🌏 AI, reshoring and development
Globalization is a concept humanity has lived with for more than 2,000 years, and helped propel forward trade and industry in the last 200 years. But a combination of factors — from global pandemics to supply shocks brought about by conflict — are threatening to unwind millennia of development. According to Bank of America, the number of mentions of reshoring in earnings calls from American firms has increased some 150% since last year.
It’s clear then, that the idea of moving away from a globalized world to a smaller horizon is taking hold among executives. The drivers of this include:
Firms seeking China+1 strategies, that is to add geographic diversity to their supply chains, and the wider move towards a “friendshoring”,
Rising transport costs and risks (see EV#477 about the exponential asymmetry of modern warfare and how that bears down on supply chains),
Growing costs in emerging markets as standards of living rise meaning places that used to be the factories of the world now aim for a higher calling,
And, of course, the increasing power and capability of AI and automation.
Because not only are mentions of reshoring skyrocketing. You’ll have already seen multiple variations on this chart:
A strong headwind is blowing against trade and integration, towards bringing supply chains and service relationships closer to home. Business leaders are making a calculated bet that Black Swan events are happening more often, and the old ways that worked for hundreds of years will get fractured again sooner, rather than later.