Does America Need to Make Things?

By Sarah Lacy

KIGALI, RWANDA– As I’ve mentioned before I like my entrepreneurs risk-taking and a little crazy. Earlier this week on TechTicker, we ran an interview with a guy who fits that bill: Shai Agassi.

In some ways, Agassi is even more ambitious than Elon Musk—you know, the guy who builds rockets and $100,000 electric sports cars. Agassi wants to re-engineer the entire auto and oil infrastructure with electric cars, charging stations, battery replacement stations (staring robots who actually change the battery for you) and sophisticated software to keep it all running—one country at a time. His company is called Better Place, and while some have accused Agassi of being an egomaniac, I give him huge props for walking away from one of the most powerful jobs in the tech world to start a new company that was this hard to pull off.

I last interviewed Agassi several years ago on stage when he was at SAP, and I was covering the oh-so-sexy enterprise software beat for BusinessWeek. If memory serves, we were good-naturedly sparring about whether Oracle’s (ORCL) acquisition strategy would work. (I’d argue I was right.) But I have to say, I like this Shai better. He made his name as an intense and gifted entrepreneur who wasn’t afraid to take risk and sometimes people like that are wasted inside big organizations, even if they have the top job. Agassi seemed inspired and unleashed compared to his SAP days. There’s more about Better Place itself and Agassi’s plan here.

But at the end of the third segment (embedded below), Agassi said something that’s been sticking in my head ever since: America has to start making things or the economy won’t work. He argues you don’t have a country with just a service economy to support it. I’m starting to fear that he’s right, especially spending time last month in China and this week in central Africa, both places where manufacturing and consumer goods industries are being built fresh and in incredibly innovative ways. It’s a bit like what you kept hearing after the dot com bust: When things turn south it’s good to have hard assets to fall back on.

Trust me, as I sit on a terrace in a landlocked African nation that has to import almost everything to great expense, America doesn’t want to get in the pure-consumer, non-producer game. And while some argue the intellectual work—ala thinking up the idea or doing the hard core engineering—is higher margin, it’s absurd and arrogant to think we’ve got a lock on the people who can do that kind of thinking.

This is clearly the biggest concern in the rust belt where thousands of manufacturing job are at risk. But if Agassi is right, Silicon Valley is in trouble too, because we hardly make anything anymore. Look at the semiconductor business: Most start-ups for the last ten years have been so-called “fabless” chip companies. And how many gadgets are made here? The great age of networking and telecom rollouts are over—instead monopolies are upping revenues by “metering” our broadband not rolling out a newer, faster infrastructure. Even outsourcing low-level software development to Balkan states contributes to this. It’s a win-win for now, but long-term emerging markets benefit more than we do.

Tech got in this situation for two reasons: technology advanced quickly enough we could outsource all the assembly and VCs liked it that way because it’s cheap. But there’s more than enough cash flowing around this Valley to fund a few risky, expensive manufacturing plays. Here’s what I’d like to see America start making again. Leave your ideas in the comments.

1. Better consumer devices. For decades VCs have shied away from consumer devices given the manufacturing and consumer marketing costs. Sure there are loads of duds out there to support that point. But whether they’re entirely made in the US or not, haven’t the iPhone, the Flip, the Kindle, the Jawbone and others proven a good device that does something well still has a future coming out of the Valley? Increasingly, people will pay up for brilliant device execution even if it only does one thing well, even if it’s not necessarily a new category.

2.Cars. Yep, we’re doing it already but it largely hasn’t been funded by the Valley. Musk invested $70 million of his own money and Agassi’s cash mostly came from Israelis. Props to Kleiner Perkins Caufield & Byers for funding Tesla competitor Fisker. But now that these pioneers have proven there’s a viable market here, the US establishment whether it’s the Valley top brass, DC lawmakers or Detroit need to get behind it in action, not words. Although President Barack Obama has been careful to say the government won’t dictate strategy for the car companies we now own, Agassi thinks America should take the opportunity to push on electric manufacturing hard. After all, we do own them. Why not get something out of it? (More on that in the video below too.)

3.Medicine. What ever happened to the biotech boom? The promise from decoding the genome? The rhetoric that the Valley was going to give birth to dozens of Genentechs? I’ll tell you what: VCs got into the habit of selling promising pre-clinical research to big pharma early and often. There’s no more company building in biotech, and that’s a shame. I get that drug discovery is hard and expensive, but we need the innovation, real science and jobs if you ask me. There’s also the side benefit of screwing with the big pharma oligopolies. And saving lives is generally a good thing for the country.

4.Electric planes that go really fast. Ok, it sounds even crazier than rockets or electric cars, but every time I board a creaky old Boeing jet for a 10-hour-plus international flight, I can’t stop thinking about Musk’s idea for an electric plane that’s supersonic and lands vertically. I don’t even know if that’s feasible, but I’m ready to retire my much-beloved noise-reduction headset if it is. If anyone would like to build a teleportation device I’ll sign up for a beta tester on that one too. I don’t care if there’s a risk that my organs will arrive on the outside of my body, I’m so over 20-to-30 hour flights on planes older than I am.

Original post

Comments

[Dave Wrixon:]

America needs to generate wealth. That could involve making things and probably should, but it essential that the US economy has a balanced proportion of its activity in wealth generating industries. Retail and Distribution do not create wealth, and there are limits to the benefits of Real Estate. Tourism is also only really beneficial if foreigners are coming to spend money chez vous.

The real problem is the US is obsessed with GDP, which does mean anything if it largely consists of Government programs and shopping. A different metric needs to devised. Further, I would suggest that if America is going to be successful in manufacturing they should consider metrication. Imperial measure is quaint and all that, but come on!

Jun 15 12:43 PM

[Tony Petroski:]

America does need to make things--and does, she makes lots of things.

In Thomas Jefferson's time 95% of workers were employed in agriculture and only a few in small manufacturing businesses, but the manufacturers were growing and that was vexing to Jefferson. America has a very strong (the strongest?) agricultural sector and yet it employs only a small fraction of the people, perhaps 3-4%. Do we consider this a tragedy?

The manufacturing sector still produces a lot of "stuff," but like agriculture, mechanization means fewer people can produce more stuff free up people for the dreaded "services," the kind of jobs that Barack and Michelle Obama used to do. Is this a great loss?

I worked for many years in a "service" job, insurance. Our service was to estimate losses and indemnify people so that they could repair their vehicles, their bodies and in some cases, their lives. We used laptop computers made in America, drove vehicles made in America, and worked directly in bodyshops, all of whom were "making stuff" as they repaired vehicles efficiently using all manner of American-made equipment. All that stuff could not have been made without our "service," so the two go hand-in-hand.

Free people doing what is in their best interest work to promote effective and efficient economies. If they desire electric-powered cars, they don't have to have their arms twisted to buy them, and the makers of such cars will become as wealthy as the original Henry Ford.

Free people can also decide the mix of products and services that suit their needs and that level is the best mix for the economy--not a mix chosen by Robert Reich and Ivy-League eggheads deciding what the right mix of products and services are at Swiss symposia as they work out the next 5-year industrial plan.

To the author: Your teleporter may send you to a place with your internal organs outside your body (eek) but golf carts with electric motors will do that for you much sooner once they collide with a Kenworth.

Godspeed to genuine entrepreneurs, ones that create real innovations and "make stuff."

Jun 15 06:01 PM

[john s. gordon:]

yes we need to make things here. what a stupid question.
otherwise we turn into a nation of zombies watching television 23 hrs a day.
> jack

Jun 16 08:47 AM

[aardvark:]

Making nothing is a sure way to end up servicing nothing, then what?

Jun 16 09:04 PM

[Danny Newton:]

I think there is a psychological need to make things even if they only last a short time. Ag workers are making things too. Spain fell as a world power when it cashed in its manufacturing base after moving tons and tons of gold into their economy from South America. Why buy it when you can buy it cheaper abroad? Having to depend on Germany for war material and letting it's economy morph into a Mom & Pop system of shop owners was a big mistake and it allowed the British not only to defeat them but to keep them defeated to this day.

Jun 17 03:00 AM