March 24, 2004: Eternal Sunshine
of the Spotless Outsourcer
Venture Capital = Creativity = Entrepreneurship = Job
Creation = Outsourcing = Freedom
Today, I’m
dropping the “O-bomb” on you: Outsourcing. The most dreaded and
very topical subject: Outsourcing. The bane of overpaid techies
everywhere: Outsourcing. The word that we should not say in polite
company: Outsourcing.
The way things are
going the subject of “outsourcing” will soon join the ranks of
religion and politics as things you should not discuss on a first
date. Being someone who never walks away from controversial
subjects, let’s tackle this one head on.
First, outsourcing
is a positive development and a natural result of a free nation and
free people. Freedom for entrepreneurs to run their business the
way they see fit. What do you want? Some government hack, some
central planning bureaucrat telling you how to run your own
company? Is that freedom? Not to me. Outsourcing equals freedom,
and if you want to curtail outsourcing, you want to curtail freedom.
Second,
outsourcing means jobs are flowing to lower or lowest cost
providers, lowering costs for consumers. Have you ever wondered why
CD players, which cost $1000 in 1983, only cost a few hundred bucks
today? Or why that 286 Epson with 1 MB of RAM and 8 MB of total
storage I bought in 1989 cost me $2500, while an infinitely more
powerful computer costs less than $1000 today? Like it or not,
outsourcing benefits us all.
Third, more jobs
are being outsourced to the United States than outsourced
away from it. According to the Commerce Department, and as
reported in
the Wall Street Journal
on March 15, 2004:
“The value of U.S. exports of legal
work, computer programming, telecommunications, banking,
engineering, management consulting and other private services jumped
to $131.01 billion in 2003, up $8.42 billion from the previous year…
“Imports of such private services -- a
category that encompasses U.S. outsourcing of call centers and data
entry to developing nations, among other things -- hit $77.38
billion for the year, up $7.94 billion from 2002. Measuring imports
against exports, the U.S. posted a $53.64 billion surplus last year
in trade in private services with the rest of the world.”
Oops. Can someone tell me why we’re
being exposed these histrionic hissy fits over outsourcing from
network news talking heads, actors who failed to graduated high
school, and hirsute, Birkenstock wearing, know-nothing college
students?
The US has a trade
surplus in outsourcing. A $53.6 billion surplus, to be precise.
How come this isn’t being reported? More jobs are being outsourced
to the US than away from the US.
Outsourcing is a harbinger of freedom, and if we are free to
outsource some jobs to other countries, other countries are free to
outsource jobs to the US. And other countries are outsourcing to
the US.
All these factors
impact the world of venture capital because venture capital rewards
innovation, creativity, ingenuity, and hard work. Outsourcing is
freedom to make smart business decisions, and if we want to limit
outsourcing (under the banner of saving jobs), we will simply stifle
innovation and as a result, stifle venture capital.
And there’s
something else, and remember where you heard this first. This
current Sturm und Drang over outsourcing in the 2000’s is
what the sniveling over Japanese economic development was in the
80’s: A whole bunch of nothing.
As wonderful as
the Japanese culture is (who doesn’t love sushi?), and as incredible
as their post war economic story has been, Japan is known for
excelling at exactly two products: automobiles and electronics.
That’s about it. Japan did not over take the US economy in size,
scope, nor in the area that I believe is the true driver of
economics: creativity. While we don’t hear much these days about
how the Japanese are poised to take over the entire US economy, I
vividly recall my childhood and teen years, when much gnashing of
teeth was conducted over the advancements of the Japanese auto
industry, and the fact that if nothing was done about it, America
would have nothing.
A bunch of hooey
as it turned out. Japan does not the lead the world in drug
discovery (the US does). Japan does not lead the world in software
development (the US does). Japan does not lead the world in
computer designs (the US does). Japan does not lead the world in
patents granted (who does? Oh, yes! The US does).
Still not
convinced? Let’s look at economic development over the past 100
years, and think about the jobs that we’ve lost due to technological
advancements or outsourcing. Does anyone miss the 100,000 carriage
and harness makers we had in 1900? How about the 75,000 telegraph
operators who once earned a good wage in the US? How about the
200,000 blacksmiths who performed highly skilled tasks? How about
the 100,000 cobblers, or the 100,000 watchmakers we no longer need?
And are we worse
off because our farm employment has shrunk from 11 million workers
in 1900 to less than one million today? How about the fact that
people employed by the railroads has fallen from 2 million to 200
thousand? Is this cause for concern?
What we’ve gained
is hundreds of thousands, if not millions, of jobs in new
industries. In the last 100 years, we’ve created new jobs that
include: airline pilots, auto mechanics, medical technicians, truck,
bus, and taxi drivers, electricians, optometrists, professional
athletes, medical scientists, and dieticians, to name but a few.
The number of physicians has almost doubled in the past century, and
the number of self absorbed, egocentric, selfish authors and writers
(your humble scribe included in that list) have increased almost
fourfold.
In 1900, the US
employed zero airline pilots and mechanics and zero automobile
mechanics. By 1997, we had over 900 thousand auto mechanics and
over 250 thousand airline pilots and mechanics.
And yes, we’ve
created a lot of engineers and computer geeks. In 1900, we had less
than 50,000 engineers in the US; by 1997, we had over 2 million. In
1970, we had 160,000 computer programmers/technicians; by 1997 we
had over 2.2 million. (Source:
Myths of Rich and Poor,
by W. Michael Cox and Richard Alm.)
As someone who’s taken quite a few
risks in life, tried to hit homeruns, and more often than not has
struck out trying, I guess I have a difficult time sympathizing with
20-somethings who whine that they can no longer find programming or
web development jobs that pay six figure. So what! Boo fricking
hoo. Join the long list of people who wish they were paid more for
doodling with ones and zeros. Stop whining, and go create
something. Real money is only made by those who gamble. Unless
you’re willing to bet the ranch, you have no right to complain that
you’re not making enough.
Jobs ebb and flow,
just as the economy changes and adapts. One rapidly growing field
in the US is logistics, and much of that growth is being fueled
by…you guessed it…outsourcing.
I see nothing but
disaster if we bow to the shortsighted idiocy of protectionists and
the lunacy of the propagators of the “Bad News Gazette,” you know,
the collective brain-dead trust of the AP, 60 Minutes, The New York
Times, Time and Newsweek Magazines, or any of the major network
evening news programs. They continue to sell us the same Chicken
Little, “the sky is fallen” drivel that they’ve been hoisting upon
us for decades. All we have now is a new batch of economic
illiterates applying new terms to the same lame story: Things are
bad, and they’ve never been worse!
In the 80’s we
feared the Japanese; today we fear outsourcing. Mark my words; in
2010 or 2020 it will be something else.
Pessimists are
pros at straight-line extrapolation. Excelling at straight-line
extrapolation is nothing to be proud of, because development and
innovation rarely follow straight lines. These straight-line pros
are essentially the same brainless twits who told me in grade school
that the world will be out of oil by 1980 and we were entering a
period of global cooling.
Oops.
Make your own
opportunity. Stop listening to the talking heads who spew bad
news. Do your own research, dig for facts, and stop waiting for
Uncle Sam to cure your problems. That’s what entrepreneurship and
freedom is all about: the ability to make something happen. Venture
capital rewards innovation and creativity, and these are things that
only thrive in free societies.
Has your company been profiled by Bill Snow? Send
an email to introduce your company:
bill@billsnow.com
About the author
Bill Snow runs this site. If you haven't figured that out yet, I can't
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