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July 21, 2003

Making the cognitive elite redundant?

This article in The New York Times titled "I.B.M. Explores Shift of White-Collar Jobs Overseas" no doubt sends shivers down the backs of every worker-bee in the IT sector. There are a few things to address here.

* Now college educated people understand the rage that blue-collar workers who expected lifetime employment at $45,000-60,000 a year felt as they saw their jobs moved overseas.

* This seems to be a modified version of what Paul Krugman spoke of in Peddling Prosperity when he asserted knowledge workers could be made redundant by computers while cooks & janitors will always be needed because of the lack of progress in robotics. The difference is that these knowledge workers aren't being replaced by computers, but rather instantaneous communication and radically lowered barriers to cooperation because of IT has made American workers expendable when faced with cheap foreign knowledge workers. In contrast, cooks and janitors are still around and not being exported overseas, but, humans from overseas (or across the Rio Grande) are now filling those positions.

Personally, I think that the pendulum will swing back from outsourcing all the high level development and architecture when the limitations of technology and intercultural communications over 6,000 miles become apparent. Additionally, the social & personal element still exists when a group of programmers collaborates, and that is hard to come by if they are scattered across the four corners of the earth (of course, until we have realistic VR technology). Until the expectation and reality re-equilibriate, it's going to be kind of painful for IT workers in the US.

Related article in The American Conservative.

Godless comments:

"Increased global trade was supposed to lead to better jobs and higher standards of living," said Donald A. Manzullo, an Illinois Republican who is the committee chairman. "The assumption was that while lower-skilled jobs would be done elsewhere, it would allow Americans to focus on higher-skilled, higher-paying opportunities. But , what do you tell the Ph.D., or professional engineer, or architect, or accountant, or computer scientist to do next? Where do you tell them to go?"

You tell them to start their own company, is what you do! Are these highly trained guys all wage slaves? I thought they were smart and creative...interest rates are at an all time low, and now is the time to bootstrap a new company.

Posted by razib at 11:14 PM

There are various disadvantages to outsourcing software development to a company halfway across the world (whether it's in Bangalore or St Petersburg). For starters, unless you have rock-solid requirements, your development process is going to be iterative: build a demo or prototype, change some stuff around based on customer or product management feedback, repeat until you sell the thing. Having your developers on another continent adds substantial overhead to this process. Also, in dealing with a large outsourcing company, you face the same problem that anyone dealing with a large cognitive services outfit does, namely, making sure they don't pawn off their mediocrities on you. Large systems integrators are especially bad for this; they have a lot of junior people who really can't hack it, and unless you're an important customer you're likely to end up overpaying. Of course if the pay scale is third world you won't end up losing as much money, but if you really need to have the work done on time there's a risk. It's a lot easier to evaluate someone's skills in person.

Posted by: bbartlog at July 22, 2003 07:56 AM

"Personally, I think that the pendulum will swing back from outsourcing all the high level development and architecture when the limitations of technology and intercultural communications over 6,000 miles become apparent. "

Whistling in the dark. Global communication is only going to get easier, at least technically. And even if US corporations did pull back, the places where outsourcing has now been going on for over a decade are now mature enough to raise a software equivalent of "Bollywood" and compete successfully on the world stage with the west.

Posted by: Dick Thompson at July 22, 2003 08:15 AM

I think the trend is undeniable. For good or bad, companies will THINK they are getting a bargain by sending computer programming to India.

This may encourage unionization of the IT industry to fight aback. It's interesting that there is so little union activity going in the U.S. considering how easy the federal labor laws make it to for a union.

My theory is that those smart enough to form a union have moved up enough in the meritocracy to have the illusion that they are part of the system and not being screwed by the system.

Posted by: Gordon Gekko at July 22, 2003 11:00 AM

I certainly wouldn't say that Indians can't program well.

The difficulties of working on software that is actually going to be installed and used in the United States, but programmed halfway around the world, eat up a lot of the benefits of paying the Indians such a low salary.

The corporate penny-pinchers making this decision think that they can write such amazingly great requirements that the Indian programmers don't need any contact with the actual end users in the United States. It may be that the salaries for the requirements writers are so high that it makes up for the money saved on the programmers.

Whether or not it really makes sense to do this, the United States has the right to protect its own workers. Otherwise the U.S. is in danger of becoming a country of very rich international capitalists and a very poor majority, without a middle class or an upper middle class.

Posted by: Gordon Gekko at July 22, 2003 01:57 PM

agreed - people shouldn't be exempt from competition just because they're upper middle class if the working class have been getting both cannons for years about why it's counterproductive to hold back restructuring

Posted by: Jason Soon at July 22, 2003 01:59 PM

none of the points raised by bbartlog or gordon gekko support the case for intervention - in fact they support the case for the opposite. if there are going to be inherent limitations to the outsourcing process then the market will eventually find out about them - it will run into these limits and there will be an equilibrium which isn's total outsourcing. if you can't trust the market to work in this area to self-correct then why not hand the micromanagement of all markets over to the government?

Posted by: Jason Soon at July 22, 2003 02:02 PM

Not all very smart people are entrepreneurial. What option do they have?

Unchecked, this will lead to international capitalists ruling the world under a system of corporate feudalism. Hardly the paradise of freedom that libertarians drool over.

Posted by: duende at July 22, 2003 02:24 PM

I wasn't trying to make a case for intervention or protectionism - I am all for free trade. And I think that a lot of good work does get done by Indian outsourcing companies, and am glad that one more part of the world has been touched with the fire of capitalism and joined the ranks of modern society. My comments were based on my own company's experiences with outsourcing to India and my own experience with software process; basically, I think there are some fairly big fixed costs associated with outsourcing a project, so you need to have a big project to make it worthwhile. Small or quick projects still get done locally.

Posted by: bbartlog at July 22, 2003 03:17 PM


As your neighborhood venture capitalist, trust me, not everyone has fundable ideas.

You're talking about a smaller and smaller cognitive/creative elite here, certainly not mass employment for US sci/eng types.

My advice: Don't go into science. Science IS FOR LOSERS. It's a frickin crap shoot if your project will work, and then you need to beg for scraps for 15 years before you get a real job or start your company.

Go into plumbing. Pays better than janitor work. hell, most of the time it pays better than science.

Posted by: David at July 22, 2003 04:18 PM

For losers? If you're all about maximizing your average expected income, and you would only be an average-quality scientist anyway (say someone about +2 sigma on the intelligence scale) then yeah, sure. But for some people, science is what they really want to do. And for some people (say those about +4 sigma on the intelligence scale) science *will* pay off, financially. And maybe meeting with other highly intelligent people on a regular basis makes the lower pay worthwhile. And if you really have the drive, you can win imperishable fame in science - but not as a plumber.
Anyway, I agree that your advice is probably good for a lot of people, namely those that romanticise science but don't have enough natural talent to excel at it. But there are two sides to the story.

Posted by: bbartlog at July 22, 2003 05:59 PM

understood, bbartlog - I wasn't implying that you were using your argument for intervention (though I think Gordon was), I was saying that your argument didn't support intervention and suggested if anything consoling factors (that there are inherent limits to outsourcing)

Posted by: Jason Soon at July 23, 2003 12:08 AM

"Unchecked, this will lead to international capitalists ruling the world under a system of corporate feudalism. Hardly the paradise of freedom that libertarians drool over."

Duende, you've been reading too much Indymedia

Posted by: Jason Soon at July 23, 2003 12:10 AM