MFG v. Service: Encouraging our smartest to build companies that build things

By Bart Taylor | Feb 18, 2014

Is the U.S. economy at the front end of a manufacturing renaissance?

It’s a popular sentiment. A groundswell of support for a manufacturing and ‘maker’ surge seems real enough.

Others are convinced the service economy is here to stay. Nataraj Slavov of the American Enterprise Institute, and Ben Ho of Vassar College and Columbia University give voice to ‘manufacturing’ skeptics. In Stop Wishing for the Return of Manufacturing Jobs - Lawmakers need to embrace the service economy” , they note “70 percent of the wealth created in the U.S. today comes from providing services, a 33 percent increase since 1950”, and add:

Americans already have plenty of stuff. Think for a second about what you spend your money on, and what you wish you had more of. Food? Televisions? Mobile phones? Cars? In a largely obese nation, we probably don’t need more food. We need higher quality food, better prepared food, tastier food, healthier food – but not more food. We have more televisions, mobile phones and cars in this country than we know how to use. We don’t need more devices. We need better content on those devices.

Recent research in psychology shows that for most Americans, spending money on experiences leads to greater happiness than spending money on material goods. As we get richer as a nation, therefore, growth in the economy will not be driven by more stuff, but by better health care, more education, more travel and better entertainment.

There may be more nuanced arguments. It’s difficult to see how ‘better entertainment’ will emerge as a pillar of the new economy. And the ‘higher quality food’ producers, and ‘content’ developers Slavov and Ho cite may indeed be driving the new manufacturing economy. They’re not a trivial, passing reference.

Especially, food makers. We not only “need higher quality food…healthier food….” , the world can’t get enough of it. Food is a manufacturing home-run for Colorado. For the U.S. And we’re just beginning to understand that.

It’s why the circa-1950 view of today’s manufacturing sector – the view of Slavov nd Ho – misses the mark. They’re in good company though. Boulder Soup Works, profiled today in CompanyWeek, is among other things an increasingly advanced manufacturer. Or they’re not. In their home state they’re an agricultural business.

Which of course they are. And Ag is huge. But Andrew Yang, and others, view them as strategic makers of the first order, not only businesses left to inspire only those who would more wisely consume in an otherwise service-centric economy.

Yang’s book, Smart People Should Build Things - How to Restore Our Culture of Achievement, Build a Path For Entrepreneurs, and Create New Jobs in America, starts with a bang:

“We’ve got a problem: our smart people are doing the wrong things. If we can get them to do the right things, it will transform the country.”

Yang argues that the allocation of talent in the U.S. has tilted precariously away from business and industry. He continues:

“If year after year we send our top people to financial services, management consulting and law schools, we’ll wind up with the pattern we’re already seeing: layers of highly paid professionals working astride faltering companies and industries. But if we send them to startups, we’ll get something else. Early-stage companies in energy, retail, biotech, consumer products, healthcare, transportation, software, media, education and other industries…”

CompanyWeek was in part launched on a related premise, that business media has followed the path Yang describes and become so service-centric - largely following banking and finance, law and professional services - that it’s lost sight of entrepreneurs and operators in other sectors.

Of course we also join the debate on the pro-maker and manufacturer side. Kate Brown, founder of Boulder Soup Works, and the dozens of other companies we profile here are inarguably building much-needed value, distinct from what service business offer our communities. And are largely ignored for their efforts.

Maybe it’s a third school of thought: encouraging our smartest people to build companies that build things. Service industries would benefit most.