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 aprticular, Grove notes the disconnect between US technology startups and the subsequent expansion of business activity leading to job growth. In particular, he 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 market place. 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.