Manufacturing and the Making of Prosperity

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“I think essential that we don’t continue to be hollowed out as an industry, where even though the assembly of the final products, the printing of the manuals, the bow on the shipping carton gets tied here in the US, most of the dollars don’t get sent across the shores. […] I think that the real problem has not been with Wall Street, it’s been with the management of our industry. It’s been with people not being willing to take responsibility for the underlying component technologies, and thinking that we could give that responsibility to others, and survive in just a successful of a fashion, which is not true. […] The problem is that in many cases, the management of our companies, is not from an engineering or manufacturing background anymore, and may not appreciate the dependence we have on these underlying technologies.”

― Interview with Steve Jobs in 1991

To understand the importance of the manufacturing in market economy. First of all, we must understand how the wealth is created. The essentials of wealth creation is exchange of goods, and more speciafically tangible goods. The essence of economic development is to expand the scale of such exchanges of goods, unleash productive capacity, and enrich society’s material wealth.

Imagine three neighbors in a small village.

Person A grows apples.
Person B catches fish.
Person C makes clay pots.

One day A wants fish, B wants a pot, and C wants apples. Without money, they trade directly: A gives apples to C, C gives a pot to B, and B hands fish to A. No coins are printed, no banks involved, yet real value has changed hands. This is the bottom logic of the economy: physical production is exchanged for other physical production.

Now bring money into the picture. Instead of bartering directly, they agree to use a token, say a single coin. That coin does not create value by itself, it only makes the exchange smoother. The real source of value remains the apples, the fish, and the clay pot. In other words, money is a tool for circulation, not the origin of wealth.

The Impact of Productivity #

What happens if Person A, through better tools, grows twice as many apples? Likewise, if B invents a new fishing net and catches more fish, everyone benefits because more goods exist to exchange. Suddenly they have more to trade, which means more pots and more fish can circulate in the village. Productivity increases the size of the pie, and money simply adjusts to match the higher level of trade. When agriculture advanced with better plows or irrigation, societies could support more people and create surplus. When manufacturing improved through machines and factories, output multiplied and living standards rose. Productivity is what turns the same hours of human labor into far greater material wealth.

The improvement of productivity is the fundamental driving force of social progress after the Industrial Revolution, which often brings far-reaching impacts, not limited to the economic level but also influencing social structures, culture, and even individual lives. It can be viewed from several perspectives:

Economic growth: Higher production efficiency means that the same amount of resources can create more products or services. For example, a new fishing net and catches more fish, an automated assembly line can double the number of cars produced in an hour, and generative AI accelerates content creation, directly driving GDP growth.
Improvement in living standards: When production costs fall, the prices of goods and services usually decrease accordingly, allowing people to buy more and better-quality products with less income. For instance, as production efficiency increases, the prices of household appliances gradually become more affordable, enabling ordinary families to enjoy convenience.
Transformation of labor patterns: Mechanization and intelligent technologies often replace parts of repetitive labor, thereby freeing the workforce and allowing more people to engage in research, services, and creative industries with higher added value.
Deepening of social division of labor: The higher the productivity, the more complex the industrial chain and the finer the division of labor. This not only improves overall efficiency but also promotes specialization. A clear example is the semiconductor industry, one of the most intricate global supply chains in existence.
Cultural and value shifts: In the long run, improvements in productivity change people’s pace of life and their understanding of happiness. After the Industrial Revolution, leisure and education gradually became needs shared by the majority rather than privileges of a few.

The Problem of Industrial Hollowing-Out #

Not all outcomes are positive. Higher efficiency can lead to structural unemployment, such as automation in the textile industry causing large numbers of skilled workers to lose their jobs. If social security and retraining systems are inadequate, tensions may intensify. More recently, as efficiency rises and industries automate, advanced economies often experience a gradual decline in manufacturing capacity as capital and talent shift toward finance and digital services, causing imbalance between the industrial and service sectors.

Global GDP reached an unprecedented level, surpassing $100 trillion in 2024. With so much nominal wealth circulating in markets, many have begun to forget the most basic principle of economics: real prosperity comes from producing tangible goods and services. People start being less pragmatic about value creation itself, mistaking speculative gains in cryptocurrencies, virtual assets, or useless services for genuine productivity. When an economy drifts too far from its manufacturing base, it risks losing not only jobs and skills but also the structural resilience that real industries provide.

Why Real Production Matters #

In the modern world, we talk a great deal about finance, AI, and even digital assets. Many people have become almost impracticable and utopian in believing that digital currency represents the future of our economy. For many of them, sustainability or digitalization can almost mean anything nowadays, but what they should know it these concepts all should stand on the shoulders of the real economy. Agriculture feeds us; manufacturing provides housing, clothing, machines, and tools. Without these, finance has nothing to measure or circulate, and digital tokens would represent nothing. After all, people eventually cash out and purchase tangible assets to live their life. If AI or digital assets cannot directly or indirectly contribute productivity and improve social welfare, they should be regarded not as progress but as distraction. No technology has intrinsic worth unless it deepens the efficiency of real production and the well-being of individuals who live by its results. I think this is the fundamental principle for judging whether an AI company possesses genuine intrinsic value during the current enthusiasm for AI. Many of the AI startups I see are not about wealth creation, but about wealth redistribution.

The economy of the 21st century has become so large and diversified that people can now experiment with instruments, which carries no intrinsic value. We should know this is possible only because agriculture and industry have created such abundance that societies can afford experiments far removed from the real economy.