Innovation Economy Helps U.S. Reclaim Reputation as an Investment Hotspot
Years ago, investment guru Antoine van Agtmael coined the term “emerging markets” to describe developing countries with investment potential. Today, Mr. van Agtmael uses the term to describe the United States. Thanks to a tech-centered, innovative economy, America is finally reclaiming its reputation as an investment hotspot.
For the first time in forty years, Mr. van Agtmael’s visit to China brought complaints from Chinese manufacturing executives concerned with American competition. After years of China dominating the manufacturing market, it seems like an unlikely role reversal to many, but Mr. van Agtmael assures skeptics that “U.S. manufacturing is becoming more competitive than you would think.” While a decade ago an overwhelming majority of executives looked to build their next plant in China, Mr. van Agtmael estimates the number today is more like 3 out of 10—with 5 of those 10 hoping to instead build in the U.S.
After forays into China, India and Brazil, Robert Livingston, the chief executive of the industrial plant Dover Corp. is eyeing expansion near Atlanta, Georgia. Similarly, Whirlpool Corp. is cautiously bringing the production of small appliances back to the US from overseas. According to Bill Good, plant manager in Greenville for Whirlpool Corp., producing in Asia “is not as big of a no-brainer as it was 10 years ago.”
Many regard claims of this “industrial renaissance” skeptically, pointing to America’s high factory closure rates and China’s unrivaled ability to cut costs. Even with a decade of dramatic wage increases, Boston Consulting Group estimates Chinese factory workers earn less than $3.50 per hour while, for example, Whirlpool’s Greenville plant pays workers $16.50 per hour, plus benefits. Yet, for today’s U.S. executives, focusing on domestic markets has little to do with lowering costs. Instead, it’s about finding a comparative advantage. For American corporations, this advantage lies in an ability to communicate with consumers, respond to their demands and provide products of unparalleled quality. And this advantage depends on technology.
The clothing industry’s American Giant hoodie exemplifies this value-focused industrial reawakening. Following rave Internet reviews, the American Giant hoodie sold out for months. Bayard Winthrop, the man behind the now-infamous sweatshirt, understands that the Internet is revamping the way America conducts business and how a deep understanding of and ability to respond to consumer demands—in near real-time—gives U.S. manufacturers a leg-up on competition. The results of the American Giant company’s highly skilled workforce and close connection with consumers were perfectly tailored, high quality clothes—clothes for which Americans were more than willing to pay.
Venture capitalist Randy Komisar believes that mass-market manufacturing practices are a thing of the past and Winthrop observes that “[B]ig players comprised by old-world distribution mechanisms are now getting beat up on quality,” a phenomenon that other nations are starting to realize. Commerce Ministry spokesman Shen Danyang recently admitted that China “can’t keep relying on a low-cost competitive advantage,” and that the nation must “accelerate to the value-added upgrading of [their] products.”
Komisar predicts that successful manufacturers will continue the trend towards quality service that fosters customer loyalty and, as the estimated 200 factories that recently pulled production back onto US soil have learned, this is difficult to accomplish from a continent away. None of this means that factories will come back to the US in droves, but it does mean that the key to proving Mr. van Agtmael’s prediction correct lies in fostering technological advancements. Technology gave the US manufacturing industry the first leg-up on global competitors in over a decade. Just imagine what America’s unmatched cellphone infrastructure and advancement in promising technologies like 3-D printing can do for the rest of the economy.