America is Eatingits Feed Corn

Rich ThompsonProfessor Emeritus

“TeleNet Program”

University of Pittsburgh

Preface

1. First gave this talk in 2006– & about ten times since then

2. Preaching to the Choir

3. So, I added some “gimmicks”– Some funny, some outrageous– Desperately seeking attention

4. I’ve become more militant

Outline

1. Life cycle of an invention

2. Inventions & the economy

3. Eating the Feed Corn

4. The Job Market & Off-Shoring

5. Four things we can do about it

They were allInvented in

America

1. Life cycle of an invention

• Goal of R&D?

• Significant inventions…TelephoneLight bulbPhonographAirplaneCRTPlasticTransistorOptical fiberCell Phone

A few more…(In computers, & American)

Programming languageIntegrated circuitOperating systemMicroprocessorModemPersonal computerInternet

What do allthese inventions

have in common?

2 important words:

new products

What else do all these inventions have in common?

Each one had an extremely large impact on the US economy…

• That was broader than the invention itself & Lasted for many years after the original invention.

Consider a hypothetical interaction between Thomas Edison & Henry Ford

1. Edison invented the light bulb– And, he had them manufactured …– He contributed to the US economy for a few years by:

1. Manufacturing a marketable product &2. Employing skilled workers at high wages.

in the US

Both these issues areextremely importantto a nation’s economy

Fort Myers, Florida

Edison & Ford, continued

2. Henry Ford may have wondered if …– Light bulbs could keep his factories open at night,– Which would allow him to employ more workers &

manufacture a cheaper automobile.– But, accountants: “Light bulbs have to be cheaper.”

3. HF: “Tom, if you could lower your price,I could make a car most Americans could afford.”

– TE: “I’d have to automate or off-shore manufacture.”Edison could trade his large direct impact on theUS economy for this even greater indirect impact.

4. But, what about Edison’s laid-off workers?– They could work for Ford… or make vacuum tubes,

at an even higher wage

A real historical example

• Who is the father of the computer?– Charles Babbidge (freelance inventor)

• Who supported his work?– Textile industry in England & Belgium– Why? – Who wrote the “loom programs”

• Was this good for textile workers?– Etymology of “sabotage”– What were they called in England?

• Was it good for each nation’s overall economy?

– Ada Lovelace

- To automate the loom

– Luddites

Augusta Ada Byron,Countess of Lovelace

A more recent example

• Import duty on Steel (temporary)– Should we have renewed it in 2001?

• Unions in Pittsburgh – yes• Unions in Detroit – no

• If you were president,– would you have renewed the tariff?– Were steel workers content with Bush’ decision?

• “Manufacturing jobs” that should be out-sourced:– PCs, some program production, & other things

Jump to theBottom Line…

• Do you see where this is going?– I will attempt to convince you that…– America’s problem is not off-shoring

• We’ve been off-shoring for over a century• Off-shoring can be good for our economy

– Our problem is that…• The “R&D pipeline” is empty !!

Generalizing, Inventions have 2 phases:

• t0, invention 1– Product is locally manufactured– Requires skilled labor– Expensive small market

• t1, improves nation’s productivity 2– Huge potential market– So important must lower cost– Outsource manufacture (light bulbs, steel, sw)

• t2, out-dated & replaced

timet0 t1 t2 1 2

2. Invention &the national economy

• During 1

– Skilled laborers get high-paying jobs– Reinforces the nation’s “middle class”– They “consume”

• During 2

– All workers are more productive– All products are cheaper to manufacture

• Effect continues after invention period– The replacement invention augments

2 Types ofNational Economies

• “Inventor nations”– Many useful inventions per year– Skilled (expensive) workers– Education & investment

• “Producer nations”– Cheap workforce

Impact on anInventor Nation’s GNP1:

2:

• After 2

1 2 time

dollars

Constant?

?

?

Today, I can produce in 1 daywhat took 1 week in 1964because of inventionsinvested in my productivity

“piggy back effect”

t0 t1 t2

Is this oversimplified?

Impact on aProducer Nation’s GNP2:

• Is the IN “exploiting” the PN?– No, it’s the PN’s only way out of the Stone Age

1 2 t0 t1 t2

time

dollars

?

Effect of multiple inventions

• On a Producer Nation:

• On an Inventor Nation:– Key point?

National economiesgrow from invention;not production

3. Feed corn

• Literally, what is it?– Part of a farmer’s crop that he invests in his herd– If the farmer eats it or sells it instead,– The farmer can spoil his “future” by

optimizing his “present”

• In our analogy, “feed corn” is…– That part of US workforce that we invest in R&D

• Who is eating it?– Companies & gov’t agencies that stop or cut R&D

the herd dies.

How long?

• … have we been doing it?– Demise of Bell Labs,

X-Parc, IBM-Y, …– Decline of NSF’s “effective” budget

• Yes, even during 1992-99

• Trigger? – perfect storm:1.End of the cold war2.Advent of mega-greed3.Bipolar politics, with no rational “center”

• … can we continue?

>25 yrs

In 2006, I said “another 10 yrs”.In 2008, I changed it to “5”In 2011, I revised it down again.

Hopeless?

• Young technologist’sview of US R&D funding:

• The historical view …• Triggers:

– WWII, GI bill– Sputnik Apollo– Star Wars, etc– Please, something (hopefully, peaceful) soon…

• Planned or reactive?– Look at 200-year history of American “policy”

t

Next trigger?

Korean “War”The “Happy Days”OPECPerestroika

$

Where’s the IEEEon all this?

• Parent IEEE– Focused on international membership– Won’t publish my paper in Spectrum Mag

• It’s “too pro-American”

• The IEEE-USA– Lobbying to curtail outsourcing,– Instead of lobbying to promote invention

• Except for Wyndrum, et al, in response to NAE’s “Gathering Storm” report

What will happen?

• PN’s see opportunity & carpe diem– They will pick up the slack & become INs– (They already have better education)

• IN’s 1st alarm– When US feels we must raise the minimum

wage to support our growing peasant-class

• IN’s 2nd alarm– When we use other country’s products?– When we use other country’s inventions!

No

Three examples…

• When American electric power plants run, not on Coal, Gas, Wind or Nuclear reactors; but on …– Fusion reactors…– developed by the EU, not by Tokamak;

• When our vehicles operate, not on gasoline, ethanol, batteries or sunlight; but on … – MagLev…– developed in Munich, not Michigan;

• When American’s replace all their digital electronics by faster appliances that use …– Ballistic transistors…– perfected in Kobe, not Cupertino;

1st three of six

Three more examples…

• When our computers all adopt a new …– efficient & reliable operating system …– developed in Siberia, not Seattle;

• When the Internet abandons IP for a …– better networking protocol…– invented at IIT, not MIT;

• When Americans use a whole new generation of products built from technology that evolved from– Physics research performed on a super-collider…– on Swiss/French border, not the one we started building

(and abandoned) on the Texas/Arkansas border.

2nd three of six

Then…

• The US will have become a nation of ...– Lawyers– Spin-meisters– Rock/movie/sports celebrities– & peasants

• Our economy will implode & we’ll become …– a Producer Nation

• Can it get even worse?

Products that:(1)no other country wants(2)Don’t have positive

long-term effect on our economy

I hope not,but it could ! Warning: a little“over the top”

Is there historicprecedence?

• Read Gibbon,– “The History of the Decline

& Fall of the Roman Empire”

• Seven reasons for the Fall of Rome:1.Moral decay2.Laziness & obesity3.Financial problems4.Outsourcing5.Religious controversy6.Division7.Hoarding & deficit

Do theselook familiar?

We see all 7 inthe US today !!

Historic precedencecontinued

• C’mon Rich, don’t over-react !– You can’t compare the US to Rome– The Romans had Barbarians at their gate…– Waiting for them to get weak…– We don’t ! …

Have you read Gibbon?Do you think he did?

Do we?

4. Job Market & Off-ShoringOutline

A. 40-year history (1980-2020)– Diminishing supply of workers

• Especially, those with the right skills

– Work-force Supply & Demand

B. Employer response

Supply of Workers will flatten:especially for “skilled” workers

#US workers

19801980 19901990 20002000 20102010 2020202019801980 19901990 20002000 20102010 20202020

Business 2.0 9/03Business 2.0 9/03Business 2.0 9/03Business 2.0 9/03

54% growth54% growth

100M100M3% growth3% growth

Baby boomersBaby boomers

• As Baby Boomers retire, workforce expansion will slow• = English Peasants Revolt of 1381, plague 40% of workforce• Been hearing about impact on Social Security

• College: 4060% over 1980-2000, expected to stagnate• Factors combine projected shortfall of skilled workers

• = 14 million skilled jobs by 2020

• As Baby Boomers retire, workforce expansion will slow• = English Peasants Revolt of 1381, plague 40% of workforce• Been hearing about impact on Social Security

• College: 4060% over 1980-2000, expected to stagnate• Factors combine projected shortfall of skilled workers

• = 14 million skilled jobs by 2020

Gap already started Gap already started

PopulationWomenPopulationWomen

Uniformly distributed across age?Uniformly distributed across age?

aged 25-54aged 25-54

Putting it togetherSummarizing the previous data

Numberof …

Numberof …

YearYear19801980 2020202020002000

Available jobsAvailable jobs

Qualified workersQualified workers

Corporate culture shiftedCorporate culture shifted

Late 90s boomLate 90s boom

Return to Buyer’s job market Return to Buyer’s job market

Future Seller’s job marketFuture Seller’s job market

Smoothed trendHopefully, a continued7% economic growth

Smoothed trendHopefully, a continued7% economic growth

Mortgage-crashMortgage-crash

crossover crossover

What’s an employer to do?

1. Outsource some jobs to 3rd world – This will and must increase

2. Add to the workforce pool– Increase immigration quotas (security?)– Encourage or legislate later retirements– Migrate some skills down to HS level

3. Get competitive in this seller’s market– ++ salaries, benefits, working conditions

You must carefullyYou must carefullyavoid these careersavoid these careersYou must carefullyYou must carefullyavoid these careersavoid these careers

Business 2.0 9/03Business 2.0 9/03Business 2.0 9/03Business 2.0 9/03

5. What can/must we do?A. Take politics seriously

• Vote based on character– Ike anecdote

• Economy & Global politics are important

• Run for political office– School Board– State legislature– US Congress

Liberal ConservativeDoes one sidehave the answer?

The answer isIn the center

Is this the “Tea Party” movement?No. Government has a small role!

Read the Constitution!

What can/must we do?B. Rebuild America’s public education

• To raise a new generation of inventors• Tax dollars teaching, not administrators

– Fire bad teachers & encourage good ones

• Return to discipline & expulsion 6 hrs/day x 45 wks/yr = 1350 hrs/yr

– Not counting lunch & study halls

• Teach 2x more math & science - well– Content >> little Timmy’s self-esteem– George Washington >> Harriet Tubman

What can/must we do?C. Fix the Economics of R&D

• Should federal government take over R&D?– Please, No !!– Our Senators would love to fight over this pork

• But, the federal government can act– Not to “power the ship”– But to “steer the ship”

• Steering takes less “energy” than powering– And is more effective

How?

Fixing our R&D economySTEP 1

• Encourage corporate investment in R&D– R&D tax credit (not deduction)

• America’s “pin-heads” will call this “corporate welfare”

– Make sure the money pays R&D engineers• Not managers, not sales engineers

– There are many excellent professors out there• With very little available research support• But, first, the universities must end “royalty greed”

Fixing our R&D economySTEP 2

• Encourage long-term investment– Break the “today’s bottom-line” mentality– “Day trading” should not be a profession

• Individually, nor by mutual fund managers

– Americans must invest in companies for the long haul• Not in “the market” & move our money tomorrow

• No “capital gains” tax break until > 5 yrs– Pay tax at the highest bracket for < 1 mo

• Then, CEOs will need to show a “5-Year Plan”– Would also curtail “Commodity Futures” trading

These people are “parasites”No contribution to the economy

How?Easy!

What can/must we do?D. Entrepreneurship

• Rebellion to solve 2 problems:1. Elevate Engineering as a career choice

2. Need “skunk-works” ++ R&D / $• Internal, or build your own

• Cleveland’s EEs will mobilize1. Organizations that can help

• 5-minute “commercials” in subs. CleSec events• Led off next month by Ben R.

2. TBA: 1-day “1-stop-shopping” event next fallA "skunk works“ is a group in an organization: given a high degree of autonomy, unham-pered by bureaucracy, tasked with working on advanced or secret projects - Wikipedia.

Conclusion

• When I gave this talk in summer of 2008:– I said: “After 20 consecutive years of really poor

leadership (a bipartisan statement),– the US has the luxury to elect one more bad president.– And it looks like we will (with either outcome).– But, only one more.”

• My conclusion today:– That was pretty accurate– In 2012, we did it again now we’re on ‘thin ice’

Other reading

• Rising above the Gathering Storm,– National Academy of Engineering

• The World Is Flat– A Brief History of the Twenty-First Century– Thomas Friedman

Thank you foryour attention