John Doerr, one of America’s premier venture capitalists—an early backer of Netscape, Google, and Amazon.com—puts it this way: “You have to take risks when you are in a high-speed turn. Sometimes you’re going so fast and the turn is so sharp, your car’s riding on only two wheels. But without risk-taking nothing big happens.” It is the American formula, Doerr added, that provides the underpinnings—in support for basic research that spins out new breakthroughs in physics, biology, and chemistry—that have made America’s venture capital firms so productive in these turns.
It is worth noting that the American formula has been, in no small part, a Republican creation, which means that twenty-first-century Republicans who deny any economic role for the federal government are at odds with their own tradition. Alexander Hamilton belonged to the Federalist Party, a distant ancestor of the Republicans and the opponent of Thomas Jefferson’s Democratic-Republicans (they later renamed themselves Democrats), from which the Democratic Party of today is descended. The Republican presidents Abraham Lincoln, Theodore Roosevelt, and Dwight Eisenhower all significantly expanded and updated the formula. The Republican Party has traditionally favored limited government, but also strong and effective government where it is required.
Lincoln, Roosevelt, and Eisenhower, along with their Democratic counterparts, understood that the challenges of the world they were living in compelled the United States to enhance its national strength and prosperity, and at critical moments they articulated a vision of American greatness that persuaded the public to support, and Congress to authorize, measures appropriate for reinvigorating the formula. That is surely a common denominator among our greatest presidents—the ability to summon the nation to renew its traditional formula at each critical turn in our history.
Alas, the historical record also shows that the formula has expanded fastest and farthest in wartime. When a country is engaged in a war, especially a war considered essential to its survival, large numbers of its people will support almost any measure that can help it win. The Civil War era, for example, was also the occasion for authorizing the first federal income tax.
From Benjamin Franklin and his lightning rod onward, America produced gifted inventors, but government-sponsored research and development only began in a major way during World War II with the Manhattan Project. The effort to build an atomic bomb came about because FDR and his advisers feared that, without it, Nazi Germany would get the bomb first. After the war, as scientific research became crucial for technical advance and the scale and complexity of that research could no longer be adequately sustained by private companies alone, the United States led the way. The low-hanging fruit had already been plucked by tinkerers in garages, and scientific progress now required national laboratories and partnerships between government, universities, and private companies. The programs that Eisenhower added to the nation’s formula for prosperity had the common goal of assisting in the global struggle against the Soviet Union and international communism. Seventy-five years after World War II and two decades after the Cold War, America’s oldest national laboratory, the Argonne National Laboratory in Illinois, is doing basic research into solar energy, the smart electric grid, and electric cars. Examples of this public-private partnership make the news pages every day. For instance, as AOL’s DailyFinance.com noted (January 7, 2011), General Motors has licensed a technology from Argonne “that will boost the performance of lithium-ion battery cells that power electric cars” such as GM’s Volt, creating “safer, cheaper batteries with longer operating lives that can also go further between charges.”
Our big challenges today require the kind of national responses that wars have evoked, but without a major ongoing conflict it will be difficult to mobilize the American people to make the difficult policy choices needed to meet them. In seeking to rally support for such policies when he assumed office, President Obama referred to a “Sputnik moment” for the United States. The original “Sputnik moment” spurred thousands of Americans to take up careers in science and engineering, and related businesses, and galvanized the country as a whole to invest in mathematics, science, and technology, as well as to improve the nation’s infrastructure. The purpose was to avoid falling behind the Soviet Union, but one of the by-products was to update the traditional American formula for prosperity, which made the American economy even more creative and productive.
Today the United States has no such rival; but we have to find a way to do now what Sputnik spurred us to do then: update our formula to match the needs of the moment. After all, we are driving on roads and bridges built in the 1950s and even the 1930s. We are cutting back on the very universities that were chartered by Lincoln. We are learning from breakthroughs made by scientists who were inspired by Kennedy’s moon shot or who immigrated to America in the 1970s, spurred by Kennedy’s vision. In short, we are living off upgrades to our formula made a long time ago. While the $787 billion economic stimulus package Congress approved in February 2009 included some investments in infrastructure and research and development, much of the spending undertaken to fight the recession went to tax cuts, to unemployment insurance, and to such minuscule improvements as the new lighting on the train platforms in Penn Station in New York City, which makes it easier to see just how grimy, undersized, and outdated they are. The formula has a long lead time; it involves one generation investing on behalf of another. So when we opt for deferring maintenance on the formula rather than making farsighted investments in it, we are denying the next generation the tools it will need to maintain the American dream.
Unfortunately, the political debate in America has strayed absurdly from the virtues of our public-private formula. Liberals blame all of America’s problems on Wall Street and big business while advocating a more equal distribution of an ever shrinking economic pie. Conservatives assert that the key to our economic future is simple: close our eyes, click our heels three times, and say “tax cuts,” and the pie will miraculously grow.
We need to get back to basics, and fast. We need to upgrade and invest in our formula the way that every generation that came before us has done. We are entering a new economic turn, one that America did more to generate than any other country. Now we have to make sure that every American citizen and company has the skills and tools to navigate it.
PART II
THE EDUCATION CHALLENGE
FOUR
Up in the Air
In 2009, a movie appeared that vividly reflected the impact of two of America’s four major challenges—globalization and the revolution in information technology. The film was Up in the Air, which starred George Clooney as a “career transition counselor” who flies around the country firing redundant white-collar workers at the behest of their bosses. His life is an endless and lonely montage of airport hotels, frequent-flier lounges, TSA patdowns, and in-flight magazines. Along the way, Clooney meets his female clone, played by Vera Farmiga, another lonely road warrior armed with multiple credit cards, wrinkle-free clothing, and carry-on luggage that fits perfectly above the seat. Their affair reminds us that everybody, even a loner, needs somebody to love.
The real co-star, though, is Clooney’s new protégée, played by Anna Kendrick, a hyper-confident, twenty-three-year-old, freshly minted efficiency expert, who comes up with an even better idea for firing people than Clooney’s fly-by pink-slips shtick: handle all the firings from a central office using computers and the Internet, and eliminate the travel and all that I-feel-your-pain-face-to-face stuff that the Clooney character does so well. As Anthony Lane noted in his review in The New Yorker (December 7, 2009), “The film begins with a sequence of talking heads—the faces and expostulations of the newly sacked, as they respond to the life-draining news. If you’re wondering why they seem so artless and sincere in their dismay, that’s because they are; far from being Hollywood bit players, these are real victims of job loss, found in St. Louis and Detroit.” They stare into the camera, responding to the news that a Clooney-like grim reaper has ju
st delivered, with emotions ranging from “This is what I get for thirty years at this company?” to “Who the fuck are you?”
That’s a very good question. It is the raw version of a very basic question many Americans are asking.
While one of the movie’s themes is that even the professionally lonely don’t really want to be alone, its larger point is that the same forces of technology, automation, and outsourcing that are destroying the jobs of the people that Clooney is firing will get him in the end as well, through Kendrick and her techno solution for the mass delivery of pink slips. So while the romantic theme of this film is that no one wants to be alone, the bigger message is that no one is safe—not even the guy whose job is firing people. The convergence of globalization and technology will eventually touch everyone. These forces are far larger than any individual. They are ferocious, impersonal, and inescapable. They are leaving a whole class of American workers up in the air. It is incumbent on all of us to understand how these two forces are shaping American lives and what we need to do, individually and as a country, to harness them rather than be steamrolled by them.
The Merger
Let’s start with a simple declarative sentence: The merger of globalization and the IT revolution that coincided with the transition from the twentieth to the twenty-first century is changing everything—every job, every industry, every service, every hierarchical institution. It is creating new markets and new economic and political realities practically overnight. This merger has raised the level of skill a person needs to obtain and retain any good job, while at the same time increasing the global competition for every one of those jobs. It has made politics more transparent, the world more connected, dictators more vulnerable, and both individuals and small groups more empowered.
Here are three random news items that sum up what has happened.
The first comes from the Asian subcontinent. An Indian newspaper, the Hindustan Times, ran a news item (October 30, 2010) reporting that a Nepali telecommunications firm had just started providing thirdgeneration mobile network service (3G) at the summit of Mount Everest, the world’s tallest mountain. This, the story noted, would “allow thousands of climbers access to high-speed Internet and video calls using their mobile phones.” Following up this story, the BBC observed that this was a far cry from 1953, when Edmund Hillary first climbed to the Everest summit and “used runners to carry messages from his expedition to the nearest telegraph office.”
You can imagine the phone calls being made: “Hi, Mom! You’ll never guess where I’m calling you from …”
The same month that story appeared, the business pages of American newspapers reported that Applied Materials, the Silicon Valley–headquartered company that makes machines that produce sophisticated, thin-film solar panels, had opened the world’s largest commercial solar research-and-development center in Xi’an, China. Initially, Applied Materials sought applicants for 260 scientist/technologist jobs in Xi’an. Howard Clabo, a company spokesman, said that the Xi’an center received some 26,000 Chinese applications and hired 330 people—31 percent with master’s or Ph.D. degrees. “Roughly 50 percent of the solar panels in the world were made in China last year,” explained Clabo. “We need to be where the customers are.”
Our last item comes from Manama, Bahrain, the tiny Persian Gulf state off the east coast of Saudi Arabia. In the run-up to parliamentary elections, The Washington Post ran a story (November 27, 2006) about disaffected Shiite voters there, which turned out to be a harbinger of revolutions to come. “Mahmood, who lives in a house with his parents, four siblings and their children,” the paper reported, “said he became even more frustrated when he looked up Bahrain on Google Earth and saw vast tracts of empty land, while tens of thousands of mainly poor Shiites were squashed together in small, dense areas. ‘We are 17 people crowded in one small house, like many people in the southern district,’ he said. ‘And you see on Google how many palaces there are and how the al-Khalifas [the Sunni ruling family] have the rest of the country to themselves.’ Bahraini activists have encouraged people to take a look at the country on Google Earth, and they have set up a special user group whose members have access to more than 40 images of royal palaces.” Nearly five years later, Google Earth images helped to fuel a revolution in Bahrain and other repressive Arab states.
The first story tells us how fast and far the network of information technologies that are driving globalization has expanded, just in the last five years. Every day the world’s citizens, governments, businesses, terrorists—and now mountaintops—are being woven together into an ever tightening web, giving more and more people in more and more places access to cheap tools of connectivity, creativity, and collaboration.
The second story tells us that all this connectivity is enabling a whole new category of workers to join the global marketplace. In the process it is exposing Americans to competition from a category of workers we have not seen before on a large scale: the low-wage, high-skilled worker. We have gotten used to low-wage, low-skilled workers in large numbers. But the low-wage, high-skilled worker is a whole new species, to which we will have to adapt.
The third story tells us that these technologies are now empowering individuals to level hierarchies—from Arab tyrannies, to mainstream-media companies, to traditional retail outlets, to the United States of America itself. As a result, many of the structural advantages that America had in the Cold War decades are being erased. Yes, America still has an abundance of land for agriculture, a ring of port cities like no other country, and huge domestic natural resources. But these alone are not enough to drive our GDP anymore, especially when you think about what we no longer have: overwhelming dominance. America emerged from World War II as the only major economy with its industrial base intact. Europe and Japan eventually caught up, but other major countries didn’t really compete. China was all but closed, its energies diverted by Maoism and a cultural revolution. India was less closed, but its leaders were content with 2 percent per capita net annual growth. Brazil was partly closed, and handicapped by populist economic policies. Manufacturers in Korea and Taiwan concentrated on cheap plastics, consumer electronics, and textiles, although they later entered the semiconductor business. The United States was able to vacuum up the best minds from India, China, the Arab world, and Latin America, where there were few opportunities for unfettered innovation or academic research. Wall Street firms dominated global markets and America had the world’s only developed venture capital system. It wasn’t that Americans were not hard workers or that our rising living standard was some fluke of history. We did work hard. Our success was based on real innovation, real education, real research, real industries, real markets, and real growth—but the playing field was also tilted in our direction. Now we have to try to sustain all those good things without all those structural advantages. Your children will only know that world when everything was tilted America’s way from reading history books. The merger of globalization and the IT revolution can make us either better off or worse off—richer or poorer. It depends on us—on how well we understand this new world that we invented and how effectively we respond to it.
Flat World 1.0
Globalization and the IT revolution are totally intertwined, each being spurred on by the other. New technologies erase boundaries, break down walls, and connect the previously disconnected. Then those connected people and firms and governments build up webs of trade, commerce, investment, innovation, and collaboration that create markets for, and demand for, more technologies to connect more people at even lower costs.
It all happened so fast, but it is clear that sometime around the year 2000 many people in many places realized that they were engaging with people with whom they had never engaged before—whether it was Tom’s mom and her new online bridge partner in Siberia or the local gas station owner discovering through the Internet a new supplier of cheaper tires in Panama. At the same time, these same people in these same places discovered that they were
being touched by people who had never touched them before—whether it was a young Indian voice on the phone from a Bangalore call center trying to sign them up for a new Visa card or a young Chinese student in Shanghai who had just taken the place they had hoped to have at Harvard.
What they were all feeling was that the world is flat (the title of Tom’s 2005 book)—meaning that more people could suddenly compete, connect, and collaborate with more other people from more different places for less money with greater ease than ever before in the history of humankind. That flattening, which would eventually affect businesses, schools, armies, terrorist groups, governments, and—most of all—individual workers across the globe, was the product of three powerful forces that came together between the late 1980s and the new millennium.
The first was the personal computer, which enabled more and more people to create their own content—words, books, algorithms, programs, photos, data, spreadsheets, music, applications, and videos—in digital form. Men and women have been creating what we now call “content” ever since cavemen and cavewomen started drawing figures on cave walls. But with the PC they could suddenly create content in digital form and, once it was in bits and bytes, they could manipulate it in many more ways.
Second, the Internet and the World Wide Web that spread across the globe in the late 1990s suddenly gave people the ability to send their digital content to so many more places and to share it, and work together on it, with so many more people for the low costs associated with gaining access to a PC and an Internet connection.
Finally, and contemporaneous with that, a quiet revolution, but a hugely important one, was taking place. It was a revolution in software programming languages and transmission protocols that go by names such as HTML, HTTP, XML, SOAP, AJAX, EDI, FTP, SSH, SFTP, VAN, SMTP, and AS2. You don’t really need to know what they all stand for; you just need to know that together this alphabet soup has made everyone’s desktop computer, laptop, BlackBerry, iPhone, iPad, and no-name Chinese or Indian cell phone interoperable with everyone else’s. Call it the “workflow revolution” because it has made digital content flow securely in all directions. As a result, anyone could get on his or her computer or cell phone and dispatch a PDF, e-mail a friend, text a colleague, or transmit a picture and know that whatever was said, posted, texted, videoed, PowerPointed, or e-mailed could go anywhere in the world and be accessed from anywhere in the world—no matter what computer or software was being used to send and receive it. That all feels totally natural today, but it was truly revolutionary at the time, when so many people were running different machines using different operating systems and software.
That Used to Be Us: How America Fell Behind in the World It Invented and How We Can Page 7
