because there were two conceits that our leadership class had when it came to globalization. The first is assuming that we can separate the making of things from the design of things. The idea of globalization was that rich countries would move further up the value chain while the poor countries made the simpler things.
You would open an iPhone box and it would say designed in Certino, California. Now the implication of course is that it would be manufactured in Shenzhen or somewhere else. And yeah, some people might lose their jobs in manufacturing, but they could learn to design or to use a very popular phrase, learn to code.
But I think we got it wrong. It turns out that the geographies that do the manufacturing get awfully good at the designing of things. There are network effects.
As you all well understand, the firms that design products work with firms that manufacture. They share intellectual property. They share best practices.
And they even sometimes share critical employees. Now, we assumed that other nations would always trail us in the value chain. But it turns out that as they got better at the low end of the value chain, they also started catching up on the higher end.
We were squeezed from both ends. Now, that was the first conceit of globalization. I think the second is that cheap labor is fundamentally a crutch.
And it's a crutch that inhibits innovation. And I might even say that it's a drug that too many American firms got addicted to. Now, if you can make a product more cheaply, it's far too easy to do that rather than to innovate.
And whether we were offshoring factories to cheap labor economies or importing cheap labor through our immigration system system, cheap labor became the drug of Western economies. And I'd say that if you look in nearly every country from Canada to the UK that imported large amounts of cheap labor, you've seen productivity stagnate. I don't think that's that's not a total happen stance.
I think that the connection is very direct.
