Does America Need to Make Things?

KIGALI, RWANDA– As I’ve mentioned before I like my entrepreneurs risk-taking and a little crazy. Earlier this week on TechTicker, we ran an interview with a guy who fits that bill: Shai Agassi.

In some ways, Agassi is even more ambitious than Elon Musk—you know, the guy who builds rockets and $100,000 electric sports cars. Agassi wants to re-engineer the entire auto and oil infrastructure with electric cars, charging stations, battery replacement stations (staring robots who actually change the battery for you) and sophisticated software to keep it all running—one country at a time. His company is called Better Place, and while some have accused Agassi of being an egomaniac, I give him huge props for walking away from one of the most powerful jobs in the tech world to start a new company that was this hard to pull off.

I last interviewed Agassi several years ago on stage when he was at SAP, and I was covering the oh-so-sexy enterprise software beat for BusinessWeek. If memory serves, we were good-naturedly sparring about whether Oracle’s acquisition strategy would work. (I’d argue I was right.) But I have to say, I like this Shai better. He made his name as an intense and gifted entrepreneur who wasn’t afraid to take risk and sometimes people like that are wasted inside big organizations, even if they have the top job. Agassi seemed inspired and unleashed compared to his SAP days. There’s more about Better Place itself and Agassi’s plan here.

But at the end of the third segment (embedded below), Agassi said something that’s been sticking in my head ever since: America has to start making things or the economy won’t work. He argues you don’t have a country with just a service economy to support it. I’m starting to fear that he’s right, especially spending time last month in China and this week in central Africa, both places where manufacturing and consumer goods industries are being built fresh and in incredibly innovative ways. It’s a bit like what you kept hearing after the dot com bust: When things turn south it’s good to have hard assets to fall back on.

Trust me, as I sit on a terrace in a landlocked African nation that has to import almost everything to great expense, America doesn’t want to get in the pure-consumer, non-producer game. And while some argue the intellectual work—ala thinking up the idea or doing the hard core engineering—is higher margin, it’s absurd and arrogant to think we’ve got a lock on the people who can do that kind of thinking.

This is clearly the biggest concern in the rust belt where thousands of manufacturing job are at risk. But if Agassi is right, Silicon Valley is in trouble too, because we hardly make anything anymore. Look at the semiconductor business: Most start-ups for the last ten years have been so-called “fabless” chip companies. And how many gadgets are made here? The great age of networking and telecom rollouts are over—instead monopolies are upping revenues by “metering” our broadband not rolling out a newer, faster infrastructure. Even outsourcing low-level software development to Balkan states contributes to this. It’s a win-win for now, but long-term emerging markets benefit more than we do.

Tech got in this situation for two reasons: technology advanced quickly enough we could outsource all the assembly and VCs liked it that way because it’s cheap. But there’s more than enough cash flowing around this Valley to fund a few risky, expensive manufacturing plays. Here’s what I’d like to see America start making again. Leave your ideas in the comments.

1. Better consumer devices. For decades VCs have shied away from consumer devices given the manufacturing and consumer marketing costs. Sure there are loads of duds out there to support that point. But whether they’re entirely made in the US or not, haven’t the iPhone, the Flip, the Kindle, the Jawbone and others proven a good device that does something well still has a future coming out of the Valley? Increasingly, people will pay up for brilliant device execution even if it only does one thing well, even if it’s not necessarily a new category.

2. Cars. Yep, we’re doing it already but it largely hasn’t been funded by the Valley. Musk invested $70 million of his own money and Agassi’s cash mostly came from Israelis. Props to Kleiner Perkins Caufield & Byers for funding Tesla competitor Fisker. But now that these pioneers have proven there’s a viable market here, the US establishment whether it’s the Valley top brass, DC lawmakers or Detroit need to get behind it in action, not words. Although President Barack Obama has been careful to say the government won’t dictate strategy for the car companies we now own, Agassi thinks America should take the opportunity to push on electric manufacturing hard. After all, we do own them. Why not get something out of it? (More on that in the video below too.)

3. Medicine. What ever happened to the biotech boom? The promise from decoding the genome? The rhetoric that the Valley was going to give birth to dozens of Genentechs? I’ll tell you what: VCs got into the habit of selling promising pre-clinical research to big pharma early and often. There’s no more company building in biotech, and that’s a shame. I get that drug discovery is hard and expensive, but we need the innovation, real science and jobs if you ask me. There’s also the side benefit of screwing with the big pharma oligopolies. And saving lives is generally a good thing for the country.

4. Electric planes that go really fast. Ok, it sounds even crazier than rockets or electric cars, but every time I board a creaky old Boeing jet for a 10-hour-plus international flight, I can’t stop thinking about Musk’s idea for an electric plane that’s supersonic and lands vertically. I don’t even know if that’s feasible, but I’m ready to retire my much-beloved noise-reduction headset if it is. If anyone would like to build a teleportation device I’ll sign up for a beta tester on that one too. I don’t care if there’s a risk that my organs will arrive on the outside of my body, I’m so over 20-to-30 hour flights on planes older than I am.