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00:00Because there were two conceits that our leadership class had when it came to globalization.
00:06The first is assuming that we can separate the making of things from the design of things.
00:12The idea of globalization was that rich countries would move further up the value chain while
00:17the poor countries made the simpler things.
00:20You would open an iPhone box and it would say designed in Cupertino, California.
00:24Now the implication, of course, is that it would be manufactured in Shenzhen or somewhere
00:29else.
00:30And yeah, some people might lose their jobs in manufacturing but they could learn to design
00:35or to use a very popular phrase, learn to code.
00:39But I think we got it wrong.
00:40It turns out that the geographies that do the manufacturing get awfully good at the
00:45designing of things.
00:46There are network effects as you all well understand.
00:49The firms that design products work with firms that manufacture.
00:53They share intellectual property.
00:54They share best practices and they even sometimes share critical employees.
00:59Now we assume that other nations would always trail us in the value chain but it turns out
01:04that as they got better at the low end of the value chain, they also started catching
01:08up on the higher end.
01:09We were squeezed from both ends.
01:11Now that was the first conceit of globalization.
01:13I think the second is that cheap labor is fundamentally a crutch and it's a crutch that
01:19inhibits innovation.
01:20And I might even say that it's a drug that too many American firms got addicted to.
01:25Now if you can make a product more cheaply, it's far too easy to do that rather than to
01:31innovate.
01:32And whether we were offshoring factories to cheap labor economies or importing cheap labor
01:38through our immigration system, cheap labor became the drug of Western economies.
01:43And I'd say that if you look in nearly every country from Canada to the UK that imported
01:47large amounts of cheap labor, you've seen productivity stagnate.
01:51And I don't think that's not a total happenstance.
01:55I think that the connection is very direct.
01:58Now one of the debates you hear on the minimum wage, for instance, is that increases in the
02:02minimum wage force firms to automate.
02:05So a higher wage at McDonald's means more kiosks and whatever your views on the wisdom
02:09of the minimum wage, I'm not going to comment on that here, companies innovating in the
02:14absence of cheap labor is a good thing.
02:17I think most of you are not worried about getting cheaper and cheaper labor.
02:20You're worried about innovating, about building new things, about the old formulation of technology
02:25is doing more with less.
02:27You guys are all trying to do more with less every single day.
02:31And so I'd ask my friends, both on the tech optimist side and on the populist side, not
02:36to see the failure of the logic of globalization as a failure of innovation.
02:42Indeed, I'd say that globalization's hunger for cheap labor is a problem precisely because
02:48it's been bad for innovation.
02:51Both our working people, our populists, and our innovators gathered here today have the
02:56same enemy.
02:57And the solution, I believe, is American innovation.