Reshore and Restore: Unlocking American Innovation for the 21st Century
Whether through COVID-19, climate change, or geopolitical conflict, the past few years have laid bare the tenuous connections underpinning key parts of our modern world. Wars, pandemics, ransomware attacks, and extreme weather events have pushed supply chains, power grids, and people to the brink. After more than 80 years of unparalleled advances in technology and quality of life, it might feel as though our grand global experiment is beginning to unravel.
However, beyond these seemingly grim prospects exists tremendous opportunity. There is a new class of entrepreneurs that view these problems through the lens of new technologies and, rather than throwing their arms up in resignation, are getting to work. They’re building new solutions that address the fragility of increasingly complex supply chains, enable access to critical resources, resolve energy crises, and more.
These entrepreneurs are modernizing entire swaths of our economy that tech largely hasn’t touched yet, while also accelerating the return of critical infrastructure components. They’re helping us reshore and restore the knowledge, skills, and resources that can make the United States and its allies more self-sufficient, and bolster the systems that make society function: energy, agriculture, mining, manufacturing, housing, and more. Here’s what that looks like.
Increasing resiliencies and redundancies
As we’ve seen from the COVID-19 pandemic and the war in Ukraine, it no longer makes sense to rely on adversaries for critical raw inputs, supplies, and manufacturing. Europe’s energy reliance on Russia is an obvious example, but it’s just one of many. In 2019, the U.S. imported almost 97% of its antibiotics from China.
However, supply chain repatriation is already happening. Companies like Resilience and Multiply Labs, for example, are reshoring drug production and medical manufacturing while also using robotic automation to change how medicines are made. This trend will only accelerate because, beyond geopolitical concerns, there are ample opportunities to build massive businesses here. These businesses will not only improve our resiliency, but in doing so, they modernize whole swaths of the economy that have yet to be transformed by technology.
The current state of the world is proving to be a true inflection point for companies that haven’t had many reasons to change historically. Energy, agriculture, manufacturing, and connectivity are all about to transform for the better. This change stems in part due to the recent technological innovations we’ve seen in machine learning, AI, and robotics, but they’re also changing because they have to. Recent global unravelings demand that we no longer ignore the shortcomings of our core domestic infrastructure.
Energy is a good example: Last year’s Texas power crisis illustrates that no matter how technologically advanced society becomes, nothing else really matters if you can’t keep the lights on.
Fortunately, a new cohort of fission and fusion companies is riding a wave of regulatory and scientific breakthroughs. The Nuclear Regulatory Commission has certified a new, smaller nuclear reactor design, and just recently, the U.S. Department of Energy’s National Ignition Facility achieved a net energy gain in a fusion reaction for the first time. Outside of nuclear energy, software is also penetrating power grid management. David Energy is creating a cleaner, cheaper, and more resilient electric grid that will reduce power outages, shrink our carbon footprint, and give us more granular control over systems that haven’t changed in decades.
Supply chains are also changing. Companies like Flexport are tackling freight and logistics head on, while the semiconductor industry is building out a broader geographic footprint, spearheaded by TSMC’s efforts to create an additional Arizona fab in order to ensure that our most important chips have a resilient supply chain. In many ways, the challenges faced during the COVID-19 pandemic shed a light on many of these problems, highlighting the many founders already working here.
Proactively solving tomorrow’s problems
While some companies are working to improve existing processes like the supply chain, others are more focused on less-prominent issues that require us to understand where the world is heading. Rather than just improving existing processes or industries, these companies are often rethinking them completely — sometimes creating entirely new methods for solving difficult problems that we’ve never needed to solve before, or haven’t previously tried to solve because the inefficient or suboptimal solution was “good enough.”
SpaceX fully embodies this idea. In the early days of Russia’s assault against Ukraine, Russian space space chief Dmitry Rogozin tweeted: “If you block cooperation with us, who will save the ISS from an uncontrolled deorbit and fall into the United States or Europe?” Elon Musk responded by posting the SpaceX logo.
— Elon Musk (@elonmusk) February 26, 2022
And then he mobilized Starlink’s satellite constellation to provide decentralized Internet connectivity to Ukraine. Starlink is now operational in Iran, too. Space is an entirely new frontier that’s just starting to break open, and we’re excited to see more companies, such as Astranis, emerge here.
American Dynamism portfolio companies like Hadrian, Anduril, and Apex are building out our domestic aerospace and defense capabilities, ensuring that we can manufacture and deploy cutting-edge solutions to the front lines before we even need them. They’re also training a new generation of builders, from all walks of life, to create new things (often actual things!) — like precision parts, and automated defense hardware and software — so that America can once again become a manufacturing superpower.
This is the chance for the United States and its allies to usher in a new era of advanced manufacturing. The U.S. is not currently in a position to simply bring manufacturing back home. We don’t have the workforce, or the skills, to reshore many factory jobs without putting in some initial investment. Fortunately, we aren’t trying to do that: We’re upskilling our existing workers and placing an emphasis on technical skills, and rather than replacing existing factories and supply chains, we’re creating better ones.
But you need raw inputs if you want to build, which is why Kobold Metals, Phoenix Tailings, and Kojo are helping us find, mine, and procure the materials needed to build everything from spaceships and smartphones to skyscrapers and smart homes. One of the biggest barriers to the American Dream is access to affordable housing, and access to materials and skilled employees will help startups like Diamond Age in its mission to dramatically lower the cost and time of building new homes.
Industries like space exploration and manufacturing, though, are just the tip of the iceberg when it comes to the new frontiers of innovation. Founders are using technology to tackle challenging problems and overcome the inertia of legacy processes, and that extends into every corner of the economy.
The future of food
Of all the problems needing solutions, perhaps nothing is as imperative as finding new ways to feed the world. Globally, we haven’t had to contend with large-scale famines in quite some time, but that could change very quickly. More than 41 million people today live on the verge of famine, and as Europe struggles with increased energy costs, food access is deteriorating. Large wheat providers are going offline, just as fertilizer production and exports are diminishing.
These new developments exacerbate existing headwinds farmers are already fighting. As global farm operators age out and retire, growers are struggling to find the next generation of skilled labor needed to run their farms. This shortage contributes to increased wages which further erodes farms’ financial viability. Crops have migrated to other continents where there’s cheaper, more abundant labor, which in turn extends food supply chains that risk being disturbed by geopolitical tensions.
Recent events show us what’s at stake. Sri Lanka banned chemical fertilizers last year, which resulted in a 30% drop in yields. In this case, the damage was self imposed — they made a choice to not use fertilizer. But now many farmers don’t have that choice thanks to widespread shortages, and Sri Lanka’s misfortunes paint a picture for what much of the world will have to contend with as centralized food production deteriorates.
Fortunately, founders are creating better ways to feed the world. AgTech startups like Pivot Bio and Sound are helping us reshore fertilizer production while other companies address farmers’ labor shortages. Robotics startups like Tortuga AgTech are reducing labor reliance by changing how farmers pick their produce, while Seso Labor is broadening labor access for work best done by people. These changes are just beginning, and will ensure that the future of food is abundance, not scarcity.
The next era of American innovation and industry
On May 26, 1940, President Franklin Roosevelt proclaimed during a fireside chat that government must “harness the efficient machinery of America’s manufacturers” to build 500,000 combat aircraft in a year to weather the “approaching storm” of World War II. At the time, the United States had less than 3,000 warplanes, and FDR’s goal exceeded the total number of planes built in all of U.S. history.
Answering this call, the U.S. industrial base transformed itself in service of a new era of American manufacturing. Detroit became the Arsenal of Democracy, and the Department of War chose Ford Motor Company to mass produce the B-24 Liberator bomber. By war’s end, a bomber rolled off Ford’s Willow Run assembly line every hour — a pace that’s tragically unimaginable in today’s world.
Ford’s Willow Run assembly line
Ford’s Willow Run assembly line exemplifies America’s ability to develop new technologies that augment our human capital and increase production output when we put our minds to it. So, although every industry will require different tools and infrastructure to bring innovation stateside, we can do it if we have founders who see what’s broken, believe they can solve it, and have the resources to carry out their visions. These are the people creating massive companies that will modernize huge portions of the economy, and in turn will make our country — and the world — safer, stronger, and more successful.
Interestingly, in that same fireside chat mentioned above, FDR acknowledged that the country’s “lack of preparedness” put them into that precarious position. That didn’t stop American ingenuity from showing up in a time of need. FDR’s era became a turning point for our manufacturing capabilities, and marked a pivotal moment in the construction of a better country and world. And while it may not feel as acute, we’re in a time of need now.
After decades of “business people” optimizing every P&L and sending as much manufacturing and skilled work offshore as possible — instead of investing in R&D, training and education, and resiliency domestically — we’re entering a new era of American innovation and industriousness that should pay dividends (literally and figuratively) for decades to come. It’s time to reshore and restore.
We’re committed to working with and investing in the best founders who want to make American Dynamism real. If you’re building the future of our country’s industrial base, or you want to discuss your perspectives on the category, reach out to grant at a16z dot com. There is much to build and we want to help you build it.
