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1/ My recent book TEMP was largely a history of how management consultants, especially ##McKinsey, destroyed the American Dream of job security.

#McKinsey helped teach corporations how to use outsourced labor.
2/ But McKinsey also learned how to do that in Silicon Valley, and then school the world.

This #thread is long, but so is #history.

From top to bottom, the post-1970s job insecurity, legitimated by #McKinsey ideas, intertwined with the industrial undocumented workforce that made #Silicon Valley possible.
4/ Unlike any previous industry, crucial work in electronics happened outside the firm. From high-paid programmers to barely-paid assemblers, software and hardware were built by workers who were not themselves employees.

In the 1980s #McKinsey was there helping to restructure firms, like HP, from the top down, creating a cascade of insecurity that started in the c-suite, and ended in an INS detention center.
6/ #McKinsey hadn't always kept companies lean and mean. During the 1940s and 50s they actually helped corporations grow (and employ all those postwar unionists). But things changed in the 1970s.
7/ The crisis of capitalism in the early 1970s had also been a crisis for consulting—even #McKinsey. Revenue per partner fell. Monthly billings fell. #McKinsey cut the number of associates. Net operating profit, even with the inflation, fell by half.
8/ As Alonzo McDonald, #McKinsey's managing director, addressed its shareholders in Freeport on Grand Bahama Island in 1976, he conveyed a feeling of relief.
9/ In the face of a threatening storm,” McDonald said, “the Firm acted a superb center of positive direction, cool reflection and analysis, and a source of confidence for our clients.”
10/ The resurgence of #McKinsey, however, did not come from these existing clients. McDonald noticed, in his opening speech, that the firm was not as reliant on the old industries.
Central to that resurgence was electronics.
11/ In the midst of Jimmy Carter’s malaise, Thomas Peters and Robert Waterman, two directors at #McKinsey and Co., had launched a new study of what made the top companies succeed.
12/ They were “bored working for big, okay companies that would pay big money, accept our recommendations, and then do a half-assed job of implementing them” and wanted to find out what made their excellent clients so excellent.
13/ Their research, underwritten by #McKinsey and published in 1982 became a #1 bestseller and business classic: In Search of Excellence.
14/ In Search presented a new model of how corporations ought to be restructured to compete in the increasingly globalizing, automating economy—and the answer was cutting staff. In Search of Excellence’s called for “Simple form, lean staff.”
For most readers, the ideas were startling, but In Search of Excellence merely synthesized what #McKinsey had already been telling its clients for years.
16/ Ronald Reagan and the neo-conservatives may have celebrated supply-side economists, but it was the interpretation sold by #McKinsey consultants that became the best-selling bibles on how to restructure American business.
17/ Consultants offered solutions for (what was from a postwar perspective) an upside-down world where the Japanese made the quality products and American cars didn’t run.
18/ Whether your firm was restructured because of a hostile takeover, a court order, or Asian competition didn’t really matter. You would still hire #McKinsey, or BCG, or PriceWaterhouse, or Coopers & Lybrand, to put the pieces together again.
19/ The old promises of the postwar had no claim on this new world, which looked very different than postwar Americans had imagined it would.
20/ While Americans had voted for Reagan’s optimism instead of Carter’s pessimism, for most Americans who worked outside of Wall Street, Reagan’s America was not a new morning, but a drawn-out dusk—except in one place: Silicon Valley.
21/ While today Silicon Valley is known for software, in the 70s and 80s it was still a place where hardware—first transistors and then whole chips—were made.
22/ By the 1980s, electronics was the largest manufacturing industry in the U.S. and Silicon Valley’s factories left Detroit’s far behind.
23/ As the rest of traditional American manufacturing—and those good jobs—began to dry up, we looked to the Valley as the lone place where American industry could once again deliver the good life.
24/ Silicon Valley arguably began in the garage of Bill Hewlett and David Packard, and HP’s founders were as committed to job security as any other postwar industrialists.
25/ As they steered the company from the postwar through the 1970s, they continued to try to protect their workers (if, at the same time, resisting any kind of unionization).
26/ In the 1970s, instead of firing workers during a recession, HP had reduced hours and had voluntary pay cuts for executives. Employees shared work and kept their jobs. Twice, this enabled them to avoid layoffs.
27/ In Silicon Valley, the big firms, like Hewlett-Packard, looked to #McKinsey for help in becoming even more flexible. But #McKinsey learned as much from Silicon Valley, as Silicon Valley learned from them.
28/ By the 1980s the most powerful American corporations typically had a continuous set of consultants, whether from #McKinsey, #BCG or #Bain, advising them on matters of business strategy. Consultants did not simply come in, do a time study, and then leave.
29/ A senior Bain partner complained of #McKinsey that “they have these deep relationships with senior management that lead companies to return to #McKinsey, unquestioned, time and time again.”
30/ Consultants were the business strategists for the corporations instead of the senior leadership.
31/ Robert Waterman, before he became famous with In Search of Excellence, had consulted at many firms across the world, including in Hewlett-Packard’s computer group, where he had met the soon-to-be CEO John Young, who was the first CEO after Hewlett and Packard left.
32/ Waterman and Young spoke the same language. #McKinsey helped HP automate their offices.
33/ In 1984, Young invited Waterman to give a speech at the annual management meeting, laying out HP’s strengths and weaknesses, as part of the run-up to a #McKinsey-run reorganization of HP.
34/ John Young reorganized HP in line with Waterman’s vision, a McKinsey vision, taking HP in a new direction with no commitment to its workers.

HP and McKinsey were not alone in promoting insecurity in Silicon Valley.
35/ That style set the tone for the entire organization of electronics.
36/ At the intersection of these three worlds of consultants, temps, and indocumentados, would be a new kind of capitalism, where the borders of the firm were more porous than ever before.
37/ Just-in-time production promised parts when you needed them for the assembly line, and at the same time, the ability to ignore where those parts came from. Same with the people.
38/ “Silicon Valley’s labor practices,” Peters would later write in 1987, “except for engineers, often make Detroit’s look humanistic.”
39/ Steve Jobs told Apple shareholders at the 1984 meeting that their new factory in Fremont, overlooking GM/Toyota’s NUMMI plant, was the “computer industry’s first automated factory.”
40/ “The factory is based on the ideas of just-in-time delivery and zero defects parts” he said, “which allows extremely high volume production of extremely high quality products.” What made this possible?
41/ To the press Apple told them that it was all about the robots: “A Machine Builds Machines,” touted Apple about its “Highly Automated Macintosh Manufacturing Facility"
42/ To understand the electronics industry is simple: every time someone said “robot” simply picture a woman of color.
43/ According to Jobs, the people “doing the work” were him and (sometimes) Woz, but the real people doing the work of building Macintoshes were 140 people, mostly women, mostly immigrant, who put the Macintosh together.
44/ These workers showed up at 5:45 am to spend the day assembling, putting the same sets of connectors, regulators and capacitors, for an entire shift. Sara Trujillo inspected circuit boards before they got baked in the oven. Hung Troung put the computers in boxes.
45/ Instead of self-aware robots, workers – all women, mostly immigrant, sometimes undocumented— hunched over tables with magnifying glasses assembling parts—sometimes on a factory line and sometimes on a kitchen table.
46/ Migrants had long been at the bottom of the Santa Clara workforce.
47/ The fruit pickers of Santa Clara country, over most of the twentieth century, had been a hodgepodge of Mexicans, Asians (Chinese, Filipino, Japanese), Europeans (Italian, Spanish, Portuguese) and, after the Dust Bowl, mid-western refugees.
48/ Over the course of the 1970s, the number of legal Mexicans in Santa Clara country rose from 15,000 to 227,000 in 1980. As the electronics industry took off, it took off in the context of a vast migrant, immigrant workforce in what was the countryside.
49/ These “factories in the country,” as historian Glenna Matthews has called them, were one of the secrets of why “the high-tech industry contains almost no unions.”
50/ In the boom years of the 1980s, Silicon Valley would define the bleeding edge of technology—and, with the help of consultants, consolidate new ways to organize workers, restructuring the American corporation.
51/ In the competitive world of electronics, corners were cut.
52/ In 1982, Fermina—not her actual name—had worked at an electronics assembly plant in Tijuana, where she had earned 65 cents an hour, “soldering gold filaments to nodes neatly marked on printed circuits” for about three years.
53/ She peered hour after hour through her microscope, bonding semiconductors. Then the peso destabilized and Fermina crossed the border to stay with relatives and look for work.
54/ Looking in the newspaper, she called a number, where she could inquire about jobs like the one she had left behind—and she could even do it in Spanish!
55/ She found her old job, bond semiconductors, but this time it was in an assembly plant in San Diego that made parts for personal computers. Instead of 65 cents an hour, she now got $5.
56/ In the plant hundreds of Mexicans worked alongside Fermina, many of them undocumented just like her. For Fermina, it was a good paying job. For the firm, Fermina, and those like her, led to great profits.
57/ In 1983, that manufacturer was the 4th largest supplier of personal computers in the U.S., with sales of $75 million—and profits of $13 million.
When an INS raid came through, in November of 1984, Fermina hid in a supply closet, terrified.
58/ Fermina escaped, but fifty of her coworkers, nearly all Mexican women, were put in vans for deportation. “I came to this country to work hard but now I live torn between duty and shame,” she told an interviewer. Fermina was not alone.
59/ Other high-profile INS raids found firms had employed, on average, about half their assembly workforces illegally. Scholars estimated that 100,000—many undocumented—Hispanic women worked in electronics just in Southern California.
60/ The bottom-rung of the electronics industry was not in a small factory or a Quonset hut, but a kitchen. Investigators found that somewhere between 10 and 30% of electronics firms subcontracted to “home workers.”
61/ Like garment workers taking in sewing, electronics workers could assemble parts in their kitchen. A mother and her children gathered around a kitchen table assembling components for seven cents a piece.
62/ These little shops put together the boards and that went to big companies.
63/ California labor inspectors turned a blind eye:
“A Mexican or a Vietnamese can take home a thousand coils for wiring one evening, and put every close neighbor and family member to work, and return the next day to the plant."
64/ "It’s not even worth our time trying to wipe it out. When there are people eager to work for pennies, you can expect that kind of thing to happen.”
65/ The exact numbers—how many firms, how many chips—is hard to point down precisely because it was itself a subterfuge. Behind the big expensive plants were vast networks of other workers.
66/ Tellingly, more firms, in the various surveys, subcontracted to home workers than offshore plants.
67/ The INS, believed that as much as 25% of the Silicon Valley workforce (~200,000) was undocumented. And in 1984 they opened a field office in San Jose. The INS did not stop the exploitation of undocumented workers, but instead gave more power to employers.
68/ Business owners could selectively check green cards against an INS database, or simply hand over “troublemakers.” Attempts to organize the electronics factories proved unsuccessful.
69/ The spokesperson for the International Association of Machinists explained that whenever they tried to organize, the company “threatened to have anyone who joined the union deported.”
70/ While the INS operated seven main detention camps, it also subcontracted detention to 1000 different companies, with names like Corrections Corporation of America or Behavioral Systems Southwest.
71/ These detention facilities varied from overcrowded hotel rooms to overcrowded jails. The miserable conditions encouraged the detailed to agree to deportation without a hearing.
72/ In Search of Excellence was such a successful book that it eventually drove Peters and Waterman out of #McKinsey, when they refused to share all the earnings with the partnership.
73/ Waterman, who had spent 21 years in the firm, in turn, joined a chorus of detractors: “#McKinsey thinks it sells grand strategies and big ideas, when really its role is to keep management from doing a lot of dumb things."
74/ "They do great analysis, but it won't get your company to the top.”
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