Interesting to see that PG agrees with something I've been saying here for a long time, about the role of globalization in economic inequality [1] [2] [3].
Of course I grew up in the Rust Belt, where the average person used to be able to make a good living with a high school education in the steel or automotive industry, but now most of the factories are idle, rusting eye-sores, most of the ambitious, talented kids want to go somewhere else -- anywhere else -- and the closest thing to a growth industry is health care for the folks who earned a good retirement during the glory days and are starting to get old.
I read a comment once that the steel industry collapsed in the US because they failed to innovate or continuously improve (much like the Big 3 automotive companies).
Do you know of any concrete examples of this? or books about how US Steel lost?
I don't know about steel, but Rother's Toyota Kata makes this case for cars. There's one graph in particular that shows carmaker productivity per worker over several decades.
Toyota, working in a Japan decimated by war, definitely came from behind when competing with Detroit's big 3. Toyota starts lower than the other 3, and all of them improve gradually together. But at some point US carmakers plateau. Toyota just keeps on climbing for decades more as the big 3 stagnate.
Eventually, US automakers try to copy the Toyota approach, and Toyota works hard to teach them. But they never quite get it, because US automakers basically miss the point, copying visible behaviors rather than the deeper structures that really make the difference.
Those curious but not wanting to read a whole book should start with the This American Life episode NUMMI:
It tells the story of a joint Toyota-GM plant in California. Basically Toyota takes one of GM's worst plants and makes it one of the best. But GM is never able to adopt the differences, or even to really understand them. The worker-level stories are particularly powerful.
At that point in time, Toyota still did not have manufacturing in the USA. Honda did, but Toyota did not; they were still not sure how to do it.
Additionally, and more relevant - American suppliers could not make parts to Toyota's quality specifications.
One of the craziest parts of this story is that GM simply did not believe the stories that were coming out of NUMMI - for instance, NUMMI could change press dies (for stamping sheet metal) in under a 30 minutes where other plants took several hours.
It is crazy to think about, but GM at that point in history had enough cash to simply buy Toyota; being the biggest dog in town leads to self-satisfaction and complacency.
GM and the big three at that time had an inspect and reject batch lot production system. Each stage of production would make a bunch of parts that would later be used downstream, possibly a few days or a week later. These parts would be inspected for defects before being used, but by then there may be a buffer of several thousand parts - that may all need to be scrapped. Toyota ran on a lean system, which meant that upstream production could cause severe downtime if those upstream suppliers or plant operations failed. This caused 2 things - emphasis on more robust operations and less waste due to scrap.
The whole time period is fascinating no matter what business you are in.
Disclosure / disclaimer - I work for GM, but did not during this time period - I've just read a lot about it.
Helping a competitor may cost them in the future, but I am guessing they got paid enough money in the present for the consultation to be worrh the risk.
I cant speak for Toyota, but they probably also would feel their own future would look bleak if their competitors died off - a good healthy level of competition is good for all players in the market, and it drives up innovation and drives costs down for consumers. In a very direct way, having able competitors ensures Toyota stays strong and doesnt stagnate.
See my comment above, but it is important to remember that Toyota did not have any production facilities in the USA at this time; they were not sure (purportedly lazy) American workers could or would conform to the Toyota Production System.
Also, at that time GM had more cash than Toyota's Market Cap. [citation needed] [1]
1. I wish I had better source for this, but Roger B Smith spent 80 billion on automation in the 80's, and Toyota's Market cap was 31-45 billion in 1992.
Thanks for that. I've read several books about this era in automotive, I liked Paul Ingrassia's ironically titled "Comeback" (in which the comeback is largely due to currency shifts). I'll check Toyota Kata as well.
Of course I grew up in the Rust Belt, where the average person used to be able to make a good living with a high school education in the steel or automotive industry, but now most of the factories are idle, rusting eye-sores, most of the ambitious, talented kids want to go somewhere else -- anywhere else -- and the closest thing to a growth industry is health care for the folks who earned a good retirement during the glory days and are starting to get old.
[1] https://news.ycombinator.com/item?id=9868017
[2] https://news.ycombinator.com/item?id=9560872
[3] https://news.ycombinator.com/item?id=7152378