America’s reindustrialization dilemma

Photo by Jason Keen / Michigan Central

A new Detroit conference highlights the optimism and contradictions of a key economic shift

Deindustrialization destroyed the Midwest and America’s middle class. The question now is whether a new generation of entrepreneurs are willing and able to sprint and recover what was lost in the throes of the most ferocious global competition in history.

That was the prompt this week in Detroit, where I attended Reindustrialize, a new conference that brought together about 500 founders, investors and manufacturing execs around the dream of “ensuring long-term economic growth and global competitiveness in the modern era” for America.

Lux’s own Chris Power of Hadrian launched the conference with a fiery keynote that emphasized not just the need for reindustrialization, but the need for it fast. He argued that we don’t have ten years to rebuild America’s manufacturing capability, but perhaps as short as three years given rising competition from China in everything from EVs to chips.

Photo by Danny Crichton.
Photo by Danny Crichton.

Unlike most tech conferences where one wonders how any human could develop such a passion for revenue-cycle management or non-fungible tokens, dedication, duty and determination oozed from participants. Many speakers recounted their backgrounds from former industrial capitals like Cleveland or Buffalo and how they had personally witnessed the immiseration of their communities during their lifetimes and now wanted to fight back. Many also noted their humble origins from working-class families, attuned to the economic anguish and backsliding that has buffeted two generations of Americans.

Across dozens of conversations, the recurring narrative was sober optimism. These were mostly founders after all, and they were consistently hopeful that America was waking up to what was lost and trying to fix it. No one I talked to was a wild-eyed idealist (again, unlike other tech conferences where you wonder where the LSD is being handed out). Unsurprisingly, building hardware and running a production line has a tendency to ground everyone to reality.

Photo by Danny Crichton.
Photo by Danny Crichton.

Symbolically, the conference was hosted in Newlab Detroit, a gorgeous industrial rebuild of the historic Book Depository building. It’s Newlab’s second location after a rebuild of Brooklyn’s Navy Yard, which similarly hosts dozens of startups focused on advanced manufacturing and bringing the frontiers of science to the physical world. Newlab Detroit is adjacent to the Michigan Central rail station, which became infamous as one of the greatest ‘ruin porn’ sites in the world before a recent $1 billion renovation funded by Bill Ford of the eponymous auto company returned the station to its former Beaux-Arts glory (it shares the same architects as New York City’s Grand Central Terminal).

Photo by Thomas Hawk via Flickr used under Creative Commons.
Photo by Thomas Hawk via Flickr used under Creative Commons.

For my part, I was the hostile interloper, taking up the position that “Reindustrialization isn’t Possible” as part of a debate against Augustus Doricko, founder of cloud-seeding startup Rainmaker and prominent Gundo proselytizer, as well as Fil Aronshtein of Dirac, which automates the creation of assembly instructions for manufacturing.

(Life Tip: It’s always fun to be the counter-argument to an entire conference’s thesis – just ask RFK Jr. the next time he visits the American Medical Association’s annual convention).

My argument during the debate focused on incentives, or rather disincentives. As much as everyone wants manufacturing to return to America, there remains a thicket of problems. Students are drafted along an intellectual route in school that all but precludes them from factory jobs, and that’s understandable given that salary, health and work flexibility remain superior in office jobs compared to most physical work. Would someone rather be bored sitting in a fluorescent-lit office waiting to respond to emails, or be paid less and work harder on a factory floor?

One of Augustus’s arguments was essentially yes, that Gen Z workers coming up through the system today are turning away from eye-wateringly expensive university educations and the nihilism of managerial capitalism to return to handiwork and tradecraft. I asked our overflow audience whether they had children, and if they would support their children becoming welders over office workers. That was a stupid blunder on my part, since 100% of the audience confirmed with a hand raise that they wanted their children to take a different path in life (it was the Reindustrialize conference after all).

It was a frenetic conversation, and I could see shadows of the 1960s anthem, “Turn on, tune in, drop out” hiding in the corners of the arguments. Rather than continue on the soulless conveyor belt of bureaucratic mediocrity, why not drop out and own your own destiny through physical labor? That’s been the argument of scholars like Matthew Crawford for years, whose 2009 book Shop Class as Soulcraft is one of many that argues for the return to prominence of manual trades and observes the immense existential pleasure that building can deliver to the human psyche.

Ultimately, the debate boiled down to economics and systems versus culture and philosophy. Do rational incentives win, or will students and new workers choose a different course even if it means giving up a bump in salary or the comfort of an air-conditioned albeit stale cubicle?

That’s where I had to break with the narrative of the conference. For deindustrialization wasn’t a cultural shift, but rather a premeditated strategy organized through economic incentives that pushed American workers to higher-margin industries and away from low-margin work. It was a naive attempt to boost America’s anemic productivity growth in the 1980s and 1990s by taking advantage of the imminent IT revolution to raise living standards.

Here’s the thing: it worked. America’s per capital income exceeded $76,000 in 2022, and has doubled in real terms since the 1980s. There are well-chronicled challenges with inequality, as well as an open question whether a doubling over forty years is fast enough growth. But Americans are making more money than ever before — and there is little evidence that reindustrialization will accelerate that income growth or offer a more productive life to more people.

As can be expected from a large group of startup founders, there was a can-do spirit in line with the general American patriotism suffusing the event. Founder after founder told me that they themselves were part of the rekindling of America’s fiery industrial engine, and that what they needed from government was mostly for it to get out of their way and let them build. The most consistent policy recommendation I heard was protectionism: the need for trade barriers to help their fledgling startups survive against a remorseless global marketplace (what economists in developing countries generally call infant-industry protections).

Yet, that antipathy to government is in large part why America fell behind in industry against countries like Germany, Korea, Taiwan and of course China. Rather than build pathways for students through apprenticeships and trade schools, or coordinate and fund industrial clusters for maximum productivity, or implement a myriad of other common policies that improve the competitiveness of industry, America did practically everything it could to slough off its manufacturing might. Government invented deindustrialization, and it is the only institution with the means and power to reverse it. A handful of startups may be successful (and in turn, make their founders, employees and venture capitalists very wealthy), but that’s not sufficient to fix America’s manufacturing crisis.

The cracks in the narratives were also physically present in Detroit itself. My co-panelist was held up at knifepoint and had his wallet and phone stolen immediately after exiting a bar. Another attendee was shaken after shots were fired in their vicinity. The ravages of policies past have a way of tearing apart the optimism of the future.

So what can be done? For one thing, concentrating more of this entrepreneurial energy and capital resources in fewer places. Attendees hailed from all over the United States, but what America needs is to build just one extraordinarily competitive manufacturing hub, not decentralize it across dozens of cities. We will not simultaneously save Milwaukee, Gary, Lansing, Detroit, Cleveland, Akron, Youngstown, Pittsburgh, Buffalo, and Syracuse. Which one should we try saving first?

It’s the kind of tradeoff we simulate with Riskgaming scenarios, and one that America can’t structurally decide on. Beyond Thursday’s disastrous presidential debate, no future president can even hope to make that tradeoff. The vast majority of these Rust Belt cities lie in swing states where voters demand impossible promises that cannot be followed through on. There is a generation of entrepreneurs seemingly ready to invest their sweat equity to solve America’s manufacturing dilemma. Reindustrialization is possible — but I’ll believe it when I see it.

The Orthogonal Bet: How to fund R&D that is for the public good?

Design by Chris Gates.
Design by Chris Gates.

In this episode, our scientist-in-residence Sam Arbesman speaks with ⁠Ben Reinhardt⁠, an engineer, scientist, and the founder of a new research organization called ⁠Speculative Technologies⁠.

Ben is obsessed with building an open-ended and exciting future for humanity. After spending time in academia, government, startups, and even venture capital, he set out to build a new type of research organization — Speculative Technologies — that helps to create new technologies and innovations in materials and manufacturing, acting as a sort of industrial lab for these public goods in order to make a positive vision of the future more likely.

There is a lot of optimism and excitement in this episode. The discussion covers the need for new types of research funding and research institutions, why it can be hard for startups to do research, Ben’s vision of the future—and his science fiction inspiration—the ways in which technological innovation happens, why he started Speculative Technologies, and much more.

As a reminder, The Orthogonal Bet is an ongoing miniseries of the Riskgaming podcast that explores the unconventional ideas and delightful patterns that shape our world.

🔊 Listen to the episode

Lux Recommends

  • Sam and I enjoyed this piece in the MIT Technology Review on "How generative AI could reinvent what it means to play.” “Role-playing games give us a unique way to experience different realities, explains Kylan Gibbs, Inworld’s CEO and founder. But something has always been missing. ‘Basically, the characters within there are dead,’ he says. ‘When you think about media at large, be it movies or TV or books, characters are really what drive our ability to empathize with the world,’ Gibbs says. ‘So the fact that games, which are arguably the most advanced version of storytelling that we have, are lacking these live characters—it felt to us like a pretty major issue.’”
  • Tess Van Stekelenburg recommends a major paper published in Nature on "Language is primarily a tool for communication rather than thought.” “We conclude that although the emergence of language has unquestionably transformed human culture, language does not appear to be a prerequisite for complex thought, including symbolic thought. Instead, language is a powerful tool for the transmission of cultural knowledge; it plausibly co-evolved with our thinking and reasoning capacities, and only reflects, rather than gives rise to, the signature sophistication of human cognition.”
  • Sam (and a bunch of my friends — am I getting old?) enjoyed this long piece from David Brooks in The Atlantic on “You Might Be a Late Bloomer.” “Late bloomers tend to have a high tolerance for ambiguity, and can bring multiple ways of thinking to bear on a single complex problem. They also have a high tolerance for inefficiency. They walk through life like a curious person browsing through a bookstore. In old age, the historian Daniel Boorstin wrote, ‘The amateur spirit has guided my thinking and writing.’ He had wandered from subject to subject throughout his life, playing around.”
  • I always love a corrective story, and so Jon Kelvey’s piece in Aerospace America intrigued me on what the world gets wrong about the Kessler Syndrome, the idea that satellite debris can cause an explosive chain reaction destroying all satellites in orbit. “In contrast, NASA’s modeling doesn’t predict exponential debris growth, according to [Mark Matney], but rather linear growth over the next 200 years — even if launches continue. But things get more complicated when you factor in that [low-earth orbit] isn’t a monolithic expanse, he says, and “‘in some altitude regions [debris growth] is exponential, some linear.’” And, “Matney puts it like this: Kessler Syndrome '“'won’t cause orbital altitudes to be unusable. It’s more like a gradual degradation that’s going to cost everybody more money.’”
  • Finally, Sam enjoyed HackADay’s "A LEGO CNC Pixel Art Generator.” “The basic operation of the machine is akin to that of a pick-and-place machine, and despite the relatively large size of a small LEGO square it still has to place at a surprisingly high resolution. This it achieves through the use of a LEGO lead screw for the Y axis and a rack and pinon for the X axis, each driven by a single motor.”

That’s it, folks. Have questions, comments, or ideas? This newsletter is sent from my email, so you can just click reply.