Friday, September 01, 2006

Are We Losing the War For Innovation? Part IV

“The next time there’s a moon shot, don’t expect the United States to take the prize. Over the past century, Americans have become accustomed to winning every global battle that mattered: two world wars, the space race, the Cold War, the Internet gold rush. Along the way, Americans have enjoyed unprecedented prosperity and live lives that were the envy of the rest of the world.”

That was the opening paragraph in the first of an ongoing recent series of articles in U.S. News & World Report titled “Can America Keep Up?: Why so many smart folks fear that the United Sates is falling behind in the race for global economic leadership.” Interestingly, this U.S. News article could easily have substituted the “Innovation” headline above, since the cautionary tale outlined in the U.S. News series is so similar to that described in the “Innovation” series. This becomes obvious when the next paragraph of the U.S. News article is read:

“It was nice while it lasted. Today, while unemployment remains low, home values continue to surge and fearless American consumers keep spending beyond their means, the land of the free is slowly, but unmistakably, yielding advantages earned over decades to foreigners who work harder, expect less, and, often are better educated. Taken piecemeal, these shifts are virtually imperceptible to most Americans. But business leaders, top academics, and other experts—especially those who travel abroad frequently—increasingly see America as a nation that has pulled into the slow lane, while upstarts in a hurry out-hustle Americans in the race for technological, industrial, and entrepreneurial supremacy. ‘Every one of the early warning signals is trending downward,’ frets Intel Chairman Craig Barrett. ‘We’re all fat, dumb, and happy, which is one reason this is so insidious.’ ”

The danger that the United States is losing its principal position is escalating as a result of inferior educational standards, and a distinctive drop in student interest in scientific and engineering careers. This is typified by a comment by General Electric Chief Executive Jeff Immelt in a January speech, “We had more sports exercise majors graduate than electrical-engineering grads last year. If you want to be the massage capital of the world, you’re well on the way.”

As described in Business Week, “General Motors, America’s biggest industrial company is a poster child for America’s waning influence, as it staggers toward possible bankruptcy.” The article continues, “...while GM’s woes may represent an ‘old company’ hangover, the same patterns are emerging in modern technological areas too. Many of the leading breakthroughs in semiconductor development, telecommunications, nanotechnology, and Internet services once dominated by U.S. companies—are steadily migrating overseas. [You’re welcome to throw stem cell research into that pot.] American businesses are seeking legions of talented technical specialists abroad, partly because they’re cheaper but also because they’re far more plentiful than in the United States.”

If you think that the outsourcing of jobs to India is limited to workers in low skilled call centers, or to Chinese engineers who do low level copycat work, here is a startling statistic—half of IBM’s 190,000 engineers and technical experts now reside overseas. This movement away from American workers is explained in part by David Calhoun, Vice Chairman of General Electric, “When we have to look for deep technical talent, not just 10 or 20 people—especially in high technology—the places you can go to and know you can hire somebody every day are India and China.” The force driving this movement is best expressed by the CEO of a software consultancy with offices in the United States, India, and China who observes, “When you’re in college watching the Super Bowl and drinking beer, you’re counterpart in China is on his fourth book.”

As a consequence of the United States dominating scientific, engineering, social, and economic disciplines, history has already identified the 20 th century as the “American Century.” It is becoming distressingly obvious that the title for the 21 st century will be, if not the China Century, at least the Asian Century.

As reported in The New York Times in February, a study reported to the National Academies, the nation’s leading advisory groups on science and technology, suggests that more and more research work at corporations will be sent to fast-growing economizes with strong education systems like China and India. (My underline.)

That this trend is accelerating is validated by the total number of foreign invested research and development (R&D) centers in China, surging from 200 four years ago to about 750 today. It should be noted however, that one knowledgeable observer discounts that number, pointing out that perhaps as few as 50 percent of these centers are doing genuine research. Nevertheless, it has been established that certainly many, such as those run by General Electric, IBM, Motorola, General Motors, Oracle, Intel, and Proctor and Gamble are indeed working to develop innovative products for global distribution.

China is not the only country with its foot to the innovation pedal. India’s list of multinationals with R&D aspirations is equally impressive although not as plentiful. Nevertheless, with a well-educated English speaking population, it is not surprising to see companies such as General Electric, Microsoft, IBM, Cisco, Intel, General Motors, Astra Zeneca, Motorola, Texas Instrument, and Hewlett Packard vying for India’s best and brightest. (Note the overlap with companies in both countries.)

American multinationals are not alone in establishing R&D positions in China. European and Japanese companies are also already deeply involved—companies such as Bayer, Siemens, Philips, Novartis, SAP, Volkswagen, and Honda for example.

In an environment where national boundaries are no longer viewed as an impediment to a company’s goal of seeking out and employing intellectual talent, there are many who view intellectual capital as the most important asset of any company. It is not surprising therefore, to see whole countries support their intellectual capital base with funds to optimize that value. Obviously, both China and India are pursuing this path, but one small country is doing so at a heretofore-unparalleled level. You can read about Singapore’s remarkable effort to establish a scientific infrastructure like no other in an upcoming article.

Unfortunately, the United States has been lagging in efforts of this nature as well as falling behind in providing encouragement to foster an interest in the science and engineering fields. This has been well documented in a report originally requested by the Senate Committee on Science, Engineering, and Public Policy. It was produced by a 20-member committee appointed by the National Academies that included Nobel Prize winners, CEO’s, university presidents, and former presidential appointees, and published in October, 2005.

Unlike most reports of this nature, particularly those produced in our nation’s capital, this one, titled “Rising Above the Gathering Storm: Energizing and Employing America for a Brighter Economic Future,” certainly must have been considered unique since neither campaign fund contributions nor other nefarious inducements were necessary to get the Bush administration to sit up and pay attention. Of course the fact that it was strongly supported by an influential group of Republican executives such as Craig Barrett, chairman of Intel, John Chambers, CEO of Cisco Systems, Norman Augustine, former chairman of Lockheed Martin, and Charles Vest, former president of MIT, enabled the group to set up meetings with Dick Cheney and Josh Bolten, director of the Office of Management and Budget to discuss how best to implement the report’s recommendations.

The report, begins, U.S. “workers in virtually every sector must now face competitors who live just a mouse-click away in Ireland, Finland, India or dozens of other nations whose economies are growing. Having reviewed the trends in the United States and abroad, the committee is deeply concerned that the scientific and technical building blocks of our economic leadership are eroding at a time when many other nations are gathering strength. We are worried about the future prosperity of the United States. We fear the abruptness with which a lead in science and technology can be lost and the difficulty of recovering a lead once lost—if indeed it can be regained at all.”

In addition to emphasizing the dangers and severe negative aspects inherent in our educational system and the dismal overall performance of American students in general, especially when compared to those in other, even less developed countries, several key recommendations were made. The report emphasized the following among the top priorities:
  • Annually recruiting 10,000 science and math teachers by awarding four-year merit-based scholarships, to be paid back through five years of K-12 public school teaching.

  • Strengthening the math and science skills of 25,000 other teachers through extracurricular programs.

  • Creating opportunities and incentives for many more middle school and high school students to take advanced math and science courses by offering, among other things, $100 mini-scholarships for success in exams, and creating more specialty math-and-science schools.

  • Increasing federal investments in long-term basic research by 10 percent a year over the next seven years.

  • Annually providing research grants of $500,000 each, payable over five years, to 200 of America’s most outstanding young researchers.

  • Creating a new Advanced Research Projects Agency in the Energy department to support creative out-of-the-box transformational energy research.

It was reported that even those in the group who met with the Bush administration leaders were surprised when the concepts recommended in the report ended up as key features in the State of the Union address in January. President Bush said, “…to keep America competitive, one commitment is necessary above all. We must continue to lead the world in human talent and creativity. Our greatest advantage in the world has always been our educated, hardworking, ambitious peoples—and we’re going to keep that edge. Tonight I announce an American Competitive Imitative (ACI) to encourage innovation throughout our economy, and to give our nation’s children a firm grounding in math and science. ”

He then proposed to double the federal commitment to the most critical basic research. (See #4 above) Another proposal was to train 70,000 high school teachers to lead advanced-placement courses in math and science (See #1 above), and to bring 30,000 math and science professionals to teach in classrooms. He also spoke about providing permanent tax credits for research and development.

In a rare show of bi-partisanship, key members of both the Senate and the House of Representatives quickly developed legislation that recognized the desperate need for implementation of many of the proposals outlined in the National Academies report, and in the president’s ACI program

Indeed, following up on his ACI program, the president subsequently requested for his 2007 budget $5.9 billion for targeted research and development and $380 million for education programs, pro-business tax policies and skilled worker training programs. The president commented that, “My 2007 budget recognizes the importance of innovation to our economic future—fostering and encouraging all the components that make our economic engine the envy or the world.”

While it remains to be seen whether even this amount of funding is adequate (or that legislation will be passed) to fully resolve the immediate problem, even greater quandaries exist that might prove the greatest stumbling block to creating a permanent solution—a most contentious, and perhaps irresolvable challenge—the implications for progress in education as a consequence of a growing minority population and questionable cultural attitudes. This is the sensitive topic for next month’s article, the last in this series.


At 1:18 PM, Anonymous Anonymous said...

After perusing your extensive analisis of an area I know nothing about,I now understand why I could whip you in tennis.When I became aware of the extensive interests you induldge in I became aware that you could not get to a drop shot just over the net,as you were concentrating on the economic problems that plague this country
Had you given your all to tennis, I was done for.Best regards to selma Ben


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