America the Serious?

Reflections on rebuilding American manufacturing

I had an oped this week in Cointelegraph about the ways in which cryptocurrency, blockchain, and associated technologies may be able to help us in the AI era. Some of it is speculative.

Come join me and Brian Chau for the next AI Bloomers happy hour, at Union Pub in Capitol Hill on July 10 at 5:30 PM. RSVP link coming soon.

I will be taking next week off for the July 4th holiday, unless, of course, something crazy happens. Happy 4th to the Americans in my audience.

I wrote the reflections below mostly from the floor of the Reindustrialize conference in Detroit, which took place June 24-26. Thanks to the conference organizers, and especially to Gregory Bernstein and Austin Bishop, for helping me get involved in the event and get smart on these topics quickly

I

Next month, SpaceX will conduct the fifth test of its Starship rocket—our modern-day equivalent of the Saturn V, but designed with economics in mind. The rocket is intended to be fully reusable and rapidly relaunchable. SpaceX’s goal, eventually, is to be able to launch a rocket, land it, and have it ready to launch again within hours.

After the booster separates from Starship, it will begin crashing toward the Earth at hypersonic speed. If it survives the brutal reentry through Earth’s atmosphere—a process that in previous tests of Starship itself produced some of the most vivid images in the history of space exploration—the goal is for the booster to land directly at a launchpad. As it approaches the ground, the multi-hundred thousand pound, 233 foot tall booster will execute a flip and a descent burn—in other words, it will fire its engines toward Earth to slow itself down. The launch tower will then deploy massive autonomous arms. The plan is to catch the rocket in midair.

To catch the rocket.

II

In the last year, I’ve sensed a vibe shift. I see it on social media, and I hear it when I talk to some policymakers and their staff. There is a sense of urgency, undergirded by an intuition that something transformative is underway—even if there is little agreement on what that transformation actually is. There is a distaste for the nebulous issues that dominated discourse in the aughts (“misinformation,” “partisanship,” “extremism,” “systemic bias”) and an attendant desire to focus on the concrete and the actionable.

Most importantly, I associate this vibe shift with an earnest desire to build—new factories, new energy sources, new institutions. A recognition that creating new things is preferable to arguing over how to redistribute the things we already have. A recognition that history is not over.

I’m not quite sure when it started. Perhaps with COVID, when we were all reminded of the myriad ways in which we depend on real-world goods with sometimes-brittle supply chains, even as our lives become increasingly digital. Perhaps with the rise of interest rates, which had the effect of shortening the time horizons of capital allocators—it’s a lot easier to devote your capital to solving ambiguous problems on a 100-year timescale when interest rates are near-zero. Perhaps with the wars in Ukraine and Gaza, and the looming threat of a war in the Asia Pacific. Perhaps with Elon Musk’s ownership of Twitter, which de-emphasized “wokeness” on millions of users’ social media platform of choice. Perhaps with ChatGPT, which woke elite society up to the possibility that shocking technological change is still possible. More likely, it’s a combination of all these and other factors.

I’ve had trouble finding the right word to describe this shift. Then, at the Reindustrialize conference this week in Detroit, Hadrian CEO Chris Power found the words for me: Seriousness, he said. America, Power argues, is becoming serious again, or at least, it’s trying to.

Seriousness.

What does it mean to be serious? It means having discrete and actionable goals, even if they are challenging, even if they seem impossible to many. It means understanding that the most important battles are fought and won in the real world, not merely the world of discourse and rhetoric. It means confronting tradeoffs head-on, not pretending they don’t exist. It means pushing the bounds of physics. It means building.

If America is to become a more serious country, it will have to get serious about building in the real world, and it will have to do so quickly.

III

Why is it important to have a robust domestic manufacturing base? Can’t we offshore most of it, and keep the “advanced” things for the domestic economy? Let China (ok, maybe not them anymore—maybe India, or Vietnam, or Mexico) produce our consumer electronics and our appliances, and let high-paid American workers make the hard stuff: the SpaceX rockets, the fighter jets, the hypersonic missiles.

There is a fundamental problem with this view, though. Knowledge is not atomic; it doesn’t stand alone. Knowledge is constructed over time, by people, working together. Knowledge is built on top of other knowledge. Capitalism allows us to gradually abstract away hard problems. We make hard things easier so that we can tackle yet harder things. All complex things are built on top of things that seem simple to us now but were once themselves difficult. We are, as they say, standing atop the shoulders of giants.

If you take the base away—the simpler things—we will gradually erode our ability to do the harder things. In the long run, then, there is no viable defense industrial base without a broader manufacturing base. If basic manufacturing capacity withers, it is entirely possible to simply forget, as a civilization, how to do it. That hasn’t quite happened yet, but it’s a direction we could be headed in.

This is not a diatribe against globalization or “neoliberalism” or classical liberal economic thought. Indeed, I view it as a fundamental affirmation of classical liberal economists like Friedrich Hayek, whose writing about the way knowledge is unevenly distributed throughout society is at the core of the argument I am making.

A weak manufacturing base also means fewer opportunities for knowledge spillovers—the transfer of knowledge between different industries or problems—and clustering effects—the benefits that accrue when an industry is concentrated in a specific region. America’s most globally competitive industries are all undergirded by these characteristics: there is a reason Silicon Valley, Wall Street, and Hollywood are all physical locations. By bringing people together, you get benefits greater than the sum of their parts.

Finally, rebuilding domestic manufacturing is just plain cool, and that is an underrated fact. It seems to me that America needs a renewed sense of national pride and more positive visions for the future. The right offers nationalism, but it is a kind of wounded nationalism—scared more than proud. The left offers a poststructuralist attack on the concept of America itself. Neither offers voters much to be excited about, and as a result, we are a cynical country.

Our greatest accomplishments of recent decades have been in the digital world. The most significant infrastructure investment of our time has been the buildout of cloud computing capacity by hyperscalers like Amazon, Microsoft, and Google. Though their work is an undeniably impressive real-world accomplishment, it is ultimately in service of distributing digital tools. Perhaps by building impressive things in the physical world—by winning increasingly intense arm wrestles with nature, right here on our own soil—we can restore a sense of wonder and awe. A country that roots for the engineers and scientists working at the technological frontier. A country that roots for progress. We built that.

Fortunately, there is good news. The tools required to push the frontiers of manufacturing forward play to many traditional American strengths: software, artificial intelligence, automation. I’ve written a bit recently about companies in this category, and will write more in the future. I also suggest watching Jason Carman’s excellent YouTube series or Christian Keil’s First Principles podcast to learn more about the kind of company I’m referring to here.

I believe that we can use our strengths in software, cloud computing, and AI to fundamentally change the capabilities and cost structures of manufacturers. International competitors, predicated on higher manufacturing employment than the US, could even struggle to compete. There is a path—perhaps a narrow one, but a path nonetheless.  

IV

Here are three things I believe:

1. Global trade is beneficial to all parties most of the time.

2. America should be proud of its world-bestriding corporate behemoths, and we should want those companies to take advantage of economic opportunities all over the world. We should want there to be more such giants.

3. America should have a world-leading manufacturing base.

Obviously, these three beliefs are in tension. US policy has resolved that tension in a way that preferences (1) and (2) over (3). It seems clear to me that becoming a more serious country will require us to make new tradeoffs. Industrial policy advocates on the left and right have proposed various new ways to make those tradeoffs. I disagree with many of their policy recommendations, which tend to rely on some combination of protectionist trade policy and direct government involvement in allocating capital to the private sector.  

Indeed, I believe it is possible to rebuild our manufacturing base without the aggressive use of tariffs or top-down industrial policy. Restoring a domestic manufacturing base will be difficult. It will require a great deal of capitalistic dynamism. There will be creative destruction. Storied companies may disappear, and policymakers will need to let it happen. In other words, this grand project is precisely the kind of thing that does not lend itself to government supervision or political interference. If America is to differentiate itself in manufacturing, it will do so on the basis of superior capital allocation. We will not “beat China” by being like China.

Over the next few months, I’ll be working on some proposals for a new balance between the three objectives I laid out above. They’ll be richly informed by current technology, the history of technology, and classical liberal thought. I may err along the way. I hope you’ll understand that this is a work in progress, yet I also want to hear the criticism. Don’t worry—I am not at all abandoning my work on AI policy. That will continue to be my main focus; I view this work as a highly complementary side project.

You can bet I’ll be serious about it, because this is a serious time. The wheels of history are turning, and we have rockets to catch out of the sky.