Every industry is getting lean; we no longer have a choice

by admin on 06/19/2011 1:45 PM

David J. Gibson, M.D.
Director, Clearway Health Solutions

You may have missed reading a thought provoking article from Thomas Freedman in the NYT yesterday.  The article entitled Average Is Over (see attached below), is particularly relevant as it relates to the political debate that is evolving with a trajectory that is progressively being divorced from reality.  All the politicians are promising jobs, jobs, jobs.  Obama wants more government spending to bring back jobs as demonstrated in his SOTU speech last night.  The Republicans are promising that the market will return jobs if the government is downsized and taxes are lowered.  What happens when both are proven to be wrong which will become evident soon after the election later this year?  It is not a pretty picture to contemplate.

The following are a couple of excerpts from Freedman’s article: “In the 10 years ending in 2009, [U.S.] factories shed workers so fast that they erased almost all the gains of the previous 70 years; roughly one out of every three manufacturing jobs — about 6 million in total — disappeared.”

Most of the current job creation is now focused in the relative low paying and previously non-exportable service sector.  Hospitality jobs such as waiters and waitresses are an example.   Now, these jobs can be exported to the IT sector.  Consider the following”

Last April, Annie Lowrey of Slate wrote about a start-up called “E la Carte” that is out to shrink the need for waiters and waitresses: The company “has produced a kind of souped-up iPad that lets you order and pay right at your table. The brainchild of a bunch of M.I.T. engineers, the nifty invention, known as the Presto, might be found at a restaurant near you soon. … You select what you want to eat and add items to a cart. Depending on the restaurant’s preferences, the console could show you nutritional information, ingredients lists and photographs. You can make special requests, like ‘dressing on the side’ or ‘quintuple bacon.’ When you’re done, the order zings over to the kitchen, and the Presto tells you how long it will take for your items to come out. … Bored with your companions? Play games on the machine. When you’re through with your meal, you pay on the console, splitting the bill item by item if you wish and paying however you want. And you can have your receipt e-mailed to you. … Each console goes for $100 per month. If a restaurant serves meals eight hours a day, seven days a week, it works out to 42 cents per hour per table — making the Presto cheaper than even the very cheapest waiter.”

This is relevant within the context of our unleashing market forces within the health care sector of the economy.  Informed consumers, as has been demonstrated in every other sector of the economy, will predictably reform the industry and drive creative destruction that has been avoided in the past for all the reasons we have previously discussed.  The provider cost per unit of service will be quickly reduced in order to compete in a competitive market.  The use of IT to increase productivity will become an imperative.  The resulting loss of HC jobs and the reduction in compensation will be an assault on one of the last relatively affluent job option within today’s U.S. economy.

This message is not intended to argue against our introducing available market consumer forces into the HC industry.  This will occur with or without our involvement.  Rather, I am speculating on the collateral unintended effect that this fundamental shift in the industry’s structure and organization will have on the general economy.

David J. Gibson, M.D.
Clearway Health Solutions

By THOMAS L. FRIEDMAN, NYT | January 24, 2012

In an essay, entitled “Making It in America,” in the latest issue of The Atlantic, the author Adam Davidson relates a joke from cotton country about just how much a modern textile mill has been automated: The average mill has only two employees today, “a man and a dog. The man is there to feed the dog, and the dog is there to keep the man away from the machines.”

Davidson’s article is one of a number of pieces that have recently appeared making the point that the reason we have such stubbornly high unemployment and sagging middle-class incomes today is largely because of the big drop in demand because of the Great Recession, but it is also because of the quantum advances in both globalization and the information technology revolution, which are more rapidly than ever replacing labor with machines or foreign workers.

In the past, workers with average skills, doing an average job, could earn an average lifestyle. But, today, average is officially over. Being average just won’t earn you what it used to. It can’t when so many more employers have so much more access to so much more above average cheap foreign labor, cheap robotics, cheap software, cheap automation and cheap genius. Therefore, everyone needs to find their extra — their unique value contribution that makes them stand out in whatever is their field of employment. Average is over. . .

What the iPad won’t do in an above average way a Chinese worker will. Consider this paragraph from Sunday’s terrific article in The Times by Charles Duhigg and Keith Bradsher about why Apple does so much of its manufacturing in China: “Apple had redesigned the iPhone’s screen at the last minute, forcing an assembly-line overhaul. New screens began arriving at the [Chinese] plant near midnight. A foreman immediately roused 8,000 workers inside the company’s dormitories, according to the executive. Each employee was given a biscuit and a cup of tea, guided to a workstation and within half an hour started a 12-hour shift fitting glass screens into beveled frames. Within 96 hours, the plant was producing over 10,000 iPhones a day. ‘The speed and flexibility is breathtaking,’ the executive said. ‘There’s no American plant that can match that.’ ” . . .

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The Future of Health Care Has to Be Lean, Efficient and Personal.

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