Preparing for Export-Oriented America

Tyler Cowen wrote a fascinating and fantastic article recently on “What Export-Oriented America Means“.   Obama had (outlandishly, it seemed at the time) pledged in 2010 to double America’s exports in five years – evidently we’re on track.  Mr. Cowen had suggested that America would regain its mid-twentieth-century status as an export powerhouse, as a result of three factors: mechanization and automation through artificial intelligence, the emergence of natural gas as a power source, and growing demand in the developing world.  I agree with all of these: mechanization will eventually outcompete subsistence wages, natural gas (and thus energy!) are likely to be disproportionately cheap in the USA for the foreseeable future, and barring truly terrible events the Third World will continue to grow.  I think I believe Mr. Cowen – so given that, how should we as individuals prepare?

The human capital side of it is fairly simple (not easy, just simple).  A lot of the gains of the new economy will accrue to those who have skills that can’t easily be outsourced/insourced to a machine or the Third World.  This probably doesn’t mean assembly-line coding!  Design will continue to be a sought-after skill, and in fact will probably get even more important.  Irrepressible liberal-arts-student that I am, I tend to guess that writing both functional and creative will be important.  Management skills will always be in demand.  Data will continue to be increasingly abundant, accessible, and manipulable, and problem-solving in business will likely increasingly depend on asking the right questions rather than ability to answer them.

Corollary to the above: Most Americans aren’t necessarily fucked, but are ill-positioned.  Many are fucked.

This is beneath Cowen’s notice, but I think there are huge changes ahead for the professional-services world – think big law, accounting, consulting and finance.  Increasing globalization and mechanization will completely destroy their talent model.    These businesses have traditionally relied on a funnel of young entrants doing bitch work and getting gradually moved up the ladder.   These low-level jobs can either be mechanized or moved overseas to cheaper locations, to dedicated analysts/associates in India or the Phillipines who solely do analyst/associate work as a career and are better at it than two-year itinerants.  My prediction is that the incoming classes at these firms will shrink dramatically, and  hiring will emphasize the skill sets needed for future partners.  Their main function will be to assist in the front office, doing sales and client-handling for work performed either by machines or in overseas back offices.  Interpersonal interaction will, as always, be an amply compensated skill.

Business losers?  Natural gas will probably not be a winner for the foreseeable future – its cheapness will power new American manufacturing, and the export potential will be limited for a long time.  The next generation of manufacturing would be great to buy stock in, but it doesn’t exist yet.  I would stay away from healthcare providers, personally – if it remains human-dependent, its cost structure will spiral upwards even if drugs get cheaper.  I’m highly bearish on the long-term profitability of finance – math and moving money are the easiest-to-automate tasks there are.  Telecom is fucked.

Winners?  Big Data is probably for real, and a winner in this scenario.  So are semiconductors and other high-value-added manufactured products – IBM divesting laptops was a great move in 2005, but that manufacturing is a natural candidate to come back at some point.  I think a lot of old manufacturing companies that can make the transition to automation will do pretty well – there’s a lot of room for real revolution in motor vehicles (systems, drives, and materials), for example, and anyone riding that wave will be rolling in profits.  Professional services should continue to be healthy.

There is a lot of room for innovative business models, especially in manufacturing and logistics.  Smart vehicles and packing robots WILL happen, and will revolutionize the logistics industry.  I think configure-to-order for all sorts of products will become the norm.  Cracking the code for the future of professional services will be insanely lucrative.  I’d need to think this over a bit more.

As always, everything will change.

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