I’m often asked how Re:Build Manufacturing got its start. Like many businesses’ origin story, it contains personal and professional elements. The personal aspect goes back more than thirty-five years, when Jeff Wilke was growing up in Pittsburgh, which was beginning to decline as an industrial mecca, and I was in high school. We both were concerned about the degradation of the U.S. manufacturing base (yes, this is what I was thinking about as a teenager!), which at that time was struggling to compete with Japan. No one was worried about China as a competitor in the late 1980s or early 1990s. In any case, ultimately those changes led us both, and several other early and current Re:Builders, to apply (and miraculously be accepted) to a graduate program at MIT called, “Leaders for Manufacturing.” The idea of the program was to equip engineering-centric professionals with the management and leadership skills necessary to drive improvements in the U.S. manufacturing ecosystem.
Fast forward to 2020. Jeff had spent the previous twenty years building the consumer business at Amazon, including leading a revolution in the way that direct-to-consumer distribution worked. In short, Prime exists because of Jeff and his team. Prior to those two decades at Amazon, the idea that you could order basically anything online and find it at your doorstep the next day, or the day after, was a fantasy. Now, of course, it’s table stakes for the entire industry. While Jeff was playing an essential role building Amazon, I was working first as the president of several small U.S.-based machine tool companies, and then spent about sixteen years managing industrial turnarounds for the private equity firms Charterhouse Group and American Capital Strategies.
What we both experienced, Jeff through his engagement with a wide array of domestic and international supply chains, and me through trying to revive struggling engineering and industrial firms, was the ongoing deterioration in the capabilities and scale of the U.S. industrial base. Our view was that this was happening for two reasons. First, there was a shift by corporations toward very short-term thinking, motivated mostly by private equity companies seeking a quick return on their investment. The second was investors’ decision to break the longstanding compact with workers that providers of capital could make substantial returns while providing solid job opportunities and, by extension, the opportunity for American workers to advance their careers and personal lives over decades of productive work. The primary manifestation of both these causes was, and remains, offshoring production to other countries.
Offshoring allows a company to rapidly improve its profits by shifting production wholesale to countries with low labor costs and little regulation. In the short-term it reduces a company’s asset base, meaning that it doesn’t need as much capital to operate. The benefits, however, are typically short-lived. Offshoring, particularly to China or other countries with little protection for intellectual property, often results in seeding new competitors. The process of manufacturing one’s own product informs future design and engineering work. When production is handled exclusively by someone else, it becomes harder and harder to maintain excellence in product design. Soon the company is dependent on others not only for production, but for design and engineering, too. Ultimately, this leads to a lack of competitiveness, reduced sales and profits, and lower employment. The impacts of this cycle on local communities are well-known. We can see the imprint of deindustrialization across America, from Lowell, Massachusetts, to Pittsburgh, Cleveland, Detroit, and beyond.
Jeff and I founded Re:Build and have been supported by a great group of investors and Re:Builders because we all understand that the degradation of America’s industrial capabilities, and specifically the manufacturing of engineering-centric products, is a huge problem for the United States. Replacing manufacturing jobs with low-wage service jobs means that more and more U.S. workers have fewer opportunities for challenging work and are hindered in their ability to build meaningful skills, become more productive, and experience substantial wage growth over years or decades on the job. Eventually the American dream becomes out of reach and people lose confidence in the American system.
Further, when people believe that their economic future is less certain, it becomes harder for citizens to meet in the public square of ideas, to compromise, and to govern. We are seeing this play out in real time as Americans in blue and red states become increasingly polarized and are turning to ever more alarming forms of populism. This is a dangerous reaction to a loss of confidence that the U.S. model works for the average American. On top of this, the lack of a strong manufacturing base inhibits our ability to adequately defend our country or its values of democracy, personal freedoms, and capitalism at home or abroad. Many of the countries we have chosen to outsource production to are at odds with the American way of life and would like to shift the world order to autocratic and restrictive forms of government.
While there was moderate concern about this over the past thirty-plus years, the COVID-19 pandemic crystallized these fears. Supply chains failed and the impact of decades of neglecting our local engineering and manufacturing companies became starkly apparent. The U.S. was unable to produce or procure basic goods such as medical protective equipment. For the first time in my career, investors were not only willing, but enthusiastic about financing the rehabilitation of the U.S. industrial base. They saw that doing so was important and could be profitable.