Thank you, Kent1 , for your kind introduction and thoughtful invitation to "stand-in" for Erich Bloch.
Erich and I serve on both the Council on Competitiveness and PCAST, the President's Council of Advisors on Science and Technology, and this morning I want to share some perspectives derived from recent work we have done.
These are perspectives on what many of us are beginning to call "a national innovation ecosystem" . . .
. . . that system of loosely interrelating elements that has enabled us to make new discoveries, capture their value in the marketplace, enhance productivity and thereby increase our standard of living.
I will develop these perspectives along three lines of thought:
First: I will describe technological and economic progress in a socio-political context.
Second: I will examine technological innovation in a historical context, and
Third: I will conclude by sharing some trends from a global, international perspective.
Together, I trust that these three themes will serve to stimulate some thinking and prepare us for the panel discussion on our theme, "Creating the Future: Technology and the Shape of things to Come." I'll speak for 20-30 minutes and then will be happy to entertain questions.
Now, lest I disappoint any of you who may have come here today seeking to find something to guide your investments-let me say this:
If there were a new version of the 1967 film, The Graduate, in which a young Dustin Hoffman is advised with just one word-Plastics, then surely the new advice would be captured again in just one word, "Polymers"-the new materials for the new economy. That's what we do best in Akron, but that is another story.
So, let's begin with the socio/political context . . .
To say that we live in interesting times is the understatement of our modern age, as America now stands at the nexus of opportunity and necessity.
Why? Because the primacy that America has long enjoyed around the world is increasingly being challenged by the very same forces of technological innovation that America itself unleashed.
Perhaps no story illustrates this better than the one about the two executives of a global company flying back to the U.S., in first class of course.
After a few drinks, they begin to relax and to contemplate their careers, where upon one turns to the other and says, "You know . . . I have finally figured out what this global economy is all about."
"And what is that?" asks his colleague.
"Well, I am finally going to get paid what I am worth . . . and I am scared to death of it!"
You may laugh, but . . . "Why should Americans expect preference in a global marketplace if we show up for a job interview with a sign around our necks that reads, ‘I'M VERY EXPENSIVE AND REALLY DON'T KNOW MUCH!'"2
Those of us in higher education often ask for feedback from the private sector on the kind of the skills that employers want us to instill in our students, and we mostly hear the usual litany-give us communications skills, writing and quantitative skills, interpersonal skills suitable to working in a team environment, etc., etc.
But recently, a new request is being heard: "Give us emotional resiliency."
Think of it-emotional resiliency as a job skill!
What executives of high-tech start-ups are increasingly telling us is that their employees need to be prepared for failure, to be prepared to
adapt to the fast pace of technical innovation, and to be prepared for changing careers three, five or more times during their lifetimes, if not even more.
Because, whether as individuals or as a society, we prepare ourselves best for change by continuously developing our skills in keeping with the changing requirements of business.
That is why we say that opportunity favors the prepared mind!
From this perspective, our current personal or political preoccupations about outsourcing seem quaint and patently at odds with reality.
Since the time of the Luddites-those textile workers in England who took to smashing mechanized looms for fear of losing their jobs-new technologies always have destroyed jobs at the trailing edge of an economy at the same time that new jobs were being created at the leading edge.
But, as they say, those who ignore history are bound to repeat it, and history certainly is replete with examples of how "fights over trade, technology and immigration foreshadowed debates over outsourcing . . ." 3
Time and again, we have seen how the politics of fear can throw monkey wrenches into the unstoppable flow of technological progress.
"What is missing . . ." from the current debate (about outsourcing) is the historical understanding and appreciation of ". . . the social and political tumult caused by America's dynamism. The rise and fall of industries and regions, the convulsions that attended industrialization and mass immigration, the revolution in values catalyzed by widespread affluence, the never-ending struggle over dividing the pie-all . . ." of these and more have their counterparts in today's economy and will surely be evident as technological innovation unfolds in the decades and centuries ahead.4
If we are honest about it, we know that just in the past few decades, our country has undergone substantial transformation, and much of it is continuing.
The fact is that "industry structures are in constant churning-firms are merging, acquiring, leaving, dying, entering, growing, downsizing, outsourcing and spinning off. At a faster and faster pace, the U.S. economy is experiencing the phenomenon the economist Joseph Schumpeter called ‘creative destruction' . . ."5
So, ". . . outsourcing itself isn't an economic problem that demands policy reform, it is a political problem that requires clarity."6
Ours is truly an Age of Global Change, an age in which the process of globalization is abundantly evident and shows that the peoples of the world are moving increasingly toward one another.
"Globalization, which characterizes the movement of our modern civilization away from the parochial and toward the global or universal"7 involves dimensions of social, cultural, technological, and economic change.
"And now [wireless technologies and] the Internet [are] poised to narrow the commercial and cultural gulfs separating rich nations from poor even further in the decade to come."8
Why? Because "by decoupling communication from physical location . . ." and from time (think of asynchronous capabilities)-a decoupling that
is far more pervasive than transportation once shortened time and distance-the Internet is becoming the sort of "disruptive innovation"
that is transforming business and society around the world.9
In short, in this global, Internet-driven economy, the issue is no longer just a matter of simple competition, it is one of America's capacity to innovate and thereby continue to have economic growth.
And that is the essence of the "Innovate America Report" by the Council on Competitiveness.
So, let us now turn to examine some aspects of technological innovation in a historical context.
In keeping with today's theme, I submit that the future has always been predicted by the technologies that created it.
However, as we just discussed, we humans are all too easily prone to delay, and sometimes derail, some of those futures!
One thousand five years ago, at the turn of the last millennium, there were no organized industries.
At the turn of the last century, in 1899, some of our dominant industries were hardware, bicycles, and telegraphy. And more than half of us were still living on farms and involved in production agriculture.
Today, in 2005, less than two percent of our population is involved in agriculture, and our dominant industries involve robotics, biotechnology, and wireless telecommunications.
And, "So spectacular had been the wave of innovation in the late nineteenth century," that the commissioner of the U.S. Patent Office recommended in 1899 that his office be abolished, because-in his words-"Everything that can be invented has been invented."10
But think for a moment just how many additional destinies humankind went on to create in the twentieth century!
Entirely new industries are products of twentieth century innovation . . . from the airline industry, to microelectronics, biotechnology and many more.
It was research that enabled the agricultural and industrial revolutions at the turn of the last century. And during World War II, research that was initially vital to the Allied war effort laid the groundwork for technological leaps in medicine, aviation, energy, electronics-developments which today affect virtually every realm of our human endeavors.
And with the development of transistors, the era of microelectronics began and sowed the first seeds of the Silicon Valley. From such modest beginnings, we are now immersed in the information age.
The research we did related to the space race not only resulted in Americans walking on the moon, but also gave rise to the space industry and enabled new technologies in satellite communications, computer science, robotics and miniaturization.
As recently as 1970, a single discovery in molecular biology initiated the new industry of biotechnology, an industry from which we are now seeing dramatic advances in medical science and the introduction of effective new technologies such as the production of human insulin by factories of microorganisms.
These are just a few examples of technological innovation as an engine for economic development . . . each effectively demonstrating that new knowledge builds new capacities just as surely as new materials build new structures, and each demonstrating that our nation's investments in education and research have built very real assets that have yielded very real returns on those investments.
Indeed, the social return on research and education investments has been estimated to be consistently at between 30 and 50 percent per year.
Economists agree that creation of new technological knowledge through research is our most direct economic avenue for acquiring added value.
When that new knowledge is quantified in a market environment, it creates fuller employment, capital formation, growing profits, and surpluses for reinvestment.
In other words, it is from research that new companies are born, that new jobs are created.
It is from research that the economy expands and new wealth is created.
How much new wealth?
A Lot! To give you just one example, think of what we have come to know as Moore's Law-named after Gordon Moore, co-founder of Intel.
Gordon Moore predicted in 1965 that processing power would double every 18 months (with corresponding price decreases), and with increasing power, we went from mainframes to PC's and to PDA's.
Along the way, with smaller and more powerful computers, Cisco and other companies have brought us networks, linkages among networks and the Internet.
And that, according to Robert Metcalf-a pioneer of computer networking-creates new value.
How much new value?
According to Metcalf's Law, the value of networks grows with the square of the number of users.
Mike Ruettgers, executive chairman of EMC Corporation, quantified the successive growth in market capitalization that has occurred in the IT industry as new technologies have overtaken older ones.
He tells us that in each successive wave, there has been a tenfold increase in wealth creation, from $80 billion in the mainframe era, to $800 billion in the wave of the personal computer, to what is now rapidly approaching $8 trillion in the current Internet era of the Ciscos, Lucents, Nokias and similar companies.
And already, Mr. Ruettgers sees a new emerging opportunity centered on information itself that could reach $80 trillion!11
That is the power of innovation!
And just as technological innovation creates new wealth, it also impacts the speed and productivity of how we go about creating new value.
Here, I will not discuss productivity other than to note that the same changes we saw for employment shifts in agriculture in the first half of the twentieth century may now be happening for manufacturing in the first half of the twenty-first century.
Moreover, large sectors of our economy-health care and education, for example-have yet to see major productivity changes, as they must if they are not to consume increasingly larger, and thus unsustainable, fractions of our resources as a nation.
In his book, "Business at the Speed of Thought," Microsoft CEO Bill Gates writes that, "If the 1980s were about quality and 1990s were about re-engineering, then the 2000s will be about velocity."
Indeed, according to Andy Kessler, writing in the Wall Street Journal, "The knowledge economy insists on speed."
But whether in value, speed or productivity, we humans are forced to "construct artful analogies" because that is the only way to "comprehend the explosive acceleration of speed and capacity" of our technology.
Consider these analogies from the Washington Post:
"If the airplane had advanced as far and as fast as the computer, today's jumbo jet would carry one hundred thousand passengers, and it would fly them to the moon and back for $12.50 at 23,400 miles per hour."
What if the automobile had advanced at the same rate as the computer?
"We could today buy a Rolls Royce for a dollar and drive around the world on a gallon of gas."
And, here is my favorite of all! What if education also had advanced as far and as fast as the computer?
". . . a high school or college education-which still takes twelve and four years respectively to complete at an average cost for either of about $60,000-could today be completed in less than 10 minutes for about 5 cents!"
Computer technology has evolved so far and so fast in the last 40 years, that one observer has suggested that the computer has evolved as far or further than life itself has in its first 2 billion years!12
So, imagine what will yet happen in our lifetimes and think of the role that you can play in shaping your world . . . whether it is by teaching and guiding our young people in our educational enterprises; by applying technology in business and industry or in service to our community; or by designing and building the structures, processes and technologies for the twenty-first century in the new wave of engineering-such as in:
Biotechnology - Genomics (Proteonomics);
Nanotechnology; and in the fusion between the physical and biological sciences:
Finally, let me turn to some trends from a global, international perspective-
Basic science has always been an international enterprise. Scientist to scientist collaborations and major internationally funded projects generally have dominated the nature of scientific collaborations throughout most of the nineteenth and twentieth centuries.
Beginning in the 1970s, however, the more rapid pace in which new discoveries from basic science became quantified in the asset ledgers of corporations ensured that investment funds would more closely track the flows of intellectual property developments around the world. And this is indicative of the growing interdependencies of the science and technology activities of nations.
Whether in the acquisition of "patent families" by the bundling of related patents one-by-one, or in the garnering of unique competitive advantages through R&D, the globalization of markets is signaling new dimensions in how science is funded and how it is practiced.
In short, S&T is now clearly part of the economic development strategies of other nations.
And while the U.S. is still the dominant player, we certainly see that, "With the availability of new production, transportation and communication technologies, developing countries can effectively compete with industrialized ones in a number of markets."13
Consider this: "Of the 100 largest economies in the world, 51 are now global corporations; only 49 are countries. Everything is global, and everything is competitive."14
And of some concern to the U.S. is the fact that the percentage of U.S. college students pursuing science and engineering degrees is less than 10 percent. "In comparison, more than 60 percent of college students in China are enrolled in a science and engineering curriculum."15
To be sure, we should remember that the environment for R&D is a complex and interactive one.
It is shaped not only by the quantity and by sources of funds available to support research activities, but also by the talent pool and capabilities of the scientists and engineers who conduct research, and by the settings in which that research is conducted, that is, its "infrastructure"-in the sense of its facilities, its institutional cultures and those other related attributes governed by geographical location and interrelating organizations and facilities, many of which are increasingly global and devoid of boundaries!
This, in the more recent work of PCAST and the Council on Competitiveness, is what is meant by an "innovation ecosystem." And this ecosystem, we should remember, also is shaped by prevailing public attitudes about the importance and usefulness of research in the broader context of societal pressures and economic opportunity.
So, what is the size and shape of the research economy-the research marketplace, if you will?
Worldwide, R&D is a $675 billion industry ($603 billion among the 30 OECD countries), of which 85 percent is dominated by just 7 countries, and 44 percent by the U.S. alone, which accounts for approximately $276 billion. 16
Of this $276 billion in U.S. R&D expenditures, 65 percent is derived from industry, 28 percent ($78 billion) from the federal government and 7 percent from foundations, states and our own research universities.17
Within the U.S. research economy, academic performers garnered about $36 billion, or just 13 percent of the $276 billion U.S. total, in 2002 (15 percent, if Federally Funded Research and Development Centers, FFRDC's, are included).18
This 13 percent academic "market share" for the United States is, of course, distributed among many of the nation's 3,611 colleges and universities. In other countries, university R&D market share varies between 5 percent in Russia, to 31 percent in Italy.
In this regard, we should note that the bulk of America's research universities are post-World War II phenomena and that many have emerged in just the last three decades. Just after World War II, fewer than 50 universities performed sponsored research. By 1980, however, the number had risen to 600 institutions and, by 1995, to 875 colleges and universities, although, 80 percent of the funds go to just 100 of these 875 colleges and universities.
An important question in understanding the research economy is the distribution of funds between the providers of research funding, and within areas of research interest that are funded.
In other words, what is the portfolio of funding resources, and what is the portfolio of areas of research funded?
Here, we find that the level of analysis is so broad as to be not too helpful analytically.
For example, for the U.S. the spectrum of federal agencies is such that six agencies (of the 13 that support academic R&D) account for 96 percent of all federal funding . . .
It is notable, however, that funding is somewhat more balanced in countries outside the U.S. PCAST thus has recommended that the U.S. not neglect life sciences, but move to increase funding for the physical sciences and engineering.
Indeed, anticipating that many, if not most, future innovations will come at the interface of biology and physical sciences, such a recommendation is both prudent and necessary.
In much of our society, as we saw earlier, change is actively resisted-and those who work in science and technology, even though they are the originators of much technological change, are not immune to this malady of change-aversion.
Indeed, as Erich Bloch suggested some years ago, those of us in academic science who are faced with these forces of change seem to be caught in a sort of scientific "midlife crisis" because 50 years of doing research one way has fostered the belief that it cannot be done another way.
Why? Because it scares us to acknowledge the ". . . changes in the financing, organization and performance of R&D and technological innovations . . ." that "have affected the actions of industry, research performers, and governments . . ." in countries around the world.20
In this changing environment, many "universities already have moved to increase funding links, technology transfer, and collaborative research activities with industry and government agencies."21
Indeed, according to NSF data, ". . . numerous strategic research and technology alliances have been created over the past two decades,
many involving international partners. During the 1980s, at least 3,800 such alliances were created; from 1990 to 2000, the number rose to nearly 6,500.22
Alliances between U.S. and foreign firms increased by about 1,000 over the two decades. In 2000, about one-third each were in IT, biotechnology and other technology sectors. In the United States, about 800 formal research joint ventures were formally registered between 1985 and 1999. They involved about 4,200 organizations, nearly 90 percent of them industrial firms. Thirty percent were foreign-owned participants, indicating a broad interest in this form of activity.
Universities were important partners in these research joint ventures.
During the 1985-89 period, they participated in 16 percent of them. Nearly one-third in the electronic and other electrical equipment sector involved academic partners, as did one in five industrial machinery and computer manufacturing ventures."23
Of course, it is of some concern that in many countries as well as in many U.S. states, governments and legislatures have been increasingly less willing to support higher education, at least as evidenced by the decreasing share of state budgets going to academe.
On the other hand, I think that the U.S. can learn from what many other countries are doing, and I also think that some U.S. states hold lessons for other countries and for the U.S. itself. For example, although the U.S. federal government has a large and diverse framework for considering R&D policy and funding, most states lack a framework for considering R&D activities, or for integrating R&D at the state level with programs at the federal level. Notably, a 1995 report of the State-Federal Technology Partnership Task Force chaired by the Governors of Ohio and Pennsylvania (the Celeste-Thornburg Report, as it has come to be known) called attention to this disjunction and offered policy recommendation to remedy it.24
Indeed, we now see that other countries are effectively solving policy disjunctions within their national boundaries and that even the new European Union is going beyond the U.S. in integrating its science and technology policies and strategies across its individual "states."
In the U.S., the traditional benchmarking of one state against another is no longer sufficient. Regional clusters of innovation, as studied by the Council on Competitiveness, must today be benchmarked against other states, as well as against other world regions that support similar competitive industries.
The latest (April 2005) issue of MIT's Technology Review magazine nicely captures the differences in how seven countries are using science and technology, and it is telling how aggressively some are pursuing S&T strategies-and how tightly coupled some of these strategies are to the needs or strengths of some of those countries.
There are lessons here for the United States!
In summary, today I have shared some perspectives on how technology operates in a socio-political context, how it creates the opportunity for economic growth (along with increasing productivity and demands for speed), and how technology is also shaping how we do science in an increasingly global economy.
The growing consensus emerging from PCAST and the Council on Competitiveness, quite simply, is that America must focus on innovation-that it must address issues of talent, investment and infrastructure; and that we are perhaps most vulnerable in the area of talent, where our educational systems are lagging and where student interest in science, technology, mathematics and engineering is hugely behind that seen in other nations.
The simplest message of the Innovate America Report out of the Council on Competitiveness is this:
"Where once we optimized our organizations for efficiency and quality, today we must focus our entire society on innovation."25
And it must begin in our schools,
and with our national resolve . . .
In the words of noted economist, Paul Romer, of the Hoover Institute at Stanford:
"The country that takes the lead in the twenty-first century will be the one that implements an innovation [system] that supports the production of commercially relevant ideas in the private sector."
"The most important job for economic policy is to create an institutional environment that supports technological change . . . [and to] resist the temptation to impede change when it causes temporary disruption . . . [And that] is not a simple task."26
Because, as we discussed at the outset, social and political concerns have had a tendency of slowing or derailing progress-
One only has to look at the early history of China (a country that had cast iron 15 centuries before the West, and movable type 400 years before Gutenberg), or to think of modern-day Luddites, to see that social and political opposition to progress is far from over.
Still, optimism should prevail, and that is because Science and Technology will eventually enable something truly splendid when, as the late Howard Schneiderman put it, "Humanity, using nature's own methods, will have learned to persuade nature to be a full partner in humanity's major enterprise-civilization."
Ladies and gentlemen, success in the new economy will belong to those regions that create and nurture the human resources of intellectual capital-the people that create new knowledge and new technologies and quickly translate research discoveries into marketable products and services.
To succeed, universities, area business, industry and government must work in partnership to support clusters of innovation that will ensure an increasingly stronger and larger source of human capital.
So, be cheerful and plunge ahead-
1 Kent Hughes, Director, Program on Science, Technology, America and the Global Economy, Woodrow Wilson International Center for Scholars
2 Todd G. Buchholz, Bringing the Jobs Home, as referenced in a book review by Ira Carnahan,
"The Lowdown on Labor Lost," The Wall Street Journal, October 20, 2004, p. D12
3 Bob Davis, "Finding Lessons of Outsourcing in 4 Historical Tales," The Wall Street Journal, March 29, 2004, p. A1
4 Brink Lindsey, "The Biggest Rags to Riches Story Ever," a review of An Empire of Wealth by John Steele Gordon (Harper Collins), The Wall Street Journal, September 23, 2004, p. D10
5 Andrew Reamer, Larry Icerman, and Jan Youtie, "Technology Transfer and Commercialization: Their Role in Economic Development," Georgia Institute of Technology, August 2003, p. vii
6 Ira Carnahan, "The Lowdown of Labor Lost," The Wall Street Journal, October 20, 2004, p. D12
7 International Cooperation and Development Fund, 2002 Annual Report
8 Business Week, November 6, 2000, p. 72-100
9 Council on Competitiveness, NII, Interim Report (July 23, 2004)
10 "Untangling E-conomics" The Economist, September 21, 2000
11 Mike Ruettgers, "Information Infrastructure: The New Business Accelerator," presented at the workshop on Transitioning Into the New Economy, Cleveland, Ohio, October 31, 2000
12 O. B. Hardison, Jr, Disappearing Through the Skylight (New York: Viking Penguin)
13 Andrew Reamer, Larry Icerman, and Jan Youtie, "Technology Transfer and Commercialization: Their Role in Economic Development," Georgia Institute of Technology, August 2003, p. vii
14 Chris Foster, chief scientist and deputy secretary of the Maryland Department of Development, as reported at the 2004 SSTI conference, Philadelphia
15 Jennie S Hwang, Ph.D., "Globalization: Technology, Jobs and Trade," SMT magazine, July 2004
16 National Science Board, Science and Engineering Indicators 2004 (Arlington, Va, National Science Foundation, Jan. 2004) Volume 1, pp. O-4, 4-46, 4-47
17 National Science Board, Science and Engineering Indicators 2004 (Arlington, Va, National Science Foundation, Jan. 2004) Volume 1, p. 4-5
18 Ibid, pp. 4-5, 5-11
19 National Science Board, Science and Engineering Indicators 2004 (Arlington, Va, National Science Foundation, Jan. 2004) Volume 2, p. A5-17
20 National Science Board, Science and Engineering Indicators 2002 (Arlington, Va, National Science Foundation, Jan. 2002) Volume 1, p. O-14
22 National Science Board, Science and Engineering Indicators 2002 (Arlington, Va, National Science Foundation, Jan. 2002) p. O-15
24 e.g., 1998 Technology 21 Report of the State of Pennsylvania,
25 Council on Competitiveness, "Innovate America," National Innovation Initiative Report, (Dec. 2004)26 Paul M. Romer, "Beyond Classical and Keynesian Macroeconomic Policy," Policy Options, July-August 1994
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