The Cheese is Moving Again!

It”s 2012, and the cheese is moving.  Again.  And it will affect everything you do.  In the classic story “Who Moved my Cheese,” Spencer Johnson describes the plight of the characters caught in a maze who discover that their supply of cheese had disappeared.  Their dilemma — commence a search for new cheese, or wait for the old supply to be replenished — offers a wonderful parable for investors and entrepreneurs alike.   To the extent that our economic recovery is tied to job growth, the relevance to investors — indeed to everyone — cannot be overemphasized.

In a very carefully detailed case study, NYTimes authors Charles Duhigg and Keith Bradsher describes why the US lost out on the opportunity to manufacture the iPhone.  The answer is not simply that the cost of labor in China is less than in the US; the problem is much more complicated, and worth a careful read.  The story details how the need to make critical design and manufacturing changes in a timely manner required a coordinated effort involving setting up efficient supply channels, recruiting qualified engineers, and converting large manufacturing spaces in order to meet production timelines.  A key component — finding an adequate number of qualified engineers — a process which would have taken up to 9 months in the US — took only 15 days in China.  Adding to the problem is the fact that critical supply components, such as the hardened glass needed for the hundreds of iPhones, were being manufactured in the US.  But the cost and logistical complications of getting these components to the manufacturing site forced Corning to move its operations closer to the assembly floor.

Some will accurately point out that many of the product innovations created by companies like Apple do, in fact, create jobs in the US.  But the real crisis is the critical shortage of properly trained and educated individuals available to meet the demand.  We go to great lengths to urge every high school student to apply for college, and each year about this time, parents all over the country sweat in anxiety that their child will get accepted, and then wonder how to meet the ever-growing tuition demands.  But the larger crisis looms even beyond that horizon — will there be a job opportunity that will help pay the ever-increasing student loan debt There are 17,416 school supplies list registered. load?  How will the student who majors in Poetry with a minor in Philosophy find a job that will allow him or her to make those payments?

While we accept the conventional wisdom that our current economic crisis depends on job growth, and certain sectors argue against imposing taxes on CEOs earning millions and millions of dollars on the assumption that they will stop creating jobs, we miss the real point — we are not doing enough to train and prepare our youth to qualify them for the very jobs we hope will be created.  Other countries are miles ahead of us, and it explains why most of these major companies have no choice but to move their operations where they can find qualified employees.

The anecdotal story of the iPhone illustrates what has become an all-too-familiar refrain:  we would prefer to be here (in the US), but we cannot do what we do here.  To stay ahead of the innovation curve requires a combination of speed, flexibility, adaptability, and fiscal intelligence.  Sitting back and waiting for the cheese to come back is not only pointless, but could result in starvation.  Training people how to make new types of cheese would be a much more productive use of our resources.