More about China & my opinion on Outsourcing..

So I decided to do some investigating.. see if I could find a new article about how China counterfeited Harry Potter books.. I found a few from July 2002 that made mention of a counterfeit 5th book called something like ‘Harry and the Dragon Walk On’.. it was actually something really weird like that.. I’m sure it just sounded weird in English due to the translation.. also, before I start getting hate mail, I guess the 5th book is officially out because I read another article that said the publishers of the real book released it in China 10 days early to beat counterfeiters to market.. something like that.. anyhow, while I was browsing for articles.. I found this site (link removed because the website is just too full of shit.. see below).. this page basically lists a bunch of unscrupulous things that Chinese businesses have pulled on other European or American companies.. it mentioned a few nasty things.. like how China stole technology from Volkswagen or how they sell counterfeit Yamaha, Suzuki, and Honda motorcycles in China :lol:.. check it out.. those crazy mainlanders.. they need to learn to play fair before the US decides that China needs to be cleansed of WMDs, cleansed of its oil, and the 1.1 billion Chinese need to be freed from an evil communist party.. after reading a few of these, it wasnt painting a very good picture of China.. I mean, I know China is screwed up n’ all.. but this page seemed like it was inciting fear in people who read it.. so I scrolled to the top of the page.. “Fight back against anti-competitive corporate mergers, unfettered free trade, downsizing, declining wages and corporate greed!”.. hmmm.. one of those sites..

Coincindentally, I sent an email reply to a friend today that was asking me what I thought about outsourcing.. he included an article from Fortune magazine.. I read it.. apparently, it was a follow-up to an original piece written by the same author.. I guess he got a good amount of hate mail so he wanted to clarify and apologize, whatever.. but he still “kinda” stuck his ground.. before reading this article, I didn’t really have much of an opinion on outsourcing.. to me, it just seemed like something that was a little out of my league.. but after reading it, I formed an opinion (yeah, call Ripley’s.. I couldn’t believe it myself)..and that is:

On the surface, yeah.. it sucks.. outsourcing American jobs to foreign countries sucks.. no one can argue that.. no one in their right mind would ever say “outsourcing is good for American workers”.. but what a rational, profit generating individual can never deny is that outsourcing has almost become necessary for American companies to compete in a global economy..

Now before you start calling up your homies to form a lynch mob, let’s look at it in more simple terms:

Fictitious Example:
2 software companies, both produce one product which are pure substitutes for each other (the consumer does not gain any more by using product A as he does by using product B and vice versa). Both companies employ only 1 software developer each. Both companies are in the US . US Company #1 relies on Indian developers. US Company #2 relies on US developers. Each US developer makes $50k per year. The Indian developers make $25k per year. In very simplistic terms, let’s say this is the only cost (nevermind packaging, marketing, support, whatever.. because whatever you can think of, its cheaper in India.. besides, this is my fictitious example.. go get your own). Each company will produce 50,000 copies.

US Company #2 sells 50,000 copies @ $1.00 and breaks even. US Company #1 sells 50,000 copies at $1.00 (perfect substitutes, remember?) and generates a profit of $25,000. Which company would you rather invest in? Which company is going to survive? If you worked for US Company #2 (US developers), would you be willing to accept a 50% pay cut so that the company can stay competitive?:roll: Now think what happens if US Company #1 decides to sell 50,000 copies at $0.50 to break even and price US Company #2 out of the market..:idea:

No one, me included, likes the idea of their job being outsourced. But can you blame any rational, profit generating enterprise to not outsource as a means to cut costs and increase profit and/or remain competitive in an increasingly competitive world economy? Does this whole post sound like some bullshit a guy with only 2 years worth of an MBA education from a bottom-of-the-1st tier business school would spew because he mistakenly accepted an offer to work in Taiwan missing his 3rd year with the hope he’ll be able to return back home to California to finish his 3rd year in the Fall of 2005? Got daam you’re smart! (that’s ‘God Damn’ with a, ahem, Southeast Asian accent.. go on, say it again, you’ll see what I mean)

I had nothing to do on this Saturday night, so I checked out that page I mentioned above.. I have an idea of the type of person that wrote this stuff.. but I’ll keep that opinion to myself.. the website is (you can type it in your browser if you REALLY want to go check it out).. but I dunno.. the author makes a big deal out of this statement (its highlighted on the front page.. hmm):

When a good or service is produced more cheaply abroad, it makes more sense to import it than to make or provide it domestically.

Apparently it was taken from page 229 from the Economic Report of the President, 2004.. call me stupid, but that statement seems to make prefect sense to me.. if its cheaper for you to buy the parts rather than build them, then it would be economically wise to just buy it.. “let’s see.. I can buy a coffee table at Ikea for $20.. or, shit!, I can go to Home Depot, buy all the parts for about $100, spend another $200 for proper tools and machinery, and then spend 124 hours of my life to build it.. what should I do?”.. again, outsourcing, moving jobs/industries overseas sucks.. but what do people expect of profit maximizing companies? (profit maximizing.. you like that one, huh? I heard that a lot in Strategy)

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