The Big Fix
David Leonhardt has a huge piece in the Sunday NYT magazine section, titled, The Big Fix.
ONE GOOD WAY TO UNDERSTAND the current growth slowdown is to think of the debt-fueled consumer-spending spree of the past 20 years as a symbol of an even larger problem. As a country we have been spending too much on the present and not enough on the future. We have been co”nsuming rather than investing. We’re suffering from investment-deficit disorder.
You can find examples of this disorder in just about any realm of American life. Walk into a doctor’s office and you will be asked to fill out a long form with the most basic kinds of information that you have provided dozens of times before. Walk into a doctor’s office in many other rich countries and that information — as well as your medical history — will be stored in computers. These electronic records not only reduce hassle; they also reduce medical errors. Americans cannot avail themselves of this innovation despite the fact that the United States spends far more on health care, per person, than any other country. We are spending our money to consume medical treatments, many of which have only marginal health benefits, rather than to invest it in ways that would eventually have far broader benefits.
Along similar lines, Americans are indefatigable buyers of consumer electronics, yet a smaller share of households in the United States has broadband Internet service than in Canada, Japan, Britain, South Korea and about a dozen other countries. Then there’s education: this country once led the world in educational attainment by a wide margin. It no longer does. And transportation: a trip from Boston to Washington, on the fastest train in this country, takes six-and-a-half hours. A trip from Paris to Marseilles, roughly the same distance, takes three hours — a result of the French government’s commitment to infrastructure.
These are only a few examples. Tucked away in the many statistical tables at the Commerce Department are numbers on how much the government and the private sector spend on investment and research — on highways, software, medical research and other things likely to yield future benefits. Spending by the private sector hasn’t changed much over time. It was equal to 17 percent of G.D.P. 50 years ago, and it is about 17 percent now. But spending by the government — federal, state and local — has changed. It has dropped from about 7 percent of G.D.P. in the 1950s to about 4 percent now.”
Wow, major R&D is almost half as much as a percent of GDP as it was.
No wonder most of our recent progress has been incremental in nature — No major R&D breakthroughs.
Our energy mostly comes from burning the same fuels we did a century ago; The propulsion system of the cars we drive have been around for well over a century; Our batteries are marginally better than they were decades ago, as are our solar cells.
What major breakthroughs have taken place recently that have changed society? The PC is about 25 years old, the internet is 15 years old.
Technology: What have you done for us lately?
>
Source:
The Big Fix
DAVID LEONHARDT
NYT, January 27, 2009
http://www.nytimes.com/2009/02/01/magazine/01Economy-t.html
Tweet
Facebook
Reddit
Digg this!
January 31st, 2009 at 5:14 pm
No, you mean, “technology, what have WE done for you lately?”
Sujal
January 31st, 2009 at 5:21 pm
I have been in the software development business since 1966. All the major players have drasticallycut back on research. Xerox Parc is gone; IBM Yorktown is a shadow of its former self and Bell Labs is a joke. So I am amazed that any statistic shows that the private sector is still spending on research at the same rate.
Any company that spends on pure research would be killed by the stock market, since the bottom line would not be as good in the short term.
January 31st, 2009 at 5:27 pm
I fear that increasingly isolated Americans lack the will/cooperation do big things for the betterment of the the bigger picture. Too many of us parrot the words “patriotism” and “freedom”, and “love of one’s country”, blah, blah, blah, but does that really MEAN to every one of us? Does it merely mean the ability for each of us to get as much wealth and stuff as fast as we can while we can, or does it mean something bigger? I fear the former has dominated everything above all in this country over the past 30+ years, much to the detriment of the bigger picture (read: having the WILL to get big things done) and that the genie is out of the bottle, so there’s no going back now.
January 31st, 2009 at 5:28 pm
America has been bamboozled by the consumption based marketing machine. Read the book called Consumed by Ben Barber. The ultimate consumption based binge was housing.
January 31st, 2009 at 5:30 pm
I agree with the main thought of this excerpt and will read the whole piece. The medical form analogy isn’t very compelling…I’m sure many doctors have your records electronically if you are a patient…they just don’t share them centrally. Plus, it lets the medical secreteary have some sadistic fun to make you fill it out properly and helps you kill the 30 minutes or more you will be waiting anyway.
BTW, while obviously we all have gained so much by having access to the knowledge present on the Internet, the use of text messaging (arguably an offshoot of the Internet) is doing quite harm to our youth. I see it everyday…not only do they use it to gossip and bully, they use it for sexual banter at a way too early age and are addicted to it. Text meaaging should be used once in awhile when a phone conversation is impractical…not constantly. It’s like being in a schoolyard 24×7 with no supervision…won’t help educational attainment.
January 31st, 2009 at 5:31 pm
@Moss: Right on. We’ve basically competed ourselves into oblivion, which is the result of our short term focus on consumption and material goods and the illusion of “wealth”.
January 31st, 2009 at 5:35 pm
@Moss: yes…housing was an incredible binge…one that keeps on binging with higher energy and maintenance costs for these McMansions. The other was SUVs, with their gas guzzling that never ends.
January 31st, 2009 at 5:53 pm
sailerman
The reason private R&D is still high is because the definition has changed. Pharma/Biotech, the field I’m in, consider large part of marketing directed at MDs as “Education”, thus R&D, not marketing. “Real” R&D in the field has been shrinking like public R&D. I imagine it’s the same in many other industries.
What’s in “The Truth About the Drug Companies” by Marcia Angell is all true and some. I can tell from an insider’s view.
January 31st, 2009 at 6:03 pm
Hi. I work in Technology, not economics or finance. Of course, I work mainly in just one sector but I’ve also been “close too” some other sectors that overlap. So I’ve been around a bit in software and bioinformatics. I’ve palled around with people (including VCs) in those areas, nanotech, biotech generally, and computing hardware (at least). I have a little experience working in, with, or around (large, industry-relevant) academic research. I can tell you what it looks like from that perspective over a 21 year career.
It’s all the fault of (a) the VC community; (b) the “open source software” business community; (c) university legal staffs and boards; (d) big-name academic researchers; (e) DARPA (and by extension Congress).
Early tech booms in the 1970s through the 1980s were direct or slightly indirect spin-offs, most often from DARPA-related work, most often on defense issues. Somwhere back there the research program directors got the idea to be a bit more liberal about inviting in private capital to pick up the ball and run. The idea from the Pentagon’s perspective was that the government can’t do everything itself and the exact opposite approach made more sense: Defense should foster and encourage private industry to build a healthy ecosystem of potential suppliers in a competitive market, maintaining relations with defense. All well and good and (I’m told) resolved a question about the role of markets in defense that goes back to the 1950s.
The modern VC firms got “invented” in the 1970s. That was the private sector complementary response / flip side of the coin.
The Universities and the VC firms (the people common to directorships / executive-level in those worlds) latched onto a scheme. The VC firms would run as investment funds. They looked at some famous examples of successful growth and came up with a fairly narrow set of financial models for potential investments. These models became elaborate over the 1980s and 1990s into the extremely streamlined (yet exclusive and quirky) process of VC funding. You know the drill: there’s the social connections to get access to make a pitch; there’s the 1-min, 15-min, 1-hour pitches. There are the standards (mostly a matter of knowing Who’s Who) of judging the quality of “management teams”. There are term sheets which vary in exact nature but not by much: 3 (or so) year investment horizons, clear exit strategies, management (founders at least) give up control very early – payoff at IPO or acquisition. Along the rounds of investment the company has to produce a few standard charts of internal performance (headcount, revenue growth, etc.) and keep an eye on purported fundamentals like potential market size and competitive landscape. All well and good as far as it goes.
A thing to notice, though, is that the VC model works really well for some new kinds of product or service (say, Apple computers or Google) but really has nothing to say about other kinds of technological breakthrough. VC works for tech that has initially large adoption rates and only in the presence of monopoly rents. If you have potential monopoly rents but the time until exit (the “horizon”) is too long, VC fails to help. If you have rapid fast adoption but no monopoly, VC doesn’t help.
Well, so what? The “so what” involves the other players and also the nature of technology.
Some technology doesn’t fit the bill. For example, unpatentable medications. Or, for example, Unix in the 1970s. VC money won’t ever fund those things, not locked into its now firmly established model. Small business loans aren’t much help. Areas of research like this back in the 1970s got funded in various ad hoc ways (e.g., Bell Labs paying for much of the Unix work) but, boy, it was hard to double down on those investments even that could have been done in profit-returning ways. Perhaps its that the profit opportunities are too diverse and so the transaction costs of pooling investment too high. Perhaps there’s something else going on there. For whatever reason, investment didn’t happen from the VC world and the alternatives were ad hoc, at best.
We could have at that point in history stepped back and said “Ok, how do we create investment vehicles for *that* kind of valuable tech.?” but we didn’t do that. Enter the other players:
The universities started putting into place new “Intellectual Property Policies,” in conjunction with the VC community, creating incentive for academic researchers to *concentrate exclusively on VC-ready tech* (on research with the greatest promise for yielding VC-friendly results). And, almost to a one, that’s what the big name researchers did. Many a grad student got rich. Many a big name researcher got the freedom-to-retire quite early. Fast forward to *today* and you’ll find that the savvy tech grad students (many of them) make their choices of schools and advisers mainly on the basis of their odds for getting in on the ground of a VC-funded start-up that spins off from their thesis work. Time was (halcyon days) that the kids picked their schools and advisers on the strengths of the learning opportunities regarding fundamentals first, with prestige and money and close second. Nowadays, it’s much more the business opportunities first and the kids pick specializations on the basis of “Yeah, I could probably put up with that.”. At least that’s my impression in talking to a bunch of them.
In the 1980s and 1990s, as part of all of this, big high-tech firms started taking hatchets to all forms of “non-essential” R&D. For example, the loss of Bell Labs and the loss of (the essence of) Xerox PARC. Some essential forms of research (e.g,. drug searches by pharmaceutical companies) got bigger but the kind of “Athenian Society” (so to speak) of good scientists, engineers, and other kinds of thinkers got the plugged pulled on them. The initial stimulus of the new incentives for academic researchers to take over this function – and focus it on the needs of VCs – took over.
That began to strongly, strongly change the character of what research is pursued. You must understand that at any given time there are many orders of magnitude more “good ideas worth pursuing” available to researchers than there are hours and dollars to work on them. The precious commodity is researcher hours and money and the VC-driven circuit came to monopolize that in the 1980s through to today.
In other words, researchers have become like drunken gambling addicts, always looking for the big wins – the big payout. A research topic that looks promising, interesting, and socially valuable – but that presents no obvious opportunity for very rapid growth and monopoly rents – takes the back seat.
Of late, the same confederacy of dunces that did all of that have tried to plug the obvious wholes in that strategy with lessons (supposedly) learned from (so-called) open source software. The experience of the VCs in the realm of open source software is informed by the curious lesson of Richard M. Stallman of the Free Software Foundation. No, really. I was close to all this history, lemme tell you:
In the late 1970s and into the 1980s the new VC-driven regime of research had sufficient impact on at least on lab at MIT that the social fabric was shredded by the “spin-off” phenomenon and *the very practice of research within the lab was trashed*. Stallman was (famously) disheartened by this and took a “get even” approach. He concentrated his considerable efforts on building a non-rival systems software stack. Economically, he wanted to create programs that would kill off start-up opportunities like those spun off from his lab by depriving (through copyright licensing tricks) the VCs of opportunities to collect monopoly rent. He wanted to restore the possibility of the social fabric that existed previously and, I think, he wanted to restore the previous *practice* of research (to make it more happy to pursue useful things in general rather than simply things useful to VCs). And in the mid 1980s, with the release of his first few programs, he did in fact kill or cripple more than one start-up. By the 1990s, with the release by Linus Torvalds of a final “keystone” piece of software, it was obvious to the VC community that Stallman’s project threatened to kill of a lot more — such as, for example, Sun Microsystems [see the film widely available on the net, "Revolution OS"].
Nobody had “invested” in the new operating system and nobody (when it arose) had claim to monopoly rents on it – yet it was a palpable threat to the then mighty Sun (and many other firms).
The VC community parsed that as “Ok, as long as it comes from this ‘open source’ community, R&D is now free and our new game is about how to mine that source of innovation better than competitors and somehow exclusively tie each new innovation to something on which we *can* collect monopoly rents.” That was the line of thinking that started with things like Cygnus and today gives us Red Hat.
In software, at least, that furthered the collapse of private funding of real R&D. HP labs more or less bit the dust. Red Hat has a lot of activities that they call (for tax purposes) R&D but that have no resemblence to the kind of R&D that actually innovates in software. The roster is long. Sunlabs is an exception (sorta) that proves the rule – lot’s of details behind that one.
So… summing up this picture:
Big money for (real) R&D shrank (relatively), got monopolized by lines of research that look promising for the narrow financial models used by VCs, and partly got replaced by the whole range “open this” and “open that” efforts in which the capitalists try to incite the mob to do their R&D for them and give the results away for free.
And it’s all, in a weird, hand-wavy way, a consequence of Defense saying “let’s try to bring in some private money and outsource some of this work domestically”.
-t
January 31st, 2009 at 6:10 pm
I can shave with my iphone… that’s enough for me
January 31st, 2009 at 6:23 pm
Don’t forget all the Financial Engineering BR!
January 31st, 2009 at 6:26 pm
The mapping of the human genome, completed around 2000, will change society.
While not a technological breakthrough, globalization and the rising standard of living in countries like China are certainly affecting our society. The U.S. has been the modern “empire” for two centuries, but no empire has ever escaped destruction. It is reasonable to assume that the U.S. will eventually give way as world leader.
From the perspective of the evolution of life on Earth, every technological advance we use has been recent and we continue to adapt to an increasing rate of change in society.
January 31st, 2009 at 6:34 pm
I beg to differ,
There have been many technological breakthroughs. However, since they would help the populace and cut out part of corporate profits, they have been held up through legal tricks.
Some examples:
1) Magnetic field breaking used to recharge batteries for electrics or hybrids or simply to extend disk brake life.
2) Water condensing technology eliminating all potable water requirements and acompanying infrastructure with water pipes and treatment plants.
3) Advanced recycling and composting techniques eliminating sewer systems, high nitrogen run-off and other pollutant streams while simultaneously producing plant fertilizer without polluting chemical factories.
4) Electric powered, remote controlled vehicles operating on Mars for 5+ years.
5) Low CD ( coefficient of friction ) vehicles for 10 to 20 mpg less fuel consumption in cars without any weight change. NASA did the studies so already paid for this.
ETCETERA
Einstein discovered the photo-electric effect over 100 years ago. Einstein didn’t figure out that Rockefeller and Standard Oil didn’t like this type of energy production.
Do you know why a lot of the gas-guzzling types like nuclear energy as a replacement? Job security. All those massive, centralized structures with high paying jobs requiring science degrees make them salivate.
People, we don’t need all this blather and empty posturing about how hard it is to switch technologies. It’s not that hard.
January 31st, 2009 at 6:39 pm
I read/hear a consistent meme about how the French “socialist” model is so terrible. I’ve dealt with a lot of companies over the year – right in the guts of them (M&A) and I can tell you the French companies are the BEST in terms of how they treat employees. They understand that humans work to live, not live to work. Never thought much about it, but am beginning to think that the “socialist” bogeyman I see bandied about is a scare tactic promulgated by the folks at the top that do NOT want to give up their 18 billion $ bonuses. They say life will be terrible for the common man, but I don’t think so. I think maybe they are just using scare tactics to protect their ill gotten gains. By ill gotten, I don’t mean so much illegal, although they might be, I mainly mean the giant scam that goes: unless you all have the latest new and improved tile floor in your McMansions, then you are losers and life sucks. (Three years ago, a new house in Vegas was basically out of fashion if it had 12 x 12 tiles instead of the new, hip, 16 x 16 tiles.)
January 31st, 2009 at 6:43 pm
The Germans have been putting solar panels on their roofes for over a decade, the English are moving full bore into tide and wind power. Our leaders ( the corporations ) are fighting this tooth and nail in the USA. We are rapidly becoming a backward country. It’s not an accident. It is contrived to protect profits in large, ungainly corporate enterprizes.
The fact is, we are going to come out of tis mess with a lot of individual energy independence and a host of laws to keep the corporations from boxing us into captive markets. We’ve got your number, weasels.
January 31st, 2009 at 6:45 pm
We were in trouble as soon as products became services.
January 31st, 2009 at 6:50 pm
Industrialization, centralization, mega businesses with 100,000+ employees and overpaid CEOs = 20th century dehumanizers which nearly destroyed society and the world for the benefit of a few greedy fucks.
We need a lot of guillotenes.
January 31st, 2009 at 6:51 pm
Yeah, I know I have spelling issues but you understand what I’m saying.
January 31st, 2009 at 6:54 pm
One thing the U.S. has led in, from time to time since the 1970s is environmental remediation and clean-up technology and environmental planning in general. Unf. our leadership keeps getting taken down by … ahem … certain administrations that think having clean air and clean water and safe workplaces is somehow “unAmerican.”
January 31st, 2009 at 7:00 pm
Barry, I love your site and commentary! You get it! But not on technology and innovation. It’s time for you to be educated on technology and innovation in this country so you can help educate the masses and the politicians!
I’ve been in the tech mix for 30 yrs – PhD Elec Engr from a top 5 engr school to BellLabs to startup founder & exec to acquisition to Mot as VP in ’90′s to ceo of a VC startup to silicon valley acquisition to ceo of a VC clean tech startup to EIR at a Sand Hill Rd VC firm.
In summary (details below):
If you think all the trash debt in the financial sector is a big hole, the hole represented by lack of proper investment and management of new technology and lack of manufacturing infrastructure is far more damaging and will take more time and $$ to fix. You’re worried about what happens if China stops buying treasuries — but it would be far more damaging if they nationalized all the mfg plants, design, and R&D teams we’ve set up on their soil, putting our companies in another huge hole….
BellLabs, PARC, GE, and other big industrial labs that filled the tech pipeline for many, many decades, are gone. Science has been discredited. Universities are trying to fill the gap, but as an above responder said, VC + Professor = disaster for the economy, but huge $$ at times in the pockets of prof’s, students, VC’s and wall st. And most of those companies disappear (anyone recall Cortek – acquired for $1.5 billion by Nortel and then shut down because the product wouldn’t work). And it came out of your 401k. Now who’s going to step up to invest and nurture the right technologies in the right way, like Intel, Mot, IBM, TI, etc did back in the ’70′s and 80′s. We’ve lost and or downgraded the “knowledge” of how to do it right. Germany knows. Taiwan knows. S Korea knows. China is learning. So is India.
================================
Here’s the deal (and the detail….)
the appropriate question is “what have we done for technology and innovation” —
A.) choked it off
How?
a)Poor industrial policy & Q to Q expectations in Wall St. Example is our response to Taiwan’s gov underwritten thrust into semi mfg in the ’80′s and ’90′s. We set up Sematech which standardized fab eq and processes which effectively “broadcast” all the proprietary knowledge of TI, IBM, Mot, etc around the world and allowed TSMC and others to buy turnkey fabs at lower “real” cost and we lost major mfg jobs and knowledge. Another example — wall st pressures forced our companies on the outsourcing bandwagon and we lost more mfg jobs and knowhow to “actually make things”. It became fashionable for the best to go into service industries (finance) and “create value” there — we’ve seen the results of that “creativity”. Further, wall st pressure forced US companies to reduce “real” R&D expenditures for short term gains. (An above reader is right, the def’n of R&D has changed across the board – marketing and early mfg are all charged to R&D now.) The wall st guys have taken their money and run. We’re left with a huge hole in “real productivity”…
b) we educated other country’s best and brightest and wouldn’t give them visas to work here
c) VC’s in the 70′s and 80′s were so successful building companies, they attracted huge investment dollars but brought in new blood that ended up immensely over investing in the late ’90′s losing great sums of $$ and much new technology down the drain after the 2000 “bust”…
d) VC’s have herd mentality too, and they all want to avoid the capital intensive areas and only invest in companies that can turn into a Google on $25 million total investment. Can’t do solar on that!
e) But then solar became “fashionable” a few yrs ago and shortsighted VC’s who didn’t really understand how much time and $$ it takes to develop new materials and get them in mass production again have over invested in huge numbers of solar companies that are, at best, “bad science” experiments. Just like in telecom in the early 2000′s, there will be a huge wash out of solar companies that raised $100′s of millions each and will never be successful.
f) In the meantime, Germany subsidized and fostered their solar companies over a longer period of time. They have far more fog than sun, but they have over 50% of the world’s solar panel installations — and more importantly, a vast lead in technology and manufacturing.
I could go on, but that’s enough for now….
January 31st, 2009 at 7:00 pm
The central tenet of modern business thinking is that if I can’t make money NOW, it’s not worth it. THIS is THE most important reason that we are so fucked.
when the issue is whether it helps the majority of the populace for the long term, we just might become a good place to live in again.
January 31st, 2009 at 7:09 pm
Barry,
I know that this sounds counterintuitive, but it is in everybody’s best interest to pull every penny out of mega corporate stocks and bonds so that they crash and burn. They are failed enterprizes. Their plant and equipment needs to be downsized and decentralized. They won’t do it willingly. You help these corporate crooks and polluters by investing in them for some profit and you are contributing to pollution and dehumanization.
January 31st, 2009 at 7:17 pm
Part of the problem is the incessant droning by the Republican party to lower all forms of taxation. It has huge political appeal vs. telling people we need to raise taxes and invest in the future. Even now they’re trying to submarine the stimulus bill in favor of what? You guessed it… lower taxes.
We’ve surely made our own bed (and our children’s).
January 31st, 2009 at 7:19 pm
RonN,
Great comment!
Since you are an expert in the field of electrical technology, can you give your thoughts on this “smart grid” idea?
Do they need extremly thick cables to pump all the voltage all over the states from wind and solar farms?
Will utility companies have a bottom line problem with a smart grid?
Anything you can post will be appreciated.
January 31st, 2009 at 7:28 pm
btbrown,
The “lower taxes” thing has always been a dodge. What’s really gone down is the “starve the beast” mindset to curtail services for common decency and civilization. Corporations and rich individuals have had adequate tax avoidance schemes for over a century. Even during the 90% years of Eisenhower, they managed to hide income and profits in foundations and “charitable” non-profits. Hell, accounting for this shit has been one of the groeth industries in the USA for 50 years! True, the last 8 years made it redundant because the SEC and IRS telegraphed the “we ain’t lookin’ ” signal but you get the idea.
January 31st, 2009 at 7:42 pm
dacht says:
“Time was (halcyon days) that the kids picked their schools and advisers on the strengths of the learning opportunities regarding fundamentals first, with prestige and money and close second. Nowadays, it’s much more the business opportunities first and the kids pick specializations on the basis of “Yeah, I could probably put up with that.”. At least that’s my impression in talking to a bunch of them.”
As a chemistry/biology PhD student at a major research university, I can attest that this description is overbroad. It may be true in niche fields of engineering, but it’s definitely not true in the realm of NSF/NIH (government) or HHMI/private philanthropy funded research, which is the predominant funding model for biologically-related research. Application for these funding models is indeed very conservative, but there’s a high priority on competence and basic research success to get positions–potential profit opportunities are limited and considered an afterthought.
But now that I think about it, what I’m describing is probably a strong argument for increasing public (government or charity) funded research across all fields. I’m assuming the situation you describe is present in fields where there isn’t a lot of government agency funding available–and it’s pretty apparent how increasing that funding would help to turn research organization more toward the present model for biological research.
January 31st, 2009 at 7:56 pm
My 18-year-old American GI son can kick the shit out of your 21-year-old Electrical Engineer.
January 31st, 2009 at 8:24 pm
As a former Electrical Engineer (though still have my hard-earned PE license), I welcome any discussion about the merits of putting down those who can literally keep the lights on.
As much as our demise can be laid at the feet of a variety of guilty policies and practices, I’d still rather be in the USA than any other country. And yes, I know Canada, Europe, China, South Korea, Singapore, Japan, Australia are paradises from all appearances.
However, in my former career in industrial engineering, I recognized a long long time ago that there was zero value assigned to technological excellence, innovation, or just plain doing things better – which is why, for example, Malcolm Baldridge (of TQM fame) is more a Japanese phenomenon than an American one. It’s just the trend I’ve personally observed over the past 20 years. And if you don’t know who Malcolm Baldridge is but you know who Warren Buffet is, then that tells you alot about the state of value perceptions in this country. And if you think innovation doesn’t exist, then find a way to visit a modern factory, for example, many “low tech” factories (paper or steel manufacturing) run on fewer and more higher-educated workers than 20 years ago because of the benefits of scale offered by technology. You never read about this nor do most people care because they don’t understand it or would rather concentrate on such vital subjects as tomorrow’s game.
Perhaps one day it’ll turn around and this great country will again reward (not necessarily financially) those who create, invent, and benefit mankind rather than those who eak out a living from perceived fanciful arbitrage.
Until then, just stay with the trend.
January 31st, 2009 at 8:31 pm
“These electronic records not only reduce hassle; they also reduce medical errors.”
I agree completely but how many medical transcriptionist lose their jobs in the process? Kind of like Vegas getting away from change personnel on the floor by going to paper.
“government’s commitment to infrastructure.”
What commitment? Like I said the other day, only a small piece of the new “Plan” has provisions for infrastructure. No one disagrees that our highways and bridges need repair. But that only maintains the status quo. Let’s stop flooding along the Mississippi by funneling the runoff to habitual drought stricken states. Let’s take our utilities underground making them less susceptible to weather or terrorism. Make sure they’re nuclear powered capable and start in the East.
“Technology: What have you done for us lately?”
That’s easy. They repackage then eliminate the old standard used although nothing was wrong with it to begin with. And in the process, force you to change then charge you more for the pleasure of doing it.
January 31st, 2009 at 9:00 pm
Barry
how can you expect “breakthroughs” from a nation that does nothing but trade stocks, flip real estate and sue each other?
if you were to create a society from scratch, would you want the best and the brightest standing in one corner just trading with each other? well, that’s the condition we find ourselves in as only Wall Street/ CT could snag the most talented and intelligent with runaway compensation
I think because of 2008, this may come to an end with the best and brightest looking to make their mark elsewhere within the economy, not just fin services
January 31st, 2009 at 9:33 pm
R&D costs dollars, once again beholden to the Bankers and Wall Street crowd. I would guess >80% of new R&D in this country is funded by government. So what was the question?
January 31st, 2009 at 9:35 pm
From 1995-2004, the United Kingdom, Sweden, Finland and Luxembourg all had higher rates of growth in GDP per hour worked than the United States or Canada, despite having much larger general government outlays as a percent of GDP. Looking at these countries one could almost conclude that government outlays at a rate of 50% of GDP is optimal. One could make the argument that as these countries had a lower GDP per hour worked to begin with, that they were “catching up.” However, one also has the example of France, Netherlands and Belgium, all countries that persist in having higher GDP per hour worked than in the United States and Canada despite having general government expenditures in the neighborhood of 50% of GDP.
http://www.oecdwash.org/PDFILES/comp_product_indicators.pdf
I suspect that there is an optimal level of government expenditures (including R&D). But I think it is country specific, being dependent on a number of factors. Furthermore it is dependent on the quality of the expenditures as well as the design of the system for generating revenue.
In our own case, without citing any empirical evidence, I suspect that the optimum size of government is somewhat larger than it is currently. More government might lead to higher growth if it is don
January 31st, 2009 at 9:35 pm
What explains our investment-defict disorder ?
Answer: 44 years of deficit spending, the kind that underwrote MediCare and lost the Vietnam War. What we’re looking at is history’s longest delayed reaction. Historically, countries that lose wars suffer in their immediate future.
Old – America’s war fatigue prompted the Vietnam War’s end.
New: The Chinese repeatedly sent troops down the ho chi mihn trail
because they didn’t want America on their contienent. They had the numbers.
January 31st, 2009 at 9:50 pm
The problem is not that we haven’t invested enough. We’ve had investment tax credits and capital gains tax cuts and every other conceivable loony scheme to increase investment. All we have to show for it are idle factories and equipment because we can’t afford to buy the products that they were intended to produce.
The real problem is that we had a short-term political gimmick machine from both parties who told the American public, forget about hard work and frugal spending, we’ll pass XYZ legislation and you can have your grand latte mocha by borrowing against the equity in your house.
It is outrageous that the politicians are blaming the bankers for playing by the rules the politicians created. Congress has degenerated into nothing but public theatre.
January 31st, 2009 at 11:32 pm
>> All we have to show for it are idle factories and equipment because we can’t afford to buy the products that they were intended to produce.
Um, no. In the US, we have idle factories because it’s cheaper in the short run to manufacture everything abroad.
>> It is outrageous that the politicians are blaming the bankers for playing by the rules the politicians created. Congress has degenerated into nothing but public theatre.
Rajesh, the rules don’t say things like “lend with 0 down to people with no provable income”, “doctor mortgage applications”, “start a Ponzi scheme”, or anything else that many FIRE economy workers (including bankers) have been doing recently. I hear from one school of thought that government is the root of all evil and the private sector should be completely exonerated. But, I don’t buy it. Plus, ironically, the school that emphasizes government’s culpability practically to the exclusion of the private sector is the self-proclaimed party of self-responsibility. This school seems reality-challenged.
January 31st, 2009 at 11:53 pm
In terms of health care, my HMO provider is computerized. Every office has a computer. When I leave I’m handed a paper indicating what was done and any vital signs (blood pressure, etc.) that were taken. By the next day I get an e-mail indicating what was done on the recent office visit (essentially a duplicate of the paper I got as I left described above). I can look up the results of tests. I can send my doctor a question via e-mail and get an e-mail answer in return. Records entered by all departments are available to all departments. All this in Los Angeles in the good old USA! The problem is getting health providers to adapt and use the existing capabilities.
As for “free” open-source software like UNIX and LINUX, many companies such as Redhat make money by providing standardized versions of the Operating System. In general, OS systems evolve as new features are incorporated and as new hardware technology is developed. A developer of some software product that needs to be run in many diverse locations needs to rely on a particular version of an OS on the computers running the product. Thus some companies can make a profit by providing standardized versions of the “free” software. Training on using the OS is another profit center.
In some cases we accept advances as givens and forget how things used to be. For example a few decades ago Captain Kirk on his starship Enterprise (STAR TREK 1966 – 1969) could call up any known fact about the universe on his computer. Today on my iPhone (4.5″h, 2.4″w, 0.48″d with a 3.5″ diagonal screen) that fits in my hand I can Google a question or look at Wikipedia to enhance my knowledge (except on how to fix the current financial crisis).
Regarding the current financial crisis where some institutions are termed “too big to fail”. Are they also “too large to save”?
February 1st, 2009 at 12:10 am
1) These electronic records not only reduce hassle;
What reduces hassle is American taking care of themselves and to stop thinking that pills will save their fat asses.
Doctors are luddites. Records will not heal you.
2)they also reduce medical errors.
Prove it. The biggest errors are getting a script when you don’t need it an not getting the best med for the job because the MD doesn’t know or your insurance company won’t pay for it because its not on formulary. Also the error is in the ignorance of what is healthy to put into the human body.
3)Americans cannot avail themselves of this innovation despite the fact that the United States spends far more on health care, per person, than any other country.
We spend more because every time we have the slightest cold/cough or discomfort we think we are dying. If we wanted to save BILLIONS of $$$$ we simply need to cut out the Insurance industry as they provide NO benefit to your health and are compensated extremely well. Cut out the middle man, simple.
4)We are spending our money to consume medical treatments, many of which have only marginal health benefits, rather than to invest it in ways that would eventually have far broader b
We should be giving tax breaks for staying healthy, like keeping our cholesterol down and BP under control.
PS wait till those obese American children grow up, you know the ones who play Nintendo all day and live on sugar snacks. Then Health Care costs will be 10x greater. We will not fix health care until we look first at ourselves not the systems!!!!!! Medicine is not as advance as we would all like to believe start with yourselves first.
February 1st, 2009 at 12:23 am
Having worked for a few large public tech companies I can attest that most of what gets reported as R&D is not really what a purist would consider R&D. That’s a shame but at the end of the day a company that stands in place will be displaced by its competitors which I think is fine.
Nevertheless, I think the US is still a (the?) world leader in science and technology and will remain so as long as it’s culture of freedom is strong. It is not a question of money IMO. I would argue it is more of a social and cultural issue more than anything else. You can pour an endless amount of money and not get any innovation.
Another point I would like to make is that it is foolish to think science and technology will solve any of our problems. They haven’t so far and they never will. An electronic medical record is nice but people who care for each other and show it is a lot more important. Patients are not equal to their medical history, they are people…
Fundamentally, what needs to be fixed is our social fabric, how we interact with each other, how we support each other, how we can all live in this world without destroying it. It’s not the new house, the new car, the new gizmo or a new stock market high or low that’ll fix it. There seem to be some parallels between our sorry environmental state and our sorry economical state. I never thought about this before but it sounds right, what do you think?
February 1st, 2009 at 12:31 am
There’s probably no shortage of money going into scientific/electronics/engineering projects for which a quick payoff is likely; consider, e.g., the rapid pace of development in the cell phone industry.
The issue, however, is that of the commitment to research where the payoff can be 10 or more years in the future. I think the NIH is now getting about $30B/year, and the NSF about $6B/yr (NIH = National Institutes of Health; NSF = National Science Foundation). Not exactly chopped liver, but not much compared to what the top hedge fund managers made in 2007.
Then there are those that want to beat up on the pharma companies; this will only slow the pace of drug discovery.
So, there is certainly some commitment to long term research projects, but we’d be better off with a lot more.
February 1st, 2009 at 1:03 am
We are no longer a nation that cares about building a company through new and better products — it’s easier to build cheaper existing products, through off-shoring of production and bean-counting.
R&D is simply overhead with a payback that is much, MUCH longer than the next-quarter time horizon of CEOs whose goal in life is personal enrichment rather than building a legacy.
These are changes in mindset that will take a VERY long time to turn around, if it is even possible to do so. Perhaps this is just another indication of the sun setting on the American Empire.
When I graduated from college with an engineering degree, corporate R&D departments were commonplace, and many corporations had PURE RESEARCH departments in addition to R&D facilities. No more.
Some of this was lost in the shift from making products to selling services, but most of it was gone long before that shift gained momentum.
The demise of R&D is a symptom of a national shift in mindset, something that will not easily be reversed, and only after pouring billions into encouraging such behavior. Of course, billions are pretty small potatoes these days.
February 1st, 2009 at 2:39 am
@Another Guy:
Spend one day in an urban public school in this country…compare to what we know from documentaries on China and India…realize that we are all competeing globally for high-tech work…and you will quickly conclude that our “world leadership” is about to be severely tested.
February 1st, 2009 at 3:10 am
Many good insights in this thread.
The “savings glut” was always the flip side of an “investment drought” here in the US.
US corporate earnings have been generated abroad in off-shoring and virtual supply chains. Labor arbitrage pulled investment toward developing economies, and then tax regimes tended to keep the earnings abroad in those developing economies rather than coming back to the US.
This globalization process has been largely an irresistible force. But the upper tier of Americans has been playing the arbitrage to the hilt without a thought for the consequences. A commenter above was correct to point out that China could proceed to nationalize a vast amount of our infrastructure investment in China — investment that would otherwise have been put into the US economy.
That doesn’t make some kind of radical protectionism a smart idea, but we really need to get serious about investing in innovative uses for American labor.
February 1st, 2009 at 4:04 am
As ye don’t seek, so shall ye never find.
Don’t blame technology, dude – the discoveries are out there waiting to be found.
February 1st, 2009 at 4:32 am
Particular thanks to dasht and ronN. Anyone wanting to post up links to yet more details on this, I would be interested.
My theory is that our inability to invest in long-term research is a symptom of a more fundamental issue: No existing society knows how to run a knowledge-centered economy. To do so, we would need to both allow knowledge to spread freely (in a way that material goods are inherently unable to) and at the same time reward knowledge creators and maintainers. Copyright/patent rewards some knowledge creators but only by crippling knowledge into behaving within the limitations of a material object (such as Windows) so that monopoly rents can be collected. This wastes most of the potential. The other direction is what we call piracy, which does unleash the knowledge but does not reward the creators, so in the long run would wind up with little knowledge to spread.
The shift from any society now existing to a knowledge-centered economy will be as large a shift as that from medieval agriculture to where we are now.
February 1st, 2009 at 6:29 am
Nowadays if it doesn’t have planned obsolescence we are not interested, batteries, light bulbs ect. can all be made to last almost forever. The corporations can’t figure out how to make money with that business model. The answer is innovation through new and better products. We are in manufacturing here in America our products never wear out, never. We make a profit every year, in fact we were profitable in year one. Most of manufacturing is done elsewhere. A service economy, which we are mostly today, is destined to fail. I hope I’m wrong. I’ve never posted here before, but read it almost daily. This is probably the best blog on the internet for good commonsense information, along with some humor for good measure. Thanks
February 1st, 2009 at 7:07 am
jessica thats an interesting concept you presented ie “knowledge-centered economy”
“behaving within the limitations of a material object” or a billable service (reached by material rewards within an acceptable time period)
I think you are getting back to the 6000 years ago original design of how to motivate humans to work for trade … or the desire to get someone else to do the work for you.
I’ve been harping for some 25years its time for change to something anew. But like the removal of sound barriers in financial law that allowed this generation to game the then developed system … the task is so BIG no one wants to attempt it for fear of being the apple cart spiller.
For the kids and grandmas of 2121, I would like to see such a change.
February 1st, 2009 at 7:56 am
“Along similar lines, Americans are indefatigable buyers of consumer electronics….”
A timely observation coming during the biggest week of the year for big screen TV sales.
February 1st, 2009 at 7:59 am
Everyone around the world is fascinated by the American psyche that’s for sure. We don’t have a choice since our own livelihood depends on it in this globalized world. Socialism requires long term planning but it’s hard to practice what we preach when the leader in the room is using shorter and shorter term thinking and practices. But Americans couldn’t care less about what the ROW thinks!
All foreigners ask the same question:”What is it in America that makes most Americans so blind to what is happening in the world and so afraid of socialism?
It’s amazing the see the amount of Americans who despise any form of socialism when they are surrounded by consumer products made using technologies developed by NASA and other government programs! How can you deny socialism when your current hedonism depends on it?
Americans are scared shitless of having a public healthcare system when it has been proved time and time again that most of those in other developed countries are better than the US’s pseudo private one (where government passes all social policies through the employer). Why would you want your employer to actually have any control on your health? And why would you want your healtcare benefits to come through your employer when you are constanly changing jobs?
There’s some some of irrational response to the word socialism and it’s like Americans are trying to hold onto their frontier heritage. With 300M people going to 500M in the next 50 years, it’s hard to understand how they can not grasp the fact that it’s not Little House on the Prairie or the Waltons anymore!
February 1st, 2009 at 8:13 am
Barry,
Love your site, but technology is not passing America by…in this you are clueless.
Let’s see:
Joint replacements, now stable, predictable…allowing years of pain-free use.
Using 3-d imaging systems, now even posterior fossa tumors can be removed, often for cure.
Spinal cord injuries, that in the past would have resulted in paraplegia, now through steroids, temperature control, decompressive therapy can actually result in complete sparing of function.
Strokes and myocardial infarctions can be aborted through clot-dissolving therapies, saving lives and/or function.
Childhood cancers are much more amenable to cure.
Organ transplants are common, and now successful routinely. Now even hands and faces have been done. Multiple organ systems can be transplanted.
Eye implants that allow a person to never wear glasses, if desired.
Control of hyperlipidemias is now routine.
Hearing is possible for many of the deaf through cochlear implants.
Cancer risks have decreased for those who avail themselves…everything from skin cancer risks through improved ultraviolet blockers to oxygen radical scavenging to prevent damage to the cell after normal metabolism.
This is just a few in the field of medicine…if you like, I can go into what you haven’t noticed in electronics or manufacturing…but you get the point. The hard sciences have made and continue to make vast technological improvements…people in fields like business and economics don’t notice these things so much…
February 1st, 2009 at 8:15 am
An interesting thread, because there doesn’t seem to be much discussion about one of the author’s major themes– the american fondness for hijacking of public good by special interests. For example, his major point about medicine wasn’t record keeping, it was:
“Doctors, drug makers and other medical companies persuaded the federal government to pay for expensive treatments that have scant evidence of being effective. Those treatments are the primary reason this country spends so much more than any other on medicine. In these cases, and in others, interest groups successfully lobbied for actions that benefited them and hurt the larger economy.”
“Technology: What have you done for us lately?”.
No disrespect intended, BR, but a clean miss. I bought a radio in Germany last year, and golly gee willikers, the station names appeared on the display, embedded in the signal. I felt like HW Bush when he made that disasterous comment of amazement at seeing a grocery store scanner for the first time, years after every commoner in America was seeing them every day. Every other new farm building in Bavaria has a huge solar electric panel on it; solar hot water has been common for a decade. Recycling? Every other block has basic recycling containers that old ladies can walk to, and the transfer station in the town we stay in will take anything at all. Styrofoam, batteries, whatever. Before cell phones were ubiquitous (I got a prepaid for 10 euros with about an hour’s time, no additional costs for 2 years) telephone booths used prepay cards with chips on them 20 years ago. As did my wife’s medical card, as the author notes. Broadband internet? ISDN to the home was more or less standard 20 years ago, if not widely used. Those little Ku-band TV dishes? They plastered the side of apartment buildings in east germany in 1991, back when Americans were still mounting giant Arecibo wannabes in their back yards. And that 150-year-old technology called railroads? They work, they’re practical, comfortable and clean, they’re all over the country. I know numerous people in rural Germany who don’t bother owning cars.
I haven’t read the “The Rise and Decline of Nations” book the author mentions, but I had it requested at my local library before I’d finished the article.
February 1st, 2009 at 8:54 am
By the way, money has allowed those innovations, and dozens more that Mr. Leonhardt missed in his article. These innovations don’t come from Europe. The French, Italians, etc. take what we do here in the US and use them, but they lack the money for innovation themselves. Once our medical system is fully socialized, we too will not innovate.
The medical system will become good treatment for those things that aren’t expensive…if you have an expensive problem, say you need a hip replacement…er, maybe not so much.
Let’s talk again in 5 years…
February 1st, 2009 at 9:11 am
Stem Cell could change the “no breakthrough” comment.
February 1st, 2009 at 9:15 am
Back to economics, and more informed journalism:
http://dealbook.blogs.nytimes.com/2009/01/30/paulson-defies-financial-crisis-and-posts-huge-gains/?ref=business
http://www.nytimes.com/2009/02/01/business/worldbusiness/01china.html?_r=1&ref=business
The Chinese have already been reported as to their desire to leave the long end of the bond market…
February 1st, 2009 at 9:29 am
You guys are entirely too credulous. This article is an unpaid advertisement for the so-called stimulus but actual pork bill now rolling through Congress. What are the items mentioned? Medical records, internet, Amtrak and education. All get big infusions in the bill.
And you’re missing the hidden agendas.
Take medical records. Your doctor doesn’t ask you to fill out a new form because he can’t find the last one. He asks you to fill it out to get updated information. And his staff almost certainly enters some if not all of it into the office’s computers. No change here. What will change is that these records will all be linked into a government funded data base, said to be used for information exchange between you practitioners, but which can and will be used to monitor, direct and ultimately ration medical care under the new national health insurance program.
Staying with medical, also in the bill are big appropriations to the states to cover Medicaid costs. The bill also expands Medicaid, famously to anyone rendered redundant, sans means test (“Your application is approved, Mr. Thain”). This is supposedly a stimulus bill, temporary in nature. What do the states do with the budget hole that appears when these funds expire? The answer is, the loss of funds increases the pressure for nationalization of health care. (By the way, since when have increased health expenditures been thought a good, stimulating thing? I thought they were a burden, a drag on society.)
I think government spending on the internet too is intended to open the door to government control. I admit it, I’m cynical about government. I think government everywhere and always seeks to expand to its perfect state: What’s not forbidden is mandatory. What’s not mandatory is forbidden.
As to the rest, the bill is mostly payoffs. Education spending, think unions. Green jobs, the environment constituency. And so it goes.
You can be for all this or against it, as I generally am. But don’t be fooled by this article. Its advertising.
February 1st, 2009 at 10:14 am
One bullet summary of comments above… 95 – 98% of Americans had better get a new dream and fast !
February 1st, 2009 at 10:15 am
(By the way, since when have increased health expenditures been thought a good, stimulating thing? I thought they were a burden, a drag on society.)
———————
That’s where society is wrong: the fixation on costs. In an economy, every cost is ALSO a revenue! An economy should reflect what people need and want. If health care is what is needed, then offer it! The problem is that people want to spend on large houses and expensive cars but consider health care an expense, a waste of money. It’s all in the attitude. A population has a fixed amount of energy and resources and must decide how to allot these. Americans want their GDP to reflect the toys but not health care. You know why? Because the ones making the big decisions are the lucky ones who are not sick or don’t have to deal with weka depoendants (that’s how they can more easily get to the top)!
There would be nothing wrong with letting health care become a more imprtant part of GDP is that’s what the population needs. You just have to make sure that the emphasis on one sector (housing maybe?) does not squeeze out other essential sectors. You have to make sure that you have the staples and the capacity to import what is needed to hold onto the quality of life you desire. On top of it, if you treat healthcare as a revenue generator instead of an expense you end up with quality that the whole world will admire and want.
February 1st, 2009 at 10:20 am
Richard:
I agree with you.
Journalists sometimes get my goat. No innovation?
Hand-held GPS so that anyone can know in a few seconds where they are in the world?
Reliable hybrids that within 5 years will plug in?
Sure other countries are ahead of us in some things like solar power…but the technology is already there, and improving rapidly…
We stand on the shoulders of the giants who came before us…
In the hard sciences, it will always be so..and innovation continues apace..but money drives it, and just keep that one fact in mind as we head down what may be a slippery slope..and I don’t mean that government knows how to invest…I will always take the opposite side of that discussion..
February 1st, 2009 at 10:28 am
The shift from any society now existing to a knowledge-centered economy will be as large a shift as that from medieval agriculture to where we are now.
—————
If you are familiar with psychology, you will know that there only a few percentage in a population who can actually think or plan long term; but rare are they the ones in the positions of power.
Only when we have the capacity to choose our leaders based on their long term thinking capabilites will we get there.
February 1st, 2009 at 10:50 am
the shift to a knowledge-centered economy is well under way and this is the conundrum for the 70+% driven consumer spending USA.
We’ll see if Obama has the chops to increase stimulus for more ‘smart infrastructure’ spending vs the needless and wasteful pork driven by status quo corporate interests.
February 1st, 2009 at 11:16 am
The problem with the knowledge-centered economy is that most people don’t have much knowledge.
I was talking doomsday with an in-law recently, and asked him why jobs like car-salesman even exist. The younger folk at the table hardly knew what a car-salesmen is: don’t you just go online, read the reviews, and then click to order the one you want?
February 1st, 2009 at 11:20 am
km4:
I agree with that,too. I have previously posted that if we are going to have stimulus, let’s stimulate the educational system, making it easier to have a smarter, more educated, more competitive populace…
I would love to see business majors have to take four semesters of calculus, differential equations, basic caculus physics, and applied physics the way engineers and others in the hard sciences have to start…maybe then the 50% declines in bear markets by money managers would be a thing of the past…I am speaking of less “gut feeling” and more sweat equity into the planning of investments of others…I know of no engineers who think their major was easy, and I know of no humanities majors who took, say, Networks I as an easy course just to fill in the electives in their curriculum….
February 1st, 2009 at 11:45 am
@danm
“There would be nothing wrong with letting health care become a more imprtant part of GDP is that’s what the population needs. You just have to make sure that the emphasis on one sector (housing maybe?) does not squeeze out other essential sectors. You have to make sure that you have the staples and the capacity to import what is needed to hold onto the quality of life you desire.”
Who’s this “You”? It isn’t me, it isn’t you, danm, and it isn’t anyone who knows anything about any “one sector”, except in the way a paid lobbyist knows who’s paying him and understands the pitch he’s been given. “You” here is the like of Barney Frank and Chris Dodd (who did such a great job of overseeing the financial sector). Fact is the decisions you danm expect will be made on merit will be made on politics. Barney, Chris and friends will made appropriations and steer contracts let not because these help us “hold onto the quality of life” but as rewards to the contributors and political allies who put them in power and promise to keep them there. The only “quality of life” being held onto is that of these, our rulers.
This is our government today. Learn it, live it, love it.
February 1st, 2009 at 11:48 am
The U.S. has changed jobs. We are the world’s policemen – The Blue Knight Brothers – and we are on a mission from God.
February 1st, 2009 at 12:04 pm
alt. energy tech.
it’s coming.
February 1st, 2009 at 12:24 pm
>> gorobei Says:
>> February 1st, 2009 at 11:16 am
Completely agree. Warren Buffett mentioned years ago that the internet would destroy many, many businesses. You could say we have overcapacity in mildly knowledgeable people. Computers/tech are raising the bar.
And this sudden “unemployability” of the middle tier employee is adding to the collapse of Peak Credit. For a while, the earnings capacity of these people was significant. And credit was extended to them on that basis. Now, they can’t pay.
http://www.unknownliberal.org/blog/?p=135
February 1st, 2009 at 12:35 pm
The point is that way too much effort goes into the short term, marginal areas meant to maximize profits for private enterprises. This is partially due to the influence incumbent technologies and industries have on the use of capital and the setting of policy.
The car is a prefect example: more innovation has been placed on very marginal consumer comforts than breakthrough innovations. Who gives a hoot about GPS, 4 wheel steering, heated seats, rear view cameras, 4 way temperature control, game consoles, wireless internet, moving headlights, heated steering wheels yada, yada, yada.
The same can be said about simple things like razor blades, wet/dry, mirco/mini, five blades six blades WTF? How about soap.. who needs six million types of friggen liquid soap? Tooth brushes… same BS. The list is endless.
Yet we have done zip zero zilch to fundamentally change the internal combustion engine. The facts are there for all to see it just depends if you open your eyes to view them.
February 1st, 2009 at 12:50 pm
Bruce in Tn, my understanding is that much private research rides off government-sponsored research, including in pharma. There’s a lot of “socialized-costs/privatized-profits” going on. So, I don’t think innovation will end once medicine is socialized. (Make that “further” socialized.)
February 1st, 2009 at 12:54 pm
Moss, I’m concerned you’ll next express your underappreciation of mops with consumable/disposable heads. But, that’s progress, bro. ;-)
February 1st, 2009 at 1:11 pm
one simple rule: Honor Necessity.
How do we wish to change society? Will these changes benefit all or just a few?
February 1st, 2009 at 1:21 pm
If you’ve been out of the U.S. in the last five years then you know that as a nation, overall, we are technologically behind others. JFK airport looks so adorable with its quaint old fashioned charm when you first come through customs.
February 1st, 2009 at 1:26 pm
Moss,
Agreed that moving millions of people around in internal combustion driven personal vehicles is a bit absurd, but the efficiency of the tech is nearly maxed out at this point. There are not going to be any breakthroughs without switching to a different model.
So, no real surprise that cars are all about bells and whistles. I don’t drive anymore, but I remember 1980s tech: it sucked! No ABS, no airbags, low visibility: you needed a lot of expert knowledge just to avoid killing yourself. When I’m in some third-world shithole, there often comes a point when I get given the keys: nobody else can drive a 1960s POS on interesting terrain.
Oh, and I love those built-in DVDs players: keeping the kids quiet is worth $50/hour.
February 1st, 2009 at 1:40 pm
Terrific, terrific article.
That is an excellent piece of econo-journalism there. I hope someone from Obama’s team is thinking this whole thing through….
The bit about men being about as educated as men 30 years ago blew me away. For some reason I was under the impression that a greater percentage of people were getting college degrees.
My perspective on the macro picture has changed a little bit because of this article. When you think about “what it takes” to really lay the groundwork for growth over the next 50 years, the whole banking crisis seems almost like the sideshow.
It’s actually quite “easy” to fix the banking mess. It simply requires more cash.
To reform the bloated medical system, improve the infrastructure, pump up the level overall education….now those are difficult problems to address. I would also add another subject that infects everything….the tort system in the US needs dramatical overhaul. The amount waste and layers of cost that have been added to every part of society because of out of control litigation is mindboggling. If the U.S. were a ship, the litigation society we’ve created are the barnacles growing exponentially under the hull, slowing us way down.
February 1st, 2009 at 1:57 pm
Andy Tabbo,
Hey, I rather like our tort system. All societies have tried to solve the “don’t behave like a dick” issue. Tort law seems to work pretty well compared with the alternatives (pitchforks, grenades, commerce bans, etc.)
Really, how has tort law held you back?
February 1st, 2009 at 2:04 pm
jessica said:
“My theory is that our inability to invest in long-term research is a symptom of a more fundamental issue: No existing society knows how to run a knowledge-centered economy. To do so, we would need to both allow knowledge to spread freely (in a way that material goods are inherently unable to) and at the same time reward knowledge creators and maintainers….”
Excellent point, an example of “knowledge management and reward of creators and maintainers” is the US system for “vetting” science and engineering ideas for the investment of $$ to develop and build businesses around.
It changed dramatically 15-20 years ago when corporate and financial re-engineering became the fad. Previously the BellLabs, Fairchild, Intel, and TI’s vetted their new engineering ideas quite openly in open engr journals and meetings. When it came time to invest $$ to develop products, move into manufacturing, market and sell them, exec’s and financial types had the benefit of much lower “knowledge” risk around the investment. However, since the early to mid ’90′s, professors and technologists are keeping the “best ideas” (those with the potential to make big $$ in IPOs) to themselves, and VC’s and investment bankers invest largely to get the “exit done” and run for the hills. The IPO buyers and investors end up losing trillions and the US is in a huge hole.
Look at solar, Germany and Japan kept their eye on the ball since the mid ’90′s, invested in tech improvements and vetted them heavily in the engineering community. The top 3 world producers in solar today are in Japan or Germany. First Solar and SunPower, US companies in the 2nd tier, weren’t funded by VC’s and are alive only thru shear willpower of their tech founders who struggled without proper investment for decades. When our VC’s and IB’s finally decided a few years ago to invest billions and billions in solar, they again invested in unvetted “bad science” and those companies will collapse just like in the previous bubble. Again, the US loses…..
February 1st, 2009 at 2:30 pm
Wunsacon:
Let’s talk in 5 years.
February 1st, 2009 at 2:31 pm
@RonN:
Where did you get your Ph.D.?
February 1st, 2009 at 2:41 pm
Planned obsolescence is the concept a number of comments allude to. Lightbulbs, razors, and many other common products could be sold in a much more durable form at reasonable cost.
Untrue to say US is keeping pace w/ Europe in all R&D. CERN and the large hadron collider is now the most advanced high energy physics facility in the world.
One more thought. The old 8088 processor drove the ICBM optical targeting systems in the early 70s. The power provided by a contemporary PC is ungodly. We as a society are just too stupid to make optimal use of the tech that is right under our noses.
February 1st, 2009 at 3:09 pm
Here’s another scary thought…
Many of China’s top politico’s have engineering backgrounds and are perhaps much wiser about choosing which new “industries” to invest in and how — to get the best returns for “society”…..
February 1st, 2009 at 3:31 pm
not sure we have innovated much in a long time. years ago some one asked what has been invented in the last 50 years, and by that they meant is not an out growth of a preexisting technology. nobody could name one. example fuel cells, they have been around for how many years? would you believe more than 100? Or computers? would you believe in their latest incarnation at least 60 years? and thats probably because private industry is very much focused on a very short time frame, at most 5 years. beyond which they won’t go . just like the stock market is very short term focused. the only long term actor is public (I.E. government). and we have had those in charge of that , that have burned down that funding to the point that its almost useless. and they do seem to be as any science and technology as they can be.
February 1st, 2009 at 3:32 pm
gorobei:
You’re kidding, right?
I’m not suggesting blowing up our legal system. As you say it’s a good system to remedy bad behavior. What I’m alluding to is the massive legal industry build around exacting HUGE penalties from businesses for the sole purpose of enriching large law firms. Because of the buildup of these legal guerillas, there is huge cost built into every product or service you consume or use, whether you realize it or not.
Certainly there are benefits to having lawyers out there to help curb bad corporate behavior. i.e. companies who knowingly sell a dangerous product. But I believe we reached a point of severely diminished returns on such activities.
February 1st, 2009 at 3:39 pm
The Korea Communications Commission is working on plans that will boost broadband speeds in that country by ten times by the end of 2012. That means Koreans will access of 1 Gbps service by 2012. That’s 200 times as fast as your typical 5 Mbps DSL connection sold in the US.
http://gigaom.com/2009/02/01/by-2012-koreans-will-get-a-gigabit-per-second-broadband-connection/
So by 2012 Koreans Will Get 1Gbps Broadband Connections while the US government continues the wasteful pork spending and American taxpayers pick up the TARP tap for the Wall St Crooks.
February 1st, 2009 at 4:11 pm
Andy Tabbo,
I’m not kidding, honestly. I just don’t see tort law as having much effect on most business, and where it does, the information asymmetry between the counterparties is often so high as to make the punishment seem pretty reasonable to me. 99% of tortuous acts never make it to court – it’s only when a firm repeatedly behaves stupidly that a class action suit kicks into action.
Most people, and businesses, behave in a pretty decent fashion: they tend to not be sued. Now and then, one comes up with a seriously crazy idea (e,g, selling lawn darts or serving coffee too hot for the cup it is served in.) If you stop doing it when the problem becomes apparent, then no real problem. But if you keep doing it, then we, as a society, get real pissed.
My group sells interesting products (you want a quantoed windowed knockin-double knockout, we can do it) but we spend a lot of time making sure you actual understand what you are buying
February 1st, 2009 at 4:22 pm
Here’s how science moved to products 30 yrs ago:
university –> corp research lab –> corp development –> biz potential eval “gates” –> product development –> mfg release to mkt –> ROI to stockholders
Here’s how it has gone in the last 15-20 yrs…
university or technologist “idea” –> VC eval & funding –> “stealth mode” development/eval/hype –> IPO/acquistion –> cash out of investors & founders –> crash and burn & huge lost investment by the public stock holders
February 1st, 2009 at 6:28 pm
I don’t think we need more government support for R&D. The problem is that the growth industries have been finance and consumption (lots of innovation in consumer goods – new stuff coming out all the time).
Reduce the size of these sectors and everything else will pick up. The best brains will not longer gravitate toward finance – it’ll soon become apparent that it takes more than intellectual muscle (math) to find success in markets. They do other stuff – potentially science. People in finance will continue to make more money than others will comparable levels of education and intelligence – but they will be fewer.
And I believe that a move away from government interference through central banks will reduce the financial sector – and indirectly reduce consumption as well since savings will have to go up.
February 1st, 2009 at 6:32 pm
Moss,
Do you mean to tell me that mentholated dental floss wasn’t a great scientific achievement? What a letdown.
Seriously, I see where you are going and the pursuit of individual comfort and decadent pleasure as opposed to genuine advances in efficiency and cost while improving the overall health and wellfare of the population is bad for our future. The Huckleberry Finn mentality of our culture where it’s such great fun to get someone else to paint the fence for you while you get the money is, I believe, at the root of our disfunction as a society.
Bruce in Tn,
You are a smart man and from what you have written I can tell you treat your employees with respect. You and people like you are an asset to our country. However, you can’t ignore the massive government funded scientific discoveries which were consequently high jacked for private profit as a plus in our country. That’s bullshit. I paid for part of every computer chip miniaturization, car technology improvement and a myriad other advances in medicine and the like that private enterprize wants to bill me for twice. Socialization is IN because private enterprize lied, cheated and generally condemned employees to second class citizens. I didn’t control air traffic for 20 years to feel inferior to a business tycoon. That’s total bullshit. The max income in this country should be the Pesident’s salary and that’s it. Business made it’s bed and, by God, it’s not going to weasel out of sleeping in it this time.
February 1st, 2009 at 6:44 pm
Gov R&D as a % of GDP has fallen right in line with defense spending and, to a lesser extent, spending on NASA. Despite the recent run-up, defense has actually declined significantly as a % of GDP since the end of WWII. It has risen back to ~4.5% in the most recent FY, but the defense budget is still far, far below historic levels on a GDP basis. The “glory days” of gub’ment R&D are an artifact of the Cold War.
February 1st, 2009 at 6:59 pm
@RonN:
What about Apple as an example? It followed a model closer to your #2. Xerox who followed #1 didn’t generate the ROI to its stockholders. There are plenty of other examples.
IMO a lot of the seeds for today’s problems were sown in the days of model #1. Universities started showing too much preference to corporate financed research and consumerism as a way of living became the norm with questionable impact on the real quality of our lives.
It seems that the greed and the desire to get rich quick (at the expense of others) is a fundamental problem in our society. It leads to behaviors that in the long term create huge problems for all of us. At the end of the day it is a question of values.
Education and science are just one manifestation, if anything though these realms have been less affected as they have managed, to some degree. to hold on to some values.
The big problem today is sustainability and the big fix will have to address that, with all due respect to science and technology those are only tools that can be rightly or wrongly applied.
February 1st, 2009 at 7:27 pm
The latest milieu on Wall Street with the ousting of John Thain, CEO of Merrill Lynch (a company I think should have had its doors closed after the Dot Bomb Era) is evidence that not only economically but structurally as a society we are reverting to a by gone era thought to have been eradicated (at least in Western thinking) from the world by the Age of Enlightenment. Having been recently given money by the government, let me fix that, by the people, to facilitate a revival in the credit markets, Thain heedlessly anoints himself a Saudi King and redecorates his office with a plethora of fine booty costing millions. At least someone had the chutzpah to fire this guy, not in the name of ethics I am sure, most likely mere jealousy of the antique Chinese gold John Crapper John Thain had installed in his bathroom. It seems everyone is in agreement that Communism failed, well Communism was never really tried, but what is known as “Communism” has failed, certainly. Perhaps we are now witnessing the demise of that other C-word, Capitalism? We are now more correctly the Third C in political parlance, A Cronyism – something that probably began as a byproduct of Supply Side Economics under the rubric of the law of unintended consequences. Since people like Thain are presumably smart people and they have bared witness to the beheading of the middle class they know that there is a growing likelihood that there will shortly come to be a two-class America – Those receiving Transfer Funds from the State and Those that decide how much and whom gets it – Oh and this paltry few also control and enjoy 90% of the nation’s resources. Starting to sound familiar from that 9th grade world history class? Remember the Middle Ages? Remember Rome? Well, we call this political/economic situation a Plutocracy. How close are we? How close will we come? Can we stave off this reversion? Or is it just a natural event – that political regimes abide by the same laws of nature in which everything comes and goes, rises and falls – Eventually coming full circle only to begin anew? Godspeed President Obama, because on everything you do the answers to these questions will depend!!!
-Matthew Millman
February 1st, 2009 at 8:11 pm
AGG:
I guess I don’t see the world as bleakly as that….this is a democracy, and if the population wants socialism…I am for it. Not me personally, but I choose to live in this democracy, and unless I see that I can’t live in a much more socialist state, I will continue on. My own feelings are that socialism kills initiative, and that is an anathema to me…
February 1st, 2009 at 9:08 pm
I did save responsibly. And invest conservatively. And I’ve watched my investments lose half its value, and my largest investment – my home – lose about 18% of its value.
Now sure, I could have spent all that money on things and then my wife and I would have had at least the enjoyment of having traveled rather than having skimped and saved.
I’m watching the government rush to help those who spent irresponsibly, made bad decisions year after year after year. And my taxes, and my son’s taxes, and his son’s will all be to pay this debt off.
So, please remind me again about the virtues of saving and spending responsibly. Because from the cheap seats, it seems like I’m just getting screwed thrice.
February 1st, 2009 at 10:30 pm
This from a doctor writing in The New Yorker:
The Massachusetts plan didn’t do anything about medical costs, however, and, with layoffs accelerating, more people require subsidized care than the state predicted. Insurance premiums continue to rise here, just as they do elsewhere in the country. Many residents also complain that eight per cent of their income is too much to pay for health insurance, even though, on average, premiums amount to twice that much. The experience has shown national policymakers that they will have to be serious about reducing costs.
For all that, the majority of state residents would not go back to the old system. I’m among them. For years, about one in ten of my patients – I specialize in cancer surgery – had no insurance. Even though I’d waive my fee, they struggled to pay for their tests, medications, and hospital stay.
I once took care of a nineteen-year-old college student who had maxed out her insurance coverage. She had a treatable but metastatic cancer. But neither she nor her parents could afford the radiation therapy that she required. I made calls to find state programs, charities – anything that could help her – to no avail. She put off the treatment for almost a year because she didn’t want to force her parents to take out a second mortgage on their home. But eventually they had to choose between their daughter and their life’s savings.
For the past year, I haven’t had a single Massachusetts patient who has had to ask how much the necessary tests will cost; not one who has told me he needed to put off his cancer operation until he found a job that provided insurance coverage. And that’s a remarkable change: a glimpse of American health care without the routine cruelty.
It will be no utopia. People will still face co-payments and premiums. There may still be agonizing disputes over coverage for non-standard treatments. Whatever the system’s contours, we will still find it exasperating, even disappointing. We’re not going to get perfection. But we can have transformation – which is to say, a health-care system that works
February 1st, 2009 at 11:15 pm
re: gnomic
I’m with you my friend – tried my best to do the right thing and lost a lot along the way – you know, buy and hold, buy and hold; Don’t worry, it’s a long term investment; It will come back – don’t worry. We’ll i’ts been a long time and it hasn’t come back and probably won’t come back for some time to come.
Buy and hold is dead – today, people want quick profits and instant gratification. Much like the Romans and their Circus Maximus.
Gov just throws more fuel to the fire to re-inflate and the cycle goes on. It all seems like a big ponzi to me.
February 1st, 2009 at 11:53 pm
Microsoft killed technology development. I’ve seen field after field shut down by the likes of Microsoft, Oracle, et al.
We let the big companies buy up the markets, and they kill innovation. We let the big car companies control transportation and kill electric cars, bullet trains, and on and on. We let the oil companies kill innovation in energy technology.
GET RID OF THE LOBBYISTS. Free small business and innovation again.
February 2nd, 2009 at 12:32 am
gnomic
I’m sorry.
I’m sorry you have felt pain. But, I must tell you that you did NOT invest conservatively. Any investment in “companies” is not conservative. When you put your money in the common stock of ANY firm, it is NOT a conservative investment. I don’t trust anyone. I don’t trusty anybody with my money. All that being said, everyone is coming to that conclusion now….
So, soon it will be time to invest in companies again, at least their bonds.
Whatever temptations you “feel”…do the opposite. That’s the best advice I can give. Don’t buy gold now. Don’t stick your money in a mattress. Chill out for several months….
There will be a time in the not too distant future to buy stocks….be patient.
February 2nd, 2009 at 12:13 pm
I think the numbers on what “society” has valued over at least the past 10 years speak for themselves.
Q) Taking MIT as an example, what percentage of *graduating* (i.e., not drop outs) engineers when into science and technology?
Less than 30%
Q) Where were the majority of MIT graduates employed?
Money management, mutual funds, investment activity and law
Q) *Before* bonuses, what was the approximate salary difference between those hired in finance vs. technology?
finance +$30,000 more than technology per year
“Technology: What have you done for us lately?”
Barry, so yes I take that sarcastic comment with a bit of jaded bitterness.
…yes I am a bitter engineer who worked many long hours through 6 years of
school, only to work longer hours and be paid almost 50% less than some of my
classmates in finance.
February 2nd, 2009 at 1:02 pm
” rww Says: January 31st, 2009 at 6:45 pm
We were in trouble as soon as products became services.
I’ll second that. In a nutshell, thats all you need to know. There is no R&D in a FIRE economy, and the few exceptions to that are what spawned the CDS nightmare, so the less R&D there the better.
We don’t make anything here anymore, so R&D expenditures are bound to go down.
February 2nd, 2009 at 4:03 pm
Bruce in Tn Says:
February 1st, 2009 at 10:20 am
…
Hand-held GPS so that anyone can know in a few seconds where they are in the world?
…
..and I don’t mean that government knows how to invest…I will always take the opposite side of that discussion..
So government does not know how to invest … yet GPS was a government project:
http://en.wikipedia.org/wiki/Global_Positioning_System
http://www.gps.gov/
Oh and check out the part about no user fees. Who do you think picks up that tab, Ace?
Seriously, you’re an engineer? Well, if you say so …
February 2nd, 2009 at 5:56 pm
How Modern Law Makes Us Powerless
By PHILIP K. HOWARD
http://online.wsj.com/article/SB123293018734014067.html