SOURCE: INVESTMENTWATCHBLOG.COM

Diversification is a broadly accepted investment strategy designed to hedge against risk. If you invest all your money in one company or one industry, you flirt with disaster during an economic downturn. Does the US have a diverse economy? Our new map reveals that the answer is both yes and no.

We found the numbers for our visualization from GoBankingRates, which analyzed 2017 US Census Bureau data to determine the value of each industry’s products. They defined industries using Harmonized System (HS) codes from the World Customs Organization. We color-coded each state based on its most lucrative sector, and we added a nice logo and the dollar amount for easy reference. The output is an intuitive map with a few surprising, and a few predictable, results.

Let’s start by pointing out the industries you might expect to predominate in certain states. Michigan, Ohio, and Indiana significantly benefit from car manufacturing in and around the Motor City. South Carolina and Alabama also stand out as states with a strong automotive presence since they are destinations for in-sourcing as car makers look for cheaper (non-unionized) labor. A few states surrounding Nebraska are major meat producers, which shouldn’t catch anyone by surprise, given the region’s strong agricultural bent. Alaska and Maine likewise benefit from a substantial fishing industry. Nevada is the only state where the most profitable industry involves accommodations and food service. Viva Las Vegas!

There are a number of surprises on our map, too. Who knew that the most profitable industry in Kansas is aerospace ($2.6B)? The same goes for Arkansas, Georgia, and Kentucky. Or that Wyoming generates more business for chemical companies ($951B) than any other state? And take a look at all the states colored purple, where machinery and mechanical appliances predominate—who knew that Florida, Idaho, and Illinois have so much in common?

The overarching takeaway from our map is a little unnerving. We read all the time about how diversification is the best guard against risk. And based on our map, the US economy is diverse in some regions but not very diverse in others. In fact, 27 out of 50 US states are led by only three industries (machinery, aerospace, and mineral products), accounting for just under $1.7T in value. That means that when certain segments undergo technological disruption or economic downturns, it can disproportionately impact sections of the country in ways people don’t expect.

Data: Table 1.1