Look closer and ask: Is America reinventing itself?

By Frank-Jürgen Richter

Nikkei Weekly, May 27, 2013

When I ask if America is reinventing itself, I don’t mean about everything; but I do see uplift. We see indications in better employment rates and in the “talking-up” of jobs returning to the U.S. from offshore. We see this in the up-market words of some politicians and especially of the risk managers employed in the financial arena. The Dow Jones average has surged, as have new housing starts, and GDP growth now touches 2.5%.

Of course indicators can fall as well as rise, and different markets operate in sharply differing cycles such that a shock (good or bad) makes ripples for a couple of years before settling to a new level. This was very well explained by Jay Forrester in 1968 when he discussed Industrial Dynamics, a modeling system, which pundits forget when inviting talking heads to explain a new blip in the figures.

Forrester was also influential in defining new ideas in supply chain management that even now are being invoked in the home-shoring of jobs as U.S. managers are finding that far-distant assembly is increasingly costly due to higher local wages and rising transport fuel costs. Also, there are rising costs of remote control, such as intellectual property theft and corruption, including the substitution of cheap but less effective subassemblies that benefit local management, but not the end user.

However, not all is rosy in the U.S. In 2009, Forrester wrote: “Students should start by facing the challenge of learning what they need to know in order to accomplish the project. Yet education in most schools could hardly be more different since students, when they are given a problem, usually assume they have been taught everything needed to solve the problem. How many in real-life situations find that challenges come pre-equipped with everything for a solution?” He was advocating the use of Systems Dynamics, another of his ideas, to follow through a research plan where all aspects are subject to uncertainty and different time horizons. Only some schools took up the challenge, as well as some state governors, and some CEOs.

Today, Massachusetts Gov. Deval Patrick talks of his state’s progress, an update of a speech he gave at the Massachusetts Institute of Technology five years ago. He says he knows now how to achieve significant reductions in greenhouse gas emissions while simultaneously increasing energy efficiency and reducing costs. This is the win-win accruing from divergent out-of-the-box thinking akin to researching a project via Systems Dynamics.

Too often in the global financial crunch we have seen austerity plans hamper development, such as pollution controls that are restraining and unimaginative. For example: reducing speed instead of finding novel solutions that allow faster speeds using fewer resources and for less cost.

Patrick says there are many examples in his state that make him proud, and which for the second year has found it the national leader in state-level energy efficiency. His earlier plea for innovation has initiated 5,000 clean-energy firms employing 72,000 people, which clearly help the economy in many ways.

This is in accord with one of President Obama’s present priorities: to make the U.S. a magnet for new jobs and manufacturing, which is something many people like to hear. But this policy must be addressed with caution as U.S. management and workers must change their attitudes greatly. It means investing in the kind of manufacturing that relies on skill, capital and advanced research. Fewer workers will be needed than in the past, and the potential for widening the wealth gap is huge, especially if more robots are used.

Offshore firms are not immune to change in this future world either. Foxconn plans to substitute a million workers at its factories in China with robots that can work 24/7. These robots will make for stronger competition, which is Foxconn’s right, especially in these days of freer trade rules. Foxconn must also keep ahead of the future rapid demographic decline in China by introducing robots. The rest of the globe must make similar decisions.

Education is key

Even so, human ingenuity is needed for development, even as we use more robotics for unskilled work. I stress that it is better to raise the educational quality of all U.S. children, college and university graduates in one big swoop by getting them to think and discuss with critical creativeness.

It is prudent of Obama to allocate windfall oil and gas revenues to science, automotive and energy efficiencies as well as to bettering infrastructure. To help him, other politicians must grasp modern viewpoints and relinquish partisan policies to coordinate development without the pork-barrelling and earmarking that has diluted aid to insignificance.

Naturally, business leaders are divided – typically by their own narrow, special interests and their hostility to most regulation. Yet they maintain also an overly strong, even blind, political allegiance. Labor unions must seek broader, more ambitious strategies to accommodate creative change, even to relinquish their stranglehold on sectors like the transport industry. Times are a’changing.

It is clear to me that the U.S. is not yet ready to again drive the globe forward, but its attitudes are better attuned to this aspect than many in Europe or Asia. My U.S. venture capitalist friends hardly noticed the crash. They said: “It’s happened. it’s happened before! So we just get on with our jobs, championing new ventures and growing the economy.”

Of course U.S. law also helps with this. In other regions, a bankruptcy can also mean prison or other stigma that are not apparent in bounce-back America. Other legislations ought to take heed and be more liberal, aiding global recovery. Watch this space carefully – America is capable of a rebound!

Frank-Jürgen Richter is founder and chairman of Horasis, a global visions community.