Outsourcing: Why the Average American Seems to be Doing Okay
We’ve been staying at the Taj Mahal Hotel for almost two weeks. What a great hotel. Calm. Civilized. Air conditioned! Every day, we come back from a hard day at work and settle into a comfortable wicker chair by the pool.
We no longer have to tell the young lady what we want. She knows. Even the Hindu gods must know what to do at 7 PM. In a few minutes, she brings a drink…
Last night, to deepen our research into the real India we went to a concert hall for a jazz performance by Mike Stern and then over to the Oberoi for dinner.
“Middle-class Americans are screwed,” said a dinner companion. We were dining with an NRI (Non-Resident Indian), who is a professor at an American university in California.
“I drove through Santa Clara yesterday. There were ‘for sale’ and ‘vacancy’ signs all over the place. And this is in a city that has some of the fastest-growing and most profitable businesses in the country. This is Silicon Valley…
“The numbers are a little misleading. They show the average American doing more or less okay. But the numbers are skewed by the top 1%. At the top of the pyramid, Americans are doing very well. They have savings. They have investments. They have businesses that are profitable…sometimes very profitable. And they’ve done well in this rally that we’ve had for the last year…
“But you go down the socio-economic ladder and you find pain and suffering all over the place. Businesses are learning to be more profitable…largely by not hiring Americans…
“Here in India, the per capita income is only about $1,000 a year. And that means that half the population, more than 500 million people, have less than $1,000 per year…or less than, say, $3 per day to live on.
“In the US, it’s 30 to 40 times higher. But both groups speak English. Both groups can do simple tasks that don’t require much training…
“So, if you’re a smart US-based business, what are you going to do? You’re going to outsource, if you can. You know, there are now personal assistants in India working for ordinary people in the US and Europe. They figured out that many executives – and other people, for that matter – communicate with their personal assistants via email. And most of what personal assistants do – making reservations…following up on customer service issues…tracking this and that – is also done via email. In the US you’d pay a good personal assistant maybe $50,000 a year. Instead, you pay an Indian personal assistant $3,000 per year. Maybe you don’t get 100% of the service you got. But maybe you just get 50%. It’s still a great deal…
“And suppose you’re going to make something. And suppose you need a lot of labor to do it. Where do you go? To Detroit? Or to Delhi? In Detroit you have expensive labor that is theoretically better trained but used to not working very hard…
“The problem for India is that people are very poorly educated. They’re supposed to be able to speak English, for example. But they can’t. And even when they do speak English, you won’t be able to understand them.
“And the infrastructure in India is notoriously bad. So, even if you can make something very inexpensively, there’s no guarantee that you’ll be able to deliver it.
“We’re seeing American companies that are getting things made in China – because everything works better there – and then selling them in India cheaper than we can make them ourselves. This is great for the owners of the American company. But it doesn’t do the working class any good.”
We’ve been studying other people at the hotel. We watch them come and go as we eat breakfast or have a drink after work. There are a few rich couples enjoying a holiday… Some Arabs. Some Americans. Large groups of Japanese tourists…a group of middle-aged Germans… The occasional back-packer, often Australian… An older man, big…overfed and over-pleased with himself…from Milwaukee or Düsseldorf…with an elegant woman from Thailand. Eager and earnest businessmen from Europe and Japan, huddling in small groups. Teams of consultants from the US, casually dressed…confident…often a few pretty girls among them, ready to give bad advice at a high price.
There was even a large assembly of mid-level bureaucrats from the USA. They sat near us at breakfast…talking endlessly about ‘dialoguing’ with their Indian peers. God help anyone who takes them seriously or pays their salaries…
Regards,
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