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Remembering Intel’s Andrew Grove, Who Sounded the Alarm Against Offshoring

Andrew Grove, the man who created Intel Corp. and made it into the world's most iconic and important high-tech manufacturing company, died last week at the age of 79.

The United States is going to miss him.

Grove, one of America's greatest business executives on par with Henry Ford and Steve Jobs, instilled Intel with his values. Chief among them was Only the Paranoid Survive, the title of his best-selling 2002 book on how to run a successful company in an ultra competitive global market.

Grove's book also pertains to the governance of the United States, and he said so. The country requires a government management structure that constantly assesses competitive challenges and takes bold action to assure economic survival.

In is book, Grove wrote that the most important priority for corporate management is to apply the principles of Six Sigma Quality (virtually zero manufacturing defects) when listening to employees who work directly in the marketplace. These employees know precisely how the company's products and services are perceived and accepted by customers and whether they are succeeding against competitors' offerings.

Grove called these people "Cassandras" — those who prophesize misfortune or disaster — and he said they are the most important people that a company employs.

"There is no tolerance for punishing people who bring you bad news because nothing less than the existence of your corporation's future is at stake in how you handle situations like that," said Grove in a speech in Detroit in 1998.

In the last 15 years of his life, Grove became one of those Cassandras, warning directly to the federal government of bad news on the economic front.

For the sake of the United States, his management philosophy could have been changed with one word, inserting "country" in place of "company," to read: "There is no tolerance for punishing people who bring you bad news because nothing less than the existence of your COUNTRY'S future is at stake in how you handle situations like that."

Sadly and inexplicably, the U.S. government has refused to listen to the millions of people who were on the front lines of globalization, losing their jobs and seeing the destruction of their communities — major American cities and thousands of once prosperous towns. The U.S. government even refused to listen to people like Grove, who warned about the dire consequences of allowing for the loss of country's high-tech industrial base.

In November 2003, when a massive wave of offshore outsourcing was swamping the U.S electronics, IT and software industries after the dot-com bubble burst, Grove went on the offensive.

In a speech in Washington, Grove said that he was there "to be a skunk at your garden party." At the time, 500,000 jobs in the U.S. electronics sector had disappeared, outsourced to Asia, and they were not coming back.

"A large number of well-trained diligent people are out of work," Grove said. "The job recovery of previous cycles and the absence of recovery in the current cycle suggests that something is basically different here."

He drew an "X curve" in which the U.S. global market share of the high-tech industry was going down, while the foreign share was headed up.

He described the forces in place that would worsen the situation for Americans, the most important being the low pay of workers in India and China.

"I think it is germane to ask, what is the public policy response?" Grove said. "I am hard put to find a documented statement or public policy series on this global shift."

Two months later, Grove got his response. On February 10, 2004, the Chairman of the White House Council of Economic Advisors Gregory Mankiw said: "I think outsourcing is a growing phenomenon, but it's something that we should realize is probably a plus for the economy in the long run."

Here's what Grove had to say about that: "What depresses me most is they haven't even articulated or recognized the problem. Even though the presidential campaign is upon us, I haven't even picked up streams of problem recognition nor a debate on this issue and what could or should be done about it. Even if that debate started today, I think time is our enemy. If it doesn't start, our actions will be too little, too late and too depressing even for me."

In the 1980s, Grove was on the front lines of saving the American semiconductor industry from Japanese mercantilism. He helped fashion a muscular U.S. government response to halt the decline, including creating the Semiconductor Equipment Manufacturing Technology (Sematech) consortium and implementing the 1986 U.S.-Japan trade agreement which forced Japan to stop dumping chips into the United States. The agreement included a requirement that 20 percent of Japan's semiconductor market be supplied for foreign producers.

It wasn't easy to get the U.S. government to act, Grove noted. There was a lot of debate, but the country's most important industry was saved.

Grove repeated his warnings and pleas for the U.S. government to develop a strategy to revive the American industrial sector in 2010. Speaking by proxy to the Washington, D.C. Conference on the Renaissance of American Manufacturing, Grove called on the federal government to adopt a policy aimed at rebuilding the American manufacturing sector. He called on the Commerce Department to change its focus from export promotion to "bringing money into U.S.

manufacturing." He called for the creation of a U.S. government "Development Board" that would meet every week to figure out why companies were leaving the United States and to implement effective policies to reverse the trend.

For the past 15 years, the management of the United States — the "elites" and "establishment" in both political parties, the Clinton, Bush and Obama administrations, academia, corporations, finance and the media — have been punishing the millions of people who have been messengers of bad news.

Washington has refused to listen to innocent and now angry citizens whose lives have been destroyed by the lack of action to protect American manufacturing from mercantilist foreign trade practices that reward those who live on the investment income generated by that system.

Chief among these "Cassandras" was Hungarian immigrant and business pioneer Andrew Grove, who had a lot to say about the loss of American manufacturing and the outsourcing of white-collar jobs.

On July 1, 2010, Grove wrote:

"The first task is to rebuild our industrial commons. We should develop a system of financial incentives: Levy an extra tax on the product of offshored labor. (If the result is a trade war, treat it like other wars—fight to win.) Keep that money separate. Deposit it in the coffers of what we might call the Scaling Bank of the U.S. and make these sums available to companies that will scale their American operations. Such a system would be a daily reminder that while pursuing our company goals, all of us in business have a responsibility to maintain the industrial base on which we depend and the society whose adaptability — and stability — we may have taken for granted. Unemployment is corrosive. If what I'm suggesting sounds protectionist, so be it."

Sadly, Grove is gone. An important era of American leadership in high-tech manufacturing ends. It happens at the start of a new populist uprising over the very issues Grove was most concerned about. America must heed Grove's sage advice that "Only the Paranoid Survive."

March 30th 2016


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