Is innovation enough? Is cultivating America’s inventive genius the way we can restore our economic leadership?
The outpouring of grief over the death of Steve Jobs has raised the presumably redemptive power of innovation to understandable, if unsustainable, heights among many within the commentariat (and many outside it). But innovation alone won’t reverse our economic decline. Indeed, without U.S. manufacturing, we’re likely to lose U.S. innovation too.
Such a notion doesn’t seem to have occurred to Walter Isaacson, whose highly readable biography of Jobs was released last month. It is America’s ability to produce the occasional Steve Jobs, Isaacson believes, that gives us our edge. “China and India are likely to produce many rigorous analytical thinkers and knowledgeable technologists,” he wrote in Sunday’s New York Times. “But smart and educated people don’t always spawn innovation. America’s advantage, if it continues to have one, will be that it can produce people who are also more creative and imaginative, those who know how to stand at the intersection of the humanities and the sciences.”
It was certainly to Apple’s advantage that it was obsessed over by Jobs, who imposed form and accessibility on the digital world. But what’s wrong with Isaacson’s assertion is that manufacturing is omitted from this equation — an omission that also looms large in his book. Isaacson shows us Jobs the inventor, team leader, corporate manipulator, business rival, designer, artist, Zen master and serial abuser of his colleagues — but never Jobs the manufacturer, which, in good measure, is what Jobs was.
During the 1980s, Isaacson writes, Jobs built a Silicon Valley factory to his exacting, and at times preposterous, specifications, but we learn nothing of the manufacturing process or of the men and women who worked there. When Jobs, who was famously forced out, returned to Apple in the late ’90s, Isaacson lovingly documents the creation of the iPod, iTunes, iPhone and iPad — by Jobs, his designers, engineers and marketers. But we hear nothing of their manufacture until, near the end of the book, we learn of a dinner Jobs had with President Obama this February. Jobs urged the president, Isaacson writes, “to train more American engineers. Apple had 700,000 factory workers employed in China,” he said, because China had more engineers who could oversee manufacturing than the United States did.
The engineer gap cannot be the only reason: Chinese labor also comes a lot cheaper than its U.S. counterpart. That, no less than innovation, contributes to Apple’s huge profits. But the stunner here is the number: 700,000. That would make Apple one of the largest private-sector employers on the planet, just a notch below Wal-Mart. The Chinese workers aren’t technically Apple employees: In its latest 10-K filing with the Securities and Exchange Commission, Apple reported last week that it had 60,400 full-time employees (and about 3,000 temps working as full-time equivalents). Its uncounted Chinese workers are employed by Foxconn, a division of a Taiwanese manufacturer that assembles Apple’s many products. But as Jobs himself said, they’re all really working for Apple.
Setting up factories in China and ramping up to employ 700,000 workers had to have been massive undertakings. But to read Isaacson’s book, it’s as if all Apple and Jobs did was innovate, and the products magically appeared.
Apple’s Silicon Valley innovators are doubtless highly paid, but there are too few of them to have any significant effect on the U.S. economy. Only by moving production back here could Apple really improve U.S. economic prospects. Given the huge productivity advantages this country has over China, there would be many fewer than 700,000 production jobs, but the advantage to the U.S. economy would still be substantial.
What’s more, as manufacturing is offshored to Asia, innovation generally follows close behind. As professors Gary Pisano and Willy Shih explained in a 2009 Harvard Business Review article, “process-engineering expertise can’t be maintained” when manufacturing is sent abroad. The ability to devise new manufacturing processes is lost, and with it, the ability to devise new products. Apple, thanks to Jobs, was an exception to this rule, but it was an exception to a lot of rules.
I recently interviewed one of Jobs’s mentors, Andy Grove, the legendary founding director of engineering and later chief executive of Intel, for a report to be published on manufacturing in a forthcoming issue of the American Prospect (the magazine where I’m an editor). One problem with the U.S. economy, Grove said, “is the hysterical love that we lavish on innovation. We never talked about it at my job — innovation was followed by production in the same factories where we innovated.” Grove is a strong proponent of returning production to the United States — if necessary, through tariffs on offshored products.
Absent manufacturing, innovation, even at its Jobsian heights, can’t do much for the U.S. economy — save, perhaps, dazzle us on our journey downward.