Wednesday, June 6, 2012

Do We Have the Moxie?

By Keith McDowell

America in decline – it’s the message of our time broadcast daily by cable news pundits and re-enforced by a dysfunctional Congress, a polarized electorate, an unstable economy, and a barrage of negative campaign ads courtesy of Citizens United. And in the midst of the continuing sluggish rate of job growth and a recent drop in market indices, it was with some trepidation that I decided to turn off the television, prop up my feet, and singularly bore myself to death for a day or two by reading the ultimate soporific tome:  The Competitiveness and Innovative Capacity of the United States, compliments of the U.S. Department of Commerce and the National Economic Council, January 2012.

Commissioned by the COMPETES Reauthorization Act of 2010 and reviewed by a brand new USDoC Innovation Advisory Board (IAC) of fifteen members, I can’t say that the lengthy report lightened my spirits, but it nonetheless serves as a well-written and reasonably quick read of our Nation’s status at the 10,000 to 30,000-foot level and the steps being taken to “startup America.” Sadly, I’m likely to be one of the few people ever to read the document.

The essential theme or premise of the report from my perspective – it’s up to you to check me out by also reading the report – is as follows: government must invest for the “public good” in the three pillars of innovation in order to cover under-investment by the private sector and to generate competitive strength as a nation through the resulting growth of private-sector  jobs – especially in manufacturing – while “ensuring that both established firms and entrepreneurs in the private sector have the best possible environment in which to innovate.”  The three pillars of innovation are research, education, and infrastructure.

Each pillar of innovation along with the state of manufacturing is dissected in a separate chapter based on a network concept of the innovation ecosystem as displayed in the following figure which is reproduced from the report.

While each chapter and the report as a whole provide an excellent review of underlying statistics and data – often painting a rather gloomy picture for the current trend lines, the issue of evaluation metrics once again arises with both proxy metrics, such as the number of patents and research publications, and economic accounting, such as the size of the labor force and number of jobs, serving as the primary measures.

Beginning with research and noting that innovation is driven by the R&D process, the report emphasizes that government investment over many decades was undertaken without commercial applications in mind and for the “public good” – especially for basic research since it usually has no direct profit incentive to drive investment by the private sector. My own personal “grade” for the research pillar is an A-minus headed for a B-plus as I’ve documented in other articles.

The education pillar deserves a grade of “B” from my perspective, not as bad as often claimed by media pundits, but headed down due to a failure of government support for education and a switch to state-assisted instead of state-supported, not to mention the anti-government stand of the Tea Party movement and its negative effects on education. The DoC report focuses specifically on the STEM issue as an exemplar of the bigger story in education. While an adequate survey of the situation, I personally continue to be unconvinced that the so-called shortfall of STEM workers is of the magnitude portrayed by many. I’m happy to be convinced otherwise, but hard data seems to point to a different conclusion as I’ve described elsewhere.

In terms of the infrastructure pillar, everyone agrees that America gets a grade of D-minus! Although the information technology sector which includes fiber, cable modems, satellites, cell phone towers, and the like is doing better than other sectors, we are nonetheless behind the curve on wireless, cloud computing, and access to open innovation – to name a few critical areas. And what about the need for a “smart grid” for the transmission of electricity and a movement toward clean energy systems? If anything, America’s grid systems are in significant decay with bridges, sewer, and water systems getting an “F” from me and others. As noted by the report, “our society has affirmed repeatedly that we would like all of our citizens to have access to certain technologies” meaning principally telephone, electricity, roadways, and now high-speed Internet, but that could be changing in the current political climate.

Without investment by both the government and the private sector in the three pillars of innovation, America is in trouble since “Innovation is the key driver of competitiveness, wage and job growth, and long term economic growth.” And that means we need a healthy manufacturing sector propelled by a new thrust in advanced manufacturing innovations including advanced technology products. The Obama Administration’s Advanced Manufacturing Partnership is a good start in that direction.

But competitiveness defined as a “set of institutions, policies, and factors that determine level of productivity of a country” requires much from us. At the national level, we must balance protecting intellectual property and its transfer against the competing element of accelerating commercialization into the marketplace. The America Invents Act of 2011 is a step forward and new experiment for the nation in that regard. At the local and regional level, research universities must serve as the anchor for co-located industry, start-up companies, business incubators, entrepreneurs in residence, “proof-of-concept” centers with funding, innovation centers, and communities of innovation all connected and bound through public-private partnerships collaborating in a regional innovation cluster.

Nothing on the global scale required for America to compete happens overnight and it can take years to recognize a return on the investment, even if the return for government is in the form of the “public good.” But government must invest and the planning laid out by the Department of Commerce report is a very positive step. The question of the day for us is simple: do we have the moxie to get this done? 

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