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The new tech-industrialization doesn’t create many jobs. Not directly. Apple employs around 50,000, which seems good until you consider that their Chinese supplier FoxConn employs 800,000 (at suicide-inducing work). Facebook only employs about 2,000 and takes pride in not creating jobs. Check out their COO, Sheryl Sandberg:

“We think one of the best ways to stay small is just to stay smaller,” Sandberg says later.

As the meeting winds down, a product manager shows a slide that nearly makes Sandberg jump out of her seat. The chart displays Facebook’s advertising revenue and volume—both lines are tilting upward. It also shows the number of man-hours spent on support operations, a line that holds steady. “This is a beautiful chart. I might frame it on my wall,” Sandberg says. “Guys, this is the difference. This is about, how big do we want to be as a company? (BusinessWeek)

The Emerging (Low-Margin) Dream

Facebook and other companies automate aggressively to minimize headcount. What they do do (I said doodoo :) is enable small businesses and entrepreneurs to do their jobs better. I recently bought an ad from a newspaper and had to talk to five different people across about 20 emails and 5 international calls. With Facebook I waste zero time and get better results. I prefer Facebook.

Personally, I get a check from Google for advertising across different sites. I’m able to market stuff cheaply on Facebook. So I guess they do create jobs in that sense. For foreigners that can live off such efficiency.I’m making below the US poverty line, but that’s solidly middle class in Sri Lanka. From an American perspective, however, it means less jobs. In that sense, it’s not good from a human perspective either. As Intel’s Andy Grove writes:

What kind of a society are we going to have if it consists of highly paid people doing high-value-added work—and masses of unemployed?

Since the early days of Silicon Valley, the money invested in companies has increased dramatically, only to produce fewer jobs. Simply put, the U.S. has become wildly inefficient at creating American tech jobs. (Andy Grove, BusinessWeek)

The American Myth

What Americans are sold on is the American dream, the myth that they somehow have a chance to make it really rich. This is the dream that drove the housing collapse when they tried to live it and, even as a vapor, it clouds their policy.

Americans love the idea of the guys in the garage inventing something that changes the world. New York Times columnist Thomas L. Friedman recently encapsulated this view in a piece called “Start-Ups, Not Bailouts.” His argument: Let tired old companies that do commodity manufacturing die if they have to. If Washington really wants to create jobs, he wrote, it should back startups.

Friedman is wrong. Startups are a wonderful thing, but they cannot by themselves increase tech employment. (ibid.)

Basically, the US startup culture is creating a few highly-paid jobs and a lot of really lowly paid jobs abroad. Small business and entrepreneurs saving the (American) economy is a political fairy tale.

Entrepreneurship is still one of America’s great strengths, right? Wrong. Rates of new-business creation have been contracting since the 1980s. Funny enough, that’s just when the financial sector began to get a lot bigger. The two trends are not disconnected. (TIME)

So, uh, what gives? Revolutionary companies don’t actually create jobs, but they do increase productivity. That productivity, however, is largely the product of outsourcing or technology, not hiring. It makes a few US tech geniuses and venture capitalists rich, largely by outsourcing or automating jobs. So the net amount of American jobs is lower. It is now easier to make a living following your passion (making music, cupcakes), but that’s still really hard if you can’t pay the rent or get married. The result of this transition is still a lot of immediate pain.

I’d say that I’m here and American salaries are bloated anyways (they are), but India and China and purported leaders are still basically copying American intellectual property and innovations. You don’t want to kill the golden goose. I think it still has some eggs.

Posted on Wednesday, July 13th, 2011 in economics, facebook, USA.