Technology: From Copycats to Innovators

By Richard Vague, Managing Partner, Gabriel Investments and Chair, The Governor’s Woods Foundation. Originally published in Democracy; cross posted from the Institute for New Economic Thinking website

In 1787, in his capacity as secretary of the Pennsylvania Society for the Encouragement of Manufactures and the Useful Arts, [Tench] Coxe had provided support for a British emigrant, Andrew Mitchell, to return to Britain and pirate textile technology [then one of the world’s preeminent industries], a scheme that failed when Mitchell was discovered and forced to flee to Copenhagen. Thomas Digges smuggled nearly two dozen British textile workers to the United States, including some hired by [Alexander] Hamilton. In another case, an English weaver named George Parkinson was granted a US patent on textile technology [that had been developed in Britain] in 1791; later he went to work for the government-sponsored manufacturing center sponsored by Hamilton . . . Secretary of State Thomas Jefferson, in charge of patent policy, arranged for the patent. . . . In 1787, Phineas Bond, the British consul in Philadelphia, bought four carding and spinning machines that had been smuggled into the United States and sent them back to Britain.

Michael Lind, Land of Promise

In its earliest years, the United States took ideas from Britain, the birthplace of the Industrial Revolution and the keeper of those manufacturing secrets that had fueled its powerhouse textile industry. By 1872, America’s economy had surpassed that of Britain, and it soon became the world’s most creative industrial power, with eager scouts from other shores trekking to its factories. By 1918, America’s economy was larger than that of Britain, France, and Germany combined.

China, in the small handful of decades since it embraced capitalism, has aggressively sought to acquire intellectual property (IP) from the rest of the world. Witness just one unhappy Wall Street Journal headline: “How China Systematically Pries Technology From U.S. Companies: Beijing leans on an array of levers to extract intellectual property—sometimes coercively.”

Some commentators have accused China of stealing intellectual property, and characterized theirs as a copycat culture not well suited for innovation. In 2011, the journalist Alexandra Harney wrote that:

[T]he harder Beijing pushes its companies and scientists to come up with new ideas, the more they seem to copy the work of others. . . . In a nation with such breakneck economic growth and an overburdened judicial system the dishonest frequently win. The system to protect the honest simply isn’t robust enough. Dishonest copiers move quickly to secure an advantage in a rapidly growing market, and their success, in turn, perpetuates China’s copycat culture.

In 2016, Peter Guy, a financial writer and former international banker, argued that “copying and reverse engineering [in China] accelerated new product launches, but eroded China’s competitiveness. Stealing intellectual property has enormously benefited Chinese companies. But, it has crippled their ability to develop the next version or innovate. Just look at almost every important technological innovation in hardware, software, and the internet. Without sounding arrogant or imperialistic, they are with few exceptions made in America.”

China has assiduously and relentlessly copied others. In fact, in joint ventures that U.S. companies have entered into with Chinese companies, and in investments Chinese companies have made in U.S. and other foreign companies, the Chinese have often made the turnover of IP to China a requirement.

Yet China is doing far more than copy, steal, extract, and imitate. It is hell bent on taking over the world’s leadership in innovation, and is well on track to accomplish this. China’s President Xi Jinping has made indigenous innovation a national priority, and technology innovation and advancement are integral to China’s current five-year plan. In its 2006 National Medium-and Long-Term Program for Science and Technology Development, and in the speeches of its government leaders, China has made clear its goal of becoming an “‘innovative nation’ by 2020, an international leader in innovation by 2030, and a world powerhouse of scientific and technological innovation by 2050.” The business press is beginning to note this shift, as with CNN reporter Matt Rivers’s 2018 article, “Inside China’s Silicon Valley: From copycats to innovation.”

On top of this, in 2015, Chinese Premier Li Keqiang announced the Made in China 2025 initiative, an industrial policy that seeks to make China dominant in global high-tech manufacturing. This was seemingly modeled on the German government’s adoption in 2013 of its Industry 4.0 strategy, designed to significantly enhance the computerization of Germany’s already highly advanced manufacturing capability.

The bald truth is that China has crafted a focused, aggressive plan to dominate the most important areas of scientific and technological innovation, and its government is investing heavily to achieve that plan. In contrast, the U.S. government has invested at a (relatively) diminishing pace, leaving the United States vulnerable to being surpassed. In fact, if the United States doesn’t assertively respond, this will readily happen.

Breakthroughs Abound, on 5G and More

The numbers speak for themselves. In 2014, China awarded 34,000 PhDs in the natural sciences and engineering, as compared to 40,000 in the United States. More telling, China awarded 1.4 million undergraduate degrees in the natural sciences and engineering, almost four times as many as the 377,000 awarded in the United States. And while the number of these degrees has been increasing in both countries, that growth has been far faster in China. In ten years, PhDs awarded in China have increased by 146 percent as compared to 55 percent in the United States. China increasingly boosts its rate with expanded scholarship support, particularly for degrees like pharmaceutical science.

One result has been that China now leads the world in scientific papers published, with 426,000 studies in 2016 as compared to 409,000 in the United States. According to the World Intellectual Property Organization (WIPO), China is now the second largest source of international patent applications behind the United States and “is projected to overtake the U.S. within three years as the largest source of applications filed under WIPO’s Patent Cooperation Treaty.” It already leads the world in digital communications patent applications.

Many academics question the validity of China’s achievements, especially as it relates to the comparative quality and scientific rigor of these papers and degrees. They note, for example, that many Chinese engineering degrees are not of the same caliber as U.S. degrees, and that some Chinese scientific publications pay authors for research papers, whereas U.S. journals do not. They also note the evidently greater number of instances in China where authors have falsified scientific results. A study by Wei Quan at Wuhan University, Bikun Chen at Nanjing University of Science and Technology, and Fei Shu at McGill University was reported on by MIT Technology Review, which found that “plagiarism, academic dishonesty, ghost-written papers, and fake peer-review scandals are on the increase in China, as is the number of mistakes…The number of paper corrections authored by Chinese scholars increased from two in 1996 to 1,234 in 2016, a historic high, they say.”

Still, examples of Chinese innovation and genuine breakthroughs abound:

China produces more electric cars than anywhere else in the world, and it is already the world’s leader in battery technology, leading The Financial Times to headline one article from September 2018, “Why the future of electric cars lies in China: Tesla grabs the limelight, but the real story is elsewhere.”

China has also built more houses and office buildings than any other country in the past decade, and its construction technology now leads the world. A case in point is its prefabrication technology. In 2010, it startled the world when it demonstrated the construction of a 15-story hotel in less than a week using prefabricated materials (igniting a collateral debate about quality and safety). Low-income countries throughout Africa and elsewhere are proving to be a growing export market for this type of construction.

Chinese progress is just as pronounced in the most highly complex arenas. CRISPR-Cas9 is an astonishing new technology that can be used to edit genes within organisms. It holds seemingly unlimited promise (and risk) as a tool for enabling cures for diseases and for modification of life forms. Though developed in the United States, there is now more experimentation in China using this new technology than there is here at home, thanks to the greater availability of government funding and a more liberal regulatory environment. Dr. Carl June of the University of Pennsylvania, who is the leading immunotherapy researcher in the world and an early user of CRISPR, has stated, “We are at a dangerous point in losing our lead in biomedicine [to China].”

In addition, China aims to take the lead in artificial intelligence (A.I.). It envisions a $1 trillion A.I. industry, as CNBC reported in May 2018. Its investors injected $4.5 billion into more than 200 A.I. companies in China between 2012 and 2015. Nicholas Colas of DataTrek Research recently wrote: “Artificial intelligence, and especially the A.I. that powers visual analytics, is a critical technology for a raft of new products. The Western companies have their own advantages, to be sure. But the Chinese model of government sponsorship and private capital is coming on very strong.”

Just as notable is the lead China may already have in the race for 5G, the next generation of mobile communications, according to a U.S. National Security Council memo. As the memo states, 5G is “by no means simply a faster 4G . . . [but instead is] a change more like the invention of the Gutenberg Press.” As The Financial Times noted, with its much larger capacity for data, significantly reduced lag times, and greatly enhanced speeds, 5G is expected to extend well beyond phones and permeate every aspect of factories, automobiles, smart homes, robots, and more.

Beyond that, The New York Times reports, “China has a clear lead in [the computing discipline of] quantum encryption. As it has with other cutting-edge technologies, like artificial intelligence, the Chinese government has made different kinds of quantum [computing] research a priority.” This will be a crucial advantage in a world in which data security is an increasing concern.

The country is arguably already the global leader in high-tech manufacturing as well. The United States simply does not have the ready skills in place to manufacture certain smartphones at the scale on which they are built in China. High-tech manufacturing, as opposed to more routine manufacturing, commands higher profit margins and is itself a platform for product innovation.

Winning the R&D Race

To a degree not widely appreciated, scale alone can drive innovation. The bigger the market, the more opportunity there is for innovation, and the more necessity there is for it as well. With a larger number of customers than its competitors, a given company can invest more in R&D for product enhancements, will get more feedback from customers that can result in improvements in such products, and has more need for product modifications and production improvements to handle this larger number of customers. Amazon makes more delivery innovations than other retailers not only because it can, but because it has to.

In the mid- to late-1800s, for instance, the United States was simply building far more railroads, telegraphs, and guns than Britain and Germany—and that was the point when U.S. innovation in these areas overtook the world. China has now reached that point for an increasing number of products and services. Those who dismiss China as a mere copycat miss this aspect of the comparison. At a certain size, Chinese companies face challenges and opportunities that no one else has ever faced. At that point, it is hard not to be innovative. On top of this, small innovators are more likely to try and sell their innovations to the largest companies because that brings a greater profit potential. For example, a small A.I. startup company, most likely cash-starved but nurturing a new, unproven, but potentially powerful A.I. product that it has invented, will usually seek to sell itself to a larger company at the point when its product starts to gain market acceptance. Most often, the potential buyers will be the largest companies in that field. Increasingly, and in a rising number of sectors, those companies are Chinese.

The situation is clear. Both by desire and necessity, China already is a world-class innovator, despite how it’s often depicted. One byproduct of this is the increasing number of scientists from the United States and other countries relocating to China because of the increasing availability of financial support.

That’s not to minimize the daunting political and economic challenges China faces. And who is to begrudge it? The issue is not whether the Chinese are trying to rapidly advance. They are. The issue is how rapidly the United States is trying to advance, and whether it is maintaining its lead over China. It appears that it is not.

The concern regarding China “systematically pr[ying] technology” from U.S. companies is valid, with recurring headlines about Chinese hacking of U.S. government and corporate secrets, or U.S. criminal charges against Chinese intelligence officers. It is certainly the case that American companies need to vigorously defend their intellectual property, and the government should be shoulder-to-shoulder with them in doing so, tightening security against IP theft in its trade agreements and its legal initiatives. (There is also tremendous international concern regarding the ethical standards, or lack thereof, that govern China’s scientific advancement, especially in areas like CRISPR-Cas9 research.)

However, ultimately, the best way for any company or country to defend its IP may not be so much in the courtroom as in the acceleration of innovation using that company or country’s own advanced IP as a stepping stone and platform. In other words, to build on its advantage and increase its lead.

Yet, to the extent that U.S. businesses and institutions are accelerating, it is with one arm tied behind their back, because there have been few moments in its almost 250-year history that the U.S. government has been less forceful in trying to lead science and technology. Even the U.S. military—a leading force in U.S. innovation ever since the Revolutionary War that ignited manufacturing in this country—has begun to come under criticism for underinvesting in innovation. Analysts suspect China’s new weapons advancements in areas such as A.I., drones, and cyberwarfare are at least equal to America’s.

Before we look at the numbers, we must discuss philosophy. China has a very overt industrial policy to guide its IP conquests. In areas like 5G and A.I., it has stated national goals for global industry leadership and aggressively directs government research and venture capital to complement industry efforts in pursuit of those goals. The United States’s industrial policy doesn’t work like this—or at least not in a cohesive, concerted, and concisely articulated manner advocated at the highest levels of government. While it might seem reasonable to think that the United States would or should have such a policy for select industries, the fact is that some prefer not to have one. Their belief is that government should not try to pick winners, because government so often gets it wrong. Instead, these industries believe that markets should decide, and that laissez-faire capitalism is the surest, most efficient path to innovation. They believe that government is a bungler when it comes to guiding business investment and quickly point to notable government failures and fiascos. Solyndra, anyone? They then point to America’s legacy of innovation and claim that it is a result of free markets.

There’s just one problem with this—it’s a false reading of U.S. history. America’s federal, state, and local governments have been deeply involved in directing industrial policy since this country’s inception. Perhaps the best example is the massive, pervasive, and decades-long involvement of the U.S. government in supporting the expansion of railroads. This was, as all such efforts are, replete with failures and missteps. But it gave this country, for a time, the world’s best transportation system, and powered it to global economic leadership. In the Land Grant Act of 1850, the Pacific Railroad Acts of 1862-1866, and the many other state and federal initiatives that followed, railroads were provided land and indispensable direct government financial support. And that is but one example of the U.S. government guiding industrial policy toward innnovation. From the construction of canals to the unlocking of atomic power, government leadership and financing has been decisive in American progress. The 12 key enablers and product differentiators of today’s iPhone stem directly or indirectly from government research, including touch-screen technology, GPS, lithium batteries, and the Internet itself.

What are the recent trends in U.S. R&D? Since 2000, America’s “R&D intensity”—its expenditure on R&D as a percentage of GDP—has been fairly flat, and currently stands at 2.7 percent. That’s slightly above the world average, but well below Israel and South Korea’s 4.2 percent. In that same period, China’s R&D intensity has more than doubled from 0.9 percent to 2.1 percent; China has passed the EU in R&D spending, and its brisk growth in this area is projected to continue. These numbers include government, academic, and industry spending.

In the United States, the federal government’s portion of R&D spending has declined. Even with recent nominal increases, the budget of the bellwether National Institutes of Health (NIH), the nation’s medical research agency, is down in real dollars compared to its budget in 2003. The average age at which an investigator with a medical degree receives his or her first NIH research grant has risen from less than 38 years in 1980 to more than 45 years in 2013, discouraging new entrants into the research field. The story is similar wherever you look, from the National Science Foundation (NSF) to the National Cancer Institute, and beyond. From 1964 to 2015, total federal funding of R&D has dropped by two-thirds relative to GDP, from 1.86 percent to 0.62 percent. Meanwhile, during the past ten years in China, central government funding in real renminbi for science and technology has more than tripled.

America’s government can either accelerate its level of R&D funding, or be content ceding leadership to China. America’s government can either target certain areas for greater increases in basic research investment, say in gene therapy, cancer research, and artificial intelligence, or it can effectively decline to do so.

Having said that, what’s the big deal if China passes us in developing electric cars, A.I., construction equipment, gene therapy, and other areas? It’s a very big deal, indeed. It means that the lion’s share of global business and of profits from new, high-margin businesses will go to Chinese companies rather than U.S. companies. It means ceding important markets to China. Over the long term, it means both fewer and lower-paying jobs because, without ownership of the world’s market-leading IP, U.S. companies will inevitably grow smaller and less profitable.

Skimping on basic, ground-breaking government research today will cost the United States dearly over time. The U.S. research juggernaut, which has been the leader and envy of the world for well over a century, will have to settle for second.

It wouldn’t take much to make firm again our grasp on the global research and development lead. For 2018, U.S. federal R&D funding will be roughly $176.8 billion. One key part of that, the NIH budget, is $37 billion. As one example, for the NIH budget, where every $1 billion increase is highly meaningful, an additional $5 billion increase would be transformational, and a $15 billion increase would create a jobs juggernaut and would help power the overall U.S. economy to new heights. It would take even less to revolutionize the NSF budget, which is at $7.8 billion and has stayed flat in real dollars since 2010.

It’s time to crank up the U.S. research juggernaut again.

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    1. Brooklin Bridge

      GC! I suppose the question comes down to, will technology dig us out of our pit or cover us up with the last few inches of sealant for our fate? . In harness with the ideology of, “Greed is God,” and perpetual expansion is his son, the latter is a tempting pick. Whether the same motive applies in China is a puzzeling question.

      1. Tom

        A pitiful article that falls prey to nationalism. It’s as if no other country exists except for the us. We don’t need more nationalism but internationalism.

  1. notabanker

    This is a fantastic post, thank you.

    Far too much time and energy is spent in the West being critical of the Chinese government ideology while not nearly enough is spent reflecting and acting on the problems of our own.

    The Chinese have used the West’s penchant for short term rent extracting and fundamental abandonment of societal investment against it and are now reaping the results. This is why you invest until it hurts in day care, pre-k, public schools and college tuition. And pour investment into infrastructure, and fully fund NASA and NIH. And remove administrative waste from healthcare. And, and, and…….

    It is basic math that the Chinese have a 3-1 population advantage over the US. Instead of running like crazy to try and keep up, we have increased that advantage 6-1 (pick your number, its a lot) by disenfranchising and essentially writing off huge swaths of the population. As Blyth likes to say, those are people are to now be policed.

    Relying on the private sector for R&D prioritization is like expecting ravenous hyenas to buy refrigerators to save some of the carcass for later. Just look at stock buybacks. They have no idea how to invest long term.

    Cranking up the US research “juggernaut” will take at least two decades. We simply don’t have enough educated people to compete, and that starts with toddlers.

    On the global stage, the titans of capitalism are now nothing more than supporting actors. Trump is conducting the orchestra pit while the Chinese are writing, producing and directing the play. We can all watch and complain about the plot, it won’t change how it ends.

    1. Carolinian

      Time for another “Sputnik panic”? Of course that earlier panic was motivated in part by fear since advanced rocketry is capable of carrying nuclear warheads. That said, it did get us to the moon.

      Unfortunately for modern day US our hammer that only sees nails is the MIC. It’s response to Chinese competition is to try to dominate it militarily rather than technologically. Perhaps it’s time for no longer dynamic but still rich America to let someone else play the hegemon for awhile. Perilously for ordinary Americans, our leaders don’t seem able to accept this.

  2. a different chris

    The first part is the usual MBA, “international banker” gobblygook. Might as well have me (a completely CIS male) earnestly describe the day in the life of a woman. Note the confusion between “intellectual”, “invention”, and everybody’s fave, “innovation”.

    China is doing very well, as you would expect with a culture that prizes hard science (not Facebook) and has now the means to pay kids to learn it. “Innovation”, patents, whatever they are all mostly BS. And Europeans would be very surprised to find that America has apparently been the source of every new idea for the last 150 years. China is starting to put sophisticated things that now work well in people’s hands, and that’s what counts.

    But he does come to the right point, maybe by accident given the clueless start – it is in the national interest to invest in the three-headed monster: the pure sciences, engineering, and manufacturing. Look, I can actually swallow a few F-35’s and even a very occasional “let’s see if we learned stuff from last time” aircraft carrier, even though both are completely useless in this coming age of missiles. But mostly it needs to be stuff that will go into everybody’s homes. From better A/C to an un-commercialized, non-eavesdropping WWW. To actual working, and free (no I’m not falling for that “affordable” or even worse, “access” crap) drugs. Medical science and technology.

    1. Dun

      “Why should we subsidize intellectual curiosity?”
      –Ronald Reagan, campaign speech, 1980

      The neo-cons have always had a hate on for the pure sciences, much like their intellectual icon Plato.

      This is probably why science journalists et al feel obligated to cite some crushingly pedestrian “practical” application for even the most obviously potentially earth-shattering research; to betray even the slightest hint of possessing more imagination than a pomegranate would be unseemly. “We need to create the functional analogue of a human brain in a computer so we can… uh… develop better pharmaceuticals!

      1. marku52

        “Who cares if you make computer chips or potato chips…”

        Someone in Reagan’s Commerce Department.

        I was slack-jawed at the time…..

  3. Watt4Bob

    In allowing our economy to devolve into a casino full of grifters seeking short-term, 20% returns on borrowed money, we’ve abandoned all long-term thinking, and we’ve been congratulating ourselves for doing so.

    It’s reminiscent of the sort of behavior seen at a cocaine-fuled party where the participants are telling each other how smart they are.

    I fear there is no argument that can convince the partiers to change their ways, they will inevitably hit bottom, taking us with them.

    What’s left to us is to prepare to take the reigns when that happens.

    And of course that means permanent revocation of their license to lead.

    It would be a good sign, and proof that I’m too pessimistic if our ‘leaders‘ somehow found the intestinal fortitude to impeach, and jail our current grifter-in-chief, but the way it looks now, we’ll just be offered a new-old one.

    Trump is not an aberration, he’s a perfect figure-head for the pathetic nation we’ve become, and the DNC’s offer of Biden as an alternative would be an even more perfect confirmation of my point.

  4. PlutoniumKun

    I would not disagree with the overall thrust of the post, but it does fall into the usual trap of seeing the world in a US vs China model. Europe – while behind to some degree – is rapidly getting its act together in focused investment in technology, although it likely doesn’t have the resources to compete on all fronts (not least because Brexit knocks the UK out of the circle of EU funded research). Japan of course was around where China is now in the 1970’s and looked unstoppable – but it has only partly achieved its potential – in a way which could be ominous for China. Japan is still very strong in some areas of technology – not least those ‘hidden’ parts of computers and smart phones – but is definitely falling behind China and even other Asian countries like South Korea and Taiwan in other areas. Technology is not just about the number of engineers and scientists you have – its about cultural issues and how you focus investment. When it has its act together, the US and Europe are very good at this (so is Russia, which lets not forget is still very advanced in aerospace), Asian countries seemingly less so (at least up to now). I think though if an Asian country really does become No.1 in tech its more likely to be South Korea than the others.

    History also teaches us that there are two very distinct processes in technological development. One is the ‘catch-up’ phase, where countries beg, borrow or steal technology to match the leading countries. The second is the vanguard phase, where they actually have to pioneer and implement new tech. China may or may not be good at this – I’d strongly suspect they will find this much harder, even with all their engineers. The world will still look to the US to lead, with Europe focusing on specific areas. But it can only do so by dropping the neolib/neocon blinkers and stop funnelling its brightest and best into Wall Street and Lockheed.

    1. notabanker

      I can only comment through my own biased eyes. I think your point on Europe minus the UK getting it’s act together is a good one.

      I’m pretty skeptical of the comment that the world will still look to the US to lead. I think the signs of US hegemony fading are clear, and China gives the world another option. May not be a great option, but in many cases it could be a better one. What happens when a key technological breakthrough makes it the only one? Russian adoption is a given. Will Asia, Australia, South America and Africa sit on the sidelines and wait for a US response? Will Germany? I wouldn’t make those bets.

    2. Thuto

      Yes IP infringement is part of the catch-up phase in a country’s technological development and one suspects “China-watchers” in the US are entirely missing the transition to the vanguard phase that is currently underway in China. While China is focusing investment towards really hard sciences where “progress” often mirrors a logarithmic function, a composite view in the medium to long term might be one of a China where technological innovation as whole grew exponentially (hence my suspicion that you speculate rather too freely when you say that the “world will still look to the US to lead”given that the inflection point from US to chinese leadership may happen without much notice as the punditry in the West will most likely miss it if they stay locked in their current Sino-skepticism).

    3. lyman alpha blob

      In its 2006 National Medium-and Long-Term Program for Science and Technology Development…

      If the US is going to continue to be looked upon as a leader, it might want to look a little further out than the next quarter’s earnings report and develop a plan, or as you say, drop the neolib/neoncon blinders. It’s going to take a massive housecleaning in DC and the C suites for that to happen and right now my $$$ is on the system collapsing first.

  5. Mike

    RE: “The issue is not whether the Chinese are trying to rapidly advance. They are. The issue is how rapidly the United States is trying to advance, and whether it is maintaining its lead over China. It appears that it is not.”

    I have concerns, but those lie within the “safety” aspect of these developments. It is a dangerous mindset to constantly “race” such technologies into use. Speed kills, and this is an area that can promise widespread killing if direct as well as side effects are not calculated into its adoption. Medical science is NOT “national”, and cannot be adopted on the basis of a horse race between winners and losers. Further, science is already captive to financial return obligations by corporate financiers, but WE should be asking if this is wise.

  6. Louis Fyne

    hindrance by 1000 cuts, pick your blame depending on your worldview, everything from:

    financialization of education,
    many colleges being either closeted hedge funds or defacto pro-sports franchises,
    the Pentagon/3-letter agencies are some of the biggest drivers of basic research versus the idealistic pursuit of knowledge;
    you have some of the brightest minds in the country spending their work day on camera filters and junk mail because working for Facebook or Google pays better than being a basic reserach post-doc;
    colleges turning into battlegrounds for the culture wars;
    the absurdity that schools/companies are failing some social justic metric if they have too many Asians aka the truly American phenom of the “over-presented minority;”
    parents not pushing STEM onto their kids;
    and there are no short cuts to mastering math/science….you can’t cram organic chemistry or trig—but our culture prefers lifehacks.

    something for everyone, liberal or conservative

  7. TimH

    I have a simple question which is “Which country produces the best engineers?”. No one ever analyses the question, which is a veritable badness to start with, because ‘engineer’ is a very loose term. The question is more obviously ridiculous if posed as “Which country has the nicest people?”.

    Anyway, most people answer with their own country, or perhaps Germany, Japan, USA.

    This shows blind bias, and, again, the question used the word ‘produces’ not ‘has’.

    The answer is China, because not only does it have the largest population, but it pushes a high percentage of it students into engineering and science. These young people are not stigmatised as introverts and nerds, but respected as the future.

    My experience in UK and USA is that engineering is regarded along the lines of teaching and nursing: employees have personal motivation to work in those fields, and so they can be paid less. Current exception appears to be software talent.

    So, until this cultural issue is fixed in the West, Chinese talent will dominate.

    1. RubyDog

      China has their own cultural issues to deal with as well. I don’t want to underestimate China’s potential for innovation, as they certainly have had periods of history with great innovations. However, the predominant Confucian ethos and education system that relies on a great deal of rote memorization and does not promote or value out of the box thinking may prove to be a weakness in this regard. Politically suppressing any hint of dissent plays into this as well. We don’t know what the future holds, but up to now, all the truly revolutionary ideas and innovations have come from the west for better or worse. Just improving on borrowed ideas doesn’t count.

      1. notabanker

        This is a very relevant point. However, the Chinese have also flooded western universities with students. They also have a robust program of international internship which they include in as a key condition in capital investments where they have significant leverage.

        The Chinese Singaporeans have this same issue and when you talk to their government and business leaders they are very aware of it and take action and develop programs to deal with it. I think a lot of people assume the influx of foreign students to the US is because their own system is of lesser quality, when it may actually be a feature, not a bug.

    2. Sanxi

      No, define ‘best engineers’, it’s not all what one might think. There is talent and there is brute force and talent is something you either have or you don’t. It isn’t necessary evenly distributed per population. Dommic Cummings of leave fame has quite a good post this week on this very topic:, check it out.

      1. TimH

        Let’s say that 5% of non-Chinese-educated graduates are talented, and 25% elsewhere. So, elsewhere has 5x the ratio of talented/best engineering graduates for the same number of graduates.

        If China graduates 10x the engineering graduates of, say, USA, then it will still be producing 2x the quantity of talented/best engineers than USA.

        It’s still a quantity issue.

  8. vegeholic

    It’s actually worse than you think. The article says that in 2014 China produced 34,000 PhD’s in natural science and engineering, while the US produced 40,000. But a substantial percentage of the PhD recipients in the US would be Chinese nationals. Sure many of them will stay and work here. But I have never understood why we do not prioritize getting our graduate schools filled with domestic students. This probably relates to quality, rigor, course selections, and incentives in secondary and undergrad curricula. Are we investing in improving these factors? Maybe Education Secretary DeVoss will lead us out of the wilderness.

  9. Tim

    It’s almost as if a GND would be an opportunity to lead in IP in the manner the author recommends. But everybody knows AOC and Bernie are idiots trying to bankrupt our country.

  10. David

    I wonder if the antithesis isn’t a bit artificial, or at least over-simplified. Innovation, of itself, may create possibilities but doesn’t guarantee any socially useful or even economically valuable results.
    Consider the case of Japan, which from the nineteenth century looked around the world to find the best ideas, but then, critically, improved on them. At first this was obvious in the military sphere, from the Battle of Tsushima to the Zero-Sen fighter in 1941. But after the war, the Japanese began with motorcycles and cameras, before moving on to cars, stereo equipment and televisions. And you know what, they are still doing very well in all of those areas. Back in the 90s, the Koreans would tell you that they had learned a lot from the Japanese (true) and intended to overtake them in the 21st century. But by and large that hasn’t happened. If you wanted a really good TV set in the 1980s, you bought a Sony, and if not another Japanese make. That’s still largely true: only Samsung can really compete.
    This is not because of “innovation” in the simple sense, except in unglamorous areas like quality and reliability. If you suffered from, or even tried to drive, a British car made in the 1970s, you’ll know what I mean. Those steaming piles of crap were pushed aside by Japanese imports which were not necessarily cheaper, but actually worked, started all the time and kept going. Roughly the same thing happened to the British electronics industry.
    The trick was very much not innovation for its own sake, but rather an attempt to see what the market wanted, whereas “innovation” in the current sense has much more to do with the traditional British practice of building something that seems clever and then telling the sales force to sell it. I remember being told by an industry expert twenty years ago that the average time between new models of Hi Fi systems was about two months, which meant they could experiment (“innovate” if you like) as much as they wanted to. One manufacturer pushed out a model with two CD drives just to see what would happen. It created a small but lucrative market for people who made mix-tapes from two CDs. The other thing is best summed up by the Japanese word “benri”, usually translated as “convenient”, but also meaning accessible, useful etc. It means the tendency to respect the consumer, and give them what they actually want and need, rather than what they manufacturer thinks they should have. There was a period when I owned successive versions of the same Japanese car, and each one had a series of small but valuable improvements designed to make the actual experience of being in the car more pleasant.
    Of course the Japanese have competition, and I’m not suggesting they get everything right. There are also western companies which, by fierce attention to detail and quality control, can achieve the same effects. But in general, just as copying doesn’t necessarily produce good results, neither does the blind pursuit of innovation, when what most people want is stuff that actually, you know, works, and responds to their actual needs.

  11. Jeremy Grimm

    U.S. industry is consolidated. A few smaller companies and start-ups still try to innovate but only because that’s the only way they can compete with the large concerns. The evolution of U.S. Patent law makes those efforts problematic. Large firms do their ‘research and development’ by swallowing up smaller firms. There’s no money for ‘research and development’ anyway. Management uses income streams to pay out dividends and buy-back stock — better for their bottom line.

    U.S. colleges and universities have research centers where particular development is supported by private firms sponsoring research they specify. The research work is done by poorly paid graduate students and post docs, many of them foreign. U.S. Government support for research, more often development than research, shriveled and bent to supplement commercial interests. And look closely at many U.S. research papers and count the number of foreign and ‘immigrant’ names. Look at the graduate students in the our college STEM factories.

    It should come as no surprise to discover that innovation in the “Innovation Nation” has been hollowed out. Innovation can be lethal to invested capital — at least such capital as remains on our soils. Countries like China still let national pride and striving undermine their commitment to corporate capital. They are simply not as advanced as the U.S. and continue practice old school Hamiltonian Mercantilism instead of yielding to the advance of Neoliberal Markets.

    1. John Wright

      Some of the old line large corporate R&D labs have disappeared or shrunken tremendously.

      Bell Labs, a R&D facility that produced the transistor and was home to Claude Shannon (information theory, boolean logic digital design) is now a part of Nokia.


      This does mention employee count, but only in 1925.

      One could suggest that the 20th century Bell Labs was a US government sponsored R&D facility via the telephone monopoly.

      With much USA manufacturing moved overseas, the “next bench” phenomenon is weakened.

      At a former employer, that was how one described the way some new products emerged due to someone nearby having a problem that needed being solved.

      Those problems to be solved are now overseas.

      There is still much manufacturing in the USA, but it may be from the smaller firms that cannot easily tap overseas workers and facilities due to the smaller firms’ size.

      Unfortunately, these small firms probably have small and less well funded R&D efforts than the old line US corporations (GE, RCA, Bell-Labs, HP, IBM) could afford.

      Moving so much USA manufacturing overseas was profitable for some in the USA, but has and will have long term consequences for many in the USA.

      But I may have a very parochial view, after being hired into a manufacturing engineering job in Palo Alto, CA in the late 1970’s.

  12. TG

    Indeed, but one point is being missed.

    US elites don’t care about U.S. manufacturing. That’s not an issue. They are happy to have the factories and innovation etc. in foreign countries like China. That American workers won’t have jobs, or that America as a nation will no longer be an innovator, simply does not matter. What does matter, is if the American elites lose control of these industries – if they lose power and profits. That’s what this is all about. The fight about ‘intellectual property’ is simply, will the factories in China steer their profits to wealthy Americans, or to China? China does not seem to want to play by the globalist neoliberal rules and be a nice docile colony of cheap labor with elites joined to America’s at the hip like Mexico is. China, so far, is run by nationalists who care about China. Fancy that.

    American elites are possibly going to wake up to the fact that, without a powerful nation standing behind them, their own power is rather less than they supposed. Remember how, in the 19th century, all those Chinese aristocrats who ruled as gods were humiliated by the directed might of the western powers…

  13. Kaleberg

    The Chinese are following the original playbook, Friedrich List’s theory of the national economy. So far, every nation that has managed to industrialize has followed his plan, the US and China included.

    What I am curious about is how technological innovation works in an environment of increasing political repression. China has serious internal problems, and as it grows wealthier, the gradients will keep rising. That means a more repressive police state. Shenzen, for example, was full of innovators who modeled themselves on a Chinese version of a society of benevolent thieves, not unlike Robin Hood’s band. Is there a place for this kind of thinking in the future? If not, who exactly will be the innovators?

    Friedrich List was sent into exile for his writings, so a lot of this is about politics. A repressive state engine doesn’t always make things easy for the innovator. It’s too easy to make lots of money by buying a piece of the state or having a piece of the state buy you. Look at our own efforts to wean ourselves from fossil fuels. What is to prevent a Chinese Lysenko from stifling, rather than encouraging real innovation?

    I’m not saying it is impossible for China to move to the front line of innovation, just that there are many challenges not present in more open societies.

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