May 20, 2011

Unemployment & Poverty: A choice American companies make

Filed under: Heads up, Making money, Stuff I love, Success at Work

Curt Landi was raised in New Jersey, near Thomas Edison’s old laboratories. Landi says he used to sneak into one of the abandonned buildings when he was a kid, and wander around, dreaming of becoming an inventor. In the 1980s, Curt and Susan Landi started their company, Supracor, in a tiny Silicon Valley office. Curt invented flexible honeycomb technology, and he and Susan fabricated samples of their products by hand in their kitchen. Curt peddled his samples to anyone who would listen. The Landis lived for years on a shoestring, and invested their lives in their business. They launched Supracor without a penny of venture capital. Today, Supracor produces state-of-the-art technology and sells it to the world.

Landi’s company does something unusual: It manufactures products made from American raw materials in the U.S. and only in the U.S. — “in Silicon Valley, where the cost is enormous to do business for a traditional manufacturer.” He employs only American workers. And his company pays American taxes because all its operations are here.

At a recent business event, Landi explained the greatest threat to America’s future: Poverty. Landi issued a challenge — to every American company — that he says is the real solution to poverty and unemployment. At the start of his presentation, Landi asks executives in the audience, “Do you love your country? Are you patriots?”

By the end of his presentation, Landi lets them ruminate on the profound contradication between their answer to those questions, and the choices they have made for their companies.

“Just imagine, if technology is built here — not licensed off shore. Manufactured here. Think about it. We built China… They manufacture everything there. We manufacture hardly anything here. Imagine the opportunity — building machines, making clothing, making computers… here… American jobs…

50 million people in poverty. America needs to wake up… We need to bring manufacturing back here… Get us out of poverty. This is the answer. Not to be greedy… GE: billions of dollars in profit, and not one cent paid in taxes… Sacrifice a little profit. A little profit. Like I do. To provide jobs to American citizens here, and spread the wealth… We together can make this happen. It only takes a spark… and that’s what’s needed. It must happen, for the survival of the United States… Let us never forget that we are heirs to an American revolution.”

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16 Comments on “Unemployment & Poverty: A choice American companies make”
By susan
May 20, 2011 at 4:39 pm

Thanks for the support, Nick. It means a lot to both of us, and especially Curt.

Susan

By Jane Atkinson (JaneA)
May 20, 2011 at 4:50 pm

I strongly suspect that the same thing would apply to New Zealand. It is increasingly difficult to find items that are locally made.

But I do wonder if the real culprit isn’t the business owner but the customer. So many people seem unable to see past lower prices, and overlook what wider-ranging effects that might have on the economic landscape.

By Larry L.
May 20, 2011 at 7:29 pm

They’ve got it figured out while so many of these other greed machines could care less. Mostly it’s the executives living behind their gated communities that are off shoring all the jobs. I’m sick of it and ready to make donations to any and all politician will to try and do something about off shoring not only manufacturing jobs, but IT as well. Recently, I was personally impacted by off shoring as I had a high paying upper middle class IT job get shipped overseas!

By Jason
May 20, 2011 at 9:00 pm

Have to disagree on this one. China is where you will find the poverty. That is why they are struggling to get up to our standard of living. Nothing wrong with trading across borders. Foreigners are people too.

To take this post to its logical conclusion, we should each pull up our drawbridge, damn the division of labor, and all become self-sufficient. This does not lead to wealth, but grinding poverty.

Question: do we expect foreigners to buy our stuff? Trade is a two-way street.

By Nic
May 21, 2011 at 5:50 am

@Jason Stop, just please stop.

By Carl
May 22, 2011 at 12:59 pm

Stop what? Disagreeing with you? Taking your implied ideas to their logical conclusion?

By RayS
May 22, 2011 at 7:43 pm

It’s nice to see a decent employer now and then.

Henry Ford payed decent wages because he wanted everyone – including his workers – to be able to afford cars. Many corporations today oursource to produce cheaper products which people cannot afford because they’re unemployed. Corporations won’t care until their bottom line is affected. If the public boycotted companies which move operations abroad, they might get the message.

I recall a textile mill burning down some years ago, up in New England, I believe. Instead of rebuilding abroad (the best financial choice), the owner rebuilt – and kept his employees on full salary until the mill was operational again. He understood that the purpose of a business was to better the world, not just make money. If you don’t make the world a better place, your profit is not justified.

By Nick Corcodilos
May 22, 2011 at 9:30 pm

@RayS: In the cold world of corporations, profit is profit whether justified or not.

I think Landi’s challenge is important not because he knocks corporations – because I don’t think he does. His point is that this is a choice. Choosing MORE profit over paying taxes and hiring American workers is not illegal. But, says Landi, don’t call yourself a patriot or proud to be an American if you opt to keep more profit rather than contribute to the upkeep of the country.

I’m not anti-trade or anti-multinational business. I just think Landi has brought a choice into sharp focus. I spoke with him after he gave that speech. He told me several of the attendees went up to him and said, “I agree with you, but I hope you understand I don’t have a choice — I have to optimize the return to our stockholders.”

Landi’s point is that this position is invalid and untrue. Corporate officers can take a different position, reduce profit, pay their company’s share of taxes, and help reduce poverty.

(Likewise, I’m not advocating “letting government fix poverty” by paying taxes mindlessly… That’s a whole other problem!)

I like Landi’s point: If companies don’t pay taxes and choose more profit over contributing to our larger social system to keep it healthy — then the people who run those companies are not patriots and are not acting in the best interest of their country. A worthy challenge.

By Dave
May 23, 2011 at 8:08 am

@JaneA: I think this is a cycle. With a certain amount of economic uncertainty (i.e. gas prices), people want cheaper goods.

@RayS: I think you’re missing the point. While I don’t disagree that the people of say China are benefiting, the motives behind it are flawed.

This isn’t a case of Americans simply opening up shop in Asia, to expand their sales into Asia.

The real motive, I’d say, is that companies are moving operations over there and then shipping products/services back to the USA to pay labor pennies on the dollar as well as skirting environmental, tax, employment regulations. Yet, these same companies want to take advantage of American infrastructure without paying their dues.

By John Zabrenski
May 24, 2011 at 9:03 am

“I agree with you, but I hope you understand I don’t have a choice — I have to optimize the return to our stockholders.”
This statement rules the lives of executives of publicly owned companies. However, how it is carried out makes all the difference. And this comes down to what time horizon applies to the return to the stockholders.
The problem here is that the large institutional stockholders (mutual, pension funds, hedge funds, etc) operate on a quarterly rating system. These organizations believe that companies should grow at some rate above the rate of GDP growth, and it should be a steady growth rate. If you are a public company with a large institutional ownership, your options are very limited.
In order to pander to this fantasy, operators like Jack Welch mastered the art of financially engineering their revenues and expenses to make this appear so. Coca Cola was another example of this in the 90s. However, sooner or later, reality gets in the way since the whole underlying construct is not sustainalbe over longer time frames.
When the inevitable downturn in the economy derails the aforementioned game, the executive must try to recover profits by severe cost cuting even if it not in the best long term interests of the customers, employees and stockholders.
Hence the outsourcing and off shoring.
So we either have to change the game via government action since the insititutional investors cannot or will not do so.
I think the best way to encourage domestic manufacturing would be to tax imported manufacturered goods for the lost federal tax revenue (social security and medicare) associated with the manufacture of these items. This tax would apply to any country that we have a negative trade deficit with. I think such a policy would quickly reduce the trade deficit and also kick start domestic manufacturing. If only congress was not owned by special interests.

By Nick Corcodilos
May 24, 2011 at 10:33 am

@John Z: I’m not convinced we need import tariffs. Cost/price of good is complex. I’m not convinced that manufacturing in the U.S. would actually cost more in the long run. Companies focus too much on costs, and not enough on adding value to their products to make them more desireable. I’m not a fan of government intervention in pricing, though I wouldn’t rule it out. I just haven’t seen compelling efforts to build stuff in the U.S. competitively.

Look at Supracor. Its products are pricey but the quality is very high, and you just can’t get the company’s product anywhere else. (Disclosure: I sit on a Supracor seat cushion. It’s designed for a wheelchair, but I use it on a wooden desk chair. Sit on one of these, and you’ll never give it up. That’s a distinct market advantage. I don’t care what tariffs you put on an import; there is no import that could replace it. That’s what Landi doesn’t tell you in his speech. I think it’s why he’s successful operating in Silicon Valley. He makes the best product for the application.)

The word “commodity” has taken over our economy. Where’s the ingenuity that makes one product worth buying over another? American companies are proud of innovation, but they continue to compete mainly on price. Or so it seems. I think it’s just easier for U.S. companies to manufacture overseas and to lower their prices, than to come up with better products that people want to buy.

By Michael Enquist
May 24, 2011 at 6:21 pm

Nick,

In your post above, you’ve reiterated the theme that is the focus of all of your job-finding advice:

Provide better quality and service in a way that profits the employer/customer and price becomes less of an issue.

Easier said than done, I know, but that’s the point of competition, isn’t it? The rewards go to those who figure out how to do it.

By Gregg Ballou
June 3, 2011 at 3:09 pm

Nice in theory but Supracor’s policy gives government a limitless ceiling on taxes and regulation. Saying we will pay whatever you want in taxes and bureaucracy for the sake of patriotism isn’t going to help our country in the long run. Governments need to compete as well.

By Nick Corcodilos
June 3, 2011 at 3:22 pm

@Gregg Ballou: Where did Curt Landi say or suggest that his company would pay “whatever you [the govt] want in taxes?”

By Gregg Ballou
June 3, 2011 at 11:41 pm

He didn’t state that specifically but if he is going to stay in CA for patriotic reasons the state can set tax rates and rules as they see fit. I agree with much of what he said, and GE should pay the same tax rate as Sepracor. If GE and Sepracor both decide to locate in San Jose regardless of cost the local government is going to extract as much tax revenue/regulatory douchebaggery as they want. States need to compete for businesses and brains, when they go too far(taxes, regulation) or not far enough(infrastructure, schools) the businesses and brains should move.

By Nick Corcodilos
June 4, 2011 at 11:19 am

@Gregg: I agree with you. When a company owner is trying to be patriotic, that’s no excuse for government to lay on higher taxes. Even companies that go out of their way to stay in the U.S. will balk at some point. I don’t see any national effort to promote the stance of companies like Supracor, and to point out the example. Perhaps that’s a worthy PR campaign by the federal government. They should be parading Landi and demonstrating what Congress is doing to keep companies like his healthy.

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