Dirk Knemeyer

America and the future of capitalism

America and the future of capitalism, December 21, 2004

A short comment contextualizing the prediction could go right here

[Talking to my friend Manish] hammered home my general belief that – barring massive social change – the U.S. is destined for an ongoing economic freefall. People in the U.S. have come to expect and feel entitled to a standard of living that is many, many times greater than people in India, China, and beyond. Now that we are in a legitimately global economy, we will either need to decrease our standard of living or significantly upgrade our skillset. After all, if we expect to maintain the same standard of living, we will not be able to compete with people who are willing to work for far, far less. I’ve heard many of us in the U.S. make the case that our skills and experience here are so much more valuable that the 5-20 times more $$$ that we demand for the same work is thus justified and worthwhile. But we are kidding ourselves. Even if we assume superior skill and experience here in the U.S., it cannot be worth the massive difference in cost.

Manish said more than once that capitalism is blind, and he’s right. At the end of the day, companies are going to make the business decisions that are in their best interest. It is all about the bottom line. So lets look at major U.S. companies, particularly technology companies, and see how many have a major presence in India. The answer is, a lot. Manish mentioned that Adobe has its own large, new building in India. That was surprising for me. It is to the point where, when I ask myself what major tech company does not have a major presence in India, I am hard-pressed to name even one. The reason is because these companies are accountable to their shareholders, and their shareholders demand higher profitability. It seems a near-consensus that a good way to achieve that is through offshoring.

And it is not only programming that is being offshored. Usability and visual design. Customer service. Did you know that insurance underwriting is being offshored? How about financial analysis? Yep and yep.

Many people in the U.S. – as well as Manish – rationalize this situation from a U.S. perspective, from the standpoint that almost all of the product strategy and design is still happening in the U.S., that there is safety at the top of the knowledge pyramid. Sure, true enough. But do we expect that to remain the case? The rest of the world is hungry and catching up. My friend Bob Baxley shared a quote from the CEO of Intel with me about how many more people are in India and China, and that even if only 10% of their populace is getting educated, it is still far, far more educated people than in the U.S. So right now, today, we can take comfort in the fact that much of the vision and strategic planning is still happening here. But as developing nations gain purchasing power, as their societies become increasingly Westernized, what then? If (for instance) consumers in these nations reject U.S. brands and products, we will be in a world of hurt.