Thursday, September 10, 2009

Liminal Economics

Yesterday, I posted about how new forms of media could change our understanding of community. Stemming from a reconceptualization of home is a new economy. It will underpin what I have termed Globalization III. A reduced appetite for risk will introduce some mountains on the Flat World map. For example:

Farouk Shami, a Palestinian-born hairdresser who built a $1 billion manufacturing company around a popular line of hair irons, is moving all of his production of hand-held appliances from China to a sprawling new factory here.

The move flies in the face of conventional wisdom, which says gadgets like this are best made in a low-cost country. But, he says, outsourcing has led to a loss of control over manufacturing and distribution.

"We'll make more money this way -- because we'll have better quality and a better image," says the 66-year-old, who says his company, Farouk Systems Inc., spends about $500,000 a month fighting counterfeits, most of which he says originate in China. The company collects the fake products and tracks the source, and then brings action in China to shut down illegal producers.

Mr. Shami figures having production under his nose will help him control quality and inventory, and also fight the fakes, since imported irons will automatically be suspect. He sells in 104 countries, but the U.S. represents over 60% of the company's sales.

"I think you're starting to see more manufacturers rethinking outsourcing," says Daniel Meckstroth, an economist at the Manufacturers Alliance/MAPI, a public policy and research group based in Arlington, Va., calling a June speech by General Electric Co. CEO Jeffrey Immelt, where he said that overseas outsourcing had gone too far and that U.S. companies needed to expand domestic production, a "bellwether of what's happening in manufacturing."

Among consumers there is an increasing interest in the intimate knowledge about the place of production. The collapse of global finance has catalyzed the trend and resulted in a clamor for a new landscape for doing business. All markets, including venture capital, are undergoing a traumatic restructuring. Where are the Blue Oceans of Globalization III?

Chinatown. I'll explain tomorrow after the Burgh Energy Report.

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