Your grandfather was right. In addition, my husband says that the way to create wealth is to take raw materials and add value to them, i.e manufacture a product that you can sell for more than the cost of the raw materials plus the labor. I think he's right on that one too.
Unfortunately our manufacturing base is slipping away. Last month I was in Chicago for a week at National Manufacturing Week (the largest trade show in America -- at least it used to be). It was down about a third in attendance and in number of booths from last year and only half of what it was 3 years ago. But there were more foreign firms represented there than ever, and they were aggressive in their marketing. Mexico brought a booth for every state in their country (about 25 booths, I estimate) and they were filled with bright, young professionals anxious to take our work home.
We are a contract manufacturer doing specialized electronic assemblies for OEMs, but my computer was filled with emails, when I got back from the show, from Asian and SE Asian companies wanting me to subcontract my customers' to them. In fact, one of my competitors had a booth right across the aisle from me, and we were astonished to find that they do not do ANY of their own work. They subcontract it all out.
Gives me an idea for a new marketing piece, "When you let a contract, do you really know who is building your assemblies? Come over to our shop and watch your assembly be built every step of the way! We will never send your precious assembly to Fly-by-nite Contracting in Huey's garage when you are not looking."