The global competitiveness situation the United States finds itself in today unfortunately is very similar to claims made by Woolworth's executives in the 1960s. They, too, fatally believed that there was no need to worry about emerging competition, in their case, from Kmart and other rival stores, because Woolworths had always been number one so why worry. If the U.S. follows the same path in underestimating our competitors we could “go out of business” the same way Woolworths did.
Brazil in the Global Innovation System
Robert Atkinson addresses where Brazil is in regard to innovation and innovation policy as well as implications for policymakers. Policymakers are reminded that innovation and productivity are the key to growth and the right innovation policy drives growth.
EU and U.S. Leaders Push Transatlantic Trade at the G8 Summit
The first round of negotiations for the T-TIP, which has the potential to be the biggest bilateral trade deal in history, will take place during the week of July 8 in Washington, D.C. EU and US leaders promise a significant boost to worldwide economic growth from the agreement.
Singapore Looks to a National Productivity Strategy to Maintain Growth
Singapore has a remarkable history of economic growth, proving doubters wrong. Currently they are pursuing a range of deliberate policies to help private industry increase productivity and keep the small nation competitive and growing.
Is Technological Change Speeding Up? How Can You Tell?
Technological change is important for our economy but it can be difficult to measure, because of our bias toward the present, because each change is different, and because technologies are complexly interrelated to our economy. We can get around these problems by measuring technological change in simplified ways--but none of the techniques are perfect.
If We Do Not Fix Immigration, Canada May Solve the Problem for Us
ITIF Summer Reading List 2013
It’s summertime and that means one thing: the ITIF summer reading list (if The New York Times can do it, we can too). There’s no scientific method here, only a poll of ITIF staff to identify the books they think add to the innovation and competitiveness policy debate. We also save you the time of having to read books that detract from the debate.
Books We Recommend
Doing Capitalism in the Innovation Economy by William H. Janeway
It’s not often we read a book that makes us think the author should be an ITIF scholar. In this very readable treatise, Janeway demolishes much of the anachronistic neoclassical economic thinking around innovation and presents a realistic view of how innovation happens, as well as the government’s role in spurring it. The first half is an interesting history of Janeway’s career as an investor in technology companies. The second half applies these lessons and the lessons from history to the process of innovation and growth. Among the rules Janeway develops is that the primary role of economic policy is to encourage “Schumpertarian waste”—the waste that comes when innovation makes existing assets worthless. For far from wasteful in the neoclassical sense, “good waste” is what drives economies forward. And in terms of how to maximize this, Janeway is clear, the role of the state is essential.
Ten Types of Innovation: The Discipline of Building Breakthroughs by Larry Keeley, Helen Walters, Ryan Pikkel, and Brian Quinn
Few have done more over the past two decades to contribute tools that enable businesses to boost their innovation success rates than Larry Keeley. This book details Keeley’s Ten Types of Innovation framework, which has proven an enormously powerful yet easy-to-grasp model for businesses looking to generate insights to achieve breakthrough innovation. Keeley and his co-authors point out that while most businesses just “innovate” around the core attributes of their product or service offerings (e.g., “feeds and speeds” in the printing business), firms capture the most value from innovations to their profit model, value chain, or customer experiences. To further capture this type of value, the book details an avenue or lever through which a firm can utilize each of the Ten Types of Innovation to achieve comparative advantage over its competitors. This long-awaited book is an invaluable resource for anyone looking to enhance the innovation potential of their organization, whether in the public or private sector.
The Dawn of Innovation: The First American Industrial Revolution by Charles R. Morris
It can be easy to buy into the notion that we had just one industrial revolution—that of the late 1800s. But as amateur historian and former banker Charles R. Morris correctly notes, there was an equally important industrial awakening in the early 1800s that by 1820 had launched America as a productive manufacturer. And much like the digital revolution of today, this surge in industrialization centered on the development and use of new, game-changing technologies. First in Britain and then in the United States, innovations such as precision metal measurement, clock making, interchangeable parts, the tack making machine, and the Corliss steam engine greatly reduced production costs, allowed for mass production and enabled global trade as never before. And as in Doing Capitalism, we learn about the key role of government in this process, particularly in defense procurement and research and development. Morris’ last chapter on China poses the $64,000 question: can China use the same methods we once did to become the next global leader? Morris argues if America “falls asleep” and gives up on innovation the answer will be yes.
Producing Prosperity: Why America Needs a Manufacturing Renaissance by Gary P. Pisano and Willy C. Shih
Unfortunately, most analyses of manufacturing fall into two categories at polar opposite ends of the policy spectrum: either manufacturing does not matter to the United States so who cares or U.S. manufacturing is doing just fine and not in need of policy reform. It’s therefore heartening to read Producing Prosperity, which affirms the importance of manufacturing to America’s economic health and calls on policymakers to articulate a coherent national economic strategy for manufacturing. In particular, the authors, professors at Harvard Business School, argue that manufacturing matters to the U.S. economy because once manufacturing capabilities go away, America’s industrial commons erode, and we lose our ability to innovate. They further warn that when a country loses technology leadership in one product life cycle, it then falls behind in subsequent life cycles, explaining for example how the migration of semiconductor foundries to Asia caused a sharp decline in silicon-processing and thin-film-deposition capabilities in the United States that later comprised U.S. competitiveness in manufacturing photovoltaic solar cells. Pisano and Shih provide a compelling narrative explaining the critical importance of manufacturing to U.S. economic health and innovation potential and show how effective public policies can play a vital role in restoring America’s industrial commons and manufacturing competitiveness. Watch a web cast of the authors discussing the book, at an ITIF event that also featured Charles Wessner and Alan Wolf.
Rising to the Challenge: U.S. Innovation Policy for the Global Economy edited by Charles W. Wessner and Alan Wm. Wolff
This must-read compendium, published by the National Academies, is a compelling work of scholarship regarding the changing innovation landscape in the global economy and America’s place in it. The authors note ominously that “the capacity to innovate is fast becoming the most important determinant of economic growth and a nation’s ability to compete and prosper in the 21st century global economy…(But) at the same time the rest of the world is investing aggressively to advance its innovation capacity, the pillars of America’s innovation system are in peril.” To address this, Wessner and Wolf call for a suite of policy reforms to improve innovation capacity and promote the development of the new industries, commercial products, and high-quality jobs required to return America to full employment. Watch a web cast of the authors discussing the book at an ITIF event that also featured Gary Pisano and Willy Shih.
Innovation Economics: The Race for Global Advantage by Robert Atkinson and Stephen Ezell
We would be remiss to not include our own book on this list. We will let our McKinsey colleague Lenny Mendonca describe the book “As a long-time analyst of the trends shaping the global economy, I am struck by the increasing number of economic and political leaders that do not grasp how serious the structural economic problems facing America are. I hope they read Innovation Economics. It ‘speaks truth power’ with candor, reason and wit and offers fresh thinking and a path forward. Rob Atkinson and Stephen Ezell have been making important contributions and better ideas about economic policy for years. Their new book is eye-opening and alarming and arrives at a critical time.”
Science and R&D
Space Chronicles: Facing the Ultimate Frontier by Neil deGrasse Tyson and edited by Avis Lang
In this book of essays, Tyson lays out a bold vision for the next-generation of U.S. space travel and the technologies, research, and policies needed to get there (such as doubling NASA’s budget). But what struck us about the book was the strong argument for the broader goal of boosting public funding for research in general. Tyson provides a long-list of breakthrough technologies developed, in part, with the help of government investments and contrast this with the currently underfunded U.S. innovation system. Further, his call for increased space research funding mimics the critical need to triple clean energy R&D investments, increase the budget of the National Science Foundation, and improve investments in the National Labs. In other words, Tyson makes funding science and technology tangible. And it’s this fundamental message that makes the book a great, quick read.
Infrastructure: The Social Value of Shared Resources by Brett M. Frischmann
With the recent collapse of the I-5 Bridge in Washington, state and federal policymakers are renewing their focus on how to maintain infrastructure vital to the U.S. economy and society. Frischmann argues many different types of resources fall under the umbrella of “infrastructure”—from traditional infrastructure such as transportation systems and communication networks, to non-traditional infrastructure such as the atmosphere and basic research. Frischmann’s principle thesis is that concerns over infrastructure are at the heart of many policy debates with one side arguing for private property solutions and the other opposing it. However, those embracing the idea of the “commons” as a means of managing infrastructure have lacked robust economic theory for their position. His goal with this book is to help fill that gap. While the book covers a lot of ground, its analytical framework is a useful tool to reflect on the limitations of some economic approaches which simply treat infrastructure as a public good or a natural monopoly.
Telecom and IT
Viral Hate: Containing Its Spread on the Internet by Abraham H. Foxman and Christopher Wolf
Foxman and Wolf argue that while the Internet provides a powerful platform for individuals to engage in free speech, it is increasingly used by extremists to spread bigotry, engage in cyber-bullying, and encourage violence. The authors discuss the development of online hate speech, the methods created to reduce its impact and the continued challenges we face. Much like The New Digital Age, this book provides a balanced assessment of the issue and outlines implementable solutions that directly address the problem. ITIF will host a book presentation and panel discussion featuring co-author Christopher Wolf on June 26.
Granted, at first glance a book on the history of phone “hacking” may not sound like good beach reading, but it actually is. The phone system was one of the first communications networks in America, and as such, just like today, it attracted its share of amateur hobbyists who wanted to understand how it worked, including finding out how to make free long distance calls, conferences calls and the like. The book presents a fascinating history of these amateur hackers, who became known as Phone Phreaks, and the efforts by Ma Bell to catch them. In the process, Lapsley provides a prescient analogue to modern debates over Internet speech, privacy and cybersecurity.
Big Data: A Revolution That Will Transform How We Live, Work, and Think by Viktor Mayer-Schonberger and Kenneth Cukier
There have been a number of attempts to chronicle exactly what “big data” is and why anyone should care. Mayer-Schönberger and Cukier focus their effort on explaining some of the more interesting impacts of living in a big data world. The first part of this book provides a fairly compelling vision of how big data is changing how we use data, but Mayer-Schönberger and Cukier are at their best when they later describe the economic consequences of big data, both in terms of how data is creating economic value and how data is disrupting many industries. While the authors also carve out a chapter to explore the “dark side” of big data, including privacy and misuse, they mostly avoid the overwrought handwringing that typically characterizes writing on this subject. Overall, the book is an enjoyable read if for nothing else than some of the great nuggets of big data trivia that show just how much the technology is changing. For a deeper analysis of this book, read ITIF Senior Analyst Daniel Castro’s full review.
The New Digital Age: Reshaping the Future of People, Nations and Business by Eric Schmidt and Jared Cohen
Most books on the technology revolution are either patently anti-innovation or so optimistic they have little realistic value. (See below in our Not Recommended section for examples of both.) One of the more balanced books on the topic, The New Digital Age outlines optimistic scenarios for our digital future, and the potential positive impacts for government, health care, and transportation. At the same time, it raises legitimate concerns surrounding issues such as privacy and security that policymakers, corporations and individuals will need to address. Given that the book doesn’t predict the sky is falling or that the sky is rose colored, we are surprised people are reading it.
India Grows at Night: A Liberal Case for a Strong State by Gurcharan Das
The economic liberalization reforms that India undertook in the early 1990s resulted in it becoming the world’s second-fastest growing major economy in the first decade of the 21st century. But Das argues that today, to the extent India’s economy is growing at all, it is despite, not because of, government policy, and “India grows at night while the government sleeps” has become an increasingly common refrain across the country. Das further note that “Where the state is desperately needed—in providing basic education, healthcare, and drinking water—it has performed dismally. Where it is not needed, it is still hyperactive in stifling small enterprise through red tape and the ‘inspector raj’” India’s government has a vital role to play in fostering Indian economic growth, but that role should be focused on creating the conditions in which private-sector enterprise and innovation can flourish. Das’s tome should be required reading in developing country capitals the world over.
Practicing Sustainability edited by Guru Madhavan, Barbara Oakley, David Green, David Koon, and Penny Low
For this book on making sustainability an economic and societal reality, ITIF was asked to contribute a chapter on sustainability from an innovation economics perspective. Here we argue sustainable development must be based on economic prosperity, and that sustainable communities, particularly in developing nations, are those that can achieve the best possible standard of living for their citizens. The chapter shows the need to overlook the misguided claims that poor nations can’t afford productivity. At the end of the day, what is really not sustainable is substandard economic growth, which leads to poverty and societal decay.
Books We Do Not Recommend
This year brought a bumper crop of books that warn us of the so-called dangers of innovation, markets, and progress and argue that the world will end right around the corner. Then there are the books that tell us that our era is completely different, technology is creating a vast new revolution and the pace of change is accelerating exponentially. These books make it seem like innovation is on autopilot and there is no need for innovation policy, while at the same time change is happening so fast that it will forever disrupt employment, the economy and society at large. It’s hard to tell which do more damage to the policy debate: the outright anti-innovation books or the utopian treatises that are so optimistic we can just sit back and enjoy the flying cars and Rosie the Robot maids.
First here is a sampling from the “sky is falling” crowd:
Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age by Susan P. Crawford
One of the most talked about anti-technology treatises of the year was Crawford’s account of the Comcast/NBC Universal merger and a denunciation of America’s broadband networks and the policy framework that created them. This long-awaited tome was the publishing industry's greatest anticlimax of the year. It has an engaging, novelistic style, offering a gritty description of the atmosphere at a Senate Antitrust Subcommittee hearing on the merger in early 2010, but it’s lacking in thoughtful analysis and is factually challenged on all key points. For example, Crawford fails to note that by all measurable statistics, broadband is much faster and more widely used in the U. S. than in Europe, and that gap is growing. Ironically, by the time Captive Audience went on sale, Europe’s chief broadband regulator, European Commission Vice President Neelie Kroes, was already advocating for Europe to drop its traditional policy model in favor of the U. S. facilities-based competition model.
To Save Everything, Click Here: The Folly of Technological Solutionism by Evgeny Morozov
Morozov made our not recommended list last year with The Net Delusion: The Dark Side of Internet Freedom, and he is back again with this latest screed. For Morozov, a contributing editor at The New Republic, the Internet and IT are all hype and leading us down a dangerous path of individualism and self-absorption. Rather than celebrate the productivity growth and convenience the Internet provides, Morozov instead says that technology should be designed (by him presumably) to be less efficient so people realize how selfish they are being (like radios that malfunction when they sense that the home is using too much energy). Any time anyone writes that they, rather than consumers, know what’s best and that productivity is not a goal, you can be pretty safe in betting that this is not a person who actually works 9 to 5 for a living and worries about whether they can afford to make their mortgage payment. Read a full review of the book by ITIF Senior Analyst Daniel Castro.
And now for the Utopians:
This book by two MIT professors claims that workers are “losing the race against the machine, a fact reflected in today’s employment statistics.” For them, new technologies are emerging at an unprecedented pace and are replacing workers and threatening widespread unemployment. This is despite the fact that virtually all scholarly studies of the relationship between productivity growth and employment find that there is no negative impact on overall employment. ITIF will further examine the debate over technology and job loss in a panel discussion featuring Race Against the Machine co-author Andrew McAfee and ITIF President Rob Atkinson from Sept. 10.
Abundance: The Future Is Better Than You Think by Peter H. Diamandis and Steven Kotler
Diamandis and Kolter are just as unrealistic in his analysis. He states that “within a generation, we will be able to provide goods and services, once reserved for the wealthy few, to any and all who need them. Or desire them. Abundance for all is actually within our reach.” To be clear, when he means all, he means all, including the poorest people on the planet. There’s only one problem with his claim: we would have to experience 25 percent annual global productivity growth for the next 25 years, up from the 3.5 percent it has averaged over the last 25 years.
Who Owns the Future? by Jaron Lanier
Once in a while you read a book that is so wrong that you can’t believe it got published. And this is one of those. Lanier, who is an accomplished computer scientist and musician, (but clearly not an economist) actually argues that digital technology is transforming the economy so fast that massive numbers of us will lose our jobs (e.g., the “destruction of the middle class”) and even though we can use all these free Internet services, unless we have jobs it will all be for naught. So, his solution: pay people to use the Internet. (You can’t make this stuff up.) But the people who would be paying would also be the people who are getting paid. In other words, cites like Google and Facebook would now cost money to use, but users would get paid to use them. Hmmm.
Here’s just one of his more nonsensical statements: “At the height of its power, the photography company Kodak employed more than 140,000 people and was worth $28 billion…When Instagram was sold to Facebook for a billion dollars in 2012, it employed only 13 people. Where did all those jobs disappear? And what happened to the wealth that all those middle-class jobs created?” Well Jared, let me tell you. All these people who used to buy cameras and film and pay to have their film processed into pictures now save a lot of money by using their cell phone as a camera and they actually use those savings to buy things, like books on how the Internet is destroying society, creating jobs for people like you. If you want a real fun read check out Morozov reviewing Lanier.