Charles Vest addresses the 2009 Inductee Class on Competitiveness and Innovation

National Academies Beckman Center
October 4, 2009

In his New York Times column one year ago, Tom Friedman contrasted the Wall Street bailout with the need for a green future. He wrote, “… we don’t just need a bailout. We need a buildup. We need to get back to making stuff based on real engineering not just financial engineering.”

That was one year ago.

Two weeks ago, he wrote about the visionary work one of our fine Silicon Valley companies is doing to produce photovoltaic solar cells. A great story, but every manufacturing job associated with it is in another country, e.g. Germany. Friedman then noted that while many in the U.S. continue to treat renewable energy largely as a fairy tale, the renewable energy industry in Germany, with more than 50,000 new jobs, is now, second only to their automobile industry.

What is this about?

It is a harbinger of a nation that has for too long ignored many of the greatest challenges of our age. It is about a nation in which far too many citizens and leaders assume that because we have been king of the mountain throughout their lives, the future will be no different. It is about the most innovative nation on the planet failing to harness that innovation in the some of the most important directions. It is about a nation that for decades has given up on providing a world-class education to its primary and secondary students, and now is tearing into the core of its great public system of higher education. It is about a nation that properly and generously shows the rest of the world how to build the foundations of strong economies while it stubbornly forgets its own lessons at home. It is about a nation increasingly unable to find a proper balance between short-term gain and long-term vitality. It is about a body politic that thinks globalization is some evil out on the horizon, when in fact it has been the reality of our businesses and industries for decades and must be shaped as a source of economic strength. It is about a nation in which someone seems to arise every morning and ask, “What new thing can we do today to become even less hospitable to people from other countries who want to visit, study, or become part of our society?”

I have asked myself if I could really stand here this morning and yet again go through such a litany? After all, our National Academies report Rising Above the Gathering Storm: Energizing and Employing America for a Brighter Economic Future presents the clearest summary of the issues and states the clearest recommendations for changing course. It has had some impact. But its findings were released in 2006, and we still have not seen broad, fundamental change.

The time really has come to slay the dragon of complacency. There is little slack left. Other nations are not biding their time.

I really am worried. Indeed I am frightened.

But deep inside me there is still a spark of optimism. It is based in the first instance on something Winston Churchill once said; “You can always count on the Americans to do the right thing … after they have exhausted all the other possibilities.”

I also have a sense of underlying optimism because this generation of young people is idealistic and attracted to address the grand challenges of the 21st century. And we surely can make them aware that this is indisputably the most exciting era in engineering and science in human history.

So, how do we get back on track?

The short answer is, update the recommendations of Rising Above the Gathering Storm and implement them.

But today I would like to explore three essential component of any reasonable strategy for moving forward: developing brainpower, unleashing innovation, and grappling with scale.


Our age is both global and knowledge driven. As the world has become wealthier and generally better educated, science and engineering talent and knowledge are distributed more broadly around the world. North America, Europe, and Asia each account for roughly 1/3 of the world’s R&D expenditures. China now leads the world in the number of young engineering professionals; India leads the world in the number of young professionals in finance and accounting; and the U.S. leads the world in the number of young life science professionals, by a small margin.

But to couple science and engineering together provides a misleading picture. The global trends in the engineering workforce are very different than those for the scientific workforce. In the early 1980s, China, Japan, and the U.S. each graduated about 75,000 bachelors-level engineers each year. By 2002, the most recent year for which accurate data are available, the U.S. production of first degrees in engineering had dropped to about 60,000; Japan had grown to more than 100,000 graduates per year; and China had leaped to about 250,000 first engineering degrees per year. Yes, there is a wide variance in the nature and quality of engineering education, but the trend is very important.

“Well,” you might say, “of course China should have many more engineers than we do, after all, their population is nearly 1.5 billion and they are rapidly industrializing.” I agree, so let’s look at a more important indicator, the fraction of college graduates who earn degrees in engineering. Broadly across Asia, Europe, and the U.S. the fraction of graduates with first degrees in the natural sciences is approximately 12 percent in each region. However, the fraction of graduates with first degrees in engineering is 20 percent across Asia, 12 percent across Europe, but only 4.5 percent in the U.S.

I believe that the low fraction of our students majoring in engineering is something we really need to worry about. The fact is that we have been filling in the corresponding gap in our engineering workforce for many years by importing talent from other countries. Well more than half of the engineering and science Ph.D. students in U.S. universities come from other countries. These immigrants have assumed major leadership in our universities and in our entrepreneurial industries.

We are grateful and should celebrate the leadership and contributions of these talented immigrants and the traditional openness of our country, campuses, and industries. But we cannot necessarily count so heavily on them going forward. Many more are beginning to return home because of perceived higher speed of professional growth and better opportunities to start their own businesses.

We also need to make our borders more welcoming and especially to implement the Gathering Storm recommendation to increase the number of H1-B visas issued each year, and that offer H1-B visas to students who earn doctoral degrees in STEM fields.

But our fundamental task must be to increase the number of U.S. citizens entering these fields. This requires two things: inspiration and improved education. We must inspire the next generation to contribute to a better world and a stronger economy through engineering and science; and we must somehow become serious about improving our public K-12 education. There are productive roles here for the National Academy of Engineering.

The NAE’s Engineering Grand Challenges are proving to be an effective organizing framework for inspiration of the next generation. And they are a wonderful example of how seeds planted by the NAE have been leveraged through the passionate work of others. Several engineering deans and university presidents around the country have picked up this agenda of inspiration and run with it. There will be six coordinated summits next spring in different parts of the country. Each will bring students, faculty, and leaders of industry and government together to focus on two or three of the NAE Grand Challenges.

With the leadership of Dean Tom Katsouleas at Duke, Dean Yannis Yortsis at USC, and President Rick Miller at Olin College, there is a national movement to establish a program of Grand Challenge Scholars among engineering undergraduates to “foster undergraduate research, study, and experiential learning related to the National Academy of Engineering Grand Challenges for Engineering.” In addition, there are undergraduate project courses, and even reorganizations of curricula around the country building on our Grand Challenges report.

Let me turn to improving education. This is a very complicated issue, but I want to point out one shining example. Rising Above the Gathering Storm recommended bringing to national scale a program started several years ago in Dallas by businessman and philanthropist Peter O’Donnell that provides modest financial incentives to teachers to qualify to teach science and math at the AP level. It also provides a modest payment of a few hundred dollars to students who pass AP subjects in math, science, and English. The results of this simple approach are simply amazing.

Following the release of Gathering Storm, while waiting for the federal government to consider this, a non-profit, private sector organization, the National Math and Science Initiative (NMSI) was established with financial support form Exxon-Mobile, the Gates Foundation, and the Dell foundation. pointing its first year, the NMSI AP program is in 67 schools in 7 states. 13,000 exams were taken by AP students in science, math, and English, an 80.1 percent increase from the previous year. There was a 51 percent increase in AP exams passed, which is over 9 times the national average. The percent increases among women and underrepresented groups was even higher. This program will expand in the coming years. NMSI’s second component, UTEACH, now operating in universities in 14 states, aspires to meet the Gathering Storm goal of graduating 10,000 K-12 teachers appropriately educated in the disciplines they teach.

So, my point is that there are things that can be done. Individuals can make a difference. And the work of the NAE and the National Academies can be leveraged by private groups, as well as by the federal government.


The United States is facing an economic crisis unmatched in recent memory. There is general consensus that this crisis was precipitated by building far too much of our economy on vaporous transactions that did not create real value.

To emerge from this financial crisis and set a sound 21st century course, we must turn our attention to unleashing engineering innovation to create products and services that add actual value. As a nation we must refocus on the real economy, and that will require a reenergized innovation system to generate new knowledge and technology and move them successfully to the competitive world marketplace. We must become more productive and efficient at the things we already do well, create new industries, and transform others. We need to address energy, environment, security, and health care delivery in order to sustain our economic stability and quality of life. Our innovation system itself must evolve to meet these large-scale challenges.

The American innovation system, as I think of it, is a loosely coupled system that creates new knowledge and technology through research, produces educated young men and women to understand and create this new knowledge and technology, and move it to market as new products, processes, and services. This system has been an enormous success from any perspective.

It derives largely from the 1945 Vannevar Bush report, Science -- the Endless Frontier that established universities as the primary element of the nation’s basic research infrastructure, and recommended the establishment of a National Science Foundation. It still accurately describes a large part of technological innovation in the U.S., especially the chain that runs from universities through entrepreneurs and venture capitalists.

However, during the last 40 years, the core of the innovation system involving large corporations has changed substantially about every decade. In the 1970s, central corporate research laboratories dominated; in the 1980s, corporate R&D was transformed and absorbed into a new style of product development in response to the challenge of Japanese consumer manufacturing; in the 1990s, large companies acquired innovation by buying start-up companies often spun out from research universities; and now in the early 2000s, globally open innovation has begun to play a major role.

Several things suggest that we may see another shift in the U.S. innovation system: 

The scientific basis of new technologies will increasingly come from the life sciences and information technology;
Macro-scale systems challenges, especially energy, will drive innovation in the coming decade;
Venture capital may now be too risk averse and may not fit some large scale systems;
Globalization of R&D investments, education, and high-quality workforce will continue apace;
Economic growth may require a new enabling technology analogous to IT and the World Wide Web in the last century; and
We will need transformative breakthroughs to address many global grand challenges such as energy, healthcare, and security.

Perhaps our current innovation system will simply evolve continuously.

More likely, it will be augmented or readjusted to tackle large-scale 20th century challenges. For example, a 2004 U.S. NAE study proposed a set of Discovery Innovation Institutes to be located on the campuses of research-intensive universities. They would conduct engineering research and innovation at a larger scale and would have direct linkages to industry and government to guide use-inspired research and more efficiently move new ideas, discoveries, and technologies into practice. Such institutes would be especially suitable to complex, large-scale, and long-lived challenges such as energy. Indeed, DOE recently proposed very similar ideas.

In higher education there are many experiments underway to foster and enhance innovation capacity and new modes of thought. Olin College of Engineering, outside Boston, has operated now for seven years with a nontraditional, design-oriented curriculum and an organizational structure without the usual disciplines. Finland is constructing the entirely new Aalto University, which will combine technology, economics, and art and design. Singapore is establishing a new university in partnership with MIT that will also be focused heavily on science, engineering, information systems, and architecture with a special emphasis on the role of design, broadly defined.

In California, Singularity University is the working name of a joint effort by NASA, Google, and several leading thinkers such as NAE member Ray Kurzweil to cross educate students from the emerging disciplines of nanotechnology, biotechnology, and information technology and prepare them to attack the great challenges of our times.

Another intriguing attempt to drive innovation to achieve large goals is the work of the X-Prize Foundation. In 1996, the $10 million Ansari X-Prize for the first non-governmental, group to achieve human space flight went to Burt Rutan, who in turn was financed by Paul Allen.

The X-Prize Foundation intends to spur innovation to solve other highly challenging and important societal problems by leveraging the financial and intellectual resources of contest entrants. The DARPA Grand Challenge program has a similar structure.

Finally, there are many emerging, web-based platforms for developing and using the collective input of large numbers of people to forge new ideas, solve problems and, in a broad sense, innovate. For example, is a website that enables thousands of people around the world to play a massive computer game whose real purpose is to use their collective brainpower to solve highly complex problems of protein folding and bimolecular design.

Driven by relentless change, globalization, distributed intelligence, the new generation will undoubtedly reshape our innovation system, and it will be none too late.


I am optimistic that we can move forward on developing brainpower and unleashing engineering innovation, but it is less clear to me how to adapt our industrial and innovation base to meet large-scale national goals. For example how will we deploy a modern electrical transmission and distribution system capable of intelligent operation and adaptation to highly variable renewable energy sources? Another example is reinventing our manufacturing base.

I think that a primary historical lesson from the 20th century is that the answer is not central planning. Government-generated technology roadmaps or other grand detailed plans, in my view, are not the way to go. But neither is the anything goes, political-interest generated collection of regulatory regimes that break the current electrical grid into a large multiplicity of overly independent segments. Somehow we must establish a common vision of the so-called Smart Grid, and set common regulatory standards and common technology standards, that can be met in various ways by regional entities and the private sector. This is another kind of social/technical grand challenge for our nation.

Finally, it is time for healthy but objective debate about how far we can move into a service economy. It is empirically evident, and possibly desirable, that the fraction of our workforce employed in the service sector, broadly defined, is approaching 70 percent. But can we truly prosper without some form of transformed manufacturing base?

Efficient, low-cost manufacturing is the essential element in the deployment of batteries, solar cells, and other green technologies. Is it really OK if the manufacturing jobs in emerging green industries are established in other countries to begin with, rather than follow the past trend of starting here, and moving overseas as the industry matures and margins become thin? Many thinkers, including a number of NAE members believe that we must find a new manufacturing paradigm, perhaps based on emerging advances in fields like robotics and biological synthesis of materials and devices where we might establish a lead. In any event, these are fundamentally important questions about the innovation system that I hope that we in the NAE can help address.