THIS IS WHY THERE ARE NO JOBS IN AMERICA

Daily Wealth ^ | Saturday, August 21, 2010 | Porter Stansberry

[Comrade Brother Abu Bubba]

THIS IS WHY THERE ARE NO JOBS IN AMERICA by Porter Stansberry

I'd like to make you a business offer.

Seriously. This is a real offer. In fact, you really can't turn me down, as you'll come to understand in a moment…

Here's the deal. You're going to start a business or expand the one you've got now. It doesn't really matter what you do or what you're going to do. I'll partner with you no matter what business you're in – as long as it's legal. But I can't give you any capital – you have to come up with that on your own. I won't give you any labor – that's definitely up to you. What I will do, however, is demand you follow all sorts of rules about what products and services you can offer, how much (and how often) you pay your employees, and where and when you're allowed to operate your business. That's my role in the affair: to tell you what to do.

Now in return for my rules, I'm going to take roughly half of whatever you make in the business each year. Half seems fair, doesn't it? I think so. Of course, that's half of your profits.

You're also going to have to pay me about 12% of whatever you decide to pay your employees because you've got to cover my expenses for promulgating all of the rules about who you can employ, when, where, and how. Come on, you're my partner. It's only "fair."

Now… after you've put your hard-earned savings at risk to start this business, and after you've worked hard at it for a few decades (paying me my 50% or a bit more along the way each year), you might decide you'd like to cash out – to finally live the good life.

Whether or not this is "fair" – some people never can afford to retire – is a different argument. As your partner, I'm happy for you to sell whenever you'd like… because our agreement says, if you sell, you have to pay me an additional 20% of whatever the capitalized value of the business is at that time.

I know… I know… you put up all the original capital. You took all the risks. You put in all of the labor. That's all true. But I've done my part, too. I've collected 50% of the profits each year. And I've always come up with more rules for you to follow each year. Therefore, I deserve another, final 20% slice of the business.

Oh… and one more thing…

Even after you've sold the business and paid all of my fees… I'd recommend buying lots of life insurance. You see, even after you've been retired for years, when you die, you'll have to pay me 50% of whatever your estate is worth.

After all, I've got lots of partners and not all of them are as successful as you and your family. We don't think it's "fair" for your kids to have such a big advantage. But if you buy enough life insurance, you can finance this expense for your children.

All in all, if you're a very successful entrepreneur… if you're one of the rare, lucky, and hard-working people who can create a new company, employ lots of people, and satisfy the public… you'll end up paying me more than 75% of your income over your life. Thanks so much.

I'm sure you'll think my offer is reasonable and happily partner with me… but it doesn't really matter how you feel about it because if you ever try to stiff me – or cheat me on any of my fees or rules – I'll break down your door in the middle of the night, threaten you and your family with heavy, automatic weapons, and throw you in jail.

That's how civil society is supposed to work, right? This is Amerika, isn't it?

That's the offer Amerika gives its entrepreneurs. And the idiots in Washington wonder why there are no new jobs…

Regards,

Porter Stansberry

[netmilsmom]

No, it’s that we know history.

People who own businesses answer to their stockholders. Many of them being you and me. I don’t believe business is evil, seems like you do. They work towards the bottom line, as they should. Why is it that the tech, customer service and medical coding/transcription jobs shipped to India are all coming back here? Because it’s cheaper to use our labor than to fix their mistakes. The system works without government interference.

And when you impose tariffs to equalize trade it never works.

http://en.wikipedia.org/wiki/Smoot-Hawley_Tariff_Act

[TopQuark]

"Tell me again the gross profit margin, net profit margin, and cash on hand at Microsoft. Compare their profit margin to (say) Exxon or Coca-Cola."

Sorry, I am done with my homework for today. Since you know the numbers, tell them. If you have a point, please make it. Or say nothing at all.

"Then tell me Microsoft's cheaper competition which is going to eat its lunch unless it cuts employee pay."

What do these words mean? "Cheaper competition," "eat its lunch," etc. Could you be less specific?

Cheers!

[PugetSoundSoldier]

Hmmm, interesting -- you actually found your employees a new job.

Yep. I firmly believe the value of a company is its employees, not the equipment or facilities. I spent more time with my employees than my family, they WERE part of my family.

It's also why I paid 13 of them more than I earned - because I wanted to keep them. And in all those years, I never had a single employee leave voluntarily. Not one. Pay them well, take care of them (health care, dental plan, Friday afternoon BBQs/pizza feeds/movie times), and they will reward you.

Oh, and before I started my own thing, I worked at 3 other jobs. I lasted an average of 4 years before I was fired for insubordination at each place. Telling your superiors they're wrong, and refusing to do the wrong thing, typically doesn't add to a long career! However, I told every employee that they had free reign to tell me when I was wrong, and if they could show it, I'd give them a $50 bill and do what they suggested.

That sounds a bit like Carly Fiorina's "No American has a right to a job."

Correct. There IS no right to a job. You have the right to try to work, but no RIGHT to actually work. Declaration of Independence and Constitution and all that.

Fine; but then, no employer has a right to a profit, if you're going to play that game.

Absolutely. The employer can do whatever it can to earn a profit, operate in the red (and eventually go bankrupt), or just shut down. As an employer, I'm not claiming a "right" to earn a profit, but I DO claim the fundamental right of the Declaration of Independence:

The Right to the Pursuit of Happiness.

I am not guaranteed a profit, but I am guaranteed the right to try to earn a profit.

You are not guaranteed a job, but you're guaranteed the right to try to get a job (which, of course, includes going out and starting your own business and creating your own job).

And (come to think of it) the claim that "it isn't the wages but the regulations" -- while it might be true of manufacturing -- isn't true of software or high-tech.

Well, high-tech design (not manufacturing). Those are much higher margin jobs (witness Microsoft with a huge 23% net profit margin, larger than anyone else in the consumer electronics industry). Writing software has big up-front costs and basically zero "production" costs.

Otherwise, why the rush of H1-B employees?

I've worked with lots of H1-B visa workers in the US, alongside them at Dell, Apple, and Microsoft. For the most part, they earn the same as American workers doing the same thing.

The difference is we do have an actual shortage of high tech workers in the US. Seriously. I sometimes consult with small startups looking to build engineering teams, and the labor pool in the US is rather small; opening it up to overseas workers as well - who, by law, must be paid the same rates - immensely aids the team-building process.

Lastly, consider that last year the US graduated 150,000 engineers, and that 40,000 of them were foreign nationals. And that China alone graduated 500,000 engineers. We simply are not graduating enough tech workers, and the rest of the world - China in particular - understand what drives economies: innovation, creation. You need technology workers. Engineers.

I'll leave you with this last image I snapped 2 weeks ago, at the HSBC center in downtown Bangkok:

The US Government - via taxation and regulation - is squashing that potential. China, Thailand, Vietnam, Malaysia, Indonesia, Taiwan, etc. are embracing that potential. They're doing whatever they can to free their citizens to reach their potential, they reward success, they let you keep the fruits of your labors.

We're running from what made us great; they're running TO what made us great. It's not greedy companies or "free trade" that is killing the US, it's greedy Government and a large section of the US population that believes in the entire class-warfare claptrap as proffered by Obama, Pelosi, Reid and the rest of the Democrats (and insane "Conservatives" like Ron Paul and Pat Buchanan).

[ColdFusion75]

Perfect reply!

I don’t fear free-trade, because I’ll put my talents, skills and work ethic against anyone, anywhere, but my government seems hell-bent on regulating me out of existince.

More government help is not the solution to problems created by the government...

Just my two cents-

[grey_whiskers]

I'm glad you did right by your people.

But I'm calling bullsh*t on your stories of H-1B workers: the one's I've worked with (at various Fortune 50 companies, as well as startups) were a mixed bag.

The business analysts (in my experience) were the best. The programmers and the QA people were the worst. Maybe it was a cultural thing, but their technical conversations were only good as long as they felt in control of the situation. As soon as they were challenged, or an error of theirs was pointed out, they would attempt to "baffle with bullsh*t" by dropping LOTS of buzzwords; then if that didn't work, call in a co-worker to do the same; then finally relapse into pidgin English in an attempt to play some version of the race card.

Many of them engaged in open plagiarism and didn't even try to hide it; and I saw one group of Indian H1-Bs drive a Pakistan out of a job in two weeks by refusing even to give him the password for his PC, stuff like that.

Not professional at all.

As far as the Engineers go, China counts engineers differently: and there, too (see Chery) sub-par work, caveat emptor, and intellectual property fraud is rampant compared to the U.S.

See also melamine-tainted pet food, sulfide-bearing sheetrock, diethylene-gloyol tainted toothpaste, and the like.

Yes, the robber barons in the US acted similarly: but I don't even hear rumors of anything approaching an EPA or similar governmental bodies in China.

I think that they are changing (whether they admit it or no), not from Communism to capitalism, but from Communism to Nationalist Fascism.

In the last year or two I read an article from an engineer outsourced from Proctor & Gamble, where he was ORDERED by his boss--backed up by C-level executives--to hand over, directly, the most advanced production techniques (chem engineering) for some of the flagship products, directly to the Chinese; as a condition for China allowing/sponsoring the plant. And to have their population, and being *given* the leading edge technology from the US, is a very dangerous combination.

I understand your eagerness to try to make money: and combined with the Eastern cultural more of "saving face" and the tendency of Third-World countries to engage in "bling" as to how fast they are rising, it makes for some pretty propaganda-type statistics.

But I think that you and many others are being played for suckers in China: and the risks are too great, long term, to ignore.

I think the real reason for this is the combined greed of a new generation of executives (Jack Welch & his ilk), for whom making ~100 x the average workers' salary just wasn't enough; together with buying into lies and propaganda of The New York Slimes' Friedman, ("The Lexus and the Olive Tree"), who treat political and economic freedom as a *given*, not something which can be forcefully removed forever by a hostile power.

It would be nice to see someone write a piece on China which was as skeptical of their self-aggrandizing claims, as most Dems typically are skeptical of Bush and Palin.

As an example, for some reasons the greens didn't even blink over the Harbin benzene spill, though the city's drinking water (a city of 9 million people) was affected.

But I'm not holding my breath: the Chicoms are really intending to buy from us the rope they hang us with: and key to that is Sun-Tzu's dictum is that the successful warrior causes his opponent to give up without a fight.

Rant mode /off>

Cheers!

[grey_whiskers]

OK, I'll be specific.

Microsoft (before the $3/share dividend a couple of years back) -- had enough cash on hand to invest its money in T-bills (the "risk free" rate of return) -- and throw off $1 billion / year in free cash flow from the interest.

Without jeopardizing either the principal OR free cash flow from continuing operations.

And the cash flow continues -- as of April 2010 net profit had risen 35%.

But somehow they have to go to the Third World to cut costs?

The only reason to do that, is if you are seeking market share vs. a competitor who is beating you on cost.

Microsoft HAS no such competitors: Apple is not beating them on cost (see any computer religious thread on FR), and if someone else WERE beating them on cost, they wouldn't have record PROFIT.

Oh, by the way: when a company declares a large dividend like that, it is an admission of incompetence on the part of management: their job is to grow the company's earnings, and then to re-deploy those earnings at a greater rate of return than the shareholder could attain on their own.

So returning a large dividend to the shareholders was an admission that Microsoft didn't know anywhere to put the money which would outperform the shareholders' efforts.

Having *that* kind of cash-flow issue is a nice problem to have, but it means that if you claim you need to cut costs on the backs of employees, you are lying through your teeth and should be (to paraphrase Dave Barry) "hung, stabbed, drawn and quartered, disemboweled, shot, and then REALLY hurt".

Gates is one of the richest men ever to exist on the face of the planet: if you invested his wealth in T-bills at 2%, the interest ON the interest ON the interest would be twice as much as the average MD makes in a year.

Ergo, he doesn't *need* to fire Americans to save money.

Cheers!

[grey_whiskers]

The difference is we do have an actual shortage of high tech workers in the US. Seriously. I sometimes consult with small startups looking to build engineering teams, and the labor pool in the US is rather small; opening it up to overseas workers as well - who, by law, must be paid the same rates - immensely aids the team-building process.

Yep, I get it.

Many snarky comments deleted -- but suffice it to say that this does not comport with my experience, nor the experience of other technically advanced white-collar types of my acquaintance.

Can't say too much more without betraying personal info -- but some of the folks have PhDs from name schools, others had years of experience in highly technical work at household-name medical institutions. All let go and forced to train their H1B replacements on the grounds that they were "unqualified".

Cheers!

[wideminded]

We simply are not graduating enough tech workers, and the rest of the world - China in particular - understand what drives economies: innovation, creation. You need technology workers. Engineers. ...

The US Government - via taxation and regulation - is squashing that potential.

American culture is squashing that potential since there is strong social pressure against studying hard and taking an interest in science and engineering, particularly in high school.

On the other hand, if we did graduate many more native tech workers it is not at all clear that they would find jobs.

We need to maintain an edge in creativity and innovation, but since China seems to be taking that more seriously than us, they will probably close in rapidly.

[wideminded]

My own background is entrepreneur. I’ve started 5 businesses on 4 continents, all in manufacturing. I started a manufacturing (loudspeaker) business in the US

Why did you start that that particular first business instead of some other?

[PugetSoundSoldier]

Can't say too much more without betraying personal info -- but some of the folks have PhDs from name schools, others had years of experience in highly technical work at household-name medical institutions. All let go and forced to train their H1B replacements on the grounds that they were "unqualified".

My experience in building engineering teams (including a team at a scientific SONAR research company in Seattle, WA and a few teams at dot-coms in the late 90s) was that, typically, the more letters a person had, the less worthwhile they were in the day-to-day process of engineering. They were good at theoretical stuff, but anything application wise was wasted on them.

When you have to "teach" PhDs in EE how to use an oscilloscope to track down an overshoot issue, you know it's bad.

Too many engineers - and I know plenty in their 40s and 50s - are either over-educated (a definite problem - see above) or have not kept up with technology. Knowing how to program in C, but not in C++, or C#, or Java, or other new languages DEFINITELY hurts your ability to get a new position. You're obsolete, and the cost you'd command with your education and experience would make on-the-job training to get up to speed a $50K+ investment, minimum.

At least, that's been my experience...

[PugetSoundSoldier]

I love the industry - audio, acoustics, loudspeakers. It was a niche, an opening, and I filled it for as long as it was reasonable to do so. I was - and am - very good at it, and didn’t lack for customers. It’s what I do now, it’s my passion - but I do it in locations where I can actually keep the majority of what I make, rather than giving it to the Government.

[grey_whiskers]

You're obsolete, and the cost you'd command with your education and experience would make on-the-job training to get up to speed a $50K+ investment, minimum.

Not following this last sentence -- does the training cost more if you are more educated? Or are you saying that you have to pay them their "going rate" while they get up to speed and trained?

In my experience, it's been a mixed bag. Many of the older mainframe people could make a mainframe sing and dance, but didn't understand other programming (Object oriented paradigms/ languages) ; but they'd still run rings around any Java whiz on data mananagement, extract-transform-load, stuff, and would "grok" any database-type tasks put before them.

But I guess getting into that level of detail is too much work for anyone above the level of manager. Much better to lay everyone off and brag about the short-term cost savings. And hope nobody notices schedule slippages, re-works, shoddy code, and the like, since those costs are spread over a number of cost centers and budget items.

Cheers!

[OneWingedShark]

>When you have to “teach” PhDs in EE how to use an oscilloscope to track down an overshoot issue, you know it’s bad.

Yeah, that’d be like a PhD in Computer Science not knowing what a linker is.

>Knowing how to program in C, but not in C++, or C#, or Java, or other new languages DEFINITELY hurts your ability to get a new position.

Interestingly enough Java and C# use the JVM and DOTNET virtual machines which may be targeted by compilers in other/different languages. That was one of the big talking-points of the .NET languages: being able to code different pieces of a program in different languages easily.

Ada has compilers that target .NET, JVM, and “native code.” Personally I’d prefer Ada to *any* of the languages you named because, IMO, it is a better language in the qualifiers/attributes of a high-level language.

[PugetSoundSoldier]

Not following this last sentence -- does the training cost more if you are more educated? Or are you saying that you have to pay them their "going rate" while they get up to speed and trained?

The latter. If you've got 25 years experience, would you be willing to get paid $25 per hour for 6 months while you come up to speed, or will you want that $50 per hour you're used to?

In my experience, it's been a mixed bag. Many of the older mainframe people could make a mainframe sing and dance, but didn't understand other programming (Object oriented paradigms/ languages) ; but they'd still run rings around any Java whiz on data mananagement, extract-transform-load, stuff, and would "grok" any database-type tasks put before them.

Oh, absolutely! The problem is that most of the programming jobs are moving from that kind of stuff, and into more modern systems and tools. New development is rarely in COBOL or Pascal, the languages I was taught in university. It's all in C#, PHP, Java, C++ - stuff I've self-taught and worked to stay current with so that I can stay relevant. If I was still with COBOL, FORTRAN, and Pascal I'd have essentially zero job opportunities compared to what I have by knowing those languages AND the more modern OO versions.

But I guess getting into that level of detail is too much work for anyone above the level of manager. Much better to lay everyone off and brag about the short-term cost savings.

IME, it's more often removing cruft - management and senior staff who HAVEN'T stayed relevant with technology. I know many active leads and managers in their 50s and 60s, but they fully understand - and use - the modern stuff. The guys I know losing their jobs in their 40s and 50s and 60s are the ones that stopped learning in the 90s, and thought their "experience" would save them.

Well, you might need to keep one or two of them around to maintain older systems, but when 99% of your development is done in C++ and Ruby, how many FORTRAN and COBOL programmers do you need?

[PugetSoundSoldier]

Yeah, that’d be like a PhD in Computer Science not knowing what a linker is.

No, more like the PhD knowing what a linker is, but not having a clue at all about how to run it free-standing, if he had to write his own MAKE files. He knows theoretically what it does, and how to use the IDE to run everything, but get him outside that area and he's completely lost.

That was one of the big talking-points of the .NET languages: being able to code different pieces of a program in different languages easily.

Yep. Of course, managed code for FORTRAN, COBOL and Pascal is pretty hard to come by, as are modern development tools! It's basically C++ (even C is relatively obsolete now) or newer - Java, Ruby, Python, PHP, C#, etc.

Ada has compilers that target .NET, JVM, and “native code.” Personally I’d prefer Ada to *any* of the languages you named because, IMO, it is a better language in the qualifiers/attributes of a high-level language.

ADA's good, but go check out Monster.com or oDesk.com or DICE.com and compare the number of ADA jobs relative to C++ or Java. I know a few Boeing guys who specialized in ADA, and they're screwed if Boeing ever lays them off - there aren't any other ADA jobs here in the Seattle area outside those at Boeing.

Basically, my experience has been that the more degrees a person has earned, and often the more decades under their belt, the less relevant they are to the day-to-day or even week-to-week or month-to-month development.

I've worked for some amazingly brilliant PhDs who had great ideas, and some wonderful theories, but when it come to actual implementation and design/production for real-world use, they were completely lost. Those who always fell back on their PhD ("we do it my way because I have the PhD") were inevitably on the projects that crashed and burned; those that would swallow their ego, and let the younger, "less experienced and educated" engineers take the lead in development were part of winning teams.

Anyway, this is a bit of tangent. Tech jobs are being lost, but not to the degree of blue collar jobs. And those are being lost predominantly because of the Government, not because corporations and businesses are traitors...

[patton]

Remember whan Fairfax, VA, made a rule the the homeless shelter could not keep food in their kitchen overnight, because it was not a “commercial kitchen?”

The homeless guys would very carefully bag up the leftover T-Day turkey, and put it in the dumpster.

The next morning, they would fish it out, and have it for breakfast.

Because -by reg - the fridge was not good enough.

[kiwi3000]

Crazy isn’t it. My daughter works for a beverage company and she brings home product that is past it’s best before date. Can’t give it to the shelter but it is good enough for the employees?
In the last nine years our government bureaucracy costs increased by 75%, while staff numbers increased so did outsourcing to consultants. One thing western governments are good at, bureauacy.
Like America we pay taxes on top of taxes on top of taxes.
We pay stupid people to breed, and the more children they have the more money they get, go figure. Natural selection in reverse.

Let them eat cake.

[TopQuark]

"Microsoft (before the $3/share dividend a couple of years back) -- had enough cash on hand to invest its money in T-bills (the "risk free" rate of return) -- and throw off $1 billion / year in free cash flow from the interest... And the cash flow continues -- as of April 2010 net profit had risen 35%.

But somehow they have to go to the Third World to cut costs?

You are confusing wealth with income. Suppose you have a million dollars in your pocket and face the question of whether to invest $1000 in a particular stock. If your expected profit from that investment is negative, you will not invest. It does not matter how much money you already have (wealth): you are thinking about the next increment of that money (income). This is true for any decision-maker, including MS.

If one expects that the hired worker will not be worth his keep, you will not hire that worker. If some other, cheaper worker may be worth his keep, that worker will be hired. This has nothing to do with cash on hand.

[TopQuark]

"Oh, by the way: when a company declares a large dividend like that, it is an admission of incompetence on the part of management: their job is to grow the company's earnings, and then to re-deploy those earnings at a greater rate of return than the shareholder could attain on their own."

This too is a misunderstanding on your part. You are correct, of course, that management's job is to grow earnings, but it is up to the management to decide on the size of the company. When cash dividend is distributed, the company (its capitalization) becomes smaller (the stock price drops by the size of the dividend).

Such distribution need not have anything to do with the quality of the management. When management does not see investment opportunities --- because of the overall state of the industry or entire economy, for instance --- it is its obligation to give cash back to the shareholders: this way the shareholder is free to deploy that cash somewhere else where opportunities may exist. If he disagrees with the management and is more optimistic of the company's future, he is free to buy more of Microsoft's stock with the cash he receives as dividend.

In sum, when opportunities are abundant, management borrows money and leverages the company; when they are meager, it first deleverages the company by paying up the outstanding loans, and then (if necessary) distributes cash to the shareholders. This is just a normal, although infrequent, reaction to business cycles.