This is my promised third column in a series about the effect of H-1B visa abuse on U.S. technology workers and ultimately on the U.S. economy. This time I want to take a very high-level view of the problem that may not even mention words like “H-1B” or even “immigration,” replacing them with stronger Anglo-Saxon terms like “greed” and “indifference.” The truth is that much (but not all) of the American technology industry is being led by what my late mother would have called “assholes.” And those assholes are needlessly destroying the very industry that made them rich. It started in the 1970s when a couple of obscure academics created a creaky logical structure for turning corporate executives from managers to rock stars, all in the name of “maximizing shareholder value.”
Lawyers arguing in court present legal theories – their ideas of how the world and the law intersect and why this should mean their client is right and the other side is wrong. Proof of one legal theory over another comes in the form of a verdict or court decision. We as a culture have many theories about institutions and behaviors that aren’t so clear-cut in their validity tests (no courtroom, no jury) yet we cling to these theories to feel better about the ways we have chosen to live our lives. In American business, especially, one key theory says that the purpose of corporate enterprise is to “maximize shareholder value.” Some take this even further and claim that such value maximization is the only reason a corporation exists. Watch CNBC or Fox Business News long enough and you’ll begin to believe this is the God’s truth, but it’s not. It’s just a theory.
It’s not even a very old theory, in fact, only dating back to 1976. That’s when Michael Jensen and William Meckling of the University of Rochester published in the Journal of Financial Economics their paper Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure.
Their theory, in a nutshell, said there was an inherent conflict in business between owners (shareholders) and managers, that this conflict had to be resolved in favor of the owners, who after all owned the business, and the best way to do that was to find a way to align those interests by linking managerial compensation to owner success. Link executive compensation primarily to the stock price, the economists argued, and this terrible conflict would be resolved, making business somehow, well, better.
There are many problems with this idea, which appears to be more of a solution in search of a problem. If the CEO is driving the company into bankruptcy or spends too much money on his own perks, for example, the previous theory of business (and the company bylaws) say shareholders can vote the bum out. But that’s so mundane, so imprecise for economists who see a chance to elegantly align interests and make the system work smoothly. The only problem is the alignment of interests suggested by Jensen and Meckling works just as well – maybe even better – if management just cooks the books and lies. And so shareholder value maximization gave us companies like Enron (Jeffrey Skilling in prison), Tyco International (Dennis Kozlowski in prison), and WorldCom (Bernie Ebbers in prison).
It’s just a theory, remember.
The Jensen and Meckling paper shook the corporate world because it presented a reason to pay executives more – a lot more – if they made their stock rise. Not if they made a better product, cured a disease, or helped defeat a national enemy – just made the stock go up. Through the 1960s and 1970s, average CEO compensation in America per dollar of corporate earnings had gone down 33 percent as companies became more efficient at making money. But now there was a (dubious) reason for compensation to go up, up, up, which it has done consistently for almost 40 years until now we think this is the way the corporate world is supposed to work – even its raison d’etre. But in that same time real corporate performance has gone down. The average rate of return on invested capital for public companies in the USA is a quarter of what it was in 1965. Sure productivity has gone up, but that can be done through automation or by beating more work out of employees.
Jensen and Meckling created the very problem they purported to solve – a problem that really hadn’t existed in the first place.
Maximizing shareholder return has given us our corporate malaise of today when profits are high (but are they real?) stocks are high, but few investors, managers, or workers are really happy or secure. Maximizing shareholder return is bad policy both for public companies and for our society in general. That’s what Jack Welch told the Financial Times in 2009, once Welch was safely out of the day-to-day earnings grind at General Electric: “On the face of it,” said Welch, “shareholder value is the dumbest idea in the world. Shareholder value is a result, not a strategy… your main constituencies are your employees, your customers, and your products. Managers and investors should not set share-price increases as their overarching goal. … Short-term profits should be allied with an increase in the long-term value of a company.”
Now let’s look at what this has meant for the U.S. computer industry.
First is the lemming effect where several businesses in an industry all follow the same bad management plan and collectively kill themselves. We saw it in the airline industry in the 1980s and 90s. They all wanted to blame regulation, then deregulation, then something else. The result was decimation and consolidation of America’s storied airlines and the services of those consolidated companies generally sucks today as a result. Their failings made necessary Southwest, Jet Blue, Virgin America and other lower-cost yet better-service airlines.
The IT services lemming effect has companies promising things that can not be done and still make a profit. It is more important to book business at any price than it is to deliver what they promise. In their rush to sign more business the industry is collectively jumping off a cliff.
This mad rush to send more work offshore (to get costs better aligned) is an act of desperation. Everyone knows it isn’t working well. Everyone knows doing it is just going to make the service quality a lot worse. If you annoy your customer enough they will decide to leave.
The second issue is you can’t fix a problem by throwing more bodies at it. USA IT workers make about 10 times the pay and benefits that their counterparts make in India. I won’t suggest USA workers are 10 times better than anyone, they aren’t. However they are generally much more experienced and can often do important work much better and faster (and in the same time zone). The most effective organizations have a diverse workforce with a mix of people, skills, experience, etc. By working side by side these people learn from each other. They develop team building skills. In time the less experienced workers become highly effective experienced workers. The more layoff’s, the more jobs sent off shore, the more these companies erode the effectiveness of their service. An IT services business is worthless if it does not have the skills and experience to do the job.
The third problem is how you treat people does matter. In high performing firms the work force is vested in the success of the business. They are prepared to put in the extra effort and extra hours needed to help the business — and they are compensated for the results. They produce value for the business. When you treat and pay people poorly you lose their ambition and desire to excel, you lose the performance of your work force. It can now be argued many workers in IT services are no longer providing any value to the business. This is not because they are bad workers. It is because they are being treated poorly. Firms like IBM and HP are treating both their customers and employees poorly. Their management decisions have consequences and are destroying their businesses.
At this point some academic or consultant will start talking about corporate life cycles and how Japan had to go from textiles to chemicals to automobiles to electronics to electronic components simply because of limited real estate that had to produce more and more revenue per square foot so it was perfectly logical that Korea would inherit the previous generation of Japanese industry. But that’s not the way it works with services, which have no major real estate requirements. There is no — or should be no — life cycle for services.
So evolution is not an option because there’s no place to evolve to. The IT industry has turned into a commodity business of high volume, lower margin products and services. The days of selling a $250,000 system for $1,000,000 and passing around big commission checks are gone.
Good management and business optimization are both essential and rare. You can’t succeed by merely saying you will solve your problems by selling more. You have to run your business a lot smarter. The way for an IT company to succeed is by being being smarter than the competition, not sneakier, dirtier, or less empathetic.
Empathy, what’s that?
IBM and HP (my go-to examples lately) are failing to recognize that a big part of their business has become a commodity. Calling it a low margin business and selling it off ignores the basic need for these companies to evolve and make serious changes to their business models. If the world is moving to low cost servers and you sell off your server business, what will you sell in the future?
Cloud computing is a prime example of a high volume, low margin, commodity service. If you don’t make the adjustments to operate as a commodity business, you won’t be able to succeed with selling cloud services. IBM and HP continue to cling to their 1990’s business model. Soon they will have no high margin products and services to sell, and they will no longer have any high volume products or services. Every time they sell a high volume, low margin business they paint themselves tighter in a corner.
A few weeks ago I was on a Southwest flight. I heard one Southwest employee say to some others “planes can’t make money if they are sitting on the ground.” They all knew exactly what needed to be done and why. You rarely see that business awareness and focus in every employee of a company, yet it is common at Southwest. You don’t see it with most other airlines. Southwest knows the value in their service lies in transporting people. If their planes are not in the air, they’re not transporting people. Do HP’s or IBM’s whole organization understand the “value” of their service?
It is only a matter of time until a company emerges that truly understands the value of IT service, because that need isn’t going away. Companies are only as smart as the collective intelligence of all their workers. If all their workers understand the value and business model, they can be a formidable competitor. When that happens IBM and HP will be in serious trouble. IBM ignores 99 percent of its workforce and keeps them in the dark.
There was period when the whole airline industry acted stupid. A lot of them failed and it was pretty ugly. There was a period when the Detroit automakers suffered a major brain freeze. Japanese companies introduced cars that were much, much better and slowly eroded Detroit’s dominance in the industry. Today Toyota and GM trade places for the world’s largest car company. Who would have thought that would happen?.
We’re right on the edge of losing our computer industry. As the market moves to Intel servers, anyone can become a big player. Where does that leave HP and IBM? The quality of “services” is so terrible right now the market is hungry for a better provider. If one emerges in Asia where does that leave HP and IBM? When that new spunky company makes it to the CIO’s office HP and IBM will be in serious trouble.
Honest to God, these American companies think that can’t happen.
We are at a very dangerous period of time in computer history and the storied companies that made most of that history don’t even see it. That’s because they are fixated on the vision of their leaders and their leaders are fixated on visions of their own retirements coming an average of four years from today.
So look, for example, at Meg Whitman and Ginni Rometty. All the things they’re doing to “transform” their businesses are causing more harm than good. They really are not aligning their business models to evolving market conditions.
We’ve lost the consumer electronics industry, we’ve lost over half of the automotive industry, we’ve lost millions of manufacturing jobs, and we’re about to lose our computer industry, too.
But it doesn’t have to happen.
In 1989 when Sony bought Columbia Pictures for $4.3 billion, many in Hollywood thought the end of American entertainment hegemony had begun. But it didn’t happen. It didn’t happen because the value in Hollywood lies almost entirely in the people who work in the entertainment industry — people who mainly lived at that time in Southern California. Sony, in turn, thought it was going to suck lots of profit out of Columbia but they couldn’t because a big star still cost $10 million per picture, a top director $5 million, etc. And don’t get me started on those Hollywood accountants! All Sony got was the skeleton of Columbia, not the heart or the blood.
Now look at the American IT industry in a similar light. American companies have been pretending to offer a superior product for a superior price while simultaneously cutting costs and cheating customers. Do you think IBM respects its customers? They don’t. But what if they did? What if IBM — or any other U.S. IT services company for that matter — actually offered the kind of customer service they pretend they do? What if they solved customer problems instantly? What if they anticipated customer problems and solved them before those problems even appeared? You think that can’t be done? It can be done. And the company that can do it will be able to charge whatever they like and customers will gladly pay it.
True mastery, that’s what we’ve lost. No, we haven’t lost it: we threw it away.
Robert,
Your article is the most concise and logical presentation of the massive harm done by the management philosophy “get the stock price up”. Do you find that start ups in the current time frame are founded on a similar metaphor?
As always, a highly informative, yet depressing, article.
Just splitting hairs, but while ‘greed’ is derived from Anglo-Saxon roots, ‘indifference’ is not. It comes from Latin differentia via Old French différence.
LOL! So I’m not the only person who was going to comment on that. That’s either heartening or terrifying!!
“planes can’t make money if they are sitting on the ground.”
This business awareness isn’t unique to Southwest. It’s an industry-wide thing called “AOG” (Airplane On the Ground), and everyone even remotely involved with the airline industry possesses this business awareness. I work for a company that repairs and calibrates test equipment used to certify avionics equipment, and whenever there’s an AOG waiting on us, you can bet we hear about it.
I don’t think RXC has ever seen a pouch with an AOG label being run out to a plane.
I would add that with the exception of Soutwest, the other airlines have devised other revenue streams that do not depend on planes flying.
It’s true that my only airline experience was working as a DC-4 flight engineer for Air Malawi flying pilgrims to Mecca (the company converted me without first asking, by the way), but my older brother spent 20+ years in Operations Research at American Airlines in Dallas so I’ve had most of this airline lore — and its quantitative basis — drilled into me. Never assume….
Actually, it is not quite as said in the article, what I heard from a Southwest flight attendant is “we do not get paid until the doors are closed”, in consequence, they are ready to fly, now you know why they rush you to your seat 🙂
AOG as a concept is not just airline industry specific, it is applied (albeit with differing slogans) across all industries where revenue depends on completion of contracts in a timely manner – which just happens to co-incide with high volume low margin services, such as airlines, (passenger AND freight). Irrespective of mode of delivery – air, road, sea, if the transportation is ‘offline’, current revenue is lost, and future revenue is at high risk from reputational cost.
RXC’s point was understandable – when the employees from the bottom up know the company’s operational imperative, and when that operational imperative aligns well with its overall business strategy, that is a good sign.
However, that single-minded drive to keep everything ‘up in the air’ – to stretch the analogy, is exactly what is driving multiple industries towards a dangerous race to the bottom of reducing maintenance windows & costs, writing off risk against potential legal costs from disaster, and driving coal-face employees into burnout from excessive shifts in high stress roles, with no relief resourcing, on failing & poorly maintained equipment. The great thing for the executives and legal? If there is an ‘accident’ they can usually blame it on the workers, citing fatigue & incompetence, rather than accepting responsibility for creating the culture which led to those conditions.
Robert,
Late in your story you talk about what if an American company really valued their customers, I have to say Apple came to mind (no doubt with their stellar sales) they must be doing many things right.
Anybody who has been using Apple products for a while (in my case, 30 years) know that Apple has historically been rather unconcerned with their customers– post-sale service and support was legendarily awful until the advent of the Genius Bar, and their products have rarely been designed with user serviceability in mind (lack of removable batteries is just one example). When Apple has succeeded– and there was a long period in the 1990s where they definitely were NOT suceeding– they have had a singular focus on their PRODUCTS, not their customers. Steve Jobs’ genius was figuring out what customers wanted well BEFORE they knew they even wanted it, and then executing on that vision. Unfortunately without Steve Jobs, Apple seems to be slowly slipping into the same abyss that they fell into in the earlier post-Jobs era of the late 80s to late 90s.
Apple is — and has always been — a special case, but here they don’t play the enterprise game at all so I’m not sure it applies. Understand that my last job at Apple (30 years ago!) was director of support programs.
Sorry Robert but Apple doesn’t pay its taxes the country they earn the money – similar as all other global corps. And prior you start to wine you should be thinking who made this all possible granting the banking industries such power in the late 80 and 90. Iron Lady Mrs Thatcher and the US Gov. If you believe there is someone destroying the US IT industries you should rather ask yourselves what they missed during the last 20years compared to others .
“”… they have had a singular focus on their PRODUCTS, not their customers.”
I haven’t heard it put that way before but it encapsulates them perfectly. And it’s far more efficient than what I was going spew out.
Re: ” they have had a singular focus on their PRODUCTS, not their customers.” As someone who has not yet found a need to participate in the Apple ecosystem, I may be qualified to express an unbiased opinion in Apple’s defense. It’s hard to make a distinction between the emphasis on customers vs. products. The products were designed to appeal to customers, otherwise they would not have been so successful. If we were to ask an Apple employee where their focus lies, I suspect they would say both.
Nope– Apple’s products were designed to please ONE customer: Steve Jobs. When the resources of a gigantic corporation are focused on pleasing one person, you are going to get an extremely focused product.
The fact that Steve Jobs was a visionary who could anticipate exactly what millions of people would want, and then successfully marshall the necessary resources to precisely execute that vision, is responsible for Apple’s success. They NEVER focused on “customers” (plural, abstract). EVER.
Of course, he answered only to God, i.e. himself. 🙂
Steve Jobs had the super power of using his Reality Distortion Field to convince people to buy the products he liked and had Apple build.
https://www.folklore.org/StoryView.py?story=Reality_Distortion_Field.txt
Actually that link, supposedly authored in 1981, describes the RDF as something he used on his employees to convince them to make the products he liked. Also, I liked this part: “Well, just because he tells you that something is awful or great, it doesn’t necessarily mean he’ll feel that way tomorrow. You have to low-pass filter his input.”
Apple’s IMAC all-in-ones require the removal of 12+ screws just to put a new battery in.
That is pisspoor design, by any measure.
They are in the same class as those cheap Chinese window air conditioners from Home Depot that are meant to be thrown out instead of repaired.
This story brought back memory of an experience the company I worked for had in the late 80’s with IBM. My company was upgrading 100,000+ PC’s. We noticed that IBM had specified monitors using *interlaced* display technology (for those of you that don’t know, ‘interlaced’ display technology is how the old analog TV’s worked, which gives a subtle flickering due to requiring 2 passes to display an image).
Now, keep in mind that NON-interlaced monitors were already in the market and were the default technology. So what IBM was doing was knowingly selling obsolete technology to a very large customer.
We alerted our executive management, including our CFO, who of course didn’t understand what the difference between interlaced vs. non-interlaced meant. IBM got word about the issue, and instead of doing the right thing, took our execs out to $$$ golf outings, dinners and the like.
What happened? IBM dumped 100,000+ obsolete monitors on us.
Perhaps you’ll be touching on this but I think its not just a tech company problem, I think it’s much more widespread than that.
In order for the ‘better kind of tech company’ your describe to make headway and lead a transformation, customers need to be making the choice to buy from those better tech companies and others like it.
Yet, throughout your post, it is clear that customers are lining up for the same old bad offerings. Customers still buy from HP and IBM despite their failings. Is that really because they have no better choice, or is it because customers cant or don’t chose better suppliers because customers are also driven by the same distorted corporate thinking around shareholder value?
In other words, is it the problem the supply of bad tech services, or the demand? Or both?
They have been running this BS on aircraft mechanics for the 35 years I’ve been in the business. I’m sure that it is SOP for the a-holes in the “management class”.
First- THERE IS NO “SHORTAGE” OF AIRCRAFT MECHANICS IN THE USA. Unless you mean a “shortage” of guys with 20 years of experience who will work for $12/hour.
Of course, one of the answers to this perceived shortage is “public/private partnerships” to train more mechanics. The classic “privatize the gains, socialize the losses” scam.
Then add the “diploma mills” and “Veteran Assistance” plans, the abuse of “Repairman’s Certificates” and flood the market even more.
Finally (and you knew I would get around to it), the “outsourcing” of heavy maintenance to Third World/overseas maintenance shops.
You want to know why AA ans Southwest are the only companies that seem to be dinged by the Feds for maintenance deficiencies? Because they are the only airlines left that actually have heavy maintenance shops anymore. Almost all of the others use sub-contractors.
If there is an A&P mech “shortage” it is of guys with 15-20 years experience, who know WTF they are doing. What you currently have is a bunch of 50 something guys who, having been on the “work harder for less and less money” treadmill are getting ready to say “screw it” and retire. The guys between 35 and 50 have mostly been run off due to multiple layoffs/pay cuts/benefit cuts/etc.
All of these guys will be replaced by 20-somethings with “Expert Systems”.
Well, you’re right about the aircraft mechanic situation. I love flying. I love aircraft of all sorts. I’m quite adept mechanically. I spent two years, five days a week, eight hours a day (with a total of three weeks off) completing the Aviation Maintenance Engineer category M course (the title of the accreditation under Canadian regulations) at one of the most prestigious institutions offering the training. Perfect attendance, a first for me!, highest overall marks in my class and as many good references from the teachers as I wanted. Graduated late 2004. Of my class of sixteen, only one of us got a job. Not me. The guy who got hired had spent three years as a gopher for a helicopter company, took the Turbine Engine Technician course and was employed by MTU for a several years before they downsized their local shop and laid him off. Then he went back to school and we ended up in the same class. The rest of us never even got a form letter in response to any job inquiries we made. Interestingly the company he works for did contract work for Southwest for a while. A spokesman from the same company appeared in a newspaper article about the “shortage” of mechanics in which he said all kinds of great things about how the company was growing and how they needed more and more aircraft mechanics. This was around 2011/2012. I looked up their job postings. Two posts open. All required the applicant to be licensed and ENDORSED on the 737-400 on up. Pay was about $30,000 per year. So they expect someone to hear about the great opportunities, take a two year course for about $30,000, get employed at minimum wage by another company who will be good enough to train them through their apprenticeship period after which they can take the final test and get their license. Then they’re supposed to somehow get sent to Seattle to take the Boeing type endorsement course for the appropriate aircraft and then they will be happy to hire them. For $30,000.
Yep. That’s what IT in the States is like.
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There’s no shortage of IT personnel in the States, but there IS a shortage of IT personnel willing to work for 30-35k a year.
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And that sums up the problem.
You beat me to it… but it’s getting like this all across corporate america, not just IT. It’s true in almost every field imaginable nowadays.
“All of these guys will be replaced by 20-somethings with “Expert Systems”.”
Expert egos, more likely.
It is true that there is, in fact, a shortage… of competent IT workers who are willing to work for walmart wages…
Re: “In other words, is it the problem the supply of bad tech services, or the demand?” The demand is for the cheapest services that get the job done. If those cheap services are sold by a well known company like IBM of HP so much the better. But to keep it cheap, those companies will use and abuse H1B and any other visa, to keep the cost down. Suppose the visa rules were strictly enforced or eliminated entirely. Then the companies would contract the work to cheaper foreign companies, just as we now do with manufacturing products in China. Suppose we outlaw all importation of products or services from foreign countries. Then, we will have given American workers a monopoly. Is that in anyone’s best interest? Maybe. Maybe not.
To simplify, your well-served customer = your pay & bonuses, if the customer may be served more economically, fine, as long as this never erodes the customer experience. An ill-served customer becomes a salesperson for your competitors.
Excellent, Bob. Excellent.
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The message to employees of IBM and HP is a sobering one. Your employer is destroying their business just as Detroit did in the 70’s and 80’s. We can complain about H1B’s. Even if the H1B program was fixed, the destruction of the IT industry would continue. This is a business management problem and evolution is the only thing that will fix it. A lot of jobs will be lost in the process. We can expect the same level of job destruction as was seen in the auto industry before things began to stabilize. IT workers, you need to find a different career and move on. IBM and HP employees, you really need to find different work and move on, and quickly.
John, couldn’t agree more. I worked at IBM for many years and watched the executive ranks turn into a bunch of ruthless goons. The handwriting was clearly on every wall, the execs called ALL the shots and they viewed the worker bees as a bunch of derelict idiots easily replaced with any available offshore body, skilled or not.
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Of course these execs, being technologically ignorant themselves and typically nothing more than corporate politicians, failed to grasp the service repercussions of their actions. However, since they were ‘the smartest guys in the room’, nobody could tell them otherwise.
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So to your post, I went and found a new job with a company that isn’t smash-faced drunk on ‘maximizing shareholder value’ and it has made all the difference in my life and career.
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I give IBM about 5-7 years before the wheels completely fall off the chassis.
It’s actually far worse than that…because corporations (especially large ones) are managed not to “maximize shareholder value” but, rather, to stabilize shareholder dividend flow, they tend to become moribund and inefficient. Take that, together with the fact that corporate directors and officers are totally unaccountable for their (and their corporations’) bad behavior, and you have a recipe for degenerate actions and harmful outcomes.
Stabilize shareholder dividend flow?? Not sure what you are getting at here, given that dividends have “stabilized” at historically low levels.
You have it exactly backwards. Dividends have practically gone the way of the dodo bird. It’s all about stock price now. Give me a company that pays a reliable dividend and doesn’t engage in short term machinations to boost stock price (and therefore executive pay) over a stock-price driven corp any day.
I’d argue that the costs of personnel in India are a lot closer to the costs in the US these days, not 10 times cheaper. Still, substitute Malaysia or China, and you’ve got the nail on the head.
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The reason why the US IT personnel are better are simply because they’ve got the 10-20 years of experience in the environment that overseas personnel don’t. And, given the structure of offshoring, the result is that very few people in India or Malaysia or China stay in the same IT job for 10+ years, so you’re constantly having to retrain personnel. If you want the experienced IT personnel in India, you have to pay similar salaries to experienced US personnel, but companies don’t want that. They want volume and cheap.
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But you get what you pay for.
My former company outsourced to Argentina. The average employee lasted 9 months there. We were constantly training up the new people.
In India companies frequently hold the employees’ passports and grade lists to keep them from leaving.
Erm, untrue. This is India, not the middle east. Passports and certificates aren’t withheld.
i must be missing something. America has already been eclipsed in IT services by Tata, Infosys, et al. No? If not, what am I missing. Just a few more years?
I think Bob is envisioning something better, not cheaper and more of the same. Those guys are beating IBM at this game, but he’s arguing (and I am praying he’s right) that something better emerges from the gaping chasm in the professional services market.
We’re hiring like mad, but that’s because our leadership believes we can’t have offshore resources working on our PHI data. If/when that changes I’m going to be running for my life, like everyone else.
Yes, what about Apple? Is it the way forward for the IT industry or is it just a rapidly inflating “iBubble” that will one day burst? Where does it sit in on the “maximize shareholder value” to “maximize customer/employee satisfaction” scale?
Can’t agree more. The computer industry replaced experienced people who were masters at their craft with cheaper offshore resources. Yes, they kept some to give direction and provide oversight, but the majority were let go. A lot of this happened ten years ago. The remaining experienced crowd is coming close to retirement. The cheaper offshore resources have never really worked with those people. Novices who work closely with masters become journeymen and eventually masters themselves. Right now there’s a big problem that the next wave of master craftsmen at many companies don’t exist.
Consider a new series… “Fall of the Nerds”. Or “Where are the Nerds?”. Or “A Call for the Nerds. Save us from the Bean Counters!”
The nerds did not have a professional Union, they believed in the propaganda that the strong would survive
The H1-b visa was established in 1990 with the passage of the Immigration Act of 1990, signed by GHW Bush and proposed by Ted Kennedy.
Great article Bob.
As always you hit the problem square on. If all companies do is maximize shareholder value than all else (including the business) must be sacrificed on that altar. It is exactly what is happening in business today. Maximize profits! – the customer and employee will just have to live with it.
And unfortunately, we do.
[…] I, Cringely has an article today – that says much the same thing – using many more worlds. It finishes this way: […]
There are two aspects to the change in the way businesses are run. The first is the fact that executives do everything they can to push up the price of their stock NOW! THIS QUARTER! UP! UP! UP rather than seek long term growth. However, there is a second aspect of this too: Short term investors who are more interested in driving up the stock price rather than in building a long term business.
Look at Carl Icahn and Apple. Was Apple some poorly run company that failed to live up to its potential? No, Icahn saw Apple had lots and lots of cash, and pushed Apple to do a stock buy-back to help drive up the price of its stock. Apple even had to borrow money in order to do this, Apple is taking cash which it could have used for research, hiring highly technical people, or even giving everyone at the company a two week vacation in Hawaii to buy back their own stock. What does Apple as a company get out of it? Nothing. It lost billions. What do short term investors like Ichan do? Make those billions as the stock surges temporarily upwards (as investors try to buy up Apple stock because the price will go up because Apple is buying its stock.)
I agree that for many companies, those that run it should have their interests aligned to those who own it. You want people who are thinking about the health and welfare of the company, and not merely enriching themselves. It’s almost a “Duh!” idea. Of course, that should be true!
However, in most stock companies, the “owners” aren’t the long term investors or those who hope the company will have a good quarter. It’s those who are merely looking to buy, have a bit of news that drives up the stock price, and sell. 90% of all stock trades are now done by computers using automated algorithms to buy and sell merely based upon stock price arbitrage. These computers know nothing about the companies themselves, but merely they can make 1/10 of a cent more if they buy stock on this exchange and sell on that exchange.
There are many proposals that could help. One is to force a brief window between an order and its execution (a few hundredth of a second). The idea is that this doesn’t affect the person buying stock because they believe a company will do good and its stock will go up in price, but will stop the constant churn (and sometimes cheating) of computer trades that merely are doing price arbitrage. Another is to tax stock transactions a few pennies per transaction. The cost will be minimal to long term investors, but will quickly add up to those who merely trade on small stock price movements.
The problem will be fighting intrenched interests who make money on the current system, and trying to enforce such a system in a world where you can easily move trading from one exchange to another in a completely different jurisdiction. If Europe and the U.S. enact these laws, you can bet some tiny island nation will suddenly become the hub of trade activity.
The more people like Icahn run around and disrupt things, the more I feel that taking a company public is a bad idea.
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Sure, you get that big payday, but then you become a slave to the stock price. In the case of most IT companies, that means minimizing R&D and lowballing salaries and employee development, the things that are necessary for long term growth but are shortchanged when you have to pump up your numbers.
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I’m not a big fan of Dell and the so-called quality of their computers, but Michael Dell did the right thing by taking the company private and keeping the Wall Street greed machine away.
Umm…where do you think Mr Dell got the money to take Dell private?
Don’t you think that Silver Lake Partners will eventually want the money they invested back PLUS a huge return? $23 billion dollars is a lot of money…
Of course, but he also had the guts to do it. He could have easily bailed, but he didn’t. Dell has stabilized, it seems, and they are doing well for themselves. And they have nobody demanding better shareholder value, either.
I cannot find any information on how well Dell is doing. Do you have any sources?
I can tell they’ve at least stabilized by the quality of their hardware and services. Their quality declined as their stock price declined, and once they went private their quality improved.
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Outside of that, I’ve heard through the IT grapevine that Dell is doing much better than they were prior to going private, but that is merely hearsay. I prefer to use the quality of work/equipment as an identifier, as disgruntled employees don’t often provide quality work.
I’m no Marxist, yet as Marx would point out the greed to hoard and get more is human nature. We’re all playing musical chairs and there are less and less chairs. What can be done? There is no easy answer. Perhaps the Shareholder value is just a natural necessary progression in what will lead to a collecitve collapse, dark ages and then repeat the last 1500 year econmic cycle anew?
SimonSays, Marx’ problem was that he misattributed greed to being a shortcoming of capitalism, when in reality greed is a shortcoming of the human condition. Greed flourished in communist systems too, as all material benefits flowed to the communist ruling elite, who seemed to enjoy them mightily. So we can safely leave Marx out of this discussion as he has nothing to offer.
Re:”greed is a shortcoming of the human condition”. It may be part of being human, but it’s not necessarily a shortcoming. It’s just a motivating factor that encourages us to produce, and obtain the resources to consume what others produce.
Greed is considered not only a shortcoming, but traditionally one of the deadly sin, because of the damage it inflicts on the goal of a healthy society as a whole, not to mention the individuals within that society. It is only recently that we have begun to see what society has long recognized as character flaws being redefined as virtues. Very strange.
There is a subtle difference between greed in the business, financial, or marketing sense, versus “the sin of greed”. Here is a thoughtful discussion about it: https://www.catholic.com/magazine/articles/the-sin-of-greed . The sin of greed is, like all sins, a personal matter between an individual and God, not to be judged by outsiders. We should not confuse wealth or high compensation with greed. Most of our sports and entertainment heroes appear to be over-compensated, same as many corporate CEOs. No one would accuse Apple, Microsoft, Bill Gates, or Steve Jobs of being greedy.
I don’t consider becoming wealthy and being greedy as necessarily the same thing. Normal people seek to become wealthy by doing things that helps both themselves and other people. Greedy people seek to become wealthy using various dishonest means that harm other people.
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Methods used by greedy people include: (1) false advertising; (2) theft of intellectual property; (3) bribing governmental officials to get undeserved advantages; (4) common criminal activities; and (5) financial engineering that portrays unprofitable results as profitable results.
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It is natural for most people to seek better circumstances for themselves. However, criminals and other corrupt people use unfair and harmful means when seeking this result. This use of unfair and harmful means is what is meant by being greedy.
“What if they anticipated customer problems and solved them before those problems even appeared?”
Interesting that Apple does that, and most of their customers are begging to buy the next iteration of an iThing.
Yet when Microsoft changed the menu layout of Office 2003 to the 2007 GUI, most people hated it. Ditto MS OS GUI changes – no improvement, just a change to the users’ workflow that is disruptive.
I enjoyed your article, Bob. Your experience plus your ‘finger on the pulse’ of the computer industry hits a bulls-eye. I can also tell you are a great copywriter…your writing flows with intentional precision. Waiting for your next article…
To fully understand this problem. Lets forget this column is about the IT business. This problem could be in any company or any industry, and the results would be the same. The core of the problem is painfully simple. Our corporate leaders have forgotten the most basic role of business. Business exist to provide products and services to its customers. It is the customers who provide the income to a business from which part of it is profit. If the business is managed properly the shareholders receive value. No customers, no shareholder value it is that simple. No amount of cost cutting can provide shareholder value if one loses their customers.
I always enjoy your articles. You are correct about the problems, but don’t give up hope.
First I was reminded of something Joel Spolsky said. I can not find the actual quote. Paraphrased, he said, “If an outsourced developer is as productive and “good” as a software developer in NY City, you would pay them the same $100,000″. If the quality was the same, the market would make the pay the same. He said it better, but you get the idea.
Second, you hold up Toyota as an example. Toyota uses a ruthless supply chain management to build cars. They take big parts and put them together. Working for Toyota is the “life long employment” and good stuff. Working for the smaller suppliers that are totally dependent on slim margins from Toyota is very hard. The model is to move the risk and inventory into the suppliers. Not good for everyone involved.
Finally, there are counter examples like Apple, Amazon, and Warren Buffet. They are managing just fine looking for long term value.
It is a shame that once great companies like IBM are failing. I don’t count HP, because the name HP is not the original company. They split HP into Agilent, then Agilent into Keysight which actually makes electronic instruments and does just fine.
The dinosaurs are not the future of technology for the USA or the world. You have the series about startups in the can. Please show us small companies, not in the valley, doing great. There is a future I can get behind.
Wanted to reorient focus to notable successful companies, you did it for me – thanks.
Bob, excellent article. Jensen and Meckling identified the general problem, which was agency hazard, but didn’t get to the underlying cause of the agency conflict between shareholders and management. Management has access to much better information than shareholders do, therefore they will always be in a superior position. Until these informational asymmetries are resolved in the favor of shareholders, there is no way to “align interests”. And the fact is, these informational asymmetries are absolutely inherent and unresolvable once a corporation gets beyond a certain size. The only solutions available are pretty drastic:
1) Restrict the charters of publicly traded corporations to highly specific purposes, like building bridges or railroads. Most people don’t realize that this was the norm until the mid-19th century.
2) Eliminate the rather substantial body of law that grants favorable treatment to publicly traded corporations versus other legal forms of business organization like sole proprietorship or partnerships. This body of law has been built up since the 1870s so you are talking about unwinding substantial federal law.
3) Eliminate the “corporate veil” and make corporate management vulnerable to personal liability.
The likelihood of these things happening is low, to say the least. But without a solution, we are facing a world run by corporate tyrants.
It is worth noting that we have the exact same agency hazard problem with our Federal government, and the situation is almost as intractable there as well. It is no coincidence that the people that run the corporations, financial institutions, federal bureaucracy, and 3 branches of federal government have pretty much merged into one indistinguishable privileged class that moves freely amongst these four different power entities.
I would highly recommend you read “Gangs of America” by Ted Nace. It is a short, well-written and well-researched book that shows how corporations dramatically tilted the legal landscape in their favor starting just after the War Between the States. You can find the book on Amazon, or just go to his website where he offers a free PDF download.
If that was actually the case, then why were CEO salaries going DOWN as a percentage of both sales and profits for the 20 years before their paper? They (and you) identify a problem that wasn’t happening. Cite some instances where it did.
Bob, you’re confusing one of the symptoms (CEO salaries) with the problem itself (moral hazard via agency conflict of interest). The moral hazard is undeniable, because management controls access to much more relevant information than shareholders can hope to attain. An honest executive will not take advantage of this superior position to maximize personal gain at shareholder expense, but a dishonest one will. Therefore, honest and competent executives are naturally disadvantaged compared to dishonest and incompetent CEOs. During the 50s and 60s executive salaries could have been mitigated for many reasons that aren’t germane. Remember that we are dealing with very limited data history here: the whole idea of a professional managerial class that is completely distinct from the ownership class is a relatively new development. Nineteenth-century corporations were generally run by people that had huge ownership stakes– Rockefeller, Carnegie, et.al. Once the professional managerial class became a reality in the postwar era, it probably took a few decades for (a) dishonest executives to rise to positions of power and (b) for them to fully grasp the advantage that they had over shareholders. And, it wasn’t until the information age started in the late 60s and early 70s that dishonest executives could accumulate the raw material required to fully advantage themselves over shareholders. It’s not clear what motivated Jensen and Meckling to write the paper when they did (an obvious question to ask is, where did their funding come from) but the fact is they did write it. It could easily have wound up collecting dust, but if you are a dishonest executive it is exactly the justification you are looking for. And if you are an honest executive trying to keep up, well, you would grab onto this paper as well. If academia generates something that can make a particular class of people rich, and that class of people are smart enough to recognize it, well guess what– it’s going to get used.
I have a guess as to why. I suspect the fact is wrong and that many CEOs are not being counted in the data because they are structured as S corp being paid under the personal income tax. these can be companies with hundreds of employees but might be family business or smaller partnerships with smaller incomes. Before the Kennedy tax cuts, the top personal income tax rate was 91%, and many high earning individuals were structuring themselves as CEO of a company to pay corporate income tax instead of personal tax. The Kennedy tax cuts dropped the rate to 70%, lowering the differential, then the Reagan tax cuts sent the rate to 50 and then 28, which is now at 41.
Superb piece! A very accurate, concise and engaging polemic on what’s at issue today!!
Well done Bob!!
The US computer industry is more than just HP and IBM. I don’t think the industry is affected much if both die.
H1B will cease to be a relevant issue as the new Trans Pacific Partnership requires allowing visas for people in computer services between member countries without restriction. I posted an excerpt in the previous post.
Lovely, just lovely.
[…] https://www.cringely.com/2015/06/24/the-u-s-computer-industry-is-dying-and-ill-tell-you-exactly-who-i… […]
Great, great article Bob! I have been trying to put what you said into some kind of concise format for some time. I would add something though. Michael Jensen and William Meckling definitely gave a reason for business to do what they now deem as common place necessity, I would argue it started earlier with Business Management Schools. These fine institutions gave the idea that you just had to be a good manager, didn’t matter if you knew the actual business or how your employees did their job, you managed people!
My Father worked in petrochemical plants his whole adult life. Started at the bottom and worked up. He finally was hired as an engineer, this was without any formal college education. This was known as a practical man. Somewhere at some point, that just went away, still hung on in IT, I suppose because of its newness. But at some point you had to have a degree, then it became a degree in computer science. This is because those managers, and the bean counter CEOs above them have no idea what to actually tell an IT “engineer” about doing their job. They mostly feel if I hire a computer science major with a degree, is safe, since I have no real idea what questions to ask of a job candidate to find out if he actually understands the biz?
I worked for a medium sized IT organization in a high school district. For a number of years our manager was although not an IT professional, a guy who really enjoyed technology and jumped in to understand the intricacies of IT. But the district decided I think because of $$ to move him sideways and make the position a stepping stone for future HS Principles. The department turned into a disaster, with major outages, etc. etc.
I think a lot of the economic decisions that are made in IT departments can also be laid on the doorstep of Microsoft. They promoted the idea all you need to do is buy MS products for the back of the house, MS Office, hire a 6 month wonder with MCSE and you will be so productive the money will just roll in. Well at first yes until the industry got mature, and when the big improvements didn’t continue to happen the bean counters said why not go cheap. Instead of 10 Admins, let’s whittle that down the 6, etc. etc. We have great connectivity with a T-1, why go faster.
“J. Pierpont Finch, a young but bright window-cleaner buys a book – “How To Succeed In Business” and following its advice joins the multi-national but poorly-connected “World-Wide Wicket Company”. Starting from the mail-room he rises to Vice-President in Charge Of Advertising…” https://www.imdb.com/title/tt0061791/plotsummary?ref_=tt_stry_pl
Great blog post, though I can’t help but think it was summed up nicely 40ish years ago when Roger Waters wrote the lyrics to the Pink Floyd classic “Money”. 🙂
“The average rate of return on invested capital for public companies in the USA is a quarter of what it was in 1965.” Do you have a reference for that? Not that I don’t believe it, but it surprised me. It seems to me, whatever the source is likely has other interesting information.
I’ve never looked deeper into this, but I keep hearing that all the productivity gains of all our technological advances have “gone to the top”. That is, increased productivity has benefited mostly the business owners, less so the workers. I also keep hearing the middle class is eroding and the wealth divide is getting ever-bigger. I believe these ideas are certainly consistent with Cringely’s thesis here.
It’s from Roger Martin’s 2011 book Fixing the Game (Harvard Business Review Press). Martin was from 1998-2013 dean of the Rotman School of Business at the University of Toronto.
https://www.sscnet.ucla.edu/issr/cstch/papers/BrennerCrisisTodayOctober2009.pdf
Customer service is certainly important, and an overlooked aspect of it is making sure that all of your employees have the ability and the authority necessary to “make things right” for a customer, regardless of what went wrong. I had a scheduling problem with a large car rental outfit in 2009, and ended up talking to multiple people trying to fix the problem. All were sympathetic and pleasant to deal with, but none of them had the authority to fix it. As a result, I’ll never rent from them again.
Part of this comes from forcing customer service people to use applications that track the “performance” of those employees while simultaneously making it harder for them to do their actual jobs. And part of it comes from poor management that directs employees to stay inside an artificial fence, lest they do something “too expensive” to help a customer. If you don’t trust your employees to do the right thing, you’re lost.
Re: “If you don’t trust your employees to do the right thing, you’re lost.” You might also be lost if you don’t match the right task with the right employee, and trust but verify. https://www.youtube.com/watch?v=As6y5eI01XE
Sadly so true- Lemmings.. good comparison
Actually, maximizing shareholder value isn’t a theory. In most jurisdictions, it’s the law. Corporations are required by law to maximize shareholder value — to the exclusion of all other comsiderations.
https://www.commondreams.org/views02/0119-04.htm
All law is to some degree an interpretive process. So “make money for the share holders”? What does that mean? Does it mean nothing but growing the stock price indefinitely until it splits, or does it mean like it did 40 years ago when it was consistent dividends? There was a sea change, and because of making the executive salaries based on rising stock price, guess what?
“…the directors and officers of a corporation shall exercise their powers and discharge their duties with a view to the interests of the corporation and of the shareholders….”
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Funny, I don’t see the words “maximizing shareholder value” anywhere in that statement! And “with a view to the interests” can be interpreted very broadly – including, of course, increasing profitability and share prices. But such financial interests are certainly not the only “interests” of a corporation, and to concentrate ONLY on these things is a stupidly narrow and greedy interpretation of these words. Also note that it lists “the corporation” before “the shareholders” (implying that the corporation’s interests take at least some precedence over that of the shareholders’), and not solely “the shareholders”.
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Pretty astute summary of the current state of the tech industry, sadly. I can see the same issues at financial organizations as well, with the same attitude to customers and staff. It would seem the big strategic consulting firms have infected public companies with a parasite class of management slowly sucking the lifeblood out of companies that once did great things.
Robert, well said and I agree. I’ve been in the I.T. Industry for 30 years and it has always come down to who provided the best service of the product or services sold. If you take care of your customers they will take care of you….
What, no mention of MBAs? Seems to me they and the teachings they received had a lot to do with where we are today. They were the geeks of “Greed is Good”.
[…] https://www.cringely.com/2015/06/24/the-u-s-computer-industry-is-dying-and-ill-tell-you-exactly-who-i… This is my promised third column in a series about the effect of H-1B visa abuse on U.S. technology workers and ultimately on the U.S. economy. This time I want to take a very high-level view of the problem that may not even mention words like “H-1B” or even “immigration,” replacing them with stronger Anglo-Saxon terms like “greed” and “indifference.” The truth is that much (but not all) of the American technology industry is being led by what my late mother would have called “assholes.” And those assholes are needlessly destroying the very industry that made them rich. It started in the 1970s when a couple of obscure academics created a creaky logical structure for turning corporate executives from managers to rock stars, all in the name of “maximizing shareholder value.” […]
I have three words for you: Time Warner Cable….there…did you feel the disturbance in the Force?
As always, Bob, you are dead-nuts on. The thing I’ll add is that we are living with the results of business-school mantra and the era of the MBA. While these “smartest guys in the room” have gone to the “best” schools, all they have shown is that they have no ability to think or act creatively and are one-dimensional quantitative managers. In other words, if you can’t measure it, it’s wrong. That’s why you see all the naysayers constantly calling for Apple’s demise. They don’t get how you can have an “expensive” product that is so profitable and widely loved. To these “managers” the only thing that can drive value is the lowest cost.
The biggest evidence that the MBA crowd is trying to “get” Apple’s biz model are all the classes on “innovation” as though it was something that could be learned from a book. These guys will never be innovators because they don’t have the bones to take risks let alone understand a good idea from a bad one.
An MBA might very well make a good manager into a better manager, but it really does nothing for “clueless” managers except make them into “dangerously clueless” managers! I’ve seen good, natural managers make excellent seat-of-their-pants decisions based on nothing more than a very limited amount of data, their gut instincts, and a healthy dose of common sense. Meanwhile, Ivy League educated MBA-types might sit around forever trying to gather “more data”, and either not make a decision in a timely manner, or make one that is far too dependent on their models and almost completely devoid of anything like common sense. That type of thing might look good in the short term but was often disastrous in the long term.
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True story: one Friday afternoon I was sitting in a meeting with a few MBA-types (technical folks at that) and a vendor, where we were discussing an unexpected and seemingly insurmountable issue that had brought our project to a halt. After a couple of hours of “management science” activities on the whiteboard, full of charts and equations and timelines and so on, they estimated that it would take six months and a half-million dollars to work around the problem, so they were going to put together an updated project proposal for doing that. (Given that the project was already troubled, this would have effectively killed it.) Meanwhile, growing tired of this I’d put my non-MBA thinking cap on, did some simple “what if” work in my head, and when they asked for my final input on the matter I told them that I would get back to them on Monday. Then I ended up completely resolving the issue with a few hours of research, test, and implementation work that weekend – going directly against the “recommendations” of the MBA-types and the vendor in the process. (Especially the vendor, who lost out on some substantial new billing opportunities when I implemented that solution.)
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Re: “MBA-types (technical…)” oxymoron detector activated 🙂
I bet he could have won Buzzword Bingo five times over in that meeting….
Cringely – T Boone Pickens is the name you’re searching for. He was THE 70’s corporate raider that popularized the term. He bought large companies and broke them up, selling the parts for more than the value of the whole company.
I think you’re right – the 70’s is when US corporate culture went from building a better mousetrap to squeezing blood from a stone.
The real question is how do we take the best of both philosophies, and I think you were right there, too: show the corporate leaders the profit in caring about your customer, and treating them like human beings.
Bob,
I feel your view of US computer industry is unfair. I am not sure the current decline of former giants can be blamed on the top executives or the culture of profit maximization.
The pace of innovation in the information and communications industry has been highly disruptive. Faster, better and cheaper technology from nimble young companies with no burden of supporting a massive installed base of old systems and software has been killing the established players. This would be true even if the management had invested in innovation.
The current giants like Google and Apple will be disrupted by changing markets and new innovations in search and gadget-free lifestyle choices of consumers. Even the young Facebook is facing declining use by current teens.
It is the nature of free markets. The tyranny of installed base has been killing off old giants than willful neglect by top management which mindlessly pursues profits.
I must respectfully disagree.
Nat Kannan
Then you’ve missed my point or I simply didn’t express it well enough. If these companies are failing simply because it’s their time to fail then all the investor ink that’s spilled explaining why one company or another is a diamond-in-the-rough has been totally wasted. It’s quants versus humanists on Wall Street today. The quants say it’s all in the numbers and the people don’t matter, but then the quants lately think also in fractions of a second and settle their accounts at the end of the day. PEOPLE DO MATTER and if you want to see an example of that look at Emerson Electric or Lincoln Welding — two very old companies for some reason still on the top of their games entirely because they listen.
Emerson Electric is an excellent example. They were led for years by a master CEO, Chuck Knight. Coincidentally Chuck turned down an offer to save IBM in the 1990’s. Lou got the job.
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Chuck’s leadership really reflected what Jack Welsh said, EPS is the RESULT of a good business plan. Yes, he and Emerson wanted to see better numbers every quarter. The difference is Chuck would have serious reviews with each division on a regular basis. He reviewed their business plans, investments, R&D, product pipeline, sales, expenses, … everything. The reviewed product lifecycle’s. As old products would be retired, their had better be new products to fill the void.
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For Emerson to produce more revenue and more profit every quarter, every division had to produce more revenue and profit. Chuck made sure every division had a business plan that would produce those results and they were executing them well. Those review sessions were intense and often brutal. Chuck was a demanding leader. But he insured Emerson had quality people leading every division and they had what they needed to continually improve their division.
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Emerson was everything Wall Street wanted in a publicly traded company. This was not the result of cutting to prosperity. They did it with great leadership and management. They way Sam and Ginni are running IBM is entirely different than the way Emerson is being run. IBM is still dependent on high margin products and services to cover their high cost of sales (commissions, etc). The computer industry is moving to a commodity business. Emerson is the master at making this transition and flourishing in a commodity world. Ten years from now IBM will be a much smaller company. Emerson will be bigger.
The American mentality is to run business with cheap guest labour, you can see this is the restaurant business
In a European you have few but high qualified labour providing a five star experience even in lesser restaurants
In America you have hordes of guest workers and poorly qualified, so you have poor service, the waiter and cook can’t even read or speak the same langue
In Europe the waiter speaks multiple languages
It’s a management mentality thing, a slaving colonial mentality, they had it with the blacks, now the Hindus
This is not the European way, you don’t see any European country do this kind of thing
The Germans don’t, and neither do the other countries, neither does Canada and the common wealth, only in America
Remember, America is the land of opportunity. Europe can guarantee high quality service at low cost by essentially limiting the opportunities for advancement. Smart people may be encouraged to do a good job by doing an easy-for-them job, and then take lots of time off and vacations. No point in working hard long hours, since it won’t get you anywhere anyway, so why bother. In America, we have the somewhat unfortunate Peter Principle, that promotes individual advancement, sometimes to the detriment of the company.
Government should prevent this kind of behaviour, instead they promote it, and the American people don’t hold their government responsible for anything, not importing guest workers to replace them, not creating a monopoly that grossly overcharges them for health and education, food production that poisons them with corn syrup and antibiotics, on and on, Americans used to complain about things and protest, now they are just abused every which way
Complicated issues, not necessarily good or bad:
Re: “corn syrup” https://en.wikipedia.org/wiki/High_fructose_corn_syrup
Re: “antibiotics” https://en.wikipedia.org/wiki/Antibiotics
Between h1b visas and security clearances post 9 11 Americans are completely intimidated
These situtations are engineered planed and executed, government after government, little by little, until nothing is left for the average American
The H1-b visa was established in 1990 with the passage of the Immigration Act of 1990, signed by GHW Bush and proposed by Ted Kennedy.
Great article.
Here’s what worries me: Like a boil that bursts, when IBM goes pop, all those evil MBA greed pussers will be loosed on America, infecting other companies. It will take some time for them to be killed off.
Warren, not to worry. Most of the MBA execs I worked with at IBM, if suddenly unemployed, couldn’t land a job at Walmart cleaning the restrooms.
Re “Killed off.” Are we talking lynch mobs here?
I would submit that US software, services, and even most computer hardware companies are sunk in the long run anyway, no matter what they do, because the rest of the world doesn’t want the NSA fondling their shorts.
Excellent piece, Bob!
I don’t see our large computer companies coming back; they are run by in-crowd CEOs and other clueless senior suite executives who are already wealthy. These people are not driven by excellence. Why should they be, when they are handsomely rewarded for poorly managing their companies – often right into the ground. And, after they have managed to ruin a company, they move on with with their coterie of wealthy, influential in-crowd senior executives and Board members only to land somewhere else – in politics; as media whores, two-bit “business advice” authors, etc.. After a brief hiatus, many of them eventually wind up being placed right back into a senior suite by their “friends” in high places Look at Meg Whitman as a prime example; she’s as close to incompetent as they come, but there she is, being rewarded by the hp Board. Look at Carly Fiorina.
Alas, as the plutocrats get one little law after another written into code – laws that drive wages and opportunity away from Americans – we are going to see a continuing decline of our middle class.
All said, I’m hopeful that the base of true diversity (intellectual and cultural) that is unique to America will somehow find its way to real social, workplace, educational, and enterprise innovation. The potential is there; we have to experiment in every way possible; we must find ways to unlock dormant human and intellectual capital; this will take courage and smarts. We have to shake off the doldrums of our accidental wealth – something that happened as a result of WWII leaving America as the only nation standing, with no serious competitors. A moron could have made profits in the 50’s, 60’s, 70’s, and 80’s (a lot of them did!); there was no competition!
The boys and girls at the top are too fat and happy to change; they are America’s version of tired blue blood that will eventually die off; it will take some time.
Chin up!
Bob,
As always, good stuff. I’ve been reading your stuff for years, since before the days of Digital Review and Charlie Matco. I offer up my worm’s eye view of upper management in the IT industry. It is in a semi-serious tone; if I took this stuff seriously I’d be up on a roof with an M14.
Management is, by and large, a hostile alien parasitic lifeform that survives on the lifeblood of companies. The lifeform sends out scouts, who find a fat, profitable corporate host, and attach themselves pronto. They then signal back to the horde, who swarm the host (friends of friends of friends…) and suck the life out of it until it drops to its knees. Scouts are then sent out to procure another host. And so it goes, from collapsed host to collapsed host, until eventually (as you allude) there is nothing left. And this is a career path for these people…
As evidence, in 1980 Atari Inc. posted over 2 billion dollars in sales. Professional management was brought in, as Atari was just populated by engineers who CREATED product that we couldn’t keep enough in supply as it sold so fast. Fast-forward to 1982, when we were BANKRUPT. Our headcount in Silicon Valley had dropped from over 18000 to around 1000 or so. By the time that Jack Tramiel (forced out of Commodore by marketing geniuses) talked Time-Warner into LOANING him the 200 million dollars to buy Atari, we had a marketing building with over 600 marketeers out of a workforce of 1000, give or take. Engineers? Who needs those?
We had a pep talk from J.J. Morgan, of Time-Warner fame when they took us over, who proudly proclaimed that he was going to “apply the universal truths of marketing to the problems here at Atari”. Problems? Like “can’t build product fast enough to satisfy demand” or “too much money” perhaps?
It’s a shame that the leeches can’t even take the long view, that, “Hey, this here trough is pretty nice. Think we’ll stay here awhile.” That’s what happens when you go from techies to bean-counters, but I’m sure I don’t have “the big picture”…
Briefly: this is happening across the economy as the infrastructure investments from the Cold War years decay and reach end-of-life. In IT, it is the old data-processing layer that is rotting away. As its authors age out and die the applications become usmaintainable. From a certain point of view, it makes sense to monetize this legacy as fast as possible. Interesting that the rise of networked systems has hastened both the monetization trend and seriously limited the reach of regulatory and enforcement agencies. (Monetization = asset stripping and the rise of the 1%.)
That’s a good one. Companies like HP and IBM got too big through mergers that were supposed to boost the share prices. Unless they spread overseas they can’t survive. Except that spreading overseas is hard to do in IT and they’re doing it backwards. You want to sell overseas, not move your people there and sell back.
This has to be the dumbest thing I’ve ever read in my life. I want my 15 minutes back.
Great article about the demise of the old-style enterprise software and services companies with their 35% margins.
I left enterprise software companies in 2009 and now use open source software to “work smarter” doing cloud devops consulting often using the Amazon AWS cloud. On the current project i even help the outsourced part of the development team in india – sort of outsourcing in reverse.
The internet and services like github are allowing clever people around the work to build open source tools collaboratively and use them in consulting engagements and beat the old-style computing giants. This could be another article in itself.
Funny thing about all of this, I don’t think anyone has asked a basic question, all of these service companies are in essence outsource companies and why do companies do it in the first place? There was a time when PCs and Networks and I were young when you hired a consultant or a firm to come into your company because you were doing some new edeavor and you didn’t “yet” have the expertise to cover the bases. You paid top dollar for the person or persons to come in and setup your new AD network, or your initial web sit, etc. etc. Then they were gone and someone learned it or you hired your own expert. I applied at one time to a company that I knew an engineer, not computers was working for. They wanted someone with experience with a given computer language which I had. They are a huge carrot producing company. Anyway the interview went great, said they would be calling for a interview to meet the bosses… nada. Turned out from my back channel that they decided not to go with the program and the language I had applied for. The story was they had a good DB program created with some DB that was now getting long in the tooth, and was getting a little unwieldy because of that. For years they had been trying to find the perfect replacement going through several vendors, looking for that complete all around solution? Spending each time a million or so. And each time at some point they had been entering orders and such in the old slow DB and before it was over they were using their same old software.
That was a long winded statement. But take that same company and tell them, look you don’t know how to process raw carrots properly. I can revamp your entire packaging plant, do it for 10% of gross and you can sit back and collect the profits. They would be laughed out of the place. Yet companies go we can’t up scale our order system. We don’t have the expertise we need to hire a big firm to do this????? How will they know the details of carrot production? How will they ever no intimately the quirks involved with your particular customers? Well they can’t. And when it comes to outsourcing your IT staff wholesale. How can you hire a firm, that then puts an ad in the paper and puts people in your facility and do it for less money than you did, and expect them to do as good a job as the people who worked for you? Does anyone actually think they will put in extra time for less wages? Etc. etc. The whole concept is a joke, and no one can convince me it is a good idea.
its the mentality, and laws, why do they hire cheap staff for restaurants that can’t speak English and have hi gene habits from India, why is this tolerated, why are there no standards, health and safety
You can have someone being a nurse cleaning up crap, and serving you dinner spreading disease
Why are these things allowed in the U.S. ?
There are no health concerns in the U.S., importing Hindus which have no control over antibiotics and feeding animals antibiotics as growth hormones could plunge the U.S. into a pre antibiotic age where you cannot even perform surgery, this is according to the world health organization
[…] On hardware commoditisation: […]
To paraphrase Shakespeare – “First Kill all the MBAs”. I’ve seen exactly the same problem in governments – at one stage, countries prided themselves on what they did through their governments (USA and Australia come to mind). Major public infrastructure construction – roads (US Interstate Highway system, dams, irrigation systems (Snowy Mountains Scheme in Australia), public utilities. But then Governments were guided by “People Who Got Things Done” – engineers, and their ilk. Now, most governments are too afraid to actually do anything themselves – the MBAs who advise them push for “Public / Private Partnerships” (Privatize the profits, make any losses a public responsibility), all taking the Reagan line – “Government isn’t the solution, Government is the problem”. The problem is that Government refuses to implement a solution.
Just as companies are concentrating on a mythical measurement – Earnings Per Share – that is short term (next quarter, next reporting period), governments (and the politicians) have also dropped the ball, concentrating on getting elected, which generally means raising the fortunes required to run a campaign. They have forgotten about what their real purpose in life is.
So what about stock ownership structures like Google’s where essentially the original founders basically control the stock and are essentially unaccountable (they cant be replaced due to the voting stock structure). Of course they won’t live forever.
In theory, this means they can manage for the long term and avoid worrying about short term “shareholder value transactions” that you see a lot of (buy backs, leveraging up to pay dividends etc.)
On the other hand, this is somewhat the same problem that European Royalty had – you could get some good Kings and some bad ones and the long term result was often suboptimal.
Google got much worse once the original owners took control
Kings have no interest in messing up their countries valuable assets for short term gain, they have no interest in importing Hindus and destroying their subjects know how and wealth
Kinds can be protested against and made to advocate if they are not popular
They have been known to stone the royal car when the British economy is not doing well
Trey to stone the presidents car in protest and see what happens to you in free America , you will probably be shot
You can be put in jail for protesting in America and get a record
Corporations should have the public good and interest in mind, like say the bbc corporation
The government should be the watchdog, but is clearly not
It’s not the case of just having one bad president or king pushing Hindu visas to replace Americans
All of the presidents and politicians have contributed towards it, few speak or vote against it, some sit on board or directors
The H1-b visa was established in 1990 with the passage of the Immigration Act of 1990, signed by GHW Bush and proposed by Ted Kennedy.
The average rate of return on invested capital for public companies in the USA is a quarter of what it was in 1965
The assets of a country are its subjects slaves and land
No king would diminish the value of his subjects by imposing third world slaves
There are lots of reasons not to import Hindus, public health,antibiotic resistance, third world health hygiene standards and education, destroying professional jobs, the reasons are many, but none dissuade the corporations and the American politicians
There is a lot wrong with America, health education, importing Hindus, lack of labour protector and benefits,
Yet Americans have Ben silent and taking all the abuse, while corporations are taking all the benefits money and rights
Americans need to practice their rights, while they still can and have some
Instead hiring practices are based on race protecting some groups like Hindus giving them full employment why,e throwing Americans that created these corporations through paying taxes and the Cold War to the dogs and the streets
Just at a guess, could it be because USians secretly love the American caste system and see the pain, toil and suffering of those beneath them as a common good ripe for their personal capture?
@pdurao,
Enough with the “Hindu” crap, a**h***. Get a life!
@pdurao,
I suspect you already knew this, but am going to give you the benefit of doubt and assume you are just ignorant and not willfully narrow minded.
* —-
The people of India = Indians.
The people who follow the religion of Hinduism = Hindu.
*————————————————————————-
Citizens of India could be followers of any religion:
Hinduism, Christianity, Islam, Buddhism, Sikhism & more.
*————————————————————————-
If you have a problem with employees being replaced with people from the country of India, the relevant term is “Indians”, not “Hindus”.
* —-
Unless, you have a problem with folks who are followers of the Hindu religion, you are incorrectly using the term “Hindus” where you should be using the term “Indians”.
There. Now you know the difference.
Do you see coverage of what Disney did on TV or is that controlled as well ?
Jensen and Meckling’s paper didn’t create the corporate condition we are in today; they simply articulated what everyone in the business world already implicitly or explicitly knew. The conditions we see in the market today are much more the result of Fed monetary policy (e.g. managing inflation by artificially keeping interest rates low, thereby forcing investment dollars out of bank savings and into stocks, which in turn inflates stock prices) than some stating-the-obvious academic paper.
The fed does lower or raise interest rates to manipulate the economy to a degree. But those rates are decided mostly by the results of what the economy does, not the other way around. Artificially low is your opinion, not something that can be quantified, and if you hear that term expressed by an economist he is blowing smoke too. Greenspan just fearing inflation put us into a recession that Regan turned around and took credit for when Greenspan took the breaks off. I notice people talk more than once about rates are artificially low, they never seem to say the opposite? Why? The rich make most of their income off of interest on money in a variety of ways.
Hi Bob,
long-time reader of your work and also fan of rock, over in the UK.
Saw this on BBC then found on youtube watch?v=42HPN39gMcQ “Play it Loud: The Story of the Marshall Amp” and thought – isn’t this how business used to be done?
Fun to watch and bring back those memories too…
🙂
Steve B
Interesting, this too came out of the Cold War
The British computers dominated too in the 80’s with cutting edge technologies
But the Americans destroyed the British companies, labour funded the British computer boom, and the Americans Reagan and Maggie destroyed it
Now the Americans are destroying themselves after destroying everyone else
The technology both in Britain and the U.S. should have been kept to create new industries, but they are not keeping it or the know how
As Bob says giving it away, you use it to create a new industry, not give away
[…] [ Source : I, Cringely ] […]
One thing different about the 1960s was a higher degree of workforce unionization. I suspect CEO pay tracks inversely to workforce union membership. That strikes me as the more significant, underlying cause. You can always find an economist to argue you should get a raise. I think it was the increasing asymmetry of power that occurred in the private sector that caused the CEO pay explosion.
.
As for IBM and HP you’re right they have a problem chasing high margin business. They’re chasing it off a cliff, which is where it’s going. Every industry matures and becomes all about cost, even Microsoft is starting to find this out. I wouldn’t be surprised to see Microsoft shrink employees by 50% over the next three years.
This has all got to be something in a computer simulation . . . I guess the singularity is real.
I didn’t read all the comments, but…
Anybody hear of tariffs? Getting rid of trade pacts? Protecting American jobs?
Where’s THAT political party?
All the potential leaders have been severely threatened, thrown in jail without charges, or “suicided” in defense of national security thanks to NSA surveillance.
FYI offshoring does not save that much, after accounting for the extra in-US management to handle communications and coordination it ends up being a mild savings. Frontline level 0 phone support is an exception.
My company created several hundred IT jobs in Boise at only slightly more cost than offshore, and we’re getting great customer feedback and results from the team.
[…] About Sweatshops Did Obama “Abandon Israel”? George Will Confirms Nixon’s Vietnam Treason The U.S. computer industry is dying and I’ll tell you exactly who is killing it and why The Shift to Renting Probably Makes Sense in the Uber Economy Who’s Speaking Up for the American […]
Old Pennsylvania joke:
Why is The Tariff like Marriage ?
Both are ways to
Protect the Domestic Enterprise, and
Encourage the Infant Industry
I enjoyed reading this. I find it very frustrating that the people at the top seem to have no idea how their companies generate wealth. So they out-source as fast as possible and the real wealth generation goes to the far East.
The problem is not just outsourcing, using Hindus on h1b visas like Disney and the rest of the IT industry collapses salaries, benefits and job security, and quality and productivity and know how suffer too as a result
The U.S. could become like India or a third world country
Then there are public health risks too, importing Hindus could import antibiotic resistant bugs, putting us in a pre antibiotic world
Importing third world workers from the third world is a dangerous game, that is not that beneficial to the majority or the first world
Stock price increases aren’t the problem. It’s managing for short term increases that is. Ultimately, you have to have some yardstick to measure value, don’t you?
The fact is IBM has been screwed up for decades and is a perfect example of a corporation committing slow suicide. And their management is a prime example of “salespeople” being managers who know nothing (and do not care to know) anything about technology.
From the 1970s until around 1990, each division had its own separate operating system for their computers (as, MVS/TSO, VM/CMS, AS/400, etc.). When PCs came along, they set up another division as an “offshoot” in Boca Raton. IBM could have created their own operating system (as the other divisions) but instead subcontracted it to Microsoft. IBM’s whole approach was to “let a thousand flowers bloom”, i.e., let the divisions compete in a Darwinian “survival of the fittest” with no management coordination between groups.
Then during the early-mid 1990s recession, when hardware sales (especially mainframes) they laid off tons of people. House prices around Armonk and White Plains crashed. Also during the late 1980s-1990s, Microsoft took control of the operating system (MS-DOS eventually Windows), and developed their own application software (as, MS-Word,MS-Excel, etc.). IBM made a vain attempt to purchase and develop their own operating system which was a flop (anyone remember OS/2 ?). They also purchased Lotus application software too late to compete with Microsoft. Bill Gates is filthy rich today partly for business smarts and partly of IBM’s management incompetence.
In 1993, John Akers was replaced with Lou Gerstner. He sold off some hardware businesses and bought other software outfits as noted above. Thus IBM seemed “revived”. Ever since it has followed the same approach of purchasing successful software companies, integrating and “rebranding” it as IBM. This worked until the early 2000s when many competitors caught up and surpassed IBM. But IBM continues following the same “failed” approaches and is gradually losing out.
And to make matters worse, over the last 10 years IBM has sunk itself very deeply into debt for executive bonuses and share buybacks to “enhance shareholder value”. Many sharp stock analysts expect IBM to declare bankruptcy when the next serious economic downturn occurs. But when (not if) they fail, they will do like General Motors (Government Motors) and run to the federal government for a bail out. And the shocking thing is, they will receive it. Because the companies like IBM, HP, Microsoft, and Oracle are so important they are like TBTF (Too Big To Fail) banks. And so we taxpayers will have to cover for their arrogance and incompetence. This will be especially galling for the former IBM employees laid off, who will get “screwed over” twice by IBM.
We can argue about Apple, but they sell SUPERIOR products. At least superior to the competition and isn’t that what it’s all about ? The average CEO lasts 7 years in their job, before Wall St demands they be replaced because they haven’t propped the stock price enough. So the job of the average CEO is to GET WHAT THEY CAN for themselves for those 7 years. Did Carly last 7, I don’t think she did. Neither will Ginni or Meg. But they know they have the 7 to get their piece, on average. When I started in Electronics, HP WAS the company to work for. Will and David are turning in their graves. Watson ? Yeah right. Replaced a Kenmore air conditioner that had been in the houses window for maybe 15 years. The Kenmore I replaced it with is worn out in only 5 years. See the connection ? I know IBM and HP wouldn’t.
In a world where both capital and now jobs know no borders all of what you speak is just a natural flow mostly from the West to the East until a new location like Africa offers more value. The current gen of overpaid US CEOs are simply being paid as facilitators of this mega trend as the fire US/EU headcount and replace them with ones from the East. For those jobs that need physical presence and cannot be done at the end of a wire (yet) we import the skills here so doctors and house painters will be foreign too one day at a fraction of the present cost. All of this will produce a massive rebalance of the worlds resources and rewards that has raised millions in the East from poverty and ultimately do the same for Africa one day too at the expense of the workers in the West who started at such a high level that they still have a long way to fall before nearing distress of the former East. If you want to stop or slow this trend then destroy the Internet and all airplanes and then pigs will fly and the ring put back in the bell………………
You simply have to enforce borders and not let the third world in, there are more Hindus in poverty than people in the U.S., you could replace everyone in the U.S. With Hindus, and drive every American into poverty and make them homeless, the question is are you going to enforce borders
Is it any benefit to import Hindus to take American jobs for America or Americas?
What’s the point of turning America into India? What’s the advantage ?
[…] • The U.S. computer industry is dying and I’ll tell you exactly who is killing it and why (I, Cringely) see also Face It, Your Brain Is a Computer […]
[…] Source: I, Cringely The U.S. computer industry is dying and I’ll tell you exactly who is killing it and wh… […]
[…] The U.S. computer industry is dying and I’ll tell you exactly who is killing it and why (by Robert X. Cringely in I, […]
Seems to me this article is on target, on the one hand and yet irrelevant on the other. We can all point out how stuff used to be in the 20th century in terms of how business was conducted and how it worked better. This article is absolutely true from that perspective. The problem I have with it is that even though if all corporate executives took this article to heart they would be smarter and their business would be better for it, there is zero possibility of that happening and why that is so is what really needs to be examined.
First off, corporate raiders won the war- they demonstrated that obscene amounts of money could be made relatively quickly and simply even though the net effect of their actions was the effective destruction of many businesses. This set up the new paradigm of western capitalism. The whole “shareholder value” meme became a means to an end and that end is the enrichment of corporate executives. So you tell me why any corporate executive should worry about the longer term health of his company when he can just jump ship to the next company and make another killing after his current one starts going down in flames. The net effect of this action is the stratospheric rise of the elites and this trend is not going to end anytime soon because all of this is applauded throughout the corporate world which includes all the mass media who are under corporate control. Everything is seemingly conspired toward this end even though it will result in much destruction and much grief throughout the world and is ultimately not sustainable. You cannot turn back the clock- too many people need a slap in the face over this issue. Ultimately this is a cultural and a corporate cultural issue and you are not going to get the heads of some IT companies to make some decision that results in sustained longevity for his company when the other option on the table results in his personal enrichment. In this 21st century world of international corporations (and the growing trend of corporate political power) it doesn’t matter if US companies get destroyed as the executive can just move elsewhere. So while all the points in the article ring true, it will do nothing to effect the trends in place.
Elliot: What I’m about to tell you is top secret. There’s a powerful group of people out there that are secretly running the world. I’m talking about the guys no one knows about. They guys who are invisible. The top 1% of the top 1%. The guys that play God without permission. And now I think they’re following me. https://www.imdb.com/title/tt4158110/
People can form professional organizations to protect their rights, strike, take the corporations to court and put the people in jail responsible for breaking laws and bringing Hindus in
It’s not enviable, corporations are organized, but Americans are not
Europeans are better organized and have better work protection and better food
It’s simply a question of organizing and mobilizing against a government that is not doing its job of policing the corporations
Modern government don’t do the right thing unless people keep an eye on them, the U.S. doesn’t
But if the people justify what is going on and are apathetic then corporations and government get away with murder, the U.S. is a prime example of this, they brain washed Americans to accept and do nothing
It’s 1984 in every way
[…] The U.S. computer industry is dying and I’ll tell you exactly who is killing it and why (cringely) […]
The business philosophy the maximizes the benefit for all stakeholders (management, customers, employees, and shareholders) is the Golden Rule. That is what this article basically says.
This article is excellent and gives the basis as to why the companies behave the way they do. Truthfully its already dead. Most of the big offshoring contracts have already happened. There are tons of jobs already moved to India. And they probably will never come back. Whats left are the scraps that have not yet moved. 100 here, 200 hundred there, 50 there. Heck I was talking to my friend today who is at one of the of telcos. He mentioned that there is going to be another wave of layoffs with the jobs shipped offshore. This has been going on for YEARS already averaging at least one EVERY MONTH. Every company I have done work is now full to the ceiling with people on H1B. This has been going on now for a solid 15 years. 15 years later and nothing has been done about. As a matter of fact they are EXPANDING it through the back door. Witness Obongo’s allowing H1B spouses to work. You mark my words, in the future every H1B will come with a spouse in tow. Buy 1 H1B, get 1 FREE! The momentum now for the H1B and offshoring is too great to stop. There was a window around Y2K where the IT geeks could have stopped it cold. But they didnt, the meekly trained their replacements and went to look for a job. Good drone! Now go get on unemployment. I would NEVER recommend the IT field to a young person. If you are smart enough to do IT, you are smart enough to do something they cant offshore.
The corporations have in no measure decreased the propaganda the money and the advertising
It’s never too late to start fighting back, the Hindus are not American and should not be working here, destroying American jobs and benefits, the people who are not enforcing the laws and allowing this should be put in jail
Things need to be reversed so that we can have full employment for Americans, not full employment for Hindus
Also we are destroying American human capital and know how and promoting Hindu capital and know how
This is criminal and should be treated as such
If it is nit stopped they will take the remaining jobs medicine etc, there are still all the other jobs left for them to take,it’s far from over, the IT sector is just the beginning, next is medicine, hotels, on and on
I am sorry pdurao are you some kind of bigot? I mean for crying out loud get off the Hindu kick!
Do you call the corporations names for importing Hindus to replace Americans ?
So you think the first world should replace their workers with Hindus ?
Why do we have citizenship ? Visas borders ?
Why do we only let Hindus in and not Europeans ?
Why do we hire based on race ?
Why do we hire just Hindus in mass and not just Europeans in mass or whites in mass ?
Why does the U.S. promote hiring based on race
Why does the U.S. have an apartheid hiring policy, full employment for Hindus while Americans are held to different standards security clearances etc
They did this kind of thing with the blacks now the Hindus. I thought America got away from its colonial ways, don’t call me names, ask why your government has the policies it has, and why it does not enforce the laws based on race etc
Why are you calling me names for thinking that because I’m a citizen to a country I should have the right to a job in that country and someone from abroad should not, it’s true for every country except the Hindus and Mexicans, why ?
So do you think Americans should just give their jobs to Hindus because they are cheaper like Disney
You get some kind of kick out of that seeing American professionals homeless and jobless on the street without healthcare
What are you if you desire this on your fellow Americans ?
Do you want to bring the U.S. down to the level of India in health, working conditions and salaries ? Worse because the Americans will not be working
There is big money and big interests involved in bringing Hindus in, you see advertising showing nothing but them in jobs, like AT&T, and films
I don’t you call the corporations and the government names for destroying American human capital know how and jobs ?
I don’t see the point of turning developed countries into India, Germany and Europe don’t do this kind of thing, and they are more competitive with better quality nit less
Are you’d some kind of anti American
To respond to you in the same kind of intelligent manner
Why do we have borders and laws ?
If the companies have a right to promote only Hindus in the work place we have a right to protect those jobs
Why don’t you go call corporations names when they promote Hindu only workplaces in America ?
What label should this have when you promote one race in the workplace imported from another continent ?
What name is this ? Human trading human commodity ? Slavery like the blanks
I thought we had laws against this kind of thing
So if I had stood against slavery you’d call me names too and defended the plantation owners rights ?
So you think corporations should have the right to import unlimited Hindus like bill gates would like ?
pdurao: replace that Hindu in each of your posts with Jew, or Confucius’ and see if you don’t get the point. Those people might be from India, but they are just as likely to be from Pakistan, or China. Using their religious affiliation is insulting, and frankly doesn’t help you make your point.
It is because of attitudes like this, and letting people use the race card to justify the unjustifiable that we are in the pace we are
First they said unions were bad, then professional organizations are bad, then you’re racist, anything you can do to protect jobs you’re either socialist, communist, racist
So what are the corporations promoting firing Americans and hiring Hindus ? Criminals ? Slavers ? Human trade traffickers ? Human commodity traffickers
Called no people names to stop them from defending professional interests is not really something that belongs in free country but more in a dictatorship, how free are Americans when they have no labour rights and Norway to defend them, no seat at the negotiating table ? Only the corporations and politicians are allowed
The working public is never allowed, one woman asked Obama why he was importing Hindus while her ee husband was unemployed, all Obama had to say was the corporations told him so, this happened only once
What names would you call this woman ? And every other American who has had his career destroyed, or will in the future, it’s far from over, there are still more Hindus left and more American jobs to be replaced
You call someone’s names because they want to stop the replacement of Americans by Hindus, you want to turn America into India with a cast system ? And poverty and disease? Just mover over there, don’t make Americans suffer and give up their jobs and become like India
Do you see any other countries give up their jobs ? Do Indians give their jobs to Chinese ? Do Chinese give jobs to Americans ? So why should Americans become homeless to give Hindus jobs know how and money ?
The attitude of the computer people was the strong will survive
No one survived the onslaught of the corporations importing Hindus
But computer people believed organizing was bad for people and good for corporations so we are now in this situation
You have to call them Hindus so as not to confuse them with Indians
Also it’s a job protection problem
No one else is using Hindu visas h1b
I don’t care if they came from India Mars or Africa it’s a professional and social problem coming from the third world
Jews are American and not from the third world with third world salaries looking to rake jobs, same for Europeans or anyone else not from the third world
The problem is using the third world as cheap labour to fire your own people, they did it with the blacks now they are doing it with the Hindus, everyone in IT sees this clearly now, but it’s late to do anything about it
I am not American, all I know about the H-1B issue is what I read on the Internets. Quote https://www.quora.com/How-does-a-company-sponsor-H1B-visas
“Every company, regardless of size or age, must petition for one of the 65,000 H-1B visas that are made available every April 1st by U.S. Citizenship and Immigration Services. Note that 6,800 of those visas are set aside, per trade agreements, for immigrants from Singapore and Chile. An additional 20,000 H-1B visas are made available for workers with advanced degrees, meaning a master’s degree or above. Usually, more applications are filed than visas are available within the first week of April, meaning that the fate of the employee’s visa rests in the hands of an annual lottery.”
From the above, it seems to me it is just an innocent way to let in a few talented people in your country, to counter a bit declining domestic birthrates, and unskilled, undocumented workers. Not THAT bad.
How could you reconcile the above with your article?
That is a good question when you walk into the workplace and there is nothing but Hindus, or better still you don’t get hired because you’re not a Hindu
Partially these visas get renewed, there is also fraud and the law is not enforced
If the law was enforced they would not be here as there are plants of qualified Americas out of work
This is a 3-part series on the H-1B visa issue by Bob. In the end, it still did not cover such basic issues that 65,000 H-1B visas are issued in a year ALTOGETHER (6,800 of them are reserved for this, another 20,000 for that), this is the number ALL US companies have to share between themselves.
@Josh:
H-1B visas are good for three years, and they can be renewed for an additional three years. Up to 20,000
advanced degree holders are *exempt* from the cap. Finally, the cap, currently 65,000, has been larger
in the past. There are over half a million H-1B visa holders in the U.S., and most of them are in positions
for which there is NO shortage of American workers.
Can a H1B visa lead to a Green Card; officially, and unofficially?
I don’t know what to do when the author gives all the basis for a counter to his conclusions.
If it’s become a low margin commodity where you are going to be outcompeted, don’t you have to leave the business and do something else ? You’ve said that like a million times. I’d argue against your conclusions here, but I’d only be citing your info here and in your other articles……so……..?
Interesting points although the article is focused on old IT companies and wall-street model where H1B is just an excuse for performing poorly. The counter is new wave companies and new business models. US strength and silver lining will be in triggering and adopting change.
https://www.youtube.com/watch?v=exnaY0l4XsM
Nobody goes to jail in America
Nobody goes to jail for importing Hindus and firing Americans
Unlike most other countries none of the corporations and politicians and presidents responsible for destroying American human capital and assets and replacing them with Hindus goes to jail, is it any wonder that American workers have no rights except the right to be replaced by a Hindu
Any other country including Canada wold be embarrassed, not America, not American corporations and politicians
Corporations in America think they have a right to third world labour, never mind American tax payers funded silicon valey
There is no fear or shame in America
Neither the public do anything, nor the Supreme Court nor the government
There are no penalties in the U.S. crime pays
There are no controls, it’s all one sided in the corporations favour
And the public has done nothing, sometimes worse than nothing, justifying the situation
Abroad a good number of politicians are in jail, but not in the U.S.
Even Canada has more shame than the U.S.
We should be watching the corporations and government, instead the government is watching the people
Excellent article, love the phrase “What if IBM — or any other U.S. IT services company for that matter — actually offered the kind of customer service they pretend they do?” I work for a german company. They’re not customer driven nor product focussed. What matters most for them are their internal processes. That’s really weird and drives you crazy.
Perhaps the internal processes are “customer driven or product focused”. They must be doing something right if they have a revenue stream big enough to cover your salary.
How very unamerican paying someone a good wage and give them benefits, much better to hire Hindus
Ps. Bob: in previous blog posts, permalinks for specific comments were available, here, for a strange reason, not. Thanks!
Are you saying the “website” field, when leaving a comment, doesn’t work any more?
I can’t comment here what I wanted. It says duplicate. Which is not.
Sony in Hollywood example sums it up. Infosys can never buy IBM. As you said services and products are different. Till business is in US, it will be American companies, ruling the roost. Services that have been outsourced, can easily be brought back unlike manufacturing.
This just blew my mind. You’ve managed to articulate extremely clearly what I’ve been feeling for some time now. I haven’t been able to put it into words, and now I can link to an awesome article about it. Thank you!
H-1B isn’t just about saving the companies that hire them money. Some years ago I worked for a mechanical engineering firm…accounting work. One day I was struck by a peculiar fact, NONE of the engineers working at this company was American born. I mentioned this to the owner and he replied, “H-1Bs”. I asked why he only hired H-1Bs and the owner said, “Golden handcuffs, baby, golden handcuffs.” Since I was doing the accounting I knew what he was paying these men….they were all men…and it was about the going rate for mechanical engineers. Fact is that an H-1B is not free to seek employment with other firms like an America citizen would be. To the owner of this particular company, control over his workers was more important than the money that he paid them.
Bob, a piece complementary to yours in the New York Review of Books: https://www.nybooks.com/articles/archives/2015/jul/09/frenzy-about-high-tech-talent/
People need to realize something – the Indians did not cause nor create the situation we have now in the IT field. This was an opportunity that was presented to them on a platter by AMERICAN companies. Nobody made the companies offshore the jobs nor lobby for more and more visas. This was done by the rapacious greed of American companies. In a nutshell this was business as usual. I have many Indian friends and I can truthfully say they want the same exact things as everyone else. Can you blame them for taking advantage of a situation that was handed to them? Once the offshoring/H1B thing acquired critical mass it took on a life of its own which is the situation we have now. Americans can whine about it all they want but beyond the whining I dont see anything being done and its been this way since the beginning. The meekly accepted their fate and trained their replacements. Whose fault is that? Is that the Indians or the corporations? ITS OUR OWN FAULT. Lets put it this way – back around Y2K if all the IT people had walked off the job in the US and marched on DC the govmt would have had a nervous breakdown as the entire country runs on IT. But they didnt. Instead they did what they were told like good drones. Contrast this with say the longshoreman – my grandfather was one. When the longshoreman went on strike you didnt dare cross the picket line because very bad physical things would happen to you. My grandfather retired as a foreman with a fat pension and lifetime medical. Do you think IT people will ever see that? Why – because they just accepted what was done to them. Frankly the IT situation in this country is done. Accept it and move on. Thats all you can really do. And frankly the H1B thing is no longer endemic to just IT. The H1B has spread deep into both accounting and finance. Any white collar job that does not require a physical presence could be done by someone on an H1B. But again the public allows it. Its just like the illegal immigration, we might as well not have immigration laws for all that they are enforced. Its a farce that is endorsed by both the Democrats and Republicans. No one cares about Americans so figure out how you are going to deal with it. All this angst around the H1B is not going to change it one bit.
Of course all you said is true, but I would rephrase “It’s our own fault” to “It’s our own rejection of unionization”. Since unionization means more inefficiency, it’s not necessarily a fault to reject what it stands for, even if it means we have to work harder for less security.
The Greek people can unite and vote no, why can the Americans not unite and say no to guest workers taking their wealth, jobs, benefits, know how, of them and their children
If every working American went on strike until all the Hindu jobs are returned to Americans the problem would be resolved over night
If the Greeks can say no why can’t the Americans, why do they let their own government and corporations decide and conquer them and intimidate them
The future of the U.S. will be worse than Greece, who do you believe created the problem in the first place
Economists and politicians are eager to destroy production and know how in the countries
The result is Greece, the only difference is the U.S. can print its own money and devalue the dollar to cover up the problems it’s creating or it would be like Greece or worse, Greece at leat is one nation, is the U.S. ?
The H1-b visa cap may be circumvented by the up coming Trade In Services Agreement (TISA). TISA may allow foreign companies to allow unlimited amount of foreign contractors to work in Country.
Since TPA (Trade Promotion Authority) passed, this allows the President to fast track TISA and only allows Congress a up on or down vote – And they may not be allowed to see the Agreement!!!
Oxi to Hindus coming here and taking American jobs that’s what Americans need to take a stand on, and full employment and salaries and benefits will come back, the Greeks stand united against the 2009 swindlers and the bankers, it was not the pensioners that stole the money but the American swimdelers printing fictitious randomly generated morgadges that did not even exist, it was like printing money, except they were mogages, nobody went to jail, maybe one person or two, that’s it
I agree fully with this article – I see it in my company on a daily basis. Focus has always been on shareholder value at the detriment of long term viability.
I just hope I can make it to the minimum retirement age (~4 years) before they decide I’m too large of a liability on someone’s balance sheet. Of course, will there be a retirement fund available for me over the long term – if they continue to have this myopic view?
I still have a (largish) number of years of employment left in me, and my plan has always been to work for myself after this. I’m one of those people who think they are going to work until they drop at 92 years old, sliding into home plate, spent.
I’ve gained new inspiration from your article. I would like to be one of those people that helps change this in some small way for people who need these services, even as these dinosaurs become effectively extinct.
IBM certainly has plenty of warts, not the least of which was highlighted in their earnings announcement two days ago — declining revenue and profits, and ensuing 6% slide in stock price… however, I don’t think you can (accurately) accuse them of still following their 1990’s business model. Hell, if that were the case, they would have been out of business long ago. In the 1990’s they were a hardware company, with the preponderance of their revenues coming from HW sales… so when PC networks began undermining minicomputer and mainframe sales, their “1990’s business model” nearly put them out of business. They were forced to evolve, and evolve they have. If you were to examine their revenue (and profit) sources today, you would find that Software, Services, and Financing contribute more than 90%, and their hardware business is a mere shadow of it’s former self. They continue to evolve, investing in Cloud Data Centers, Software as a Service, etc, to address the ever evolving acquisition penchant of their clients. Ignoring those new business models, and trying to sell Intel Servers everywhere would in-fact be following a 1990’s business model.
I also think criticizing them for selling off divisions/businesses that become commoditized is misplaced. Their strategy is to compete in high-margin/high-value businesses, i.e. areas in which customers are willing to pay a premium for solutions. I think their ability to recognize their strengths and/or weaknesses, and follow that strategy is commendable. They are not a consumer/commodity player, they have a “business” focus, as implied by the middle word in their corporate name.
Re: “Their strategy is to compete in high-margin/high-value businesses, i.e. areas in which customers are willing to pay a premium for solutions.” If there is anything we should have learned from all of Bob’s IBM articles, and the comments made by present and former employees, is that IBM is trying to achieve that lofty goal by firing their best people, replacing them with cheap foreign labor, incapable of actually providing customer service. Cutting costs to the bone only temporarily raises EPS until revenue drops too much to maintain the business.
Was visiting a Costco in suburban Tokyo earlier this week. Noticed a Toshiba notebook, 15.6″ screen, Win 8.1,DVD-RW for about ¥46,000 or $370USD. I contrasted that with the price of a new unlocked iPhone 6 that hugs the $1000 mark. Yep, the times are a changing.
Sent from my circa 2011 MacBook Pro
Computer prices have varied from $250 to $2500 for decades. Still do. Jewelry, OTOH, has always been expensive.
[…] “This is my promised third column in a series about the effect of H-1B visa abuse on U.S.” #Cringely [cringely.com] […]
[…] I, Cringely The U.S. computer industry is dying and I’ll tell you exactly who is killing it an… – This is my promised third column in a series about the effect of H-1B visa abuse on U.S. technology workers and ultimately on the U.S. economy. This time I want… […]
I’ve always believed that the goal of a company is to maximize shareholder value, but I’d interpreted it to mean “maximize long-term shareholder value.” Companies should assume that investors are pension funds, which they largely are, and that sustainable growth is the goal. Privately-held companies must understand their shareholders’ values, which may not be solely about cash returns. I think that analysts and financial talk show hosts are largely responsible for shifting the focus from stability to short-term returns.
[…] Maximizing shareholder return has given us our corporate malaise of today when profits are high (but… […]
At the end of the day what is going on is the very accurate real-life reflection of our technological dependency:
– we want information NOW!!!
– we want ROIs and hefty profits/bonuses/wages NOW!!!
[While our ancestors were breaking their backs on long term careers, involving long periods of learning on-the-field.]
So, why should we blame those of us able to see only on short-term? It is our fault and the fault of our parents and grand-parents and grand-grand-parents for not being able to THINK ON LONG-TERM and act in the best ways for our humanity: including here the understanding of technology being a tool at hand to solve problems and make our lives easier – but not to replace our human functions and to transform everyone of us in couch potatoes with a high-speed link through our brains…
Just a note on the executive pay issue in the 60’s and 70’s. Prior to Reagan’s tax cuts the US tax system was extremely tilted against receiving high salaries, making direct comparisons to that era difficult. I’m not saying that exec compensation isn’t out of control, but using the 60’s and 70’s isn’t a fair comparison.
[…] The U.S. computer industry is dying and I’ll tell you exactly who is killing it and why […]
The result is Greece, the only difference is the U.S. can print its own money and devalue the dollar to cover up the problems it’s creating or it would be like Greece or worse, Greece at leat is one nation, is the U.S. ?
[…] This article (it’s long) caught my eye and held my attention: The U.S. computer industry is dying and I’ll tell you exactly who is killing it and why. […]
[…] This article (it’s long) caught my eye and held my attention: The U.S. computer industry is dying and I’ll tell you exactly who is killing it and why. […]
Also let’s be realistic, and realize that much of the H1B abuse and subsequent displacement of American IT workers is driven by organized crime coming from India. It’s a profitable enterprise for foreign racketeers who aren’t exactly hindered by ethics or morality. Selling visas for $5000, bribing corporate hiring managers, paying off politicians, human trafficking, indentured servitude, etc. Not to mention the nepotism, once they are in hiring positions, Indians will only hire Indians. Maybe because they’re forced to by their criminal “sponsors”.
Meanwhile everyone complains about immigrants from south of the border. The U.S. media is completely stupid on immigration.
The problem is not the PC itself.
In fact millions including this family still use Windows 7 and until MS yanked it we even had Windows XP offline on triple boot. The moment we put in 10 on the living room PC as a test drive not only was Win 7 destroyed/overridden but they somehow took away XP which was purposely offline permenent to prevent such a scenario from even happening.
The Triple Boot still calls it Win 7 Loader but it goes straight to 10 when activated..
To this day we still don’t know how MS found our offline Windows XP.
Amazingly Linux Mint our main loader was not touched during this process only Windows products got screwed royal…
The real decline killing PC’s is real software which were a dime a dozen in the 90s in almost any store that sold electronics.. Now all we got are Steam Amateur stuff which most of it is not meant to be taken seriously. So we have a HUGE gap in the market waiting to be exploited.
The few places that still sell software it’s all hidden objects/Bejeweled games which most don’t even make it to the install screen on 7 and the serious stuff is from XP Requirements.
I did manage to find a WW2 Airplane game that worked.
What we need is a new Jack Tramiel https://www.youtube.com/watch?v=NBvbsPNBIyk&ab_channel=ComputerHistory This is a funny yet informative Jack Tramiel talking by the Computer History Museum.
We need an open system anyone with something like Commodore BASIC and the Commodore Keys for quick ;programming to revive the industry.
Windows is a mess because it’s all RAM not ROM which if Windows was would be a lot more stable to work/program on.