption of the radio as the primary tool of communication, third political party outgrowth and hemorrhaging of European empires on the cusp of World War I. Fast forward to today and we see the same sorts of transformations in communications, work and productivity and geo-politics--and once again a very restive American public facing politicians who may be too afraid or unable to define a painful question in a polarized political era.
Take, for example, 2011’s best missed opportunity--the demise of several government funded solar companies. For Republicans, it was a prime political opportunity to score points over the effectiveness of 2009’s ARRA (Stimulus) Bill. “The public lost hundreds of millions!” they cried in outrage. ”We have no business spending public money on picking winners and losers,” they added. Democrats (because they are Democrats) slunk off into the middle of the night to leak documents to the press about Republicans who also had sponsored earmarks for companies in their districts. No wonder why the public loves Congress.
Lost in the midst of the firestorm was the real lesson to be learned--the value of supporting innovation in strategic industries. The public got a debate between Democrats vs. Republicans when the real race is between U.S. and The World.
Most analysts agreed the demise of Evergreen Solar was because neither they nor Solyndra could survive the onslaught of cheaper solar panel imports from China. Acolytes of Adam Smith would say that’s proof of the free market at work; unfortunately, the story doesn’t end there. Two months after Evergreen Solar filed for bankruptcy, their cutting edge technology was bought for pennies on the dollar in U.S. bankruptcy court by China Private Equity Investment Holdings, who will now spin out a new generation of high efficiency solar panels that will employ Chinese labor and be sold (below domestic prices) in the U.S. market. Respectfully Mr.Smith, that's called stupidity at work.
The point here isn’t to bash China or its companies, or to salute them for being better capitalists, but it’s clear they have done a much better job synching their national interests with their economic tactics. They are the behemoth of solar because it’s national policy is to move Chinese workers into the middle class. Solar is a prime target because it’s an industry with global demand. Whether China can keep its price edge when their labor costs eventually rise is a question for another day, but meanwhile back in Pleasantville, USA, we already have to apologize for protecting our million worker domestic auto industry.
Using the solar industry as a microcosm, is it more in our national interest to have a thriving solar supply chain to employ American workers and to wean ourselves from energy imports, or are cheaper prices on solar panels from abroad that lead to faster penetration of solar adoption in the marketplace (and reduce carbon emissions) the highest goal? Good evening, Mr. Phelps.
With apologies to Mark Twain, the reports of the death of American manufacturing have been greatly exaggerated. The U.S. still is the largest manufacturer in the world, but as a nation that has lost over seven million manufacturing jobs since the late 1970‘s while doubling our manufacturing output, it begs the question, “Can we reconcile our tastes with our national interests?”
Would it be worth an even cheaper iPhone if we were just willing to have thousands of workers live dormitory style in the U.S. and work 12-hour shifts like their Chinese counterparts? And what about those workers whose skills are two widgets behind before they even get started, or worse, too old to sell a home and move a family in the name of innovation?
If you still believe simple tweaks to our tax rates and monetary policy contain the correct answers to these questions, you probably also mistake the notions of compromise and bipartisanship as actual solutions that achieve anything other than keeping the noise level down while the rest of us are watching the Oprah Network because she’s so gosh darn positive.