> Offshoring was almost always about labor. Wall Street wanted higher returns, so the jobs went to cheaper labor pools.

Absolutely, 100%, without a doubt, wrong as can be. A complete and utter distortion of the realities that drive and have driven what has been an evolving landscape for decades.

At first, when we were making forks, plates and linen abroad, sure. This has not been the case for a very long time. I would say thirty years, if not forty.

What, then, is the reality of modern offshore manufacturing?

The most important thing the Chinese have done is to build a FULLY INTEGRATED AND SHORT SUPPLY PIPELINE. Period.

Next, they have a massive well-trained and capable technical workforce at every level. From assembly to technicians and engineers. While we were wasting time teaching our kids about Marxism they were educating technicians, engineers and scientists by the millions, as fast as they could. Many of them were educated in US and European universities and went on to spearhead industry efforts and education in China.

After that, once again, while we were indoctrinating our kids on the virtues of Socialism and Marxism, they turned their country into one of the most entrepreneurial forces on earth. The drive you see out of China to just "get shit down" has to be experienced to be believed. It's incredible.

I'll give you a simple example: Say I need to manufacture a part. I send out for quotes to 50 US-based companies and 50 Chinese companies (if I can even find 50 companies in the US). I will likely have more than 50 quotes from the Chines companies OVERNIGHT! More than 50 because some factories will likely connect you with others. The US-based companies? You are lucky if you get five quotes in four weeks. It's that bad. Actually, it's worse than that.

There are other factors, of course. Cost of labor is likely almost dead last in the list of advantages they have.

Why is the supply chain so important? Why are brains so important?

Well, you saw it during this pandemic. The US could not make fucking N95 masks to, quite literally, save our lives. Why? Because we don't even make the cloth, elastic, thread and machines here. Everything is in China. And so, even if money was not important we could not make masks. Such a simple product and we simply could not make them. Still can't, not at scale.

Say you want to make a relatively simple electronic device. Let's assume labor costs you zero in the US due to some amazing automation. You still can't compete with China.

Why?

Because the supply chain isn't here. It's in China. Which means every chip, wire, resistor, screw, sensor, piece of plastic, paper, packaging, box, manufacturing tools and equipment, test equipment, molds, etc. will have to come from China. Which, in turn, means your cost basis increased significantly. If you insist on doing a few things here (like molds and CNC machined parts) you will pay through your teeth, because our wages, taxes, regulatory and other factors cost too much.

This is where the whole discussion about minimum wage starts to come in. If you are forced to pay someone a minimum of $15 per hour, pack it up and ship the work to China, because, whether you know it or not, your business is dead.

In China there are towns that have evolved in order to optimize for certain product classes. Want to make microwave ovens and refrigerators? There's a town where your entire supply chain is within a one hour truck ride from your factory. The same business in the US would have to wait WEEKS TO MONTHS for parts and the supply lines would be nowhere near wherever they might care to locate within the US. Not any more.

I realize that most people are not in manufacturing and simply don't have a clue. I get it. It is too easy to reduce reality to a single variable (labor) and ignore the fact that nothing in life is driven by a single variable. In fact, there are dozens, hundreds of variables that drive different realities.

Companies don't offshore because they are greedy. They offshore because, if they don't, they cease to exist. We have reached a moment in time where, but for a few select market segments, the options have been reduced to one: China.

The fact that our kids don't leave high school and college with a solid financial and entrepreneurial education predicts our future. What we are doing to our kids in our educational institutions (K-12-University) is simply criminal.