> Constant pressure to hit quarterly performance targets meant that machine quality often suffered. In some cases, machines would be shipped out the door unfinished so the delivery could be booked, and assembly would be completed by service technicians at the customer’s ___location. In his history of the American machine tool industry, Albert Albrecht states that “the actions of these larger corporations and conglomerates, under the leadership of financial MBA’s, perhaps more than any other factor, contributed to the restructuring and decline of the US machine tool industry at the end of the 20th century.”
In short, the MBAs happened. Clueless management was brought in who then decimated anything they did not understand. I.e. everything. Aided by Reagan policy to aggressively outsource manufacturing from the nineteen eighties US manufacturing just imploded.
Just speculating here, but by the time the Japanese and the Germans caught up and got really good at machine tools, the metric system would have become an obstacle as well. Because the US insisting to do everything in inches, foot pounds, and what not doesn't translate very well internationally when you start outsourcing all your manufacturing. Outsourcing meant manufacturing standardized on the metric system using equipment and parts not made in the US.
Just speculating here, but I imagine that all that combined lead to a natural preference for non US based manufacturing companies that took over from US companies to not use any US made equipment or parts. So, manufacturing became predominantly metric based and that would have affected standard components, screws, bolts, parts, etc. All made by non US companies standardizing on all of that.
> Constant pressure to hit quarterly performance targets meant that machine quality often suffered.
It’s not necessarily the case that greedy, ignorant MBAs came in and ruined everything. Like, if their practices were so inferior, then any domestic firm that didn’t get taken over by them should’ve had a leg up and could’ve dominated the domestic market.
Don’t you think the more likely source of “pressure” was the international suppliers who had lower costs?
> Aided by Reagan policy to aggressively outsource manufacturing from the nineteen eighties US manufacturing just imploded.
Was the policy to outsource everything, or liberalize markets and let firms and consumers more freely choose where to buy things from? Globalization has done quite a lot to lift people out of poverty and keep prices low.
Brand names carry weight for several years before the damage becomes apparent.
Often their cost cutting measures seem positive at first as it creates a profit uptick, but it's usually at the cost of the brand, so 3-5 years later things take a turn (once the consumer has figured out the brand can't be trusted anymore). By that point it's hard to put the blame on the appropriate person or identify the appropriate reason for a less profitable year.
I said it thousand times in different but related at root topics, quality and reliability are possible but why would somebody build something that would last forever? It’s more profitable to churn cheap garbage over and over specially when customers wouldn’t pay for quality products or when a new, more flashy and feature-rich one is launched everyday. It’s the same for electronics, fashion, cars, machines and anything. Manufacturers just push consumers to “desire” the brand new product but the grinder is spinning faster and faster and the landfills getting higher and higher.
In cases where it matters, it's still a competitive advantage. Consumers don't care, maybe, but companies absolutely do, for their business-critical tools.
> Like, if their practices were so inferior, then any domestic firm that didn’t get taken over by them should’ve had a leg up and could’ve dominated the domestic market.
There aren't infinite firms. Plus in the article, the previous paragraph goes into how the tooling industry was being bought up by conglomerates so the finite firms became even easier to count.
A company fitting your argument is Telsa. The existing firms weren't willing to canabalize their existing product lines so they didn't invest into EVs and now a domestic firm is eating at their market share. However, "Who killed the electric car?" is from 2006, there has been a lot of pent up demand for EVs that no domestic firm was selling to.
However, something also fitting your argument is Moneyball [1][2]. It's not until the 2002 season that teams start to use statistics to determine who to staff their roasters? The League is from 1876; it took 126 years of baseball before a team figured out how to use math!
> Don’t you think the more likely source of “pressure” was the international suppliers who had lower costs?
Well, the article agrees in that it says "By now, tools from Japan and other countries were as good as or better than US tools, not to mention cheaper and more reliable.".
However, R&D was also being cut prior to this so if you don't do any R&D and your products become uncompetitive it's probably because R&D was cut.
> Was the policy to outsource everything, or liberalize markets and let firms and consumers more freely choose where to buy things from?
Well, don't forget there are winners and losers when trading.
In this case the losers are the American Tooling Industry; the winners were everybody that bought from them lol.
--
I do think this growth every quarter is a big problem though. The early observers of business cycle all noticed that it has its ups and downs. Pretending that there won't be a down and fudging the numbers so that you don't have any downs is going to cause future problems. Delivering not-finished lathes counts to me as fudging the numbers.
The main way for countries with higher wages to compete is through automation. You can't supply 1000 laborers at $2/hour, but you can supply five skilled mechanics at $50/hour.
The problem with this is that the 1000 people who had been doing the labor in the US for $25/hour don't want that to happen any more than they want it to move offshore, and they're the people with the skills to ensure the automation goes smoothly. So they resist and then lose to offshore manufacturing rather than domestic automation.
Which in turn causes the US to lose even more manufacturing jobs, because now that factory is in Asia and it's more economical for its inputs and outputs to be other factories in Asia.
The way out of this is to make sure domestic barriers to entry are low, so that you get more new domestic companies like Tesla that aren't stuck in this trap. Right now that isn't the case and Tesla is an exception that got there on hype and eccentric leadership, whereas what you really want is for domestic small businesses to be able to eat the lazy incumbent's lunch long before China does, and indeed to be able to eat the Chinese company's lunch by replacing a thousand low-wage workers with a handful of high-paid specialists.
> It’s not necessarily the case that greedy, ignorant MBAs came in and ruined everything. Like, if their practices were so inferior, then any domestic firm that didn’t get taken over by them should’ve had a leg up and could’ve dominated the domestic market.
In this instance, it was people like Icahn.
Machine tools were a very cyclical market. Consequently, they did well as part of a vertically integrated conglomerate where the profits could be booked over time and the R&D could be shared with the manufacturing parent. When forced to spin out and stand alone by corporate raiders, those companies were effectively doomed as you just ripped out their ability to do R&D.
In addition, people forget that the Japanese companies were very much not playing fair. MITI (Ministry of International Trade and Industry) and the keiretsu/zaibatsu companies were actively attacking the US companies--this was effectively governmental and monopoly collusion. This attack was to the point that they almost wiped out the semiconductor industry (which prompted the DARPA VHSIC project and later Sematech in response) for example. They did similar actions in the manufacturing industries but the government never responded with the same vigor.
> Was the policy to outsource everything, or liberalize markets and let firms and consumers more freely choose where to buy things from?
The policy was to fund the hell out of West Coast (high tech and mostly no unions) and to leave the Rust Belt (manufacturing and lots of unions) to rot.
I will be one of the first to line up to piss on Reagan's grave for the complete shit that he was. However, to be fair, NOBODY had any answer to the fact that manufacturing automated and could get by on two orders of magnitude fewer employees. Every country dependent upon manufacturing went through a horrible time (see: England and Thatcher for similar vitriol). In fact, nobody still has any answer 4 decades+ later. It's one of the reasons there are so many old, very angry MAGAs.
> Globalization has done quite a lot to lift people out of poverty and keep prices low.
At what local cost? Nobody in Cleveland gives a shit about whether someone in Africa is doing better when they can't make their house payment.
> When forced to spin out and stand alone by corporate raiders, those companies were effectively doomed as you just ripped out their ability to do R&D.
It would be just as fair to blame the original culture of having vertically integrated conglomerates to begin with.
If there is anyone who should be able to figure out how to automate manufacturing with a small number of workers, it should be a bunch of machinists. But you put them in a lumbering conglomerate and teach them that automation is the enemy because it will take their jobs. Then they take that same attitude into a smaller company that has to be leaner in order to survive and you've set them up for failure.
Whereas if you embrace it, instead of domestic buyers getting their goods from cheap labor in China, domestic and international buyers get their goods from automated domestic factories that employ fewer people per unit but make more units than ever before because they have globally competitive prices and the global demand when you can supply at a low price is enormous.
> Nobody in Cleveland gives a shit about whether someone in Africa is doing better when they can't make their house payment.
But the reason they can't make their house payment is the same kind of regulatory capture that they supported and caused them to lose their job, which in turn makes housing unaffordable because you can't outsource plumbers and electricians.
AR enables offshoring the smarts at least, you treat the person at the ___location of the work as if they were a robot ... until the robots get good enough, I guess ...
Not yet. Wonder where west would be if politics threw trades to the wolves and kept machinists. Maintain manufacturing prowess and build cheap factories.
Riffing on your last remark, the federal labor statistics list of Ohio occupations with the highest ___location quotients (prevalence in that area divided by prevalence of the same occupation nationwide) still shows machine tools related professions near the top. Surely that cluster of expertise would be in even greater demand if the national economy were to grow in that direction.
May 2022
Engine and Other Machine Assemblers
4.21
Multiple Machine Tool Setters, Operators, and Tenders, Metal and Plastic
3.79
Patternmakers, Metal and Plastic
3.23
Forging Machine Setters, Operators, and Tenders, Metal and Plastic
2.99
Heat Treating Equipment Setters, Operators, and Tenders, Metal and Plastic
2.91
Tool and Die Makers
2.81
Grinding, Lapping, Polishing, and Buffing Machine Tool Setters, Operators, and Tenders, Metal and Plastic
2.75
Sewers, Hand
2.71
Cutting, Punching, and Press Machine Setters, Operators, and Tenders, Metal and Plastic
2.70
> However, to be fair, NOBODY had any answer to the fact that manufacturing automated and could get by on two orders of magnitude fewer employees.
Hasn't the answer been tons more products being made? More product designers, more tool manufacturers, more people in charge of designing factories, more automation engineers, more robotics engineers?
More people supporting those products, more people in sales, more people doing packaging design, logo design, and so on and so forth.
(None of this is environmentally sustainable, separate discussion!)
> everything in inches, foot pounds, and what not doesn't translate very well internationally when you start outsourcing
It translates pretty well for the last 90 years:
In 1930, the British Standards Institution adopted an inch of exactly 25.4 mm. The American Standards Association followed suit in 1933. By 1935, industry in 16 countries had adopted the "industrial inch" as it came to be known, effectively endorsing Johansson's pragmatic choice of conversion ratio.
See also the paragraph above referencing the precision tools enabled by Swede Carl Johansson's "Jo Blocks." For a nice video/contextual storytelling, see Machine Learning channel's Origins of Precision: https://www.youtube.com/watch?v=gNRnrn5DE58
I've long been sounding the alarm on MBA'ification destroying everything. To me its the most under discussed problem with society in better quality of life areas.
In the beginning they cleaned up messy, inefficient, wasteful processes. However for the most part MBA's ran out of real stuff to do 10-20 years ago. Ever since then it has just been about how much more can they shave off of 0.1% of 0.1% of just one more thing that doesnt need it but hey they have a quartly bonus attached.
Or like a comedian I recently saw said, every new business these days are basically something like:
Hey you know how a taxi driver can afford to feed his family?
The metric system wasn’t a factor, it was all economics as laid out in the article. Tooling both foreign and domestic was/is a mixture of imperial and metric to meet certain markets. The major force behind machining, automotive, did their conversions to metric back in the 1970s. The U.S. was seriously lacking in computerized machining and had plenty of time to shift to metric based machines, but the MBAs had already determined long before that they preferred overseas manufacturing at a fraction of the cost.
Machining today is heavy metric, even in the U.S. and there is still no economic way to make it all work, much like with steel production and other manufacturing concerns.
MBAs are fine, honestly. I have a manager who came up in the industry he works in. He worked at the 'coal-face', understands the issues and has real perspective. He got an MBA later in his career and uses what he learned from that to more effectively communicate up the chain and has some new ideas that he filters through his industry experience to make his team more effective.
Children who get an MBA before getting a job and think they have some magic sauce that solves problems for an industry without respecting the work that's been done and knowing why those problems exist to begin with (maybe they're trade-offs? For a real reason?) are a problem, as are the clueless twats who listen to their breathless assertions as though they carry any weight.
MBAs are taught techniques for optimizing for quality and cost. It's not always an either/or decision.
Even when it is an either/or situation, sometimes it's better to build a product that is half the price for a quarter of the lifespan. A buyer who will use a tool for 30 hours doesn't really care if the service life of a tool has been reduced from 1000 hours to 250 if the price is halved.
I know what you mean, but I think we can say for sure that it's definitely not globally optimal to produce durable goods (of any kind) that are half the cost but a quarter the lifespan. Half price for half utility is fine, but half price for a quarter utility is just pure waste -- even if you don't need the tool for 1000 hours, you can resell it to somebody who will use it for the next 970 hours (or the next 30, after which they sell it again). There are transaction costs here which make it a little more complex, but in a society where this was common, they would be driven down by scale -- more pawn and consignment shops would pop up, culture would teach people how the process works, etc. (By the way, there are also extra transaction costs for the people who need 1000 hours of tool time but have to buy it 30 hours at a time.)
Any system that encourages this behavior (i.e the one we have) is obviously not a winning system.
1. hiring each other and bloating bureaucracy in healthcare and education and other industries jacking up prices that werent expensive before
2. come up with ideas like 'shrinkflation' and 'planned obsolescence
3. reducing quality and making products unrepairable so we have massive waste in landfills and things like a giant pacific garbage patch
4. purchasing quality brands , parasiting the brand name, and making the actual product shitty
5. hollowing out every industry in quality and jobs...making private equity monopolies so theres no competition and then hiring more MBAs.
What you call 'optimizing quality and cost' I call 'trying the fuck the consumer to the maximum amount without them noticing'. But, to be fair, those are the same thing.
Just my observations. Capitalism is becoming a zombie and MBAs are the cordyceps.
What the issue is, is that we’re essentially in the third ‘wave’ of US economic change post WW2 manufacturing boom.
Post WW2, the United States was the only manufacturing economy that hadn’t been bombed to smithereens, has not only little to no real debt, but a lot of debtors that would repay them, and had massive amounts of undeveloped land ripe for development, and a major new manufacturing base looking for things to do.
This allowed the US to become the world’s reserve currency (along with gold) in the Bretton Woods agreement in ‘44. That lasted until ‘71.
At around the same time, the economies of Western Europe and Asia had mostly recovered, and they were starting to catch up on manufacturing to compete with the US.
This led to increasing competitive pressures with US manufacturing, and increasing incentives to go towards Globalization and outsourcing to chase the cheap labor and more willing to compete manufacturers in these locations. Switching the US to a ‘knowledge economy’ was the natural progression.
That easy money is mostly gone now, and the US is also no longer far ahead in many areas on knowledge.
China in particular is starting to come close on almost all metrics. If Europe has a recession, their primary disadvantage (cost) may turn into an advantage.
So then the US is much more on par with everyone else - for the first time in several generations.
And that causes quite a rude awakening economically, as now the US potentially has real and actual competitors it isn’t 5 steps ahead of already.
MBA’ism is because long ago the economy switched from ‘actually leaps and bounds ahead of competitors’ to optimization. As most of the actual structural differences have now equalized, and we’re down to who can make it cheaper/simpler. No one wants a 5 lb drill that costs $100 if they can have a 2lb drill that costs $50 and does the jobs they want well.
> MBA’ism is because long ago the economy switched from ‘actually leaps and bounds ahead of competitors’ to optimization
False. Many companies make more money now than ever. American GDP and technology is leaps and bounds ahead of other countries as well.
MBA's exist to create shareholder value while fucking the consumer and the laborers as much as possible without getting into trouble.
melanine in baby food, and suicide nets outside of factories, for example, are cost optimization strategies that didnt work out.
I can just picture an MBA running the cost/benefit numbers in an excel spreadsheet comparing treating the workers better versus putting suicide nets outside the windows.
And this isn't even a new thing: it was absolutely true (in fact, more true) way back in the 1980s and 90s, and really started in the mid-to-late 1970s. American cars were utter garbage: poorly engineered, poorly performing, and poorly manufactured, with terrible quality.
So why do people seem to assume that other American-made stuff in that era was so well-made? Sure, there's a few shining examples such as HP test equipment and printers, but the American auto industry was churning out truly bad products, so why isn't it also assumed that other domestic industries were plagued by the same poor standards and management?
It’s all relative. There was competition to compare against, so one can say ‘terrible’ vs ‘good’. Otherwise, it just ‘is’.
Notably, compact transistor radios were quite a marvel - and came out of Japan around that time too. Same with the Walkman, shortly afterwards.
Tools were more commonly American made, and were very heavy - but often durable. German equivalents were notably more expensive but ‘better’. Chinese made tools were originally terrible quality, but by around the early to mid 2000’s that changed.
I forget exactly when, but Mitutoyo (Japanese) started being notably ‘better’ in what - the 90s? Hitachi made power tools are pretty good, but I think that’s been about the last 10 years.
TVs were at first terrible from Asia, then started to get much better. By the 90s, they were pretty much all Asian manufactured no?
chips, household products....what you're saying is manufacturing has left the US.
fungible shitty unnecessary goods have rock bottom prices. costs of things human beings need to live like education/training, health care, food housing have skyrocketed.
I completely agree with you that getting off the gold standard and letting a leprechaun like Yellen skyrocket inflation to cover for bad political mistakes, is a terrible idea and 1971 is a huge inflection point in United States on numerous economic graphs and indicators, as we've both seen the website.
Keep in mind the late 60s were also when immigration started it's upward trajectory as well with the 1965 immigration act, and now we're letting in the equivalent of an entire new U.S. state every year.
The Bretton woods change was to allow stimulation of the economy - because things at home were losing momentum (relatively speaking) as other countries manufacturing bases and economies recovered from the damage from WW2. It was a way of keeping the US a few steps ahead.
Printing gold backed dollars quickly doesn’t work very well when you can’t increase the rate of mining gold quickly. Non gold backed dollars are a lot easier.
As long as goods and services can be made cheaper every year, it works well since inflation isn’t felt badly - there aren’t any supply restrictions where something is going to get noticeably too expensive.
All the things I talked about though all have that issue - they can’t be made cheaper somewhere else. someone can only build so many houses in LA before there is literally no more room, and someone building a house in Shanghai doesn’t help anyone in SF live closer to work. Building a new college/university in Vietnam isn’t going to help a kid in Oregon get their degree.
We’ve been exporting inflation because it’s worked. But when other countries stop being so much cheaper, or costs of critical things for the population finally exceed affordability, it doesn’t.
Yellen, Powell, and others are just following the rules and mandate they are given.
In short, the MBAs happened. Clueless management was brought in who then decimated anything they did not understand. I.e. everything. Aided by Reagan policy to aggressively outsource manufacturing from the nineteen eighties US manufacturing just imploded.
Just speculating here, but by the time the Japanese and the Germans caught up and got really good at machine tools, the metric system would have become an obstacle as well. Because the US insisting to do everything in inches, foot pounds, and what not doesn't translate very well internationally when you start outsourcing all your manufacturing. Outsourcing meant manufacturing standardized on the metric system using equipment and parts not made in the US.
Just speculating here, but I imagine that all that combined lead to a natural preference for non US based manufacturing companies that took over from US companies to not use any US made equipment or parts. So, manufacturing became predominantly metric based and that would have affected standard components, screws, bolts, parts, etc. All made by non US companies standardizing on all of that.