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Efficiency is Key

A little economics for your morning read, so grab a bagel, a hot cup of Joe, and let me regale you with a little info on comparative advantage.In 1817, David Ricardo first described the concept of comparative advantage. The nuts and bolts of this concept is that you should focus on producing what you can produce at a lower marginal cost than another country, or when you narrow the scope to the micro level, another person or business entity.

The message I really want to convey in this blog, is KNOW WHAT YOU'RE GOOD AT and CAPITALIZE on it. Typically what we enjoy doing is something we excel in doing. America, for instance has long been trending toward a service economy from a manufacturing economy. Some people get a little disheartened that nothing is made in the USA anymore, but I'm here to tell you, FEAR NOT. If you're not outsourcing your manufacturing, you may not be taking full advantage of this highly competitive global market. First, consider the success of your business. If your business thrives, you can employ more people, thus creating jobs for Americans. These employees of yours will not be manufacturing anymore like the days of old, BUT you can focus on web development, marketing, logistics, etc… The USA no longer enjoys a comparative advantage in manufacturing (largely due to high labor costs and high overhead costs). This doesn't mean, you can't take full advantage of the global market.

Let us assume that you're an aspiring clothing designer. It would be in your best interest to design locally, while manufacturing your garments in a poorer country where they will be happy to receive the work, and have the skilled labor to carry out your order. These less developed nations have a comparative advantage in the manufacture of textiles. Once you receive your high quality shipment of fashionable clothing, you can market your product, set up a distribution center, and sell your product. As you can see, the goal doesn't need to be made in America, it needs to be SOLD in America.