February 10, 2004: Thou Shalt Not Whine: Thoughts
on Efficiency and Scale
by
Bill Snow
One of the mantras of venture capitalists, and thereby one of the mantras of the
burgeoning cult of VC101 (I can dream, can’t I?), is the term “scalability.”
Business models that scale – how many times have we heard that one?
Another way to say scalability is to say efficiency. Business unfettered
by the mindless (but well meaning) minions of red tape will constantly search
for increased efficiency. The results of this ceaseless search often
include outsourcing, mergers, and downsizing, all of which usually mean job cuts
in the good old US of A. A look at recent business headlines reveals this
grime reality: IBM will
outsource nearly 5,000 IT related
jobs to India; The JP Morgan/Bank One
merger will result in 10,000
layoffs; Kodak will
cut up to 15 thousand positions.
India, in
particular, is receiving plenty of
press about the trends of
outsourcing, and when you
consider that we are being bombarded with
story after
story about the loss of jobs
stateside, things look dire.
So, what
should we do? Should we institute barriers to trade? Let’s see, we
enacted the
Hawley-Smoot Tariff Act in 1930
to protect American jobs. The result of this protectionist measure was
more unemployment, not less. The Great Depression didn’t reach its nadir
until 1932 or 1933. Things got worse, not better, when Uncle Sam steps in
and tries to save jobs.
“OK,
Bill,” you say, “I’m with you. Tariffs are a bad thing. So what
should we do? Change our buying habits? Change our lifestyle
habits?”
Think
about that one? With the exception of my technology-challenged mother, how
many of us are willing to give up our digital cameras and return to film…so we
can save the jobs of those 15 thousand Kodak workers? After all, the main
reason for the Kodak cuts is due to the shift away from film to and into digital
photography.
Not me.
And I suspect most of you are unwilling to change your lifestyle so other people
can keep their jobs. We like the ease and, dare I say, efficiency, of
digital cameras. The fact that 15 thousand people will be out of work?
Not my problem, pal!
Probably
the only time I found myself in agreement with former Clinton Labor Secretary
Robert Reich is when, writing about job loss and changing economies,
he said, “America also used to
have lots of elevator operators…”
What a
great, sapient, way of explaining this economic reality.
Jobs
shift, jobs change, economies grow and adjust. This often results in
ambiguity and uncertainty. Then again, isn’t the nature of
entrepreneurship ambiguity and uncertainty? Isn’t the nature of what we
hope to do in business and entrepreneurship predicated of finding new ways of
doing things fast and cheaper? Isn’t that what VCs want to invest in?
We don’t
miss the days when 90% of our population was required to produce 100% of our
food, do we? How many of us, the fully infected gadget culture of instant
wealth, would be able to handle life on a farm? Subsistence farming?
I don’t think so.
We don’t
miss the millions of farm jobs that “disappeared” during the past 200 years.
As former secretary Reich pointed out, we don’t miss the elevator operator.
So why should we miss the IT jobs that are going to India? Instead of
griping about job loss, outsourcing, and other worries, let us be thankful we
live in a society that allows capital, people, and ideas to freely flow where
those resources are best utilized.
And
instead of being merely thankful, let’s take advantage of the fact that all of
us have the opportunity to become millionaires. Let me repeat that:
we all have the ability to become millionaires. We all have the freedom to
live life as we see fit. We all have the ability to make things happen for
ourselves. We don’t have to wait until some tinhorn bureaucrat says it is
“OK” for us to proceed. In keeping my column “fair and balanced” (since
I’ve already quoted a democrat), I’ll close by
paraphrasing something Ronald
Reagan once said: Individuals have the right to live like kings in US because
they have the ability to earn that living.
All it
takes is hard work and the ability to out think your competition. Embrace
changes, embrace new technologies, and try to find ways to leverage those
changes to benefit you. The system is set up for us to win, we just have
to believe in ourselves…and execute.
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About the author
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