Andrew Grove is the former CEO of Intel who was responsible for its transition from memory chip producer to microprocessor producer. According to Wikipedia, Grove is responsible for an increase of 4500 % in Intel’s market capitalization. In his youth he and his family escaped from Budapest, Hungary during the Soviet invasion of 1956. Groves holds a PhD in chemical engineering from UC Berkeley. Grove is now retired and is a senior advisor to Intel.
Grove recently wrote an article for Bloomberg that is quite insightful in its analysis of certain aspects of American corporate culture. In particular, Grove notes the disconnect between US technology startups and the subsequent expansion of business activity leading to job growth. He also notes that startups are failing to scaleup their business activity in the USA. The Silicon Valley job creation machine is powering down.
Grove makes an interesting point here,
A new industry needs an effective ecosystem in which technology knowhow accumulates, experience builds on experience, and close relationships develop between supplier and customer. The U.S. lost its lead in batteries 30 years ago when it stopped making consumer-electronics devices. Whoever made batteries then gained the exposure and relationships needed to learn to supply batteries for the more demanding laptop PC market, and after that, for the even more demanding automobile market. U.S. companies didn’t participate in the first phase and consequently weren’t in the running for all that followed. I doubt they will ever catch up. Andrew Groves, 2010, Bloomberg.
To build on what Grove is saying, I’ll embellish a bit and add that an industry is actually a network of manufacturers, suppliers, job shops, labor pools, insurers, bankers, and distributors. When deindustrialization occurs, the network of resources collapses. The middle class takes a big hit when a commodity network moves offshore. In the end, the intended market for commodity goods and services- ie., the middle class- is weakened by the very move that was supposed to keep prices down and profits up.
Grove is most concerned with the matter of scaleup. This is the business growth phase that occurs after the entrepreneurship proves its worth in the marketplace. Investors pour money ino large scale operations and staff to get product onto the market. Grove suggests that investment in domestic startups who do not follow on with domestic scaleup are not participating in keeping the magic alive.
Offshore scaleup negatively counteracts the benefit of domestic innovation. In a sense, it is an abdication of the trust given to the entrepreneurs by the citizens who provided the infrastructure to make the innovation possible.
Grove makes a good point in his editorial and I think that the rest of us need to take an active stance to question the facile analysis so often uttered by business leaders when it comes to relocation of business units offshore. Citizens paid for the infrastructure and a large part of the education that makes our innovative technology possible. There needs to be more public pushback on business leaders and government officials about this topic.
Lamentations on Chemistry 
I lost much interest in Mr. Grove’s business advice after he went at the pharma industry. Maybe this is better advice; a blind squirrel can still find the occasional acorn.
Hi John,
I don’t disagree with Derek’s view on Groves assessment of pharma. Silicon Valley people tend to view everything in a non-linear way. I’m not sure that Grove appreciates the cycle time of things under FDA control.
But that said, I still have to agree with Grove’s opinion on what is happening with deindustrialization. We have evolved an outsourcing business model largely as a result of the fiduciary responsibilities of corporate officers to their shareholders. A corporate officer who does not consider offshore manufacturing if there are profit benefits is in violation of his/her responsibilites to the shareholders. A privately held company, on the other hand, can remain in the US as a matter of choice and irrespective of finding the global cost minimum on the balance sheet.
This notion seems irretrievably naive. But in fact, companies make this choice all of the time.
While all of this deindustrialization is happening, American taxpayers continue to pay for higher education and other infrastructure to support the notion that money thrown in that direction eventually leads to a thriving American economy. American and foreign business leaders are taking full advantage of our advanced civilization with all of its appurtances and institutions to export our “bought & paid for” magic to other countries. Even with secrecy agreements in place, the export of technology becomes the transplant of technology. While the fact of this is inevitable, the rate is adjustable.
For all of the self-congratulatory chirping by corporate CEO’s on cost containment, the fact is that the current business model of outsourcing commodity manufacturing is fostering social and economic instability in the US. The loss of middle class manufacturing jobs which support a swollen federal government will only lead to the unprogressive disassembly of programs and services that we have come to associate with our civilization.
“Citizens paid for the infrastructure and a large part of the education that makes our innovative technology possible. There needs to be more public pushback on business leaders and government officials about this topic.”
We don’t have citizens in this country we have consumers. And only citizens can stop this country from sliding into the abyss of feudalism and fascism.
A citizen knows his rights while a consumer only knows hunger.
Can you remember the last time when a US politician used the term citizen rather than consumer? I’m not sure when I was officially transformed into a consumer but is must have been sometime in the last twenty years.
I barely noticed, though my wallet got decidedly lighter.
I’m now just a munchy munch machine easily swayed by advertising and thrilled that I have to choose between two equally corrupt politicians in my next election. In a way it’s satisfying to be so bland and easily swayed.
Late at night, after all the stores have closed I sometimes wonder who decided that I’d become a consumer?
Hi Roger,
If you do not already have a blog, you should start one and start writing about this and other things that are of concern to you. Use it to consolidate your ideas into a body of thought. I don’t know, perhaps you already do this.
I’m trying to figure out how to take the next step myself. From the blogosphere to the podium, or maybe to YouTube. We need new thinking and new faces associated with it.
The Lamentations TV Network. There is a thought. Chemist to talking head. What a bit of alchemy that would be.
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