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Kuros
Joined: 27 Apr 2004
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 Posted: Fri Jun 05, 2009 1:25 am Post subject: The US lost decade of innovation |
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That lost decade would be from 1998 until last year.
The failed promise of innovation in the US
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"We live in an era of rapid innovation." I'm sure you've heard that phrase, or some variant, over and over again. The evidence appears to be all around us: Google (GOOG), Facebook, Twitter, smartphones, flat-screen televisions, the Internet itself.
But what if the conventional wisdom is wrong? What if outside of a few high-profile areas, the past decade has seen far too few commercial innovations that can transform lives and move the economy forward? What if, rather than being an era of rapid innovation, this has been an era of innovation interrupted? And if that's true, is there any reason to expect the next decade to be any better?
The information technology revolution is worth cheering about, but it isn't sufficient by itself to sustain strong growth�especially since much of the actual production of tech gear shifted to Asia. With far fewer breakthrough products than expected, Americans had little new to sell to the rest of the world. Exports stagnated, stuck at around 11% of gross domestic product until 2006, while imports soared. That forced the U.S. to borrow trillions of dollars from overseas. The same surges of imports and borrowing also distorted economic statistics so that growth from 1998 to 2007, rather than averaging 2.7% per year, may have been closer to 2.3% per year. While Wall Street's mistakes may have triggered the financial crisis, the innovation shortfall helps explain why the collapse has been so broad.
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An innovation shortfall might also have weakened the country's underlying productivity growth, which in turn influenced real wages and the ability of consumers to spend without borrowing. Certainly economists on both the left and the right believe innovation is an essential ingredient for growth. A December 2006 paper by the Brookings Institution, co-authored by Peter R. Orszag, now head of the Office of Management & Budget, observed: "Because the U.S. is at the frontier of modern technological and scientific advances, sustaining economic growth depends substantially on our ability to advance that frontier."
The flip side: A shortfall in innovation could undercut growth and incomes, especially over a decade-long period. True, the economic statistics appear to show decent productivity growth across this stretch. But since there is compelling evidence that the figures are overstated by the credit bubble and statistical problems, we can construct a plausible narrative for the financial bust that gives a starring role to innovation�or rather, to the lack of it. It goes something like this: In the late 1990s most economists and CEOs agreed that the U.S. was embarking on a once-in-a-century innovation wave�not just in info tech but also in biotech and many other technologies. Forecasters upped their long-run growth estimates for the U.S. economy. Consumers borrowed against their home equity, assuming their future incomes would rise. And foreign investors lent America money by buying up U.S. securities, assuming the country would come up with enough new products to pay off the accumulated trade deficit.
This underlying optimism about the economy's growth potential became an enabler for Wall Street's financial shenanigans and greed. In this narrative, investors and bankers could convince themselves that rising home prices were reasonable given the bright future, which was based in part on strong innovation. In the end, the credit market collapse in September 2008 reflected a downgrading of expectations about future growth, which put trillions of dollars of debt underwater. |
If inflation offsets gains in wages, then the key modifier for improving fiscal quality of life (at least as can be measured economically) would have to be productivity.
The personal computer, digitization, and the internet revolutionized the office environment, providing sustained and lasting gains in innovation, gains that would have started to peter out about a decade ago. But what has innovation done lately? Nothing. We have languished in the advances of the digital revolution as bubbles in the stock market and housing have accumulated. Our optimism was predicated on past successes and a new discovery that never came. |
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visitorq
Joined: 11 Jan 2008
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| Posted: Fri Jun 05, 2009 2:16 am Post subject: |
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I think a lot of innovation in the past came from government funded institutions... whether universities or the military. Maybe the US gov't needs to start subsidizing industry a lot more than it has been -- only fair when you consider how much Asian export countries have benefitted from doing just that.
I think GM will benefit a great deal from gov't bailouts when all is said and done. The banks don't deserve a penny though... |
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Robot_Teacher
Joined: 18 Feb 2009
Location: Robotting Around the World
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| Posted: Fri Jun 05, 2009 9:16 am Post subject: |
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While Microsoft and Apple have been highly innovative companies as well as a handful of web developers, Asia contributed a great deal to tech in the past 10 years as the reigns were handed over to them in the process of outsourcing as well as developing countries striving to achieve more.
During the past 10 years, American companies have not been investing in developing young American professionals nor hiring to groom much of anyone domestically American into advanced skill set individuals, becuase companies have been managed by guys with short term profit goals instead of building long term value like the old skool managers did who were mostly buy and hold investors as well. Today, it's not buy, develop, and hold, it's use and abuse in the short term with get rich quick in mind. They just want cheap educated highly skilled slaves to capitalize off of; not well paid profit sharing professionals climbing the ladder. If you want to climb, you got to create your career through entrepreneurial means. This holds so true for recent MBA's who were hoping for a good job as a way to save up for investing, but it means you need to inherit money to get a go at it. Ever meet Mr. Emptypocketsinbigstudentloandebt managing a store for only $20,000 a year upon graduation from B school?
America failed it's young. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Fri Jun 05, 2009 9:43 am Post subject: |
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| Robot_Teacher wrote: |
While Microsoft and Apple have been highly innovative companies as well as a handful of web developers, Asia contributed a great deal to tech in the past 10 years as the reigns were handed over to them in the process of outsourcing as well as developing countries striving to achieve more.
During the past 10 years, American companies have not been investing in developing young American professionals nor hiring to groom much of anyone domestically American into advanced skill set individuals, becuase companies have been managed by guys with short term profit goals instead of building long term value like the old skool managers did who were mostly buy and hold investors as well. Today, it's not buy, develop, and hold, it's use and abuse in the short term with get rich quick in mind. They just want cheap educated highly skilled slaves to capitalize off of; not well paid profit sharing professionals climbing the ladder. If you want to climb, you got to create your career through entrepreneurial means. This holds so true for recent MBA's who were hoping for a good job as a way to save up for investing, but it means you need to inherit money to get a go at it. Ever meet Mr. Emptypocketsinbigstudentloandebt managing a store for only $20,000 a year upon graduation from B school?
America failed it's young. |
Did you do an MBA? |
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visitorq
Joined: 11 Jan 2008
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| Posted: Fri Jun 05, 2009 10:45 am Post subject: |
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| Robot_Teacher wrote: |
While Microsoft and Apple have been highly innovative companies as well as a handful of web developers, Asia contributed a great deal to tech in the past 10 years as the reigns were handed over to them in the process of outsourcing as well as developing countries striving to achieve more.
During the past 10 years, American companies have not been investing in developing young American professionals nor hiring to groom much of anyone domestically American into advanced skill set individuals, becuase companies have been managed by guys with short term profit goals instead of building long term value like the old skool managers did who were mostly buy and hold investors as well. Today, it's not buy, develop, and hold, it's use and abuse in the short term with get rich quick in mind. They just want cheap educated highly skilled slaves to capitalize off of; not well paid profit sharing professionals climbing the ladder. If you want to climb, you got to create your career through entrepreneurial means. This holds so true for recent MBA's who were hoping for a good job as a way to save up for investing, but it means you need to inherit money to get a go at it. Ever meet Mr. Emptypocketsinbigstudentloandebt managing a store for only $20,000 a year upon graduation from B school?
America failed it's young. |
I think America is still the most innovative country by far, the problem is that most real innovation is done in non-profit government funded institutions. The private sector then latches on to some of the ideas and commercializes them, which is good, but then they lack the kind of government subsidies and protection given to tech in Asian export countries (where it is treated as a strategic matter of national security) and ultimately they lose out (not as competitive), with few exceptions. Many small US start-up companies are innovative, but too small to compete on mass markets with Asian competitors.
As for the Asia countries being innovative - they're not. Japan perhaps, to an extent; the rest just take our ideas and copy them in a cheaper way and export them (their governments also buy a lot of their stuff in exclusive contracts to prop up the industry, but foreign products are taxed). Korea for one has never innovated anything ever.... |
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Fox
Joined: 04 Mar 2009
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| Posted: Fri Jun 05, 2009 6:33 pm Post subject: Re: The US lost decade of innovation |
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| Kuros wrote: |
| But what has innovation done lately? Nothing. |
Do you mean innovation has done nothing for the economy lately, or innovation has done nothing particularly useful at all lately? |
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Sergio Stefanuto
Joined: 14 May 2009
Location: UK
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| Posted: Fri Jun 05, 2009 6:41 pm Post subject: |
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| visitorq wrote: |
| Robot_Teacher wrote: |
While Microsoft and Apple have been highly innovative companies as well as a handful of web developers, Asia contributed a great deal to tech in the past 10 years as the reigns were handed over to them in the process of outsourcing as well as developing countries striving to achieve more.
During the past 10 years, American companies have not been investing in developing young American professionals nor hiring to groom much of anyone domestically American into advanced skill set individuals, becuase companies have been managed by guys with short term profit goals instead of building long term value like the old skool managers did who were mostly buy and hold investors as well. Today, it's not buy, develop, and hold, it's use and abuse in the short term with get rich quick in mind. They just want cheap educated highly skilled slaves to capitalize off of; not well paid profit sharing professionals climbing the ladder. If you want to climb, you got to create your career through entrepreneurial means. This holds so true for recent MBA's who were hoping for a good job as a way to save up for investing, but it means you need to inherit money to get a go at it. Ever meet Mr. Emptypocketsinbigstudentloandebt managing a store for only $20,000 a year upon graduation from B school?
America failed it's young. |
As for the Asia countries being innovative - they're not. Japan perhaps, to an extent; the rest just take our ideas and copy them in a cheaper way and export them |
Could it not be argued that they perfect them? |
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Kuros
Joined: 27 Apr 2004
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| Posted: Fri Jun 05, 2009 7:59 pm Post subject: Re: The US lost decade of innovation |
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| Fox wrote: |
| Kuros wrote: |
| But what has innovation done lately? Nothing. |
Do you mean innovation has done nothing for the economy lately, or innovation has done nothing particularly useful at all lately? |
It was me trying to sound clever (and failing). I meant that innovation hasn't really had an effect or perhaps there hasn't been innovation. I didn't know the answer so I constructed the ambiguity, but on second reading it just looks like I'm confused. |
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mises
Joined: 05 Nov 2007
Location: retired
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pkang0202
Joined: 09 Mar 2007
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| Posted: Sat Jun 06, 2009 7:14 am Post subject: |
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The US isn't losing anything in innovation. Consumer electronics mean nothing. Chinese companies are making great PMP players that put anything the US has to offer to shame, that doesn't mean the US is losing "innovation".
US exceeds every other country, by a huge margin, in patents that are filed.
The last I checked, the US has the number 1 University in the World, and many that are ranked in the top 25. And I'm pretty sure MOST of the people attending Harvard, MIT, Stanford, Princeton, Yale are ...GASP!.....Americans. |
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Kuros
Joined: 27 Apr 2004
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| Posted: Sat Jun 06, 2009 7:36 am Post subject: |
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| pkang0202 wrote: |
| The US isn't losing anything in innovation. Consumer electronics mean nothing. Chinese companies are making great PMP players that put anything the US has to offer to shame, that doesn't mean the US is losing "innovation". |
No, you don't understand the argument.
The argument is that we haven't had any great productivity boosters in the 00s, whereas the 80s had the personal computer and the 90s had the internet. Sorry, Apple, the IPod is great but it cannot transform our economic paradigm.
And this is not an Asia v. US argument. The US created the personal computer and the internet. Asia hasn't given us anything like that. Neither Asia nor Europe are any more innovative than the US, but the US has joined them in the ranks of no new ideas. |
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Koveras
Joined: 09 Oct 2008
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| Posted: Sat Jun 06, 2009 7:39 am Post subject: |
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| I think a little less productivity might be nice for a change. |
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bucheon bum
Joined: 16 Jan 2003
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| Posted: Sat Jun 06, 2009 8:48 am Post subject: |
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| Kuros wrote: |
| pkang0202 wrote: |
| The US isn't losing anything in innovation. Consumer electronics mean nothing. Chinese companies are making great PMP players that put anything the US has to offer to shame, that doesn't mean the US is losing "innovation". |
No, you don't understand the argument.
The argument is that we haven't had any great productivity boosters in the 00s, whereas the 80s had the personal computer and the 90s had the internet. Sorry, Apple, the IPod is great but it cannot transform our economic paradigm.
And this is not an Asia v. US argument. The US created the personal computer and the internet. Asia hasn't given us anything like that. Neither Asia nor Europe are any more innovative than the US, but the US has joined them in the ranks of no new ideas. |
so the past decade has been like the 50s, 60s, and 70s? |
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Pluto
Joined: 19 Dec 2006
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| Posted: Sat Jun 06, 2009 8:59 am Post subject: |
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| bucheon bum wrote: |
| so the past decade has been like the 50s, 60s, and 70s? |
This past decade was built on a real estate bubble. Kuros is right, I don't see any new innovations that will be able to permanently shift the economic paradigm in the near future. Sure things will improve, Moore's Law is still in full effect. Computers and mobile devices are becoming cheaper and better, but I see nothing that will change the way we live our lives. |
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bucheon bum
Joined: 16 Jan 2003
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| Posted: Sat Jun 06, 2009 9:10 am Post subject: |
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| Pluto wrote: |
| bucheon bum wrote: |
| so the past decade has been like the 50s, 60s, and 70s? |
This past decade was built on a real estate bubble. Kuros is right, I don't see any new innovations that will be able to permanently shift the economic paradigm in the near future. Sure things will improve, Moore's Law is still in full effect. Computers and mobile devices are becoming cheaper and better, but I see nothing that will change the way we live our lives. |
What big innovations were made in the decades I mentioned that significantly boosted productivity? Perhaps the 80s and 90s were the exception and not the rule? That's my point.
And in regards to seeing nothing that will change the way we live our lives, well, time will tell.  |
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