Antoine van Agtmael, co-author of ‘The Smartest Places on Earth: Why Rustbelts Are the Emerging Hotspots of Global Innovation,’ talks with Smart Manufacturing magazine Editor in Chief Brett Brune
Antoine, why did you write the book?
Our book was an effort to do two things. First of all, to show that the old economies actually have quite a bright future. Because we have what it takes to succeed in an age of smart manufacturing—because we have great universities, we have the freedom of thinking, we have the sharing of brain power, we have a strong IT base, we have the knowledge of… Big Data processing. All of this together is what’s going to be the New Economy. And I believe that this is going to take place and that’s the second point of our book not just in places like Silicon Valley and Cambridge. No. We’re seeing this now in 35 places all over the US, in the heartland of the Rust Belt. About 20 of these 35 places are former Rust Belt cities.
You wrote about “hotspots of innovation” around the world creating smart, complex products that deliver value far greater than products that could be created using “the outdated, low-cost model” as you put it. You wrote about “cheap” giving way to “smart.” What can you say to people who have a hard time believing that the low-cost model is over?
I would say they’re living in yesterday’s world. First of all, the low-cost countries, like China, are no longer so low cost because the so-called cheap labor has gone up. Wages are seven times what they were 10 years ago. Second of all, automation and 3D printing are no longer science fiction but are used all over, from car plants to even the NIH, which has robots that do things a thousand times faster than people can do them. I would also say that robots, whether you like it or not, are increasingly becoming the cheap makers of things. Smart does not mean, as some people think, high cost, but it means that you are able to customize and it means that you are able to get more for the same price. Think of a car today and 20 years ago.
Consumers are actually no longer looking for things that are cheap but increasingly for smart, well-made and even homemade things. Think of the iPhone, which is a lot more expensive than cheaper smart phones you can get. And then, of course, you have to remember that manufacturing today is a lot more than the physical making of things. It involves design. It involves software development. It involves maintenance. So the whole definition of manufacturing needs to be extended. We are entering the era of a whole new branch of the economy. And, finally, the demands of our time are very different from the 20th and 19th century. The age of dirty growth is definitively over. We’re in an age of targeted medicine instead of chemotherapy, of self-driving cars, of tires that adjust to road and weather conditions, of wearables that measure what’s going on in our bodies and put out alerts even to healthcare providers, and of grids that are smart. These new products come from where they were invented and developed—often the United States and Northern Europe.
Do you think we had to experience some kind of arc? Did we have to go through an era of cheap to get to an era of smart—along the lines of “no pain, no gain”?
Yes. In fact, I believe that having this competition from places like China strengthened our economic immune system. Because what did it do? It made companies leaner and meaner. It made us focus again on what made us great, which was innovation.
You highlight brain belts in North Carolina, New York, Ohio, Minnesota and Oregon in the book. Which of these do you expect will impact smart manufacturing the most in terms of short term, say in the next five years, and why? And which do you expect to have the biggest impact in the long term, and why?
I don’t know. I think each of these places you mentioned will have smart manufacturing. But it’ll each be of a different kind. In Minneapolis, they’ll focus on new types of medical instruments like pacemakers that integrate sensors and wireless communications and big data. In Portland, they’ll focus on health monitors that provide these early warnings. In a place like Pittsburgh, they’re focusing on the self-driving car, as Uber is doing now. North Carolina will bring back the manufacturing of whole new types of sophisticated textiles. And they’ll make, as they do already in the Research Triangle, a new type of lighting and LED lamps. Akron will lead in new materials. Albany will be at the forefront of semiconductor development and nanotechnology. Rochester will leap ahead in photonics. Buffalo in batteries. So each of these places in the process of developing its own strength in smart manufacturing.
In Northern Europe you focus on the Netherlands, Sweden, Finland, Germany and Switzerland. Which of these was the most surprising to you and why?
There were a lot of surprises when we traveled to these various places. I grew up in the Netherlands, and my first internship was at Philips, then a huge, global, proud manufacturing company. But Eindhoven, where they were located, in the south of Holland, took a really big dive when a lot of that production was outsourced to China. The interesting story, which I found doing the research for my book, was that it rose again like a phoenix from the ashes with its open innovation campus: a huge company called ASML, an electronic microscope maker like FEI, a company like Sioux, many, many start-ups—all around this concept of what they call the brainport. They already had the port in Rotterdam and the airport in Amsterdam, so they called it the brainport.
In the travels you undertook to write the book, whose personal smart manufacturing story do you find the most compelling and why?
It’s hard to pick one. But in the US I found it interesting to visit Cree, for example. Cree makes LED lamps and, as you know, we’re going away from the old lamps and now are using LED lamps, which are much more energy efficient. They’re designing and making them in the Research Triangle—all based on the ideas of some young graduate students working with a professor at NCSU.
What smart manufacturing intelligence have you discovered since the book was published?
Let me cite three things. One is that the developments in self-driving cars are going much faster than even I expected. This is really going to be a reality fairly soon.
Another is that the movement from a focus on cheap to a focus on smart is not something that is a permanent competitive advantage. It’s a real competitive advantage, but it’s not permanent. I discovered that China now very well understands that this is an issue. China is now the biggest buyer of robots in the world. And, in general, the Chinese leadership is beginning to understand that innovation is going to be central to their future, as well.
China sent out a team to interview the people who put together the Bayh-Dole Act of 1980, which was really important to allow researchers and universities to benefit from federally funded research. So they’re getting it. So how permanent or how temporary this competitive advantage is will be a question for the future.
A third point I discovered and have focused on since I published the book is that automation is the new China. We worried a lot about competition from China, but automation is going to be the biggest disruptor in the future. Automation is going to have a tremendous impact on the kinds of jobs available for the people who turned out to be very angry in the last elections—people who don’t have the world’s best education and who got stuck. The self-driving car, for example, is going to have an enormous impact on drivers, which is the biggest job for people with a high school education.
What can the rest of the world learn from “Silicon Europe,” the organization formed by the brain belts Eindhoven in Holland, Leuven in Belgium, Grenoble in France and Village in Austria, and the industry association Silicon Saxony in Germany?
This is a wonderful idea, but it’s still very early. It’s at the PR stage. What they can learn, though, is that this group of brain belts has gathered together first of all in an effort to speak the same language. Members of the group will also share brainpower in a broader sense and will make sure that the authorities in Europe don’t forget the importance of research and development.
How important is government support to the success of brainsharing links between a university’s knowledge base and a company’s need for expertise? Should federal governments be on the hook?
Absolutely. The basis for all innovation is basic R&D. Most people don’t know that the United States continues to be, by far, the world leader in basic R&D. If we lose that leadership position, we will lose our leadership position in innovation. That’s where the federal government is critical.
The federal government in the US, and especially the defense establishment, is also critical, much more so than in Europe, in that organizations like DARPA and its equivalent in the intelligence community and in the Energy Department, actually are the most innovative venture capitalists in the country. It’s thanks to DARPA that we have the self-driving car. It’s thanks to DARPA that we have a variety of new, very innovative materials. It’s thanks to DARPA that we have innovative robots. It’s thanks to the National Science Foundation that we have Google.
So the role of government is absolutely critical.
Think back to the nuclear bomb, the Manhattan Project. Think back to the space race. Think back to the development of the jet engine. These were all cases where government worked together with business and academia to innovate and move ahead. Think of Bell Labs, probably the best example of smart innovation in the past—of sharing brain power. Think of Fraunhofer in Germany, basically an organization that is the model for Obama’s manufacturing innovation institutes in the US, which I think is a great initiative. It’s basically a place where local and federal governments put in some money and corporations put in the bulk of the money, and together they move forward. Think of the Holst Centre in the Netherlands, which uses R&D money from the government and some local money to help support innovation.
These are all examples that show that the government is an indispensible piece of this whole picture.
You quote people in the book saying that people are more optimistic again in terms of feeling able to compete with the Chinese. What do you anticipate will happen in the next four years under a President Trump with regard to competing with Chinese manufacturers?
Protectionism is a form of laziness. It is admitting that you’re second rate. It is not focusing on being great. No. It’s admitting that you’re second rate because you protect yourself against someone else who is better. That’s not the way to move forward.
The key to the future is innovation. We have to focus on our strengths, not on our weaknesses. The idea of imposing a 35% tariff not only will lead to a Chinese reaction but it’s really shooting yourself in the foot. Now, fortunately, I think many of the economic people around him do not agree with protectionist measures. I don’t think they are going to happen.
I think there will be some jawboning of businesses, and that may not even be such a bad idea. But I don’t think that we can go back to an age of protectionism and we certainly shouldn’t because we underestimate the extent to which the United States and everyone in the United States has benefited, not only in terms of lower inflation, lower consumer goods, but because through our exports we have really participated in the rise of the middle class in China and other emerging economies.
So to give that up and shrink back to ourselves would be a terrible idea.
How do you see the talent gap problems in smart manufacturing being solved?
It’s a really big problem. We’re focusing now on job losses, but it would be better to focus on the job mismatch—the fact that many of the workers who lost jobs have difficulty finding jobs in this new economy. I call it a job mismatch. There is a huge skills gap that Anthony Carnevale, a professor at Georgetown, has estimated at 5 million jobs by 2020. Why is that? It’s because we are moving from cheap to smart. And it’s because we have had a college obsession—a form of an educational elitism. We should focus more on the type of work/study programs that they have in Germany and Canada. They succeed first in giving young people training within a factory environment while going to school. It helps them prepare for work in what you could call the New Economy. These same tools can be used on a much bigger scale than they are now—because now we only give lip service to this. They can be used to retrain workers. This is not going to be the ultimate solution, but it’s going to be one of the contributing solutions.
Finally, we have to make working in a factory sexy again. We have to make it attractive again. And it is attractive. Today’s factory, often small, often clean, often high tech, is a very different place from your father’s manufacturing.