Are We Losing the War For Innovation? Part I

The following was sent to me as an email. It’s supposed to be a joke. It may be humorous, even amusing, but it isn’t funny:

“Last week I purchased a burger and fries at McDonald’s for $3.58. The counter girl took my $4.00 and I pulled eight cents from my pocket and gave it to her. She stood there, holding the nickel and three pennies. While looking at the screen on her register, I sensed her discomfort and tried to tell her to just give me two quarters, but she hailed the manager for help. While he tried to explain the transaction to her, she stood there and cried.”

The email continued: “Why do I tell you this?—because of the evolution in teaching math since the 1950’s. Here is how it progresses: Teaching math in 1950: A logger sells a truckload of lumber for $100. His cost of production is 4/5 th of the price. What is his profit? Teaching math in 1960: a logger sells a truckload of lumber for $100. His cost of production is $80. What is his profit? Teaching math in 1970: a logger sells a truckload of lumber for $100. His cost of production is $80. Did he make a profit? Teaching math in 1980: A logger sells a truckload of lumber for $100. His cost of production is $80 and his profit is $20. Your assignment—underline the number 20. Teaching math in 1990: A logger cuts down a beautiful forest because he is selfish and inconsiderate and cares nothing for the habitat of animals or the preservation or our woodlands. He does this so he can make a profit of $20. What do you think of this way of making a living? Topic for class participation after answering the question—how did the birds and animals feel as the logger cut down their homes? There are no wrong answers. Teaching math in 2006: Un ranchero vende una carretera de Madera por $100. El cuesto do la produccion era $80. Cuantos tortillas se puede compar?”

While some might find this offensive, there is at least a kernel of truth in the story. It is illustrative of the insidious decline in the traditional standards intrinsic to the American educational system. Here are just a few of the results cited by the National Science Board during a Congressional hearing in February: 68 percent of America’s fourth graders performed below math proficiency levels for their grade; in math, the performance of American 15 year olds earned a ranking of 21 out of 30 industrialized countries; in the U.S., 32 percent of undergraduate degrees were awarded in science, technology, and engineering fields. In Japan however, 64 percent of degrees awarded were in those fields.

Unfortunately, the deeper one digs into the subject of educational deficiencies in our country, the more depressing the details—some of the numbers are stunning. According to a March 2006 report from the Alliance For Excellent Education, “Nationally, only about two thirds of the students who enter 9 th grade will graduate with a regular diploma four of five years later. That’s almost 1.3 million students who didn’t graduate from U.S. high schools costing the nation more than $325 billion in lost wages, taxes, and productivity over their lifetimes.” The significance of this number is more easily understood when average annual earnings by amount of education are viewed as follows—those with only Some High School: $18,734; High School Diploma: $27,915; College Degree: $51,206; Advanced Degree: $74,602. Since a worker with a college degree earns almost twice that of a high school graduate, and almost three times that of a high school dropout, it is obvious that there is an education premium.

Based on the correlation between education levels and earnings potential, it can only be concluded that it is more likely for a child born into a minimally educated (and therefore lower income) family to be mired in a similar cycle than one born into a higher socioeconomic environment. This is essentially the conclusion reached by Steven D. Levitt, the economist author of the highly acclaimed New York Times best seller, Freakonomics. He writes, “A high socioeconomic status is strongly correlated to higher test scores, which seems sensible. Socioeconomic status is a strong indicator of success in general—it suggests a higher IQ and more education—and successful parents are more likely to have successful children.” Turning that sequence 180 degrees raises the issue of poverty breeding lower levels of education, that in turn breeds poverty, that in turn breeds lower levels of education, and thus a vicious, seemingly never ending circle is formed.

In an op-ed piece in the New York Times last August, Bob Herbert wrote, “First the bad news. Only about two thirds of American teenagers (and just half of all black, Latino, and Native Americans teens) graduate with a regular diploma four years after they enter high school.” As if that isn’t depressing enough, Herbert continues, “Now the worse news: of those who graduate, only half read well enough to succeed in college.” That helps explain the statistics showing only 52 percent of those entering private colleges, and an even lower 42 percent of public college enrollees complete a degree program in five years.

If you are unlucky enough to have children or grandchildren in South Carolina high schools, only slightly more than half (50.7 percent) of the original freshman class will graduate. The national average graduation rate from high school is an astonishingly low 68 percent—and if you are comfortably ensconced in your belief in our “wonderful” educational system here in Florida, the drop-out rate is second only to South Carolina, with a graduation rate of a mere 53 percent. Can you imagine the implications of almost half of a freshman high school class dropping out before the end of four years? That is a staggering statistic.

This past March, the Bill & Melinda Gates Foundation issued a report titled, “The Silent Epidemic: Perspectives of High School Dropout rates.” This report is unique because the dropout problem was described from the viewpoints of the true experts—the dropout students themselves. Much of it dealt with the reason why these students made the decision to drop out and concluded that “the central message of this report is that while some students drop out because of significant academic challenges, most dropouts are students who could have, and believe they could have, succeeded in school.” In fact, a majority had grades of “C” or better.

Nearly half said a major reason for dropping out was that classes were just not interesting and they were bored. Is this a teacher, and/or a curriculum problem? Nearly 7 in 10 responded that they were not motivated or inspired to work hard, and 80 percent did only one hour of homework a day. Yet, two thirds said they would have worked harder if more was demanded of them. Ironically, 70 percent were confident they could have graduated if they had really tried.

The most distressing aspect of the Gates’ report is this statement: “The decision to drop out is a dangerous one for the student. Dropouts are much more likely than their peers who graduated to be unemployed, living in poverty, receiving public assistance, in prison, on death row, unhealthy, divorced and single parents with children who drop out from high school themselves.”

A problematic high school educational system is only part of another impending crisis that was detailed in an op-ed piece by Thomas Friedman in The New York Times more than two years ago. He pointed out that “…the percentage of Americans graduating with bachelor’s degrees in science and engineering is less than half of the comparable percentage in China and Japan, and that U.S. government investments are flagging in basic research in physics, chemistry, and engineering. Anyone who thinks that all the Indian and Chinese techies are doing is answering call-center phones or solving tech problems for Dell customers is sadly mistaken. U.S. firms are moving serious research and development to India and China.”

Mr. Friedman then describes the consequences of the above problems. “The bottom line: we are actually in the middle of two struggles right now [in 2004]. One is against the Islamist terrorists in Iraq and elsewhere, and the other is a competitiveness-and-innovation struggle against India, China, Japan, and their neighbors. And while we are all fixated on the former (I’ve been no exception), we are completely ignoring the latter. We have got to get our focus back in balance, not to mention our budget. We can’t wage war on income taxes and terrorism, and a war for innovation at the same time.” (My emphasis.) Here we are, two years after that was written, and if anything the situation is getting worse—we are still mired in a war in Iraq, newly involved in a virtual war for oil, and as described by Mr. Friedman, severely troubled by a continuing war for innovation.

Elaborating even further, Mr. Friedman cites a comment by Craig Barrett, the CEO of Intel that might blow you away. He noted that an international science competition sponsored by Intel every year drew 50,000 American high school kids. On the surface that sounds pretty good. However, Barrett then said, “I was in China and I asked them how many kids participated in the national fair [and ultimately in the Intel finals]. They told me 6 million kids.” Does that provide you with some sense of the magnitude of the problem and the implications for the future status of the United States in the global economic order?

If you have read Thomas Friedman’s best selling book, The World Is Flat: A Brief History of the Twenty First Century, you quickly recognize the correlation between a superior educational system turning out first class students and the economic and social success of a country. With a problematic educational success rate in the United States, and a seemingly less educated population, unlike the 20 th century that was known as the American Century, the 21 st century seems destined to become, if not the China/India Century, then certainly the Asian Century.

Here are a few examples taken directly from the U.S. Department of Education website, www.ed.gov:

1. American 15-year-olds ranked 24 th out of 29 developed nations in mathematics literacy and problem solving on the most recent Program For International Student assessment [PISA] test.


2. Only 7 percent of America’s 4 th and 8 th graders reached the “advanced” level on the 2003 Trends in International Math and Science Study [TIMMS] test. By contrast, 38 percent of Singapore 4 th graders and 44 percent of 5 th graders did.


3. While only 44 percent of U.S. high school students studied a foreign language in 2002, learning a second or third foreign language is compulsory for students in the European Union and elsewhere.


4. More than 200 million children in China study English, while only 24,000 elementary and secondary school children in the U.S. study Chinese. Less than 8 percent of undergraduates in American universities take foreign language courses.


5. Advanced Placement Calculus students ranked first in the world on the TIMMS test; U.S. students overall ranked second to last.

All of these deficiencies, and more, are creating a major, perhaps insurmountable obstacle to the United States maintaining its heretofore-premier position in the War For Innovation. Next month’s issue will provide additional insight into this complex problem.

A History Lesson: What Might Have Been

There are an uncounted number of definitions of the word “history,” but the one I like best was offered by Ambrose Bierce, a rather sardonic journalist/columnist/editor/ novelist, who lived from the mid-1800’s to the early 1900’s. He defined history as “an account mostly false, of events unimportant, which are brought about by rulers, mostly knaves, and soldiers, mostly fools.” What’s that saying?—If the shoe fits… Then there is the definition by Aldous Huxley who wrote, “That men do not learn very much from history is the most important of all the lessons history has to teach.”

This seeming obsession with history was ignited when the gas pump hit the $50 mark as I was filling up my car. It was then that I recalled a piece of legislation from over 30 years ago that, had it gained approval in the Congress, might have, at the very least, ameliorated our “addiction to oil.” How much of this, your history lesson for the day, do you remember? A part of this quiz relates to the fact that certain names have been purposely omitted to test your memory. See if you can guess who they may be.

In 1975, the Vice President of the United States, Nelson Rockefeller, developed legislation, ultimately offered to Congress involving the creation of a $100 billion government corporation to be called the Energy Independent Authority (EIA). [Adjusted for inflation, this would be the equivalent of about $250 billion today.] With $25 billion to be provided by the government, and the rest to be raised through a special bond issue, the plan was to provide loans and guarantees to private companies in order to encourage the development of new domestic energy sources. This plan was envisioned as an oil related Manhattan Project, or Man on the Moon effort to establish America’s oil independence.

The ultimate fate of this legislation must be viewed in its historical context, and it is also necessary to become familiar with the political scene at the time. The historical record used here, and the facts in the quotes below are taken from two presumably objective and non-partisan sources: one is the official website of the United States Senate (Google: United States Senate Art and History> Nelson Aldrich Rockefeller); the second is the Gerald Ford Presidential Library’s “Encyclopedia of the Presidents.”

Although there is a long run-up to it, our story begins (and I quote) “In 1974, after Richard Nixon’s resignation, Gerald Ford assumed the presidency and prepared to appoint his own vice president; Rockefeller and George Bush headed his list of candidates. Bush, a former Texas congressman and Chairman of the Republican National Committee, was the safer more comfortable choice. But Ford preferred a balanced ticket. Weighing the assets and deficits, Ford acknowledged that Rockefeller was still anathema to many conservatives. Still the new president believed that the New Yorker was well qualified to be president, would add executive expertise to the administration, and would broaden the ticket’s electoral appeal if they ran in 1976.”

When Ford announced Rockefeller’s appointment to the vice-presidency, “the media applauded the selection. The New York Times called it a ‘masterly political act and Newsweek congratulated Ford for adding a ‘dollop of high style’ to his ‘homespun presidency.’ Time observed that President Ford felt secure enough to name a dynamic personality as vice president. Ford basked in his accomplishment [and] in November, when reporters asked him what he considered the top achievement of his first hundred days as president. Ford replied, ‘Number one, nominating Nelson Rockefeller.’”

The article then describes the contentious confirmation process that greeted this nomination of an individual that many Republicans considered not conservative enough. Nevertheless, Ford pushed both houses for approval and on December 19 th, 1974, after both houses agreed, Rockefeller was sworn in. “Gerald Ford told the nation that he wanted his vice president to be ‘a full partner,’ especially in domestic policy.” The article then explains that “…during the months while Rockefeller’s nomination stalled in congress, Ford’s new White House staff [headed by…] established its control of the executive branch and had no intention of sharing power with the vice president and his staff.”

The article continues by describing how “Rockefeller envisioned taking charge of domestic policies the same way that Henry Kissinger ran foreign policy in the Ford administration. Gerald Ford seemed to acquiesce, but [his] chief of staff… [and his deputy]…objected to the vice president preempting the president. When Rockefeller tried to implement Ford’s promise that domestic policymakers would report to the president …[Ford’s chief of staff] intervened with various objections.”

A key domestic issue at the time was America’s increasing dependence on foreign oil. This is described in the second source, the Gerald Ford Presidential Library’s Encyclopedia of the Presidency. It states, “The power of OPEC, almost everyone agreed, made it essential that the United States become ‘energy independent,’ or at least greatly reduce its dependence on foreign oil. [Does this sound familiar?] Ford in his 1975 State of the Union message proposed to approach this goal by decontrolling the price of domestically produced oil and increasing fees on imported petroleum, coupled with a windfall profits tax on oil companies. The result, Ford conceded, would be even higher gas and oil prices, but domestic production would be stimulated. The Democratic leadership in Congress rejected Ford’s plan...Arguing between the two sides continued through 1975, with Democratic members of Congress from the oil-producing states generally supporting the administration.”

It was at this point that Vice President Rockefeller entered the fray with the proposal to establish the Energy Independence Authority (EIA). In order to lend maximum significance to his plan, Rockefeller sought out a major legendary figure to lead his proposed organization, the famed scientist Edward Teller, known as “the Father of the Hydrogen Bomb.” However, “EIA was hotly opposed within the administration by [William] Simon [the Treasury Secretary], [Alan] Greenspan, [head of the Federal Reserve], [James] Lynn [Director of the Office of Management and Budget], and more quietly by …[Ford’s Chief of Staff] on the grounds that it would be enormously costly and violated principles of free-market economics. Ford nevertheless submitted the plan to Congress, but did almost nothing to promote its enactment.” As a result, the legislation never passed.

There is a sad epilogue in the historical records. The Senate website has a sub-headline titled, “Ford’s Biggest Political Mistake.” It states, “In the fall of 1975, President Ford determined to run for election and appointed Howard ‘Bo’ Callaway of Georgia as his campaign manager. Ford did not consult Rockefeller until the day he announced the choice. Callaway immediately began spreading the word that Rockefeller was too old, and too liberal, and too much of a detriment to the ticket. Some administration officials believed that …[Bush’s Chief of Staff] wanted the vice-presidential nomination for himself and hoped that this humiliation would encourage Rockefeller to remove himself from contention.”

At that point, Rockefeller “announced that he would not be a candidate for vice president the following year. Although he publicly insisted that he jumped without having been shoved, privately he told friends, ‘I didn’t take myself off the ticket, you know—he asked me to do it.’” The article continued commenting that Ford later said, “Dumping Rockefeller embarrassed Ford as much as it did Rockefeller. It was the biggest political mistake of my life,” Ford confessed, “And it was one of the few cowardly things I did in my life.”

Here is where the “What if...” or the “What Might Have Been” phrase comes into effect. With $100 billion available under the tutelage of Edward Teller, what could have been accomplished? Perhaps the technologies of the time were not advanced enough to produce much progress. On the other hand, the benefits of Ethanol, for example, were well enough recognized that in that very same year, 1975, Brazil embarked on its very successful program that has resulted in its position of oil independence today. If Ford’s staff had been less concerned about political posturing, might we be where Brazil is today?

As the gas pump hit that $50 mark I couldn’t help but conjecture, “What Might Have Been.”

If you have not yet guessed the name of Ford’s Chief of Staff, it was Donald Rumsfeld. His deputy was Dick Cheney.