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1 Bob Levin  Sun, Sep 4, 2011 2:21:29pm

I would disagree. The American experience is that innovation does lead to growth and prosperity. For years the US led the world, and most likely still does, lead the world in patents, which have lead to new companies.

Microsoft and Apple saved the US economy in the 1980 and 1990s. Now, whether a telephone/Batman Tool Belt is what we all need, that's another issue.

2 freetoken  Sun, Sep 4, 2011 2:31:02pm

While I think that the topic is important, I do take exception with Hart-Lansberg and the Asian Development Bank's analysis of the "costs" of the iPhone.

Put simply, both seem to be unaware of the RDT&E and post-purchase support and the life-cycle costs of complex systems. Thus they think that Apple is making much more "profit" per machine than in reality.

More importantly, they underestimate the number of jobs that the iPhone brings to the US. Not only does Apple directly employ thousands of engineers working on this product line, but the communications companies also benefit from the iPhone (which is why they sell them, after all.) And furthermore, the third party Apps creators, many of them in the US also, have jobs directly related to the iPhone.

Finally, both set of authors ignore the socialized costs that arise from pollution and resource requirements, which China bears by hosting the manufacturing.

3 Achilles Tang  Sun, Sep 4, 2011 2:51:53pm

re: #1 Bob Levin

I would disagree. The American experience is that innovation does lead to growth and prosperity. For years the US led the world, and most likely still does, lead the world in patents, which have lead to new companies.

Microsoft and Apple saved the US economy in the 1980 and 1990s. Now, whether a telephone/Batman Tool Belt is what we all need, that's another issue.

I don't know about MS and Apple ever saving the US economy 20 or 30 years ago (when outsourcing was just starting in a large scale), but innovation by a small number of engineers (many of which are now foreign or foreign based) does little for the overall employment rate in the USA in 2011.

As to patents, China has surpassed the USA in numbers of patents in 2010-2011, and patents themselves are becoming problematic in an international economy where only some honor them and it takes more lawyers and other overhead to monitor patents than it often does to create the ideas.

4 Achilles Tang  Sun, Sep 4, 2011 3:04:26pm

re: #2 freetoken

Put simply, both seem to be unaware of the RDT&E and post-purchase support and the life-cycle costs of complex systems. Thus they think that Apple is making much more "profit" per machine than in reality.

It is true that R&D is a factor, although many businesses can do very nicely on 50% gross sales margin taking that into account. Apple does not do high capital cost R&D into, say, new forms of optical memory, like IBM does.

More importantly, they underestimate the number of jobs that the iPhone brings to the US. Not only does Apple directly employ thousands of engineers working on this product line, but the communications companies also benefit from the iPhone (which is why they sell them, after all.) And furthermore, the third party Apps creators, many of them in the US also, have jobs directly related to the iPhone.

That totally misses the point. The same could be said if absolutely nothing was manufactured in the USA. Little of the above earns export credit to the USA (and yes, the Apps are included). At some point we need to sell something to those from whom we buy stuff or we run out of money to buy it with. You know, trade deficit stuff...

Then there is a matter of corporate taxation. One reason for overseas manufacturing is that the foreign intercompany accounting can easily be made to show zero book taxable profit in the US; never mind the 64% profit margins in the article.

Finally, both set of authors ignore the socialized costs that arise from pollution and resource requirements, which China bears by hosting the manufacturing.

That has certainly been true in the past, but is changing fast in part due to Chinese internal requirements and in part due to outside pressure when gross pollution is identified.

5 Bob Levin  Sun, Sep 4, 2011 4:31:40pm

re: #3 Naso Tang

Did you ever hear the phrase 'As GM goes, so goes the nation'? That used to be the motto of the US economy. If you haven't heard it, it's because a significant shift occurred with the invention of the personal computer, causing virtually all of the US economy to retool. The leaders of this new industrial revolution? Microsoft and Apple, and the entire Silicon Valley culture.

Significant outsourcing began to occur prior to the year 2000, when many thought there would be a complete computer collapse, and therefore economic collapse, at the very beginning of the year 2000, when it was thought that the shift in date would set all computers to the year zero and thereby screw up all stored data. There was so much work to be done that companies began to hire programmers from around the world for this task. For companies in other nations, it became a simple matter of upselling their customers in the US.

The overall point, though, is that innovation does create new industries and is the engine of growing economies. This has been true throughout history.

6 Achilles Tang  Sun, Sep 4, 2011 5:19:47pm

re: #5 Bob Levin

First point: Microsoft and Apple didn't "save" the economy in the 80's. The PC changed many things, but I worked in software those days. Business didn't retool just because the computers became smaller or the internet made JIT more practical.

The 2000 year bug was a heavily over hyped issue that created a bunch of short term work for many (much of it automated scanning of old Cobol code) and outsourcing started well before 2000, but the biggest issue here is manufacturing, not Indian programmers. (Outsourcing of factories, not intellectual property).

The point of the link is that (USA) innovation creates new industries, but not necessarily in the USA. History is little guide when we are talking of manufacturing and jobs for those who don't have masters degrees in advanced technologies, or having real products to export in this age.

7 Buck  Sun, Sep 4, 2011 7:13:15pm

Coming within 10-20% of current Chinese prices is harder that you might imagine.

This isn't about 10-20%.

8 Bob Levin  Sun, Sep 4, 2011 7:57:25pm

re: #6 Naso Tang

We have different recollections of the 80s.

Business didn't retool just because the computers became smaller or the internet made JIT more practical.

You're kidding, right? When's the last time you saw an IBM Selectric? What do you think VisiCalc did for the average office? Do you even remember what an adding machine sounded like? Whatever the cause, there has been a complete overhaul in every machine, every office, every car, every appliance, every factory, every hospital, but not my former dentist's office, because of Silicon Valley.

outsourcing started well before 2000

Are you starting your timeline when Europe and Asia began to rebuild after WWII and were no longer dependent on US manufacturing? Or that a new Japanese plant in 1958 might make things for the 5 and 10 cent store cheaper than the same goods could be made in Iowa? Are you implying that there is something wrong with this? I must be missing your argument.

9 Achilles Tang  Sun, Sep 4, 2011 8:40:30pm

re: #7 Buck

Coming within 10-20% of current Chinese prices is harder that you might imagine.

This isn't about 10-20%.

You didn't understand that point.

10 Achilles Tang  Sun, Sep 4, 2011 8:45:59pm

re: #8 Bob Levin

We have different recollections of the 80s.

You're kidding, right? When's the last time you saw an IBM Selectric? What do you think VisiCalc did for the average office? Do you even remember what an adding machine sounded like? Whatever the cause, there has been a complete overhaul in every machine, every office, every car, every appliance, every factory, every hospital, but not my former dentist's office, because of Silicon Valley.

Are you starting your timeline when Europe and Asia began to rebuild after WWII and were no longer dependent on US manufacturing? Or that a new Japanese plant in 1958 might make things for the 5 and 10 cent store cheaper than the same goods could be made in Iowa? Are you implying that there is something wrong with this? I must be missing your argument.

You are starting in the 50's and 60's. I am not. In any case, I am talking of manufacturing, for export, not small office efficiency, nor selectrics. There was plenty of computing capability in the 70's and 80's that didn't depend on PC's. That's how I made a living then.

We digress.

11 Bob Levin  Sun, Sep 4, 2011 11:01:06pm

re: #10 Naso Tang

You are starting in the 50's and 60's. I am not. In any case, I am talking of manufacturing, for export, not small office efficiency, nor selectrics. There was plenty of computing capability in the 70's and 80's that didn't depend on PC's. That's how I made a living then.

We digress.

I'm trying to figure out what it is we're digressing from. If we eliminate the 50s and 60s, and the 90s are too late, this leaves us the 70s and 80s for....I don't know. If you're talking about the export of manufacturing, the types of the goods that made Walmart a powerhouse, then (because of the microchip) either the labor is very cheap to the point of slavery overseas, or it is almost completely automated and lightning fast in the US. Skilled labor has been evaporating for a long time.

Does this mean that we are agreeing, or is there a nuance that I'm missing?


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