James L Adams—People and Products

The End of Discovery?

  I was once a member of the U.S. Air Force, stationed at Edwards Air Force Base, the home of the Air Force Flight Test Center.  The AFFTC motto was Ad Inexplorata— Toward the Unknown.  I thought that was pretty wonderful.  I still have a left over patch with the motto on my wall.

 I have always loved discovering interesting things and information that I have not known about, wandering through areas I have never visited, and experiencing things I have never done.  I do not particularly like guided tours, group travel, or guide books, even though I know that I miss seeing and learning about world-famous sites and data.  But that’s me.

 But now the internet is exploding upon us.  The special report in the October 27, 2012 issue of The Ecconomist magazine is on the juxtaposition of technology and geology, and among other topics, goes into three dimensional mapping, in which increasing amounts of information is correlated with geographical location, so that your mobile phone, knowing exactly where you are, can give you amazing amounts of information about that spot — historical, visual, statistical, and of course commercial (Groupon offers from stores that are near, Yelp ratings on nearby businesses, etc.). 

I used to enjoy trying to figure things out with help from my very bright wife.  Between us, we could usually do pretty well.  Now her kind retort to my questions is “It’s probably on Google”.  We used to like to drive around, visit wineries, and find wines we liked.  Now I notice a full page ad in the Sunday October 28 New York Times for Wine Spectator’s new app Wine Ratings +, which offers over 270,000 ratings and is updated with 1,000 new reviews each month (over 30 a day).  In fact, speaking of driving, I love to drive, whether it is driving to Los Angeles on Highway 5, or being lost in the Sierra foothills.  I also notice an article in the same NY Times about the imminent self-driven car, which probably won’t ever get lost, and certainly won't put you in the meditative state that comes from driving long distances (no I don't get into accidents).

We evolved to explore, or at least I did.  I must admit I have never chosen to live in a big city, although I enjoy exploring ones I have never visited.  But to me, living in one I knew, with a extraordinarily complete three dimensional map in my smart phone, bing constantly plugged into the internet and my job, and actively engaged in several social networking sites would be like living in hell. I need lots of unknowns in life and time to think about them, because to me trying to figure out such things is hugely rewarding. 

Ad Inexplorata.

Good Products —the Joy of Stapling

This is my Arrow Heavy Duty T-50 Staple gun.  I have owned it for many years, and it must qualify as a classic as it is still being made.  Although powered staplers are available, they require wrestling with either pneumatic lines, electric cords, or discharged batteries, and I don’t need one, since I do not drive staples all day long.  This stapler drives staples ranging from l/4 to 9/16 inch long, and such staples are invaluable for doing things such as fastening fabric or screening to wood, fastening panels to frameworks,  and accomplishing other tasks in which nail and screw heads are too small.

 It definitely qualifies as a good product by the criteria in my Good Products, Bad Products book.  It is reasonably priced, seems to be highly reliable and long lived, since I have owned it many years and it has never failed me, bangs staples home with a vengeance, fits me very well,, is extremely well made, and is highly thought of in the culture of amateur, but capable builders and repair and maintenance people (of which I am a member). Although I am not aware that it is the Museum of Modern art in New  York, it is a clean and functional design, and its unusually bright plating allows it to be easily found if its owner has a shop in which tools hang on nails, but usually do not return to the nails which they have previously occupied (me again). The stapler is easily understood, simple to load and use (no video or confusing manual required), mechanically elegant, and gentle on the environment.

 And I have come to love it.  I have an open barn, which as well as holding a great deal of wonderful objects my wife categorizes as junk, also contains a sprinkling of restored vehicles and other equipment and a few motorcycles and go-karts.  It seems to be very attractive to owls, especially in the rainy season.  I like owls, and they are nice to have in barns because rats and mice, who like to eat and use as nest materials such things as wiring harness insulation and seat cushions, stay away..  But owls are large animals, and they seem to have made the roof trusses in my barn into the official owl rest-room in the area.

 Owl poop is seriously awful, since it is sticks to everything, seems to be impervious to water and most common solvents, and when finally removed, takes a bit of paint with it.  So I decided to interfere with their pleasure by making it more difficult to roost on the truss members.  The barn is 20 feet high, but I have a friend who owns a large forklift that is capable of reaching a 15 foot height, so I spent a few hours happily standing in a fruit box on the forks stapling bird netting to the appropriate truss members while he  whirled me around the barn.  It was really fun.  The weather was perfect, the ride was exhilarating, and my stapler gave me the power to put the netting exactly where I wanted to.  I don’t know if I have won the battle, because  owls are indeed very wise, but I wouldn’t mind at all if I had to do more of the same.  Tools are to extend the capability of your body, and the stapler certainly did (of course the fork lift did also).  I would have looked pretty foolish trying to handle heavy sheets of netting 15 feet in the air while working a hammer or screw driver with one hand and holding nails or screws with the other.

But upon writing this post, I realize am also very fond of my Swingline model 747 desk stapler in this photo. I have also had it for many years, initially acquiring it for no cost after it was unclaimed after a large office move.  It too is reliable, long-lived, elegant in operation, humble but pleasing in appearance, easy to operate, and gentle on the environment. And it always responds and never argues with me.  In fact looking at this picture makes me realize that my desk is mostly covered by digital things that are always requiring and often frustrating.  The stapler simply sits there and responds beautifully to having paper stuffed into its mouth and being hit on the head.   I probably sometimes take out my frustration with my electronic equipment by hitting my stapler much harder than is needed, even though it is a most  faithful servant.

 

And looking at the photograph, I also notice a few paper clips on my desk—even simpler classic products that do their jobs beautifully.  And they are also useful for many other tasks, from cleaning fingernails to opening the spouts of old glue bottles.

 

 

Product Quality, Complacency, and the Presidential Election

I run into general agreement that companies often overlook possible breakthroughs and gains in product quality because of complacency—“we have done great for many years, so why put effort and money into change? Let’s stay with what we know how to do".

 In the Oct 21 New York Times there was a thought-provoking article entitled “The Opiate of Exceptionalism", by Scott Shane.  It is about politics, and in particular this election.  He begins by reminding us of the low U.S.rankings in many measures of success (child poverty, educational achievements, infant mortality, incarceration of our citizens, behind most of Europe, Australia, and Canada in social mobility, etc. etc. etc.).  He then goes into the meat of the article, which is that politicians who place too much emphasis on the details of our problems do not get elected.

We prefer not to dwell on our problems in depth. We are confident that we will overcome them without too much pain.  We even hear the words “American Exceptionalism”, which imply that there is something unusual about us that makes us better than other nations.  That is a risky belief, because history has shown it not to be true.  The rise and fall of empires has been consistent, and generally unexpected by the people in them. It is easy to find people in England the former Soviet Union, and even France who are stilll baffled as to why the world no longer considers them a superpower. Of course the U.S. is more exceptional………………….

 We want our presidential candidates to reassure us that they have simple and relatively painless solutions to our problems.  Unfortunately, solutions to many of our problems are neither simple nor painless, nor will they make everyone happy.  They are solvable, but that requires that we work together, and keep our eyes on the future and not on the past —two things that are not always easy for large numbers of people to do.   It is interesting to review Abe Lincoln's “A House Divided Cannot Stand” speech, which was thought to be politically risky when given. I think of it occasionally when the  U.S. Congress doesn't seem to be able to get out of its own way.

 The tendency for complacency is deep within human DNA, and  serves a purpose, because it helps us diminish worry, and feel good about our lives.  It is satisfying to have been involved in many years of producing large bore V-8 engines of ever increasing horsepower.  We can overlook efficiency because there will always be available cheap gasoline, right?  More oil will be discovered, right, coal can be converted to gasoline cleanly, biofuels will become cheap, Canadian tar sand gasoline will drop in price, right?

 Complacency also makes us feel good about ourselves.  We are losing our competitive advantage in manufacturing, but we are smarter, more innovative, more entrepreneurial, and better at business than people in other countries, right?   And of course, our products will be of higher quality than anyone else’s as soon as we quit outsourcing.  Made in the USA will reign supreme again.  Not that easy. 

Globalization is here to stay, and many other countries are in pursuit of increased overall product quality. And they have the skills and motivation to succeed.  I agree with Shane’s article and believe we should encourage our political candidates and ourselves to go more deeply into our problems, and I think our companies to think harder about product quality. As my daddy used to say, nobody owes us a living.  And as we all should know, you have to work hard to be exceptional.  It doesn’t automatically come with your citizenship, race, gender, past performance, I.Q, size, or appearance.

If you would like to read a well-written article concerning complacency, read Malcolm Gladwell's July 27 2009 New Yorker article about the psychology of overconfidence entitled "Cocksure".  It is here.

Off the topic, if you would like a thought provoking article on whether there will ever be cheap gasoline again, try this one.

Product Quality, Outsourcing, and China

  Listening to the presidential debate the other night, I was taken by some comments that Mitt Romney made about China “cheating”, how their currency was undervalued, how if necessary we would protect our vital industries by such things as tariffs, etc.  I realize that politicians like to say short simple things that voters like to hear, and I don’t know how much contact Mr. Romney has with Chinese companies, but give me a break.

 Many people in the U.S. resent China, because they see it taking over manufacturing, which we feel we should dominate forever.  But China probably felt that way about Britain when it took over the lead, and Britain obviously felt that way about the U.S. when we did.  Nations tend to take the lead in manufacturing when they have the understanding of the pertinent technology, access to cheap but intelligent and motivated labor and low-cost resources, and the desire at all levels from workers to heads of government. China has all of that in large quantities. And perhaps more people in China are satisfied with the opportunities in manufacturing as opposed to the fantasy of  making big money quickly through finance or entrepreneurship. 

 Since the U.S. likes to believe that it deserves being the best at everything, it is easy to feel that China must be cheating if it successfully competes with us.  But by whose rules?  Traditionally the Chinese have not believed as strongly as we do that individuals have ownership of intellectual property.  Despite their success in manufacturing, they are still a poor country, albeit with a long and impressive history and a huge population.  Their capitalism is state run, and we believe they should be a democracy.  But even the last issue of The Economist is worrying about capitalism in the “developed” world being a bit out of control.  And India (which has a comparable population) is more of a democracy than China, but has traditionally had trouble agreeing as a nation.  If we were China, would we act differently than it is acting?

 China will undoubtedly follow the path of all countries who have had a dramatic rise in manufacturing ability (Japan and Germany after World War II) and reach a point in which wages rise with increasing national wealth and success, motivation declines because of the “good life”, and Chinese companies begin building factories in the U.S. as Japanese and European companies do. It is already outsourcing to many other countries.   It will probably continue to improve at manufacturing, and producing higher quality indigenous products, and we should do the same, rather than waste our effort trying to slow it down.

 As far as outsourcing, it is somewhat a function of tax structure and labor cost, but also it occurs because it is possible to get better service and work in other countries.  Apple likes Foxconn because they respond instantly to changes from Cupertino, and because they dependably produce very high quality products.  Their labor costs are low, but this is not the main consideration, because what they earn is a minor portion of the cost of an i-Phone.  I was recently talking to a friend and ex student who is a manager at Tesla and trying hard to source in the U.S. He finally found a vendor in Ohio who could do a good job of casting a complicated part, but they unfortunately could not machine it within requirements.  So he resorted to a Taiwanese company (he too is worried about China) that rapidly gave him what he needed.  If you look at what China has done in areas such as aerospace and is doing in industries ranging from heavy construction to alternate energy, it is becoming very good in many aspects of technology.  And as I keep saying, good wins.

 It is true that outsourcing is affected by tax structure.  Companies now often can win financially by manufacturing overseas, and the result is the loss of potential jobs at home.  But tariffs lose.  As nations such as India have found out, they do initially protect industries, but over time the industries tend to lose their ability to compete globally.  As to the Renminbi being too low in value, it will rise, but in the meantime, it works for China and how do we know that the dollar is not overvalued?  In any case, we probably would not respond favorably if the European Union tried to get us to change the dollar’s value to discourage people from importing so many U.S. products.  And “cheap “ imported products have certainly benefited consumers.  I am reminded of a New Yorker Cartoon of a few years ago, which portrayed a shoe-store display window with a sign saying something like “Athletic Shoes Made Entirely in the U.S.A.—$240 per pair”.

 As a final possible clue to China’s success in manufacturing, last time I looked, eight out of nine top government leaders in China could claim to be engineers or scientists. As an engineer, I think engineers and scientists are good people to have around when manufacturing is concerned. And  as you probably know, China claims to be producing some 600,000 engineers per year, as opposed to our 70,000.  Arguments have been made that they lie, and anyway these are not of the quality of U.S. engineers, and are in fact often what we would call technicians or graduates from two-year programs.  But we are talking manufacturing here.  Technicians with engineering knowledge are more than useful, as are people with two-year degrees.  The Chinese engineering students studying in the U.S. are of course not typical, but they are generally outstanding. 

 And we also tend to judge engineers through the value systems of people who are involved in university education.  I am a member of the faculty of one of the top ranked U.S. engineering schools, and I could easily find you experts on our faculty on such topics as nanotechnology, quantum computing, biotech, and analytical decision making.  And most of them love research and supervising Ph.D. students.  But I am not sure I could find you anyone whose expertise includes designing a factory, or even a production line.

I am presently trying to give a little help to an old friend at Stanford, Professor David Beach, to help him raise the visibility and support level of his long-established and outstanding program, which is called the Product Realization Lab (school words) and is all about integrated design and manufacturing, with perhaps an emphasis on manufacturing.  It is a struggle.  In most of our highly ranked engineering schools, science rules, not manufacturing.

 

Hangar Number 1, Moffett Field and its Museum

I seem to be drawn to buildings that are very large, and have for years been a fan of the large hangar at Moffett Field (no longer in commission) in Mountain View, California.  NASA Ames occupies part of the Moffett Field land, and is presently responsible for use of the flight facilities. At one time I directed various studies there during the summer, and always managed to find reasons to visit the hangar.

 The hangar (Hangar Number One) and associated facilities were built in the early 1930’s as a Western base for the U.S. Navy’s proposed use of dirigibles to provide long range reconnaissance.  The Macon, the first user of the Hangar, was 785 feet long, powered by eight 560 horsepower engines, equipped with accommodations for 100 officers and crew, and kept aloft by helium, rather than flammable hydrogen.  It carried five fighter planes for protection.  The Hangar is 212 feet tall, but the dirigible cleared the structure by only some 12 feet.  This old photo shows the hanger swallowing the Macon. 

 The Navy experiment with large dirigibles was short lived.  The Macon crashed in 1935, and due to changes in strategy, improvements in aircraft, and problems with the dirigible program, the hangar was diverted to other purposes.  Over the years it had developed leaks in the covering, and asbestos had been found in its roofing.  There was talk of taking it down, but happily there was a great deal of resistance because of its historical and landmark value.  The cover has now been removed (and hopefully will be replaced), and the bare structure can be seen from Highway 101. it is wonderful indeed.  Here is a photo from the frontage road after the doors were stripped. The hangar is now completely stripped

 But recently I wanted to observe it more closely, and Moffett field now being a “government facility”, I approached the guarded gate, and inquired whether I could get on the base.  I was told that that would not be possible unless I had business with someone there.  Merely wanting to look at the hangar structure would not cut it.  But, said the guard, why didn’t I go visit the Moffett Field Museum (sometimes called the Navy Museum — not to be confused with a spacecraft museum in the NASA Ames buildings), which was directly adjacent to Hangar One.  I did so, and managed to entertain myself and my camera by acquiring some up-close and personal time with a structure that will probably never be duplicated, and the museum was swell.  Here is a closer shot of the structural detail (note size of pickup parked beside it).  

 I am a fan of small museums, and wish people would visit them more, because they are always interesting, and operated by dedicated volunteers.  This one traces the history of Moffettt Field, and of course Hangar #1 and the Macon, with lots of good displays that are attractive to both adults and kids, with eager volunteers to help.  If you are in the area, I would recommend you check it out along with the hangar in its present naked form.  The museum is not open every day, so check its website, which is here.

 

Makers, book by Chris Anderson, and Manufacturing

Chris Anderson is the Editor in Chief of Wired magazine, and founder and chairman of 3D robotics, a company  that manufactures autopilots for remote control of amateur unmanned aerial vehicles.  He has a solid background as an editor (Nature, Science, The Economist), and is the author of several books and a technological visionary.  His latest book, Makers, (Crown Business Books, Random House, 2012) subtitled The New Industrial Revolution (sound familiar?), like the Peter Marsh book I wrote about in my posts of October 1 and 4 (title The New Industrial Revolution), speaks of the changes that things digital will cause in the world of manufacturing. It was fun reading the two back to back, because although both authors predict great changes, Marsh comes across as British thoughtful, while Anderson comes across as-----the Editor in Chief of Wired magazine. He is clearly a good writer, and very  knowledgeable of the digital world, but although the book  is a fun read, and thought provoking, I found it to be a bit over the top, both in his sense of timing for the changes he predicts, and their extent.

 Computers and associated equipment have made great inroads in everything from the gathering of marketing information for the design of products, through the design and manufacturing processes, to marketing and sales.  But the first computer I came in contact with was in the early 1960’s, when I at the Jet Propulsion Laboratory,  It was a large IBM mainframe that helped us with structural analysis and other such tasks. That was 50 years ago.  So such developments as Computer Aided Design, Computer Controlled Machining centers, and Big Data did not happen instantly.

 Among those who study the history of technology, it is often said that new technologies require 50 years to develop into something approaching their final stage.  I think that is an understatement in the case of digital electronics, and that present developments, although heady indeed, are far from the final answer.  The proliferation of companies, web information, and various levels of fun and games on the internet will settle down, and the quality will increase.  Many internet activities, both software and related hardware, are still catering to early adopters.  I am relatively new to social networking, but of the people I am linked to, only a few are very active, admittedly some hyper.  And in my opinion, the internet is definitely accumulating junk, perhaps exponentially, which is inevitable as long as it costs nothing to put information on it, and there is neither an incentive to delete anything, nor people responsible for doing so.

 In particular, while reading his book, I wondered about the enthusiasm that people like Anderson have for the democratization of design, in which each of us, equipped with our powerful low-cost 3d printers and easy-to-use CAD system, are going to design and make our own products, backed by crowd sourcing, which will then allow us to launch brilliantly successful businesses.  Certainly so-called additive manufacture will play an increasing role in the manufacture of  prototypes,  parts best made by the process, and small runs of parts.  But simply being able to shape our own  parts on a computer and manufacture them, does not make us good designers.  Such things as emotional response to products, human and cultural fit, taste, and good judgment about such things as serviceability and lifetime are important.  Both intrinsic and extrinsic knowledge are needed, and one gains them through time and experience.  And perhaps there is a bit of talent involved.

 Nor is handling any sort of funding or successfully starting a business as straight forward as many would like.  There is an unfortunate tendency for people who have been successful in such things to sound the “jump in, the water’s fine” call, and not talk about the sharks.

I have probably always been what Anderson defines as a maker, although I lean toward hardware (see photo of my wife's new ant).  I have quite a bit of experience with design and manufacturing in both industry and academia and consider myself a good designer of things with which I have had experience. But I have also put in many hours working with cars, and when it comes time for a family car, I would rather a large company with an outstanding track record produce it for me. And if purchasing a chair for my living room, I would rather choose among products designed by people with a lot of practice at making comfortable ones (not me), and unusual visual sensitivity. Also, individuals cannot produce things such as airplanes, highways, oil tankers, or high speed trains.  Perhaps not even high quality smart phones or wrist watches.  Or for that matter, athletic shoes or socks. I believe the common saying that design is a team sport, and outstanding teams usually have outstanding players.

 And I don’t think mass production is going to go away.  It will be increasingly automated (unless unions return) and  it will include more flexibility, but as Anderson admits, there is great benefit to the costs that can be achieved by investing in tooling which will be used to produce a large number of identical copies, and quality can be obtained through large numbers.  And there is my favorite justification —the convenience of using products by people other than the designer.

 

Science, Technology, and Society — Electric Cars

  For some ten years, I chaired the STS (Science, Technology, and Society) program at Stanford University.  There are many such programs in Universities, usually struggling for money and recognition.  In the case of Stanford, it was not particularly loved by the Engineering School, partly because to study technology in a social setting is to become a bit critical of various aspects of it, and partly because the Engineering School prefers to spend its resources on producing professionals in their field, as do schools such as Medicine, Business, and Law. It seems  that in a society such as the U.S., people simply want to accept technology and science as good, and are not that interested in either their nature, or where they come from, especially if mathematics is involved.  When Jerry Weisner, an extraordinarily idealistic, bright, and politically connected man, was president of M.I.T., he attempted to start an entire STS school. Midst the political interests and overall lack of interest by Engineering and Science faculty members, he failed.  There are some faculty who teach and do research in the area at M.I.T, but not even a department, nor is there at Stanford.

 I  feel strongly that since the U.S. is so committed to science and technology,  general education should talk more about such things.  I wrote a book on the difference between science and technology some years ago (Flying Buttresses, Entropy, and O-Rings, published by Harvard Press), and I think it is a good book, but the sales have been relatively modest.  Many people would rather lump the two together as a field filled with people wearing pocket protectors and white coats, and in the case of success would just as soon give credits to “young scientists”, rather than learning about the processes involved.

 I was reminded of the STS issue by a relatively small article in the October 7  New York Times Magazine entitled Why Your Car Isn’t Electric, in which there are a few quotes from STS people.  The article is here.  STS people sometimes argue about whether science and technology are more socially determined (what people want), or technology determined (what is possible).  The answer is some of both.  Products must be technologically feasible, but also wanted by the society.  But directions of technology and science that are backed by lots of resources and demand win out, and become dominant as people get used to them and the infrastructure develops,  Did you know your refrigerator might be powered by gas, were it not for all the money that General Electric had long ago?  Those of you who are older might remember Servel.

 Automobiles are the topic of this article.  As is pointed out, the largest carmaker in the United States at the turn of the 20^th century was the Electrical Vehicle Company, which owned 30% of the electric cars in the county (it leased its cars) but was driven into bankruptcy by, as the article says, “a series of shady business dealings”.  This gave an opportunity to people building petroleum fueled vehicles, who then improved their products over the years, until they became the definition of “cars”.  Now it is very difficult to convince people to try other types of transportation.  As an example of extraordinary efforts, the article informed me (I am not a Prius owner) that the Prius creeps forward when one takes one’s foot off of the brake, a feature not necessary, but included so it feels like a “real” car.

 To me the nature of science and engineering and the forces that shape them is fascinating.  I encourage you to dive into such issues a bit more.  It may clarify questions such as whey are we making cities unusable at certain times of the day by clogging them with large petroleum-burning vehicles that are designed to go 70 miles per hour, but often can hardly move.  Also why we developed nuclear weapons to worry about, and why we are automating so many people out of jobs. 

 

 

 

 

More comments on Peter Marsh's "The New Industrial Revolution"

In his book “The New Industrial Revolution”, Peter Marsh paints an optimistic picture of the future.  As I said in my last post, he feels that manufacturing will continue to become more global, that different areas and cultures will find advantageous roles in different aspects of manufacturing, and that more and more countries will go through rapid rises in manufacturing through the path from low wages to high value added.  However, over time he predicts that wage difference will decrease, skill levels and education will increase, and other than proximity to customers, there will be fewer reasons to manufacture outside of the home country of businesses.  To him, the uniqueness of the “New Industrial Revolution”, over previous ones, has not only to do with more sophisticated technology, but also that it will affect the entire world, rather than a single or a few countries

He predicts that “richer” areas will tend toward research and design of products, and “poorer” ones toward production, as is already the case.  Some areas will specialize in the production of products requiring manual work, and others will move toward even more automation.  Some areas will produce higher cost and more customized products, and others will count on toward traditional mass production. All of this assumes, of course, that countries are not driven by national hubris to attempt to interrupt the process through political and/or military means, or protectionism, which has historically been shown to have very negative long-term effects. 

But in thinking about his book, I became increasingly impressed at the misleading character of the overall numbers we use to measure national success in global ventures,  This is particularly true with overall trade balance numbers. For instance, our use of GDP rather than GNP lumps production in factories in a country together, independently of ownership.  As an example, our scoring system considers all products produced in China as “Chinese”, even though a quarter of the manufacturing in China is controlled by non-Chinese owned businesses (many U.S.), and does not take account of the elaborate nature of global value chains.

Marsh gives an interesting example in his book by breaking down the dollar flow from Apple iPhones, which receive much attention for being “built” in China. In 2009, the listed value of the Chinese export of iPhones to the U.S. totaled approximately $2 billion, enough to promote significant anti-China feelings among those oriented in such a direction. According to his figures, the factory transfer price (paid by Apple to Foxconn, for instance) was $179 each. But these phones contained $121.5 million of components made by US companies and exported to China to be included in the finished product.  Only $6.50, or 3% of the transfer price was for assembly.  The remaining $172.50 in each phone was for components coming not only from the U.S., but also from other countries such as Japan, Korea, and Germany.  Looking at these figures, Marsh calculates that the trade balance to the U..S. could be seen as being $73.5 million paid to Foxconn for the assembly and related engineering effort put into the phones, offset by $121.5 million of U.S. products exported to China, for a net surplus of $48 million in our trade with China, rather than a deficit of approximately 2 billion.  Components from countries other than the U.S. were, of course, indirectly paid for by the U.S. via the $179 transfer fund, but they show up as imports to China, not the U.S.  Sound confusing?  It is to me.   And of course Apple does very well by selling the finished product for approximately $500, so other than our perceived loss of jobs to Foxconn, which provides outstanding service to Apple, how unhappy should we be that the assembly of iPhones is “outsourced” to China?  

When it comes to global manufacturing, if the “New Industrial Revolution” predicted by Marsh continues to take place and global value chains become even more complex, we have to learn to think a bit more deeply about balance of payments, and  more cooperation between nations wiil be necessary, as well as the traditional competition.

 

 

A Good Read - The New Industrial Revolution, by Peter Marsh

Peter Marsh is a journalist who writes about manufacturing-related industries for the Financial Times.  This new book is well worth reading, whether you are directly involved in manufacturing or not.  It has a good bit of history, an explanation of what is happening in the world now, and Marsh’s predictions about the future.  Although I was familiar with quite a bit of the history he covered, I very much enjoyed the book, partly because Marsh definitely knows his stuff, and partly because his British viewpoint makes him a bit more credible than the present voices in the U.S. bemoaning China and outsourcing. 

 Over the years, different countries have led the world in manufacturing. Interestingly enough, China was the leader in global manufacturing in the early 19^th century, producing about a third of the world’s output.  India was second with a quarter, and Russia a distant third with 5 percent. Britain’s share was under 2 percent.

 Since then, China dropped sharply to only about 5% of the total and Britain became the leader in the late part of the 19^th century with 20% of the total.  Then in the early 20^th century, Britain’s share dropped and the U.S. took over the lead, which by 1950 had climbed to over 40%. Now, China is back, having a slight lead over the U.S. at about 20%, and many other countries, such as Germany, Japan, South Korea, and Brazil are playing a major role. He mentions that in 2010, 41% of the world’s production took place outside of the conventionally defined “developed” nations.

 Historically, China went through a long slump in manufacturing, and is now rapidly increasing its global role.  The U.S., for a number of reasons, is going in the opposite direction.  But overall manufacturing in the world is increasing, so the overall share a country may have does not tell the whole story.  Even though manufacturing levels are now down due to the economy, in general manufacturing in the U.S. has continued to increase, even though it has a lower share than in the past and is changing its nature (more automation and global involvement).   Marsh feels that in the long run, manufacturing output is somewhat related to population, and that China, India, and other developing countries will continue to increase their global position, although less rapidly than in the past few years. But he feels  there will be plenty of room for manufacturing in the presently “rich” countries.

 Marsh sees major changes in the processes of manufacturing and the nature of products in the future.  He sees not only mass customization, but more individualization of products, more mechanization of production, and new types of hybrid businesses and closer relations between companies in “rich” countries, and companies in “poor” ones, since each have unique strengths and goals. He sees a continued increase in globalization, and increasing specialization between companies that do mainly research and design and those that focus on production.  He points to companies such as Apple and Cisco, that contract out their production, except for prototypes for use in design and testing, and companies such as Foxconn, that specialize in production.  But he acknowledges that all companies will seek to add more value by moving toward product ownership through owning intellectual property and hiring increasingly sophisticated people.

 Although, like many, Marsh is excited about flexible manufacturing and customization of products, I was  happy to see that he admits that this is not the answer for all products.  In the 1940’s and 50’s, much effort was put into the standardization of products.  This was not only to take advantage of mass production, but also to make products easier for people to use.  We seem to be losing sight of this with our present products and our emphasis on innovation.

 Products are to serve us, not challenge us.  One of my favorite radio stations in our area just changed frequencies.  I am not enjoying changing the presets (buttons) in the receivers I own, because each requires a different ritual. I am not impressed by the designers who undoubtedly thought they had a cleverer way to do so.  One of my friends recently mistakenly turned off the sound on his cell phone, and could not figure out how to turn it back on.  Although it was a strange phone, I volunteered to help him.  This took much longer than it should have, since his phone has a very different menu layout than mine.  As a consumer, my life would be easier if, displays and maintenance and operating procedures were standardized as much as possible, even though the producers might have to give up a bit of their individuality. But I look forward to more customization of “off-the-shelf” bicycles.

 I will talk a bit more about  Marsh’s projections for the future of manufacturing in my next post, but again, I think his book is a good general read for anyone.  It is published by Yale University Press.