Why Amazon can't make a Kindle in the US

[Aimless]

Inspired by the recent discussions on keeping it in the American family

http://www.forbes.com/sites/steveden...le-in-the-usa/

http://www.forbes.com/sites/steveden...le-in-the-usa/

http://www.forbes.com/sites/steveden...manufacturing/



Was tickled by the following article:

http://www.forbes.com/sites/steveden...gile-to-a-cfo/

The philosophy of cost accounting

Cost-accounting is built on the philosophy of scalable efficiency and squeezing out costs, particularly labor costs. Cost-accounting is supposedly how you measure progress or lack thereof in an organization. Cost-accounting is not a choice. It is legally required. Outside or external parties to a business depend on accounting reports prepared by financial (public) accountants who apply Generally Accepted Accounting Principles(GAAP) issued by the Financial Accounting Standards Board (FASB) and enforced by the U.S. Securities and Exchange Commission (SEC) and other local and international regulatory agencies and bodies.

As a result of this legally mandated conceptual framework oriented towards reducing labor costs, we find organizations focused on, guess what? Cutting costs, often through downsizing and outsourcing, and suffering from crippled innovation, frustrated customers and dispirited employees.

It'd be a little funny, I think, if it were so that govt. demands actually shaped companies to be the evil way they are today, by means other than corporate income taxes and the like.

[Dreadnaught]

The original series seems to run contrary to basic economic theory by encouraging companies and nations to cling to industries they are bad at.

While they claim they are making a criticism beyond manufacturing, I really don't see much beyond the usual fretting over Western countries manufacturing things cheaply in Asia.

Does Sweden have an industrial base? I mean, has the decades-long failure of Saab and Volvo brought Sweden's economy to the ground?

[CitizenCain]

Who says Mercantilism is dead? Certainly no one Steve Denning's heard of.

[wiggin]

For a while I thought he might have a few cogent points buried in all of the 'oh noes our manufacturing!' claptrap and protectionist ranting. He had some reasonable points about how it's easier to closely connect process-oriented design with actual manufacturing if you are co-located. But I think his case is wildly overstated.

The reason outsourcing has gotten so big lately is that it's much easier to coordinate high-value design/engineering work in America with cheap labor in Asia due to vastly improved communications. There's really little reason for most engineer types to spend much physical time on a plant floor (though occasional trips may very well be worth it, especially for obvious ones like manufacturing/packaging engineers), since most of the information can be conveyed over email, video/audio link, etc. Detailed specs and data can go back and forth at will. My wife works for a British consultancy that works with clients across Europe and North America. She (based in Massachusetts) routinely works with engineers and scientists in their UK office to help design and innovation work for a client in, say, California, or Germany. And their goods may very well be produced in China. Who cares?

This is especially true for many of the industries that have moved wholesale to cheaper locales. Relatively mature processing technologies aren't likely to be significantly improved upon short a quantum leap in design, which means co-location of design and manufacturing is of little consequence. There are some unintended knock-on consequences - for example, the DoD has recently gotten nervous about not having a domestic chip fabrication capability, and they're taking steps to fix it. But by and large taking a rote task and moving it overseas to cheaper workers is a great way to free up our capital and much better educated workforce for pushing the boundary of technological innovation further. Even the 'high tech' goods being made overseas - chips, LCD screens, etc. - are pretty commoditized and run on razor-thin margins. That's miles different from US manufacturing.

We still manufacture a ridiculous amount of stuff in this country, far more than any other country in the world (China's getting close, and Japan's been stagnating lately but still makes about $1 trillion a year, but no one else even is in the running). And the stuff we make is by and large fairly complex and challenging to manufacture: industrial equipment, aircraft, durable goods of various sorts, etc. There's a reason most of it is made in the US, and it's because it's generally better to make it here. Leave the shirt-sewing to cheap workers elsewhere, and focus on pushing technological innnovation forward coupled with whatever manufacturing it makes sense to have in the US.

[Loki]

It'd be a little funny, I think, if it were so that govt. demands actually shaped companies to be the evil way they are today, by means other than corporate income taxes and the like.

That quote makes absolutely no sense.

[agamemnus]

The original series seems to run contrary to basic economic theory by encouraging companies and nations to cling to industries they are bad at.

The mis-application of basic economic theory will not help explain the real world.

A person who is unemployed is not very productive. Outsourcing makes people unemployed, but cuts costs... but another industry arises from the freed up labor. That's the theory, but not the fact. The fact is that the company, now owned by rich folks and foreigners, has a nice fat balance sheet and sits on it, doing nothing for the rest of the population.

----

And yes, communication still matters. I just bought an Asus gaming laptop for a phenomenal price, nothing that Dell (or Alienware) can come close to in terms of comparables. The only hitch is that Asus design is half-baked (replacing the NUM key with a calculator, randomly sourcing defective component batches and claiming they're OK) and its Chinese tech support is as competent as a pile of straw.

I would prefer competent tech-support and excellent design, but it doesn't exist unless you want to pay an enormous premium... even then, most tech support is already outsourced to people who know nothing and just waste your time anyway.

[Loki]

The mis-application of basic economic theory will not help explain the real world.

A person who is unemployed is not very productive. Outsourcing makes people unemployed, but cuts costs... but another industry arises from the freed up labor. That's the theory, but not the fact. The fact is that the company, now owned by rich folks and foreigners, has a nice fat balance sheet and sits on it, doing nothing for the rest of the population.

That certainly explains why most Americans are unemployed right now, and certainly no Americans have gotten new jobs in the last few years.

[agamemnus]

That certainly explains why most Americans are unemployed right now, and certainly no Americans have gotten new jobs in the last few years.

Uh-huh. How many years out of the last decade would you say that the US had job gains, not counting low-paid service sector work? Now apply the housing bubble mirage to the "boom" years...

EDIT: now look at job gains not by raw numbers but by percent of the population...

[Loki]

Why don't you go and compare average income from the 1970s (when globalization started speeding up) to the average income today.

[Dreadnaught]

The mis-application of basic economic theory will not help explain the real world.

A person who is unemployed is not very productive. Outsourcing makes people unemployed, but cuts costs... but another industry arises from the freed up labor. That's the theory, but not the fact. The fact is that the company, now owned by rich folks and foreigners, has a nice fat balance sheet and sits on it, doing nothing for the rest of the population.

This is a common trope against the basic principle of trade. Companies don't just "sit on it" when they make cash. They invest it (which involves hiring new workers), or increase dividends.

The larger a corporation is, the more it's pressured to grow revenue over profit margins.

[CitizenCain]

The fact is that the company, now owned by rich folks and foreigners, has a nice fat balance sheet and sits on it, doing nothing for the rest of the population.

So BP hides all its earnings under the seat cushion of its chair too, just like me?

Because, as has already been pointed out to you, profits for some company on some balance sheet somewhere are someone else's investment capital, because of how the economy works. The only way to keep that from being the case is to take all that cash and hide it under the mattress, or bury it in the backyard, (etc). Otherwise, it's in a bank account somewhere, and that bank is actually loaning that money out on investments it thinks will turn a profit.

Your assertion otherwise is so fundamentally wrong, it's even an Econ 050 (remidial economics) fail.

[GGT]

Kindles and e-books could easily be made in the US. So could iPads and iPhones. Any smart phone, for that matter. As well as refrigerator/freezers, ovens/stove tops, microwaves/kitchen exhausts, bathtubs/shower stalls, HVAC components....the US is really great at bundling things. Hardware + software.

What the US isn't so good at, though, is understanding that customer service and quality are things people will pay a premium for. And that *might* mean paying US workers a bit more than Asian counterparts.

[GGT]

The lithium battery for GM’s [GM] Chevy Volt is being manufactured in South Korea. Making it in the U.S. wasn’t feasible: rechargeable battery manufacturing left the US long ago.

Some efforts are being made to resurrect rechargeable battery manufacture in the U.S., such as the GE-backed [GE] A123Systems, but it’s difficult to go it alone when much of the expertise is now in Asia.

And who outsourced the "expertise" to Asia, but mega-corps like GE in the first place? WHY? Same reason they've decided to transfer their radiology R & D to Asia, along with their best and brightest American minds. And then sell those services back to Americans, at a profit, with tax deductions.

The whole thing is nothing more than extraction of American capital and talent, to benefit the mega-corps. They get away with it because they happen to give some money to the money-laundering-multi-national corporations, using third world employers and workers. It's a rigged system.

[Dreadnaught]

The manufacturing cost would be dramatically higher in the US. And what deep level of customer service is involved with a Kindle?

[GGT]

The manufacturing cost would be dramatically higher in the US. And what deep level of customer service is involved with a Kindle?

And an extra $10 per Kindle wouldn't be feasible? Seriously?

You must have forgotten the previous thread I started when the Kindle first launched. As a graduation gift. I decided to wait, but you recommended I buy. Rapidly changing costs of [certain] products don't have anything to do with costs of manufacturing or production, but more to do with rapidly changing innovation. And consumer culture....where [certain] consumers just want the newest gadget or toy.

[Ominous Gamer]

what deep level of customer service is involved with a Kindle?

this is a joke right?

-----

This came out a few weeks ago, about companies getting fed up with poor import quality.

[agamemnus]

So BP hides all its earnings under the seat cushion of its chair too, just like me?

Because, as has already been pointed out to you, profits for some company on some balance sheet somewhere are someone else's investment capital, because of how the economy works. The only way to keep that from being the case is to take all that cash and hide it under the mattress, or bury it in the backyard, (etc). Otherwise, it's in a bank account somewhere, and that bank is actually loaning that money out on investments it thinks will turn a profit.

Your assertion otherwise is so fundamentally wrong, it's even an Econ 050 (remidial economics) fail.

Again, incorrect application of basic economics theories leads to incorrect conclusions.

That money isn't going anywhere except to entrenched mega-corp, who waste it, to the rich, who waste it, and the poor, who waste it. The US income curve is beginning to acquire a double-bell. Not healthy.

HP's recent moves show how bajillions of economic wealth can be wasted by a few decisions at the top of a mega-corp. Yet they are still in business.

Edit: I just noticed GGT is also using "mega-corp". No, I am not GGT's sock puppet. :P

Edit 2: Great article O.G.: this is the market economy in action... that article gives me hope that Cain/Loki/Dreadnaught's ideas on the market system might eventually get to the real world state of affairs. :P

[GGT]

Hey guys, tons of money (over $2 Trillion) is sitting around and not doing much good for anyone. Parked in Treasuries is paying for the 'full faith and credit of the US, even at a loss. Some depositors are paying for that privilege. How crazy is that?

[Loki]

That money isn't going anywhere except to entrenched mega-corp, who waste it, to the rich, who waste it, and the poor, who waste it. The US income curve is beginning to acquire a double-bell. Not healthy.

Define "waste".

[agamemnus]

Define "waste".

Low "cash" multiplier or sumit.

Luxury boat = low "cash" multiplier.... money for maintenance of the boat, sure... but it does nothing but burn money and provide a smidgeon of fun for the owner(s)/user(s).

High-quality fruit and vegetables = high "cash" multiplier. Lower risk of disease and better nutrition means lower health care costs down the line.

Cigarettes/alcohol (a tendency of the poor) = low "cash" multiplier. Kind of the opposite of high quality fruit and vegetables.

[Loki]

Are you serious?

[GGT]

Huh, I'd have defined "waste" as corporate cash to the tune of $2 TRILLION, not invested in expansion or hiring....but losing money in US Treasurys.

[agamemnus]

Huh, I'd have defined "waste" as corporate cash to the tune of $2 TRILLION, not invested in expansion or hiring....but losing money in US Treasurys.

Hmm, well, that money goes nowhere, so others are left to actually allocate resources...

Are you serious?

You define "waste", then...?

Anyhoo, I'm not sure how well-served we are as a nation to destroy the manufacturing synergies (that we had lost long ago) and outsource pretty much everything to Japan, China, etc.. Then we pay for it by having oceans polluted by improperly disposed waste from Asian plants and setting up costly CO2 markets... after many of our companies turn a blind eye to Chinese manufacturers with ridiculously lax pollution controls.

[Loki]

http://en.wikipedia.org/wiki/Deadweight_loss

Again, what you wrote makes absolutely no economic sense. I wouldn't even know where to start to refute it.

[CitizenCain]

Again, what you wrote makes absolutely no economic sense. I wouldn't even know where to start to refute it.

No kidding. I'm just gonna agree with them, and hopefully that'll stop the excruciating flow of economics for the clinically delusional.

The problem's being caused by the j00s hording their j00 gold in their bank vaults "entrenched mega-corp"s. Now let's get the obligatory j00 hunt over with and move on.

[Loki]

I'm somewhat sure agamemnus is a j00.

[CitizenCain]

Excellent!!! Another successful j00 hunt. What do we do with it now that we've found it?

Normally, I eat what I catch hunting, but that doesn't seem like an option here, and I don't know any really discrete taxidermists. You got any ideas?

[agamemnus]

...

... anyway.

You could frame what I defined as waste into deadweight loss. You could define anything as deadweight loss. Only makes pretty charts.

Loki, I think you don't want to acknowledge that things that you can't quantify well with current methods actually do exist...

[CitizenCain]

No, no, no. We're moving on. I agreed with you, even indulged in the post scapegoat j00hunt. That means we do something else, something that's not economics delusions.

[agamemnus]

Like....

Make Kindles in the US?