‘The Titanium Economy’ Review: Making It in America

After many grueling nights designing and building a car in “makeshift tents,” Elon Musk came out with a forward-thinking lesson for Tesla. “It’s not about developing a car design — it’s absolutely about the production system,” Mr Musk said in 2019 at the unveiling of the automaker’s SUV, the Model Y. “You want to have a good product build, but that’s basically the easy part. The factory is the hard part.”

Mr. Musk wanted to take vertical integration — or supply chain control — to what he has since called “absurd” heights. His business philosophy was crucial. In February 2022, the federal government announced that supply chain problems meant American manufacturers had five days’ worth of chips in their inventories — an emergency shortage compared to their inventories for 40 days three years ago.

The disaster speaks to the need to rebuild manufacturing at home, argue co-authors Asutosh Padhi, Gaurav Batra and Nick Santhanam in their fluid, easily digestible and timely book The Titanium Economy: How Industrial Technology Can Create a Better, Faster , Stronger America”. .” The premise of the book is that “we are capable of spawning a thousand companies similar to Tesla in any industry.” The authors write, “Part of what Musk understood — something that other industry leaders have embraced as well — is that at the core of the American spirit is to control your destiny.”

Messrs. Padhi, Batra and Santhanam, all current or former McKinsey executives, come from engineering and management backgrounds that give them authority in the field of “industrial technology”—the collective term for manufacturing, robotics, and hardware production. Although employees, they have helped run factory floors, an area not typically associated with McKinsey. Mr. Santhanam, a chemical engineer, turned professional during the dot-com boom but preferred to work with hardware he could touch and later became a McKinsey consultant to semiconductor manufacturers. Mr. Batra once worked in a consumer goods factory in India, where a rural town of 20,000 was “supported by the factory”. Mr. Padhi worked for industrial companies in Cleveland, where stoic workers innovated without speaking, unlike in Silicon Valley, which he saw as a land of talk.

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As more companies move their factories out of China and elsewhere, the authors argue that American manufacturing is driving a social and economic force they call the Great Amplification Cycle. Factories open shops in small American towns, workers learn new skills and take home better paychecks, buy houses and improve their lives. As time goes by, more and more talented people appear, looking for a better quality of life, opening businesses, injecting capital and contributing to the local culture.

The authors glide through a series of jaunty anecdotes about 3D printing, advanced materials and artificial intelligence in manufacturing applications, pointing out that some industrial technology companies can rival the earnings of Facebook and Amazon. Yet the sector attracts less than 1% of venture capital. Trex, a Virginia-based company that uses advanced robotics to recycle plastic bags into building materials, has seen its share price rise nearly 5,000% over the past decade. With its two factories linked by advanced software, Trex is an example of a successful company replacing the older, static central factory model.

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The Titanium Economy is at its best when it takes us outside of the superstar cities of Silicon Valley and New York and into affluent manufacturing centers in South Carolina, Texas and Indiana. The authors write that “for every Flint, Michigan notorious for losing auto jobs, there is a Simpsonville, South Carolina.” In the 1970s, Michelin opened a tire factory in Simpsonville, home to 25,000 people, and helped train workers. Since the 1980s, automaker BMW, aerospace company Collins and numerous other firms have emerged and hired the region’s skilled workforce.

The Titanium Economy: How Industrial Technology Can Create a Better, Faster, and Stronger America

By Asutosh Padhi, Gaurav Batra and Nick Santhanam

Public Affairs

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Crammed with tales of money and wealth, The Titanium Economy sometimes sounds too good to be true, like a McKinsey brochure for clients and investors. In fact, the authors’ McKinsey affiliations sometimes seem to dampen their ability to question the companies they cover. “In terms of governance, different board compositions, higher analyst coverage, and changing proportions of low-turnover investor profiles contribute to multiple expansion,” the authors write in a cryptic passage. Meanwhile, the ability to explain the market to investors is “an area where many industrial companies still fall short.”

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The reluctance to accept criticism also extends to countries where McKinsey has a strong presence. The authors write that the Chinese government is “determined to take the lead” in providing state funding to critical industries. But they never mention that the country, which is importing more chips than ever before, is generations behind America’s semiconductor industry and far from its vision of self-sufficiency.

The authors argue that the US government should become more involved in a national industrial strategy. But they gloss over the transformations already underway. They never mention the CHIPS and Science Act signed in August, which provides $52.7 billion in subsidies for US semiconductor production. Intel CEO Pat Gelsinger called it potentially “the most important piece of industrial policy” since World War II.

This is just a shift in how American business leaders view domestic industry. Still, The Titanium Economy is an entertaining read about an overlooked and underappreciated field and its most successful businesses. The timing is right. Americans are realizing the importance of building resilience at home, rather than outsourcing for a simple price cut.

Mr. Cain is a Senior Fellow with the Lincoln Network and the author of two books on technology and industry.

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