LearnVest’s office is based in New York City, and many of us live in Brooklyn, an area often the butt of hipster jokes worthy of the new TV show Portlandia.
Like many cities across America—and maybe the area where you live—Brooklyn has farmers’ markets, hand-crafted peanut butter brittle, artisanal pickles and plenty of kombucha. Now, a new article from The New York Times argues that, instead of teasing these purveyors of gourmet beef jerky, we should consider them the vanguard of a changing U.S. economy.
Artisans such as these, the story argues, may actually be the future of capitalism.
As Adam Smith, the philosophical father of capitalism, suggests in “The Wealth of Nations,” one of the keys to moving forward as an economy is to increase specialization. In other words, it’s less efficient to have a bunch of people manufacturing pins from start to finish, using multiple machines to do so. Production would move more efficiently if one group focused only on making the body of the pin with one machine, and another group specialized in creating the pinheads using another machine.
Similarly, in the context of the “craft economy,” the U.S. may no longer be the best place to make a little of everything. Rather, writer Adam Davidson argues, America may find more success by homing in on specialized items and doing them really well.
China’s Got ‘Cheap’ Covered … Should We Specialize in Expensive?
Under the present world order, the U.S. probably isn’t going to win at the game of cheap labor or hyper-efficient industrial manufacturing. But what if we stopped trying to compete on the cheaper items and started specializing in the more niche ones with a lesser chance of getting out-priced?
In other words, if buying organic kombucha is your thing, you’re probably just the sort of thoughtful consumer who would seek out the artisanal variety, not the cheaper version bottled in mass factories using child labor and shipped across an ocean. If you’re prepared to spend your money on gourmet beef jerky, price is obviously not your primary motive—if it were, you’d be buying Slim Jims.
This is one way to avoid competing directly with cheaper products from low-wage nations, because the high-end and cheaper varieties fill totally different needs. If entrepreneurs can successfully plug specialized needs for less price-sensitive customers, there should be a lot of room to develop the American economy alongside burgeoning developing nations’ industries.
And, as Davidson argues, plenty of American workers are trading in higher-paid but less meaningful jobs for the opportunity to create, and bottle, the best proverbial pickle. “The hot field of happiness economics argues, rather persuasively, that once people reach some level of comfort, they are willing—even eager—to trade in potential earnings at a lucrative but uninspiring job for less (but comfortable) pay at more satisfying work,” he writes.
The Hope of a Specialized Future
According to him, the hope is that, “As China and other emerging nations develop, the United States can stay on the profitable forefront, delivering specific high-tech parts to their factories and the latest upmarket foods to their middle class.” Even so, Davidson concedes that such a craft economy could be more subject to the whims of fancy and fate, as some products fall out of fashion or become commodities that could be made overseas more cheaply.
Where This Leaves Us
Certainly, the rise of China and other developing economies may vastly shift the dynamic of global trade—just look at the impact of Chinese inflation on the rest of the world—but we see interconnectedness as part of the new world economic order. That’s the same reason the whole world has been watching the European debt crisis so closely. What happens in one corner of the world reverberates everywhere.
One of the best ways to protect yourself as an individual investor is to ensure that your investments are appropriately diversified. A good mix of investments means that if one link in the chain falters, your whole portfolio won’t.
If you have your own entrepreneurial aspirations (whether jerkey or jam), check out our Entrepreneurship 101 series for guidance from successful entrepreneurs who have been there, done that—and given LV the inside scoop.