Enabling Industrial Innovation

Building the Hard Technologies of the Future

Incredible new companies and technologies are emerging in physical industries such as aerospace, transportation, power generation, and construction—innovations that will transform life for all Americans in a more direct and tangible way than the software revolution of prior cycles of innovation.

While social networks, communications platforms, and mobile applications have undeniably had significant impact, their pull on capital and entrepreneurial talent has resulted in an environment where many of our physical systems function like they did 50 years ago. Entrepreneur and venture capitalist Peter Thiel famously criticized this focus on digital over physical industries in 2013, saying, “We wanted flying cars, instead we got 140 characters.”

Since Thiel made this statement, the environment has thankfully changed, as more builders and investors are focusing on difficult and capital-intensive physical industries. This movement has been referred to as “Deep Tech” and “Atoms vs. Bits” and well-articulated by leaders such as Trevor Zimmerman of Unless and Katherine Boyle of a16z’s “American Dynamism” fund. As a result of these efforts and the dedication of thousands of amazing entrepreneurs, we are in a world where private spacecraft, flying cars, and fusion reactors are real. They have been invented, are being validated, and will continue to enter mainstream American life in the coming years.

Industrial innovation along these lines is different than software, as the end result of the innovation cycle is a physical product that must be built by men and women who are skilled at building things. The culmination of years of innovation at a software company is an application that is deployed to clouds, computers, and mobile devices—which, speaking from experience, can be a difficult and seemingly herculean task. However, the culmination of years of innovation at a flying car company is an order of magnitude different because it then requires building tens of thousands of flying cars. Years of innovation and hundreds of millions of dollars of invested capital become irrelevant if innovation cannot be brought into the physical world via manufacturing by men and women who build.

Manufacturing is the single determining variable that dictates the success or failure of industrial innovation. A flying car company is irrelevant to society if it cannot effectively transition from development to manufacturing excellent flying cars efficiently at scale. The same dynamic applies to spaceships, fusion power plants, smart infrastructure, and all the other categories that constitute industrial innovation. They must be built, which is a fundamentally different challenge than the challenges that have faced the nation’s great software companies.

The question for Americans—innovators, policymakers, and citizens—is how. If we agree that industrial innovation is good and has the real opportunity to increase our freedom of movement, enhance our quality of life, and protect our environment, how do we approach the challenge of manufacturing?

Several models exist currently. There are excellent companies who are taking on this challenge and building entire new in-house manufacturing programs. Other companies are building the advanced-factory as a service—essentially building new manufacturing facilities from scratch to service industrial innovation. These models are needed, effective, and inspiring, but they fail to embrace the strength of the existing American manufacturing ecosystem.

We are a nation of builders. The pride, identity, and strength of the United States is and has always been our ability to build the future. The American manufacturing economy employs 11.9 million workers across 250,000 manufacturing businesses spread through every state and county in the country. While the American manufacturing industry is fragmented and has faced challenges resulting from the outsourcing movement of the last 25 years, it is still strong and must be part of the framework for industrial innovation. In order to succeed, our flying car companies and all these other great drivers of industrial innovation must engage the existing American manufacturing industrial base.

A blended approach to manufacturing, where innovators build the parts they are uniquely able to build while engaging a localized supply chain of American manufacturing partners, is the most capital-efficient and lowest-risk model for innovators. This approach also provides the secondary benefit of uplifting the small and medium-sized businesses that constitute the US manufacturing industrial base. Engaging American manufacturers to participate in the supply chain for industrial innovation will facilitate job creation, community development, national security, and economic growth to a far greater extent than any policy directive or political initiative.

Building a domestic supply chain is not without risk or difficulty. As many of the remarkable companies that are driving innovation are located on the coasts, it will require those businesses to venture into the American heartland to engage manufacturers where they are. It can also be difficult to identify and evaluate these businesses, many of whom have not invested heavily in developing a comprehensive online presence.

Regardless of the difficulty, this is simply how it must be done. In order to get flying cars instead of 140 characters we must build, we must build in the United States, and we must build in partnership with the existing ecosystem of great American manufacturers.