Reprint from my PD&D column

This recession has everyone, and I do mean everyone, looking for answers. I have been harping, as have an increasing number of real pundits, about the role of innovation in facilitating recovery.  The president has been pushing a sustainable, innovative and green technology culture to help fuel the future and beat back the recession, and I applaud these important efforts, but I will once again stand on my soapbox to say that our future as leaders in innovative technology must go beyond the ever-popular “green” and “granola” projects.Reprint from my PD&D column

Technological innovation has fueled this country for over a hundred years,  and it distinguishes this society from the rest of the developed world. It’s the very substance of our unique culture, our mixing pot gene pool, and it’s the only thing that can save us from the inexorable homogenization of globalization. For as globalization neutralizes one countries’ population, natural resource or location advantages, it is the “cultural” make up of that society that will allow it to thrive in the long term.

China, for example, has enormous population resources, is increasingly well educated, offers a lower pay scale and standard of living, and has vast numbers able to work for less. The OPEC states have huge energy reserves and capital that comes from that abundance. For today at least, Singapore is a central, stable and predictable gateway from the Far East to the West.

However, all of these advantages are temporary.  China’s standard of living will rise, as will the expectation of its populace. The oil will run out, or its impact will be mitigated as we rush toward global warming solutions, and the pivotal role of such hubs as Singapore or Malaysia will be reduced as globalization increases the prosperity of South and Central America and, inevitably, Africa.

Once globalization has worked its stirring of the pot, only education, technological sophistication, and culture will allow one country to win out over another in the “standard of living” game.

Consider that the U.S. no longer has a population willing to work cheap, we don’t have easily accessible natural resources, and we continue to fall behind in education, particularly in the very technical areas that drive innovation. What’s left?  It’s our risk-taking,

our belief in second, third and fourth chances. It’s our love of invention and inventors that can save us from this recession and station us to stand against the homogenization of globalization.

There are so many pundits now declaring that this country’s economy can be resurrected by innovation that even I am impressed. But many wonder whether we have lost the ability to innovate, whether the fundamentals of our innovative culture are gone.

A  recent article in Business Week by Michael Mandel, “The Failed Promise of Innovation in the U.S.,” suggests that while we think of this as an innovative nation, we’ve really been deluding ourselves. In reality, he says, our “innovation quotient” has been going down for many years.

An interesting observation that I think, misses the point. We may have slipped in terms of the “evidence” of innovation, i.e. new product launches, billionaires made by startups, or the number of startups, but these indicators don’t prove we’ve lost our innovative edge. What they demonstrate is that the support systems for innovation, meaning the societal institutions necessary to bring an innovation to market, have been seriously crippled. So, perhaps Mandel is right, but for the wrong reasons.

First,  let’s examine the workshop, the place and the people of innovation. We love to think of Bill and Dave in their garage in Palo Alto cobbling together their first oscillator and building Hewlett Packard into a billion-dollar company, but most fundamental innovation is done in government and corporate labs,

at least the complex technologies of today. Garage inventors can’t afford a $10K spectrum analyzer or mass spectrometer or diamond press. Sure, there are amateur tinkerers out there, adding technologies into everyday objects, but most groundbreaking work comes from deep-pocket institutions like universities, national labs and a few visionary corporations. Technology has become so complex that great innovations take more money and time than the little guy can afford.

Another cause for the decline lies in the fact that our corporations have little stomach for the tough work required to bring revolutionary technology to market. Most American corporations aren’t interested in serious new product development. Those that seem to be controlled by the gods of “process control,” like Six Sigma, and have no tolerance for skunkworks projects not directly aligned with proclaimed corporate goals. Serendipity is not allowed.

Not on this year’s product planning list? Sorry, no funding. Your product will take five years to develop? No thank you. Companies would rather buy technology after it is established, and leave the risky exploration to others. With no freedom to explore, there is a very little invention.

Finally, I am fundamentally convinced that the way we think of money has changed in the last few decades, and this has a significant impact on how we look at investing in innovations. We’ve become driven by short term profits. When stock values rise and fall on projected quarterly profits and the opinions of a 25-year-old junior analyst in Boston or New York, you can’t expect big investments in interesting artifacts. Long term investment in innovation is antithetical to short term profit.

Another interesting financial development of the past 30 years is the ability to compare various investment types by a common measure; the discounted cash flow model. This Procrustean bed of financial measurement allows investors to choose investments based on the discounted cash flow at its present value – or what an investment is worth today. If the projected profit from an invention in years two thru five are not adequate,

investors choose real estate, IT, or stock swap debentures, not innovation. Never mind that a patent will last for 17 or so years;  the projected cash from years seven through 17 is considered irrelevant and “discounted” and has virtually no impact on present value.

So, where does this leave us and how do we get back on track? Clearly, our nation’s risk quotient is a bit off, but we haven’t lost the cultural DNA to invent, and while other countries can buy equipment, buildings, and technical expertise, they can’t buy our culture. This is our strength and we need an environment in which to preserve and exercise it.  If there was ever a need for federal and state government support, it is in this arena. We must create an environment in which innovators can actually innovate.

The federal government has the STTR/SBIR programs, which while broken by cronyism, at least serves as a starting point. Some states have technology funds, like the well run Emerging Technology Fund here in Texas, but most are small, inadequate and run by bureaucrats rather than entrepreneurs. We need to develop more programs like these – programs that support innovators and idea people, not road builders, not administrators.

To date, we have allocated nearly a trillion dollars to bailing out banks and financial institutions and stimulating big business. Imagine what might happen if we put that kind of funding, and our faith, into the hands of inventive engineers and forward-thinking small companies? With that kind of commitment and support, we might help this nation hang on to its leadership in innovative technology, and even create some jobs while we’re at it.


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