When It's Time To Scale, US Manufacturing Hits a Wall

curtwoodward writes "MIT researchers looked at 150 of the school's spin-out companies in manufacturing businesses over a decade, and found many of them hit the same chasm: Once it was time to ramp up to large-scale production, they couldn't find domestic investors and had to go overseas. The bulk of the research will be published later this year, but it raises an interesting conundrum — if an MIT-pedigreed company has serious trouble ramping up production in the U.S., how much harder is it for the 'average' business that wants to grow? Is it even still possible to do high-tech manufacturing here — or should it be?" Intel seems to be doing OK with U.S. manufacturing, but they have the advantage of established operations.

Comments

Spoiled Americans

[Anonymous Coward]

Americans have no one to blame but themselves and their short sighted insistence that they be paid enough money to keep themselves in food, shelter, transportation and medical care here in America, rather than what it would take to do all of the above in Bangladesh.

Re:Spoiled Americans

[Runaway1956]

Yes - and no.

I'm getting to be a pretty old guy. I remember the initial rounds in off shoring. The steel industry was in trouble here, in the states. Companies were telling the unions, "We're going bankrupt, we need to renegotiate, we need to cut costs. If you'll take a small pay cut, let us get on our feet, we'll make it up to you. We need help, or we're out of business!"

How much of that claim was in good faith, it's impossible to judge, really. But, the portrayal was mostly accurate.

I'm the son of a steel worker. I heard the union men saying that "No one in the world can make steel like we do. Go ahead, take your plant to the Netherlands (or wherever), you'll be back in five years, looking for qualified steel workers!"

Well - plants were moved overseas - and they haven't come back. In fact, steel plants have been opened in third world countries, and they operate at a profit. Even little brown men and women from tribal towns in India can make quality steel. (Don't ask why China has such a problem, I haven't figured that out.)

Greed plays a big part in all of this, and the greed isn't all on one side, either. Where I grew up, EVERYONE had almost new cars, a boat in the yard, expensive stereo equipment - you name it. If it was new and shiny, if it was "fashionable", if it was considered "high tech", then all the union men had one, because they could afford it.

I thought my dad was wrong, when he refused to deal with the steel companies, and time has proven me to be right. Today, we only have a small fraction of the steel industry that we had in 1980.

Had the unions accepted a three percent pay cut and a reduction in benefits, most of those jobs would still be here. It's not like any union man was going to miss a meal by taking a three percent pay cut. They worked hard at the plant, but they were on easy street at the end of the work day.

The steel companies led the off shoring of American manufacturing out of necessity. Other manufacturing industries sat back, watched, and followed suit.

We'll never get back what we have lost, and it all came about because steel workers were greedy.

Re:Spoiled Americans

[pnutjam]

Why would the jobs still be here? The companies probably would have ended up like hostess, always coming back to the table with their hand out. A cut might have delayed things by afew years, but a couple of unions caving in would not have changed the last 50 years. The owners might have made afew more bucks.

Re:Spoiled Americans

[grcumb]

Americans have no one to blame but themselves and their short sighted insistence that they be paid enough money to keep themselves in food, shelter, transportation and medical care here in America, rather than what it would take to do all of the above in Bangladesh.

I take your point - it's a good one. But the story here seems to be a lack of confidence in the ability to get a return on investment. I'm actually half-inclined to see the core problem here as investors who ask, 'Why should I get a modest rate of return here at home when I can get a higher rate of return elsewhere?'

That's fine, as far as it goes, but it doesn't consider quality, long-term stability, or even pride and brand identity. In other words, I'm not sure that even backing down and selling out completely to the top-hat crowd would change their perspective that the US is a bad investment.

So yeah, shame on us for wanting a living wage and refusing to sacrifice our last modicum of health and well-being at the altar of investment; and shame on them too for not even caring enough about the place they live.

Re:Spoiled Americans

[Austerity Empowers]

"Why should I invest money here, when it requires me to realize a taxable gain and bring it to the US, when I can leave the money overseas and invest it in a manufacturing plant that makes me even more money?"

Re:Spoiled Americans

[DriedClexler]

Really? Tell me all about semiconductor manufacturing in Bangladesh.

Re:Spoiled Americans

[rve]

Go ahead, take your plant to the Netherlands (or wherever), you'll be back in five years, looking for qualified steel workers!

How can a US based company ever compete with a low wage, low cost of living country like the Netherlands, where employees aren't entitled to any benefits and will work 12+ hours a day for a basic meal?

Re:Spoiled Americans

[Anonymous Coward]

You _seriously_ need to read "And the Wolf Finally Came: the Decline and Fall of the American Steel Industry".

Cooperation at some places like J&L was genuine and in good faith.

At others such as Wheeling Pitt and US Steel, not so much.

(In the case of Wheeling Pitt, workers cooperated with WHX & Ron LaBow and lost everything)

The one thing they both had in common? For the most part, they both failed.

Don't get me wrong, in some places steel survived, but only because management wanted/needed/planned for it years in advance.

(ie US Steel knew in the 70's they had to cut capacity, and that the Mon Valley would only have one hot side when the dust cleared. Yet they told the workers it was their fault: for not meeting new quotas, for wanting COLA, for wanting workman's comp when injured on the job or electing the Homestead Five)

A good primary example is ET and Irvin survived even though workers wouldn't budge. Some even said go ahead and close it like the others. It survived because it had perviously been selected by management for modernization and they actually did follow through.

For the most part, vertically integrated producers are gone; mini mills have ruled.

Far as big manufacturing and such, as long as companies have access to mobile work forces (ie not captive ones) wages will primarily control where they will go as labor is the biggest expense in general.

Unfortunately you just can't live in the US for 8000/yr, have a family, be debt free, save for retirement (you think there will be a pension, social security? ask the pensioners who worked for Bethlehem Steel after ISG raided the pension just like WHX and tossed them to the PBGC after a life time of work), have children and try to provide a better opportunity for those children.

Seriously read the book; Hoerr doesn't just make random statements and claims, he has the references to prove it. Read the foot notes after you finish each chapter.

He and his family are from Tube City; he even worked in the National Works to put himself through school...

Re:Spoiled Americans

[Anonymous Coward]

1: If management can't sit down with the unions and show them the books, then they deserve no quarter and the company should sink.

2: http://minerals.usgs.gov/ds/2005/140/ds140-feste.pdf

1964 is when the market for pig iron capped out; it coincides with the 1st clean air act and that is when off-shoring really began. During that time the unions and steel companies couldn't come to an agreement, and congress continuously stepped in and mettled in their affairs. In 1981 is the shipped tonnage literally halved within a year due to the real estate market crash. We had a crappy market in the 1980's and nobody wanted to invest, and as real-estate was in the shazbot, nobody was building steel structures. In 1990 the Clean Air Act was passed and that put the cork in the pooch so to speak; you've got to burn a lot of coke to make steel.

3: http://market-ticker.org/akcs-www?get_gallerynr=2000

Interest = Inflation + Margin + Risk.

GDP, adjusted for debt emission, is net zero. For the last 60 years.

2% year over year inflation is an exponential equation.

Inflation is caused by issuance of debt.

When Inflation is high, to maintain reasonable interest one must either reduce margin, or increase risk. The entire US market does not want to invest in domestic long-term projects because of three reasons:

A: When the government decree's it has defacto power to do anything and thus its power is unlimited, and it in fact does things like re-order the debt structure of GM and screw people who thought they were secure in their investments, businesses realize there is an increased risk in the market. At least in china if they can pay off the right people they can be secure in their investments. This is especially bad when the government commits fraud.

B: At some point in credit expansion, people begin paying off current debts with new debts. This is where the exponential function starts and moves upwards from. Once it's established, your investments get forced into higher risk classes because there is literally no way to reduce margin further. At some point inflation pushes risk to an absolute value and you lose.

C: If you buy a bunch of material and labor and really invest in a company, someone, usually an exec or another investor, is going to turn around and figure out a way to asset strip that material and labor for their own personal profit.

So, to answer your question as to why it all happened, this has absolutely fucking nothing to do with poor managers coming hat in hand with tounge-in-cheek to unions asking for a small reduction. It has everything to do with rabid environmentalism (We double our energy use every 7 years all off of petrol, why the fudge can't we do Thorium Nuclear and use current to process metal? Aah, NIMBY), out-of-control government and banks, and managerial and union failure.

Re:Spoiled Americans

[Pecisk]

" The steel industry was in trouble here, in the states. Companies were telling the unions, "We're going bankrupt, we need to renegotiate, we need to cut costs. If you'll take a small pay cut, let us get on our feet, we'll make it up to you. We need help, or we're out of business!""

And you take their word for it? You know when company goes bankrupt, no one actually tells you about it. It just happens. I really smell fish here. I would really like to see numbers of that company on that year. It feels more like "we wanted to increase profit for shareholders".

I can agree that unions sometimes can be very stubborn, because of previous workers experience, which is usually not so pretty. However, there are lot of smart people usually, so "they just were greedy" is oversimplification at best.

Re:Spoiled Americans

[delt0r]

Or even worse. The slums that are Lichtenstein (yea quite a bit of steel there) or Switzerland. I am here now slaving away to the *bone*. I only get to go skiing 3 times a week. Of course America can't compete with their very high living standards and expectations.

Re:Spoiled Americans

[Anonymous Coward]

*BANG* I'm sorry, did I break your concentration? Allow me to retort:

You fucking idiot. It is the same trick for the past 40 years that has destroyed American companies and it has JACK SHIT to do with unions or employee wages. I'm going to counter your claims, explain exactly why and how you are wrong on every level from start to finish, so please bear with me, but I will address every part of it.

First of all, have you ever even heard of currency markets? The different currencies exist in different countries, and trade across the boundaries is required to move manufacturing overseas. When a trade imbalance exists across a currency market, the value of the currencies compared to each other changes. For example, if China sells 10x more than it buys from us, then there will be an excess of US dollars in their market, dropping the value compared to China's own money. This regulatory function effectively can prevent trade imbalances and makes exporting manufacturing expensive, lazy, and stupid, and not profitable no matter what. In the early 70s, China decided to "peg" their currency to our own, meaning the Chinese government buys up all the extra USD on the market to keep supply low and maintain a trade imbalance to help build their manufacturing base, and they use those USD to purchase US debt in order to make some kind of return on it. It is ONLY thanks to this illegal international manipulation of currency markets that any labor can be exported at a savings whatsoever, otherwise, even if the Chinese were doing 100% of their labor with slaves and the cheapest shit materials and processes, it would STILL not be more profitable than making it here. So when it comes to moving shit overseas, if you are blaming unions, you are completely and totally ignorant, shit facedly stupid and unworthy of conversation.

Second, your post reeks of statements hating upon wealth and good fortune and prosperity, and the freedom those people had to do as they pleased with their money/lives. Fuck you for that.

Third, you call them greedy and say unions killed the companies. Well, lets examine that claim with an example. I'll use hostess because it is recent. When hostess went bankrupt the first time, it was because of the mismanagement of investment funds by the executives and the average worker pay was 48k per year. The private equity that purchased hostess then did several things: Started managing the finances better, dropped wages by 30%, increased corporate compensation 20% per year, started using cheaper ingredients. This meant higher profits and lower costs, a real boon for the new owners. Well, over time they increased the companies debt for use in operating capital by gradually over-leveraging the company to bring it to bankruptcy again, giving themselves the most senior portions of the company for payoff. They then demanded the unions take another cut down to 24k per year, half of what they originally made, from a solid middle class job to a working class shithole job, and said "if you don't, we liquidate you". And they did. The executives take home more money from what they did at hostess than was needed to keep paying the workers for an additional 20 years without making a single sale. It was 100% greed of the private equity. The same thing has generally been the case of private equity firms that are lumped into hedge and mutual funds to produce a profit for America's wealthy at the expense of our middle class. It is cheaper to liquidate existing assets than create new ones, after all.

In fact, since 1970, mergers, acquisitions and buyouts have lead the nation to a reduction in total firms operating in top 95% of GDP from over 6000 to under 60 today. This drop in competition is responsible for over 95% of the price inflation from 1970 until today. It is responsible for the stagnation of wages despite a 4x increase in worker productivity on average since then. It is responsible for high unemployment despite a rapidly "growing" economy. It is responsible for the slow death of innovation, investment, so

Re:Spoiled Americans

[RabidReindeer]

It's not?

We're trying!

Re:Spoiled Americans

[Grishnakh]

A cut might have delayed things by afew years

Everything dies after some time. The longer you can keep things afloat, the better (for you), but nothing's ever permanent. Nothing would have kept the US the leader in steel forever, nothing; eventually something would change it, such as people in another country finally figuring out how to do it themselves for less than you can. But if you can keep the economy (in a certain sector) good for another few decades, that's a large part of the career of one generation of workers.

Think of it this way: suppose you and all your friends worked at a prominent buggy whip manufacturer, and the year is 1885. You enjoy a great quality of life due to circumstance; maybe your employer is really generous. You've come to a crossroads where you can either take one action and continue working at the buggy whip manufacturer and getting very good wages and enjoying a great quality of life, or you can take another action and allow the company to outsource all its manufacturing to Canada or wherever, and you and all your friends will lose your well-paying jobs and have to go find something else to do which probably will pay far less. Well, if you take the long view, it doesn't really matter which course you take, because that company is going to be out of business in ~30 years, because of the rise of the automobile and the total obsolescence of horse-drawn transportation. But in 30 years, you'll certainly have retired, and enjoyed a long career with great wages if you choose path A, whereas with path B you'll suffer 30 years of misery after losing your house because your new job doesn't pay nearly enough to allow you to afford it. And in that 30 years with path A, you'll have earned plenty of money to help your children choose a different path in life than making buggy whips, such as sending them to college, so they'll be prepared when inevitable change comes, whereas with path B, your kids will grow up destitute.

Re:Spoiled Americans

[Grishnakh]

It seems to me the unions, when presented with situations like this ("we'll make it up to you"), need to demand a contract where the union workers will profit somehow if the company does turn around and regain profitability, rather than just relying on good faith.

Re:Spoiled Americans

[BVis]

Yeah, greedy workers! How dare they expect to share in the company's successes! They should just take the scraps they're given and be happy about it. The executive's summer homes don't buy themselves, after all.

The jobs didn't go overseas because the steel workers wanted too much money. They went overseas because management felt they were entitled to obscene profits, and didn't care whose lives they ruined in the process. We're not talking about paper pushers here, we're talking about steel workers working a brutally hard job in an extremely dangerous environment. Why shouldn't they make enough money to support a comfortable lifestyle for their families?

Receiving good wages/benefits for hard work isn't greedy, it's the "American Dream", or at least that's what it used to be. Now, the "American Dream" seems to be "get other people to work hard and keep the profits for yourself." These companies will wish that they'd kept the well-paying jobs here once nobody can afford their products.

Re:Spoiled Americans

[thoth]

Had the unions accepted a three percent pay cut and a reduction in benefits, most of those jobs would still be here.

How do you figure that? Wouldn't management just come back a few later and go through the whole thing again?
Basically had they agreed the first time, they would have had another decade of paycut rounds and eventually had their jobs shipped overseas anyway.

We'll never get back what we have lost, and it all came about because steel workers were greedy.

Riiight, everything is entirely the fault of the workers, because they aren't willing to sacrifice everything in the name of management salaries, bonuses, and corporate profit margins. I mean, there's just no way ever that their jobs would have been lost to overseas competition eventually.

Re:Spoiled Americans

[Anonymous Coward]

This is why I am a huge proponent of profit sharing. Make the union members have an invested interest in staying efficient and getting more efficient. Even better, promise no lay offs ever in their contract. People who obsolete themselves should be promoted into a position to make other processes more efficient. When push comes to shove on declining business, offer early retirement packages to cut the work force.

Re:Spoiled Americans

[HornWumpus]

Markets are a bitch.

Externalitys were internalized by the steel industry. Coke ovens had to be made cleaner.

When those costs were internalized the industry was uncompetitive globally. China has the coke ovens now.

China also has the large diameter blast furnaces. Those are a sunk cost and should run, more or less, forever absent a new competitor and China internalizing their pollution costs.

This is what progress looks like. Sucks to be a first world steel worker or some who likes to breath in China. They will work it out.

I half expect the Steel industry to move to a bunch of medium sized, dirt poor, Islands, so they can 'more or less' ignore their pollution.

Re:Spoiled Americans

[HornWumpus]

At that point they usually don't want shares. They know they've bled it pretty close to dry. The shares are cheep, nobody wants them.

It never occurred to the American unions to send some money and expertise to Chinese/Indian unions.

Re:Spoiled Americans

[HornWumpus]

Now you understand half of it. Next you need to see that the Chinese are sitting on stacks of paper which will hurt their economy worse then printing it has hurt ours.

This is what an economic war looks like. Currency pegs are countered with printing presses.

Worst of all, the third world countries so incapable and corrupt (e.g. Zimbabwe, Venezuela) that they back into using the US dollar as defacto currencies. They back themselves into China's position without getting the benefits.

Re:Spoiled Americans

[pnutjam]

That's not the choice that was offered. The choice was take multiple pay cuts until you have to add a part time job or make you wife and kids work. If a company is on a downward spiral the workers don't need to go along for the ride. When a company is doing well the owners deserve to get paid more because they are taking on the risk, but when that risk manifests they want the workers or the local government to shoulder that risk. It doesn't change the outcome, but it changes the culture (in a bad way).

Re:Spoiled Americans

[Shred303]

Runaway I grew up outside of Pittsburgh and that is pretty much my view on how things unfolded. Here the unions had striking down to a science, anytime there was a healthy profit the unions would strike, so the owners decided it was no longer worth reinvesting into the mill, so they got as much out of what they already had invested and they let the plants die a slow death. I hear the specialty plant across the river, producing a tiny fraction of what it used to, is finally going to close. After a couple decades of being shut down I heard the small mill in my town reopened and is doing a small operation.

Re:Spoiled Americans

[Runaway1956]

I'm from Lawrence County, lived mostly in New Castle. My dad worked at B&W Tubular Stainless, Wallace Run plant. We may have crossed paths a few times . . .

Re:Spoiled Americans

[lsatenstein]

Americans have no one to blame but themselves and their short sighted insistence that they be paid enough money to keep themselves in food, shelter, transportation and medical care here in America, rather than what it would take to do all of the above in Bangladesh.

I guess you mean that the standard of living is too high in the USA, and until you have starving population, and absolutely no collective benefits, then the USA could compete. Gee, Are you willing to support your parents and your in-laws? Would you build a second story on your home for them, assuming you could afford a home?

The problem is not social benefits, the problem is one of financing, and taxes on profits. The Romneys of the world would rather invest outside the USA to grow those companies who will in turn export to the USA. it is so, and quite legally, keep USA companies earning marginal profits. Someone called that vulture capitalism, as opposed to Venture capitalism.

Re:Spoiled Americans

[volmtech]

Steel is heavy. You can't smuggle it in with a small plane or walk it across the border. Tariff the crap out of it and most American steel workers would still have their jobs. Sure, things that could only be built using cheap steel would not get built, but the Empire State Building was built with American steel during the Great Depression, so progress wouldn't have stopped. Government workers, pensioners and office workers love cheap imports but blue collar workers don't care to, and most can't, work for Indian or Chinese wages.

Re:Spoiled Americans

[volmtech]

Most companies,unlike Apple, compete on price, . If one company cuts cost by off shoring, the others have to follow. It's not greed, just survival. If the first company couldn't off shore, the others could still compete using domestic labor. If whatever they're making cost so much that consumers can't afford it they will have to go bankrupt. People will just buy something else. Importing a cheap good that people can afford sends American capital out of the country. If all manufacturing is off shored people with money can raise their standard of living with cheap goods but the unemployed factory worker can't share in that.

Simple Fix

[CanHasDIY]

Just switch your focus to manufacturing things that either can't be made in/sold to/bought from other countries (like cryptography software).

Or maybe guns. Americans love American made guns.

Re:Simple Fix

[fbumg]

Anything will draw money and interest if you just label it as "green".

Re:Simple Fix

[flyneye]

The mistake made here is that scaling production is a GOOD thing. We have seen endless examples of Mega corps. tanking and taking employees and investors with it. The secret, good ol' fly will share with you is; keep it small, specialize,shun investors and if your product is worthy you will live like a king. Complete control is impossible on a large scale and only breeds asshats dropping resume' on your desk reeking from useless degrees, boring accomplishments and assbackward statistical management techniques that wouldn't even appeal to a $cientologist with a warehouse of half built gizmosensors.
        Small house craftmanship is the way to live and work if you want the American dream. You can keep your deadlines, heart attacks and useless ranks of management siphoning your value and devaluing your product. I will also reiterate "FUCK INVESTORS", if they really wanted to make money, they would do what you are doing and put their money into themselves. If they can't do it at that point, they didn't DESERVE any money because they can't HANDLE money and would've only contributed to the problems of the world caused by themselves anyway. Darwin and Bob were both right about Normals; "survival of the fittest" and " if you act like a dumbass, they'll treat you as an equal".

Re:Simple Fix

[demonlapin]

Nope. We import guns all the time.

Re:Simple Fix

[TopSpin]

I think guns are a protected industry in the US. I'm pretty sure that we're not allowed to import foreign made guns for sale.

We import many, many foreign guns. There are limits, however. The US doesn't allow Norico (the largest small arms manufacturer on Earth, a Chinese company) to import. Also, foreign small arms must get through the ATF points system which limits what can be imported. Also, there are tariffs. Most other imported finished goods have no tariffs.

The result is that although there are large numbers of imported small arms, the limitations and extra costs to importers allow domestic manufacturing to be viable. Thus, we have companies like Ruger and Smith and Wesson; big, successful manufacturers that build most or all of their products in the US. There are also a plethora of small manufacturers.

Domestic small arms manufacturing is among the best evidence that applying some resistance to imports allows domestic manufacturing to thrive.

Re:Simple Fix

[peragrin]

So your saying because of corporate bought, non capitalist, anti-competition tariffs gun manufacturers can be competitive.

And we should reduce government regulations according to the conservatives.

Re:Simple Fix

[peragrin]

a company needs investors. The trick is Wall street isn't about investing it is a gambling addiction.

Seriously for one month make all trades last for a minimum of 1 hour. and watch the volume dry up. As Day trading bankers actually have to invest in companies instead of gambling.

Re:Simple Fix

[Anonymous Coward]

I think you'll find they are surprisingly selective about exactly which government regulations they want to reduce.

Re:Simple Fix

[Gideon Fubar]

This.

Those conservatives are so nobly sacrificing themselves for the greater efficiency. Ayn Rand would not approve of their altruism.

Re:Simple Fix

[hairyfeet]

Well that and the fact that they make products that don't suck. It doesn't really help to have "Made In America" on something if its total crap. For an example I have to LMAO at the crazy prices those that don't know any better will pay for 80s-mid 90s American Fenders when frankly unless you got custom shop they were just junk, especially their basses which weighed a ton and had lousy tone, just dead sounding. At that time frankly the Made In Korea Squires sounded a HELL of a lot better, in fact if the rumors are true Fender canceled the Squire Pro Tone series because people were buying them over MIA Fenders because the MIK Pro Tones played and sounded better. As someone who had both I have to agree, i sold the MIA and kept the Pro Tone 5 because of how nice it played and sounded, the MIA? It was like playing with dead strings, just a dull lifeless sound.

So while i agree having some protection is just common sense, i mean look at how the Chinese protect their markets, but protection won't help if the quality just isn't there. Now I'm not saying the old "Americans can't do good work" because that is bullshit spewed by the globalists, but if the company chiefs lowball everything and try to make 1 guy do the work of 4? Then quality is gonna go down, no way around that.

Re:Simple Fix

[Nidi62]

Most firearms owned in the US are actually made in the US, including foreign brands. Walther is now made by Smith and Wesson, my Sig Sauer was made in New Hampshire, Glock is made in the US. There are Federal laws that require many weapon types to be made 90% out of American-made materials or assembled in the US(this comes into effect primarily with firearms such as AK-47s). As far as I know, most of the weapons we import tend to be AK/SKS type weapons (mostly Chinese in manufacture) and brands such as Beretta(Italy), Taurus (Brazil-they actually bought the rights and machines to manufacture 92 modeled firearms) and Bersa (Argentina). But most "foreign" guns are actually American made.

Re:Simple Fix

[waltmarkers]

Most other imported finished goods have no tariffs.

Heh - you're cute. While many finished products don't have a tariff - arms aren't exactly in a small group of tariffed goods.

Harmonized Tariff Schedule of the United States
http://hts.usitc.gov/

Re:Simple Fix

[TopSpin]

I'm cute and I've probably forgotten more about the HTS and US trade than you'll ever know.

Re:Simple Fix

[pubwvj]

"a company needs investors."

Not really. That is a common mythconception. Grow slowly and borrow instead of getting investors. That means you benefit more from your innovation. There is no better place for you to invest your own money, and time, than in your own creations where you have control.

Re:Simple Fix

[icebike]

"a company needs investors."

Not really. That is a common mythconception. Grow slowly and borrow instead of getting investors. That means you benefit more from your innovation. There is no better place for you to invest your own money, and time, than in your own creations where you have control.

But you have pretty much written off "Scaling Up" when you take this approach.

It may be a better long term practice for small business that wants to remain small business, but it is not a solution to meeting demand
or or any of those other things that you typically expect when a product becomes popular and widely available. Its fine for a family business, more suited to the service industry than to manufacturing.

You also run the risk of leaving the door wide open for competitors, some of whom will be using your inventions, but none of whom you will have the money to fight, because you insist on growing slowly. It doesn't matter if you are seeking to replace the College Yearbook, and end up creating Facebook, or seeking a better PDA and end up creating the iPhone. If you don't scale quickly and massively, you will lose your market to the next guy who will go all in. Just ask Palm or Psion or My Space.

You have to scale, or forever remain a niche product. Tesla is facing this test as we speak. DeLorean failed it.

Re:Simple Fix

[cavreader]

How would you start a business, even a small one, with out using money? Do you max out your credit cards and hope your business is successful enough to payoff your credit cards? Money can be supplied upfront by the person starting the company or by soliciting investors to supply the funds. Investing does not automatically have to involve public stocks or engaging Wall Street investment brokerage houses. And every business is different. Want to start of new chip foundry? Just pony up approximately $50 million just to get started. Want to start a business that requires more than 2 workers to get started and you will need the money to pay them.

According to some people there should be no one controlling anything. Anyone employing strategies like confidential trade secrets, patents , and copyrights to control their work are deemed enemies of the alternative state.

Re:Simple Fix

[flyneye]

Think bonsai.
Its about the guys who specialize, who can get a nice product line going on their own. When it hits,you have some nice money yourself from your product and you outsource production to production to your specs. I give you T.V. Jones http://www.tvjones.com/ . A guy whose passion led to a sweet product, site sales, bulk sales for industry, celebrity endorsement,and a lifestyle that reflects his passion. This guy has been interesting to watch and operates in a fast paced stylized group of people known for their hedonistic excesses, Musicians.
Just the businessman I admire for the moment. I have others, but this keeps my reply short and will make my point.
Bonsai.
Small shop, a few employees.

Same thing that works for software houses, works for hardware houses.
But there's less piracy ; )

Re:Simple Fix

[g1powermac]

As a business owner myself, I do agree with this, to a point. There are times, especially if you are a manufacturer, that you desperately need capital to just keep up with the ever growing orders. And if you ever get decent publicity, you could be screwed very quickly as you won't have nearly enough inventory to supply the massive increase of demand. And when that happens, a couple of things can occur. One would be that because you can't supply demand, a hole has opened up ready for a competitor to take over. Or, maybe worse, people lose interest in the whole concept of the product because they just can't purchase it. The other problem comes when you throw all the money you have at making more only to find out that still isn't enough. But, you're so strapped up in debt that you literally now must produce more to pay the debt, but you can't because you ran out of money to make more. You end up forcing yourself to go bankrupt even though you have lots of sales.

However, this all hinges on one very major assumption: that the product being sold has the potential of being widely popular where you could easily see exponential growth with just a little marketing, whether expected or not. A true niche product probably has very little possibility of going mainstream and so it can grow at a much slower rate and at possibly higher margins. Just take a look at niche software products like Adobe's stuff or any point of sale system. The prices are high, and especially for the point of sale stuff, not that complicated in features. Like what my one computer science professor always said, the money is in the niche software, and this goes for all markets as long as its a true niche serving a real need. Stuff that isn't widely known but serves a general need is not a niche, it is just starting out.

Re:Simple Fix

[demonlapin]

Yes, but what I was responding to was

we're not allowed to import foreign made guns for sale

which is, as you pointed out, false. I had Beretta and Taurus in mind. Didn't think about Bersa.

Re:Simple Fix

[patfla]

> can't be made in/sold to/bought from other countries

That's what the Economic Complexity Index is about:

http://en.wikipedia.org/wiki/Economic_complexity_index

Re:Simple Fix

[icebike]

You sort of missed the part about losing your entire market because you refuse to grow.

Re:Simple Fix

[davester666]

Borrow? Are you serious?

The rule truly is "You can have a loan if you can prove you don't need it."

Re:Simple Fix

[davester666]

and you have 200% collateral.

Re:Simple Fix

[Grishnakh]

Don't forget Springfield's XD line of pistols, made by HS Produkt in Croatia. Also the CZ pistols made in Czech Republic.

There's lots of guns imported into the US. There's no Federal laws requiring guns to be made in the US, or else those and all the brands you listed would not be sold here, yet they are. You're probably thinking of US Military requirements, which do indeed require guns to be mostly made here when the US Military makes a contract with a gunmaker. That's what happened to the Beretta M9 pistol: the Italian-made models worked well enough in testing, but when they started building them here, they screwed it up somehow and the American-made models issued to servicemen were total crap and had a ton of problems. They eventually got it sorted out, but not before the debacle earned M9s and Berettas a terrible reputation in America.

Re:Simple Fix

[frank_adrian314159]

Americans love American made guns.

Well, to be honest, we love Chinese-made guns, too. Or guns made anywhere else for that matter. We need them to defend our freedoms against marauding big government. God bless America.

Re:Simple Fix

[tlhIngan]

Just take a look at niche software products like Adobe's stuff or any point of sale system. The prices are high, and especially for the point of sale stuff, not that complicated in features.

POS is extremely complex. The actual adding up of costs isn't, but when calculating taxes, it's HORRENDOUSLY COMPLEX. Most stores will sell a mix of stuff that is taxed, and isn't taxed. And some places have stuff that have several taxes, fees, levies, to be applied as well.

For a small business, the register is usually programmed with several buttons to cover the tax cases (no tax, full tax, partial tax). But if you have a POS system, it's usually tied in with inventory so scanning it can retrieve the inventory record to determine what taxes it needs to apply, what fees/levies are required to be added separately, etc.

Then it's all tied in with a reporting system so you can do your business taxes and report how much tax you've collected in sales and such.

And if your store has internet sales, things get more complex still.

There is no POS software. It's a POS service product you're really buying because it's continually updated. The basic part is easy. The business logic is constantly in flux.

Re:Simple Fix

[CanHasDIY]

How would you start a business, even a small one, with out using money? Do you max out your credit cards and hope your business is successful enough to payoff your credit cards?

Hey, it worked for Kevin Smith!

Re:Simple Fix

[HornWumpus]

Most protected industries are incapable of exporting.

The US exports tons of guns. It's a service we do the globe.

We also 'export' tons of bombs.

Re:Simple Fix

[HornWumpus]

Bankers love booked orders. If you have booked orders you can get a loan.

The question is executing when you have to wait for booked orders before you can start to scale. Also not overscaling when the market _will_ fizzle quick and everybody knows it.

Re:Simple Fix

[volmtech]

To bad Bill Gates didn't take your advice.

Very light on content

[Gr8Apes]

RTFA, and am still left with a host of questions. The linked article is about as informative as the summary (unusual, how'd that happen?) and as bereft of any real information. The core issue though, the lack of an American manufacturing base for consumer goods, should worry everyone. I mean, dog food made in China? Why?

Re:Very light on content

[sycodon]

I'm betting it all comes down to government regulatory barriers. Financial, zoning, environmental, etc. And to be clear, the barrier will be costs, not refusals, like that idiot in Chicago that used his power to threaten Chick-fil-a.

Re:Very light on content

[Tablizer]

I mean, dog food made in China? Why?

Uh, I think you mistranslated food made FROM dogs into food made FOR dogs.

Re:Very light on content

[LordLimecat]

You do realize that the US still leads in manufacturing right? (as of 2009)
http://www.cbsnews.com/8301-505123_162-36742134/manufacturing-surprise58-the-us-still-leads-in-making-things/

Its possible that China has passed us in the 4 years since that graph, but being #2 in the world and only slightly behind a country 4 times our size is hardly a "serious problem", particularly when we dwarf the next closest competitors.

Re:Very light on content

[Anonymous Coward]

It is a problem as long as people think it is. The big problem is that people want to make jobs, and the backbone of the US used to be manufacturing goods. Now that citizens need jobs and a lot of them, it is easy to push for more manufacturing. Some of the jobs are very technical and the skill level goes down to uneducated levels, so it hits a wide spectrum of skills.

Personally, I do think that handmade goods or even goods made in the US are typically made to a higher standard (more durable, better components, etc), but the group think of citizens is to buy a lot and throw things out when they are still useful. This idea needs to change if higher quality manufacturing is to make a strong come back.

The US should look into future technology manufacturing that can be done in a large amount with easy to get components. If the US could make energy cells without rare-earth minerals (I consider them a liability) and export them (charged with renewable energies), there could be a market at least in Europe. Reliable, portable, and cleanly made high power energy cells will be required not only here but also for space technologies.

At the very least, the US is the best at aerospace technology. We should emphasize that more and get resources beyond that of other nations (asteroids as an example). First to claim gets the rights, if other nations complain, tell them to get up there too themselves.

Re:Very light on content

[Imrik]

Note that the article you linked also shows that manufacturing in the US is declining. Existing businesses are continuing to make the goods they've always made, with some variation, but little is going on in the way of new production.

Re:Very light on content

[Gr8Apes]

Only because we include buildings, airplanes, and cars. Remove those, and we have next to 0 in manufacturing.

For instance, where do your clothes come from? Shoes? Wallet? Toys? Components in your cars, if not the cars themselves? Electronics? CDs, DVDs, and BDs? Rubber Balls?

If that (incomplete) list doesn't get you thinking, nothing else I say will start that process. Essentially almost everything we use daily, including some food, comes from outside the country. That is a REAL problem. If you don't think it is, then you are part of the problem.

Manufacturing

[phantomfive]

The US produces something like 18% of the world's GDP. It's silly to say the US can't manufacture things. There are problems with labor-intensive manufacturing, but manufacturing overall is still something that's done in the US.

But that is not even the point of the study. If you read the article, it mentions that at least some of the companies stayed in the US to do manufacturing (the article doesn't give numbers, it says "often they moved out of the US for manufacturing"). The problem they had was they couldn't find investors in the US. They had to find foreign investors. Sometimes they found foreign investors and managed to stay in the US for manufacturing, but there is the assumption that foreign investors encouraged manufacturing out of the US as well. THAT is what this study is about, not a poorly-informed speculation on the decline of US manufacturing.

Re:Manufacturing

[sycodon]

Don't forget that investors look at more than just the product and the market. The look at the regulatory environment too because that can derail an otherwise profitable venture.

Re:Manufacturing

[Tablizer]

The US produces something like 18% of the world's GDP. It's silly to say the US can't manufacture things.

The US's Comparative Advantage is BS. BS bubbles, BS accounting, BS wars, BS political campaigns, and BS marketing. We get world investors to buy into fads, bubbles, ponzi's, and scams like no other country.

We don't need to make anything real when we have mastered fakery. Doing real things if for newbie countries.

Re:Manufacturing

[CanHasDIY]

Don't forget that investors look at more than just the product and the market. The look at the regulatory environment too because that can derail an otherwise profitable venture.

Yea, how dare those bastards make clean air and water for everyone priorities over profits for the select few!

Re:Manufacturing

[LordLucless]

Yea, how dare those bastards make clean air and water for everyone priorities over profits for the select few!

Because our pure-hearted regulators only ever do what's best for everyone, and never use their authority to line their own pockets, or stifle their friends' competitors.

Re:Manufacturing

[Anonymous Coward]

Manufacturing doesn't involve only making goods, cheap or expensive, it's also about training, maintaining and paying a workforce.

Make it easier for companies to make those train those workforces and actually hold on to them by removing some of those stupid laws that make the term "wage-slave" a reality, and things will change by themselves.

Re:Manufacturing

[CanHasDIY]

Yea, how dare those bastards make clean air and water for everyone priorities over profits for the select few!

Because our pure-hearted regulators only ever do what's best for everyone, and never use their authority to line their own pockets, or stifle their friends' competitors.

Yea, you've got me there.

Re:Manufacturing

[Anonymous Coward]

And I always thought a Bachelors of Science was a good thing :( too bad it's all a sham.

Re:Manufacturing

[phantomfive]

That's one of the more babbly posts I've seen on slashdot. Keep it up and one day you'll outdo the timecube guy.

Re:Manufacturing

[jrumney]

The number one foreign investor for bankrolling large scale manufacturing startup is the Chinese Government, conditional on moving manufacturing to China. And the costs are huge, so investment options are limited; a startup has no credit record, so they need to pay suppliers up front, and as the product is unproven, distributors won't pay until the product has left the retail shelves.

Re:Manufacturing

[wiredlogic]

The other side of the coin is that there is an entire industry of design and manufacturing service providers intended to help local entrepreneurs negotiate the challenges of shifting to offshore production. Nothing like that exists on such a scale for incubating domestic production.

Re:Manufacturing

[cavreader]

Well apparently BS is all that is needed to make other countries look second rate hacks. It's puzzling how Americans can be so stupid, fat, provincial, and linguistically challenged but still lead the world in GDP, manufacturing output, agricultural exports, world famous Universities and Colleges, and of course military power. What does that say about the second placers? Maybe they spend to much time evaluating US shortcomings and need to concentrate on their own well being.

Re:Manufacturing

[Bobrm2k3]

That graph is very misleading. I just put the inferred numbers into a spreadsheet and if you adjust for inflation you will find it increases into the early 90's and then begins to decline.

Re:Manufacturing

[phantomfive]

True, good point, I should have been more careful in the graph I selected. Here's a better graph. I was mainly trying to show that US manufacturing hasn't been destroyed, and is still doing things.

Re:Manufacturing

[The Master Control P]

It's our fault the Chinese government permits corporations to poison their people, because Americans insist that our government not permit corporations to poison us?

I find your reasoning... flawed.

Re:Manufacturing

[BlueStrat]

Yea, how dare those bastards make clean air and water for everyone priorities over profits for the select few!

Because our pure-hearted regulators only ever do what's best for everyone, and never use their authority to line their own pockets, or stifle their friends' competitors.

And they most certainly would never, ever use regulations to erect barriers-to-entry to small startups entering a market like automobile manufacturing (the 1948 Tucker Torpedo comes to mind) for the last 6 decades and more, nor remove choices from the public (TV/internet/telecom). /sarc

Strat

Re:Manufacturing

[AnonyMouseCowWard]

It's not your fault, not directly.

The western world had its industrial revolution more than a hundred years ago. It polluted its own rivers, its own cities, and had adults and children alike working in terrible conditions. Slowly but surely, its population realized this was not sustainable, that the costs were too great, and instigated changes such as environmental controls, laws on working conditions, etc. Businesses and factories had to adapt to the changing conditions and the lack of close-to-slave labour, but the price was worth paying.

Fast-forward to the future, and with the advent of new technologies and speedier communication methods and transports, we live in a globalized world. It is now possible to manufacture goods in another country than yours at a lower cost. These countries have just started their industrial revolution, do not know better or are dealing with a very accelerated developmental process and its growing pains, while usually having the short end of the stick due to an imbalance in power in global politics. Capitalists everywhere jump at the opportunity to maximize their profits, but at the same time, they also offer cheaper goods to their customers. Everyone wins.

Everyone wins? No, everyone wins here, in the western world. You and I enjoy products (of varying quality, I must admit) that are cheaper than if they were produced here. Consumers rejoice, and send a clear message: keep it coming, that's what we want. We are happy to maintain a high quality of life, in a a safe and healthy environment. Someone, somewhere though is paying the price, and that is the workers in south-east Asia or elsewhere, who die in their cancer villages. Is it your fault, my fault, our fault? Not directly. I sure as hell don't control environmental politics in China. I also am not responsible for managing the development of a country of a billion people. I do however have the choice of buying products that were made by companies respectful of the environment and its employees. Slashdot likes to decry the conditions of the Foxconn workers, and the western world pointing fingers at it and sending that message to Apple makes them care just a tad bit more, but somehow when the environment is concerned, it's their own goddamn problem? A lot of the pollution problems in developing countries is incurred because they are developing, because of _us_ caring only about a cheaper price and results and not one iota about their conditions. We're not willing to pay for them to have environmental regulations.

The Chinese industrial revolution is barely 30 years old, and they haven't yet learned to stand up for themselves. They're starting though, slowly. Give them time, give them the hundred years the western world had. We'll see then. Meanwhile, enjoy your cheap stuff and keep blaming them for the world's environmental problems.

PS: This post is not against _you_ in particular. I'm just trying to argue that fault is not very clear-cut, but I do think that part of it is ours.

Re:Manufacturing

[HornWumpus]

The Tucker? I never did understand how he expected to make a profit selling cars with fucking airplane engines in them.

Sure they have great power and are light, they also cost a fucking fortune. Assume he could have produced them at half cost as he didn't need any FAA paper. He still couldn't have made money.

That said I'd love to put an over-hour airplane engine in my Fiat 850 sport. Perhaps a helicopter turbine.

Re:Manufacturing

[BlueStrat]

The Tucker? I never did understand how he expected to make a profit selling cars with fucking airplane engines in them.

Sure they have great power and are light, they also cost a fucking fortune. Assume he could have produced them at half cost as he didn't need any FAA paper. He still couldn't have made money.

That said I'd love to put an over-hour airplane engine in my Fiat 850 sport. Perhaps a helicopter turbine.

Well Tucker liked the engine so much, he bought the company. That helped. BTW, the engine was meant for the Bell 47 (the helo that was featured as a med-evac chopper in the TV show M*A*S*H).

Tucker was also going to buy TWO steel plants to supply his car factory and the engine factory to further reduce costs, but the government (at the behest of competing car makers) blocked the acquisition of the steel plants.

Strat

Re:Manufacturing

[HornWumpus]

Airplane engines aren't expensive because they're cheap to make.

Also features like updraft carbs make them shitty car engines from a maintenance standpoint. Fixing that requires changing the heads.

Re:Manufacturing

[BlueStrat]

Airplane engines aren't expensive because they're cheap to make.

Also features like updraft carbs make them shitty car engines from a maintenance standpoint. Fixing that requires changing the heads.

Aircraft engines are more expensive than comparable automobile engines because they must pass numerous certifications and comply with strict regulations in both the design as well as the manufacturing process. Every single step must be documented and referenced back to an FAA-approved procedure for that particular engine documented in an approved manual, thoroughly inspected/tested, and signed-off on by an FAA inspector.

The engine Tucker chose used fuel injection, not carburation. Wikipedia has some information regarding the auto, engine, and Tucker's story. There are also websites that go into more detailed accounts of Tucker, the Tornado, and the history & politics behind his destroyed car company.

Strat

Re:Manufacturing

[HornWumpus]

Doesn't matter if the fuel injection is under the motor, as it is in all airplane engines I'm familiar with. You've still got the intake under the motor, basically right on the ground in a car. Maintenance nightmare.

Besides the FAA paper, airplane engines are also made to a higher standard. Redundant ignition and charging systems, better metal, forged parts vs cast, exotic metals used for weight savings etc. Granting he could have redesigned some of these features out. Also note: airplane engines are designed to run at relatively steady RPM and to be rebuilt after relatively few hours.

Also also note: The mechanical fuel injection of the day sucked balls. That alone added large costs. The fuel pump on my kid bothers 911 costs $6000 for a rebuild.

Finally Tucker has been mythologized. It's hard to determine the whole truth of the matter through all the BS. Planning on buying your own steel mill before you have your car company running is a scammers distraction. Doubling down on a bluff perhaps.

Summary is misleading as usual

[Anonymous Coward]

It's a matter of financing, not manufacturing capability. You should have worded it differently in the summary.

So what if they had the "MIT name behind them" (or any of those other overpriced big-name schools like Stanford or Harvard for that matter). Did they even consider that maybe their business plan and/or product sucked ass and investors here in the US knew better than to spend money on it?

Re:Summary is misleading as usual

[mbkennel]

If the business plan or product really sucked then they would have folded, not gone overseas.

Financiers have strong cultural prejudices against US manufacturing because of their political outlook.

Re:Summary is misleading as usual

[nitehawk214]

Yeah, it is harder to abuse american workers in seeking profit.

where are they!!!?

[Anonymous Coward]

Where are all the Job Creators!! I hear so much about the favorable treatment they deserve.

Re:where are they!!!?

[Tablizer]

Where are all the Job Creators!! I hear so much about the favorable treatment they deserve.

Indeed. I just kicked a dude in the face. I helped create a job for both a surgeon and an orthodontist. It feels so good to be a job creator.

Re:where are they!!!?

[WindBourne]

They are taking their money to China and working with the communist.

Re:where are they!!!?

[bunkymag]

And a lawyer. For shame.

Re:where are they!!!?

[DriedClexler]

If the government gave me a ton of free money, I could *totally* create jobs too, by going on a spending binge. Why doesn't anyone ever consider that solution?

Why doesn't anyone consider how fortunate the economy would be to give me free stuff?

Re:where are they!!!?

[delt0r]

They do consider it and do it all the time. Its just not you who gets that money.

Re:where are they!!!?

[StormReaver]

I helped create a job for both a surgeon and an orthodontist.

And a cop, a lawyer, a bailiff, a judge, a tax assessor, a tax collector (to pay the cop, lawyer, bailiff, and judge), and the many people to whom they pay minimum wage.

You, sir, are providing for the American nightma...err..dream.

Re:where are they!!!?

[Wolfrider]

--Slippery Jim DiGriz, is that you?? :b

Not Enough Information

[the eric conspiracy]

The US does very well with big ticket items or things that can be scaled by automation. The world's largest manufacturing facility is Boeing's main assembly building in Everett WA.

Where it gets dicey is when it can't be automated and a lot of manual labor is needed. Like assembling stuff like iPhones. Then the wage difference really bites.

The MIT story didn't give much detail but I bet a lot of these startups were making little gizmos like the iPhone.

Re:Not Enough Information

[K. S. Kyosuke]

Where it gets dicey is when it can't be automated and a lot of manual labor is needed.

Actually, the word "manufacturing" etymologically-wise, means precisely that: "manu facere", to make by hand. Perhaps a different neologism like "robofacturing" ought to be used instead?

Re:Not Enough Information

[Anonymous Coward]

The issue is a lot of those gizmos end up having to go overseas anyway:

1: Most electronics are from Chinese factories. It saves money if the device is just made there and shipped as a complete item.

2: If a company does business in China, China by their laws has to own 51% of whatever arm of that company is on their soil. So, of course, there is pressure to make stuff there.

3: There are the large subsidies and US tax breaks to offshoring so a US firm is a lot better off having the US presence be as small as possible.

Re:Not Enough Information

[WindBourne]

Actually, nearly ALL things can and should be made by robotics. And yes, that includes iphone. That is what they are working on right now, over in China.

Re:Not Enough Information

[Darinbob]

Many things that are manufactured do not need to be scaled to mass production. However the US has some of the best electronics manufacturers for smaller runs, with much faster turn around than the big scale foreign manufacturers who only do runs of 15,000 units or higher. Even if a company manufactures some products overseas there is still a need for smaller manufacturing for the same company, or even the same product (ie, prototypes).

Re:Not Enough Information

[Darinbob]

For a mass produced item like iphone this is true. But there are some items that will only have 1000 of them made, ever. Or after the first 1000 they want a tweak for the next 1000, and so forth. Maybe the circuit boards can be automated but much of the process will still involve manual labor (inspecting the cut boards, modifying the manufacturing equipment, building a bed of nails tester, etc. There is also a large amount of interaction between the manufacturer and the designer and having the two companies close together is a big time saver.

Re:Not Enough Information

[AK Marc]

The labor is a small portion of the iPhone cost. Regulations are most of the cost difference between US and China manufacturing costs. That, and even if the costs were the same, Apple would still make them in China because it's the only place currently in the world where you can place an order for 10,000,000 widgets and get them on time and at the agreed price. In the US they just laugh at you, other places may take your money, but you won't get 10,000,000 widgets on time.

Re:Not Enough Information

[HornWumpus]

It's not that robots can't do one offs or short runs.

It's that the setup costs kill the deal. People are versatile. As with most things, it's a balance.

Re:What does it matter?

[CncRobot]

You will either own a robot, maintain a robot, program a robot, ask "would you like fries with that" or be unemployed.

Industrial robots are becoming much cheaper and easier to use. Within a decade I suspect everyone will know someone on their block with one, either a small CNC router or 3D printer. Pick and place robots to make complicated circuit boards are replacing old school line workers who could solder like they had a master's degree in it.

Re:What does it matter?

[Qzukk]

yet it will employ nobody except a couple of engineers to watch over the plants.

Why would they do that? When it catches fire and burns to the ground, they'll just file an insurance claim.

Re:What does it matter?

[LordLimecat]

Somehow the advent of the car didnt result in massive unemployment because of all of the laid-off buggy drivers, and construction equipment didnt result in massive unemployment due to no-longer-needed ditch diggers.

Technology advances, old problems are solved, and new ones are found. Lets not go full-scale luddite here.

Re:The Problem: They're in Massachussets

[Tablizer]

Explain the success of Germany then?

American investors uninterested in manufacturing

[erice]

That is what TFA is really saying, not that America can not manufacture. That jives with my own experience. The US investment community is addicted to quick turn Internet services that can turn around in a matter of months. Startups that actually need to produce physical products are starving because investors don't want to put their money into projects that take millions of dollars and several years to break even.

What is interesting is that they are foreign investors willing to fund manufacturing. Some are even willing to manufacture in the US. So it is a US investor psychology problem not a global one.

The real issues

[WindBourne]

is that AMerica was a powerhouse. In addition, we had a LARGE R&D fund by the feds. However, starting with reagan, and being pushed with just about every president since then, we have quit investing into America. In particular, one area that is insane is that we have all of these free trade agreements, where it says that nations are not allowed to dump, subsidize, or manipulate their money. Yet, China is the worst one, and to this day continues to get worse with manipulating their money, dumping and subsidizing.

Until American politicians stand up and balance the budget AND then tell China (and others) that we will no longer allow them to cheat on the FTA, then we will continue our downhill slide.

Re:The real issues

[Crosshair84]

That's a myth. Historically, countries that have had very little public funding of science have outpaced countries that do. For every dollar the government spends on science, it displaces about $1.25 in private science funding.

The Myth of Science as a Public Good (by Terence Kealey)
http://www.youtube.com/watch?v=C_PVI6V6o-4

Re:The real issues

[spiralx]

I've read a book by that guy and agree with his premise, but it does focus on the technological side of science rather than pure research, stuff that may or may not have any practical use directly.

Manufacturing in the US *is* hard

[Silicon_Knight]

I'm a small business owner (I created OpenBeam: http://www.kickstarter.com/projects/ttstam/openbeam-an-open-source-miniature-construction-sys). It is basically a small, nice version of an erector set, that is currently being used for building 3D printers. (See: http://reprap.org/wiki/Kossel).

US manufacturing is *hard*, for sure, for small businesses. In fact, the system is set up so that I'm better off shipping jobs overseas.

We buy our extrusions from a small mill in California, a family owned business. Our first batch was great. We made a small engineering change on the next batch and ordered the extrusions in October of 2012. We received the parts in early December, and the black anodizing was crap - it literally looks like it's been dive bombed by seagulls with diarrhea. We shipped back 700 of 2000 pieces for rework, and we still have not received it back. Meanwhile, I'm out of stock, I have thousands of dollars of backorders that I can't fill, and I still have no idea when I'll get replacement stock back in. And to make things worse, when we complained initially about the quality of the parts, the answer we got was literally "you're small potatoes, we don't have time for you"

Meanwhile half way across the globe, my injection molder (http://blog.openbeamusa.com/2012/05/18/behind-the-scenes-injection-molding/) is churning out parts, 50,000 at a time. He always delivers when he says he'll deliver. With UPS and Expeditors I can get goods landed on my doorstep anywhere from 48 hours to less than 3 weeks for ocean freight shipping. It costed me $1000 to ocean freight half a metric *ton* of parts, and it'll be here in 3 weeks. The reason for going overseas for injection molding is simple: The material we use is a high end glass-reinforced nylon and the only shops the US that can handle it are military and aerospace molders and they demand an incredible premium.

On top of all this, I currently import a bunch of motors, pulleys, bearings for my 3D printer kits, US customs requires that I file an individual HTS classification for each line item, and taxes me individually. I then pay my old coworker's kid $20/hr, which is a princely sum for a 14 year old girl, to do my packaging and kitting. However, If I paid some guys overseas $10.00 a day to do the same job, I can declare my imported goods as "construction toy set" and avoid paying import taxes all-together. Therefore, there are absolutely NO incentives for me to keep the packaging job in the US, except for the short flexibility between an engineering change and getting the change pushed through on the line.

When it comes to export, I'm equally screwed. Until I signed up with Expeditors, there was no easy way for me to export my shipment around the world. So while I have customers in the UK, EU, and NZ/AU areas, for the longest time I had to resort to USPS Priority mail to ship them stuff, and priority mail rates just went up. Surface parcel service was discontinued a few years ago during budget cuts, so unless you are a bonded importer / exporter, you really have no option of doing a low cost export. Meanwhile, I paid US$20.00 for a batch of parts for 2 day shipping for a crate of timing belt pulleys from Shanghai to Hong Kong. There are so many Chinese logistics company these days that shipping is incredibly cheap to move things around in China.

People don't realize that the world is getting a lot smaller these days. The other day a vendor returned an email quotation - 5 weeks after initial RFQ. I had already paid someone else and landed parts in that amount of time. A supply chain is only as strong as its weakest link and it seems like for small businesses there are just no good options for manufacturing.

-=- Terence

Re:Manufacturing in the US *is* hard

[DigiShaman]

And this is why we need a simplified tax code. All our problems with running a business these days is all the red tape of excessive rules and regulations. I'm not suggesting getting rid of some minor regulations, but damn our nation has its hands tied.

Re:Manufacturing in the US *is* hard

[Lehk228]

so you have to pay duties on imported parts for manufacturing, but finished products for sale you don't?

that's the most backwards stupid shit i have ever heard in my life. penalize companies making stuff here and reward companies doing all of their manufacturing overseas.

Re:Manufacturing in the US *is* hard

[phantomfive]

A supply chain is only as strong as its weakest link

Interesting insight.

Re:Manufacturing in the US *is* hard

[TopSpin]

I file an individual HTS classification for each line item

The HTS is a fascinating bit of work. For people that don't know, the Harmonized Tariff Schedule is a US government published document that classifies just about every conceivable good and assigns tariffs, duties, etc. It is huge and is now only published in electronic form.

As the parent wrote, most finished goods in the HTS are 0% tariff. There are many things in the HTS with tariffs, but if it's a finished good it is usually exempt from any cost whatsoever. Some exceptions include small arms and autos; the UAW negotiated a 25% domestic value-add requirement in the '80s if foreign manufacturers wish to avoid tariffs. That one requirement is the sole reason that all auto manufacturing hasn't evacuated the US. Today there are dozens of foreign owned auto plants in the southern US writing paychecks to thousands of US workers because of that law.

No other nation is as import friendly as the US. Unless your nation has imams and muftis actively operating uranium isotope centrifuges in a bunker somewhere then you too can export to the US tariff free. You can wreck the environment to whatever degree you wish, abuse, neglect or contaminate however many people you want and it won't even slow down your goods as they get whisked into the US.

That's what domestic manufacturers and the US working class have to compete with for 80% of all finished goods in the US.

Re:Manufacturing in the US *is* hard

[Anonymous Coward]

How is a simplified tax code in one country going to unify tariffs and import/export fees throughout the entire world?

Re:Manufacturing in the US *is* hard

[characterZer0]

You should look into setting up a Foreign Trade Zone. That would let you bring stuff in without paying duty, do the assembly and kitting locally, and then paying duty on the finished product instead of what you imported.

Re:Manufacturing in the US *is* hard

[Anonymous Coward]

>No other nation is as import friendly as the US.
So are all the countries on that list. http://en.wikipedia.org/wiki/List_of_free_ports
U.S. is NOT even in the list, so you figure out how "friendly" it is.

http://www.doingbusiness.org/rankings
http://en.wikipedia.org/wiki/Ease_of_doing_business_index
#1: Singapore
#2: Hong Kong
#3: New Zealand
#4: U.S.

You'll find that U.S. is not near the top, but not the #1 choice.

Re:Manufacturing in the US *is* hard

[Anonymous Coward]

"On top of all this, I currently import a bunch of motors, pulleys, bearings for my 3D printer kits, US customs requires that I file an individual HTS classification for each line item, and taxes me individually. I then pay my old coworker's kid $20/hr, which is a princely sum for a 14 year old girl, to do my packaging and kitting. However, If I paid some guys overseas $10.00 a day to do the same job, I can declare my imported goods as "construction toy set" and avoid paying import taxes all-together. Therefore, there are absolutely NO incentives for me to keep the packaging job in the US, except for the short flexibility between an engineering change and getting the change pushed through on the line."

Very interresting insigt.
Honestly i agree that the laws about this should be changed, but i have to bring up a BIG issue about this:
With globalisation it has become much easier to make products in low wage countries and then sell them in hihgh wage countries. your example is yet another proof of this.
The problem arrises when too many companies, like today, who create stuff in low wage countries expect to sell them in high wage countries. In the end we end up with no buyers in high wage countries as too much of the production have moved overseas and then what? People in the low wage countries probably cant afford to buy the stuff with a wage of 10$ og less and hour and noone in the high wage countries cant afford it because they have lost their jobs to the the low wage countries. Doesnt we end up with a system where worldwide demand will plummet, and by that company profit and living standard across the board?

Re:Manufacturing in the US *is* hard

[thoth]

Thanks for the detailed post! Really interesting to read about the various issues from somebody battling it out in the trenches, so to speak.

Re:Manufacturing in the US *is* hard

[hackertourist]

You know, posts like this are why I keep coming to /..
I'd have never come across OpenBeam otherwise, and it looks like a perfect fit for some projects I'm working on.

Re:The Problem: They're in Massachussets

[WindBourne]

Not just Germany, but nearly the entire rest of the western world. Canada and Australia are good example.

I'm that guy on my block

[Leuf]

I think you have no idea what a cnc router can actually do. It's not a black box where you put wood in and a bureau comes out the other end. You aren't going to 3d print a bureau either. A low end cnc is actually crap for production work. It simply doesn't have the rigidity or capacity to replace the other tools in my shop by any stretch of the imagination. And the parts that come out of it still require a great deal of further work just to get to a part which is still a long way from a completely assembled piece of furniture. It's just another tool where there are many other specialized tools that beat the pants off of it for a great deal of operations.

Re:I'm that guy on my block

[CncRobot]

Yea, with a username of CncRobot its probably a good guess I would have no idea what a CNC Router could do.

Re:I'm that guy on my block

[Leuf]

Heh, minor oversight. In that case you probably know what a really good cnc can do, but maybe not what a cheap one can do. Let's just pretend I meant "you" in a more general sense.

Vertical Integration

[pubwvj]

The trick is vertical in-house integration. That is what our family has done with our businesses. The more we do in-house the more control we have the lower the costs and the more money stays in our pocket. This gives us better resilience for surviving and even thriving through economic downturns. Own the tools of manufacturing as much as possible.

Re:Vertical Integration

[Areyoukiddingme]

Bingo. Works for you, works for SpaceX, works for a few others. Vertical integration is almost a necessity for a US manufacturing business, just because of all the silliness described in detail by Silicon_Knight/Terrence.

Re:American investors uninterested in manufacturin

[radtea]

Startups that actually need to produce physical products are starving because investors don't want to put their money into projects that take millions of dollars and several years to break even.

If it ever does (break even). Scaling up is an incredibly high-risk business, because some things just don't scale.

In Canada we recently opened a national chemical engineering facility (http://www.greencentrecanada.com/) that is specifically aimed at helping researchers scale chemical processes that work at lab-scale (grams) to industrial scale (kilograms to tonnes). There are plenty of things that just don't work outside of the lab, and new processes in particular are often invented by experts who are the only people in the world who can make them work successfully.

The skills required for scaling up are very different from those required for discovery, and having something like this were there is a specific group of experts in scaling up is a godsend to university spin-off businesses, and adds a level of reassurance to investors that simply couldn't exist otherwise.

Re:The Problem: They're in Massachussets

[benjfowler]

Political crap.

Europe is an engineering and manufacturing powerhouse. They've got unions coming out of their asses.

back that up a second

[slashmydots]

What the hell is all this crap I keep hearing about "investors?" Have they ever heard of a long or a bank? My company's credit SUCKS and we just financed $150,000 worth of equipment from Wells Fargo and another $30,000 from GE Capital. Either you have actual investors as in stock holders and then the money you need is just there (in theory) or you're private and then just get a loan. That's what banks do, they give loans. If you're going after some venture capitalist, it's because your idea sucked and your company has no history. But no, this article is about scaling up. If you've been solid for 5+ years and now you're doing so good you need to expand, what exactly is stopping a bank from giving you a loan? Either your business isn't as stable as you think, you're going too big too fast, or you're not actually all that profitable. Normal, good businesses get approved for loans in the millions for expansions.

Re:back that up a second

[DerekLyons]

That's what banks do, they give loans. If you're going after some venture capitalist, it's because your idea sucked and your company has no history.

Sure - if you have collateral. (That's why your company with sucky credit was able to finance the purchase of equipment.) But businesses in the growth phase need money for a whole host of things that can't be collateral... operating capital so you can move to bigger premises and hire more people, raw materials, medium and long term cash infusions to keep the paychecks from bouncing while you bring the product to market... etc... etc... Banks won't loan money in those instances because, well, they're in the loan business not the investment business. Two different sources of cash and capital for two very different reasons.

Soooo, you're saying...

[arfonrg]

Soooo, you're saying that companies are having a hard time setting up manufacturing operations inside a country that is very hostile to domestic companies, domestic manufacturing, and encourages moving jobs overseas with things like "most favored trading partners" and "free trade treaties"!?!?!

NO WAY!!!

Americans make war

[Mister Liberty]

That's what they're good at.
Export it a lot too.

--
  There's no programming around corruption

Hit a wall alright

[Trogre]

A Great Wall, one might say.

DISCLAIMER: In keeping with Slashdot tradition, I didn't actually read the article.

Re:The Problem: They're in Massachussets

[arfonrg]

"Germany (much like Spain) had a chronic unemployment problem, a result of a labor market that was too highly regulated and offered too much protection for workers. German policymakers began to change the system back in 2003 with a series of measures that made the labor market more flexible and encouraged greater participation in the workforce."
TRANSLATION: They weakened the unions....

"Germany is making BMWs, not Chevys. If you’re making a BMW and charging so much for it, you can manufacture in a high-cost environment and still make a nifty profit. If you’re making a Chevy, which to a greater degree competes on price and doesn’t have a strong brand reputation"
TRANSLATION: They manufacture high-profit margin stuff.

"German management also just seems more determined to find ways of staying profitable while still manufacturing in Germany. The chairman of power-tool maker Stihl, Bertram Kandziora, told me that U.S. companies “don’t try hard enough to keep production inside the country.”"
TRANSLATION: Germans try NOT to reward offshoring.

Read more: http://business.time.com/2011/02/25/does-germany-know-the-secret-to-creating-jobs/

I wish I had mod points...

[arfonrg]

I'd mod you up big time...

Re:The Problem: They're in Massachussets

[AK Marc]

Nobody uses the term in the original meaning anymore. You do realize that the page you linked to classifies Finland and Sweden as 3rd world, and Iran as 1st world, right?

Re:Why?

[Anonymous Coward]

But despite the headline number, the statutory rate only tells part of the story.

Loopholes and other special treatment for different kinds of businesses mean that businesses pay an effective rate of only 29.2% of their income, which puts the United States below the average of 31.9% among other major economies, according to analysis by the Treasury Department.

FROM YOUR SOURCE!
The effective rate is below average by almost 3%.

Extrapolation

[wakeboarder]

So, we are going to take one instance and extrapolate it to the rest of the USofA, sounds logical to me.

Re:What does it matter?

[icebike]

In ten years, everybody in manufacturing is going to be fired because everything will be done with machines. Then the manufacturing will be located everywhere to get around tariffs, yet it will employ nobody except a couple of engineers to watch over the plants.

Thats been predicted for decades. Granted, there aren't many cobblers in the world any more. But there are far more people involved in shoe manufacture these days than ever before. Lots of them make shoe making machines.

Re:The Problem: They're in Massachussets

[Anonymous Coward]

Germans were also willing to work shorter hours during ties of economic recession rather than be laid off entirely. I don't think America would even contemplate such a thing.

It's sheer numbers

[Mabhatter]

This comes up in Apple/Foxconn/iPhone post all the time, but one fact of manufacturing in China is the sheer number of employees they can throw at a job. In one instance Apple made a last minute design change... Foxconn pulled 8,000 workers (already employed, trained, etc) in the plant OVERNIGHT to start refitting Apple's product. There are very few manufacturing operations that big in the US... Automakers stopped making thing that big decades ago. It would be difficult to even ASSEMBLE workers, training, and a workspace for that size anywhere. The only companies with that many employees on location are cube-farms now.

Re:The Problem: They're in Massachussets

[Mabhatter]

Germany makes VERY intensive (tolerance, process, engineering, materials) products, but not A LOT of them.

Foxconn was cranking out 100,000+ iPhones a DAY at peak production. That is thousands of employees in parallel lines working around the clock.

Germany doesn't have enough unemployed and trained workers in same city to staff a factory that big. But the real thing missing is CAPITAL to pay all the pay checks for a few months (of 8,000+ employees) and buy all the parts, and a pay rent on a place to make things at.

Didn't you listen to Mitt

[rsilvergun]

it's wrong to feel entitled to food, housing and health care. Seriously. He said this. And the worst part was it wasn't news. The only news was 47% of Americans felt slighted when they should have felt horrified.

Re:Didn't you listen to Mitt

[Anonymous Coward]

it's wrong to feel entitled to food, housing and health care.

As opposed to, you know, getting a job and earning some of those things?

Re:Didn't you listen to Mitt

[rtb61]

yes, because the US minimum wage can get you all those things, hah hah hah, you so funny and in China the minimum wage, hmm, also doesn't get you those things, you just work till you die.

Re:Didn't you listen to Mitt

[smooth wombat]

it's wrong to feel entitled to food, housing and health care.

No one is entitled to health care. Your health is your responsibility, not mine. I shouldn't have to pay a dime to take care of you when you smoke 2 packs a week or drink a case of beer every weekend or suck down a 2 liter of Mountain Dew every day while sitting on your fat ass and not bothering to get out of seat all day.

If you think you're entitled to health care, at my expense, then I'm entitled to tell you how to live your life so I get the most bang for my buck.

How's that strike you?

Re:Didn't you listen to Mitt

[Politburo]

I always find it amusing when people act like they're the only one paying taxes.

Re:Didn't you listen to Mitt

[smooth wombat]

Considering it's not a tax, the point is meaningless.

No where in the bill did it say it was a tax. The President repeatedly said it wasn't a tax. The only one who said it was a tax was Justice Roberts who read into the law something that wasn't there.

What it is is the government telling me I am responsible for someone else's health bills and if I don't pay for their bills, I get penalized for it.

Therefore, if I am being forced to pay for their health bills, I get to dictate how they live their lives so I'm not paying for every little thing because they're too lazy to take care of themselves.

It's no different than the government telling research labs they can't use fetal stem cells for research if they get government money or how some states say their money can't be used for abortions.

Re:Didn't you listen to Mitt

[nu1x]

What job ?

Re:Didn't you listen to Mitt

[DedTV]

I wish I could have been horrified. But I was too busy being one of the 53% who were working so we could pay taxes and use the remainder to pay for food, housing and health care.

Makes closets just fine

[rsilvergun]

I know if at least one company that uses it to make closets. None of their people have the slightest idea how to do wood working. They measure your existing closet, put the numbers in, and take the wood out. From there it's basically Ikea. It might look like crap to you, an experienced woodworker, but to anyone else it's just fine.

Re:Makes closets just fine

[Leuf]

A good cnc can do a great job of cutting up sheet goods into stuff like closets and kitchen cabinets. But you have to start getting beyond hobbyist machines to do it well. You aren't going to do anything like that on my machine that cost under $3k but only has a 12"x24" capacity.

Even if the guy down the block has that cnc machine, that doesn't mean you're going to go to him to make all your stuff either. The Ikea people are always going to have better economies of scale over that. So the neighborhood guy needs to offer something more than just duplicating the same cheap crap.

There's always going to be a market for things that aren't just the easiest way to extrude the thing out of the all purpose robot.

Manufacturing a product isn't easy money

[bored]

So no one in the US cares, the plan is to pump the value up before you actually have to sell any product. Then sell the company for so much profit that it takes the next 50 years to pay off the debt. That way a bunch of leaches can skim out all the profits without having to do any actual work.

It was all over for American business when the banksters decided that it was more profitable to take over well run companies with large investments that were only paying back at a few percent and sell the whole thing off to the highest bidder than be satisfied with 10% returns until the end of time. Combined with a business attitude of locking customers in, and milking them for everything they are worth rather than providing a decent product at a decent price, its only a matter of time before the US takes a big hit and places like mexico look like the land of opportunity.

Re:American investors uninterested in manufacturin

[manu0601]

The US Federal Government SEIZED GM from the bondholders

And you think no other country government could do such a thing? I am sure the Chineese government could do the ame thing in China

Re:The Problem: They're in Massachussets

[dbIII]

Not just Germany, but nearly the entire rest of the western world. Canada and Australia are good example.

I don't know about Canada, but Australia has lower costs of employment directly due to slightly higher taxes paying for the healthcare instead of a company having to pay for it via some sort of health plan. That's why Hollywood liked to outsource movie production to Australia, and why some video game companies did the same. Even places like RSA had a lot of work done in Australia, but incredibly stupid US encryption export laws had a lot to do with that - they couldn't legally produce decent software for encrypting international money transfers for banks within the USA.

Beretta = Maryland

[oneiros27]

One of my friends from high school lived in a house across the highway from the Beretta factory in Accokeek, Maryland:

https://maps.google.com/maps?q=Benelli+USA&hl=en&ll=38.649305,-77.036712&spn=0.013155,0.021586&cid=4117604210822074107&gl=US&t=m&z=16&iwloc=A

Google lists it as 'Benelli', which is owned by Beretta, but the road is 'Beretta Drive'

Andy Grove

[Anonymous Coward]

Didn't Andy Grove famously write a few years back about how scaling up innovations into mass production was a serious obstacle which was bleeding jobs and product ideas overseas to countries more efficient at this?

http://www.businessweek.com/magazine/content/10_28/b4186048358596.htm

I'm surprised Slashdot is only just coming around to the issue just now.

The biggest issue:

[MtViewGuy]

The US income tax code based on Title 26, the Internal Revenue Code, actually discourages savings and capital investment in the USA. I mean, look at what is wrong with our tax code now:

1. 30,000 tax lobbyists--HALF the lobbyists in Washington, DC--fighting for every scrap of a tax loophole. And you get political corruption on a huge scale over this.
  2. The result is a tax code so complex that it makes James Joyce's "Finnegans Wake" almost easy to read in comparison. Even the IRS can't figure out much of the tax code!
  3. The sheer complexity means exorbitant yearly compliance costs, estimated by some economists to be around US$430 BILLION per year in 2012 (and climbing fast in each subsequent year).
  4. It also encourages the outsourcing of millions of jobs, thousands of factories, and hundreds of corporate headquarters for tax avoidance reasons.
  5. It results in (by some estimates) around US$15 TRILLION on American-owned liquid assets sitting in "offshore financial centers" and other foreign banks for tax avoidance reasons (care to explain all those "banks" in the Cayman Islands, Bahamas, British Virgin Islands, and so on?).
  6. Government uses the tax code as a political instrument to favor or punish political constituencies as little as ONE taxpaying entity.
  7. Because the IRS needs to know intimate details of personal and business financial records in tax return filings, there are potentially serious issues with invasion of privacy.
  8. The IRS assumes you're guilty of tax evasion, and you end up having less rights than most common criminals!

This is both economic and political insanity, and explains why Apple just about builds all of its product line from Chinese suppliers. Maybe it's time to seriously look at unprecedented income tax reform such as the no-loophole flat tax Steve Forbes proposed in 1996 or the FairTax income tax replacement proposal (H.R. 25/S. 122) to finally make business income taxation extremely business-friendly so it encourages businesses to set up or expand operations in the USA.

Re:What does it matter?

[icebike]

And most of those 7 billion have a huge variety of shoes to choose from, literally hundreds of choices.
Lots of people making and selling shoes.
Lots of people making shoe making machines.

  Machines making shoe haven't reduced employment in the shoe industry.

Re:American investors uninterested in manufacturin

[Crosshair84]

The question is not "Could they" the question is "Will they". In the US the answer is "YES!!!". In China, every indication is "No". Politically, the US is one of the riskiest countries to invest in. Combine that with regulations that take at least three times longer to get approved in the US than even in Canada and you have a country that isn't worth investing in vs the alternatives. I can get twice the dividends in Canada than in the US when buying equally sound companies. Add to that the Canadian dollar is going up against the US dollar.

One important note from history: The money leaves first, the people leave second. We have the first right now, if we stay on the current path we will soon have the second. The government knows this, which is why it now charges $450 for the form to renounce US citizenship, it used to be free. People in government know that soon the young will want to leave the country in search of opportunity that no longer exists in the US. In the global economy, a US citizenship is now a liability. Since the young have no wealth to tax, they have to make it as hard as possible to get rid of ones US citizenship. It is $450 now. If they can charge $450 for it then they can charge $5000. Much like the Warsaw Pact countries, the US government might get desperate to prevent the best and brightest from leaving, though it could just fall apart before that point when the dollar tanks.

Re:The Problem: They're in Massachussets

[Burz]

These countries you cited have universal healthcare-- Very important to the investment and entrepreneurial landscape, actually. Americans try to stay with corporate day jobs until they are old enough to get Medicare, and this consumes much of our energy and attention until we retire.

Elsewhere in the developed world, adults from a wider demographic range can more easily choose the lifestyle and occupation of market researcher and investor without being hammered by healthcare costs.

To answer a question

[sesshomaru]

Is it even still possible to do high-tech manufacturing here â" or should it be?

I suppose that the answer to "should it be?" depends on how likely we think it is that countries we are at war with will send us their high-tech products in order to fight them.

Of course, we'll probably never have another major war, which is why we spend so little on military technology. If we were worried about it, I expect our military budget would dwarf our social spending budget by orders of magnitude. Since it doesn't, and we just have a small military for defense, we must not be worried about it.

And of course, it would be silly if we thought we needed a gigantic defense budget, because then we'd never let treacherous CEO's send our technological crown jewels overseas in order to give our strategic competitors (which if we were really silly might think was the Shanghai Cooperative Organization: China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan, and Uzbekistan with India, Iran, Mongolia, and Pakistan currently having "observer" status) a huge military advantage if there was ever a major war between the world powers.

So, no, as a country that believes purely in peaceful trade and in purely non-military solutions to world problems, we should not worry that Innovation occurs on the factory floor. After all, as a tiny country along the lines of Lichtenstein or Vatican City, the United States doesn't have any territory or natural resources that other nations would ever want to seize by force, which is why we are better off having a banking and finance oriented economy. No matter what happens the dollar will always be the main world currency, and we'll always be able to bribe any belligerent, heavily armed, high tech countries with them. Fnord.

Simple: End the Fed

[Lawrence_Bird]

What should be done is to extend that study back to the 1970s, 80s, and 90s. Bet this "problem" did not exist back then. Of course, in a global world capital should be free to move around and if these startups get their funds from foreigners, well, good for them. Sad for the US as a nation though. And where lies the fault for this?

What is the incentive to invest in very risky assets when the Fed will give you a nice return just for letting them hold your cash and bonds? Why risk failure in a risky venture that the Fed will not backstop? Why invest in a startup that is likely to fail when you can ride the existing equity market bubble as the Fed pushes more and more cash into it?

Re:Why?

[LDAPMAN]

And your answer is?? An economy planned by some privileged elite or academics?

But what are the reasons?

[RogueWarrior65]

Certainly the cost of hiring people in the U.S. in general is a factor and more so now that ACA is in effect. Once you get to 50 employees now, your cost shoot up dramatically. Unionization? Possibly but not for tech labor. Regulation? Entirely likely. High taxes? To be sure and while a company could relocate to a tax friendly state, can they find the type and quality of labor they need locally? Or perhaps there is a concern that once a manufacturing business reaches a certain size, government will come along and try to demand a bigger cut of the profit by way of higher taxes, increased cost of dealing with regulation (aka having to hire more Ship B people), risk of unionization (aka having to hire more Ship B people).

Re:The Problem: They're in Massachussets

[Politburo]

orly? Look at the BLS data on workers who are "part-time for economic reasons" over the past 5 years.. it basically doubled at the height of the recession vs. prior.

Government Roadblocks

[bobcote]

Ramping up production in the US is more of a political issue than a technical one.
You have to hire employees, which in certain heavily unionized states, is closer to adopting them. You have to file environmental impact statements on every aspect of the project, including truck traffic to and from your site. Approvals need to be obtained from local, state and federal agencies all of which operate at their own pace. By the time this is done, your Asian and even your EU competition has beaten you to the punch.

I would rather see the jobs here, but I sort of understand the pressure the companies are under.

Re:What does it matter?

[HornWumpus]

Right. _He's_ the one engaged in magical thinking. Twit.

It's funny how no matter what the problem is, to some people, the answer is socialism.

Thank god we aren't taxing industry to keep the formerly employed agricultural workers in bread and circuses.

Re:The Problem: They're in Massachussets

[HornWumpus]

That's because German unions are full of Germans.

Re:The Problem: They're in Massachussets

[HornWumpus]

Germany is full of Germans? Do you know many Germans? My dad for example: 'Du, foaler bloater kind! Das ist nicht arbite, das ist spiel.' Obviously my German sucks.

On the other hand look at the horrible music Germany has put into the world; Polka and it's modern, even worse, cousin Techno.

Is there any Techno accordion music? That would be tooth ache inducing. I don't want to know. Techno accordion with war bag pipe accompaniment.

Former Client Talked about this ALL the time

[Dripdry]

Manufacturing and materials science in the U.S. is gutted.
People who know key information are dying and leaving, and we're having to relearn things at this point.
It was REALLY bad 5 years ago, and it's only going to get worse unless we (say it with me) INVEST MONEY IN IT.

Good lord is America ever short-sighted.

Re:The Problem: They're in Massachussets

[OhHellWithIt]

"Germany is making BMWs, not Chevys.

BMWs are also made elsewhere.

Re:The Problem: They're in Massachussets

[AK Marc]

Language changes. Your rejection of the current definition will not resurrect the old one.

Re:The Problem: They're in Massachussets

[Tablizer]

TRANSLATION: They weakened the unions....

Translation: they found a happy-medium. Too much of anything either direction sucks.