Andy Grove on Manufacturing

Bloomberg Business Week published an important commentary from legendary former Intel CEO Andy Grove. They also published a response by Duke’s Vivek Wadhwa. Both are worth reading and debating. The case Grove makes is so important, my next few posts will be on the issues he raises.

Grove argues that keeping manufacturing jobs in American is a national priority and we should do whatever it takes to keep those jobs here. His focus is on tech sector factory jobs. But I think he is making a broader point about factory jobs in general. Which is countries that don’t provide work for their citizens are countries with major social and political problems as well as economic. Grove clearly believes that without factory jobs, America will not provided work for too many of its citizens.

He believes this challenge is so important that he suggests moving away from free markets. When a successful capitalist like Andy Grove suggests free markets may not be in the best interest of Americans we need to pay attention. Groves writes: Our fundamental economic beliefs, which we have elevated from a conviction based on observation to an unquestioned truism, is that the free market is the best of all economic systems—the freer the better. Our generation has seen the decisive victory of free-market principles over planned economies. So we stick with this belief, largely oblivious to emerging evidence that while free markets beat planned economies, there may be room for a modification that is even better.

Grove makes the additional case that not making high tech products puts America at risk of losing the ability to stay in the lead in the next generation of those technologies. His story goes we invent the technology here, our venture capitalists finance the start up, but then the scale up is done elsewhere and the country where the scale up is done – not us – dominates the industry going forward.

Grove advocates that America needs to make job creation its #1 priority. His policy recommendation is a form of both protectionism and picking industries (government targeting new technology industries.) Specifically he proposes: The first task is to rebuild our industrial commons. We should develop a system of financial incentives: Levy an extra tax on the product of offshored labor. (If the result is a trade war, treat it like other wars—fight to win.) Keep that money separate. Deposit it in the coffers of what we might call the Scaling Bank of the U.S. and make these sums available to companies that will scale their American operations. Such a system would be a daily reminder that while pursuing our company goals, all of us in business have a responsibility to maintain the industrial base on which we depend and the society whose adaptability—and stability—we may have taken for granted.

Wow! Clearly a set of ideas worth exploring.

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Lou Glazer

Lou Glazer is President and co-founder of Michigan Future, Inc., a non-partisan, non-profit organization. Michigan Future’s mission is to be a source of new ideas on how Michigan can succeed as a world class community in a knowledge-driven economy. Its work is funded by Michigan foundations.

This Post Has 4 Comments

  1. This is likely to become a much talked about issue in Michigan this fall now that Virg Bernero is the Democratic nominee for governor. The main pillar of his economic platform is rebuilding manufacturing. I heard him on TV this morning saying, “We need to put the ‘P’ back in GDP. Sounds like he was trying out a campaign slogan.

    Also, I attended a National Academy of Sciences advanced battery conference recently where several speakers said it’s unlikely that U.S. battery manufacturers will be able to export batteries. That’s because other major countries, such as Germany and China, are requiring that batteries used in their countries be built there. They apparently agree with Andy Grove.

    1. Agreed. This may well be the dominant economic issue in the campaign and beyond. Voters wants their old good paying jobs back. I’m skeptical elected officials can do that but they will claim they can. Any more than elected officials a century ago could bring back farm jobs. One of the ways they will claim they can bring those jobs back is protectionism as Mr. Grove proposed and seem slike other countries are already doing. We don’t have a great history of protectionism growing the pie. There are two more posts from me coming on the Grove article. Check them out. I think his article is real important and worth debating.

  2. Grove makes some interesting points, but I’d encourage the people of Michigan to believe that the old factory economy is gone and is not coming back. Even if we invigorate manufacturing through public policy, the sector that emerges will likely vary dramatically from what many here have known. It may be a bit of an unknown-unknown, to borrow a phrase; the new economy we create to replace the early and mid-twentieth-century industrial model may look vastly different that its precursor. If every Michigan worker comes to think of themselves as a unique purveyor of value, whether they work on an assembly line, in small teams, as an executive, or in their garage, we can create the type of flexible and adaptive workforce we need to respond to whichever economic model emerges in the years ahead.

    1. David, Agree 100%. What is worrisome about Grove’s article is his belief that unless we protect manufacturing work (1) we end up with a society that doesn’t have enough work for those needing work. He doesn’t say it but particularly for non college educated men. If right – and I don’t know it is, in fact assume it is not – that is really dangerous to society. And (2) we lose the knowledge work that comes with developing second generation products. Once again as I wrote I assume that is wrong. Given who Grove is and both are so important they are worth taking the time to discuss.

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