Sometimes my friends come to me and ask for help with their situation.

I have a friend who is very talented, and has done some very compassionate things for me in the past. I really enjoy the opportunity to give something back with coaching and mentoring. I give the best suggestions I can, things that seem to work universally when they are tried. My friend often responds that my suggestions about learning and trying new things are something I can do just because I am a genius. I appreciate the compliment, but its one I always object to. I see myself as pretty ordinary. I really believe my friend is very capable, and not only could do these things I suggest, I know this friend has already done many of these things in the past. My friend just needs to believe that these things can be done again! (Yes, I am awkwardly trying to avoid saying he or she. What a contortion. Perhaps I should flip a coin and randomly change all the pronouns to protect the shy!)

Eventually, when I object to the idea that I am a genius, and that my suggestions about learning new things are now something I am somehow uniquely qualified to do, eventually our conversation ends up with my friend avoiding the personal pain of change. My friend changes the conversation by asking me, "There will always be 50% of the people who are below average. What do you do with them?"

Well, what my friend really means is that 50% of the people will be below the mean, but lets not quibble about that.

I didn't know what to say. I didn't really care to think about that 50%, I was more thinking about my friend and what my friend could do. So I jokingly replied, "Uh, I try not to do anything with them." But my friend wanted me to seriously consider the issue. So I thought, and eventually came up with the response that if you had a room of 100 millionaires, fifty percent of them would be below average for that group. (Well, ok, below the mean.) And you would have, at any particular time in that room, the ten poorest millionaires. What do we do with them? (More in another post on this question...)

But the problem is probably even worse than my friend is pointing out. Apparently it's not just what do you do with those who are below average, it's what do you do with the people only a little above that average line too...

Acccording to Average is Over in the New York Times, talking about an article in the Atlantic 'Making it in America', the author Adam Davidson relates a joke from cotton country about just how much a modern textile mill has been automated: The average mill has only two employees today, “a man and a dog. The man is there to feed the dog, and the dog is there to keep the man away from the machines.”

Thomas Friedman continues,

Davidson’s article is one of a number of pieces that have recently appeared making the point that the reason we have such stubbornly high unemployment and sagging middle-class incomes today is largely because of the big drop in demand because of the Great Recession, but it is also because of the quantum advances in both globalization and the information technology revolution, which are more rapidly than ever replacing labor with machines or foreign workers.

In the past, workers with average skills, doing an average job, could earn an average lifestyle. But, today, average is officially over. Being average just won’t earn you what it used to. It can’t when so many more employers have so much more access to so much more above average cheap foreign labor, cheap robotics, cheap software, cheap automation and cheap genius. Therefore, everyone needs to find their extra — their unique value contribution that makes them stand out in whatever is their field of employment. Average is over.

An aside...
Two other things economists are talking about regarding high unemployment:

It seems that extending benefits extends the amount of time most people spend on unemployment. Most people seem to get hired in either the first two weeks, or the last two weeks, of their unemployment benefits. When states change the length of benefits, the increase in hiring shifts to the last two weeks of the new length of the benefits.
People used to be willing to travel to a new place to seek employment. There seems to be a marked increase in people willing to do that. Again, it might be because of the benefits extensions, people can remain in place longer.

Friedman goes on to talk about the "E la Carte", a restaurant menu application for iPad. Annie Lowrey at Slate writes about it as a way of shrinking the need for waiters and waitresses.... Here is the obvious thing: Only a stupid restaurant, (and stupid readers), would think of leaving all the ordering to just the ipad..... But here is the really stupid thing about what this article quotes from her article: The iPad isn't going to deliver the food. It isn't going to change the table cloth, or deliver fresh silverware when a patron drops their fork, or extra water, or bring the food to the table, or notice you are done with the meal, and suggest what it thinks might be a really great desert choice. It's not going to eliminate one iota of the physical hustle and bustle in the job of being a waiter or a waitress. It certainly won't eliminate the extra that a friendly waiter can add to the dining experience.

What it can do is this: A smart restaurant would use the ipad as a tool for the waitress to improve accuracy, and streamline operations, and allow the waitress to have more time to be conversational and service oriented.

So is the "E la Carte" some conspiracy to eliminate jobs? Hardly. But will it eliminate the job security of waiters who want to slack off, or be surly, or can't get an order correct to save their life? Maybe.

When you are thinking about the 50% of waiters who are below average, do you really want your meal experience to be dependent on that kind of person just because it is somehow unfair to not let them keep that job? Wouldn't you be like most people and feel your restaurant experience ruined by a waiter who messes up your order? Next time you eat at a restaurant and your waiter is below par, think about what do you do with that person who is average or below average. Will you not let your experience with them prevent you from coming to that restaurant again? And if you would let that affect your impression of the restaurant, and negatively affect your decision to return, what is the logical choice that the owner of that restaurant should make?

In actuality, maybe someone who isn't detail oriented enough to get the orders straight, but is very good at the rest of the job of being a waiter, might be really helped by the "E la Carte" to keep their job. So it can go either way. But I think you see the point, which is exactly the point of that article. That worker better figure out some way to excel, or someone else will be knocking on their bosses door offering to do a better job.

Friedman ends his article with

There will always be change — new jobs, new products, new services. But the one thing we know for sure is that with each advance in globalization and the I.T. revolution, the best jobs will require workers to have more and better education to make themselves above average. Here are the latest unemployment rates from the Bureau of Labor Statistics for Americans over 25 years old: those with less than a high school degree, 13.8 percent; those with a high school degree and no college, 8.7 percent; those with some college or associate degree, 7.7 percent; and those with bachelor’s degree or higher, 4.1 percent.

In a world where average is officially over, there are many things we need to do to buttress employment, but nothing would be more important than passing some kind of G.I. Bill for the 21st century that ensures that every American has access to post-high school education.

But are our schools turning out the kinds of workers that are really needed? How many times have you had a waiter or a taxi driver who invested in getting that bachelor's, or even master's, degree, and yet was there driving your taxi or serving your food and gave you lousy service? Maybe more often than you realize.

The reality is that "E la carte" is a tool, nothing more, nothing less. It's not a conspiracy against restaurant service workers. If they work hard to be above average and offer excellent service, (and perhaps spend some off time to educate themselves by read books like Dale Carnegies "How to win friends and influence others"), they have nothing to fear from the "E La Carte".

Friedman suggests that we create another government program to subsidize secondary education with more access to post-high school education. Maybe this could help.

But as I mentioned, there is no shortage of people over-educated for the job they are now doing. The reality is that people make poor choices, but often they hate change more than they hate fixing their wrong choices. But sometimes, the difference between a wrong choice and a better choice might be mainly in attitude. Certainly in today's job market, fixing a bad job choice by quitting and trying to find a new job is certainly scary. Perhaps taking steps to improve attitude and ability in your current job is the best choice. I suggest that the real conclusion might be people need to do more for themselves to seek out education that will improve how they do their job. Maybe that has to be another degree from a school. But probably more often it probably doesn't have to be that expensive. We are awash in books and studies that anyone can buy, or even borrow from the library, about how to improve themselves. Perhaps it simply means being willing to stretch out and learn and do some new things to be more valuable in your current position.

Unfortunately, many are unwilling to stretch themselves. You can't teach something new to someone who doesn't want to learn it. And they probably aren't going to learn something they aren't willing to apply.

And this is exactly what creates opportunity for those who are willing to work and better themselves to rise above the average around them. Should we hold back those who make the effort to be above average, or take away their rewards for doing this, just because the just-average, or the below average, don't want to make the effort to do this?

No legislation can fix lack of drive for self improvement. But it can certainly contribute to it if it creates support for people not to grow. Entitlement creates a comfort zone that can kill the drive to excel and contribute.

The Atlantic Article

The Atlantic article says,

In the past decade, the flow of goods emerging from U.S. factories has risen by about a third. Factory employment has fallen by roughly the same fraction. The story of Standard Motor Products, a 92-year-old, family-run manufacturer based in Queens, sheds light on both phenomena. It’s a story of hustle, ingenuity, competitive success, and promise for America’s economy. It also illuminates why the jobs crisis will be so difficult to solve.

It also states,

Yet the success of American manufacturers has come at a cost. Factories have replaced millions of workers with machines. Even if you know the rough outline of this story, looking at the Bureau of Labor Statistics data is still shocking. A historical chart of U.S. manufacturing employment shows steady growth from the end of the Depression until the early 1980s, when the number of jobs drops a little. Then things stay largely flat until about 1999. After that, the numbers simply collapse. In the 10 years ending in 2009, factories shed workers so fast that they erased almost all the gains of the previous 70 years; roughly one out of every three manufacturing jobs—about 6 million in total—disappeared. About as many people work in manufacturing now as did at the end of the Depression, even though the American population is more than twice as large today.

The reality is that these machines help the still employed workers create a product with a higher level of quality. These machines can help the average worker produce products of a quality that years ago would have required a true craftsman to build. And years ago, not very many people were willing to put in the work to become a craftsman. So yes, these machines eat into the profits of the very skilled as well as the least skilled. But today, most of the people willing to become a craftsman move into a role of figuring out how to allow non-craftsman skilled people, along with machines, to produce a quality product.

The challenge that many people see as a problem is that a global work force creates more competition. It used to be that the below average in a country only had to compete against that countries own above average people. Only a certain percentage of people are going to do the hard work to rise above the average, so there is a kind of a balance. Now, a poorer countries above average individuals aren't limited to competing against the below average in their own country, they can now in many situations offer their above average skills to compete against our below average too. And even if they are only average, they can still compete against our only average people on the basis of cost.

So now, our average and below get to compete against not only the above average people in this country, they get competition from elsewhere also.

But is this competition just caused by greedy companies taking advantage of workers?

Standard makes and distributes replacement auto parts, known in the industry as “aftermarket” parts. Companies like Standard directly compete with Chinese firms for shelf space in auto-parts retail stores. This competition has intensified the pressure on all parts makers—American, Chinese, European. And of course it means that Maddie is, effectively, competing directly with workers in China who are willing to do similar work for much less money.

So it is the companies that are trying to survive in order to be able to offer jobs. They are looking for productive and cost efficient workers that will help them compete with other companies. The competition acts as a check on balance on any company making too much profit.

Well, maybe. What about companies like Apple?

Apple has become one of the best-known, most admired and most imitated companies on earth, in part through an unrelenting mastery of global operations. Last year, it earned over $400,000 in profit per employee, more than Goldman Sachs, Exxon Mobil or Google.

Apple employs 43,000 people in the United States and 20,000 overseas, a small fraction of the over 400,000 American workers at General Motors in the 1950s, or the hundreds of thousands at General Electric in the 1980s. Many more people work for Apple’s contractors: an additional 700,000 people engineer, build and assemble iPads, iPhones and Apple’s other products. But almost none of them work in the United States.

“Apple’s an example of why it’s so hard to create middle-class jobs in the U.S. now,” said Jared Bernstein, who until last year was an economic adviser to the White House.

What has vexed Mr. Obama as well as economists and policy makers is that Apple — and many of its high-technology peers — are not nearly as avid in creating American jobs as other famous companies were in their heydays.

Source: Apple, America, and a squeezed middle class

Newer companies aren't operating in the same environment as yesteryear:

“Companies once felt an obligation to support American workers, even when it wasn’t the best financial choice,” said Betsey Stevenson, the chief economist at the Labor Department until last September. “That’s disappeared. Profits and efficiency have trumped generosity.”

Source: Apple, America, and a squeezed middle class

The business of business is not to be generous. The business needs profits to grow. And competition with more efficient rivals forces efficiency upon all. If it doesn't, the less efficient companies will have higher priced products, and businesses with lower profits will not give enough return on investment to attract capital to expand.

For about 100 years, right through the 1980s and into the 1990s, mills in the Greenville area had plenty of work for people willing to put in a full day, no matter how little education they had.

Notice the education theme again.

Companies and other economists say that notion (of companies not being generous enough) is naïve. Though Americans are among the most educated workers in the world, the nation has stopped training enough people in the mid-level skills that factories need, executives say.

Source: Apple, America, and a squeezed middle class

Are people taught, or do people learn? Can you force them to do what they wont take the time to do?

But around the time Maddie, (Madelyn Parlier), was born 22 years ago, two simultaneous transformations hit these workers. After NAFTA and, later, the opening of China to global trade, mills in Mexico and China were able to produce and ship clothing and textiles at much lower cost, and mill after mill in South Carolina shut down. At the same time, the mills that continued to operate were able to replace their workers with a new generation of nearly autonomous, computer-run machines.

OK, so its the politics of deciding it is a benefit somehow to let cheap labor countries undercut our factories, and smart people figuring out how to make very capable machines.

Manufacturers of products far more complicated than shirts and textiles. These new plants have been a godsend for the local economy, but they have not provided the sort of wide-open job opportunities that the textile mills once did. Some workers, especially those with advanced manufacturing skills, now earn higher wages and have more opportunity, but there are not enough jobs for many others who, like Maddie, don’t have training past high school.

So some people, who pursue their own education, are benefiting from these trends.

To better understand Maddie’s future, it’s helpful, first, to ask: Why is anything made in the United States? Why would any manufacturing company pay American wages when it could hire someone in China or Mexico much more cheaply?

The article talks about fuel injectors, which are actually very complicated and computerized to achieve the goal of making cars more energy efficient without losing performance. The moving part in a fuel injector moves forward and back a total distance of 70 microns—about the width of a human hair. Any flaw in manufacturing, even a piece of dust, can make it not work.

They require up-to-date technology, strong quality assurance, and highly skilled workers, all of which are easier to find in the United States than in most factories in low-wage countries.

So workers who put in the educational effort to be the kind of worker needed today have a future. And for the rest who refuse, the situation is actually the reverse of how it is usually painted. It is not the rest of the world coming here to compete. By not pursuing education, our unskilled workers are actually trying to compete not just with the unskilled workers in their own country, but with unskilled workers in the rest of the world!

A few decades ago, “turning machines” like these were operated by hand; a machinist would spin one dial to move the cutting tool large distances and another dial for smaller, more precise positioning. A good machinist didn’t need a lot of book smarts, just a steady, confident hand and lots of experience. Today, the computer moves the cutting tool and the operator needs to know how to talk to the computer.

And a little less than three decades ago, those machinists vigorously resisted the coming computers. I helped design and write statistical process control software for computers that would let the machinists more constantly measure the quality of the parts they were producing. Instead of waiting until the end of a manufacturing run to find out that the parts being made were out of tolerance, and scraping $10,000 worth of raw materials, the machinists could continually measure dimensions, and be able to adjust the machines before the parts drift out of tolerance. These computers would help them do a better job! Every machinist should have wanted their factory to install our software. But the machinists would do anything they could to sabotage the computers. They were doing all they could to resist change, they didn't want the computer to "take their job".

Standard's newest skilled machinist, Luke Hutchins is 27 years old, and the article talked about his life.

When he was in his teens, his parents told him, for reasons he doesn’t remember, that he should become a dentist.

The reason should now be obvious. Dentists perform a hands on service that can't be shipped to a third world country. It is not likely to create a robot that can do dentistry, although there is experimentation with remote surgery. Dentists have no third world competition, (except for people who can travel to those parts of the world and want to try a little medical tourism), and as a result dentists enjoy the chance to charge high prices and make a lot of wealth for themselves. A dentist friend of mine is disgusted by his dentist friends who mostly spend their lunches together talking about where to buy a new condo, or what length boat they need, instead of taking the time to serve the poor. If the dentist must specialize and keeps up with the latest technology. It's either that, or be put out of business by another dentist who does embrace learning and using things like lasers, implants, etc.

He was quite good at the programming language commonly used in manufacturing machines all over the country, and had a facility for three-dimensional visualization—seeing, in your mind, what’s happening inside the machine—a skill, probably innate, that is required for any great operator. It was a two-year program, but Luke was the only student with no factory experience or vocational school, so he spent two summers taking extra classes to catch up.

Is his skill inate? Or is it maybe something that is learned early on?

When I was a kid, I didn't spend anywhere near as much time watching TV as most of my friends. In high school I would not win any debate involving trivia about events on reruns of TV shows. Instead I spent my time playing with legos, erector sets, and practicing to solve the Rubiks cube until I can do it consistently in 45 seconds or less no matter how mixed up it is. I don't know if my 3-D skills were innate, that goes to the genius quip that I object to. Instead I give a lot more credit to my solving the cube 10,000 in one year to develop the skill to solve it in less than 33 seconds, on average. And recording all those time trials, and learning all about statistics, and how to use a fancy calculator, in order to do regression analysis daily and weekly and monthly to measure my progress. As a result of things like that, I tied for 6th place in my state in math skills, and scored 100% on the spatial aptitude section of the Armed Forces Vocational Aptitude Battery. Innate skill? Or the result of hard work and learning that was actually done just for the fun of it?

You know, it's funny, I'm reading this article in the Atlantic paragraph by paragraph. I read to something interesting, cut and paste the comment here, and then I write what my opinion is about what was said. And then I see the next paragraph making exactly my point. Fascinating.

After six semesters studying machine tooling, including endless hours cutting metal in the school workshop

Isn't that exactly what I described about Rubik's cube, and how to develop these skills. So while I am sure "innate" nature is helpful, its probably all the time he spent on the practice that is most important.

When things are going well, the Gildemeisters largely run themselves, but things don’t always go well. Every five minutes or so, Luke takes a finished part to the testing station—a small table with a dozen sets of calipers and other precision testing tools—to make sure the machine is cutting “on spec,” or matching the requirements of the run. Standard’s rules call for a random part check at least once an hour. “I don’t wait the whole hour before I check another part,” Luke says. “That’s stupid. You could be running scrap for the whole hour.”

Very smart of him to embrace the kind of testing that helps him keep quality continuously on track. That is exactly why I wrote software to help a machinist keep track of the measurements and visually see the changes before he ended up scrapping a huge run of parts. Too bad Luke doesn't have the software I wrote decades ago to help him to achieve a craftsman's level of skill.

Luke says that on a typical shift, he has to adjust the machine about 20 times to keep it on spec. A lot can happen to throw the tolerances off. The most common issue is that the cutting tool gradually wears down. As a result, Luke needs to tell the computer to move the tool a few microns closer, or make some other adjustment. If the operator programs the wrong number, the tool can cut right into the machine itself and destroy equipment worth tens of thousands of dollars.

This is an excellent explanation of why statistic process control is so important in manufacturing. Maybe back in the days when we could afford to waste hundreds of pounds of metal on tail fins for a car, this wasn't a big deal. But today, when ounces matter, and the environment matters, we have to work smart.

Luke wants to better understand the properties of cutting tools, he told me, so he can be even more effective. “I’m not one of the geniuses on that. I know a little bit. A lot of people go to school just to learn the properties of tooling.” He also wants to learn more about metallurgy, and he’s especially eager to study industrial electronics. He says he will keep learning for his entire career.

Excellent! His commitment to education, no, let me say his passion for learning, will keep him on the cutting edge. I like this guy. I am sure in ten years, if he does what he says he is going to do, he'll be one of the experts who other people look on as a genius. And he'll probably look just as puzzled as I do when someone calls him a genius. "Huh? I had to learn this stuff!"

It’s relatively easy to train a newcomer to run a simple, single-step machine. Newcomers with no training could start out working the simplest and then gradually learn others.

And no one cared about paying for 50 cent gas to lug around hundreds of pounds of tail fins. And the vast majority of those guys waited for the factory whistle to blow so they could go home and drink beer and watch sports. And life was good.

Skilled workers now are required only to do what computers can’t do (at least not yet): use their human judgment.

This author didn't read his own article. Just a couple of paragraphs ago he did such a good job of relating why constant adjustments are needed to the machines, and why a human needs to monitor and adjust the process.

OK, so Luke has put himself in the above average, even the way above average, group do to his hard work. He has had some opportunities, and perhaps lucky choices. What about the rest who are below him?

But why does Maddie have a job? In fact, more than half of the workers on the factory floor in Greenville are, like Maddie, classified as unskilled. On average, they make about 10 times as much as their Chinese counterparts. What accounts for that?

A factory manager, Tony Scalzitti, lays out the difference between skilled and unskilled workers:

“Unskilled worker,” he narrates, “can train in a short amount of time. The machine controls the quality of the part.”
“High-skill worker,” on the other hand, “can set up machines and make a variety of small adjustments; they use their judgment to assure product quality.”

They have a clean room where

The injectors progress through a series of stations, at each of which an unskilled worker and a simple machine perform one task... the person is there only to place the parts and push a button...

Once Maddie inserts the two parts and removes her hands, a protective screen comes down, and a computer program tells the machine to bring the cap and body together, fire its tiny beam, and rotate the part to create a perfect seal. The process takes a few seconds. Maddie then retrieves the part and puts it into another simple machine, which runs a test to make sure the weld created a full seal. If Maddie sees a green light, the part is sent on to the next station; if she sees a red or yellow light, the part failed and Maddie calls one of the skilled techs, who will troubleshoot and, if necessary, fix the welding machine.

Standard engineers have prepared to make certain that the machine operator doesn’t need to use her own judgment. “Always check your sheets,” Maddie says.

A new worker can be trained in less than half an hour. Management sees them as interchangable, and pays them about $13/hr, which is slightly above the average wage in that part of the country. Level 2 machinists like Luke, and are able to setup the machines and make adjustments, are paid about 50% more.

For Maddie to achieve her dreams—to own her own home, to take her family on vacation to the coast, to have enough saved up so her children can go to college—she’d need to become one of the advanced Level 2s. A decade ago, a smart, hard-working Level 1 might have persuaded management to provide on-the-job training in Level-2 skills. But these days, the gap between a Level 1 and a 2 is so wide that it doesn’t make financial sense for Standard to spend years training someone who might not be able to pick up the skills or might take that training to a competing factory.

So, Maddie needs to train herself to move into the other tier. No one is saying that is easy. But there is no mystery to it all. She would need to learn about things like tolerance, and microns, and learn about the programming language that runs the machines, something she knows nothing about. There is no magic. Luke did the hard work to learn these things, and he should be rewarded for that. She could learn too.

There is no caste system to keep her from being a skilled Level 2 if she really wants this.

The article doesn't say if Luke is single, but perhaps Maddie should consider dating someone like Luke. Yeah, I know, that's way too old fashioned and traditional to suggest she would have an easier time of achieving her dreams if she was married to an above average guy, instead of going it alone as a single mother.

The connection between successful marriages and successful wealth creation has been well established. More than 90% of American millionaires are part of married couples, and on average those couples been married almost thirty years. Another 5% of American millionaires are widows or widowers. It is time to recognize that highly successful owner managers are almost always one half of a highly successful couple. Thomas J. Stanley’s recent book The Millionaire Mind gives an insightful look into this phenomenon.

Dr. Stanley’s research suggests that financial success can be the result of a good marriage, rather than its cause.

A study by an Ohio State University researcher shows that a person who marries — and stays married — accumulates nearly twice as much personal wealth as a person who is single or divorced.

And for those who divorce, it's a bit more expensive than giving up half of everything they own. They lose, on average, three-fourths of their personal net worth.

"Getting married for a few years and then getting divorced is clearly not the path to financial independence," said Jay Zagorsky, whose study divided married couples' assets so they could be compared with singles.

Sources:

Phil Thompson – Business Lawyer, Corporate Counsel - http://www.thompsonlaw.ca/pdf_folder/millcouple.pdf
Chapter 6, "Choice of spouse" - Stanley, Thomas. J., Ph.D., The Millionaire Mind, Andrews McMeel Publishing, Kansas City (2001).
"Study: Marriage builds wealth and divorce destroys it" http://www.usatoday.com/news/nation/2006-01-18-marriagewealth_x.htm

Could our modern trends in single parenting, divorce, and other social fabric changes be a part of what gives workers like Maddie less security? These articles give no hint of such possibility. Are attacks on millionaires merely attacks by those with unconventional living preferences on those who have gotten ahead by living a traditional style life? Maybe by people who don't want to admit to the benefits of traditional living over the alternative lifestyles? Well, that's a subject for another blog post.

Instead the article only mentions the factory manager's view that Maddie's job is only safe because she makes less in two years than what a robot arm would cost. If the robot arm gets cheaper, or the factory starts running extra shifts to make more parts to spread out the cost of the robot arm and get back their investment within two years, Maddie might have to find a different job.

“What worries people in factories is electronics, robots,” she tells me. “If you don’t know jack about computers and electronics, then you don’t have anything in this life anymore. One day, they’re not going to need people; the machines will take over. People like me, we’re not going to be around forever.”

Do you see the problem? She needs to read this article. Look at her attitude about learning, and about the machines. She could have Luke's attitude, but she doesn't.

Instead the article focuses on the factory. Why doesn't the factory cut costs less relentlessly, or be willing to make less profit, or be nice and "solve America's jobs crisis in some small way."

The company is contributing to America's jobs. By making parts, and being competitive, they make money which they do spend on workers. Whether those workers work directly for them, like Maddie, or whether they are supporting the workers who make robot arms, sales of their products are supporting workers. Does Maddie want to do what it takes to be part of the group of workers willing to meet the needs of industry?

The company headquarters are in New York. They gave this author an understanding of the issues they face.

But running a factory in New York City is expensive and filled with logistical hassles, and over time, these problems became more severe.

Should we talk about the high taxes in New York? The doesn't mention specific problems, but one wonders about the contribution of government regulations and taxes.

Consider who founded the company....

The company was founded by his grandfather, Elias Fife, a Jewish immigrant from Lithuania who knew nothing about cars but saw an opportunity, in 1919, when he learned that many people were frustrated with Ford and the other car manufacturers because they never made enough replacement parts, since all the money was in building new cars. The

Do you think this Jewish immigrant came to America with suitcases filled with dollars? If he did, he might not have "decided to build a trustworthy, reliable brand whose products met or exceeded the quality of the original parts."

A fair product, at a fair price, that people needed.

Elias worked until he died, at which point his son, Bernard, and son-in-law, Nathaniel Sills, took over the company. Larry, Nathaniel’s son, was never particularly interested in cars and dreamed of being a reporter for The New York Times. He spent a few years as a country manager for Pfizer in Ghana, where he had some adventures. But by 1967, he knew it was time to come home and start work at Standard. “Nobody ever told me I had to,” he says. “I just knew it was expected.” He’s never regretted that decision, he told me.

So he had time to "find himself", but he knew that the best thing to do was come home and run the family business.

But he has had to adapt to change. Gone are the smaller mom-pop garages and auto parts stores. Now he has to deal with well advertised megalithic parts stores:

As Autozone, Napa, and other huge auto-parts stores expanded their reach, they used the bargaining power that comes with size to pressure companies like Standard to lower their prices.

To grow and survive, and provide what the new sources were demanding, he needed to diversify. He needed investors.

Throughout the 1970s, ’80s, and ’90s, dozens of Larry’s old friends and competitors gave up and sold out. Larry’s son, Eric, decided to work at Standard after college and now runs many of the company’s manufacturing operations.

As his friendly competitors retired, Larry bought many of their companies. He paid for these acquisitions by borrowing money or selling more company shares. For years, Standard had been, technically, a publicly traded company, but since the Sills and Fife families owned most of the stock, it had been run more like a family business. But eventually, to fund acquisitions, the families gave up majority ownership. They now hold less than 10 percent of the company stock.

But Larry may have over expanded. He went into debt, and it almost undid the company.

Standard couldn’t raise enough money to pay off the bonds it had already sold. Larry began to fear bankruptcy. “It was awful,” he says. “The only time in my career I lay awake worrying.”

He turned the business around by focusing on principles that were Biblical. The article doesn't mention whether or not Larry knew that getting rid of debt is Biblical, but he sure came close to the brink from the bad effects of debt.

Acting quickly, he sold the building in Queens, laid off 10 percent of the administrative staff, and cut costs everywhere he could. Standard did survive, of course, and is actually doing quite well now. Larry paid off most of the debt, and by concentrating on what the company is best at, he has increased its profits. Economic slowdowns are, perhaps paradoxically, a good time for the aftermarket auto-parts business. Many people delay the purchase of a new car, instead replacing parts on their old one.

Larry still does not have easy choices to make.

To keep the business of the giant auto-parts retailers, Standard has to constantly lower costs while maintaining quality. High quality is impossible without good raw materials, which Standard has to buy at market rates. The massive global conglomerates, like Bosch, might be able to command discounts when buying, say, specially formulated metals; but Standard has to pay the prevailing price, and for years now, that price has been rising. That places an even higher imperative on reducing the cost of labor. If Standard paid unskilled workers like Maddie more or hired more of them, Larry says, the company would have to charge its customers more or accept lower profits. Either way, Standard would collapse fairly soon. (Industrial profit margins are notoriously thin to begin with—typically in the low single digits—and reduced profits or losses would drive down Standard’s stock price, making it a likely target for predatory acquisition.)

With such low profit margins, Larry can't afford the drag of being in debt. And those predators might not be so nice to keep trying to provide jobs in the U.S.. They might acquire the company just to get their customer base, and kill off the manufacturing, or just send it out for the lowest dollar. Standard's engineers try hard to avoid this for very good reasons:

The company’s engineers are constantly reviewing the parts they buy, to see whether they could make the parts more cheaply in-house. Not infrequently, Standard finds that by doing so it can control costs, quality, and delivery speed far better, and thus can better serve the superstores.

Some parts can easily be manufactured in Mexico because high precision and skill isn't needed. So they manufacturer where the labor cost is the best to achieve the needed quality, which in some cases means building parts in Mexico.

Others parts such as ignition coils looked like they needed to be manufactured in the U.S.. But the Polish workers are getting better and better. As they move above the average, and strive for quality and excellence, the company will give them the chance to make this part at a better price.

“Poland is also low-cost, and they’ve got some really qualified engineers,” Larry says. “They do good work.”

You see, this is the crux of the issue. I am sure the Polish workers knew they were below average on the world market, but they worked to be above average, and now they will be rewarded for this, and be given a chance to use their new skills to make money. When the jobs leave the U.S., those workers in the U.S. find themselves in the less than average category, competing with cheaper places in the world. Given time, workers in India, China, and other places will strive to improve, so they can be above average compared to American workers. What can help the American workers survive in the face of this?

“There’s a lot of hassle: shipping costs, time, Chinese companies aren’t as reliable. We need to save at least 40 percent off the U.S. price. I’m not going to China to save 10 percent.” Yet often, the savings are more than enough to offset the hassles and expense of working with Chinese factories. Some parts—especially relatively simple ones that Standard needs in bulk—can cost 80 percent less to make in China.

If Maddie doesn't improve her skills like Luke did, she puts herself in competition with that group of workers. In competition with people being held back by the less developed infrastructure of their country.

When workers in our country don't strive to improve, they are betting their prosperity on other countries not getting their act together. This doesn't seem like a very safe bet, to rely on the hope that someone else will be lazy and not try to surpass you.

Workers in China and Poland and Mexico, for example, have become more highly skilled, and their factories are now able to produce more-precise goods than they could a decade ago. But at the same time, the wages of those workers have risen, as have shipping costs. Unrest in northern Mexico or an oil-price spike caused by trouble in the Middle East can encourage manufacturers to keep production lines in the United States. The development of increasingly complex machinery can do the same: because expensive machines are more likely to pay off when they can be counted on to run 24 hours a day, every day, the availability of steady electricity, for instance, is essential.

Much beloved Apple now makes practically everything it sells overseas.

Almost all of the 70 million iPhones, 30 million iPads and 59 million other products Apple sold last year were manufactured overseas.

Source: Apple, America, and a squeezed middle class

Steve Jobs was asked by Obama what would it take to return those jobs to America.

Mr. Jobs’s reply was unambiguous. “Those jobs aren’t coming back,” he said, according to another dinner guest.

The president’s question touched upon a central conviction at Apple. It isn’t just that workers are cheaper abroad. Rather, Apple’s executives believe the vast scale of overseas factories as well as the flexibility, diligence and industrial skills of foreign workers have so outpaced their American counterparts that “Made in the U.S.A.” is no longer a viable option for most Apple products.

Source: Apple, America, and a squeezed middle class

And those foreign companies are doing everything possible to attract business to help their workers compete:

For years, cellphone makers had avoided using glass because it required precision in cutting and grinding that was extremely difficult to achieve. Apple had already selected an American company, Corning Inc., to manufacture large panes of strengthened glass. But figuring out how to cut those panes into millions of iPhone screens required finding an empty cutting plant, hundreds of pieces of glass to use in experiments and an army of midlevel engineers. It would cost a fortune simply to prepare.

Then a bid for the work arrived from a Chinese factory.

When an Apple team visited, the Chinese plant’s owners were already constructing a new wing. “This is in case you give us the contract,” the manager said, according to a former Apple executive. The Chinese government had agreed to underwrite costs for numerous industries, and those subsidies had trickled down to the glass-cutting factory. It had a warehouse filled with glass samples available to Apple, free of charge. The owners made engineers available at almost no cost. They had built on-site dormitories so employees would be available 24 hours a day.

The Chinese plant got the job.

Source: Apple, America, and a squeezed middle class

The Atlantic article mentions other ideas that are thrown about to help Maddie, and these ideas focus on what others could do for Maddie:

Just about every economist would argue that China should stop artificially cheapening its currency, but getting it to do so would not dramatically increase low-skill manufacturing employment in the U.S. Most analyses show that in response to a rising yuan, American manufacturing companies would more likely shift production to other low-wage countries—like Indonesia, Bangladesh, or Mexico—than to U.S. factories.

Today's factories in America are more productive than ever. But they do it with fewer workers. Productivity increases are a good thing, it frees people from drudgery jobs, and lowers prices, giving us all more purchasing power. More productive workers usually get paid more.

During the 20th century, a lot of workers moved off the farms and into the factories. They had enough prosperity to pay for an education for their children, who would hopefully get to work jobs with less drudgery.

In that period of dramatic change, it was the highly skilled craftsperson who was more likely to suffer a permanent loss of wealth. Economists speak of the middle part of the 20th century as the “Great Compression,” the time when the income of the unskilled came closest to the income of the skilled.

A scary thing for craftsmen is that Luke at 27 can do things that used to require 15 years of apprenticeship to learn.

The double shock we’re experiencing now — globalization and computer-aided industrial productivity — happens to have the opposite impact: income inequality is growing, as the rewards for being skilled grow and the opportunities for unskilled Americans diminish.

Note the opportunity there. To the opposite of the below average, there is a chance to be in the above average group. Hope is not a strategy. Our unskilled workers are not going to successfully compete for the unskilled jobs in Bangladesh, Indonesia, or Mexico. The economy is doing exactly what it should do: Reward the workers who are willing to work harder, but even more important, smarter and get more educated.

The article ends on a down note:

It’s hard to imagine what set of circumstances would reverse recent trends and bring large numbers of jobs for unskilled laborers back to the U.S. Our efforts might be more fruitfully focused on getting Maddie the education she needs for a better shot at a decent living in the years to come. Subsidized job-training programs tend to be fairly popular among Democrats and Republicans, and certainly benefit some people. But these programs suffer from all the ills in our education system; opportunities go, disproportionately, to those who already have initiative, intelligence, and—not least—family support.

I never heard Maddie blame others for her situation; she talked, often, about the bad choices she made as a teenager and how those have limited her future. I came to realize, though, that Maddie represents a large population: people who, for whatever reason, are not going to be able to leave the workforce long enough to get the skills they need. Luke doesn’t have children, and his parents could afford to support him while he was in school. Those with the right ability and circumstances will, most likely, make the right adjustments, get the right skills, and eventually thrive. But I fear that those who are challenged now will only fall further behind. To solve all the problems that keep people from acquiring skills would require tackling the toughest issues our country faces: a broken educational system, teen pregnancy, drug use, racial discrimination, a fractured political culture.

This may be the worst impact of the disappearance of manufacturing work. In older factories and, before them, on the farm, there were opportunities for almost everybody: the bright and the slow, the sociable and the awkward, the people with children and those without. All came to work unskilled, at first, and then slowly learned things, on the job, that made them more valuable. Especially in the mid-20th century, as manufacturing employment was rocketing toward its zenith, mistakes and disadvantages in childhood and adolescence did not foreclose adult opportunity.

For most of U.S. history, most people had a slow and steady wind at their back, a combination of economic forces that didn’t make life easy but gave many of us little pushes forward that allowed us to earn a bit more every year. Over a lifetime, it all added up to a better sort of life than the one we were born into. That wind seems to be dying for a lot of Americans. What the country will be like without it is not quite clear.

Sorry, but there are opportunities in all of this. Will people meet the challenges and make the sacrifices necessary to get ahead?

There is no pre-ordained caste system in this country decreeing that Maddie must remain poor because of her past choices. She is only 22. She has her whole life ahead of her. She already has a job that pays above average. Is she using her free time to make investments in her future that will keep her above the average?

Some might say she doesn't have time to go to school because she has to work and to take care of her child. And despite mentioning the effect of marriage on wealth, certainly she shouldn't rush into marriage with the wrong person.

Even if the child is only one year old, I would bet that she has some free time should could spend on learning.

Today, we have such an abundance of books on every topic. We have libraries. Anyone can have a cheap computer. There are tons of free software online, and legions of people answering questions, and sharing their experience online, a huge resource. All kinds of resources to support learning if one is willing to apply themselves. And there are other things other than manufacturing that people can do. Perhaps some should consider learning a hands on trade that can't be outsourced.

Let anyone who is below the average, or at risk of being below the average, decide to sacrifice television, and spend that time on self education. Let them sacrifice, for a little while, rampant consumerism. Avoid the lure of debt. Let them sacrifice partying, and learn to enjoy all the beautiful free parks, and improve their fitness in the process. Learn to live on less for a little while. Live in less space. And invest the savings of those sacrifices in their future through education. Maybe even some volunteer work to build up experience.

While enrolling in a school might be helpful, no one needs to force Maddie to go through the exercises in a calculus textbook. She could do it on her own, in her own time, around her own schedule and commitments. If she needs it, she could make friends at the local university and get some tutoring very inexpensively if she needs it. If she learns it well, she could take an Advanced Placement test and get college credit for what she learned without attending any class! Let her do that with subject after subject. One at a time if necessary. Doing these things will help put her in the above average group. She doesn't have to stay in competition with the lowest workers. In a few years she could have one or more real college degrees. Then she could use her study habits to study law, or medicine. The future really is in her hands.

Eventually there will be a prosperity payoff where people who make these kinds of choices will have enough of a bounty to enjoy the fruits of their labors. The payoff is based on universal laws.

Other references

Free-Market Socialism - http://www.nytimes.com/2012/01/24/opinion/brooks-free-market-socialism-.html?_r=1&src=me&ref=general

Human costs built into iPad and other Apple devices - http://www.nytimes.com/2012/01/26/business/ieconomy-apples-ipad-and-the-human-costs-for-workers-in-china.html?src=recg

A reader comment:

You may not like reading about this; I certainly didn't. I don't like thinking about my own complicity in this system. I don't want to know that when I visited that nice, clean, pretty store and looked at all of those shiny, cool, brand new products, that there was an ugly, sad and shameful story behind it.

Denial is easier than taking responsibility. I can just say that I had nothing to do with any of this. Heck, I just paid for the thing...that's all.

Focusing on this, and believing it, might mean I have to think hard, or do more work, or pay more money, or, even worse, it might involve some hassle---and I hate hassles. I'm entitled to convenience. And I also want it as cheaply and as quickly as I can get it.

You're right. Instead of all that tiring "personal responsibility" stuff that my conservative friends are always lecturing me about, or that "systems thinking" that my progressive friends are into, it would be easier to distract myself or to pretend that I don't understand how these products arrive on the shelves.

Hey, I know what to do! I'll just attack the people who wrote this article, and the New York Times itself. How dare they make me so uncomfortable and so conflicted!

And I'll insist that, even it this isn't a pretty picture, the ONLY alternative to this system is the USSR under Stalin. I'll say that any critics of Apple's production must be "anti-capitalist" and "just envious" of their success.

And that will at least make me feel better for a while.

What to do about the 50 or 60 or 70 percent of the people who are below average

The Atlantic Article

Other references

4 Comments

Anonymous

Garnet Chaney

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Garnet Chaney