A BusinessWeek slideshow highlights some key areas where Mandel sees the failed promises of innovation, like cancer treatments, fuel-cell powered cars, and gene therapy. But wait, is Mandel really saying that slightly better auto and medical technology could have cushioned the subprime meltdown?
Look to the exports, he says. Consider the global tech products market. In 1998 we ran a $30 billion trade surplus in advanced tech; by 2007 we ran a $53 billion deficit. Imagine the billions lost in that swing, and that's just one market. In his words:
[Overall] exports stagnated, stuck at around 11% of gross domestic product until 2006, while imports soared. That forced the U.S. to borrow trillions of dollars from overseas. The same surges of imports and borrowing also distorted economic statistics so that growth from 1998 to 2007, rather than averaging 2.7% per year, may have been closer to 2.3% per year.In other words: the United States has become a bit like General Motors, writ large: we've hit an innovation wall and now we don't have enough to sell that the world wants to buy. Today we're borrowing money to plaster over the gap.
Where Mandel's explanation comes up short is: What are these innovators doing wrong? And if we're failing as innovators, how do you design a macroeconomic policy to unleash ideas? Certainly, Mandel would agree that spending more on science and technology education is one way to encourage more college graduates to go into the scitech innovation world. But what else? We could ease rules on drug trials to roll out more products, but it might not be in the consumers' interest to have lax FDA policies. We could have government-sponsored contests, like the $300 million prize John McCain offered for a working electric car. We could build in more tax breaks for research in certain preferred medical fields. What else? Open question, really.
The figure a few years ago was that the Department of Defense employs half the engineers in the U.S..
Encouraging more people to go into technology is the long-term solution. Freeing up the ones we have by cutting the defense budget would be a much quicker solution.
Hey that's a good stat. But you can imagine what would happen if we cut the defense budget, lost a boatload of engineers and had something like the armored vehicle fiasco happen in the aftermath. People would say: This is what happens when you cut the defense budget -- we can't afford basic armor for our soldiers. And that could kill defense budget reform for years. Maybe better to start trimming away special expensive long-term military projects first, right?
The DOD funds a lot of things that could have important commercial applications. For instance, some interesting fusion power devices are being funded by the DOD and nano-technology. I do research in military medicine and we partner with university and commercial hospitals.
Scientists and engineers go where the money is. For years, hedge funds hired lots and lots of physicists, mathematicians for high finance jobs. If a scientist or an engineer can make more money doing IT or selling insurance (s)he is going to do that, so trying to create a glut of unemployed smart people is not going to work. I would argue it already exists.
I'm not buying it. His argument basically is a bunch of anecdotes, isolated datapoints, and dubious endpoints: Pharma stocks are down! Death rate improvements have slowed! Wages increased very slowly from [height of dotcom boom] to [beginning of worst recession in 40 years]! Organogenesis failed to fulfill its promise immediately!
We're talking about the decade that saw Google, the iPod, iPhone, iMac - heck, it was probably Apple's most innovative decade in its history - highspeed internet, blogs, the Segway, the Kindle, the Wii, the Nintendo DS, the Sony PSP, Tivo, DVDs, Blu-Ray, PDAs, cell phones, NetFlix, digital cameras, Pixar, giant flatscreen HD TVs, the optical mouse, WiFi, wireless broadband, hybrid cars, space tourism (!!), the introduction of modern treatment for AIDS, etc.
Give me a break. This isn't analysis, it's just scaremongering. What, should I pay attention to the bearded, wild-eyed guy on the corner with the sign proclaiming that the end o' the world is nigh?
I'm not entirely buying in to the article, either, but Bob... the iPhone is swamped by Nokia/Symbian internationally. The PSP and Blu-Ray were Sony's brainchildren. The Wii belongs to Nintendo Most PDA's and Smartphones are not designed or made by American companies (RIM/Blackberry is Canadian, HTC Chinese, Nokia Scandinavian), I'm not even sure of an American company that makes/designs televisions anymore, and on and on. Your list is not exactly inspiring of American ingenuity. We've got drug companies and Apple and Google (and still Microsoft), but your list isn't remarkably inspiring. The argument isn't that the world is in a creative glut so much as we're not leading it.
Fair point; but still. Leave off the foreign innovations, what does that leave:
Google, Apple, Microsoft, Amazon, NetFlix, Pixar's movies, treatment for AIDs, Napster, Mozilla Firefox, the Kindle, Craigslist, Twitter, Facebook, Wikipedia, the development of GPS, the Xbox and Xbox 360, the optical mouse, eBay, PayPal, the Java programming language, Adobe Flash, MapQuest (and Google maps, of course), the wheeled suitcase, the Roomba, cordless drills and other tools, hand sanitizer, FedEx, Expedia, etc.
I leave open the possibility that, against the apparent evidence, the US is lagging in innovation. But Mandel's article didn't show it.
I think repealing Sarbanes-Oxley would help. Part of the reason we have so much less innovation is because it's harder for high-tech start-ups to access the capital markets.
Most of the innovation that the US enjoyed in the past came from our manufacturing base, like the former huge manufacturing base we had with computer related goods in the 90s. The innovation was what companies used to try to get a jump on their competitors, whether via improved product or a new class of product.
Some simple examples of the above include the Mr. Coffee drip coffee maker for the home and the Bostitch nail gun for the construction industry. Those two seem like simple things, but they revolutionized their respective markets. I could go on and on about any number of innovative products created in the US in the past.
As the US walked away from its manufacturing base, most of which was consumer related, there was less reason to be innovative. Product cost became king and that meant foreign companies would have the advantage. Eventually, American companies gave up the game. One earlier poster mentioned TVs. Every single American TV maker exited the business or closed. Today, all innovation comes from foreign TV makers for the simple reason that there are no American ones.
Even our small computer industry has been reduced to 3: HP, Dell, Apple. Of those only Apple has been able to make a good buck off the computer sales due to its differentiation via OSX.
The reason for innovation in the medical area is because large profits are still possible. If the profit potential is reduced by such things as price controls on prescription meds or rationing of the use of very expensive diagnostic tools, you will see a major reduction in that innovation.
Back in the late 1960's about three quarters of the research and development being done in the USA was paid for by the federal government -- much of that for miitary and space related programs. At the moment about ONE quarter of US R&D is paid for by the feds. Also. the percentage of the US economy devoted to R&D spending has dropped slightly, from about 2.7% to 2.4%.
The notion that vast numbers of engineers and scientists can somehow be "released" to civilian enterprises by defense cutbacks is ... dubious.
And actually, quite a lot of those people were laid off over the years by the government and went into non-R&D jobs or early retirement because the civilian economy didn't want them. It isn't quite as bad as being an auto-worker, but engineering is a layoff-prone career. Did you ever meet an engineer who wanted his kids to be engineers?
The discussion here is focused on high end, high profit consumer products: electronic devices, new medical treatments and home appliances. All good, but there's a whole 'nuther world of industrial procucts related to innovation in the processes of producing goods rather than in the goods themselves.
The real action in innovation is in developing products that improve the process of production or provision of goods and services.
Drew Weiss