Saturday, April 01, 2006

John Sibley Butler: "When the Chinese get innovation right, it's over."

John Sibley Butler, the keynote dinner speaker at InnoVenture, did a fantastic job. John is director of IC2 at the University of Texas at Austin, where the Austin Model of knowledge-based economic development was created. The core of John's talk centered on the conditions that lead to the development of knowledge-based economies.

He had an ominous observation that stuck with me in particular. He had just returned from a long visit to China, and he commented, "When the Chinese get innovation right, it's over."

Recently the Kauffman Foundation released a study identifying key factors driving offshoring of corporate R&D. The study concludes that,
Contrary to popular belief, it is intellectual capital and university collaboration, not just lower costs, that primarily attract companies to locate R&D activities in locations away from their home country, according to a new study sponsored by the Ewing Marion Kauffman Foundation. The study of more than 200 multinational companies across 15 industries, mostly headquartered in the United States and Western Europe, finds that emerging countries such as China and India will continue to be major beneficiaries of R&D expansion over the next three years as companies seek new market opportunities, access to top scientists and engineers, and collaborative research relationships with leading universities.
If the United States does not get more serious about education, especially of the next generate of scientists, engineers, and mathematicians, it will be over.


Evan said...

I know I emailed you a couple things regarding JSB's statement a few days back. The most pertinent being the mental experiment posited by Russell Roberts at Cafe Hayek.

"So here's a mental experiment. Even with China's tremendous growth over the last 20 years, America's per capita income is many times higher than China's. What if you woke up one more morning and discovered the whole thing was a lie. The Chinese had mismeasured their national income information and it turned out that the Chinese, in fact, had a per capita income many times that of the United States. It could be true, you know. Maybe they really are really, really, really rich. How would it change your well-being? Would it make any difference whatsoever?"

Would it? Would it mean that they got innovative and it's finally "over?"

Another point JSB made was about quality of life factors being a major contributor to a regions success--culture, climate, etc. Though I haven't travelled to China (yet), I'd say that America still has a lot going for it in that dept. That is to say, I think the world's best and brightest are still attracted to America instead of China.

But John Sibley Butler went on to say that there's enough brain-power inside of China's communist borders to compete with anyone out there. And that may be, but I defer to another quote from Russell Roberts:

"A variation on the Chinese threat is that someday, if they keep growing, they'll pass us. This is the view that economics is like the Olympics. If you don't finish first, you're stuck with the bronze or silver medal or worse, you don't even get to the medal stand. But economic success is not like the Olympics. It's not a zero sum game."

Unless China also gets innovatively aggressive, I don't think anything's "over." I'm not advocating anything less than a competitive stance, but I don't think we need to fear that "it's over."

"If the United States does not get more serious about education, especially of the next generation of scientists, engineers, and mathematicians, it will be over."

Assuming that "America's per capita income is many times higher than China's," wouldn't it be better to take a two-pronged attack---hire/steal as many of those great engineers and scientists over to the good ol' US of A while investing in our next generation of technical geniuses? Maybe all we need to do is start thinking about what "quality of life" means to Chinese scientists.

Swamp Fox said...

It won't be over in the sense that citizens of the United States will be destitute. It will be over in the sense that it is over for Great Britain, which will never again be the dominate superpower in the world.

Much of the wealth and power of the United States is derived from the fact that technology is invented here, and we own the standards. As a result, the language of business around the world is English, for example. We have the most powerful military. We have the largest and most liquid financial markets. Etc.

Once the balance tips, and much of the innovation and technology is invented in China in Mandarin, the world, as we currently know and lead it, is over.

Lewis Grizzard used to end his comedy routines, "Life is like a dog sled team. If you ain't the lead dog, the scenery never changes."

Evan said...

Well, one thing's for sure, a 26-character alphabet is much more efficient than a 2,500-character alphabet. I don't see that changing any time soon.

China has a long way to go. And they'll certainly be facing a lot of growing pains before they can assume a global leadership position.

It's funny you bring up the UK; they probably have the highest size-to-impact ratio of any country. A mere 60 million strong, they still have a huge seat at the table and a considerable amount of influence with the world's remaining superpower. It might simply be the lingering cultural attachements, but I don't think the UK is too upset about where they are. In fact they have it pretty cushy--not needing to police the world hemorage money away anymore.

That brings up another question...

Let's pretend China becomes the lead dog on the sled. I'd imagine that'd spark some mergers and aquisitions in the West. The United States of Europe or the United States of the Western Hemisphere is nothing to sneeze at.

Anyway, the only thing I fear from China is that they somehow stay communists AND drastically gain in power. That's just bad for everyone--including the Chinese.