You no longer need riveters when a product has no rivets
I almost always enjoy the Economist. The quality of writing is so good, the Obituaries wonderful (look at this one of Bill Millin the piper who German snipers refused to shoot, even though he was ‘armed’ with the pipes), and on most topics I learn so much. At the same time, I usually detest its politics, and it’s naive belief that the ‘invisible hand’ is the only way forward (short of the Gulag).
This week there is a breathtaking (dizzy?) Leader on changes in manufacturing, particularly on the possibilities opened up by 3D printing. My exposure to this is limited, and mainly confined to a terrific book by Cory Doctorow, ‘Makers‘. So, the Economist, after listing the previous industrial revolutions (Britain in the late 18th century with the development of textile factories, and Henry Ford’s assembly line) predicts a third revolution based around 3D printing, computing and mass customisation.
The revolution will affect not only how things are made, but where. Factories used to move to low-wage countries to curb labour costs. But labour costs are growing less and less important: a $499 first-generation iPad included only about $33 of manufacturing labour, of which the final assembly in China accounted for just $8. Offshore production is increasingly moving back to rich countries not because Chinese wages are rising, but because companies now want to be closer to their customers so that they can respond more quickly to changes in demand.
All of this jars with the two industries I work in, education and health, and the problem of Baumol’s cost disease. How we do increase productivity in such service sectors — why do health costs keep going up and why is the cost of University education rocketing. A particular phrase that chimed is as follows:
you no longer need riveters when a product has no rivets
When I think of much of medical education this is what comes to mind. We keep producing riveters.