Grace Creek Media
"Innovation: Is America Suffering an Innovation Gap?"
CONVERSATION WITH MICHAEL MANDEL, ROBERT ATKINSON and CHERYL SCHWARTZ
Correspondent:  Jim Glassman

JIM GLASSMAN:
Welcome to Ideas In Action, a television series about ideas and their consequences.  I'm Jim Glassman.  The topic this week is America suffering an innovation gap?  Once the world's leader in developing new products, the U.S. is losing ground to other countries, at least according to a recent report by the U.S. Department of Commerce.  In an era of global competition, what are the consequences if American innovation stalls.

Joining me to explore this topic, Michael Mandel, former chief economist for Business Week Magazine and founder of Visible Economy, a new venture combining business and economic journalism with educational videos.  Robert Atkinson, president of the Information Technology And Innovation Foundation, a D.C.-based technology policy think tank.

And Cheryl Schwartz, chief operating officer of Blue Canopy Consulting, a firm specializing in information security and technology integration and a member of the Northern Virginia Technology Council.  The topic this week:  what should be done about America's innovation gap.  This is Ideas In Action.  (MUSIC)
ANNOUNCER:
Funding for Ideas In Action is provided by Investor's Business Daily.  Every stock market cycle is led by America's never-ending stream of innovative new companies and inventions.  Investor's Business Daily helps investors find these new leaders as they emerge.  More information is available at Investors.com.
JIM GLASSMAN:
America's leadership in developing new products has long been a source of pride, but some say the U.S. is now falling short.  Although new high tech gadgets appear almost daily, some experts argue that these seemingly new products are based on technologies that are already dated.  And that fundamental breakthroughs will require a new push for innovation.

Commerce Department data show technological innovation is linked to 75 percent of the nation's economic growth after World War II.  But now the Information Technology and Innovation Foundation ranks the U.S. in sixth place overall behind Singapore, South Korea and Luxemburg and last in progress towards new, knowledge-based innovation over the last decade.  What can reignite the drive towards cutting edge technologies that not only transform lives but create demand and move our economy forward?  Mike Mandel, you talk about an innovation drought in the United States.  What do you mean by that?
MICHAEL MANDEL:
Well, we've learned to think about the U.S. as a very innovative-- country.  People, as you say, talk about the iPhone, talk about Google.  They sort of say to us, "Of course we're innovative."  But if you look across the entire range of things, life sciences, speech technology, artificial organs, all the things that we're-- if you-- if you run back 10 years that were supposed to happen, we were supposed to have amazing advances that-- that we fell short on.  So communications, we've been great.  Life sciences has been a disaster.  Physical sciences we haven't put money into.  So in area after area we have fallen short.  Innovation shortfall.  Innovation drought.
JIM GLASSMAN:
When you say life sciences you mean biology, that sort of thing?  I mean we are developing new drugs?
MICHAEL MANDEL:
We're developing very few of them and they're incremental.  Compared to what was expected.  Gene therapies?  There's no commercially available gene therapies at this point.  You know, cancer treatments?  Fallen way short of what was expected.

Biotech was supposed to lead to a stream of cutting edge new drugs.  Instead we have pharma companies who have had to merge because their drug pipelines have dried up.  We're going to look back on this period as being a disaster in the life sciences.  Not on the science but in the-- the actual products.
JIM GLASSMAN:
Rob, your organization ranks the U.S. sixth overall, I want to get this straight, in innovation and competitiveness compared to other countries.  How'd you reach that-- ranking?
ROBERT ATKINSON:
Well, in a report we issued last year called the Atlantic Century we looked at-- the U.S. and 39 other nations.  And we looked at a number of different variables that are related to the process of innovation.  So things like-- how much corporate R&D is invested ever year as a share of GDP.  How much private R&D?  How much venture capital?  How many new startups?

How much-- how many scientists and engineers are in a country?  And the common wisdom, including in many of-- much of the press, is that the U.S. is the world leader in innovation.  But that's really equivalent to looking at a star and saying that it hasn't-- it hasn't turned supernova yet because we're not seeing it.

We're-- what we're really doing is we're looking in the rear view mirror.  The U.S. used to be the leader.  But now we're not.  We're sixth out of these 40 countries.  And as you said earlier, what's really most disturbing and most surprising, that's when we did the study, we were dead last in progress.  So--
JIM GLASSMAN:
Yeah, 40th in innovative progress.  And-- so what does that mean?  In other words, we-- we may be sixth in where we are now but we're not moving quickly enough?
ROBERT ATKINSON:
Well, actually, when we-- if we-- when-- when we went back and did the study-- when we did the study we looked at where the U.S. was in 2000 and where they are today.  Where we are today.  In 2000 we were so far above it-- we were number one in 2000, but not just by a little bit.  By a lot.

So the closest country to us in 2000 was Sweden and they were 10 percentage points below us in an overall ranking of zero to 100.  Now we've fallen to sixth.  Sweden's ahead of us.  A number of other countries.  And the reason is that it-- on all of these variables, the growth of corporate R&D, the growth of government R&D, the growth of venture capital, we have been slower in most of those variables than these other countries.  So you put all this together-- and we just haven't made the inputs-- the progress that these other countries have made.
JIM GLASSMAN:
And so the long-term implications of this 40th ranking are-- pretty scary?
ROBERT ATKINSON:
Well, they're really scary be historically the U.S. has led the world in per capita income and-- and-- and the economy because we've been the most innovative country in the world.  And this is even more important today because now we're competing against a whole slew of countries that can out-compete us on cost by far.  We have to be able to compete on innovation and the next new thing.  And if we can't do that, or if we're having trouble, it's going to mean that we're not going to have the kind of good quality jobs that we need.
JIM GLASSMAN:
Cheryl, as-- an on-the-ground innovator, do you think that government can help businesses innovate more or should it just get out of the way?
CHERYL SCHWARTZ:
Well, first off, I think that the reality is from an innovation perspective we actually see quite a bit of innovation.  And I think it depends upon how you define what innovation is.  There's a very broad spectrum of innovation.  Everything from breakthrough science and discovery all the way through incremental engineering and process improvements for productivity.

I think that in a lot of ways we kind of forget that.  And what we're seeing now is we're kind of at the cusp of what I call the social networking world meets the business collaboration platform meets these innovation networks.  And What's happening is there's scientists, there's entrepreneurs, there's thought leaders from all over the world that are now joining on these innovative-- platforms and are able to share ideas and solve problems.  P&G is a perfect example of that.  Proctor and Gamble has an innovation network that now over 50 percent of their products are coming out of this innovation network.
JIM GLASSMAN:
Let-- let me-- let me understand what that means.  I mean I understand how the technology makes it easier for people to communicate and share their ideas, but when you say Proctor and Gamble has an innovation network--
CHERYL SCHWARTZ:
Yes.
JIM GLASSMAN:
--What does that exactly mean?
CHERYL SCHWARTZ:
They have designed this thing called Connect and Develop which basically reaches out to thousands of people all over the world, scientists, thought leaders and so forth, to help collaborate and share in ideas and how to solve problems.  So they put sol-- they put ideas out there.  They put problems out there.  And those people then work together 'cause you now are dropping these political barriers and borders and people are working now as one to try and solve these problems.
JIM GLASSMAN:
Now-- are these employees or-- I mean what--
CHERYL SCHWARTZ:
No, they're--
JIM GLASSMAN:
--Why do they--
CHERYL SCHWARTZ:
--Insiders--
JIM GLASSMAN:
--Share--
CHERYL SCHWARTZ:
--In that--
JIM GLASSMAN:
--The information?
CHERYL SCHWARTZ:
They're insiders and outsiders.  I think that what you find-- I think the statistics I've read is probably 85 percent of the people now in the    Generation X and Generation Y are interested in actually solving problems to improve humanity.
JIM GLASSMAN:
See this--
CHERYL SCHWARTZ:
That's it.
JIM GLASSMAN:
--This is the part I don't understand.  Mike.  Why is it that we're falling behind in innovation in the United States at the same time-- the sharing of information is so much easier?  And, you know, computers can try things out that you don't--
MICHAEL MANDEL:
I think--
JIM GLASSMAN:
--Even have --
MICHAEL MANDEL:
--It's a very good--
JIM GLASSMAN:
--To try out--
MICHAEL MANDEL:
--It's a very--
JIM GLASSMAN:
--In real life.
MICHAEL MANDEL:
--Question.  The theory was that-- global sharing, okay, was going to accelerate innovation.  Okay?  In communications it has.  Social networks.  But if you look-- and you-- you have to go and you have to look area by area.  Okay?  So, for example, if you look at the development of, say, gene therapies, okay?  Or cancer drugs or diabetes drugs.

You look at-- we've spent-- in the U.S. we've actually spent-- the most money on-- in life sciences.  We haven't spent a lot of money on other things.  If you look, you sort of see it's all fallen short.  If you look at P&G you see that actually there's been incremental innovation, but the breakthrough innovations that actually produced the growth, the real growth, haven't been there.

Now it could turn out to be true that these global net-- innovation networks start producing better than they have.  But I can tell you that if you-- actually look at what has been-- come out of them, the-- the sense of disappointment is-- is palpable.  So, for example, it may be that you have better products for cleaning your home.  It's solving a problem.  Okay? But that's not actually what drives growth.  And-- it's-- it's the big ideas.  It's the big ideas that create jobs.
JIM GLASSMAN:
Okay, so-- so Rob, how-- why are we failing to develop these big ideas?  Is it, I don't know, lack of basic research or-- you know, what's going on?
ROBERT ATKINSON:
Well, look, go back to this notion of what other people would also call open innovation.  It's another term for this.
JIM GLASSMAN:
Right.
ROBERT ATKINSON:
An innovation network.  One-- one way to look at open innovation which-- most people don't look at is-- why are companies going to open innovation?  Partly it's 'cause they can because of the Internet and other things and it's useful.  But one of the reasons is because they're simply not doing it on their own anymore.  So everybody's looking outside to pick that up.
JIM GLASSMAN:
Cheaply.
ROBERT ATKINSON:
Cheaply.
JIM GLASSMAN:
Cheaply.
ROBERT ATKINSON:
Because they're not doing it anymore on their own.  So you look at basic research by U.S. corporations has significantly declined over the last 15 years.  Even applied research has declined.  And-- so what companies are trying to do is-- and the reason it's-- declined, Jim, is because the market is so competitive companies can't afford to do that kind of work 'cause it's what economists calls-- it spills over.  It benefits everybody.

So there's a collective goods problem or a collective action problem.  And companies are not able to solve it on their own.  So that's one of the reasons why.  You go to look at other countries, to use an example, the R&D tax credit was design-- was developed-- the U.S. was the first country in the world to develop the r-- research and development tax credit for companies.

And in the late-- '80s, early '90s we had the most generous research and development tax credit in the world. By far.  Now we're-- 17th out of the 30 OECD countries in research and development tax credit.  The French now have a research and development tax credit four times more generous than the United States does.  And so that's one factor.  Government cutbacks in research are another factor.  There are a whole set of things that-- that are a part of this problem.
MICHAEL MANDEL:
Can I just add one thing?  What the U.S. has done over the last 10 years is specialize in life sciences and healthcare research.  Seventy percent of the academic spending on R&D goes for life sciences.
ROBERT ATKINSON:
As opposed to physical sciences.
MICHAEL MANDEL:
As opposed to physical science.  As opposed to environmental science.
ROBERT ATKINSON:
Right.
MICHAEL MANDEL:
In a world in which people talk green all the time, the U.S. is actually increasing the share of our spending that goes to life sciences.  We are not putting it into environment, the so-called green jobs of the future.  We're not putting it into the physical sciences, which-- which is what would underlie the information technology-- breakthroughs.  Okay, we put this massive bet on the life sciences.  The government-- if you look at the share of government spending--
JIM GLASSMAN:
And you're saying that even though there's a massive bet it hasn't paid off?
MALE VOICE:
It hasn't paid off.  And if you think about it this is-- we-- well, it goes along with our healthcare spending.  We put all that money into healthcare.  We put a lot of money into life sciences.  And, unfortunately, the pharma companies which have been at the leading edge of this-- part of that-- they-- they have been cutting R&D personnel either because they've been cutting it or because they haven't been paying off.
JIM GLASSMAN:
Cheryl, what about the cur-- let-- let me add another problem.
CHERYL SCHWARTZ:
Okay.
JIM GLASSMAN:
What about the credit markets?
CHERYL SCHWARTZ:
Sure, access to capital's a huge issue.
JIM GLASSMAN:
Right.  Access to capital, either through credit or equity.  It-- and has that become a big problem, especially in recent years for--
CHERYL SCHWARTZ:
It's a--
(OVERTALK)
JIM GLASSMAN:
--Startup businesses or--
CHERYL SCHWARTZ:
It's a problem for--
JIM GLASSMAN:
--R&D?  For--
CHERYL SCHWARTZ:
--Small business and it's also a part-- it's a problem in large businesses for different reasons.  Wall Street does not actually reward innovation.  They have never, because of their tactical nature.  The--
JIM GLASSMAN:
In other words, innovation costs something in the short-term--
CHERYL SCHWARTZ:
Correct.
JIM GLASSMAN:
--And so it hurts your earnings?
CHERYL SCHWARTZ:
Yes.  And the rule-- rule-- the reward-- they do reward you after the fact-- after the fact.  They don't reward you before the fact.  I think small businesses; access to capital is a huge issue.  You know, I actually have talked about and been a big proponent of tax credits for investments in new technology and innovation.  And I think that's really, really important to set bold goals.  You have a generation of people who want to do what you're talking about.
MICHAEL MANDEL:
They want to help.
CHERYL SCHWARTZ:
They want to-- social responsibility is a new season of re-- of innovation.  But I think on your innovation point that I think is really important, why-- we innovate to create jobs.  And we innovate so that we can create sustainable-- sustainability and for economic advantage, right?

And the reality is I think the United States can't survive on innovation alone.  And I think what's happening is the building blocks are being outsourced.  And what the government can do is try and get those outsourcings back into the United States so we start building the components.  And I think with this next new wave of innovation it is critical that in healthcare, energy and those things, we are not sourcing R&D 'cause what-- that is what's happening now.  More of the R&D is getting outsourced, which is painful.  And I think that the life cycle of innovation needs to come here.
JIM GLASSMAN:
What does that mean out-- it-- it's being outsourced?  You mean that a big American company will put theirs research facility somewhere else?
CHERYL SCHWARTZ:
Correct.
JIM GLASSMAN:
But it still benefits the American company?
CHERYL SCHWARTZ:
It does.  But what's happening is the IT building blocks and the engineering building blocks for building that technology does tend to go overseas and that is not happening here.
JIM GLASSMAN:
Let-- let-- let-- let me bring Rob in here.  So if there are limited resources, that's one of the problems here.  Do you think the government should make decisions about say picking winners?  Concentrating on certain industries?
MALE VOICE:
Yeah.  Here's what we want to do.  We want to pick winners in generalized technology areas.  We don't want to pick particular firms and we don't want to partic-- per-- pick particular narrow technology.  So it's pretty clear that battery technology is going to be future-- critical to our future.  We have to get-- good electric batteries for cars.  But we don't want-- the government shouldn't be going, "Well, this is this kind of-- lithium is the-- better than-- than-- than the nano."
JIM GLASSMAN:
But that's one of these promises that Mike was talking about.  There's been a lot of money invested in-- in finding--
MICHAEL MANDEL:
No, actually there hasn't--
JIM GLASSMAN:
--Battery--
MICHAEL MANDEL:
--There--
JIM GLASSMAN:
--Technology?
MICHAEL MANDEL:
--Actually there hasn't been.
JIM GLASSMAN:
No?
MICHAEL MANDEL:
No. What's fascinating here about kind of what you say is that probably the most important thing that the government can do is actually just make it clear that innovation is important.  So we as a country have not done this.  If you look-- if you look--
JIM GLASSMAN:
But how do-- how do you do that?  Is that just something--
MALE VOICE:
I think it's--
JIM GLASSMAN:
--That--
MALE VOICE:
--Very si--
JIM GLASSMAN:
--That the President should get out and say or--
MALE VOICE:
I-- I--
JIM GLASSMAN:
--Or is it tax--
MALE VOICE:
--Well--
JIM GLASSMAN:
--Credits or--
MALE VOICE:
--Think about it--
JIM GLASSMAN:
--What is it?
MALE VOICE:
--This way.  What's the thing that can slow innovation down the most?  Bureaucracies.  Bureaucracies are the friend of the status quo and the enemy of the new.  And really what we have-- what you need-- the-- first the signal from the top that innovation is a good thing.  That's the most important thing.

Then some of the things like-- the R&D tax credit, which are not that much money, are-- are easier to get through.  Okay?  You need to make it clear that we are in favor-- when-- when Obama talks about innovation these days; this is the way his speeches run.  We like innovation.  What we really like is green innovation.  And those green innovation, we'll talk about-- in-- job-- jobs for people doing installations.  So it quickly goes from-- three sentences goes from innovation to--
JIM GLASSMAN:
So what should--
(OVERTALK)
JIM GLASSMAN:
--He say?
MICHAEL MANDEL:
What he should say is that we care about innovation.  We care-- it's important to have new things.  Okay?  And-- and the first thing we're going to propose-- not because it's necessarily a lot of money.  Go ahead and sort of do the R&D tax credit or something that is-- put it up at the top of the agenda.
JIM GLASSMAN:
So is there anything more-- we keep talking about the R&D tax credit.
CHERYL SCHWARTZ:
Yeah, so I think--
JIM GLASSMAN:
Anything-- and that may not happen because there's--
MICHAEL MANDEL:
But the--
JIM GLASSMAN:
--A lot of concern about taxes in general.
CHERYL SCHWARTZ:
But I think setting goal--
JIM GLASSMAN:
And revenues and--
MALE VOICE:
Setting goals--
CHERYL SCHWARTZ:
I agree.
JIM GLASSMAN:
--And budget--
CHERYL SCHWARTZ:
I think--
JIM GLASSMAN:
--Deficits.
CHERYL SCHWARTZ:
--Setting bold goals for innovation is absolutely important for--
JIM GLASSMAN:
What about--
CHERYL SCHWARTZ:
--The government too.
JIM GLASSMAN:
--Education?
CHERYL SCHWARTZ:
Education?  For education, health, energy and environment we need to set bold goals.  You have a generation of people coming up that that is what they want to do.
JIM GLASSMAN:
But isn't that--
CHERYL SCHWARTZ:
Even by--
JIM GLASSMAN:
--Part of the problem in the United States?  That there has been a decline in the quality of science and technology--
ROBERT ATKINSON:
Well, it wasn't--
JIM GLASSMAN:
--Education.
ROBERT ATKINSON:
--So much a decline in the quality as in the-- just the pure numbers.  We need to focus much more laser-like on what's called STEM education.  Science, technology, engineering and math. Here in Washington we're really-- we're really blessed to have-- one of the best high-- science high schools in the country, Thomas Jefferson.  It's a science magnet high school.  It cranks out kids who are really dedicated and passionate and go on-- but we only have 100 of these science high schools in the country.  We should have 500.  We should have 1,000.
JIM GLASSMAN:
What-- what about what business can do?  Are-- are-- are American businesses becoming more risk averse?
MICHAEL MANDEL:
Well, they weren't risk averse.  If-- if I think about-- companies like Intel, they've put out a lot of money.  Boeing has put out a lot of money.  The pharma companies put out a lot of money.  They put the money in.  Right?  And the reason why they became more risk averse is because it failed.  It wasn't because the-- Wall Street stopped them.

I mean it turns out that innovation is just very risky business.  So here we have a situation where innovation's risky business.  The U.S. has hooked itself economically in the global division of labor as innovation.  It's something that we as a country have to get behind as-- as a country.  And I'm less concerned about the picking winners and losers really.
JIM GLASSMAN:
Well, necessary--
(OVERTALK)
JIM GLASSMAN:
--I think that paradox here-- you say, on the other hand, the United States has-- has-- has has essentially decided that innovation is our comparative advantage, but then we haven't--
MICHAEL MANDEL:
But the talk--
JIM GLASSMAN:
--Gotten behind it enough?
MICHAEL MANDEL:
We talk-- we talk about it as if we-- we behave as if it's our comparative advantage.  We sort of allow the factors to --
ROBERT ATKINSON:
But--
MICHAEL MANDEL:
--Go overseas.
ROBERT ATKINSON:
--But one of the reasons why innovation is so hard and that's because in the U.S. if you develop an innovative product the odds of it being stolen, the intellectual property being stolen and expropriated from you with no rights to-- by China, by India, by Brazil, by Russia is very, very high.  And we do very little to protect U.S. companies on their intellectual property.  So they know that the risks are very high for them to lose that.  And they-- innovate less because of it.
JIM GLASSMAN:
How big a problem is that, Cheryl?  For the-- with the companies that you know?
CHERYL SCHWARTZ:
I think that--
JIM GLASSMAN:
And people say, "Well, I'm not going to innovate because it's going to get stolen?"
CHERYL SCHWARTZ:
Yeah, I--
JIM GLASSMAN:
"I'll go do--"
CHERYL SCHWARTZ:
--I don't think that's--
JIM GLASSMAN:
--"Something else?"
CHERYL SCHWARTZ:
--That isn't something.  I think the cyber-- in the cyber arena, I mean just certainly being on the defensive is something that we-- we need to work on.  But I think that in terms of, you know, people being afraid.  I think on the government side, the government wants innovation, to your point.  However, they want a proven-- they want a proven solution.  (LAUGHTER)  So I mean--
MICHAEL MANDEL:
That's the point.
CHERYL SCHWARTZ:
--That kind of-- that's-- that kind of puts it (LAUGHTER) in a nutshell.  So I think--
JIM GLASSMAN:
Because innovation-- because-- the nature--
CHERYL SCHWARTZ:
It's risky.
JIM GLASSMAN:
--Of innovation is it's risky.  You don't know what the future is.
CHERYL SCHWARTZ:
Right.  There are--
(OVERTALK)
CHERYL SCHWARTZ:
--Pockets of innovation.
MICHAEL MANDEL:
--To it.
CHERYL SCHWARTZ:
Dartmouth--
MICHAEL MANDEL:
That they want--
CHERYL SCHWARTZ:
--Dartmouth's--
MICHAEL MANDEL:
--They want--
MICHAEL MANDEL:
--Doing things.
MICHAEL MANDEL:
--Innovation as long as it's not risky.
JIM GLASSMAN:
But I-- I want to (LAUGHTER) go back to something you said.  The very first thing you said, Mike-- which troubled me a little bit.  You said it was supposed to be this.  It was supposed to be that.  And it-- it didn't develop.  But I mean we don't know what innovation's--
(OVERTALK)
JIM GLASSMAN:
--Going to bring us.
MICHAEL MANDEL:
--If you go-- if you go back to '98 and if you go back to what people were investing money in, venture capitalists, corporations, large sums of money.  None of these-- none of these-- entities had timeframes longer than five years.  Maybe seven years.  Okay?  There were vast sums of money invested in things like micro machines.  Vast sums of money invested in things like speech technology.  There were vast sums of money invested in low orbit Earth satellites to provide broadband everywhere.  Right?  You remember that?
ROBERT ATKINSON:
I do.
MICHAEL MANDEL:
There were large sums of money invested in gene therapy-- trials.  Okay?  You go down the list and you look.  We're not talking about pie in the sky stuff.  We're talking about where we as a country have put down our markers.  Not in the-- our-- not in the research, not in the basic research.  By-- by-- but by organizations who expected to get a return in the five to tier-- 10-year timeframe and did not get it.  I'm going by the market.  Where the market put its money.
JIM GLASSMAN:
'Cause it-- so the market felt--
MICHAEL MANDEL:
The market--
JIM GLASSMAN:
--This way.
MICHAEL MANDEL:
--The market felt--
JIM GLASSMAN:
And so--
MICHAEL MANDEL:
--The market-- the market put billions of dollars, okay, into biotech-related stuff.  Hundreds of billion of dollars.  And I'm not exaggerating here.  Okay?  And with-- and in terms of the te-- what-- with a less than 10 year timeframe.  And things just-- here's the-- here's the most optimistic way of putting it.  Okay?  Things just took longer than we thought.
JIM GLASSMAN:
So-- but there are areas where the United States still excels, right?
ROBERT ATKINSON:
Sure.
JIM GLASSMAN:
And where-- where are they?
ROBERT ATKINSON:
Well, we excel in-- for example, in commercial aviation.  We'd excel even more if it wasn't for-- Airbus and getting vast-- just pure subsidies from the government to support Airbus.  Boeing is the world leading company in jet aircraft.  We excel in--
JIM GLASSMAN:
And yet we haven't really seen any spectacularly different jet aircraft I think in the last, I don't know, 50 years or so?
ROBERT ATKINSON:
I think the seven-- what's it?  The 787?
MALE VOICE:
787.
ROBERT ATKINSON:
That's like-- the fully-- first fully composite aircraft to fly by wire.  It was relatively new.  So, you know, I-- if you want to say have-- can-- can we get to what they were planning to do, the low orbit-- jet to get to Japan, that's not something that a company's going to invest in by themselves.
MICHAEL MANDEL:
Just like this-- you just stop right there.  That's just really important.  Okay?  Because-- because Boeing has been making incremental innovations but they have not fundamentally changed the economics of air travel, which is part of what the airline's problems are.  They want new jets because they can get a 15 percent gain in-- in fuel efficiency on it.  But 15 percent is not an enormous amount.  That's not enough to drive economic growth.
JIM GLASSMAN:
Right--
(OVERTALK)
JIM GLASSMAN:
--I mean we've heard for example that-- the idea of air taxi service.  In other words, you know, we-- we still have planes doing exactly what they did 50 years ago, flying from one big airport to another big airport with 100 people on them or--
MICHAEL MANDEL:
Be--
JIM GLASSMAN:
--200--
MICHAEL MANDEL:
--Because--
JIM GLASSMAN:
--People on them.
MICHAEL MANDEL:
--We can't get the technology working to do the air traffic control.
JIM GLASSMAN:
But where does-- where does innovation come from?  Doesn't it actually come from the bottom up?  Isn't the-- isn't this something that the government finds a hard-- a hard time doing?  Or big companies find a hard time doing?
CHERYL SCHWARTZ:
No, I think it's an unmet need.  It's an unimagined need.  It's a need that people really feel is out there.  There's a pain point.  Where there's a pain point-- that's what really I think gets innovation going.
JIM GLASSMAN:
Paint point meaning you just-- you--
CHERYL SCHWARTZ:
Yeah, it's too--
JIM GLASSMAN:
--There's-- there's a need--
CHERYL SCHWARTZ:
--Difficult to do--
JIM GLASSMAN:
--For something that's--
CHERYL SCHWARTZ:
--It's too--
JIM GLASSMAN:
--Too hard.
CHERYL SCHWARTZ:
--Difficult.  Like, you know our dependency on oil would be an example.  We need to figure out a way to get out of that.  I mean those are the kinds of things that, you know--
ROBERT ATKINSON:
But (UNINTEL)--
CHERYL SCHWARTZ:
--We need to be thinking about.
ROBERT ATKINSON:
--But to (UNINTEL) your point, where does innovation come from, it really-- there's two sort of theories in-- in-- in the literature and what Cheryl just talked about is technology pull.  There's also technology push.  And I would argue that a lot of our innovation comes from technology push.

It comes from just inventions that emerge that spur innovation.  So, for example, the ability to-- of Intel to keep-- or AMD or other companies to keep driving down micro processing prices and-- and storage and just creates all this innovation.  So-- a good example of that would be-- in-- Mike's point about biotechnology.  I'm less pessimistic than Mike is about the life sciences because I think this is just a tough nut to solve.
MICHAEL MANDEL:
I'm hoping you're right.
ROBERT ATKINSON:
But-- but one of the new--
MICHAEL MANDEL:
No, you--
ROBERT ATKINSON:
--Techno--
MICHAEL MANDEL:
--Might be right.
ROBERT ATKINSON:
Right.
MICHAEL MANDEL:
I can't tell.
ROBERT ATKINSON:
But there-- there are amazing new technologies out there like a company like Life Technologies out of San Diego.  They're developing the ability to do these-- these analysis of genes at-- at-- at an-- unbelievably fast rate.  At an unbelievably low price.  And that's just emerged in the last five years.  So I think these platform technologies are very--
JIM GLASSMAN:
Let me just--
MICHAEL MANDEL:
--Important.
JIM GLASSMAN:
--Ask Mike the last question.  What do you think is the most important thing to do to boost innovation?  One thing?
MICHAEL MANDEL:
At this point I would sort of say making sure that the government is not on board financially, but on board in terms of message.  Setting that this is-- that this is-- you know, financial reform, healthcare reform.  Where's innovation in this package of things?  Okay?  That's really I think-- I think making sure that everybody knows that this is the way that the U.S. is going to-- is going to-- thrive.  Okay?  And whether it's in energy or life sciences or any-- other area, that's what we have to do.
JIM GLASSMAN:
Thank you Mike, thank you Cheryl--
CHERYL SCHWARTZ:
Thank you.
JIM GLASSMAN:
--And thank you Rob.  And that's it for this edition of Ideas In Action.  Don't forget you can take this show on the road by downloading it on your MP3 player through iTunes.  That's an innovation.  Or check out our website -  www.IdeasInActionTv.com.  Thanks for joining us for Ideas in Action.  I'm Jim Glassman.  (MUSIC)
ANNOUNCER:
For more information visit us at IdeasInActionTv.com.  Funding for Ideas In Action is provided by Investor's Business Daily.  Every stock market cycle is led by America's never-ending stream of innovative new companies and inventions.  Investor's Business Daily helps investors find these new leaders as they emerge.  More information is available at Investors.com.   This program is a production of Grace Creek Media and the George W. Bush Institute, which are solely responsible for its content.
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