🌏 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.