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Q&A: The Innovation Machine Needs Fixing


In the 1980s, Japan's powerhouses were hammering their U.S. rivals left and right. Headlines dripped woe and worry. But that collective angst dissipated almost overnight when Japan's economy stalled, paving the way for the 1990s tech boom in the U.S.

When the next round of stiff competition arrives, probably from China and India, the U.S. may not be so lucky, warns Greg E. Blonder. A standout researcher and manager at AT&T Bell Laboratories from 1982 to 1998, Blonder is intimately familiar with both sides of the research and development equation. Now a venture capitalist with Morgenthaler Ventures, Blonder discussed the threats to U.S. innovation with Senior Writer Otis Port.

Q: The dot-com years spawned lots of innovative startups. What's wrong with that?

A: It fostered a gold-rush mentality that sucked a lot of good scientists and engineers out of schools before they finished their degrees. Even a lot of professors went off to start companies. So it created a climate that was negative toward long-term thinking and work on long-range problems.

That matters because I don't think we realize how broken we are. And when we wake up, when the next crisis hits, it will be way too late. Innovations are built on basic research that was done long ago--15 or 20 years ago for electronics and communications, and 20 to 30 years earlier for new materials.

Q: America's innovation engine is broken?

A: To be blunt, yes--in the sense that we haven't been planting new seed corn. Long-term research needs steady hands, steady financing over very long periods of time.

There are only three places that gestate long-term research: monopolies like [the old] AT&T, universities, and the government. We've basically eliminated the traditional monopolies, and large companies have been forced out of long-term R&D--except for a very few places like IBM. Industry is also farming out more short-term research to universities, so the good professors who didn't get sucked out by the dot-com bubble are doing less long-term research. Even funding from [the Defense Advanced Research Projects Agency] is steady only for short periods, like a venture capitalist.

So what's broken is that everyone has started playing the same short-term role. Everyone wants to be a VC--invest for a few years, then cash out.

Q: What can we do to foster long-term research?

A: This is a strange time to make this claim, but I think we ought to open the floodgates to immigration and encourage scientists and engineers to come to the U.S. One reason we're a strong country is that the last two great waves of immigration brought the smartest, most motivated people here. Look at the number of Nobel prize winners who were first- and second-generation Americans. Make a list of the people who've created industrial empires or thriving new ventures, and you'll find damn few who were here for three generations.

The public is worried about the threat of foreign terrorists. But my experience has been that immigrants are the most adamantly patriotic people you'll find. They have a visceral appreciation for what they've gained by coming here.

Q: Who will be our next big competitor--China?

A: China will certainly present us with a bigger challenge than Japan. They're disproportionately interested in engineering and science--much more so than we are. They're also very entrepreneurial, unlike the Japanese.

But there's also India. Even more so than China, it's homogeneous in terms of value systems and skill sets. And again, they have a deeper penchant for technical careers than we do, plus all the same desires to build businesses. Look at the number of successful Indian entrepreneurs here--it's astonishing.

So if I had to pick two groups that could compete with the U.S., it would be the Indians and the Chinese. More so than Europe, more so than Japan.


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