Tag Archives: Richard Florida
HP, Adding Jobs, Cutting Jobs – But The Question Will Not Go Away, Where Will the Jobs Be?
News item:
“Hewlett-Packard to lay off 27,000 employees,” (John Naughton: Can mighty Meg Whitman save HP from terminal failure? – Massive job losses have been announced at Hewlett-Packard. Now the ailing computer company needs to put a whole string of expensive mistakes behind it)In her message she laid the bad news on the line. “At the end of 2009 we reported a workforce of about 304,000. At the end of 2010 we had almost 325,000 employees, and at the end of 2011 that number had ballooned to nearly 350,000. Over that same period we saw year-over-year revenue growth of 10% in 2010, of 1% in 2011, and, so far in 2012, revenues have been declining.
“We’re struggling under our own weight…”New item: c, 1999
Carly Fiorina is the first in a series of new leaders of HP who lead the company into acquisitions, and an increase in the number of employees to get the job done for the coming years.In 1999 HP appointed a glamorous new CEO, one Carly Fiorina.
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Meg Whitman says “lets get rid of those jobs we’ve been adding”
So, Hewlett-Packard, beginning with Fiorina and all the way up to Meg Whitman, increased their employees, bought Compaq, gave birth to and quickly scrapped an iPad “competitor” (not so much of a competitor, it turned out), and now the company is in trouble.
And so it goes.
Of all the crises we face, the big one is this – there are not enough jobs. And I’m not smart enough to figure out where to put the blame, or where to look for the best solution(s).
Yes, it is true that Meg Whitman was brought in to right a pretty precariously sitting ship. But it is also true that her predecessors also sought the best for the company. (one side note: both Carly Fiorina and Meg Whitman have run, unsuccessfully, for higher office, as Republicans).
And as company after company keeps trying to achieve or maintain profitability, as company after company seeks to enhance productivity, so that they can produce the same goods or products or services with ever-fewer workers, the overall employment picture keeps looking ever more dismal.
Picture HP over the last decade, or so. You know exactly what they were engaged in. They hired people; a lot of people. In those interviews, and in those company orientation sessions, the HP officials would say, at the direction of their leaders, in one way or another:
“Come work for us and with us. We are a great company, building a great future. You will be a part of a company that is poised to even greater days ahead, and we need you to help make that happen. And, this is a company that will treat you right, give you great opportunity to advance, and take good care of your needs so that you can focus on doing the best possible job.”
I suspect that speech was given over and over again.
And, it didn’t work out, and leader after leader was replaced, and now the new leader comes in, and gets rid of 27,000 employees {read that figure – 27,000 people who had been told that this was the company to build a future with!}… And now, just imagine the morale of the folks who “survived” this current round of layoffs.
In The Coming Jobs War, Jim Clifton (Chairman of Gallup) quotes Nobel Prize-winning Economist Robert Fogel, writing:
“even if Fogel’s prediction comes almost true, it will be jobs Armageddon in America. Its unemployment plus underemployment will rise to more than 40% (over the next couple of decades). Leadership of the free world will not just be lost, but overwhelmed.”
I understand the argument. A company exists to make a profit. A company does not actually exist to provide jobs. Jobs are among the tools companies have to make the products and provide the services that lead to profits. And without a profit, there is no money to pay for the jobs. And, if the work that is done by ten people can be done by nine people, and that enhances the bottom line in the profit column, then cut to nine. (or, cut from 350,000 employees to 323,000 employees, HP’s current situation).
But… but… what if every company cuts, and cuts, and then the total number of people who do not have jobs continues to grow? Then, where will the demand be for the goods and services of these companies that are now so much more profitable? Ultimately, the demand will dwindle, thus the profits will dwindle. The cycle really is vicious, and painful to ponder.
(By the way, this loss of demand is behind Richard Florida’s call for a true increase in the wages of service workers. He says that without an increase in service wages, demand will remain too low, and the economy will not return to what most of us would view as ”normal”).
Yesterday, there was an intriguing opinion piece in the New York Times: Let’s Be Less Productive by Tim Jackson: “Has the pursuit of labor productivity reached its limit?“
Mr. Jackson basically argues that we scale back the move to doing more with fewer employees. In some instances, he argues that scaling this back would greatly enhance the service we receive. For example, we’ve all read about the pressure for doctors to see more patients per hour in the hours of their day. This cannot be good for the quality of our medical care.
Here are brief excerpts from the Jackson article:
The quest for increased productivity occupies reams of academic literature and haunts the waking hours of C.E.O.’s and finance ministers. Perhaps forgivably so: our ability to generate more output with fewer people has lifted our lives out of drudgery and delivered us a cornucopia of material wealth.
But the relentless drive for productivity may also have some natural limits. Ever-increasing productivity means that if our economies don’t continue to expand, we risk putting people out of work.
So, what is the purpose of this post? It is to ask, again, as I have asked so often, where will the jobs be? Jobs are threatened by automation. Jobs are threatened by the focus on profits, thus productivity. And, every time we turn around, the number of new jobs created comes up far short of the number of jobs that are being eliminated by these and other factors.
Thus, the need of the hour is the need for jobs. There is a Coming Jobs War, says Clifton. From his book:
The coming world war is an all-out global war for good jobs.
…what would fix the world – what would suddenly create worldwide peace, global wellbeing, and the next extraordinary advancements in human development, (is) 1.8 billion jobs – formal jobs. Nothing would change the current state of humankind more.
The leadership problem is that an increasing number of people in the world are miserable, hopeless, suffering, and becoming dangerously unhappy because they don’t have an almighty good job – and in most cases, no hope of getting one.
A good job is a job with a paycheck from an employer and steady work that averages 30+ hours per week.
Though Clifton writes of a global need, it is clear that we face this challenge right here in our country.
Where will the jobs be? On this Memorial Day, as we think about patriotism, maybe it would be a patriotic thing for our business leaders, the CEOs of companies, and the stockholders of those companies, to think, collectively, about what they can do in their companies to help move our country forward in this so very important way.
Where will the jobs be? We need our best minds working on this. Maybe nothing else is as important right now.
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Read the review of the lift on book by our bloggign colleague Bob Morris here — The Coming Jobs War: A book review by Bob morris.
Read an interview with Jim Clifton about this book and its importance from Forbes here.
David Brooks (and Tyler Cowen) add more to the Discussion — Where Will the Jobs Be?
I have posted often on a couple of themes: where will the jobs be?, and what kind of economy will we have – a real economy, or a fantasy economy? (Traders vs. Builders, to use Richard Florida’s terminology. Read especially this earlier post: “Traders” vs. “Builders – the “Fantasy Economy” vs. the “Real Economy”).
These themes are closely connected, and today in the New York Times, David Brooks adds greatly to this conversation. He quotes from the popular e-book by Tyler Cowen, The Great Stagnation (which I have not read, but is now on my list).
The comments responding to this article reveal the great political divide in this country. Conversation – intelligent conversation – seems increasingly endangered.
But this was not a political column. And many of those who left comments miss the underlying problem, in my opinion. I have bolded what I think is the most important section below. Brooks’ entire column, The Experience Economy, is worth reading. But note especially these excerpts:
Cowen’s core point is that up until sometime around 1974, the American economy was able to experience awesome growth by harvesting low-hanging fruit. There was cheap land to be exploited. There was the tremendous increase in education levels during the postwar world. There were technological revolutions occasioned by the spread of electricity, plastics and the car.
But that low-hanging fruit is exhausted, Cowen continues, and since 1974, the United States has experienced slower growth, slower increases in median income, slower job creation, slower productivity gains, slower life-expectancy improvements and slower rates of technological change.
Cowen’s data on these slowdowns are compelling and have withstood the scrutiny of the online reviewers. He argues that our society, for the moment, has hit a technological plateau…
As Cowen notes in his book, the automobile industry produced millions of jobs, but Facebook employs about 2,000, Twitter 300 and eBay about 17,000. It takes only 14,000 employees to make and sell iPods, but that device also eliminates jobs for those people who make and distribute CDs, potentially leading to net job losses.
In other words, as Cowen makes clear, many of this era’s technological breakthroughs produce enormous happiness gains, but surprisingly little additional economic activity.
This column is a great example of “this is what the problem is, but I don’t know the solution” thinking. I don’t fault Brooks, or Cowen – I don’t know the solution either.
But I think that all the blame, aimed at President Obama, or Congress, or the Republicans, or the Democrats, is misplaced. I think the technological discoveries and innovations of the era really have created an economy which provides fewer jobs. A lot fewer jobs! — especially for the “physical workers” among us – a number which is not going down. The national average is that 25% of those entering high school do not finish high school. What jobs will be available for these people, and the others who do not finish college? Through the years, the United States has always had jobs for such people. Those kinds of jobs are increasingly rare.
In the term used by those who discuss these ideas, we are in the midst of a structural realignment, not just a cyclical problem. But, if there is a realignment, it implies that there is a working/workable other side. It would be nice to know what that will be…soon.
Inventors of Derivatives vs. the Inventor of Disneyland – or, Why We Got in So Much Trouble
The evidence keeps mounting regarding the proliferation of traders over builders, and this has not been a good development for our economy.
I first saw this distinction described in Richard Florida’s book The Great Reset. I blogged about it here: “Traders” vs. “Builders” – the “Fantasy Economy” vs. the “Real Economy.”. Here is the key quote from his book, which I included in that blog post:
We’re witnessing a replay of the age-old conflict between “traders” and “builders,” as Geoff Beattie, the head of Woodbridge, dubs it. Traders make money off, well, trading things. They create little or no real wealth, because they do not engage in productivity; they profit through trading. Builders, on the other hand, focus on investing in real assets in the real economy… The landscape today is littered with instant tycoons who made their fortunes on tiny upticks in the stock market or by trading shares in other people’ debt. For far too many of these traders, the only productivity was profit and their only customers were themselves. I raise this to make this point: builders need to take their preeminent position back from the traders for the economy of the future to flourish.
This weekend, Frank Rich referred to this problem in his column Who Killed the Disneyland Dream? It’s a revealing column, but this one paragraph reveals the shift from builders to traders:
It’s a measure of how rapidly our economic order has shifted that nearly a quarter of the 400 wealthiest people in America on this year’s Forbes list make their fortunes from financial services, more than three times as many as in the first Forbes 400 in 1982. Many of America’s best young minds now invent derivatives, not Disneylands, because that’s where the action has been, and still is, two years after the crash. In 2010, our system incentivizes high-stakes gambling — “this business of securitizing things that didn’t even exist in the first place,” as Calvin Trillin memorably wrote last year — rather than the rebooting and rebuilding of America.
It’s not that I think we should “judge” those who are in the “trading” business. Men (and now women) have always gone where the jobs are that pay the most, and help them get ahead. If finance is the golden goose of this generation, then so be it.
But…but… our society needs to do a better job at building things. Who will rise up to fill these slots, and help us restore this economy in a real, not a fantasy, way? This really is the question of the day.
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(I just read the Calvin Trillin article that Frank Rich referred to. It really is worth reading!)
Jeffrey Immelt De-emphasizes “Traders,” Rediscovers “Builders”
Here’s the title of the article: G.E. Goes With What It Knows: Making Stuff by Steve Lohr (New York Times). The title really does say it all. And the fact that Jeffrey Immelt is understanding this, and acting on it, is significant.
Here’s the issue: should our best and our brightest make stuff, of should they move money around? Richard Florida, in his terrific book The Great Reset, summarized the problem this way:
Here’s the issue: “traders” (making money by trading things) vs. “builders” (real assets in the real economy).
The role of finance changed from being, in the words of William Black, a “servant” of the economy to a “predator.” Instead of supporting the real wealth producing parts of the economy, (the finance sector) has become a parasite on them.
…builders need to take their preeminent position back from the traders for the economy of the future to flourish.
(I blogged about this here).
(Fred R. Conrad/The New York Times) Jeffrey Immelt, C.E.O. since 2000, has pared down General Electric to rely less on financial wizardry in its lending unit and more on physical products from the manufacturing divisions.
Now it sounds like Mr. Immelt gets this, and says that our entire country needs to get this also. Here are some paragraphs from the article about Mr. Immelt and G.E.:
Perhaps no company outside of the banking sector was hit as hard by the financial crisis as G.E., certainly none that seemed healthy before the economic tailspin. Its big finance arm, GE Capital, long a cash machine that bolstered the mother ship’s bottom line, became an albatross, threatening to pull down the entire enterprise. G.E. cut its dividend for the first time since the Great Depression, lost its triple-A credit rating and hastily arranged a $3 billion investment from the billionaire Warren E. Buffett.
Having skirted disaster, G.E. is recovering gradually these days. Its finance unit is on the mend, with the size of its debts and troubled loans trending downward. Mind you, middling recoveries are a relative matter at G.E. After all, the company remains a colossus on track to deliver profits of more than $10 billion on sales of about $150 billion this year. But investors are used to getting more from G.E., which earned $22 billion on revenue of $173 billion in 2007.
So G.E. has revamped its strategy in the wake of the financial crisis. Its heritage of industrial innovation reaches back to Thomas Edison and the incandescent light bulb, and with that legacy in mind, G.E. is going back to basics. The company, Mr. Immelt insists, must rely more on making physical products and less on financial engineering — a path that, he insists, is also necessary for the American economy as a whole.
Mr. Immelt candidly admits that G.E. was seduced by GE Capital’s financial promise — the lure of rapid-fire money-making unencumbered by the long-range planning, costs and headaches that go into producing heavy-duty material goods. Other industrial corporations were enthralled with finance, of course, but none as much as G.E., which became the nation’s largest nonbank financial company.
So, after Jack Welch championed G.E.’s journey into finance, Mr. Immelt is calling for G.E. to get back to focusing on “making stuff” — “a path that, he insists, is also necessary for the American economy as a whole.”
Yes it is! We need far more “builders,” and can probably do quite nicely with far fewer “traders.” We really do need to “rely more on making physical products and less on financial engineering.”
Ever More Traders, Seemingly Fewer Builders – Consensus is Growing
The consensus is growing. The problem is truly coming into focus. The solution seems to elude us all.
A while back, I wrote this blog post: “Traders” vs. “Builders” – the “Fantasy Economy” vs. the “Real Economy.” (It is the most read post on our blog in the last quarter). It was prompted by my reading of the Richard Florida book, The Great Reset. Though the entire book is worth reading, it is a small section that jumped out at me most strongly. Here’s the key quote:
…builders need to take their preeminent position back from the traders for the economy of the future to flourish.
A long list of observers and authors are weighing in on this disconnect in our society. Here’s a quote from Frank Rich, Still the Best Congress Money Can Buy, from this morning’s New York Times:
As John Cassidy underscored in a definitive article titled “Who Needs Wall Street?” in The New Yorker last week, the financial sector has paid little for bringing the world to near-collapse or for receiving the taxpayers’ bailout that was denied to most small-enough-to-fail Americans. The sector still rakes in more than a fourth of American business profits, up from a seventh 25 years ago. And what is its contribution to America in exchange for this quarter-century of ever-more over-the-top rewards? “During a period in which American companies have created iPhones, Home Depot and Lipitor,” Cassidy writes, the industry reaping the highest profits and compensation is one that “doesn’t design, build or sell a tangible thing.”
The article Rich quoted is What Good Is Wall Street? Much of what investment bankers do is socially worthless by John Cassidy. He puts it simply:
For years, the most profitable industry in America has been one that doesn’t design, build, or sell a single tangible thing.
And here are excerpts from The Power of Failure by William D. Cohan (William D. Cohan on Wall Street and Main Street):
Despite the very dire consequences of the latest financial crisis that Wall Street perpetrated on the world, America cannot seem to shake its infatuation with Wall Street bankers and traders.
We continue to shower them with riches, prestige and glory. We make movies about them. We write books about them. We seriously overpay and then envy them. This year alone, while millions of others suffer from the Great Recession, bankers and traders are expected to be paid — incredibly — another estimated $144 billion in compensation and benefits. Accordingly, Wall Street remains the No. 1 destination for our best and brightest.
There is enormous power in failure, especially when one learns from it. Wall Street has been making a lot of mistakes lately. But will it bother to ever learn from them? And will we have the courage to return Wall Street to a less exalted place? The answer to these questions will increasingly come to define what America is all about in the future.
So, Wall Street has taken us down some blind paths, and failed spectacularly. Yet, Wall Street profits are up, and seems to already be back on top. Our best and brightest would still rather work there than elsewhere. And when they do, they build little or nothing – they master “trading,” not “building.”
We need our best and our brightest building an actual economy, not moving money around in a stagnant one. But we seem to be powerless to bring about any needed change.
So, what shall we do in this fantasy economy era?
Women In Business and The Knowledge Worker, The Knowledge Age, and Moving Forward (Insight from Richard Florida)
Richard Florida (The Rise of the Creative Class; The Great Reset) is one of the authors I just regularly “check in with/catch up on.” In a recent article, What Makes Women Rich, he makes a simple point very clearly and persuasively: them more opportunity for women, the more progress a nation can make. The article is worth a careful read. Here are excerpts:
Women make up the majority of the U.S. workforce and an even larger majority of knowledge, professional, and creative workers. In a provocative and controversial essay in this magazine, Hannah Rosin argues that the post-industrial economy is better suited to the types of skills and capabilities women possess. The current economic crisis has been dubbed a “mancession” by some – as men in blue-collar jobs have borne the brunt of layoffs and unemployment.
It stands to reason that economies that afford women more opportunity will gain economic advantage for the simple reason that they can tap a broader reservoir of talent and skill.
Economic opportunity for women is closely associated with the transition to knowledge-driven economic structures with higher levels of human capital and more creative class occupations. Women’s economic opportunity is also greater in nations which are more open and tolerant generally toward gays and lesbians and racial and ethnic minorities. Overall, we find an especially close association between the economic opportunity afforded women and our Global Creativity Index, a composite measure of national creativity and competitiveness. Nations where women have greater economic opportunity also have higher levels of overall life satisfaction and happiness.
Not only do women have greater opportunity in wealthier, more open, post-industrial nations, women are an integral component of the economic development equation. Nations that are more open to women and afford them more opportunity gain economic advantage by harnessing a greater level of human skill and potential. Now, more than ever, the path to economic prosperity requires further human development. Creating economic and social structures which develop women’s full talents and afford them the full range of economic opportunity is a key element in securing lasting economic prosperity.
