Manufacturing is already gone

The United States was once a manufacturing powerhouse. But that time has passed. Today, industries such as automotive, steel and apparel have moved overseas or south of the border to countries like China, India and Mexico, with significantly lower wages than the United States.

Approximately 70 percent of the U.S. economy is now service based. This loss of manufacturing jobs does not, however, signal economic decline, but rather economic transition. The United States still has by far the largest Gross Domestic Product (GDP) of any country at about $16 trillion. That is nearly twice as large as China’s and over 2.5 times as large as Japan’s, which rank second and third, respectively.

How do countries like the United States, without cheap labor, maintain their economic edge? Through continuous research and development. New product concepts. An assembly line of inventions rather than widgets. And, just as importantly, protecting (and thereby controlling) the inventions through legal mechanisms, particularly patents, properly valuing the inventions and profiting from them.

In many industrie,s it is no longer important to manufacture, because manufacturing is a commodity input provided at a commodity price. Instead, it is important to be the source of, and control, the invention. By controlling the invention you can control the product pipeline, from manufacturing, to distribution to sales. This is the new business model for nations with mature economies. Conference rooms and white boards have replaced factories and heavy equipment.

The generation of wealth through invention requires inherently valuable inventions and solid intellectual property protection. In today’s marketplace, a strategy not founded on inventing and protecting inventions but consisting instead of, for example, getting to market fast and developing brand recognition, may be unrealistic and suboptimal, particularly for start-up companies or any business in a highly-competitive market. Product information is now easy to obtain, consumers are sophisticated, and competitors nimble. Assume that without inventions and meaningful intellectual property protection, competitors can and will copy every valuable aspect of your product or service. You will be left to compete solely on price and delivery time, and potentially not have the opportunity or resources to develop market penetration or brand awareness. Not only will profits be lost, but so will the ability to attract investors and buyers. For example, few will invest in a start up with no barriers (such as patents) to keep competitors at bay.

Most American businesses understand the value of inventions. It is estimated that about 80 percent of the value of publicly-traded United States companies is now in intangible assets, and that the total value of United States intellectual property is about $5.6 trillion. That is greater than the entire GDP of any country other than China or Japan. In 2010, the United States spent an estimated $405 billion on R&D. That was more than the European Union, China or Japan spent:


Thomas Jefferson once said “The price of liberty is constant vigilance.” Today, the price of economic liberty, and our economic future, is constant investment in research and development and protecting inventions. There is no going back to the days of commodity manufacturing. Embrace invention and make it a cornerstone of your business strategy.