1) People had thought that globalization would mean that high-income countries would remain at the top of the value chain and design products and low-income companies would produce the simple things and manufacture. But, he claims, there are network effects to manufacturing. Those countries low on the value chain, once they learn how how to build things, are better equipped to rise in the value chain and replace companies completely.
2) He claims that companies became addicted to cheap labor from overseas, and it's stifling productivity gains. He brings in the analogy of how higher minimum wage tends to motivate fast food restaurants to develop better kiosk technology.
In summary he claims that there are two issues:
1) People had thought that globalization would mean that high-income countries would remain at the top of the value chain and design products and low-income companies would produce the simple things and manufacture. But, he claims, there are network effects to manufacturing. Those countries low on the value chain, once they learn how how to build things, are better equipped to rise in the value chain and replace companies completely.
2) He claims that companies became addicted to cheap labor from overseas, and it's stifling productivity gains. He brings in the analogy of how higher minimum wage tends to motivate fast food restaurants to develop better kiosk technology.