2010 Annual Meeting

President's Address - Technology and the Future of U.S. Competitiveness: Nightmares and Dreams

Technology and the Future of U.S. Competitiveness
J.W. Marriot Hotel, Washington DC
October 3, 2010



In 2005, the National Academies responded to a call from a bipartisan group of senators and representatives to recommend the top 10 actions that federal policymakers could take to enhance the science and technology enterprise so that the United States can successfully compete, prosper, and be secure in the global community of the 21st century.

They also asked for a strategy, with several concrete steps, to implement these actions.

Our response was the report Rising Above the Gathering Storm: Energizing and Employing America for a Brighter Economic Future. A committee of 21 distinguished leaders experienced in industry, academia, philanthropy, and government, chaired with remarkable effectiveness by Norman Augustine, drafted this report.

Gathering Storm stimulated a very large amount of conversation in Washington and throughout the country. Together with work by the Council on Competitiveness, Gathering Storm led directly to the America COMPETES Act of 2007, authorizing implementation of most of our recommendations. It was passed with remarkably large bipartisan votes and signed by President Bush. Major components of the research budget increases we recommended have been funded during both the Bush Administration and the Obama Administration. But this funding is metastable at best, having been added once by supplemental appropriation, and currently funded largely through the FY 2010 Stimulus Bill.

ARPA-E, a venturesome new energy research office recommended by our committee, has been established and is funding a plethora of exciting high-risk, high-benefit R&D in small companies and universities.

Unfortunately, our highest priority recommendations, those dealing with K-12 Science, Technology, Engineering, and Math (STEM) education and the preparation of a 21st century teacher corps have not yet been substantively addressed.

So, today we face metastable research funding, insufficient action in K-12 education, and the COMPETES Act expires at the end of this year.

For these reasons, my colleagues, NAS President Ralph Cicerone, IOM President Harvey Fineberg, and I asked Norm Augustine and the available members of the original committee to saddle up again to scan the economic and technological horizons to see how our nation’s competitive position has changed in the five years since their report was issued.

On September 23 we released their unanimously approved report, Rising Above the Gathering Storm Revisited: Rapidly Approaching Category 5. The subtitle, Rapidly Approaching Category 5, says it all. The Committee’s overall conclusion is that “in spite of the efforts of both those in government and the private sector, the outlook for America to compete for quality jobs has further deteriorated over the past five years.”

They continue to believe that the critical underpinnings of a successful nation in today’s global context are encapsulated in their recommendations. They are grouped into four segments:

1. Increase America’s talent pool by vastly improving K-12 science and mathematics education;

2. Sustain and strengthen the nation’s traditional commitment to long-term basic research;

3. Make the United States the most attractive setting in which to study and perform research so that we can develop, recruit, and retain the best and brightest students, scientists, and engineers from the United States and throughout the world; and

4. Ensure that the United States is the premier place in the world to innovate, invest in downstream activities such as manufacturing and marketing, and to create high-paying jobs based on innovation.

Why did they conclude that our situation has further deteriorated?

I can only scratch the surface here, but let’s start with the fact that we in the U.S. have always considered ourselves to be Number One.

But here is a little dose of reality about where we actually rank today:

# 6 in global innovation-based competitiveness, but #40 in rate of change over the last decade1

#11 among OECD countries in the fraction of 25-34 year olds that have graduated from high school2

#16 in college completion rate3

#22 in broadband Internet access4

#24 in life expectancy at birth5

#27 among developed nations in the proportion of college students receiving degrees in science or engineering6

#48 in quality of K-12 math and science education7

#72 in density of mobile telephony subscriptions8

This is not a pretty picture, and it cannot be wished away.

As Bill Gates has said, “When I compare our high schools to what I see when I’m traveling abroad, I’m terrified for our workforce of tomorrow.”

Successful entrepreneur Larry Bock says, “I find myself hiring talent for my companies abroad, not because I want to but because I can’t find qualified engineers and scientists in America.”[By the way, Larry has taken a powerful initiative in founding and driving the USA Science and Engineering Festival to be held here in Washington this month. The NAE will have a great exhibition designed and implemented in partnership with Disney/Pixar to attract and inspire young people.]

At our NAE Forum last year, NAE member and former DuPont CEO Chad Holliday said “[Other Nations] have taken this recession [as an opportunity], not to talk about it, not to debate it, but to actually take steps … We must do exactly the same thing.”

To further drive the point home, I quote China’s premier, Wen Jiabao, “The history of modernization is in essence a history of scientific and technological progress. Scientific discovery and technological inventions have brought about new civilizations, modern industries, and the rise and fall of nations … I firmly believe that science is the ultimate revolution”


So, fact-based pessimism is in the air.

A National Nightmare could be unfolding.

But this does not need to happen.

It is the 11th hour, but this Nightmare need not materialize.

Indeed I do not believe that it will. But we must get started now on a strategic agenda for the long haul.

The Category 5 Committee believes that implementing its recommendations is an essential foundation for such a national strategy. By no means is it the entire foundation, but it is at its core of that foundation.


When I have been engaged in discussions about Rapidly Approaching Category 5, or about the original Rising Above the Gathering Storm, or for that matter, in any discussion about engineering and the future, three questions almost always arise:

1. Why should we invest in research, because our discoveries and inventions inevitably will be snapped up and commercialized in other countries?

2. Surely we don’t need more engineers or scientists; those in other parts of the world will do their work at a fraction of their salary or wage.

3. How can you request more federal expenditure for research and education in this time of financial hardship and growing deficits?

These indeed are vexing issues, because one could find a lot of data that support – or seem to support – these positions. The pool of talented and well-educated or well-trained workers in other countries, especially in Asia, is growing at a dramatic rate. And the salaries and wages for both professionals and skilled workers in China or India or Vietnam is much lower than in the U.S. We cannot control that. It is a direct result of rapid economic growth, supply and demand, market forces, stage of development, and also of history and culture.

These are daunting challenges for us and for the generation of Americans to follow. But inevitable? I can’t find my way to see an inevitable devastating result here. Cause for profound worry? Absolutely yes. But I do not accept inevitability. Other countries cannot impose inevitability on us. It could only spring from a loss of will or lack of logical response within our own country.

We all look back with great amusement at the prediction commonly attributed to patent commissioner Charles H. Duell in 1899, that “Everything that can be invented has been invented.”

Well, hopefully our grandchildren will look back someday and chuckle about those who at our turn of the century said, “Everything that can be invented in the U.S. and create domestic jobs has been. It’s over.”


Perhaps we should pause and look back just 25 years and recall that in the 1980s, many serious people were quite certain that Japan would dominate the world economy in a manner such that America would be crushed.

That too did not happen. Part of the reason it did not happen holds an important lesson for today. Japan had some major advantages. Its postwar generation worked incredibly hard in a very disciplined manner. It had the advantages of building Greenfield factories, and -- yes indeed – it had comparatively low labor costs. Its markets were either closed to us, or were difficult for American companies to penetrate. It developed excellent engineering talent with a drive to excel, a deep attention to detail, and a respect for manufacturing. They set and accomplished bold goals for precision, performance, and miniaturization of consumer products.

The deep paranoia in the U.S. formed a singular vision. Japanese students and visitors to the U.S. would take advantage of our open society by learning our technology and copying our innovations. They would then commercialize them and beat us economically – steal our technological crown jewels and run over us with them in the marketplace.

But what really happened?

I contend that in the end, the really important transfer of knowledge was not U.S. technology going to Japan; rather, it was Japanese knowledge of manufacturing process and quality being transferred to the U.S.

It was a painful period, but our consumer-manufacturing sector was forced to respond and it transformed itself. This transformation was hard, and it is still ongoing, but in the end because of our own actions the Apocalypse never came. Japan indeed became a prosperous nation, and the quality of life of its people increased dramatically. Despite its subsequent economic stagnation, today it still is the second or third largest economy in the world.

So nothing was inevitable. But U.S. companies had to understand the changing reality and adjust to it by transforming themselves. There was a rebalancing of competition and cooperation between the U.S. and Japan. We competed fiercely, and by accepted standards the Japanese were not always fair competitors. But there was an odd sort of cooperation as we learned from them how to produce high-quality products with specifications, throughputs, and cycle times previously undreamed of.

By facing reality and acting, the U.S. was able to persevere, and indeed entered an unprecedented era of economic growth and wealth generation as an entrepreneurial spirit exploded and our past investments in basic research led to vast new arrays of products and services. Among other things, we created the IT industry and launched the biotechnology industry.

Unfortunately, we lost that edge as we became overzealous about technology-based products that served very little real purpose. Market forces sorted that out and the “tech bubble” burst, but we were left with some very important and indeed transformational companies and tools, Google being the prime example.


Then a very different wave of economic damage hit us. In my opinion it had two fundamental causes. First, markets were entirely distorted as unfathomable amounts of capital came under the control of people and organizations whose work added little if any actual value. We forgot things as basic as that the purpose of houses is to provide shelter and a decent quality of life to families and individuals, and that the purpose of banks is to safeguard people’s money and provide loans at reasonable rates to individuals and businesses for legitimate purposes. We also forgot that the very sophisticated computational tools and quantitative models we have produced for complex tasks such as evaluating financial risk, can only be applied effectively by people who have an understanding of how they actually work and of the assumptions on which they are built.

On top of all of this has been devastating indifference toward the miserably inadequate way a very large fraction of our children are educated, blindness toward how dramatically the world as a whole and our place in it have changed, and refusal to face up to the results of our addiction to fossil fuel.

This is a very bleak analysis.

I believe that we need to be deeply worried.

But my point in sharing my observations about the near-death experience of our manufacturing sector 25 year ago when Japan grew large on the world economic stage, is that once the truth sank in, we took the painful steps that were required to get back in the game. We analyzed, repositioned, persevered, and emerged stronger. We did it. In that case, the “we” who achieved this was U.S. industry.

But this time around, more is required than change within companies. This time around it requires a public awakening, establishment of political will, resetting of priorities, sacrifice for the future, and an alliance of governments, businesses, and citizens. It requires truth telling, sensible investment, a rebirth of civility, and a cessation by both political and corporate leaders of pandering to our baser instincts.

Engineering, education, science, and technology are clearly within the core of what has to be done.

After all, this is the Knowledge Age. The U.S. cannot prosper based on low wages, geographic isolation, or military might. We can prosper only based on brainpower: properly prepared and properly applied brainpower.

This brings me back to the three questions asked frequently in response to our Gathering Storm and Category 5 reports.

1. Why should we invest in research, because our discoveries and inventions inevitably will be snapped up and commercialized in other countries?

My answer is neither new nor original, but I believe it is correct.

Robert Solow’s well known, Nobel-Prize earning research taught us that the most important driver of productivity is technical progress, driven by investment in research and new knowledge. Taking a very long view, Paul Romer’s analysis of economic growth of the U.K. and the U.S. over two centuries shows that it was only possible because of the continual development and advancement of technology.

Where do new technology and new knowledge come from? They come from research.

Where do the really transformative innovations come from? They come from long-time horizon research: fundamental research, and use-inspired basic research. Federal investment in U.S. university-based research brought us the computer, the laser, the enabling technologies of the GPS system, numerically controlled machines, the Internet, the deployment of the World Wide Web, the genetic revolution, and most of modern medicine.

There are virtually no jobs in the U.S. today that are not directly enabled by one or more of these research-based innovations.

If we do not invest vigorously in basic research, an economic downslide is assured.

If we do invest vigorously in basic research, we have a chance. By being first out of the box, and increasing the probability of transformational breakthroughs, we can be first to produce, and first to market. If we look clearly and holistically at our innovation system, we should be able to carve out job-producing space, especially at the high end.

I will be the first to admit that there are no guarantees, and that issues of tax policy, healthcare, patent protection, and other major factors must also be addressed.

But, no research; no chance.

2. Surely we don’t need more engineers or scientists; those in other parts of the world will do the work at a fraction of the salary or wage.

Well, I for one am not ready to fold up the tent and leave the field of competition.

Dare I point out that that the salary and wage rates in every other category of employment also are lower than in the U.S.? So at heart, no matter how well informed or intentioned, this perspective reflects a “can’t do” mentality.

A month or two ago, it was reported that new manufacturing jobs were beginning to emerge in the U.S. but workers with appropriate technical and quantitative skills are not available to fill them.

A basic finding of the study of economic development is that the larger the number of technologically trained and creative people who come to contact with each other, the higher the probability of innovation.

Floyd Kvamme, a major VC player in the development of Silicon Valley defines venture capital as “the search for good engineers.”

Across Asia today, 21 percent of university graduates are engineers. Across Europe, 12.5 percent of university graduates are engineers. In the United States the number is 4.5 percent.

So why hasn’t the United States already been steamrollered? The answer is clear. We have addressed the engineering gap by attracting remarkable talent from around the world to study in the U.S. and have been fortunate that many have stayed and become leaders in industry, academia, and entrepreneurship. Large numbers of such individuals still aspire to stay and contribute to the U.S., but our visa policies increasingly make their path difficult. We must fix this post haste. Furthermore, this gravy train is slowing down. Larger numbers of engineers and entrepreneurs are returning to China, India and elsewhere. Vivek Wadwha’s surveys indicate that their primary reasons for returning are that their professional careers or the companies they wish to found can be built much faster back in Asia or South Asia.

I believe that we need more U.S. engineers to create and lead the companies, products, services, and processes of the future. Despite the horrendous global headwinds that are rapidly approaching Category 5, there is still value in locating companies and manufacturing facilities where the smart and innovative engineers are.

3. How can you request more federal expenditure for research and education in this time of financial hardship and growing deficits?

Our colleague and peerless leader Norm Augustine answers this question based on his experience as an aeronautical engineer and business executive:

“When it becomes necessary to reduce the weight of an airplane, you don’t accomplish it by throwing off the engine.”

Why do we react to this by laughing? It is because we immediately and nervously recognize that it is a clear truth and accurate analogy. It is not flippant; it makes a valid and essential point.


It is time to regain our optimism and our “can do” spirit in order to remain a great nation and meet the challenges of our times. The way to accomplish this is to reconnect what we do with what we dream.

We need a country with more people dreaming about what’s possible, where young people – no, all people – are inspired to imagine a better world and help make it a reality.

That was once the American way, but now we are wandering around seemingly aimlessly. What happened to the charge-ahead spirit that led to the success of our “moon shot” challenge? Today we carry far more computing power in our pocket than was on an entire Apollo spacecraft, but we have a lot less public passion for engineering dreams into reality. I don’t mean mindless TV “reality,” I mean real reality -- forging improvements in real people’s lives and creating real jobs.

In the last century, big-thinking engineers brought us automobiles, airplanes, electrification, clean water, computers, refrigeration, radio, television, medical imaging, lasers, the Internet, and the Web. They transformed our world. Those engineers were mostly young, and they were empowered by education and funded by government, industry, and venture capital to create new technologies, hire people to produce them, and move them into the market place. That was the heart of the real economy.

Yes, some of those technologies also left a legacy of problems we now must deal with, such as cyber-crime, the specter of nuclear war, and a national addiction to fossil fuels. But, if we can inspire, educate and fund them, a new generation of engineers can be at the heart of solving these problems, and of making dreams of a better world become the new reality.

Our 14 NAE Grand Challenges for Engineering address energy, water, climate and sustainability; improving the delivery of healthcare; increasing security against both natural and human threats; and expanding human capabilities and joy. Some of these challenges must be met to sustain human life on earth, and all of them, if met, would improve the quality of that life.

Working to address the Grand Challenges should be made as appealing to people – especially our young people – as excelling in sports or acting.

The United States used to be full of people who believed in endless possibility. But pessimism is now holding us back. As my favorite philosopher, Pogo Possum said, “We are surrounded by insurmountable opportunities. “

I would like to challenge the Congress to reauthorize and fund the America COMPETES Act to help propel us back into 21st century innovation by training and rewarding competent and inspiring teachers; attracting once again the best and brightest minds from America and the world to study science, engineering, and mathematics; and supporting the fundamental research needed to power our economy by creating real value.

And I’d like to challenge all of us to stop shortchanging our children by failing to provide them with a world-class education that both inspires them to dream big dreams and empowers them make those dreams real.

I am optimistic. Puzzles, problems, questions, challenges are what inspire young people. Want to see a kid crave science? Give her a cause. Let her know she can use it to change the world.

Dozens of universities across the United States are now providing that opportunity through the NAE Grand Challenges Scholars Program, designed to prepare students to be the generation that tackles the big issues facing society. These scholars will build on a deep core of technical education, but also develop a facility to join forces with colleagues from humanities, management, political science, and law to meet these challenges of our times.

Because of such initiatives, there are still Eureka moments ahead of us. But we need to draw young people in and excite, and prepare them. Re-defining who we see as heroes, perhaps with the help of the entertainment industry, is part of the answer.

The American people need to watch, read, support, and demand what is important as well as what is entertaining. Artists can help open our minds, and athletes can show us the power of focused excellence, but then we’ll need engineers to turn visions into reality.

It is time to change the national conversation and the national agenda, because dreams need doing.

Nightmares don’t need doing.

So, … Nightmare or Dream?

It is our choice to make.