Date: Wed, 2 Mar 2005 16:49:28 -0800 From: Norm Matloff To: Norm Matloff Subject: SJMN columnist Helft calls for honest debate To: H-1B/L-1/offshoring e-newsletter Enclosed below is a column by Miguel Helft of the San Jose Mercury News. He is a former H-1B himself (actually, the old H-1, precursor to H-1B), and has generally written from a pro-industry point of view. He's a nice, friendly guy, but I've been quite critical of his writings in the past (see for instance http://heather.cs.ucdavis.edu/Archive/HelftA.txt), so it is nice to see him in the enclosure below shooting down a few of the myths perpetrated by the industry lobbyists. Unfortunately, though, he himself falls victim to one of their favorite propaganda lines. And in one case, he overlooks a key confession made by a prominent Silicon Valley executive in his presence. Here are the details. First consider this passage: But when leaders in business, government or academia seek to downplay the impact of outsourcing, they're doing everyone a disservice. Over the past year, arguments seeking to do just that have proliferated... I'm very pleased to see Miguel note, correctly, that academia is one of the major players in deceiving the public. Now this one: o [Industry claim:] The current wave of job migration is the latest in a succession of similar waves that have benefited the valley. As chip manufacturing jobs were replaced by computer jobs, then by software jobs, Internet jobs and so on, the valley has only prospered. True. But that ignores the unprecedented influx of about 300 million skilled workers into the global workforce in the past decade or so. Their hunger for employment will translate into the biggest challenge that this country's workforce has seen in generations. Exactly. The past is not much of a guide. Things have changed, a LOT. o [Industry claim:] Only lower-level jobs are going to India and China. That's simply untrue. The kinds of jobs being exported are rapidly moving up the skill ladder. Tech titans such as Oracle, Intel, Microsoft and IBM aren't building campuses overseas to fill them with grunts. Again, I agree. o [Industry claim:] Few tech jobs have been lost to outsourcing, far fewer than those lost to a deflating tech bubble. That may be true, at least so far. But it ignores the fact that virtually every start-up that is funded in Silicon Valley today is hiring some of its workers overseas... Again, Miguel is correct, but it is even worse than this. First of all, he should have mentioned that it is the FUNDERS who are DEMANDING that the startups they fund ship work overseas. Secondly, it's often more than just "some"; instead, the theme is to send most of the engineering work overseas, and hire marketing and sales people in the U.S. For more on the role of the VCs, see: http://heather.cs.ucdavis.edu/Archive/VCsDemandOffshoring.txt http://heather.cs.ucdavis.edu/Archive/VCsDemandOffshoring2.txt http://heather.cs.ucdavis.edu/Archive/VCsDemandOffshoring3.txt http://heather.cs.ucdavis.edu/Archive/VCsDemandOffshoring4.txt Next, sadly, Miguel buys into one of the industry lobbyists' favorite myths, ironically in countering another of the lobbyists' favorite myths (they often contradict themselves, but no one in Congress or the press notice): o We'll be fine, because countries like China and India don't have a culture of innovation and risk-taking. Really? How, then, can we explain that foreigners, including many from China and India, were behind a third of the start-ups launched here during the tech boom? When those innovators and entrepreneurs can start the next generation of firms without having to emigrate, they will. VCs will gladly bankroll them. And experienced American executives will head overseas to fill whatever gaps those countries may have in management and marketing know-how. Miguel more or less has the correct conclusion, but for very incorrect reasons. Here is the situation: First and foremost, that 1/3 figure he mentions is highly misleading. It comes from the research done by Professor (now Dean) Annalee Saxenian of UC Berkeley. Saxenian has consistently conducted pro-industry research, funded by the Hewlett Foundation, with "Hewlett" as in "Hewlett-Packard." (Here is an example of why I said that Miguel was right on the mark when he cited the complicity of academia in disinforming the American public.) Saxenian's paper has been repeatedly cited as "evidence" that immigration has been good for Silicon Valley. Yet, Saxenian's data actually show that U.S. NATIVE ENGINEERS IN SILICON VALLEY HAVE BEEN MORE ENTREPRENEURIAL THAN THE IMMIGRANTS. See Section VI.E of my law journal article, at http://heather.cs.ucdavis.edu/MichJLawReform.pdf So, the claim implied by Miguel that the immigrants are increasing our level of entrepreneurialism is false. (Note: I rarely use the term _native_ in discussing these issues. When I talk about protecting the livelihoods of "American" programmers and engineers, I am referring to U.S. citizens, including naturalized ones like Miguel, and also green card holders.) Second, Miguel is falsely conflating innovation and risk taking, which obviously are two very different things. If you open up a new hot dog stand you are taking a risk, but unless you've got really different sausages or a sensational new Chez Frankfurter ambience, you're not being innovative. So let's disaggregate innovation and risk taking, and look specifically at innovation. It's well known that at least in the case of China, engineers tend to be less innovative than are American engineers. I say it's clear, because the government of China itself has been worried about this problem, and has been attempting to address it (as have the governments of two other East Asian countries, Japan and South Korea). In this regard, it is worth noting an article written by an engineering professor in China ("China's New Engineering Obstacle," by Chen Lixin, Prism, pub. by the American Society for Engineering Education, September 1999). Chen warns his nation that the engineers being produced by Chinese universities are not good enough for China to compete in the global high-tech market. Professor Chen says the educational system in China produces students who cannot think independently or creatively, and cannot solve practical problems. He writes that the system "results in the phenomenon of high scores and low ability." This turn of phrase captures the problem quite succinctly. But as I said, Miguel's conclusion is right even though his argument is wrong. The real reason his conclusion is correct is that China is huge, and with that huge a population, you are going to have SOME engineers who are very innovative, even though on a percentage basis the proportion will be lower than that in the U.S. As the industry lobbyists say, China does graduate a large number of engineers each year. That's misleading, because most of them aren't doing engineering (they are technicians, building inspectors, etc.), but even accounting for that, it's still a large number of people, large enough to get a decent number of good innovators. For instance, I really like the JIAJIA distributed shared memory software package developed at the Chinese Academy of Sciences in Beijing. And finally, let's look at Miguel's lead comments: It's time to ask whether the rise of tech powerhouses in Asia and the movement of tech jobs there will do to Silicon Valley what the rise of the Japanese car industry did to places like Flint, Mich. Not because it's likely to happen -- at least not anytime soon... If by "tech jobs" Miguel means people involved in marketing and sales for tech companies, he might be correct. But if he means engineers, he's ignoring what then-Intel CEO Craig Barrett said in Miguel's presence (see http://heather.cs.ucdavis.edu/Archive/Roundtable.txt for the whole interview; I've added some all-caps emphasis here): Q: What will the Valley look like in three years? I look at the job growth prospects being difficult in this environment. COMPANIES CAN STILL FORM IN SILICON VALLEY AND BE COMPETITIVE AROUND THE WORLD. IT'S JUST THAT THEY ARE NOT NECESSARILY GOING TO CREATE JOBS IN SILICON VALLEY. If the jobs lost aren't being replaced, the Valley could see a decrease in standards of living, a decrease in housing values, and things of that nature. Q: AREN'T WE TALKING ABOUT AN ENTIRE GENERATION OF LOWERED EXPECTATIONS IN THE UNITED STATES FOR WHAT AN INDIVIDUAL ENTERING THE JOB MARKET WILL BE FACING? IT'S TOUGH TO COME TO ANOTHER CONCLUSION THAN THAT. If you see this increased competition for jobs, the immediate response to competition is lower prices and that's lower wage rates. There is an alternate possibility, which is the California government and the U.S. government choose to be more competitive and to get more aggressive tax credits for jobs that are created here. ... Q: Does Intel have a responsibility to help keep the United States an attractive and competitive place? Intel first and foremost has a responsibility to its shareholders and employees to give them opportunity. Companies have to do what is required from them to be successful. But underneath that, we have an obligation to 50,000 U.S. employees to provide a competitive workplace for them, and we have a responsibility to the communities where we do business to try to improve the prospects of young people in those ... But if you ask does Intel have an obligation to suffer a financial disadvantage to hire more American employees, as opposed to Indian employees or Chinese employees, that's like asking does Intel have an obligation to California, as opposed to Oregon or Washington or Nevada or Colorado. Note Barrett's attempt to turn the issue to Intel's political advantage by implying that if only Congress were to give Intel and the others tax breaks, all those jobs would stay in the U.S. instead of being offshored. Clearly that is false, as he then points to the very low wages available to Intel by offshoring. No tax break can compete with that. In reality, Barrett is admitting that the days of Silicon Valley as a major engineering center will soon be a thing of the past. The fact is that even an industry-commissioned study, performed by a consulting firm headed by a Nobel laureate in economics, said the same thing. Their conclusion was that offshoring will add some jobs to the U.S., at the expense of the loss of other jobs, and if one looks at the details of their analysis, one finds that the jobs we lose will be the engineering jobs and the jobs we gain will be in nontechnical areas such as marketing and sales, just like the VCs have admitted (see above). Lowered expectations, indeed. See my column in the Communications of the Association for Computing Machinery (ACM is the main computer science professional organization), at http://heather.cs.ucdavis.edu/CACM.pdf All in all, though, very nice column, Miguel. Norm http://www.mercurynews.com/mld/mercurynews/11029338.htm San Jose Mercury News Mar. 02, 2005 As jobs are outsourced, honest debate is needed By Miguel Helft It's time to ask whether the rise of tech powerhouses in Asia and the movement of tech jobs there will do to Silicon Valley what the rise of the Japanese car industry did to places like Flint, Mich. Not because it's likely to happen -- at least not anytime soon. But because it may be the only way to have a frank conversation about the profound changes these trends will mean for the economy of the valley and the country as a whole. That conversation has been elusive. Whenever it does take place, it's polarized and not terribly constructive. Consider the following: When a group of prominent tech CEOs was asked about outsourcing at a recent meeting, their reaction was pretty much unanimous: The political storm over outsourcing has blown over, and that's a good thing. It's an understandable reaction. A year ago, tech CEOs were being demonized. They were branded as Benedict Arnolds. Their businesses were threatened with ill-conceived protectionist legislation that would only further erode America's capacity to compete. So they're happy to see the issue off the front pages. But when leaders in business, government or academia seek to downplay the impact of outsourcing, they're doing everyone a disservice. Over the past year, arguments seeking to do just that have proliferated: o The current wave of job migration is the latest in a succession of similar waves that have benefited the valley. As chip manufacturing jobs were replaced by computer jobs, then by software jobs, Internet jobs and so on, the valley has only prospered. True. But that ignores the unprecedented influx of about 300 million skilled workers into the global workforce in the past decade or so. Their hunger for employment will translate into the biggest challenge that this country's workforce has seen in generations. o Only lower-level jobs are going to India and China. That's simply untrue. The kinds of jobs being exported are rapidly moving up the skill ladder. Tech titans such as Oracle, Intel, Microsoft and IBM aren't building campuses overseas to fill them with grunts. o Few tech jobs have been lost to outsourcing, far fewer than those lost to a deflating tech bubble. That may be true, at least so far. But it ignores the fact that virtually every start-up that is funded in Silicon Valley today is hiring some of its workers overseas. It is start-ups -- not large, established firms -- that historically have generated job growth in the valley. So the issue is not so much about the jobs lost, but about those that will never be created here. o We'll be fine, because countries like China and India don't have a culture of innovation and risk-taking. Really? How, then, can we explain that foreigners, including many from China and India, were behind a third of the start-ups launched here during the tech boom? When those innovators and entrepreneurs can start the next generation of firms without having to emigrate, they will. VCs will gladly bankroll them. And experienced American executives will head overseas to fill whatever gaps those countries may have in management and marketing know-how. To be sure, many valley leaders have long advocated policies aimed at boosting American competitiveness. If adopted, they would help blunt some of these challenges. But they represent only a fraction of what's needed to prepare us for the changes that will be wrought by the leveling of the technology playing field across the globe. Unless we can talk honestly about those impending changes, we'll fail. We may not turn into Flint. But we won't be able to sustain either our standard of living or this valley's quality of life. MIGUEL HELFT is a Mercury News editorial writer. His column on technology policy appears on the first and third Wednesdays of each month. Contact him at mhelft@mercurynews.com.