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Sunday, February 13, 2011 2:54 AM


Former Sun CEO on Jobs: "We aren't doing manufacturing; we aren't doing design; we aren't doing computers. It's all moving to Asia"


Scott McNealy, ex-CEO of Sun Microsystems, is concerned about job prospects in Silicon Valley. However, what he has to say applies to jobs in general, not just high technology, and not just in California.

Please consider Former Sun CEO Worries About Region's Prospects

Even as Silicon Valley's unemployment rate eases and many local technology companies post positive financial results, Scott McNealy is pessimistic.

Santa Clara County's jobless rate fell to 10.4% in December from 11.3% a year earlier. But Mr. McNealy, the co-founder and former chief executive of computer maker Sun Microsystems Inc., doesn't think Silicon Valley's emerging sectors such as social networking and "green" technology are going to make up for jobs lost as sectors such as software and computers consolidate.

WSJ: When did you see Silicon Valley begin to recover from the recession, and how far along has it come?

Mr. McNealy: It's not a terribly job-filled recovery. Productivity gains continue to push the need to hire out.

I see a migration from the early days of the Valley. We aren't doing manufacturing; we aren't doing design; we aren't doing computers. It's all moving to Asia and other places where there are lots of technical engineers who are willing to work at a more reasonable salary because they don't have to spend $3.5 million on a home and pay half of it to taxes.

I think every new transition has created less job opportunity as technology has become very leveraged. I don't think our education system, our regulations, our government policies have kept pace with the changes that technology is driving.

Maybe I'm sounding like an old guy, but [Silicon Valley] ain't what it used to be. I, for one, don't think this is the best place in the world to start a company.

WSJ: What needs to change in Silicon Valley to foster job creation?

Mr. McNealy: It's not the Valley. It's the overhead and the overhang, the clouds brought in by Sacramento and Washington, D.C., the regulations, the deficit and the misallocation of resources. It's all of those things. Obviously, I'm a believer in the private sector and in personal responsibility.

The biggest issues with the Valley are local, state and federal governmental overreach and overregulation. It's over-pensioned, over-unionized and over the top.

WSJ: Are there any unconventional indicators that you watch to judge the health of the local economy?

Mr. McNealy: It's not very scientific, but my boys all play a pretty expensive, but middle-class sport: ice hockey. I see very clearly that there are a lot more financial strains on the families of the hockey teams here in the Bay Area. Families vote not to go to the tournament in Colorado Springs or their kids vote not to do the highest level of hockey because it's too expensive. Or they drop out of hockey altogether. It's significantly worse than it was a couple years ago.
The journal pointed out social networking and green jobs. However, McNealy dismissed both, and rightfully so. Social networking may make a few venture capitalists rich but it certainly will not be a big source of jobs. McNealy didn't say it, but even most "green jobs" have moved to Asia.

Besides, if it takes government subsidies (and most green jobs do), it isn't worth doing. It's time for smaller government, not more of it.

It was interesting to see McNealy say "the biggest issues with the Valley are local, state and federal governmental overreach and overregulation. It's over-pensioned, over-unionized and over the top."

That is undoubtedly true but it was somewhat surprising to see given that Silicon Valley itself is not heavily unionized. The union effects, however, are both far-reaching and very damaging. I am happy to see McNealy point that out.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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