Outsourcing Shock

There is a familiar pattern by which new ideas become incorporated into our society. First, people are skeptical and resistant. The prevailing forces crush the new idea. If the idea doesn't have outstanding merit, it dies stillborn. Second, the idea starts to pick up followers and advocates. First the early adopters, then the forward looking mainstream, then the mainstream. Third, as the idea starts to have real legs that are obvious even to journalists, the over-enthusiasts take over. The idea begins to be touted as the new hottest thing since sliced bread. Suddenly, one can scarcely pick up a newspaper or magazine without a mention. This idea will be better than any idea ever before. It will get us to the moon. It will cure cancer! Fourth, the hangover sets in. This idea isn't so great. What was I thinking? This idea is awful. Everyone starts jumping off this bandwagon. Fifth, this idea is denigrated. This idea is terrrible. It lost me a pile of money in the stockmarket. Let's not talk about that. The final stage occurs when, in the midst of depression, the proper level, use, or place for the new idea is found, and the idea is no longer new, it is simply part of everyday life.

Such an impulse-response spike is what we have witnessed in the late Nineties with the Internet, or in the Twenties with modern manufacturing techniques. The larger the change the greater the spike. After the initial impulse there is a period of periodic "ringing" which gradually dampens down and blends into the system noise.

Outsourcing is a more recent example of a new idea whose shocks to the system are still being worked out. Starting in the late Nineties, outsourcing was the new idea du jour which was going to transform our economy beyond all recognition. All the manufacturing jobs were going to move to China while all the service jobs migrated to India. What could possibly be left for Westerners to do in such a low-cost world?

At a period seven years later of near all-time-low unemployment, it would appear that the benefits were over-exaggerated and the fears were overstated. Life once again has turned out to be a false hope and a groundless fear. One article writes:

The great tide of offshoring that has sent millions of U.S. jobs to low-wage countries such as China and India seems to be slowing. If I'm reading the signs correctly, U.S. workers are facing lower odds this year of seeing their jobs sent overseas in the name of corporate cost-cutting than at any point in this decade.

Why is that?

My own company is a good example. In order to produce some things cheaply, we have outsourced the low-wage production to India. This plan had been hatched years ago, when the spike of enthusiasm for outsourcing was very high. It takes a long time for people to respond to changed reality. We've had work done in India for the last year, and it has been good work, but it hasn't been enough. It takes a long time for things to go to India and come back, and it is difficult to control what's happening there from here. So, even though it would cost somewhat more, there's a sudden desire to open a second production process right here in Boulder, right next door. It would give us more flexibility and more control. Saving money isn't always the only consideration. Sometimes getting more is desirable, even though it costs more to get it. Sometimes you can make more money by spending more money, and such is the state right now with our outsourcing efforts.

I'm ready to declare the outsourcing to India idea simply part of the noise right now. It's an idea whose time has not passed, but integrated.