Losing 25,000 more jobs? That's a good start, IBM

ON EXCELLENCE

January 04, 1993|By TOM PETERS

The second day of Bill Clinton's economic summit coincided with IBM's latest admission of woeful performance: bye-bye to another 25,000 jobs, a $6 billion, one-time charge to earnings and a $1 billion reduction in the product- development budget. Clinton, hinting at a willingness to jawbone his way into microeconomic decisions, bemoaned the product-development cut.

Whoa, Bill.

Had I been charged with drafting Clinton's statement about IBM (assuming cause for a statement -- a shaky assumption), I would have suggested the following "talking points" for the president-elect:

* Way to go, IBM! Glad to see you've awakened to the need for drastic change. Sorry, of course, to hear of any job cuts, but I know we can't count on the Fortune 500 for job creation in any event. I'd rather see a lean, mean, feisty, globally competitive IBM with 200,000 employees than 400,000 folks at a sluggish IBM, dying by a thousand cuts. (Ditto GM, etc.)

* "Attaboys" to Michael Dell (Dell Computer), Bill Gates (Microsoft), John Sculley (Apple), Bert Roberts (MCI) and others. I'm delighted that IBM's retrenchment was not caused by a surge in Asian and European competition, but by the competitive spunk of the U.S. information industry (telecommunications, computers, semiconductors/microprocessors, peripherals, network and applications software).

Intel, Apple, ASK, AST, EDS, Dell, Microsoft, Lotus and friends are leading America to astonishing heights in this awesome industry (more than half of U.S. capital investment is now in computer- related areas). The miracle is that in an industry we invented, and which is now No. 1 in the world (until American-led biotech takes over), we have managed to maintain such an astonishing market share. There's no precedent for this long period of vitality -- not in autos (where the Europeans caught up a half-century ago) or any other arena.

* A toast to the late economist Joseph Schumpeter. Long-term success, per Schumpeter, is due to "gales of creative destruction." Not pretty, but true. And necessary. Though dislocation is painful -- terrifying for workers, families and communities -- that's better than putting a brake on disruption (and the prime disrupters -- our entrepreneurs, from Portland to Austin to San Diego). Trying to preserve jobs at the likes of IBM and Digital Equipment is simply counterproductive.

* Kudos to our aggressive information industry users, who no longer kowtow to IBM. The information industry is driven by pioneering users (e.g., BancOne in banking, Wal-Mart in retailing) as much as by pioneering producers.

* And applause for our often-maligned financial entrepreneurs, who've been willing to bet on the new industries. Read my lips: We'll try to remove many of the shackles currently holding back our lenders.

* A special "hats off" to CEO Andy Grove of Intel, now No. 1 in the semiconductor industry. I fully understand that your success is thanks to a government policy not to "help out leading high-tech industries." If the government had intervened when semiconductor bosses asked a few years ago (e.g., slowed the flow of Japanese dynamic random-access memory chips, as Reagan did with Japanese auto imports), you'd have been hogtied by the Japanese-led, global DRAM glut, which is causing nightmares in Tokyo.

In fact, without much (any?) help from Sematech or Japanese market-share concessions, you shifted amazingly quickly from commodity products to high value-added, advanced microprocessors. (P.S. Laura Tyson, my industrial policy czar -- oops, appointee to head the Council of Economic Advisers -- will carefully study the free-market Intel saga. That's a promise.)

* There's research and development, and then there's research and development. While I'm hardly ecstatic about IBM's $1 billion cutback in product development, I understand that shocking big-company inefficiencies extend to R&D as well as manufacturing.

Time and again, in the information industries, clever, quick, efficient groups of a few dozen out-innovate hordes of thousands at central laboratories. The investment issue is as much about efficiency as volume. More is better, but only if "more" goes to those who spend wisely. In Arkansas, I learned -- even if some of my new advisers don't seem to get it -- that the most efficient and effective investors usually are small- and medium-sized enterprises, not yesterday's fading stars.

* The summit taught me a lot, not least to watch for nouveau establishmentarians (some, sadly, from Silicon Valley) looking for a handout. I guarantee I won't succumb to pleadings from old companies, prematurely old companies and vigorous industries that want us to blunt energetic foreign competition or selectively help out favored sectors of an industry (which invariably means propping up a handful of huge, inefficient companies).

I also promise to reject the childish, macho nonsense about us being engaged in "economic warfare." America's companies, even the lumbering behemoths, are wising up (witness the IBM announcement), mostly in response to vigorous competitors from Tallahassee to Taipei. Let's face it, we can mostly thank Nissan, Toyota and Honda for the vastly improved quality of the American-made limousines in which I ride these days.

(Tom Peters' column is distributed by the Tribune Media Services Inc., 720 N. Orange Ave., Orlando, Fla. 32801; [407] 839-5600.)

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