Many of today’s business “gurus” and investors do not consider a person an entrepreneur—nor their business a startup—unless they have a high-tech product. Business web sites, blogs, and ezines all seem to promote high-tech as the primary means to innovative salvation of America’s economy.
That’s a shame because with more and more U.S. high-tech being outsourced to other countries, it is now more important than ever that we acknowledge and support the “real” startups—those that do not involve high-tech products. Of the over six million new businesses started each year, only a handful of them are considered high-tech, yet they are the ones that attract the attention of investors, the government, and the media. Very few people acknowledge that the remainder of the six million even exist.
Take for example, Annie Haven, who started her business in 2005 and has steadily grown 30 percent a year ever since…with customers as far away as Spain and Singapore. And what is Annie’s business? She sells dried cow manure on the Internet.
Annie grew up on a cattle ranch and developed a process for drying cow manure and packaging it in 3 inch by 5 inch “tea” bags. The “tea” bags can then be steeped in 5 gallons of water to make liquid fertilizer for plants and gardens. Since the cattle are free range and eat only organic food, the fertilizer is also organic—and all natural.
To me, that is pure innovation…good old-fashioned American ingenuity…and we need to encourage and support more people like Annie Haven. Whether through the media, private investors, or the government, more attention needs to be paid to the “simple” innovations and creations that are being carried out every day by totally unknown and out-of-the-spotlight people.
My hat is off to Annie, and all the many unsung innovative entrepreneurs around the world.
I recently read an article in the New York Times about women in the high-tech industry, particularly Silicon Valley. It was quite discouraging information, but it does give some insight into why the U.S. is falling so far behind the rest of the world in innovation and information sciences.
Here are some highlights from the article:
- Women own 40 percent of private businesses in the U.S., but create only 8 percent of venture-backed tech startups.
- Just 14 percent of Venture Capitalists are women.
- Women outnumber men at elite colleges, law schools, medical schools, and the overall workforce, but are noticeably scarce in the high-tech world.
- Only 18 percent of college students graduating with computer science degrees in 2008 were women—down from 37 percent in 1985.
- Only 1 percent of girls taking the SAT in 2009 said they wanted to major in computer or information sciences.
- Mixed-gender teams have produced technology patents that are cited 26 percent to 42 percent more often than the norm.
- Women have few role models in high-tech.
These are just a few of the key points presented in this illuminating article. I highly recommend the article, because it speaks directly to our country’s decline in innovation and loss of high-tech leadership.
The title of the article is Out of the Loop in Silicon Valley, by Claire Cain Miller. I included a link here.
Innovation creates so many jobs and so much opportunity for our country…it is absolutely key to our long-term success in the global economy, [and patent filings] are a reflection of innovation.”
—David Kappos, Director of the Patent Office
It would be hard to argue with Kappos statement—the U.S. has been a world leader in innovation for decades. Unfortunately, that reign may be coming to an end.
The number of patents filed in 2009 dropped 2.3 percent from the prior year…the first year since 1996 that fewer patents were filed by U.S. inventors year over year.
Yes, you say, but we are in the midst of the Great Recession, and we should expect patent filings to drop. True enough, but it does not explain why U.S. patents (yes, U.S. patents) issued to inventors in foreign nations increased 6.3 percent over the same period.
Here is what Bijal Vakil, partner on White & Case’s intellectual property team, in Palo Alto, CA had to say:
…this trend could spell financial ruin for some U.S. companies. We’ve lost our competitive edge, and other companies from other countries stand to benefit.
I’m about to go and watch the President’s State of the Union speech, where he is supposed to talk about jobs and getting our economy back on track. We’ll see!
But, here’s the real deal—Congress and the Administration can posture and postulate all they want, but if they don’t come up with a plan to get our kids and schools revitalized in the areas of math and science, innovation leadership will soon be taken over by other countries…and where does that leave our high-tech businesses then?
It is interesting, and also sad, to watch the public fury unfold against the big bailouts, especially the AIG scandals…while an even bigger scandal goes unchecked in our own neighborhoods every day.
What is this scandal?
Author, blogger, & Political Commentator, Keli Goff recently published an article in the Huffington Post describing the costly scandal of the high school dropout. In her article she points out that:
- A 2008 study found that high school dropouts cost the American public more than $100 million per year.
- A 2009 study found that one high school dropout in Ohio will cost the state’s taxpayers $200,000 from the time they drop out until they reach age 65.
- Every 29 seconds another American student becomes a dropout. (How many kids dropped out while you were reading your email today?)
- Four out of every 10 young adults (age 16-24) lacking a high school diploma received some type of government assistance in 2001.
- A dropout is more than eight times as likely to be in jail or prison, as a person with at least a high school diploma.
So, we spend hundreds of millions of dollars each year supporting high school dropouts without batting an eye–but we turn out with protests, signs, and marching, when AIG does something stupid.
Even worse than the high cost of our high school dropouts, is how this situation is contributing to the downfall of the United States as the world leader in Innovation. We are losing our best young minds because our educational system is broken and needs to be totally restructured. Trying to prepare students just to score high on their SAT tests no longer works.
Our educational system needs to teach and encourage young minds how to dream, how to visualize, how to question, how to search…and they need to know it is ok to try something and fail. Unless we start to teach “outside the lines” we will continue to lose brilliant young minds that could make a difference in America’s future.
Of course, we cannot put this entire burden on teachers–we need mentors, sponsors, participating businesses, civic leaders, and the like. When school lets out is not when education stops–life is what happens after classes, and it is up to all of us to make sure every young person in our community learns how to use that time to make the best life.
America is no longer the Innovation leader of the world, and I am afraid if we don’t change the way we educate our young people, we will never regain that role.
Any agreement or disagreement–or, is everyone still too worked up over the bailouts and executive parties?
In Part I of this series (shown below this post), I presented the general findings of the
nonprofit, nonpartisan, public think tank, Information Technology and Innovation Foundation (ITIF), regarding Innovation in the U.S. vs. 40 other leading nations/regions of the world. The ITIF report is based on scientific findings–not opinions–and shows that not only has the U.S. dropped to the number 6 innovator in the world, but also its rate of change (improvement) is dead last.
In the same report, the ITIF also presents those things the U.S., or any nation/region, can do to improve competitiveness and innovation. I have capsulized their suggestions as follows:
- Provide incentives for companies to innovate. Incentives should be in the form of robust R&D tax incentives; accelerated depreciation on new equipment; workforce development tax credits; corporate tax structures that make the U.S. more competitive world-wide; and other incentives that encourage businesses to spend more on innovation.
- Encourage high-skilled immigration. The broader the scope of thinking–the better the likelihood of new ideas and innovation. The U.S. is currently sending high-skilled immigrants home, and that is counter productive in the long-term.
- Promote a digital economy. The U.S. is successful in offering new digital devices and services, primarily to the younger generations, but they haven’t been able to make a mobile phone service that doesn’t consistently drop calls. There are thousands of square miles in the U.S. that have no mobile phone service, and thousands more that have only sporadic service. Also, there are more areas in the U.S. without broadband service, than there are with it. Europe and Scandinavia do not seem to have these problems. [A few years ago, I used a mobile phone near the Arctic Circle in Northern Sweden. Today, mobile phones are totally unreliable in my suburban house in the U.S.]
- Support institutions that are critical to innovation. Not just universities that perform research, but also the kinds of institutions and training-centers that foster commercialization of their research. In addition, there should be more support for local economic development, entrepreneurship development, and workforce training.
- Remove regulations and government policies that retard innovation. Small businesses produce 13 times more patents than large patenting firms, yet spend four and a half times as much per employee in compliance of environmental regulations, and 67 percent more per employee on tax compliance than big businesses do. In the U.S., not only does small business receive very little government support, but it also appears that the government is working against small business through overly stringent regulations of small business.
Well, there you are. That’s what the ITIF believes needs to happen to stop America’s slide into oblivion as a leading innovator in the new knowledge-based innovation economy of the world.
I believe all the above items are well and good–and should be done–but they seem to only address the symptoms. The above are things our government can heavily influence, but I believe the reason for America’s demise as the innovation leader goes much deeper.
Commentators to Part I suggested that the root problem is perhaps a cultural and socioeconomic problem. I believe they are right, and I will soon post, as Part III of this series, my views and concerns on the reasons for diminishing innovation in the U.S., along with what I think needs to be done to improve the situation.
I would also like to hear from everyone out there who has a suggestion on how they think we can bring innovation back to the forefront of the U.S.
It was bad enough that the U.S. traded its manufacturing might for quick profits by outsourcing outside the country, but now it looks like our knowledge-based economy is faltering under global competition as well.
A report just released by the nonprofit, nonpartisan, public think tank, Information Technology and Innovation Foundation (ITIF) indicates that innovation in the U.S. is rapidly falling behind the rest of the world. The study currently places the U.S. in sixth place in the world, and running at a pace that will place it even lower over the next decade.
There have been many studies made over time, as well as more recently, that place the U.S. as the world leader in innovation. However, those studies have been based on opinions, interviews, and surveys. This report by the ITIF is the first to approach innovation from a scientific perspective, using 16 indicators to study innovation and competitiveness. These indicators fall into six broad categories:
- Human capital
- Innovation capacity
- IT infrastructure
- Economic policy
- Economic performance
Not only did the ITIF study place the U.S. in sixth place in the world for innovation and competitiveness, but the study also determined that all of the other 39 nations/regions studied have made faster progress toward the new knowledge-based innovation economy in recent years than did the U.S. The study shows that the U.S. has made the least progress of the 40 nations/regions in improvement in international competitiveness and innovation over the last decade. The U.S. is dead last in this category.
This should come as no surprise, since the National Academies published their landmark study, “Rising Above the Gathering Storm,” back in 2005. It warned then that America’s lead in science and technology was “…eroding at a time when many other nations are gathering strength.” It appears their warning has come to pass.
What is happening to the greatest industrial nation in the world? Have we allowed greed and avarice to cloud our minds, so we can’t see beyond the next payday? Are IPO’s more important than innovation? Is shareholder value more important than spending profits and dividends on R&D and innovation? Are our industrial leaders so intent on filling their pockets, they have lost their way? Has our government (under the guise of public interest) regulated the heart out of those companies that could best put the U.S. back in the role of world leader?
The ITIF study presents six things that need to be done by the U.S. (or any nation/region) to improve their innovation and competitiveness. I will present these six things as part II in my next post. Watch for it.