title: @zachglabman: Most people never get to see the part of America that actually makes things. I d...
author: zachglabman
content_type: twitter_article
published: 2025-11-25T17:05:23+00:00
source_url: https://x.com/zachglabman/status/1993365412634149151
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Most people never get to see the part of America that actually makes things. I didn’t either until I
Most people never get to see the part of America that actually makes things. I didn’t either until I spent six months inside ~75 factories.
I'm convinced that energy, sensing, manufacturing (and materials) capacity, miniaturization, software-defined hardware, etc are the physics-constrained bottlenecks that will determine the next 50 years of civilization-scale value creation. Reindustrialization is the answer.
Narrative Dissonance
In manufacturing, two narratives dominate the conversation. Either we’re losing ground to our adversaries, rent-seeking and de-industrializing, or we’re on the precipice of a new industrial renaissance and we’ve never been more back. Neither is quite right.
A shop visit in Hudsonville, Michigan.
The truth lies in the middle, obscured by noise. Small businesses make up over 98% of manufacturing businesses . SMBs can range from a tiny machine shop with one machine ( $50m rev) all the way to companies you’ve never heard of with 20+ plants doing >$1B annually. Some of these shops are thriving, some are dying, and the difference comes down to whether the systems around them are aligned or working against each other.
Building on the coordination problem I wrote about previously , here’s a summary of what’s broken:
The workforce disconnect is generational. Gen X thinks nobody younger wants to work hard anymore. Millennials and Gen Z, crippled by debt and false promises about university, resent the system for lying to them. This generation wants to be trained, have mentorship, and earn a living wage with growth potential. The disconnect is that we’re losing the infrastructure to provide that training. SMB manufacturers barely have time to respond to RFQs, let alone set up apprenticeship programs.
Capital is misallocated. For 30 years, financial markets discouraged funding capital-intensive businesses, even though they’re the ones that generate the deepest, most durable economic returns. After we de-pegged from the gold standard, a floating and chronically overvalued dollar pushed investment toward financial assets. Financial deregulation in the 1980s and neoliberal trade agreements gave foreign producers privileged access to our consumer market. As speculation became more profitable than production, money flowed away from productive capacity, giving us mostly nominal growth.
Money talks and the loudest businesses usually win. Industrial policy means understanding the landscape of non-profits and government-funded organizations like MEPs , MFG USA , DARPA , ARPA-E , SBA , SBIR , etc, and the deeper coordination effort needed to break the mold of the defense-industrial complex we’ve reinforced for 70 years. Patent system deregulation under Obama weakened SMBs so big tech could profit. The companies put in front of government have deep pockets and agendas disconnected from the shop floor.
Reindustrialization isn’t going to be achieved via a single policy change. The bigger picture makes all the difference here: when education, government & policy, industry, capital and technology move together, capacity compounds. When they don’t, we get what we’ve had for 30 years: nominal growth, real decline.
The blueprint is simple in theory, but alignment is going to take a bunch of complementary efforts to make it faster to build, easier to train, cheaper to finance and more profitable to produce.
We don’t have enough OEMs
The reason most small shops get caught in a “defense trap” to grow is that’s where money and policy are concentrated. It’s largely a product of the defense-industrial complex and the deep pockets of the primes . This is how it works: primes subcontract components to smaller companies (Tier 1s) who subcontract further and further down to the raw material level, creating a multi-tier ecosystem of suppliers. This is real “trickle-down” economics at play, and why manufacturing creates so many upstream and downstream economies when demand is there.
Defense manufacturing thrives in America because it has to. Much of this work is regulated under ITAR or DFARS , requiring domestic sourcing. The DOD doesn’t regulate what primes do internally or where they source non-critical components, but ITAR creates a protected market for American shops. Capable manufacturers cluster around aerospace and defense because it’s the one sector where they can’t be undercut by subsidized foreign competition.
Commercial manufacturing, like consumer goods, industrial equipment and robotics, gets hollowed out because those markets have no equivalent protection. Following COVID, we became acutely aware of supply chain vulnerabilities: single sources for raw materials, component supply chains completely monopolized by our adversaries.
America has no globally-competitive robotics OEM. We don’t have the supply ecosystem to build one here either. Not because we don’t allocate investment capital—it’s concentrated in defense and aerospace (NASA/AUST mostly). Our allies and adversaries accomplished this by investing in the technology robotics requires: AI, actuators, sensors, miniaturization. Japan, Germany, China, Korea and Taiwan are leading this charge .
Breaking this cycle requires diversifying demand beyond defense. The levers I discuss below all point toward the same goal: creating commercial and industrial demand to rival the defense sector for talent, capital and capacity. When shops can build for multiple markets instead of depending on primes, we get the OEMs we’re missing.
A Blueprint for Reindustrialization
Re-industrializing requires alignment across five systems: Education, Government & Policy, Industry, Capital and Technology. Each system is misaligned today. The rest of this explains how, and what it will take to realign them.
Education
Reindustrialization requires people who know how to make things. Right now, the pipeline is broken.
I open-sourced a list of tech and trade schools in the US. Go nuts ( https://trade-schools.pages.dev/trade-schools/ )
Our education system rewards credentials over competence, pushes kids toward four-year degrees for jobs that don’t exist , and makes it nearly impossible for practitioners to teach the trades that do. It’s absurd that a 30-year toolmaker with tribal knowledge about precision machining can’t teach high school students without a master’s degree in education.
Of course, there are exceptions. Schools like Minnetonka High and Hawthorne High have built skilled-trades tracks in manufacturing, robotics and design. But this trend of declining trades education is broadly true across America .
While the relative percentage of unfilled jobs in manufacturing is not that far off from other industries, it doesn’t count the 60,000 manufacturing companies we lost between 1998 and 2010, which is arguably detrimental in countless other indirect ways. Millions of Americans drown in student loan debt from four-year degrees. Machinist roles sit unfilled all over the country, welders are aging out faster than we’re training replacements and controls engineers are so scarce that manufacturers are bidding them away from each other.
Germany trains about 60% of its young people through apprenticeships. We train 0.3% . Sacrificing shop class was a mistake. The Department of Labor’s massive 2025 investment in skilled trades apprenticeships is a move in the right direction. These programs create debt-free pathways to six-figure careers while companies get workers trained on the exact equipment they’ll use.
Key Levers
Expand USDOL Apprenticeships . Reward employers who train and retain workers. Focus on manufacturing-adjacent fields, like maintenance, controls, tooling, materials, where the skills shortage is most acute. Pay shops to take on apprentices and give them tax credits for every worker they retain past two years. GE Aerospace and Home Depot are doing a good job building talent pipelines.
Reward trade and tech schools. Tie public funding to placement rates at local manufacturers. If a community college can place 80% of its CNC students into paying jobs within six months, allocate more funding. High schools need to bring back shop class, this time teaching students CAD/CAM, DFM, and modern manufacturing. Trade and tech schools are workforce infrastructure but the social stigma around them is killer .
Credential reform. Let practitioners teach. Treat “time in trade” as a valid teaching credential, or at the least create a pathway for those who are interested in donating their time. Most states offer alternative CTE teaching routes for industry experts , but they vary widely and are unnecessarily bureaucratic. A machinist with 10,000 hours on a five-axis mill knows more about manufacturing than any academic.
Government & Policy
Thanks to Ian Fletcher for the inspiration on this one. I highly recommend reading his recent book !
Government is powerful but slow. It subsidizes innovation and regulates production, then wonders why nothing scales. Policy gets made in silos while our trade partners coordinate to subsidize manufacturers, manipulate currency and block our companies from their markets. We need a unified industrial strategy that cuts friction domestically and enforces reciprocity globally.
While it’s true markets don’t organize themselves for national advantage, ham-fisted intervention creates its own distortions. Imports are cheap and the dollar is powerful for more than one reason. I used to think that devaluing the currency would be the way we bring manufacturing back… but a weaker dollar would hammer the 70% of our economy that’s consumption-driven while marginally helping exports. The dollar’s strength reflects that global capital trusts US institutions . Germany and Japan proved you can manufacture at scale with strong currencies by competing on precision and speed, not price.
The real issue is that we stopped investing in capability . Currency policy is a lever, meant to be used tactically. We can’t pretend devaluation alone would incentivize a rebuild of industrial capacity. We need the productivity gains first, because nobody wants to buy expensive mediocre stuff.
Alexander Hamilton understood this in 1791 - his Report on Manufactures argued that infant industries need government support to compete with established foreign producers. Henry Clay built on this with the American System in the 1820s: tariffs, infrastructure investment, and strategic coordination to create a unified economic strategy. We need a similar approach today built for a developed economy pushing the technological frontier, not protecting dying industries.
@will_alverson testifying earlier this month on AI in manufacturing.
Industrial policy works when it’s targeted and patient. In the 1960s-1980s, Japan used strategic tariffs and subsidies to dominate television manufacturing. They protected domestic component makers (semiconductors, circuit boards, display tech) while subsidizing production scale-up, capability gains and export financing. By 1985, Japanese companies controlled 90% of the global VCR market and most TV production. American brands still existed, but they were assembling Japanese components.
Today, SBA already uses higher loan guarantees as an export lever : International Trade and Export Working Capital loans under the 7(a) program can carry a 90% guaranty for export-oriented borrowers, compared to 75–85% on standard 7(a) loans. Triple down on that, but tie it to measurable capability improvements like OEE gains, FPY targets and throughput. Instead of subsidizing all production, we can measurably subsidize better production. SBIR is an effective example: 15,000 firms received Phase II grants between 1992-2005.
In addition to the above, consistency is key. One unfortunate product of the US system is that we love to change the rules. A Michigan industrial recycling company dealing with EPA air quality regs, OSHA machine guarding standards, state environmental permits, local fire codes, and ITAR compliance might have to hire a team of consultants to figure out how new rules contradict each other every other year.
Industrial Policy Task Force. Create a permanent cabinet-level body, led by someone with credibility across industry, tech and policy, that brings together the aforementioned stakeholders to align incentives. Japan has MITI (now METI), South Korea has EPB/MOTIE, Singapore has EDB . Make it the entity that owns Reindustrialization as a national KPI the same way the Fed owns inflation or Treasury owns debt management.
Reform the SBA. Let the SBA provide equity financing and growth loans to advanced manufacturers ( like many other advanced economies ). Develop mechanisms to finance purchase orders, as net-120 payment terms and overdue invoices kill working capital for small suppliers. When a $5M shop lands a $500K contract with Boeing, they shouldn’t need to take a loan at 12% interest to cover cash flow while they wait to get paid. The SBA, or another organization, should bridge that gap.
Market Access Charge (MAC) . Levy a small fee on foreign capital inflows to rebalance currency and trade deficits then reinvest the proceeds in domestic production. Call it whatever you want, but this is reciprocity. Other countries use currency policy to advantage their exporters. We can counter it without sparking a trade war. A 1% fee on inflows could generate billions for manufacturing infrastructure, workforce training, and supply chain development.
Condition FDI on reciprocity. Require fair trade, data, and labor reciprocity and apply industry-specific thresholds. If China restricts US ownership in their semiconductor or aerospace sectors, mirror it. If the EU blocks a US acquisition in energy or defense, block theirs. Reciprocity isn’t punishment. But we have to be strategic: automatic retaliation risks supply chain hostage situations when 30% of our inputs come from countries we’d be restricting. Use reciprocity as a negotiating tool to open markets, not just close ours.
Public demand guarantees. Long-term government procurement contracts for critical goods: semiconductors, medical devices, clean energy hardware, aerospace components. JP Morgan recently announced $1.5 trillion in financing for critical industry, proof that when government signals long-term commitment, private capital follows. Scale this model across sectors.
R&D and local tax credits for SMEs. Expand and simplify access for small and mid-sized manufacturers. A 50-person shop in Michigan developing a new stamping process is doing R&D, but rarely claiming credits . It probably shouldn’t require a CPA firm to navigate the forms either. Wisconsin’s manufacturing and ag credit lets producers write off capital investments and R&D expenses at the state level. Other states should copy this: use tax policy to support the critical industries they want to grow.
Invest in MEPs (Manufacturing Extension Partnerships). MEPs like MAGNET help small manufacturers adopt new tech, improve processes, and expand markets. According to NIST’s FY 2023 impact survey , every $1 of federal funding for the MEP National Network generated about $24.60 in new sales and $27.50 in new client investment, along with cost savings and over 100,000 jobs created or retained. Scale up their funding, and find ways to rank and reward states on small-manufacturer growth, productivity gains and export wins. Make it a race to the top.
Shot-clock permitting and waivering. Enforce a 6-12 month maximum review timeline for industrial, energy, and logistics projects. If you can’t decide in a year, the answer is yes. Permitting delays cost money, jobs, and momentum. CEQ’s own analysis of environmental impact statements between 2010 and 2018 found that the average federal EIS took about 4.5 years to complete, with a median of 3.5 years and a quarter of projects taking more than six years. Some even longer .
Federal-state harmonization. Create uniform minimum standards for safety and labor regulations. If you meet federal OSHA requirements, you’re automatically compliant at the state level, without need for duplicate inspections. Wisconsin and Ohio shouldn’t have different machine guarding standards for the same CNC mill. State-level experts will have specific environmental or other standards.
Regulatory stability windows. Empower a bipartisan task force in each agency to lock in rules over multi-year periods. The cost of regulatory uncertainty is highest where firms’ investments are irreversible and gestation periods long, exactly the profile of major manufacturing upgrades. If EPA updates emissions standards, manufacturers get a few years before the next change. This lets shops amortize compliance costs and plan investments.
Government should not run factories. It’s on the government to find ways to subsidize strategic industry and positive externalities. The best industrial policy is the one that removes friction, enforces reciprocity and gets out of the way.
Industry
Manufacturing operates in constant constraint. Tight cash, thin margins, unpredictable demand, supply disruptions, workforce turnover, regulatory overhead. A broken machine can idle a $50M line. A supplier delay can kill a contract. Offshoring and PE consolidation have hollowed out the 10-100 employee shops that used to anchor regional economies.
The core problem is demand uncertainty. Shops can’t invest in capacity , equipment, or training without confidence that orders (and dollars) will materialize. Commercial manufacturing gets undercut by subsidized foreign competition. The only reliable demand comes from regulated industries, so capable manufacturers cluster there. Think aerospace/defense, medical, food. This concentrates risk as well: SMBs depend on a few large customers, compete on lowest bid for lower volume production, and lose the ability to serve commercial markets.
Earlier this year in Kalamazoo, Michigan.
Industry can control execution. Manufacturers that achieve world-class throughput, vertical integration, and workforce development become magnets for demand. They build capability that makes them indispensable.
Throughput-first discipline. Track OEE (Overall Equipment Effectiveness) , FPY (First Pass Yield), and cycle times. Most shops know revenue, few know uptime or scrap rates. Measure how much you make, how fast you make it, how often it’s right the first time. A 2% reduction in scrap, 5% boost in uptime, 10% cut in changeover time all compound into 20-30% productivity lifts over a year.
Incremental vertical integration. Bring high-value steps like machining, finishing, assembly and tooling in house to shorten lead times and control quality. Outsourcing might save 5% on cost, but it adds weeks to delivery timelines. A fabricator bringing powder coating in-house can cut lead times from 10 days to 2. Arb.
Commercialization culture. Bridge the gap between R&D and scalable production. Too many innovations die in the “valley of death” between TRL 4 (lab validation) and TRL 7 (production prototype) . Build testbeds, pilot lines, shared facilities where small manufacturers can trial new tech without betting the company. Partner with local universities, labs and other manufacturers to create spaces where you fail fast and learn cheap.
Workforce development as competitive advantage. Partner with DOL, local tech schools, and corporations to fund on-site apprenticeships. A machinist apprentice costs less than a bad hire, stays longer, and learns your processes from day one. More than 80% of shops investing in apprenticeships report lower turnover and faster ramp times .
Strategic hardware adoption. Most “AI for factories” or advanced robotics won’t solve the real bottlenecks. Simple changes to SOPs might be more impactful than buying the fanciest robot. Think first about repetitive tasks, data reporting, machine monitoring, etc before buying equipment because it’s cutting-edge.
Capital
Finance has become one of the bigger bottlenecks in scaling productive capacity. It rewards speed and speculation, not patience and productivity. (Some) Private equity loads manufacturers with debt, strips assets, flips in 3-5 years. VC may seed innovation but their time horizons are not much longer. Patient capital funding 10-year builds and tolerating two years of negative cash flow is pretty tough to find these days.
Americans have $43 trillion in retirement accounts and control tens of trillions more in equities, yet we see barely a trickle of this capital flowing into domestic manufacturing because industrial assets aren’t bankable without guarantees and because some PE models optimized for value extraction.
Financial engineering isn’t inherently bad. Using debt to upgrade a stamping line or fund a new facility is productive. Using debt to pay dividends while gutting R&D is rent-seeking. A 40-person machine shop running on QuickBooks and a whiteboard sometimes needs outside expertise to scale , or uncover new ways to do so. There doesn’t seem to be any institution that rewards the former and penalizes the latter. Outright penalizing PE firms is dumb, but incentives need to be recalibrated so capital flows toward building, not stripping.
If a shop wins a $2M order, they’ve got $800K in working capital tied up for 24-36 months before getting paid.
Anhthu Nguyen’s recent proposal of Industrial Base Treasuries shows how government-backed guarantees at 3.5-5% reserve ratios could unlock $3+ trillion in industrial financing—the same model FHA used to build America’s housing market, now applied to factories.
If you want to buy back stock or issue debt, capital is cheap. If you want to build a factory, you’re fighting uphill. The incentives are backward.
Industrial loan guarantees. Banks aren’t structurally built to underwrite long-duration, asset-heavy manufacturing loans, as regulatory capital rules make them expensive to hold. So even with good orders, manufacturers look “unbankable”. But when the government backstops 50-80% of the downside, the equation changes, enabling lenders like JPMorgan to deploy far more of their recently announced $1.5T credit book into real-economy projects. This is exactly how SBA’s export-oriented 7(a) programs work today: a modest guarantee triggers 7-10x private lending . De-risk the loan, keep banks on the hook for part of it, and credit finally reaches the shop floor.
Tax-free long-term holdings. Zero capital gains on productive assets held 10+ years. If you buy a factory, run it well and keep it productive for a decade, you shouldn’t pay taxes when you sell. This shifts incentives from flipping to building and maintaining.
Preferential inheritance treatment. Follow Germany’s model : if you keep a family business in manufacturing, you get favorable estate tax treatment. It keeps capital locked in production instead of forcing liquidation to pay taxes. Too many second- and third-generation manufacturers sell when the founder dies to cover estate taxes. Fix that, and you’ll keep more factories in family hands, where the incentives align with long-term stability.
Industrial equity vehicles. Insurance companies, pension funds, and endowments are sitting on trillions in capital, yet almost none of it reaches domestic manufacturing. OECD data shows these pools are overweight financial assets and underweight real-economy infrastructure. The SBA’s SBIC program is one of the only mechanisms designed to push private capital toward industrial firms, but it’s structurally aimed at SMBs and is far too small to provide liquidity for $50-200M manufacturing projects. Until there’s a vehicle that can absorb institutional-scale checks and channel even 2-3% of those portfolios into industrial build-outs, the liquidity gap will remain.