The American Way
Far from presenting a threat to American values and living standards, today's immigrants -- be they Asian, European, or Latino -- are refueling our entrepreneurial economy* * *
northeastern ohio looks like an American cliché come to life: rolling green hills, well-tended Amish farms, and old, red-brick industrial towns whose economic zenith seems long since past. Yet where many, especially in these recessionary times, see only the fading of a nation, Vinny Gupta finds a vista of opportunity and renewal.
"People in America think luxury is a birthright," says the Indian-born entrepreneur in his spartan office, in Canton, Ohio. "But this country can move ahead only if we bring back the ethics there used to be."
For Vinny Gupta those ethics are not the stuff of parental scolding but the foundation of business principles that have helped him turn around three failing midwestern foundries. They are values that, taken together, might in the past have been described as the Protestant ethic -- based on thrift, willingness to defer gratification, and single-minded devotion to building an enterprise.
Today, however, one is more likely to encounter such archetypally "Protestant" attitudes among Hindus -- or refugees from Southeast Asia -- than among assimilated Americans. Like Vinny Gupta, the newcomers have come to America with fresh eyes and fresh convictions, and with a willingness to face competitive industrial challenges that too many of our more established corporations hesitate to confront.
Gupta learned about the erosion of values at the feet of masters. After earning degrees from Michigan Technological University and Case Western Reserve, and joining Gould Corp. as a metallurgist in 1976, he saw an industry dominated by conglomerates that were either feverishly abandoning the die-casting business or milking their foundries dry. Everywhere he went, whether at Gould plants in Wisconsin and St. Louis or, later, while working for the then-Connecticut-based conglomerate Condec Corp., Gupta saw pervasive disdain for employees by line managers, and apathy among "the hotshots in corporate jets."
To Condec executives, the old Orrville, Ohio, foundry where Gupta was general manager was just one of several businesses that included more highly prized operations elsewhere. "The managers in Connecticut didn't know anything about the business," recalls 39-year-old Gupta. "I'd go to these lunch meetings in Connecticut and go into the dining room -- everyone there had one of those beepers -- and I'd get to spend 10 minutes talking business, and they'd spend two and half hours talking about what they'd do on their vacations."
By the early l980s, Condec was under financial attack and scrambling for cash. Orrville, which was losing $125,000 each month, seemed ripe for closing. Gupta saw an opportunity to make his mark on a foundry no one wanted. Using his own savings, a long-term note from Condec, plus cash from Akron investor Jerry Pollock (who took a 40% interest in the plant), Gupta bought the foundry.
Finally in control, Gupta proceeded to do all the things that, beforehand, he could not push through Condec management. He cleaned up the plant, often taking up the broom himself. He invested in necessary new or scavenged machinery, and he found economical ways to purchase raw materials and processing equipment.
His approach was neither arcane nor revolutionary. He simply dug into his business elbow-deep every day.
Since Gupta bought the facility, the company, now called Technocast Inc., has soared from less than $2 million to nearly $9 million in annual sales, with pretax profits last year reaching close to $500,000. Over that time productivity among the plant's 125 employees has improved fourfold, to more than $70,000 per worker. And improvements in quality have enabled Technocast to attract a long list of new, top-drawer customers.
Things are working out so well that Gupta has bought two other plants, one in Michigan and another in Ohio, where he is attempting to replicate his success. "Foundries are dirty work," the casually dressed Gupta explains as he walks through his recently purchased century-old factory. "Having an education in a dirty business is a unique asset. A lot of educated people don't want to work in a dirty business. There's always opportunity where the other guys don't want to go."
Vinny Gupta and the industrial renewal represented by Technocast reflect a phenomenon repeated not only nationwide -- from the sewing shops of Manhattan to the high-tech laboratories of Silicon Valley -- but across centuries. Newcomers to the United States are today among the nation's greatest assets in the global economic struggle. But then, historically newcomers have always been among the nation's greatest assets,~ more American in their attitudes and aptitudes than the third-, fourth-, or fifth-generation Americans whose society they joined.
Today's immigrants reaffirm a long-standing historical pattern in American entrepreneurial culture that has been constantly reinvigorated and reshaped by waves of ambitious newcomers. Indeed, contrary to conventional characterization of immigrants as economic burdens on their new homeland, newcomers to this country have played a critical role in the molding of our industrial landscape.
In the early 1800s, during the "cotton-mill fever" that marked America's first industrial boom, British immigrant Samuel Slater typified the newly landed opportunity seekers who brought their values along with their skills. Builder of what may have been the New World's most modern textile plant, Slater, along with his contemporaries, transfused American entrepreneurs with the ethical mind-set of the British dissenters -- a mind-set that raised devotion to work, order, and self-control to the level of a moral code. As the 19th century wore on, the Germans, French, Greeks, and Jews immigrated to the United States, followed more recently by Asian, Latino, and Middle Eastern newcomers. Though strikingly diverse in nearly all respects, each group brought its own version of Slater's work ethic.
That most truly American ethic has as its source what Steve Hui, founder of Everex Systems Inc., calls "the refugee mentality," an outlook that demands thrift, self-discipline, and the willingness to defer gratification. It creates entrepreneurs who invariably work hard and well and keep close to their businesses. It rests, ultimately, on a fundamental belief that, in the end, one's circumstances are one's own responsibility. And, as Vinny Gupta would remind us, those precepts are the secrets to economic success.* * *
Where does the refugee mentality come from? At least in part from circumstance. The harsh conditions that lead immigrants to America, and the difficult realities they encounter upon their arrival, help account for their drive and determination. Immigrants face an uncertain world, often playing by rules of behavior and organization that are unfamiliar to them.
For many, the best response is to create a controllable "space" within the huge and threatening world, drawing upon family and ethnic culture as resources in the new environment. "As an immigrant, you know you have to work seven times as hard," explains Gupta. "You have to rely on your wife, your family, your friends. It's an enforced advantage, even if it's hard."
Those tendencies showed among the earliest American industrial immigrants. Samuel Slater, for instance, sought business partners only among close kin and trustworthy friends. Like Gupta and many immigrants today, he had an almost visceral dislike for detached investors who controlled industries about which they had only passing knowledge.
Those same attitudes characterize many of the ethnic groups that migrated to North America in this century -- Jews fleeing czarist and Nazi persecution; Vietnamese, Koreans, Cubans, and Chinese escaping communism. Pressed by traditions of poverty and suffering, they developed the refugee mentality. Rather than seek support from the state or from society at large, says Everex's Hui, who first came to the United States in 1967, those with the refugee mentality accept difficulty as a natural part of life to be overcome by themselves and their families.
Hui's company epitomizes more than one aspect of the mentality he describes. The once-high-flying Everex, a personal-computer maker in Fremont, Calif., had grown phenomenally to more than $437 million in annual sales, but suffered a large loss last January. Hui, committed to the long term, is loath to cut back on research-and-development funding. Instead, he has cut his own salary by 50%. President of a company with 1,750 U.S. employees and 2,000 worldwide, he lives up to the ideals of frugality by flying coach, even on long, transpacific hauls.
Hui's principles extend further into companywide operations. In this high-debt era, for instance, Everex has little long-term debt and keeps finished goods, as a percentage of inventory, at around 10%, or less than one-third the average among personal-computer manufacturers. As is common at factories in the Far East, emphasis is placed on streamlining operations to gain maximum use of limited space.
"The way I was brought up, I feel there is opportunity in hard times, that if we can be tougher and more durable, we will come out ahead," explains Hui, 41. "This is how you look at life if you are uprooted. There are no failures in this world, just setbacks."
The setbacks immigrants suffer are often cruelly personal -- which is to say, racist. As recently as 1969, an Ohio State study found that being Jewish, as compared with being a member of any other major religious group, was by far the greatest obstacle to corporate promotion. Indian-born professionals, according to a study by Alka Sabherwal at the State University of New York at Stony Brook, earn considerably less than similarly qualified American-born counterparts. Sometimes those institutionalized biases are suspected but hard to document, such as when Asian engineers speak of the "glass ceiling" that restricts their mobility to strictly technical jobs.
As a result Jews and many Asian immigrants have tended to view self-employment as the most feasible means of support. In many cases, those immigrants have chosen fields in which capital requirements are limited, such as the garment trade. Bernard M. Baruch College professor Abraham Korman notes that the Jewish entrepreneurs, who by the mid-1930s were strong in virtually every aspect of that industry, often collected enough cash to operate by tapping family or factors who would lend money against receivables. Networks of specialized businesses, from sewing contractors to providers of shipping services, helped keep capital requirements to a minimum.
In more recent years other ethnic entrepreneurs have entered the garment business for similar reasons. In New York City about 16,000 people now work in Chinatown's garment factories, and Chinese entrepreneurs, often employing Chinese or Latino workers, play leading roles in other key garment-producing regions as well, notably San Francisco and Los Angeles. Their ascent has been propelled by their traditional attitude toward the importance of savings and investment.
One form of that Chinese thrift can be seen in the development of informal savings clubs based on kinship, friendship, and various forms of patronage. Made up of 20 or fewer members, the groups provide start-up capital to prospective entrepreneurs.
Garment contractor Loy Tam had little more than some family connections when he left the uncertain political climate and hard conditions of Hong Kong for Los Angeles. At first he worked as a waiter while his wife sewed garments at a Chinese-owned factory. In 1978 Tam decided to try the trade himself with $10,000 borrowed from a cousin (who had made some money in real estate with funds saved while working 18-hour days as a waiter and in a supermarket).
Tam bought 10 machines and opened a small shop -- Universal Sewing Contractors. Today he has 60 machines, grosses more than $1 million annually, and employs 40 workers -- about equal numbers of Latinos and Chinese. Like Vinny Gupta, he believes the key to profit is keeping overhead low and staying close to operations; his wife, Po, supervises the day-to-day sewing work.
"My wife is very smart and knows the business," explains Tam, 50, at his crowded factory in Eagle Rock, outside downtown L.A. "This way we save money and control quality. The customers like to work with us."
As in the garment business, Asians are increasingly represented in the brain pool in California's huge high-tech industries. But perhaps more important than brainpower are the attitudes brought by the Asian immigrants. At a time of growing pessimism even in normally optimistic California, Asian-owned and -operated companies have been among the most aggressive about competing directly in the industrial sphere against companies from Japan and Southeast Asia. Solectron Corp., for instance, has emerged in recent years as one of the most important contract manufacturing operations in California, with a compound annual growth rate of 67% and 1990 sales of $205 million. Solectron, in San Jose, does the "dirty work" of high tech: the assembly and testing of printed circuit boards, the wiring of computers and disk drives -- work often disdained by Anglo-dominated corporations.
The ethnic element in the Silicon Valley culture is certainly not lost on Taiwan native Winston Chen, the company's 50-year-old chairman and CEO. Chen credits much of Solectron's success to the values of its mostly immigrant management and work force. "We have a lot of cultural assets here," Chen says, in his modest office. "It's not easy to manage this diversity -- we have Iranians, Mexicans, Japanese, Chinese, and Vietnamese workers, and they all tend to be cliquish. But they work hard and attend to detail."
Chen maintains that those attitudes clash with the sort of mind-set that prevails at many companies in the valley, in which innovation is prized above all else. Frequently companies develop a great product and fill a niche but then fail to improve their quality and performance as others begin to attack their market. The result, he points out, has been a history of corporate supernovas that have shone brightly but briefly.
"They have a short-term mentality," asserts Chen, who has lived in Silicon Valley for about 15 years. "Our type of company is process-oriented. We are very humble -- we always want to learn and improve what we are doing."* * *
Attitudes like Chen's, Vinny Gupta believes, are more a reprise than a replacement of the national spirit that many suspect we lost long ago. "What we have found is the success formula for the next American revolution," Gupta says as he inspects a piece of company-built equipment in his Orrville foundry.
In the 1830s the Germans came to the area of northeastern Ohio that Gupta now calls home. Then the Irish came to build canals. By the 1880s immigrants had come from southern and southeastern Europe. And by the turn of the 20th century, those newcomers had helped transform the region into one of the world's industrial powerhouses.
Ferdinand Schumacher came from Hanover, Germany. His company, which eventually became The Quaker Oats Co., started manufacturing cereal during the Civil War, employing some immigrant labor. Other immigrants carried on that tradition. Led by Goodyear founder Frank Seiberling, himself the descendant of German immigrants, Akron emerged as the world center for the tire business and remained the headquarters for four of the world's five largest tire companies until as late as the mid-1960s. Other industries, such as printing, oil, and steel, all thrived, providing employment for thousands of European immigrants.
That dynamic entrepreneurial tradition was all but dead by the time Vinny Gupta arrived in the Rustbelt. The key businesses in the region, notes George Knepper, professor of history at the University of Akron and a leading expert on Ohio's industrial growth, had floated far from their original entrepreneurial moorings.
Today it is Gupta's ideas, more than those of the local corporate establishment, that seem most in keeping with the old values of midwestern industrialism. Gupta rarely purchases a machine if he can manage to build one in-house; recently he and his staff at Technocast fashioned their own sand-mixing machine, saving the company about $1 million. Gupta has also become adept at scavenging, traveling to liquidation sales to purchase fresh supplies of pig iron -- at 10¢ on the dollar -- and buying used furniture and equipment wherever possible.
Such an emphasis on frugality, says historian Knepper, would have been commonplace among Ohio businessmen of a century ago. "The old entrepreneurs," he says, "were guys who always knew how to make do."
Equally important, Gupta has brought back a sense of entrepreneurial control to a region that has seen generations of hierarchical management and, increasingly, absentee ownership. Gupta, like the early Ohio industrialists, works hands on; he habitually arrives on the job first and often leaves last. As he walks through his Canton facility, he seems well acquainted not only with all the key workers but with the details of their work as well.
That dedication, notes Technocast vice-president and general manager Gary Minor, rubs off on everyone from managers to line workers at the Orrville plant. Minor, who came to Ohio from the hill country of Kentucky, has spent three decades in the foundries and has never seen anything like Gupta's enthusiasm.
"The management now is part of the company. It makes a difference if Vinny gets here before you at 4 in the morning," the 51-year-old manager explains. "You don't have a president of the company sitting in his office and saying, 'Do this,' and, 'Do that.' It's an atmosphere where if there's a problem, you solve it -- even if you have to work 12 hours, you do it."
For his part, Gupta sees all that as merely upholding an American tradition. "It's nothing that hasn't been seen before," he says, walking through the dingy old expanse of the mid-19th-century plant. "Immigrants bring fresh thinking, yes, but we also bring back the orthodoxy, the attitudes that got this area going in the first place."* * *