Wednesday, September 28, 2011

Why manufacturing your own stuff is still a good idea

Thorstein Veblen's personal favorite of his 10 books was the Instinct of Workmanship first published in 1914.  What made it important was that it challenged long-held assumptions about the nature of work because he would claim that not only do people like to work, they are driven to do excellent work and become very frustrated when working conditions inhibit them from doing the excellent work they would rather do.

So here we see that the Harvard Business School has discovered one manifestation of the Instinct of Workmanship (the one that claims people are much more likely to value and care for things they have made themselves).  Of course, the conclusions they draw from their study are lame—but that's pretty much what you expect when you compare Veblen to Harvard.

The IKEA Effect: Study Finds Consumers Over-Value Products They Build Themselves
The Huffington Post Jillian Berman First Posted: 9/26/11  
Treating that cheap, self-assembled IKEA coffee table like it's a prized heirloom? You're not alone, according to a recent study from the Harvard Business School. 
Through a series of experiments, the Harvard researchers found that "labor alone can be sufficient to induce greater liking for the fruits of one's labor: Even constructing a standardized bureau, an arduous, solitary task, can lead people to overvalue their (often poorly constructed) creation." 
The researchers decided to test this concept -- which they call the IKEA Effect, after the Swedish retailer -- after noticing that they all were holding on to "lousy mugs and lousy bowls that we built when we're in college," Michael Norton, an associate professor at the Harvard Business School and one of the study's researchers said. In addition, companies are increasingly offering consumers the opportunity to customize and co-create their products, he said. more
And here we see the disaster that followed when Boeing management decided to punish their workers in Washington for having had the temerity to strike in 2000.  First the company moved their management team to Chicago so they might not have accidental solidarity with their house rocket scientists.  Then to prove the point that they really didn't need those uppity SPEEA workers around Seattle, they outsourced every job possible with their new Dreamliner project.  Well, that didn't work.  Three YEARS past their due delivery date and billions over budget, management still won't admit that maybe, just maybe, it would have been easier—and a LOT cheaper—to get along with the people who actually produce their products.
Here's The Really Revolutionary Thing About The Boeing Dreamliner
Eric Goldschein | Sep. 27, 2011

Boeing's 787 "Dreamliner", first announced in 2003, was exciting for a number of reasons: a more fuel-efficient, more aerodynamic aircraft as the first composite airliner, built without multiple aluminum sheets and thousands of fasteners.

But the most intriguing part of the Dreamliner's production was the production itself. 
Rather than building the whole aircraft under one roof, Boeing announced that its factory in Everett, Washington would be receiving pre-built pieces from all over the world, to assemble those parts and make the final product.

Boeing Commercial Airplanes works with 5,400 factories around the world. For Dreamliner assembly the company employed used 50 tier 1 suppliers, each working with multiple factories, plus secondary suppliers, a Boeing spokesman told us in an email. Boeing hoped for a simpler assembly line, lower inventory and quicker production overall.

As you've probably heard, there were delays. Lots of them. Eight years after announcing plans for the Dreamliner and four years after the expected release, the planes debuted this week.

Did it work?

Well, Boeing may have alienated its loyal Washington workforce, overshot its budget and paid millions in late fees, but the company says it will stick to this process going forward. more
And finally, FINALLY, we are seeing the formal studies that confirm what those of us who worked so hard to defeat the various trade deals like NAFTA were saying all along.
Study: China Trade Did More Damage To US Economy Than Anyone Knew
By Susie Madrak   September 27, 2011 04:00 PM

Workers have said all along that U.S. trade policies were killing American jobs, and now the research is finally catching up to them. Maybe we'll be smart enough to drop the three Bush trade agreements Obama is currently trying to push:

For years, economists have told Americans worried that cheap Chinese imports will kill jobs that the benefits of trade with China far outweigh its costs. 
But new research suggests the damage to the U.S. has been deeper than these economists have supposed. The study, conducted by a team of three economists, doesn't challenge the traditional view that trade is ultimately good for the economy. Workers who lose jobs do eventually find new work or retire, while the benefits from trade, such as lower prices, remain. The problem is the speed at which China has surged as an exporter—overwhelming the normal process of adaptation. 
The study rated every U.S. county for their manufacturers' exposure to competition from China, and found that regions most exposed to China tended not only to lose more manufacturing jobs, but also to see overall employment decline. Areas with higher exposure also had larger increases in workers receiving unemployment insurance, food stamps and disability payments. 
The authors calculate that the cost to the economy from the increased government payments amounts to one- to two-thirds of the gains from trade with China. In other words, a big portion of the ways trade with China has helped the U.S.—such as by providing inexpensive Chinese goods to consumers—has been wiped out. And that estimate doesn't include any economic losses experienced by people who lost their jobs. 
The theory of comparative advantage, framed two centuries ago by British economist David Ricardo, says nations prosper by focusing on what they do best and trading with other countries that have different strengths. But amid the surge in inexpensive imports over the past decade,some prominent economists have challenged that view. 
In a 2004 article, the late Nobel Laureate Paul Samuelson argued that while trade may benefit some Americans, it does so by "decimating" the wages of blue-collar factory workers. Princeton University economist and former Federal Reserve Board vice chairman Alan Blinder—once a champion of free trade—in recent years has argued that U.S. firms' increased outsourcing to low-wage countries puts millions of American jobs at risk. 
Michael Spence, a Nobel Laureate economist at New York University, said the new finding reflects how prevailing theories of trade aren't up to the task of dealing with the breakneck pace of China and other developing economies. Since the world has never seen such large countries grow so quickly, history isn't much of a guide. "It's not like we can look to the past and ask ourselves what happened last time this happened, because there wasn't a last time," he said. more

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