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Is US Innovation Flaming Out?

MOUNTAIN VIEW, Calif. -- A lack of emphasis on basic research could make it harder for the United States to climb out of the current economic crater, according to some Silicon Valley experts from the research community.

The result is that the country lacks a trove of big-deal technologies at a crucial time. "We have come off a major cycle, and we do not have the wherewithal to kick into the next cycle," said Judy Estrin, former Cisco Systems Inc. (Nasdaq: CSCO) CTO and Packet Design Inc. founder.

She was one of the speakers at a panel discussion titled, "The Innovation Economy: R&D and a Crisis," put on by the Churchill Club and hosted by the Silicon Valley offices of Microsoft Corp. (Nasdaq: MSFT).

Granted, the panel was entirely in favor of long-term basic research, the kind where scientists explore new areas without any promise of practical results. Think Bell Labs when it was, you know, part of the Bell System.

Estrin's new book, Closing the Innovation Gap, discusses the decline of U.S. innovation since World War II. Joining her on the panel were two executives from corporate research divisions and a venture capitalist focused on the research-heavy biotechnology industry.

One of Estrin's themes was that while an economy driven by self-interest is OK, the country has let that focus get too myopic. The culture of the last couple of decades, driven by Wall Street and Washington, has turned self-interest into a game of "short-term greed" rather than long-term goals, she said.

Along those lines, Estrin and other panelists agreed the United States has lost its appetite for any research that doesn't pay off quickly. "As a country and a business community, we have lost the courage to take risks," she said.

Some of that might be attributable to recent experience, as panel moderator Michael Mandel -- BusinessWeek's chief economist and a PhD in economics -- suggested. A lot of the money poured into new medicines didn't pan out, and some large investments in the dotcom '90s turned to dust. "It wasn't that people stopped taking risks; they had their risks beaten out of them," Mandel suggested.

In the interest of adding a contrarian note, Josephine Cheng, an IBM fellow and vice president of the Almaden Research Center, noted the information age is more than 30 years old -- arguing that perhaps a slowdown would be natural about now. Other panelists rejected that idea, though.

Cheng did agree that the United States doesn't seem poised for a burst of innovation to aid the economy. "We have too many MBAs and lawyers," she said. "We need to go back to focusing on basic science and technology."

One simple answer might be to point to biotech and say "Look! Gobs of innovation!" But partner Sue Siegel of Mohr Davidow Ventures expressed frustration at the difficulties in getting inventions out to the market.

"They've been on the benchtop, but what has not happened is the benefit to us, the consumers and patients," Siegel said. In part, that's because funding focuses on caring for sicknesses rather than preventing them; Siegel also noted the FDA needs more funding to be more capable of looking at the number of new technologies coming around.

Panelists doubted that the Obama administration's economic stimulus package -- crafted with a stated goal of job creation -- would be much of a help for long-term research.

"I worry that this is a very short-term stimulus package," said Rick Rashid, Microsoft's senior vice president of research. "You can do a lot of damage throwing a lot of money and not following up. You can spend a lot on infrastructure, and that's great -- but if it's just to create a couple of post-docs and they won't have a job in a few years, that's not."

Estrin noted that large nonprofits -- "the ones with endowments that can survive the stock market crash" -- have been good at funding long-term projects and could continue to do so.

— Craig Matsumoto, West Coast Editor, Light Reading

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Pete Baldwin 12/5/2012 | 4:10:02 PM
re: Is US Innovation Flaming Out? On a different kind of short-sightedness:

During the panel, Josephine Chen (IBM) made the remark that if some of the stimulus package is going towards just building roads, these ought to be the most awesome, sci-fi, 21st-century roads possible.

I haven't kept up on the Roads part of the stimulus, but I doubt it's going to happen that way (as does Chen). That's too bad. I don't think these need to be flying-cars roads, but some extra touches like prepping infrastructure for future wimax/LTE coverage, say, could boost the utility of the spending.

Anyway, it's a case where some long-term thinking would be appropriate but probably won't happen.
krbabu 12/5/2012 | 4:09:57 PM
re: Is US Innovation Flaming Out? I didn't attend the panel event but, with all the preoccupation in propping up the economy, it is possible that long-term research and innovation could suffer unless someone in the US - i.e., Obama - administration is specifically tasked to be accountable for this purpose. It has to be remembered that the scientific and technical population elsewhere - e.g., China and India - could easily eclipse its counterpart in the United States. And, in the long run, it is about people power.
rjmcmahon 12/5/2012 | 4:09:54 PM
re: Is US Innovation Flaming Out? On roads: I read in Outside Magazine that the furthest that one can get away from a road in the U.S. is 20 miles. In other words, the country has roads all over the friggin' place. If anything, we need less of them.

As far as futuristic roads goes what seems interesting to me is integrating the electric grid into portions of the road in a manner such that hybrid cars could easily attach and detach to the grid while in motion (similar to slot cars) reducing the energy density requirements needed per the onboard fuel. Instead of dotting the freeways with gas stations just hook up the cars to the grid.
melao 12/5/2012 | 4:09:54 PM
re: Is US Innovation Flaming Out? I honestly think that innovation is moving east, for quite a long time. USA still is the land of innovation, but it is losing ground, like europe lost to US last century.
rjmcmahon 12/5/2012 | 4:09:53 PM
re: Is US Innovation Flaming Out? Yeah, I didn't believe it either. The author did say it was for the lower 48. I assume they were talking about all roads (public/private/dirt/etc.) and as the crow flies for the distance measurement.

It was a wilderness preservationist that wrote the article. Don't know how to validate the claim though using satellite views of the lower 48 shows roads, roads, and more roads. I do know that for land to be classified as wilderness the distance from a road is a mere 1 mile. Pretty sad if you think about it.

I live in CA and the state has been issuing infrastructure bonds to cover the perennial deficit for quite some time now. I have my doubts that the majority of these proceeds are going towards anything worthwhile (not to mention how much the issuers take as commissions)

It's pretty typical for a politician to use "roads" and "eliminating congestion" as a selling point because the masses always complain about things like traffic. My sister's a second term city council member (pop 100K) and she got a bit sick of the mayor always using this b.s. when needing the public's support. Every tag line was "It's going to improve roads and bridges and minimize traffic!"
mgardner750 12/5/2012 | 4:09:53 PM
re: Is US Innovation Flaming Out? The truth is that much of the US infrastructure has been neglected by government for quite a while.

New roads get attention, maintaining them has not always been a priority. A large % of the bridges need work. Nature takes it toll on metal.

The water mains in NY leak. The water pipes are corroding in the ground. One significant cause is the DC leakage in the ground from high voltage rail in the subway. The NY subway itself needs major investment as does the Chicago L.

I saw that in San Francisco that there are still wooded sewer pipes in operation. St Louis has a large project underway to improve its aging sewer system.

We can all want the fastest broadband experience, but we canG«÷t ignore the basic infrastructure needs for electricity, water, sanitation, highway network that provides fresh food and most importantly HD over the air TV.
^Eagle^ 12/5/2012 | 4:09:53 PM
re: Is US Innovation Flaming Out? RJ,

I agree with your post about roads in general. However, I will tell you that outside magazine is incorrect on the distance you can get away from roads in the USA. 1) especially incorrect in Alaska. and 2) I also know for a FACT it is incorrect in lower 48. Lol, without tipping too much about myself, it is clear to me that it was younger writers / editors at Outside that did this evaluation. There was one done many years ago by Outside / Mariah (showing my age now) that had much further distance isolation from roads in the lower 48. And I know for a fact those areas have had NO roads built into them in the last 20+ years. I know because I have been to some of those places! more than once.

So, Outside did too shallow a study. But in general, your point is well taken and I appreciate and agree with your POV

gocowboys 12/5/2012 | 4:09:52 PM
re: Is US Innovation Flaming Out? First of all, I don't know anyone in this business that has a pension. Second, let's see: Microsoft (baby boomer), Apple (baby boomer), Cisco (baby boomer)...many more. I won't tell you about my company or you will know who I am. As a baby boomer, I do find your comments insulting.

Bernie Madoff is not a baby boomer!

It is idiotic to indicate to associate this issue with a generation. In point of fact, this is a failure of governmental regulation and wall street greed.

Innovation is the recipe for long term recovery. Unfortunately, virtually none of the stimulus package is going toward spurring innovation.
gocowboys 12/5/2012 | 4:09:52 PM
re: Is US Innovation Flaming Out? The long lived advantage to the economy for infrastructure build outs is virtually nil. Clearly, it is a good thing to invest in bridges and roads etc... but it does little more than provide some temporary relief to unemployment.

The fact is that the system for innovation is completely broken in this country. Innovation is fueled by VC and Angel investment. Right now it is almost impossible to get VC funding(Angel is a devil too :-) ). The investment community is completely focused on near term ROI and there is no near term ROI. If the government wants to improve the economy, they need to invest in innovation and companies capable of creating tangible growth. Right now everything is about triaging dying companies.

This country has the best minds and entrepreneurs on the planet. The problem is the government and the investment community.

Just my humble opinion
rjmcmahon 12/5/2012 | 4:09:52 PM
re: Is US Innovation Flaming Out? I was being facetious. I figured if we could blame government and Wall St. for society's failures we could equally blame the baby boomers (who are easily duped and have yet to prove their metal in a real crisis ;-)

According to Strauss and Howe

Basked as children in Dr. Spock permissiveness, suburban conformism, Sputnik-era schooling, Beaver Cleaver friendliness, and Father Knows Best family order. They came of age rebelling against the worldly blueprints of their parents. Youth pathologies worsenedG«Ųand SAT scores began a 17-year slide. In the early 1980s, many young adults became self-absorbed G«£yuppiesG«• with mainstream careers but perfectionist lifestyles. Entering midlife (and national power), they are trumpeting values, touting a G«£politics of meaning,G«• and waging scorched-earth Culture Wars.
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