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A Silicon Valley vet argues that the U.S. needs a national strategy to regain its lead in crucial industries

Winner Take All

How Competitiveness

Shapes the Fate of Nations

By Richard J. Elkus Jr.

Basic Books; 272 pp.; $27

With all the attention that's paid to Google (GOOG), Facebook, and MySpace (NWS), you might get the idea that America continues to dominate information technology and electronics just as it did when computers began transforming the human landscape 50 years ago. But you would be wrong. In his important, well—argued new book, Winner Take All: How Competitiveness Shapes the Fate of Nations, longtime Silicon Valley executive Richard J. Elkus Jr. demonstrates how, through complacent government and misguided business practices, the U.S. has surrendered its lead in one key market or technology after another, from cameras and video displays to HDTV. As a result, he says, the country has lost its competitive edge—and it will take a new mindset and gutsy investment to get it back.

Winner Take All is somewhat reminiscent of arguments made in the mid-1980s, when the U.S. fretted about competition from Japan. It seemed at the time that America's free-form capitalism would fall prey to Japan's planning and coordination—as Japan systematically targeted steel, machine tools, television sets, and computer chips. Some argued that the U.S. ought to have an industrial policy, too, but that talk died down after Japan's economic bubble popped in the early 1990s. Elkus sees all of Asia as today's threat, but rather than calling for a pure Japanese-style policy based on detailed planning and picking winners among technologies and industries, he advocates a national competitiveness strategy. His approach relies more on consensus than on government as puppet master.

Elkus believes a strategy must be championed by the President and embraced by industry, academia, and the people. Think Kennedy and space. The author also believes the strategy must be built on agreement that certain technologies and markets seem likely to be vital to the nation's future and must receive investment even if there won't be an immediate payoff for shareholders. Among these he lists electronics, information technology, communications, aerospace, and nuclear technology. Although some key markets are long lost, he believes we should attempt to win them back.

The book is certainly timely. Wall Street's latest "innovations" are crumbling, and America's immense appetite for overconsumption seems finally to be slaked. So, with what raw material will we build the economy of the future? Probably not social-networking Web sites. They may provide entertainment for people with time on their hands, but have shown little ability to improve productivity, create substantial numbers of jobs, or earn a profit.

Elkus' answer is that innovations must be grounded in science and technology if they are to help rebuild the national economy. He also believes that if the U.S. is to stay at the cutting edge of developments, it has to have a stake in each stage of the innovation supply chain—including manufacturing. "Innovation is based on an ongoing infrastructure of knowledge and experience in both product development and manufacturing," he writes in his preface. "When the infrastructure goes away, innovation goes with it."

Elkus knows what he's talking about. At Ampex (AMPX), the pioneering Silicon Valley video-recording company, he oversaw the creation of the first consumer VCR, only to witness Japan's eventual domination of the VCR and TV industries. Elkus was later an executive at several semiconductor companies where he watched as the U.S. threw away its lead in a number of chipmaking technologies.

If anything, Elkus knows too much. The book lags when it provides too much detail about the decline of one U.S. technology industry after another. And he repeats his themes to the point that you want to say: "I get it, already." Still, it's a perceptive and persuasive book.

We're confronted these days with a host of large problems, from a rudderless economy to high energy prices to the threat of global warming. Turn each problem on its head, though, and it is an opportunity to apply technology and create new products, services, and jobs. Step one is leadership. The next President must envision a better future and inspire the nation to make the sacrifices and investments to achieve it. Elkus' book provides a blueprint for getting started.

Hamm is a senior writer for BusinessWeek in New York.

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