Tench's Blog

Notes on manufacturing in the US:

May 13, 2020

 

I’ve been doing some thinking about the current weaknesses in the US economy as exposed by the CV shutdown. One of the biggest “manufacturing-wise” is the “efficientization” of the supply chain through outsourcing and off-shoring.  This in turn has had the effect of closing enumerable factories and the good middle class jobs.  Of course, this “efficientization” has moved to the service sector as epitomized by Walmart, Amazon and other “gig-economy” actions to drive down costs (more off-shoring, part timing, de-unionization, no benefits, etc). So, we’re left with many people who are struggling economically, even before the pandemic.

 

So, I was doing some research into the origins of all this, which - coincidentally - parallel my own career path, starting with GE.  So, there are 2 books/subjects that I’ve been revisiting:

1). The reckoning by David Halberstrom who chronicled the decline of the US auto industry following the (dual) oil shocks of the 70’s and 2). Jack Welsh, who really pushed US manufacturing and corporations in general to move towards “efficientization” that was measured by share holder value. So, I found a great quote about this in The Week magazine:

 

“Focusing on shareholder value and stock market capitalization ultimately turns a company into an abstraction, its life sustained by financial flows that are less and less connected to the underlying fundamentals of the company — its workers, its resources, its infrastructure, the real needs it provides to the people it serves. When the good times end and the money dries up, what's left of the company may not be able to stand on its own.”

 

The other point about the (The Week) article and other criticism of welsh is that "his legacy is not only a changed G.E., but a changed American corporate ethos, one that prizes nimbleness, speed, and regeneration over older ideals like stability, loyalty, and permanence." If nothing else, Welch left us with a very concrete demonstration of where that particular set of priorities ultimately takes you.”

 

But, as alluded to above, Welsh was reacting to the shocks encountered by US corporations like the car companies, but was really more about globalization.  That is, other countries -Japan and Korea first - were starting to displace US manufacturing as they recovered from the War. Put differently, the US was on top since there was no one else after WWII, and as a result, US corporations and factories - especially - became bloated and inefficient. The labor unions added to this inefficiency, so all this combined with US policy actions/mistakes: over regulation, Vietnam War, great society and the resultant inflation, created a very problematic corporate sector epitomized by the car companies circa 1980 (and the terrible cars they made: see the Chevy Citation!!). So, enter Jack Welsh at the right time and place, and the rest is history. 

 

But of course, the continued drive of globalization fed into corporate efficientization - measured by shareholder value - so quite simply, the pendulum has swung (badly) in the other direction, and brings us to where we are today:  too much inequality. So the question is, how to “even things out” without swinging the pendulum back the other way.  Of (also) course, Trump came up with a simple solution: Build the Wall!! Of course (of course), that is too simple, especially when you throw automation into the stew.

 

But, one grand irony about all this is that companies with a very efficient supply chain, automation and distribution - e.g. Amazon - are just what it needed for this current CV. On the other hand, due to their overall success in this, they have inadvertently raised the status of their low-level employees, which probably isn’t such a bad thing (there is a whole different argument on what happens to shareholder value, corporate profits, etc. and whether that is a good or bad thing).

 

Health Care - Senate Republicans need to save the economy and their Party by standing up to President Trump

May 11, 2020

 

Although not specifically about marketing, the reopening of the economy in a safe and sustainable way is a business imperative for every professional function. Everyone in the world, especially me, is extremely anxious to open the economy. But, such opening must be done safely, and it has now become almost a cliche to write that the US is severely short of Coronavirus testing to insure a safe opening.  Commentators who are more authoritative than I have articulated this requirement, including the Atlantic Article: Testing is the only way out of this mess whose key paragraph is copied below for convenience:

 

“Testing is your first fundamental step in a plan to keep infected people from susceptible people,” Ashish Jha, the K. T. Li Professor of Global Health at Harvard and the director of the Harvard Global Health Institute, told me. But the federal government has failed to expand testing capacity in any meaningful way, he said.

 

The Senate Republican Caucus is the only government institution left that has any influence over President Trump. As such, they MUST act to coerce the current administration to deploy the awesome resources of the Federal Government to create and implement a nationwide Corona Testing program. If you don’t act - and worse, fall back on ideological excuses for not acting -  the resultant economic and public health calamities will be in the hands of the republican party for generations to come.

 

Note: I am a non-partisan, independent voter who is looking for the best solutions for the country. As such, I am niether supporting nor detracting from any poiltcal party or figure