DEBUNKING THE "CORPORATE AMERICA AND ENTREPRENEURSHIP IS THE “GREAT INNOVATOR” MYTH. [219*7]

ON MY WAY TO LAS VEGAS to attend a business function of a company I helped create (meaning I am one of those entrepreneurs I am about to debunk) I read an article in magazine Harpers, Nov 2013 edition, by the Anti-Economist, Jeff Madrick, titled “The Future Progressive”. Among other things, he talks about who actually does the innovating around the world and here in America. As a result, I wanted to share some of the facts and insights he offered regarding the myth that it is private industry that has come up with most of the major innovations throughout history on their own, without benefit of government assistance. The truth is, they haven’t; not by a long shot!

I can’t speak to how much help people like Alexander Graham Bell, Thomas Edison, Robert Fulton, Henry Ford got, or didn't get from the federal government in their quests; I am 30,000 feet in the air, somewhere over Oklahoma, after all, but I can address more modern times from knowledge I possess or is in the article I read. Therefore, I can say this, most major innovations, “general-purpose technologies” or GPTs as Madrick suggests they are called today, over the 100 years came from the necessities of the Civil War, WW I, and WW II, and the Space Program. They did not come from the entrepreneur. They didn't come from people like Steve Job’s. Instead, he took other people’s work and improved upon it. Same thing with almost all of those Dot.Com “geniuses”, as did Henry Ford and Robert Futon (to some degree).

So, if private enterprise/entrepreneurs didn't do it, who did? Well, you know what I am going to say of course, governments did or government-industry partnerships. For example, a now not so recent invention (God, I am getting old) the Internet, an innovation that has rocked-our-world, is not the creation of some bright-eyed geek employed by an early version of Google; it is not even the creation of Vice President Gore, although he did hep (with funding when he was a Senator). No, it was a creation of a federal government agency called ARPA (now DARPA, the D is Defense), which stands for Advanced Research Projects Agency, in concert with many universities they had under contract with whom they want to communicate more quickly, effectively, and collaboratively. There is no question those bright-eyed geeks in private industry made it better when money could be made, but they didn't innovate it in the first place.

The same is true of most of the pharmaceuticals that come to market; the federal government, in America’s case, foots most of the bill and takes most of the risk; risk those drug companies would touch with a ten-foot pole for fear of hurting the bottom line. And that is what it is all about; why private industry, capitalism, doesn't innovate very much … it is too risky and costly; too much danger to the stockholders, you see. It is much better to let someone else do it and then reap the rewards by making it profitable (and trying to stiff the inventor while they are at it – think automatic windshield wipers).

Now, here are some facts from The Future Progressive.

• In the 1970s, Fortune 500 companies had an average of 36 major innovations per year while in the 2000s, it has fallen to a measly 4 per year!
• Over the same period, the number of major innovations coming from government laboratories rose from 9 per year to 32 per year!
• I think we all know what Conservatives have done to and want to do the government’s R & D budget; they want America to produce only 4 major innovations a year … I wonder how many China produces?
• In 2011, the Federal government funded 53% of basic research, private industry only 23%.
• The iPod resulted from monetizing the 2007 Nobel Prize winning work of two European researches funded by France and Germany. Similar stories can be found for voice-recognition software and touch-screen technology.
• Oh btw, you know those infallible private capitalist visionaries who never get it wrong, or so the pro-business only people say, they lost billions on Solyndra while Bush-Obama lost only $535 million.
• Another “oh btw”, only 1% of the renewable energy projects Obama funded actually failed; nobody mentions that 99% succeeded.
• From other sources, because of the sequester 700 National Science Foundation grants have been canceled and the Army has defunded half its R&D programs.

These are damning statistics to those who think the Federal government stands silently by while Corporate America, driven by the theory that Capitalism is the father of innovation, does all of the inventing. don't you think. So, why are Conservatives dead set on destroying America's capability to do basic research? Because they believe their own hype that the private sector is one 1) motivated to innovate and 2) can do a better job of it on their own even though a century of history proves them wrong.

There are two good reasons why the private sector can't be and shouldn't be the source of major innovation, 1) they aren't motivated, except in very narrow circumstances, to do so and 2) often they don't have nor can they obtain the resources to do basic research. Keep in mind that capitalism is all about the bottom line, that is what motivates corporate tactical and strategic decision making. Lately, like the last 30 or 40 years, the time horizon has been getting shorter and shorter; just consider what drove the 2008 Great Recession. Capitalism is not an altruistic economic theory, instead, it is a self-interested and selfish enterprise; that is why it works so well. Consequently, basic research, unless it has an immediate payout, is not on their radar scope, except when someone else is paying for it; most often that someone else is the Federal government. Further, basic research rarely has an immediate payout, a lot of the time it has no payout at all!

Then, there is the case of paying for it when you do it. Basic research is extremely expensive and, as just pointed out, often leads nowhere, even though the promise makes it worth investigating. If governments didn't get involved, we would still be living in the Dark Ages. You don't think Galileo paid for his own research, do you? How about the University of Pisa for starters. Well, few corporations pay for theirs either, as the statistics above show.

So, I leave you with a question, if Conservatives are successful in destroying the Federal governments basic research programs, where do you think America is going to end up relative to our competitors who do fund their research?

11/20/13: The President of Harvard just came out denouncing the Sequester and outlined the great damage it is doing to the Nations standing in the world community vis-a-vis keeping intellectual knowledge within our borders because of the huge cutbacks in government R&D efforts. She said there is a noticeable migration of brain power from the U.S. and its declining R&D programs to countries where the government does invest in its future.