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Conventional wisdom says that technological progress is over. The collapse of Silicon Valley Bank has sent a chill through the investment community, and the technology sector has seen a correction as interest rates have risen. But I would argue that we are about to enter a new golden age of technological innovation and investment. The difference is that this time, it’s not about the consumer, but about the industry.
Three-quarters of the world’s $100tn GDP is made up of traditional legacy industries such as manufacturing, transport, logistics and healthcare – which have yet to be profoundly transformed by technology. That’s now becoming part of what venture capitalist Greg Reichow, a partner at Palo Alto firm Eclipse Ventures, calls an „industry evolution.”
Two weeks ago, I visited one of Eclipse’s 70 portfolio companies outside of Boston. Vulcanforms, an additive manufacturing company, takes the model of Henry Ford’s River Rouge factory, in which steel went in at one end of a production line and finished cars came out the other, and many industries use 3D printing to form metals and make parts.
VulcanForms can produce tens of thousands of parts for a jet engine a day, then switch to making medical implants or consumer electronics parts within hours. „Knowledge of how to build the part in software,” says Reichow. This allows a digital manufacturer like VulcanForms to become a River Rouge for many industries. Large industrial customers can focus their core R&D, sales and marketing rather than manufacturing, which in theory can now be outsourced not to hundreds of suppliers in dozens of countries, but to individual factories wherever customers are located.
It’s a big change, and manufacturing is a part of it. Coupled with the digitization of the industry, the willingness of most companies to increase resilience in their supply chains has increased local manufacturing capacity in strategic sectors. A legislative push to tackle climate change could create a new technological boom in the industrial sector. Countless investment funds are being raised to support the development of high-tech start-ups in advanced manufacturing, mobility, energy and other areas related to re-industrialization.
„Everything we see around us, except the food we grow, is manufactured,” notes MIT professor John Hart, co-founder of VulcanFarms. „Now, post-pandemic, many forces are converging to reshape how we make things. We understand the need for agile supply chains. We realize how important manufacturing is to our economy and national security. Third, we must decarbonize, which will require the development of new manufacturing systems. .
With sectors like industry, power and transport responsible for 70 percent of carbon emissions, changing the way we make things will be critical to meeting climate change targets. Printing metal layers, for example, requires a fraction of the energy and carbon load to cut parts from a block of solid material.
Technology investors see huge opportunities in change. Former White House supply chain policy adviser Elizabeth Reynolds — who spent the past two years sorting out port backups and infant formula shortages — has left the Biden administration, which plans to plow up to $100 million a year into an investment fund. As start-ups focused on industrial transformation. This includes things like additive manufacturing and materials science, but also sensors, robotics, AI and software to help digitize a vast number of small and medium-sized industrial companies in America.
Now, those companies are very closed. But in the world envisioned by the likes of Hart, Reynolds, and Reichow, consumers will be as connected as they are to the Internet, sharing resources and information seamlessly on a new industrial smart grid. Production and growth opportunities are obvious. „It’s not about filters that allow cats to become dogs,” says Reynolds. „The technological innovation around re-industrialization is so different, we’re on the cusp of a real revolution in that area.”
In fact, I think we may be at a tipping point like in 2007. Back then, the introduction of the iPhone ushered in a huge boom in consumer technology. The „app-economy” has evolved and changed the entire way we communicate, work, play and shop. Business is about to go through something similar, a long-awaited change accelerated by secession, pandemic and war in Ukraine. This is a change that will change the nature of our economy. That’s a big reason why I’m still long the Nasdaq, even though there’s still a big short-term correction ahead.
Whether the new industrial revolution will be an unemployment revolution is an unresolved question. Tech talent is beginning to migrate away from consumer software and into industry. But AI, combined with the dramatically reduced human labor requirements of high-tech factories, has reduced the number of people needed to do this work. However, it is worth noting that the utility economy created types of work that did not exist before. If we’re lucky, a new industrial revolution will do just that in ways not yet imagined.
This article has been edited to correct a typo by Elizabeth Reynolds
