back to article Lost in the obits: Intel's Andy Grove's great warning to Silicon Valley

A few years ago, Andy Grove took the Davos crowd to task. The received wisdom at the time – and it still is – was that America's future was as a "knowledge economy." It was 2010, and the former Intel CEO lamented that Foxconn employed more people – 800,000 in total – than Sony, Intel, Apple, Dell, Microsoft and HP combined. …

  1. Lars Silver badge
    Happy

    Nice article but then you loose your concentration with "disentangling ourselves from Brussels regulations designed to featherbed Europe's corporations.".

    1. Phil.T.Tipp

      Disagreed. It's both a topical and factually valid statement.

      1. Anonymous Coward
        Anonymous Coward

        @Phil.T.Tipp

        The article is about scale (albeit manufacturing, mostly). Well, exiting EU equals losing scale ...in trade (if you really want UK out of EU regulations and stuff). 58% of UK export goes to EU.

        Granted, if you go the Norwegian or Switzerland way, it's different. But Norway pays the EU about as much as a member. It also has to implement almost all regulations in order to be part of single market. Switzerland also follows rules, even in banking.

        Short version: If you want to use single market, you follow the rules and pay, otherwise you're out paying tariffs. Everything else is windows dressing. Welcome to the real world.

    2. Charlie Clark Silver badge
      Thumb Up

      Seeing as most of the article is about the US the swipes against the EU do indeed make little sense. Add to that Germany's manufacturing industry hasn't suffered from being part of the EU. Mind you, Germany's own version of Silicon Valley, dubbed "Silicon Saxony", has been more of a subsidy magnet than a wealth creator.

      In summary: Britain's pro-service, anti-industry policy has nothing to do with the EU.

  2. Anonymous Coward
    Anonymous Coward

    The problem is the natural outgrowth of legislation, at least in the US.

    As someone who is a bit familiar with manufacturing and doing business overseas, I find it fairly impressive (in a bad way) that it's come to this. There are substantial costs and overheads involved in offshoring manufacturing. It's pretty crazy. But the regulatory environment in the US is so fucked up that it actually makes sense. Lots of jobs are simply not worth a lot of money, and lots of labor simply doesn't have a lot of skill. You'd think we could match these up. You'd be wrong. So we're employing millions in Asia and elsewhere and have close to 100,000,000 people who could and probably should be working in this country but aren't (official unemployment numbers are useful mainly as punchlines for those who understand how they are calculated - if any of us in private industry engaged in that level of fraud we'd be thrown in prison and rightly so). In the mean time, the US (and most of Western Europe - don't get cocky) is sitting on a fairly epic wage bubble. Our labor - even the most skilled of us - is priced way too high by global standards, and this will sort itself out eventually. It will be a very painful adjustment. The bill for the free lunch promised us by four or five generations of politicians is coming due, and it will be steep.

    1. MD Rackham

      Re: The problem is the natural outgrowth of legislation, at least in the US.

      So 1/3 of the population of the US could and probably should be working but isn't?

      You're promoting child labor, aren't you?

      1. TheBigCat

        Re: The problem is the natural outgrowth of legislation, at least in the US.

        It is just looking at a statistic that is harder for the government to cheat on. Actual employment is near a 30 year low in the USA.

        http://money.cnn.com/2013/06/06/news/economy/employment-rate/

      2. FelixReg

        Re: The problem is the natural outgrowth of legislation, at least in the US.

        MD Rackham: You're promoting child labor, aren't you?

        Can't speak for AC, but I do. It really bugged me that my kids could not legally work, AKA "Do things for other people." It was both cute and sad when one daughter would regularly ask for a job when we were out and about. She was pre-teen and didn't understand why she could not do what she saw others doing.

        Sure, most classic kid jobs are long gone. Especially those matching our weird images of "child labor" - working 27 filthy, dangerous hours a day for a bowl of gruel. But get rid of these antiquated laws to find out whether there are age appropriate jobs that kids *can* do. Kids would be much better off.

        1. Phil.T.Tipp

          Re: The problem is the natural outgrowth of legislation, at least in the US.

          Kids' jobs are still going strong. Think the supermarket kids, the burger flippers and pizza delivery types. Those are not jobs for responsible adults, can't raise a family on kids' wages.

      3. ElectricRook

        Re: The problem is the natural outgrowth of legislation, at least in the US.

        So 1/3 of the population of the US could and probably should be working but isn't?

        You're promoting child labor, aren't you?

        No dufus, there are some 90 million Americans between the ages of 18 and 55 who are not in the work force, they are sponging off the folks who are working. 5% unemployment means that about 5 million of the remaining 100 million are seeking work.

        1. Terry Barnes

          Re: The problem is the natural outgrowth of legislation, at least in the US.

          ", they are sponging off the folks who are working. "

          The government's safety net ensures that people unable to work don't starve or have to live on the streets. That's not sponging, it's just one of the requirements to consider your society to be decent and humane.

          1. Anonymous Coward
            Anonymous Coward

            Re: The problem is the natural outgrowth of legislation, at least in the US.

            Sorry I agree with ElectricRook.... Personally I believe it's the People's Job to take care of each other, not the Government Job. When People help others, the folks receiving the help are often much more grateful, when it's the Government taking care of you, most (not all) feel like they deserve it. When the Government gives you a pay raise, it causes you to resent your employer and the Government gets your gratitude.

            The Governments greatest fear is a population that doesn't need them. They can and will continue to pass laws that make you think you need them..... That couldn't be more wrong..... They need you.

            btw, I do put my money where my mouth is. My charitable contributions is the single largest line item in my budget, above both my mortgage and health insurance.

            1. Gigabob

              Re: The problem is the natural outgrowth of legislation, at least in the US.

              I think the situation is much more complex. What Andy Grove was articulating is that most resource distribution chains are complex systems. If we outsource segments of these systems to other areas we lose critical skills and capabilities and the chain itself collapses. You can't get to automated self correcting systems if you don't intimately understand the process.

              Similarly - as resources get concentrated - as they have in the US via control of tax policy (all wages and current income production is taxed - but assets are not) then those with resources to "help" those in need have no incentive. In your model you want the "people" to help - it is equivalent to the poor helping the poor. In a steady state environment with no shocks to the system - this could be managed. But in the current environment where three things are happening, economies are recovering from major economic dislocation, the nature of work is being fundamentally altered by technology and political uncertainty has thrown a spanner into the wheels of government - then we need an outside agency to provide structure and direction to recovery - much as Roosevelt's New Deal did after the Market crash in the 30's and the US did after WWII with the Marshal plan.

              My single biggest budget line remains my income. If it were my charitable contributions - I would either have nothing to contribute next year or have a much bigger trust fund than I can manage.

            2. Terry Barnes

              Re: The problem is the natural outgrowth of legislation, at least in the US.

              " Personally I believe it's the People's Job to take care of each other, not the Government Job. "

              That doesn't work though, does it? It's why, for example, animal charities in the UK are fabulously wealthy while people are using food banks. Government can enforce fairness, charity tends to see over-provision to some groups and under-provision to others.

              We might have volunteer fire fighters, but what they do is regulated, managed and funded by government because no other approach would work.

            3. MD Rackham

              Re: The problem is the natural outgrowth of legislation, at least in the US.

              "I believe it's the People's Job to take care of each other"

              I agree. That's why the people (as in "we the people") banded together to, amongst other things, "promote the general welfare." Compare and contrast to libertarian paradises like Somalia.

              [Obviously speaking American here, but most countries have something similar, in theory if not in practice.]

        2. Naselus

          Re: The problem is the natural outgrowth of legislation, at least in the US.

          "No dufus, there are some 90 million Americans between the ages of 18 and 55 who are not in the work force,"

          There really aren't.

          As noted in the link above, the employment rate for 16-54 year olds is about 76%. That group accounts for about 2/3rds of the population of about 300 million. So you're looking at 25% of 200 million people - maybe 50 million. However, given a typical disability rate of about 20%, 40 million of the whole working-age population are to some extent disabled. That accounts for 40 million of that 50 million.

          So that leaves about 10 million out of 200 million who could be working but aren't, a number which turns out to be more or less spot on for the 5% headline unemployment rate (which is considered the optimal rate by economists to prevent inflationary pressures in the economy).

          10 million out of 300 million is not exactly a crippling burden upon the rest of the population (after all, in the 1950s far more women than that were unemployed, in a country with only half the population, and during the greatest and longest economic boom ever), and tbh it's much the same in the rest of the West. The major social welfare burdens are mostly based on the colossal expenses associated with an aging population (pensions and healthcare costs etc) rather than the fairly minor cost of food stamps and unemployment cheques.

          That makes any relatively effective attempt to reduce social security bills into an attack on the elderly, a group who reliably vote to protect their interests and which both parties in the US (and most other places) are careful to avoid antagonizing. As the UK government is finding out right now, trimming social security spending without impacting pensioners is basically impossible.

          1. Keven E

            Re: The problem is the natural outgrowth of legislation, at least in the US.

            ".. as noted in the link above..."

            Anything change in 3 years?

        3. martinusher Silver badge

          Re: The problem is the natural outgrowth of legislation, at least in the US.

          >No dufus, there are some 90 million Americans between the ages of 18 and 55 who are not in the work force, they are sponging off the folks who are working.

          If you go out during the day where I live there are a lot of women out and about doing stuff that's not work. A lot of it is connected with child care. Its very tough raising children and working a full time job and because child care costs as much as a generic non-professional wage it makes sense for a parent to be at home if the family can get by without running two jobs.

          You could call parenting 'sponging', I suppose.

    2. Jimbo in Thailand

      Re: The problem is the natural outgrowth of legislation, at least in the US.

      "Our labor - even the most skilled of us - is priced way too high by global standards, and this will sort itself out eventually. It will be a very painful adjustment."

      In the past that might have been true but not sure that's accurate today since non-outsourced employee salaries have plummeted post-2008 oil/banking bubble burst. Instead I think the staggering costs of current CEO salaries, perks, and bonuses, including those of the top brass, are bound to severely affect the ability of companies/corporations to compete globally. I believe US CEO pay should be capped at no more than 10:1 CEO/employee median salary ratio, like it was in the distant past instead of the current 50:1 to 600:1. Obviously this will never happen so the plot 'sickens' as my old California buddy used to say.

  3. energystar

    "we broke the chain of experience that is so important in technological evolution..."

    Wise man. Not everything measures in term of profits. Most important things are not even measurable. Hope God give him a pass to Paradise. But sure He has some additional work for Andy.

  4. Snowy
    Flame

    or if...

    you offshore all the work no one at home can offered to buy it!

    1. Anonymous Coward
      Anonymous Coward

      Re: or if...

      Or even be able to spell the word afford.

  5. lnLog

    I beg to differ...

    There are tonnes and tonnes of silicon in silicon roundabout, how else do you make all that concrete?

    1. Charlie Clark Silver badge
      Coat

      Re: I beg to differ...

      I believe this one is yours, sir. ->

  6. PushF12
    Childcatcher

    And zero lobbying was done

    Groves recognized this economy-destroying problem, but did nothing to fix it despite being in a unique position to do so.

    Quite the opposite indeed. Intel became an enthusiastic part of the corporatist government complex that created it.

    1. ElectricRook

      Re: And zero lobbying was done

      There's a lot more to it than that, if you want to sell computers in Asia, you probably need to have a factory there, otherwise the local governments will tax you to death. Likewise Europe and south America. Besides putting all of your eggs in one basket (America) is dangerous in that a Bernie Sanders could pop in and nationalize your business out from under your feet ala Castro's Cuba in the 1950's. Think "you didn't build that " campaign from Obama.

  7. Anonymous Coward
    Anonymous Coward

    Andy Grove, never annoying

    On the Annoying Scale, Andy Grove always seemed to sit at about zero point zero % annoying. Very wise and pleasant, as far as I could tell from the media. Sad that he didn't live to age 100+.

    As compares to (for example) Carly 'The Sarah Palin of IT' Fiorina, who is extremely annoying every time she opens her idiotic pie hole.

    1. fajensen Silver badge
      Terminator

      Re: Andy Grove, never annoying

      Carly Fiorini's only skill is the ability to run whatever she, for occult reasons*, is given responsibility for into the ground.

      *) I could do the same, faster and for less. Competition does not apply to the CEx-segment!

  8. Anonymous Coward
    Anonymous Coward

    Translating to:

    Merciless exploitation of a resource (human labor being also among them) is fundamental to capitalism. In order to maximize profit, resources have to be at zero cost and workers should work 24h a day and be paid a grand total of 0.00USD per day which translates into an astronomic productivity level. So each time a resource is exhausted or regulations threaten the profitability, corporations are naturally looking elsewhere.

    As you can see, it's as simple as that!

    1. ElectricRook
      WTF?

      Re: Translating to:

      Merciless exploitation of a resource (human labor

      were you kidnapped and held at gunpoint and forced to work? No? You voluntarily entered into an employment contract and received the wages and benefits you agreed to exchange for the days of your life?

      Quit bitchin' and walk out the damn door and don't look back!

      Those guys don't play fair, they expect me to earn my way through life :(

      God I hate whiners.

      1. Anonymous Coward
        Anonymous Coward

        Re: Translating to:

        Hate some more then, gotta keep that cholesterol building up for the benefit of all. After all we don't want God to notice, seeing what happens to the muslims who gets His attention.

      2. Charles 9 Silver badge

        Re: Translating to:

        "were you kidnapped and held at gunpoint and forced to work?"

        Being told to work or starve amounts to the same thing. We may pray to be given this day our daily bread, but reality demands we sing for our supper. The problem is that jobs can be considered a resource just like everything else. And when there are twelve people on the island but only six coconuts, no matter how much you try to divide it, things can only get ugly.

      3. Anonymous Coward
        Anonymous Coward

        @ElectricRook - Re: Translating to:

        If history is correct, your US ancestors were importing African slaves because they didn't cost much (

        actually almost all the most developed nations today have some little dirty colonial past to hide). When they couldn't do that anymore, they turned to other people (Irish, Chinese, Greek, Italians) who were a little more expensive put they paid for their own transport so that helped recover some of the costs. But of course, the curated history they teach these days in school does not mention this.

  9. Schlimnitz
    Thumb Down

    New video-ads in the middle of articles?

    Me no likee

    1. fajensen Silver badge

      Ad-blocker fixes!

  10. Anonymous Coward
    Anonymous Coward

    My brain has already drained

    I used to work at Intel mobile in Germany, which is now staffed by a significant number of low cost Asian immigrants. Hardly bringing expertise into the US!

    In the UK, Mr Dyson may pay lip service to retaining British engineers, but he (and other British employers) should put his money where his mouth is and pay highly qualified engineers adequately.

    I work in Germany where I get paid twice what I would get in the UK as an engineer.

    Why is Mr Dyson surprised when British school children avoid engineering as a career due to poor pay and conditions.

    Yes, I agree, retaining manufacturing industry is key, but if free trade allows subsistence pay to manufacture goods which are freely traded around the world, why would any business choose high cost manufacturing centres.

    1. Charles 9 Silver badge

      Re: My brain has already drained

      Because if you expect to have any customers for your goods, you better make sure people get paid.

  11. allthecoolshortnamesweretaken

    <sarcasm> Andy Grove - yeah, nice guy, but what did he know about economics anyway? He didn't have a degree in economics or an MBA - he was just an engineer who started and ran a very successful multibillion company for a couple of decades. Didn't even once ran a big corporation into the ground, so clearly not a real manager. </sarcasm>

    1. energystar

      Yeah!

      Andy was JUST talking of the miserable declining of USA engineering. And of USA economic future. That future is Now. Intel Corp is OK, thanks.

  12. Stevie Silver badge

    Bah!

    Do you support a heavy levy on Chinese imports? "Yes"

    Would you support a law that would raise the cost of flattscreen TVs, soundbars, blu-ray players, game consoles and computers by half? "Hell no!"

    Jam Tomorrow. The Trump promise.

    1. Anonymous Coward
      Anonymous Coward

      Re: Bah!

      In principle, no, I don't want more government interference. And I vehemently disagree with Trump's despotic proposals.

      OTOH, I would happily pay 50% more than "dirt cheap" if it meant having non-Chinese choices on the market, more hands-on manufacturing jobs in America, and not being told "you're crazy to want to make XYZs, they can do it for half the price!"

      Cutting federal/state red tape would be a better way to make America competitive again, but we don't want China's problems (eg. pollution) so I'm afraid some protectionism is in order as well.

      1. Charles 9 Silver badge

        Re: Bah!

        So what do you do? You don't want your resourses raped and pillaged yet you don't want to be seen as slave-driving, and there's no guarantee the medium is a happy one (it could be UNhappy instead: too high to be comfortable to the business owners and at the same time not high enough to be considered breadwinning).

  13. Anonymous Coward
    Anonymous Coward

    High Tech Scale

    Having worked for a hard disk company for 25 years I can see what he means about scale but I don't think there is an obvious solution. Over the last few years, it was becoming obvious rotating storage was rather doomed for most consumer applications in favor of SSD's. We were like IBM making typewriters in the 70's. Although our company had wonderful teams that could be transitioned to new product categories - there weren't obvious high volume products to move to. We were all waiting for the next big thing that needed rotating storage. What I saw as a possible solution was to form smaller teams on separate (non-disk) products - much like startups - but utilizing the buying and manufacturing power of the corporation to their advantage. But if the corporation is public maybe that's difficult to get approved by the investors. They'd rather see the corporation overhead reduced and so we lose some of our best engineers, our buying power, and manufacturing skillsets (scale).

  14. martinusher Silver badge

    There's more to manufacturing than making stuff

    The advocates of outsourcing tend to underestimate the complexity of manufacturing which is why the Chinese were so keen to accommodate them in their efforts, low balling labor and manufacturing overhead to gain priceless know how and experience. These advoates have a distinctly colonialist mindset, assuming that overseas was just an infinite pool of cheap labor ready and willing to do the work for slave wages while they creamed off the fruits of their cleverness. They used things like the "Smiley Face Curve" to justify their wonderfulness. They are so sure of how smart they are that they assume that people like the Chinese are just a bunch of coolies, people who can't think, can't plan and can't innovate, despite the overwhelming evidence to the contrary.

    Those of us who know better -- people who actually make stuff -- are just voices in the wilderness. We knew that corporate types will do anything for short term profit (and their bonuses) including giving away the farm. We not only built up the Chinese capability but also hollowed out our own, flooding our businesses with bureaucrats and bean counters (we typically get criticism of 'regulatory environments' but as we all know in industry the biggest block to moving forward isn't the government, its institutionalized parsimony that causes us to waste thousands in the search to save a few hundreds). There are holdouts but the corporate environment militates against them -- to them, engineers are just overhead.

    Andy Grove was 100% correct. (Which didn't stop Intel outsourcing work, including some from underneath me back when I was an accidental Intel employee. Their haste to move our work offshore regardless of cost and practicality was obscene.)

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