Made in the USA

With so many things made elsewhere and imported into the USA, seeing this slogan brings a smile to my face. There is no doubt in my mind that American manufacturing is losing some of it’s competitive edge but the loss isn’t coming from the lack of innovation. It’s all about economics. American labor can cost anywhere between $20 and $100 per hour whereas Chinese labor can cost as little as $3 to $10 per day.  The throughput in both cases is about the same. Everyone wants to work hard and do their best regardless of their nationality or location.

Can you imagine this in America? (Source: http://www.flickr.com/photos/renesteffensen/3192251080/)

It is for this reason that America sometimes cannot compete. Take pencils for example. When was the last time you saw an American made pencil? Not often I bet. Toys is another example. Nearly every toy in the world is made in China. Clothing comes from Latin American countries. Even most of our bicycles and their parts are made in Taiwan. If all of those things were made in America then the price of those products would jump 10 to 100 times in price. Labor wouldn’t be the only reason the cost would go up. America’s environmental laws are much more stringent than those found elsewhere in the world. Where America must carefully try to contain pollution and dispose of it in a controlled manner, China is dumping it’s waste products down every toilet, river, and sewage grate. Don’t believe me? Read about it for yourself.

But not all is lost. America does have some cards to play and it lies in the local market. Take shampoo or soap for instance. Guess where that’s made. That’s right. It’s made in America for Americans. Nobody of any noteworthy status is even trying to import Chinese hygene products. Remember the Chinese baby formula scare we had recently? A businessman would have a hard time winning customers over and an even harder time keeping them. Food follows closely behind. Cereal, bagels, and waffles are all made in America to be distributed in America. Paint also falls into that category. Would an American really want to buy Chinese made paint after the lead that was found in imported toys? If none of that sounds familiar, refresh yourself here.

Nationality aside, watching your child suffer is one of the most painful and dreadul things a parent can go through. (Source: http://www.ctv.ca/servlet/ArticleNews/story/CTVNews/20080917/china_recall_080917/20080917?hub=Health&s_name=)

Then again, America has the infamous Ford Pinto.

Even if the products were guaranteed safe, you have to take into account the transportation costs of moving the imported Chinese products to a distribution center before sending the products to the stores. American truckers aren’t going to charge a special low rate for hauling imported goods.

These examples highlighted commodities that only go for a few dollars. There’s very little differentiation in commodities. We simply buy what’s cheapest. However, there is another hand America can play. It’s called innovation. One hour labor costs the same whether you make a piece of shit or a polished diamond. Material is sometimes insignificant in relation to labor costs. Everyone pays approximately the same amount for raw materials because they are traded on the world market. So, if you’re going to spend one hour doing something then you might as well do something that nobody else knows how or is willing to do.

Love ‘em or hate ‘em, you have to admire companies like Zipp and Edge Composites. Everyone knows Zipp for their dimples and Edge Composites for the molded spoke holes in their rims. SRAM developed the double tap shifting system. While the world was learning how to copycat their older designs they were busy figuring out the next big thing. Nobody else was willing to do what they did and their efforts paid off.

This kind of innovation leads to an elevation of a brand. It becomes exclusive. Take a look at watch companies like Rolex and Omega. While they were always considered to be “nice” watches, they were never the uber luxurious brands they are today until the 60s and 70s. It was the digital revolution that changed the market place. Almost overnight, you could buy a watch that ran longer, more accurately, and with greater reliability for way less money than a mechanical watch. Where a mechanical watch could lose one to three seconds a day, a battery operated quartz digital watch would lose the same amount of time only in a month! So why would anyone pay several tens or hundreds of dollars more (back then) for something that works worse?

Rolex and Omega had to reinvent themselves. They no longer make watches as much as they make pieces of jewelry. When you buy a Rolex you are buying a decoration for your wrist. Call it a work of art that makes you think back to a different time if you want. The prices shot up into the thousands and suddenly a new market was created that only they could compete in. They defined who they want to buy their products and somehow the money just keeps coming. Now you buy a Rolex because you want the world to know you are classy and rich.

You get the same feeling when you see someone roll up to a group ride with Zipp 404 wheels. Don’t deny it. You stare a bit and wonder just how much those wheels cost. Someone always has to buy something new once before it can become used and chances are you could be looking at a first time purchase there. Those wheels could easily cost $2k buy themselves. That says one thing: Homie’s got cash money.

So while America may have forgotten how to make shoe laces, America is dreaming up what will replace them. America will make what nobody else can or will. That is where America can win in the global market.

(P.S. I focused on American products here because America is my home and my country. Many of the same principles probably apply to the Western world in general. You tell me if I’m wrong.)