Authors: Gary Shapiro
The Comeback
THE COMEBACK
GARY SHAPIRO
Copyright © 2011 Gary Shapiro
Excerpts from “Canada Lawmakers Ratify Free Trade Agreement With Colombia, Send to Senate” by Theophilios Argitis. Used with permission of Bloomberg.com Copyright ©2010. All rights reserved.
Excerpts from “Colombia: Exports to Reach $40 Billion ’10; Double in 4 Years” by Darcy Crowe. Reprinted by permission of the
Wall Street Journal
, Copyright © 2010 Dow Jones & Company, Inc. All Rights Reserved Worldwide. License number 2550840759663.
Excerpts from “Two L.A. agencies get $111 million in stimulus funds but have created only 55 jobs” by David Zahniser.
Los Angeles Times
, Copyright ©2010. Reprinted with Permission. All rights reserved.
FIRST EDITION
All rights reserved. No part of this book may be reproduced in any form or by any electronic or mechanical means, including information storage and retrieval systems, without permission in writing from the publisher, except by a reviewer who may quote brief passages in a review.
Library of Congress Cataloging-in-Publication Data
Shapiro, Gary.
The comeback: how innovation will restore the American dream / Gary Shapiro.
p. cm.
ISBN 978-0-8253-0563-4 (alk. paper)
1. Technological innovations—United States. 2. Entrepreneurship—United States. 3. American
Dream. I. Title.
HC110.T4S52 2011
338’.0640973--dc22
2010047997
For inquiries about volume orders, please contact:
Beaufort Books
27 West 20th Street, Suite 1102
New York, NY 10011
[email protected]
Published in the United States by Beaufort Books
www.beaufortbooks.com
Distributed by Midpoint Trade Books
www.midpointtrade.com
Printed in the United States of America
To my wife Susan and to her parents, my grandparents, and every other American (including those no longer alive) who sacrificed so much to come to the United States. You left behind family, you had to learn a new language, you worked hard and sacrificed so much for your children. You have contributed to our economy, you are amazing citizens and huge patriots, and you have made the United States a beautiful and successful mosaic. We can repay our debt to you by ensuring the American Dream stays alive.
3 Innovation: The Fuel of Economic Growth
4 Entrepreneurial Innovation: The Jobs Engine
5 Innovation Requires Immigration
6 The U.S. Constitution and the Fire of Genius
7 All the World’s a Market: Innovation Requires Free Trade
8 Innovation Requires Good Schools
9 Innovation Requires Competitive Broadband
10 Government Spending: Imperiling Innovation and More
11 Government Spending: Modest Proposals to Restore Sanity
12 Private Enterprise: Restoring Our Foundation for Growth
13 Innovation Requires Support of U.S. Companies
14 Innovation Requires a National Energy Policy
15 An Innovation Lesson in Health Care
I
WAS ONCE
asked to provide some advice to a company that at one point had a product that was not only the best in its class, but also technically far ahead of its competition. It created a better way of offering its service, and customers loved it and paid for it.
Then it made a fatal mistake.
It asked its customers what features they wanted to see in the product and then delivered on those features. It seemed like good business: Ask your customers what they want, and then give it to them.
Unfortunately for this company, its competitor didn’t ask its customers what they wanted. Instead, the competitor had a vision of doing things differently. As a result, they did it better. Their customers didn’t really see the value or need for those features until they saw the product. When they tried it, they loved it.
So what did the company I was working with do when it saw what the competition was doing, despite my admonitions to do otherwise? It repeated its mistake and once again asked its customers what they wanted in the product. Of course the customers responded with features that they now loved from the competitor, while the competitor continued to innovate.
The paradigm had shifted. Innovation had paved the way. The company I was advising? I made them memorize what Alan Kay once said: “The best way to predict the future is to invent it.”
Consumers aren’t sages. They aren’t in the business of imagining the next great thing. That’s the job of innovators, who don’t have a choice. To borrow a phrase from my friend, Gary Shapiro, they either “innovate or die.” Those who rely on someone else to tell them what the future holds usually find themselves six feet under before they even realize they’re in the coffin.
But progress—real progress—is like that. It’s punishing and it’s merciless.
It’s also absolutely vital for the continued prosperity of the United States. As Shapiro makes abundantly clear in the pages that follow, innovation is America’s economic salvation. It creates wealth, jobs, even entire industries where nothing existed before. And innovation is the key in reversing our decline.
Like that company I worked with, our government is making a fatal mistake. It believes it is acting like a good business when it treats our economy like a focus group, asking each member of the group what it likes and what it doesn’t like. Taking these answers, it then attempts to fashion our economic policy.
The results of this “innovation by committee” are plain for all to see: exploding deficits, minimal growth, anemic job creation, and an ever-growing reliance on government aid. Whether under Republican or Democratic administrations or Congresses, the United States has been mired in uncertainty for years.
This book is about how to reverse this process and restart America’s innovation engine. It’s about how to get American back on track and reassert our preeminence in the world.
I have had the privilege of knowing Gary Shapiro for many years. He has been at the forefront of protecting America’s innovators since he helped beat back an attempt by the content community to bury the VCR thirty years ago. That was a defining moment for Shapiro, as it would be for the revolution in consumer electronics that followed. It was a fight that showed that the success or failure of
innovation has as much to do with the effort to defend it as it does with the usefulness of the product.
I also worked closely with Shapiro as he helped lead the national transition to digital television. That successful effort disrupted the status quo but changed our nation for the better. Of course, along with thousands of others, I have also been to International CES, where innovation and the future are on display.
The result of those thirty years Shapiro has spent in the trenches, fighting for innovation, has led to the ideas presented here. This book is a policy guide for our lawmakers to follow if they are serious about fully enabling America’s unique culture of entrepreneurship. He presents a disturbing picture of our current situation, and offers the tough choices we’ll need to make to get ourselves out of it.
You probably won’t agree with every one of his ideas. Whether you’re a Republican or a Democrat, conservative or liberal, there’s going to be something in this book that will challenge your long-held beliefs. Let it. It’s time we stop focusing on the success of one party or ideology, and start focusing on the success of our country.
But this book is more than a policy memo, too. It is a plea from one American to another to remember the American Dream—the Dream that the author has lived, the Dream that I have been fortunate to live. The Dream our ancestors came to this country to live.
Mark Cuban
October 2010
M
Y DEFINING MOMENT
occurred In July 2008 at a lavish hotel in Qingdao, China. At a formal banquet I sat next to the head of the province, the top Communist presiding over some 100 million Chinese. With fewer than ten words, he changed me. In a few brief seconds, he planted a seed. This seed I received uneasily. In fact, for a while I just used it as an amusing anecdote. But the seed expanded, changed, and grew into a tree of resolve. This annoying man catalyzed my grief, denial, thought, and action—but never my acceptance.
I sat next to him as part of the formal opening banquet for the SINOCES, a trade show held each year in the beautiful coastal city of Qingdao. Little did I know, this event had started several years earlier and had borrowed part of the name from the International Consumer Electronics Show (CES). At the Consumer Electronics Association, CES is our pride and joy. It is the world’s largest and most exciting homage to consumer technology innovation. Held each January in Las Vegas, with more than 2,500 companies exhibiting cool new stuff, International CES attracts more than 125,000 leaders from business, media, and government from around the world.
Based in Arlington, Virginia, the Consumer Electronics Association (CEA) is a nonprofit trade association of some 2,000 American companies who make and sell technology products. I have worked for or at CEA since I was a law student in 1979. Throughout my
time here, I have been a part of every innovation, from the VCR and the PC to the CD to the Internet. By producing our CES trade show and guiding our government policy to foster and encourage innovation, I have had a front row seat in witnessing a technology innovation revolution. I have been privileged to see innovations that have changed the world, created millions of new jobs, and transformed how we receive information, entertainment, and education.
It has not always been easy. Technology innovation has also changed other industries, and not in pleasant ways. Innovation breeds progress, but it also destroys. Ask a typewriter mechanic if he has a lot of clients these days. We have fought many fights, but for the most part, we won the battles that would have restricted progress, and the world is now better. I am extremely proud that we have improved the world through innovative technology.
I anticipate each year’s International CES like a kid entering a toy store. Nothing is more exciting than the new innovations and technologies and seeing how each of 2,500 companies position themselves to buyers, the media, investors, and the important executives. So as the CEO of the organization owning the CES name, I knew we had to act when we learned the CES name was being used in China with “SINOCES” without our permission.
SINOCES was created in 2001 by the electronics trade association in China and the city of Qingdao (famous for the Tsingdao beer). I knew a lawsuit in China was impractical, so we cut a deal. As both the city of Qingdao and our Chinese sister association shared our desire to create a big technology event for Asia, we negotiated a partnership through which we licensed our name, received a cut of the revenue, and helped with marketing, programs, speakers, and attendees. We also brought an American delegation, of which I was a member. It was a nice relationship—at least until 2008, when the economy softened.
Before the fall, the Chinese would do anything for us—even at the expense of their citizens. For example, in 2005, my wife Susan and I arrived in Beijing late, missing our connecting flight to Qingdao. The next few flights to Qingdao were full, so we told our partners we would not arrive until the next day. They said to stay put in the Beijing Airport. Within ten minutes, an official found us and whisked us to the Qingdao-bound plane waiting to take off on the tarmac. Two Chinese citizens had “voluntarily” given up their seats to accommodate us. Indeed, the Chinese did everything possible to give us an amazing experience, including police escorts and many celebratory meals.
