Monday, May 31, 2010

Economics: Not Just Pay

TORONTO, ONTARIO - This evening on the PBS NewsHour, an interesting discussion was aired on the public reaction to the oil spill in the Gulf of Mexico. Science educator Bill Nye, energy expert Amy Jaffe and technology forecaster Paul Saffo weighed in on why the spill was being perceived in the way that it is by the average citizen.

A fair portion of the discussion focused on the lack of public confidence in engineers, and the idea that "poor engineering" has been a hallmark of the United States for a generation. Bill Nye took it back "all the way back to the Ford Pinto" and emphasized the two space shuttle disasters as destroying the pride in engineering that had once existed in the country following the NASA missions to the moon in the 1960's and 1970's. Jaffe pointed out that many mathematicians and engineers are going to Wall Street and financial firms instead of working in engineering, a phenomenon I have written about before on this blog.

Yet, I think there is a separate trend here being highlighted in talking about the quality of engineering. It's not just that higher salaries are luring qualified "quantitative people" away from engineering, it's also that the corporate environment in United States (and apparently in Great Britain, if BP is any indication) explicitly eschews good engineering in favor of cutting corners to achieve short-term financial results.

As I think about my personal experiences in engineering, both in the companies I have worked for and in partner companies that I came to know and companies that friends have worked for, there have been two kinds of companies that actually emphasized making a well-engineered product that would meet market demand (and hence make money in the medium to long-term). The first were privately-held companies, both large and small, in the United States whose executives did not have to worry about what happened to a stock price each quarter. The second were foreign companies, based in either continental Europe or Asia.

Venture-funded and publicly-traded companies in the United States often do wonderful research on advanced technologies, but once feasibility is demonstrated, the product development process is short-changed. Everything is about shipping a product, regardless of how well it works, and meeting quarterly forecasts for raw revenue. In an odd market distortion, customer satisfaction with the product is an afterthought, something that can be addressed down the road. The barrier to entry for competitors is often so high that only huge companies can realistically enter the market and compete, and companies figure that in the meantime, they can drive up their stock prices by shipping inferior product. (This probably also explains the exceptions to the generality I've made here--companies that buck this trend like Apple are in competitive consumer markets where the barrier to entry is not so high and ignoring customer satisfaction is fatal.) It's not that their engineers can't make a better product for their customers; they are not allowed to do so.

The same pressures apply to safety, as seen most dramatically in the Deep Water Horizon disaster. Engineers knew how to deal with a situation such as what has happened--but it required spending money on a remote-control shut-off valve that would have been effectively mandatory in Brazil and Norway. Call it a regulatory issue or a corporate issue, but don't call it an engineering issue--the problem was foreseeable and a solution was available that would have had only a very small impact on the overall cost of the operation.

There's also a self-perpetuating effect within these companies. As engineers observe that quality and ethical practices are regarded by their employers as unimportant or even downright undesirable, they respond by no longer even trying to follow such practices. The culture of the companies becomes one of emphasizing short-term financial returns over any other consideration.

The net effect is that the public sees a shoddy product or safety disaster, and they begin to regard engineers in society as incompetent and incapable of doing things correctly. The United States has gotten to this point, as the panel tonight on the NewsHour expressed. Until the corporate environment in the country somehow changes, I don't see the impression ever changing back.

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