A Phone Man's Point of View™

By Mike Sandman

A phone repairman gets to see really interesting stuff on service calls. Most phone men don’t care, they just want to get out of there. Some phone men, like me, learn stuff on every call.

Through the years, I’ve categorized what I’ve learned into two categories – WHAT TO DO and WHAT NOT TO DO in business. They’re both very important!

When I started my first business, I was an idiot. I didn’t know anything. I was willing to work, I learned pretty quickly, and I constantly had new ideas, but I was still an idiot. I learned the way most business owners learn… By screwing up and doing better next time. Only a small percentage of business owners have the resources to screw up much.

When I closed my first telephone business and started working as a telephone repairman for a couple of companies with phone systems in both large and small companies, my education really started.

I got to see lots of management styles at lots of types of companies. Offices, warehouses, manufacturers, hotels, hospitals, doctor’s offices, truck and heavy equipment repair companies, food processing companies, and the unbelievable suburban Chicago locomotive manufacturer. The attitudes of the employees were usually the real indicator of a successful company.

The owners/managers of these companies were pretty strange guys or gals (as I am), but how strange they were didn’t seem to have a correlation to the success of a company. It was rather a common thread of what I saw. There needed to be that strange guy or gal – or the company would never have existed.

After leaving most really big corporation’s offices (not their factories), I wondered why they’re still in business? They seemed to survive on pure momentum. Crazy managers and crazy employees, doing crazy stuff. Common sense seemed to be prohibited from entering the building.

A good percentage of the companies I called on were factories. Big or small, they had posts every 50 or 100 feet between the various machines or assembly areas, with a phone hanging on it. There was a paging speaker at the top of some of the posts. There were workers hustling and bustling. Tables full of workers assembling and maybe soldering stuff. You could see that one area of the factory might be empty, waiting for the products from another area of the factory. If they were working on metal stuff, there was scrap metal or turnings near every machine.

The warehouse area was where raw and finished products were kept, with docks where trucks delivered and picked up stuff.

I did find myself wondering if I could do what the workers there were doing. Could I operate one or two types of machines, all day, every day, until I retired? Could I assemble the same little gizmo by the thousands? I had a lot of respect for the workers. By comparison, being a phone repairman was an incredibly interesting and easy job, with something new happening every hour.

Then there was the nicely air-conditioned and heated office with the trail of dirt on the carpet leading from the door to the factory floor, where there were lots of office workers supporting the factory:

• Executive Management
• Middle Management
• Management / Secretarial
• Purchasing
• Sales
• Service / Support
• Maintenance
• Payroll and Accounting (usually a bunch of ladies smoking like fiends)
• Engineering / R&D or a Lab, with some CAD computers and printers (and a bunch of draftsman’s tables mainly holding stacks of papers after 1985 or so)
• Quality Control
• Shipping / Receiving / Warehousing (who would have ever thought that it would now be called Logistics?)

I was really impressed. Every service call was like going to a toy store for me. No two companies were the same. The manufacturing companies were my favorite because I got to see how those gizmos were actually made and all the neat equipment that made them. What I learned over the last 35 years is still rolling around in my head today (maybe a little foggy nowadays).

Hospitals were the scariest places, especially when I got hepatitis after eating at a Chicago hospital’s cafeteria only once while working there. When I told the hospital, they said “Yea, a lot of the doctors and nurses have hepatitis here.” This was the kind of place where I would open up the house box (a box on the wall with the wires for a particular part of the hospital) and find roaches fried between the wires (a lot of restaurants were in the same condition). The hepatitis wore me out for over six months. When I woke up in the morning I felt like I had never gone to sleep. I don’t think I ever got the same level of energy back.

After the Internet bubble burst in 2000, things started to change in our economy. The Iraq war really slowed the economy down. Big companies were having a hard time selling more stuff than the previous year, which is what it takes for the head of the company to keep his job (and huge salary).

In business, you either:

• Sell more stuff
• Raise prices to make the same amount of money selling less stuff
• Cut costs

There are no other choices, except going out of business or being acquired. Just about every single company in the US had the same idea at the same time: Make the stuff in China to cut costs.

It took a few years, but there are now very few factories in the US. The same companies are selling the same products, but it’s made overseas. The cost of buying raw materials and making the products overseas was incredibly low, and the companies could get rid of a lot of overhead in the US since there were no factories to support. These companies were making incredible profits. Enough to buy lots of private business jets, buy more companies, and build new headquarters buildings.

For perspective, a popular business jet costs over $25 million to buy and over $4,000 an hour to fly. Every time I hear about a company owning a business jet, I wonder how much extra I’m paying for that tube of toothpaste or pair of socks? Obviously way too much. Maybe it’s just me, but I try not to buy stuff from companies that I know are wasting money like pigs (usually the ones with lots of lobbyists).

There are very few factories left in the US. Most of the stuff we buy is made overseas. Business in the US is now just warehousing the stuff before it’s distributed.

The factory workers are out of jobs, the maintenance people are out of jobs, all the office workers who supported the factories are out of jobs. As a phone man, since 2001 we’ve seen companies with a closet full of spare phones that belonged to all the people who were laid off. They don’t need a phone repairman to fix phones because of all the spares from the laid off workers. If a phone breaks, they just grab another one out of the pile in the closet. It’s not looking like those phones are ever going to be needed again.

So what does that same manufacturing company look like now:

• Factory
• Executive Management
• Middle Management
• Management / Secretarial (a lot fewer people to manage!)
• Purchasing (a lot less stuff to purchase since the factory in China acquires it!)
• Sales
• Service / Support (a lot fewer people since it’s outsourced to another country!)
• Maintenance
• Payroll and Accounting (a lot fewer people to pay!)
• Engineering / R&D or a Lab (a lot fewer people since most R&D is now done in China or India!)
• Quality Control (so a few pets or people die… keep letting the Chinese check our food out for us)
• Shipping / Receiving / Warehousing (who would have ever thought that it would now be called Logistics?)

Why is the US economy looking pretty weak?

• All these factories are gone
• China is making all the stuff we used to make here
• We’re sending all our money to China and India

This scheme worked OK until now. So what’s different?

1. They can’t sell more stuff because there are fewer US humans who can afford it
2. They’ve wrung all they can out of raising prices
3. They can’t cut costs any more because China is raising their prices, and the cost of oil to get it here by boat or plane is way up

That doesn’t leave the management of these companies with any ways to make more money than last year. The stock prices will go into the toilet, and the head honchos will be out of a job.

Almost anybody could have anticipated what’s happening now after outsourcing everything, so how did this happen? We’re all living for the moment. Screw the future, lets make more money now (and I get to keep my high paid executive corporate management job).

The people who did anticipate the results were labeled as “protectionists.” Filthy scum protectionists who hate all the poor people in the third word countries who are just trying to survive.

Protectionism is the idea of restricting trade between countries to make sure that stuff made in a low labor wage country doesn’t flood a country who’s producing the same stuff with more expensive local labor. The cheap stuff coming into the country is usually restricted by putting tariffs on the that cheap stuff coming in, to make it more competitive with stuff made with local labor.

That worked just fine for decades, including on stuff made from the first low cost labor country – Japan. But now, there are now almost no tariffs on anything, and just about everything is made in low labor rate countries. Free trade is great, apparently for everyone else – not us.

There were tariffs on all this stuff to “protect” our US jobs for maybe 100 years. The Dingley tariff law was the first protective tariff law from 1897, which was titled “An Act to Provide Revenue for the Government, and to Encourage the Industries of the United States.” Now the industries are gone. If tariffs worked pretty well for 90 years, what happened to them? Two words: Corporate Lobbyists

It takes a lot of money to win an election as a Senator or Congressman. Corporations donate a lot of the money Senators and Congressmen use to win their elections. When Senators and Congressmen are no longer Senators or Congressmen, they need something to do to make money. Many become lobbyists for the same corporations who made contributions to their campaigns, and who they passed laws for while they were in the Senate or Congress. Oh yea, they also collect a pension from the US government (us) at the same time.

The corporations went to congress and as many politicians as they could find, and gave them a couple of examples where protectionism really did cause problems. Suddenly, you were un-American if you didn’t want totally free trade. Nobody wanted to look un-American, and everybody wanted to make as much money as possible at the moment, so here we are. A country that doesn’t make anything. We buy most of the stuff for our Military from other countries. We buy a large percentage of our food from other countries. Common sense seems dead.

Besides protecting US industry, the other purpose of tariffs is to collect money to support the government. If there are no tariffs, the US isn’t getting taxes on those imports. If we don’t get the taxes, the individual citizens and corporations have to pay for all the government services. Since it’s widely known that corporations don’t pay much in taxes, that leaves the burden of paying for just about everything on the ordinary working stiff.

Federal, state and local governments are working under incredible deficits. Money that used to go to the states and local governments from the Federal government has pretty much dried up. We all know that Federal, state and local governments waste a huge percentage of the money they get, but in the “old days” when we collected taxes on imports, they had the money to waste. Now they don’t have the money, but they’re still wasting it.

The manufacturers who are left in the US are pretty busy. While a lot of the things we buy are produced by the thousands or millions, some things aren’t made for consumers, and are only made in ten or hundred quantities.

China isn’t geared up to make hundreds of anything. A factory sets up a production line to make a particular item, and they want to run the line as long as possible before tearing it down, reprogramming the equipment, and retraining the workers to make the next item. If they make $1 per item, they really can’t make money making 1,000 of them if it costs $500 to setup the line. They want to make thousands.

In the US, manufacturers have learned to make things in smaller quantities. It’s not that hard, just a different mindset than what’s used in Chinese manufacturing. Each item a US manufacturer makes is more expensive than if it was made in large quantities in China, but at least these items are available. If US manufacturers weren’t here making this stuff, it just plain wouldn’t exist today.

It’s not just Democrats or Republicans. They’re both equally responsible for this bad situation, and they seem totally paralyzed to do anything to fix it. I can’t blame them, since saying anything is a no-win situation after the various news organizations chew up whatever they say and spit it out so the politician sounds like an idiot. Maybe they are an idiot for becoming a politician under those no-win circumstances?

Unfortunately, we’ve reached the point where paralysis is no longer an option if Americans want to retain our lowered standard of living (even if a lot of Americans don’t want to work as hard as our parents). The longer we wait, the more painful it’s going to be for all of us (except for the politicians who retire with a nice pension).

It makes sense to make some stuff in other countries. It makes no sense to make everything in other countries. It makes no sense to get a large part of the food we eat from other countries. It makes no sense to sell off important parts of the US to foreign countries.

It’s time to stop politicians and corporate lobbyists from using Protectionist as a dirty word… It’s currently used a lot like the word Racist. If someone labels you that, you’re a bad guy no matter what you say or do (similar to Joe McCarthy’s use of the word Communist in the 1950’s). In sales, if you say something enough times it becomes fact, even if it’s not true.

I’m not sure what happened to the “Made in the USA” big deal from the 1980’s? The 1980’s Made in the USA big deal was the result of the near collapse of Chrysler, one of the big three US automakers. Chrysler is now owned by Canadians, who bought it from the Germans, so there are really only the big two US automakers left – and they aren’t doing great!

There were “Made in the USA” labels on lots of stuff in the 80’s. Since we all have to live here in the USA, and the economy needs some help, maybe it’s a good time to rethink our approach to Made in the USA?

Is Made in the USA dead?

Our company puts a Made in the USA label on every product we make here, even though it costs about a penny for the label and even more for the labor to put it on. We make a little less profit by putting these labels on, but it sure feels good having done it for the last 10 years.

We can start making stuff in this country again. It’s going to be hard to compete after literally giving away all of the R&D we’ve done in the last 50 years to China, and the fact that nobody is doing R&D here (it’s all done in China or India). The hardest part is going to be for Americans to learn to work hard, like our parents and grandparents did. No matter how hard it is, it’s going to be fun… The same kind of fun our parents and grandparents had building the US to be the country it is today.

One small problem is that along with the expertise, we also exported most of the equipment for making the stuff to China. The Chinese aren’t going to give it back (even if Americans still own it), so we’re going to have to make it here ourselves. No small task.

I really don’t know exactly how we’ll get the equipment, R&D or manufacturing expertise back into the US, but if we don’t start now America is going to look very different in as little as five years.

In a magazine article I wrote back during the SARS scare in Asia in 2003, I jokingly stated that “China has coated plastic packaging with the SARS virus, since it’s impossible to open one of these packages without cutting yourself. The SARS virus will slowly kill all the Americans, after which all of the homes in the US will be taken over by Chinese – sitting around on our furniture, taking care of our pets.” It might not be SARS or plastic packaging that kills off Americans. It’s probably the greed and stupidity of our politicians and big corporations.

Probably the most amazing thing that the US has ever done was to ramp up production for World War II. Planes, ships, equipment and munitions were being manufactured here in huge quantities even before the US officially entered the war. If we did it then, we could do it again. It’s either us or the Chinese who are going to survive. I know the direction I want it to go!

Just to be accurate, the Chinese are way more screwed than we are. When we stop buying as much stuff from them as we do now, either because we decide to make it ourselves or because our economy has gone in the toilet and we can’t afford to buy the stuff, China is going to be in pretty big trouble. To their credit, they actually held back on industrializing most of their country. They’ll survive, but in a very similar way to the way we look back on the 50’s here in the US, the Chinese will look at 2000 through 2008 as the “golden years” of modern China.

Probably the biggest threat to China is someone stopping their shipping. If they can’t get the raw materials in by boat, and they can’t ship finished goods out of the country by boat, they’re out of business. In the same scenario, if we can’t get the finished goods from China because our ports are blocked or the container ships are sunk trying to get to our ports, our economy grinds to a halt – not just a slowdown.

China has been developing submarines for some time. They have some of the best submarines made today. They’re not to go to war, but to protect their biggest vulnerability. If someone finds a way to destroy the ports in China, the US or Europe, or to sink the hundreds of container ships crossing the oceans at any one time, we’re all in big trouble.

In business a bottleneck that slows production can seriously harm a company, or even put it out of business. We’re all exposed to this potential bottleneck that could leave the US with nothing to sell in its stores, and very little to eat. It will make the great depression look like a picnic. Sure, it’s not likely that the Chinese container ships won’t get here, but it’s certainly a possibility that nobody has a contingency plan for (maybe eating pet dogs and cats is the government’s current plan?).

To put things in perspective, 240 years ago there wasn’t even a United States. 100 years ago we were riding around in wagons and plowing the fields with horses. Henry Ford made the first Model T in 1908. In 1908 we didn’t have air-conditioning, heating, refrigerators to keep our food, or even natural gas or electricity in a lot of areas to run lamps / lights or the few electric devices available. The earth is 4.5 billion years old. Out of those billions of years only the last 100 have seen anything like industry. Only the last 50 have seen electronics. Only the last 10 years have seen most of our stuff made in China.

It wasn’t that long ago that the tiny island of England controlled a large part of the planet. They were industrialized, they had the best military and civilian schools, they controlled the oceans, and they had colonies everywhere. England is a shadow of their former greatness. It can happen to us. It’s our choice to sit back and let it happen, or do something about it.

It’s time for common sense to come back to the United States, and for corporate lobbyists to become a thing of the past. We’ve got to do what’s best for America, not the corporations. We either have to find new politicians who aren’t afraid of making mistakes to get our country moving, or give our current politicians a dose of courage to cure their paralysis (copious amounts of whiskey?). The current President and presidential candidates are paralyzed along with Congress. If they make a mistake, their careers are ruined by the media – so they do nothing.

Mistakes are a natural way to learn. It’s been that way since the dawn of time (that darn apple), and it will be that was until the last human takes his last breath. Mistakes makes us stronger if they don’t kill us. It’s unnatural to crucify someone for making a mistake, but we do it every day – and not just to politicians. That must be why we have more people in jail, and more lawyers than any other nation on earth.

The first step? Put reasonable tariffs on the stuff we import so we can get rid of the deficit, and make US manufacturing and food production economically feasible. Yes, everything will cost a little more, but it’s a matter of pay me now or pay me later. Adding even a tiny percentage to everything that’s imported will get our country back into the black. This isn’t rocket science, it’s common sense. We can control it. We can’t control fires, floods or the weather, but we sure as heck can control our economy and taxes – and the American lifestyle.