Here’s what was happening while our “best and brightest” were studying economics at Harvard (a notorious gut major when I was teaching there) so they could be yuppie investment bankers and never grow up.
Last month, my news assistant came in with a new Blackberry. Only it wasn’t a Blackberry. It was a cheap Chinese knockoff of a Blackberry. Of course, the Chinese knockoff wasn’t the same as a real Blackberry. It was better.
He’d had a real Blackberry for six months — bought it on a trip to the US for $400, then had to pay another hundred or so in Vietnam to get it unlocked for local mobile service — and it was inconvenient and flukey. The new one, he found easier to use. The parts, obviously, were exactly the same — they clearly came from the same factories. But he even found the Chinese software more convenient. They were adding features that hadn’t existed on the “real” Blackberry. The knockoff cost $150.
I thought about this after reading this Derek Thompson Atlantic Business post referencing BusinessWeek’s Michael Mandel’s article arguing that the US may be losing its innovative edge. Mandel points out that the US ran a $30 billion trade surplus in advanced tech in 1998. By 2007 it was a $53 billion deficit. Thompson asks: “Where Mandel’s explanation comes up short is: What are these innovators doing wrong?”
The example of the Chinese knockoff Blackberry suggests that maybe US innovators aren’t doing anything wrong. It’s just that they’re now competing against Chinese innovators, where they weren’t 10 years ago. This may have happened for two reasons. The first is that lack of intellectual property protection, combined with the outsourcing of manufacturing for all those high-tech products to China, gradually destroyed the US’s technological edge.
The second is that in 1998, China didn’t have very many top-flight engineers. But they’ve spent the last 10 years doing nothing but graduate engineers, and now, they do. And that changes everything.