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From a market efficiency standpoint, that company would have been far far better off simply hiring her and paying her a boosted salary, rather than getting access to her knowledge indirectly through McKinsey, and having to pay a substantial premium to McKinsey...To me, that's simply a sad testament of today's corporate culture. Companies aren't willing to pay good money for good engineers, but they are willling to pay small fortunes to bring in consultants, who often times are the same engineers who they weren't willing to pay the first time around.
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<p>You're implying that tech companies in general are actually hurting themselves by not hiring this EECS grad when in fact, they are paying her employer a fortune. But you've missed something critical. Those tech companies actually do know what they're doing by not hiring that MIT EECS grad of yours. In fact, coming from a purely logical standpoint; tech companies will save much more money and profit MUCH more by simply hiring outside the country. </p>
<p>Tech companies are doing something smarter than this Sakky. Yes. Something infinitely smarter and money saving. It's global outsourcing. Why pay a comp.engr./IT worker in America 60K+ starting when you can hire somebody in India for less than 20K a year! The efficiency is the same. Why hire an MIT EECS grad who's demanding such a high salary when you can find Indian computer whizzes for less than half as cheap!</p>
<p>I cannot make the same analogy for civil engineers. The nature and demand for the profession is very healthy. Civil engineers are very safe from things like outsourcing. From a purely logical standpoint, I can see if MIT civE's starting running off to banking/consulting, that this might hurt the companies but this doesn't happen near as much when compared to the EECS dept. EECS is by the far the most recruited department at MIT by companies like Mckinsey. Like I already said, it doesn't hurt tech/IT companies not to hire EE's for a high salary because they have millions of extremely qualified applicants overseas who are willing to do this. MIT civE's and other top civE's don't run off into banking because they're wanted here and not comprised for due to the case of cheap labor.</p>
<p>EECS, in short cannot be categorized with ALL of engineering. However, unfortunately; in the near future chemE's /mechE's may also be outsourced and then the trend may continue. The trend being, of course that you'll top chemE/mechE engineers soon start running off into wallstreet professions but that ISN'T happening yet. At least substantially like the case with EECS grads. </p>
<p>EECS is unique when compared to other engineering majors because the factor of outsourcing plays a key and vital role in its recruiting process in this country.</p>
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Tech companies are doing something smarter than this Sakky. Yes. Something infinitely smarter and money saving. It's global outsourcing. Why pay a comp.engr./IT worker in America 60K+ starting when you can hire somebody in India for less than 20K a year! The efficiency is the same. Why hire an MIT EECS grad who's demanding such a high salary when you can find Indian computer whizzes for less than half as cheap!
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<p>But you've only analyzed the first step. As Thomas Sowell might say, you haven't gotten to step 2.</p>
<p>OK, so you say that these engineering companies are being smart by hiring somebody from India for a lot less. But then the question is - why is is that these consulting/banking firms ALSO don't hire somebody from India for a lot less too? After all, if the guy from India is good enough for the engineering company, then he should also be good enough for the consulting/banking firm, right? I don't know any new Indian investment bank that has been started, but why doesn't somebody start one that will compete against Goldman Sachs, but pays for cheap Indians and not the millions that Goldman Sachs bankers get paid? </p>
<p>Or conversely, how about this. The consulting/banking firms don't just magically have all this money to pay huge salaries to their employees. Where do they get this money? Answer - from those regular companies! But why? Why don't these regular companies smiply refuse to pay those huge fees that the consulting/banking firms charge? Why not engage a consulting/banking firm based in India? Or, if that example sounds extreme, then why doesn't somebody right now start a new consulting/banking firm based in India, but that services US companies? As a case in point, several major Indian consulting firms like Tata, Wipro, and Infosys exist today. They are mostly doing IT consulting, but all of them have made noise about getting into strategy and management consulting too. So why don't these regular companies just dump McKinsey and its high fees and just hire Infosys? </p>
<p>My point is this. These regular companies are going to be paying these top-notch US people one way or another. Either they hire them into the company directly, or they do so indirectly by engaging McKinsey, and McKinsey brings them in. But either, these people get paid. It would seem to me that if a company really wants to save money by hiring cheap Indians, then wouldn't they ALSO want to save money on consulting fees, either by not hiring consultants at all, or hiring cheap foreign consultants? What I don't get is why is it that cheapness only works one way, but not the other.</p>
<p>OK, first off, Boeing is in major trouble... Second... other than the Boeing thing, you're right. I had my structural engineering blinders on, and I was thinking about structural engineering and civil engineering companies (not Big Oil) when I said what I said. I stand corrected, or as often said in high-brow debate, "My bad."</p>
<p>Can't help but notice that there's a big divide between Big Oil/Technology companies and traditional engineering companies, though.</p>
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OK, first off, Boeing is in major trouble
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<p>How so? According to the stock charts, Boeing is at the highest market cap/stock price in the history of the company. I fail to see how a company that is at arguably the best financial shape of its life can't afford to increase engineering salaries. </p>
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EECS is by the far the most recruited department at MIT by companies like Mckinsey. Like I already said, it doesn't hurt tech/IT companies not to hire EE's for a high salary because they have millions of extremely qualified applicants overseas who are willing to do this.
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<p>First of all, I would vigorously dispute your characterization of outsourcing. The fact is, there are more technology jobs today than there have ever been, despite outsourcing. Companies like Apple, Microsoft, Google, Yahoo, Intel, and the like have been hiring US EECS students like mad lately. Apple, for example, has probably doubled its engineering workforce in Cupertino just in the last 2 years because of the success of the Ipod, and is likely to double it again quite shortly. </p>
<p>However, let's say you're right. Let's say that you really can outsource all of your EECS work to India. Fine. Then don't hire these MIT EECS students to be EE's. Hire them to be "internal consultants" or "internal bankers". After all, you are already paying the consulting and banking firms huge fees, which they then turn around and use to hire these MIT EECS guys. So instead of that, why not just simply bring those guys in directly and have them be an internal consulting arm? The money from these companies ends up in the pockets of these guys anyway, it just ends up on a circuitous route where first the company pays McKinsey, and then McKinsey pays these guys. Wouldn't it be better if the company just paid the guys directly?</p>
<p>(Well, look at that.... Boeing's stock is up. Guess the WSJs that arrive in central Illinois via carrier pigeon are a bit out-of-date.)</p>
<p>So... what do American engineers offer companies? We're not cheap. Let's say we're better. Why doesn't this appeal to companies? Why <em>don't</em> companies hire EECS people to begin with, rather than consultants+outsourced engineering branches? How do we convince people to hire American engineers, and how can we be competitive?</p>
<p>How can we fix it? There's a problem at hand. Engineers fix problems. Why haven't we fixed this one?</p>
<p>Oftentimes the value of consultants is precisely that they're NOT inside the company. They've seen how a wide cross-section of companies, including maybe your competitors, handle particular problems so they can bring that expertise and accumulated knowledge to bear on your situation.</p>
<p>Oftentimes consultants are called in to deal with situations that are of great importance to you, but occur very infrequently. Maybe once. Can't staff up for that. they have the experience to deal with these situations because they are tackling them nation or world wide, constantly. You aren't.</p>
<p>Many investment banking situations are of this nature as well. When you're contemplating taking your company public, you'll only do that once and it's success is critically important. So you give that task to people who already know how to undertake this process, which you won't do again. Additionally, the investment banks have access to "barriers to entry" such as massive securities sales and trading operations which are needed to distribute your stock offering.</p>
<p>For both of these industries, human capital is key. There's no massive manufacturing plants, there's just the accumulated knowledge and creativity of these guys you hire. They are not interchangeable. They have unique skills, like professional athletes. They like to think of themselves like that. And get paid like that too.</p>
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So... what do American engineers offer companies? We're not cheap. Let's say we're better. Why doesn't this appeal to companies?
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<p>I'm not even sure this is the best way to look at it. US companies are willing to hire boatloads of extremely mediocre Americans for all kinds of other tasks. I've seen terrible Americans working as salesmen, terrible marketers, terrible secretaries, terrible machinists, terrible computer technicians, terrible accountants - basically there are lot of very bad American workers out there. Some of the absolute worst computer support I have ever gotten was from the inhouse IT guys at a company I used to be with, and all those guys were Americans. In fact, all of us basically learned to maintain our computers ourselves because we knew that not only could we not count on the support from the techs, but that they were liable to blow things up on our computers. Yet, the company still pays strikingly high wages to these guys. </p>
<p>I've seen American salesmen who don't even wake up before 1PM. I've known a few who have (secretly) worked for several companies on the side, selling stuff. For example, I knew one computer salesman who was also secretly working as a real estate broker on the side, so he might go into an account purportedly to try to work a computer sale, but in reality, he was trying to sell mortgages to the people there. </p>
<p>So why is it that we have to demand that US engineers have to be better than the rest, when the fact is, plenty of other Americans get hired who are simply terrible at what they do? If companies really care about quality, then shouldn't they be beating on ALL of their employees, not just the engineers? If they want to save money, why not start by firing all of their bad employees?</p>
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Oftentimes the value of consultants is precisely that they're NOT inside the company. They've seen how a wide cross-section of companies, including maybe your competitors, handle particular problems so they can bring that expertise and accumulated knowledge to bear on your situation.</p>
<p>Oftentimes consultants are called in to deal with situations that are of great importance to you, but occur very infrequently. Maybe once. Can't staff up for that. they have the experience to deal with these situations because they are tackling them nation or world wide, constantly. You aren't.</p>
<p>Many investment banking situations are of this nature as well. When you're contemplating taking your company public, you'll only do that once and it's success is critically important. So you give that task to people who already know how to undertake this process, which you won't do again. Additionally, the investment banks have access to "barriers to entry" such as massive securities sales and trading operations which are needed to distribute your stock offering.</p>
<p>For both of these industries, human capital is key. There's no massive manufacturing plants, there's just the accumulated knowledge and creativity of these guys you hire. They are not interchangeable. They have unique skills, like professional athletes. They like to think of themselves like that. And get paid like that too.
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<p>Yeah but all of this does not answer why don't these consulting and banking firms just hire a whole bunch of cheap Indians to do more of their work. After all, if companies are supposedly excising all of their high-paid US engineers and replacing them with cheap Indians (a notion of which I fundamentally disagree, but let's go with it for now), then why don't these banks excise all of their highly-paid bankers and replace them with cheap Indians? Think of it this way. You can still have 1 US-based millionaire banker who actually goes to the face-to-face meetings. But all of the grunt quant spreadsheet work that IB analysts do now, you can instead give it to a bunch of cheap Indians. Why hire a guy fresh out of Harvard undergrad and pay him 100k to start, when you can instead hire 10 Indians and pay them 10k each? </p>
<p>I agree with you that the key to consulting and banking is human capital. But human capital can be sourced globally. In fact it already is, in the case of certain engineering tasks.</p>
<p>For activities requiring an active securities trading operation, an Indian firm would be at a huge disadvantage I would imagine because as a country India is not yet highly credit worthy. Should this change over time then it would not surprise me at all to find Indian banks competing for business globally. Heck we see banks from all over Europe, Canada and Japan compete.</p>
<p>At the upper level probably the main barrier to success for India-based consulting operations is getting senior people who know something that would make somebody want to hire them. As I said such people are not fungible. Then there is time and expense of traveling overseas a lot, if they have to be in frequent close contact with US-domiciled operations.</p>
<p>As for the low-level drones, well these firms don't feel the need to operate on a cost-first basis. Or else they could already bring down their labor costs by simply paying US workers less. As we discussed, they already grossly overpay their existing primarily US-based analysts. They simply don't care that much about costs. </p>
<p>That being said, I think they will over time move some back-office operations to India where they can, and save the expensive paychecks for the front-office.</p>
<p>Okay, so it doesn't matter that American engineers are at the top of their game, or the bottom of their game, or whatever, since there are plenty of lazy Americans in other fields out there.</p>
<p>Well, what gives? What's the deal? Why are we seemingly stuck in this tax bracket?</p>
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For activities requiring an active securities trading operation, an Indian firm would be at a huge disadvantage I would imagine because as a country India is not yet highly credit worthy. Should this change over time then it would not surprise me at all to find Indian banks competing for business globally. Heck we see banks from all over Europe, Canada and Japan compete.
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<p>So don't have it be an Indian firm. Have it be a US firm. For example, why doesn't an existing US investment bank create a captive Indian "quant" department and simply outsource most of the grunt analyst spreadsheet jobs there? Why not hire US recent grad and pay 100k to that guy when you can hire 10 Indians for that 100k? </p>
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As for the low-level drones, well these firms don't feel the need to operate on a cost-first basis. Or else they could already bring down their labor costs by simply paying US workers less. As we discussed, they already grossly overpay their existing primarily US-based analysts. They simply don't care that much about costs.
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<p>Well, I would have to say that they should care about the costs to some degree. Most of the major investment banks are publicly trade companies. So even if the individual IB managers don't care about cutting costs, the shareholders should care and (through the Board) should be constantly pushing for greater profitability, meaning lower costs. Either that, or they should simply dump their shares.</p>