America's tech moment of truth

Commentary--Foreign nations are recruiting the country's best companies and universities to go overseas. Can they be won back?
Written by Michael Kanellos, Contributor
Commentary--I'd like to deliver my first State of the Union speech. I don't hold public office, but as a citizen, I figure that I have this prerogative. My message: We're doomed, people.

I was actually hoping for something more upbeat in my inaugural address, but why beat around the bush? In the past few years, other nations have caught up with, and in many ways surpassed, the United States in reaching important milestones, and the future is probably going to get worse.

Part of the reason I cover international technological trends is to suck up to my future masters. Here are just some of the ominous signs:

• Asia became the center for industrial manufacturing several years ago and is now making inroads into high-technology, cutting-edge manufacturing for things like chips, according to George Scalise, president of the Semiconductor Industry Association, which keeps tabs and sends out alarms on America's decline. (I came up with this gloomy prognosis after speaking with Scalise. Because of the nature of his job, he can have that effect on people.)

A decade or so ago, roughly 35 percent of the investments in leading-edge chip technologies were made in the United States. In the last five years, only about 10 percent to 12 percent of those investments landed stateside.

Because I'm a San Francisco journalist, some of you will conclude that I'm inherently biased against America. You couldn't be more wrong.

"We're falling behind rather rapidly," Scalise said.

Many of these overseas investments are made by U.S. corporations. Initially, many of the engineers running an overseas operation are U.S. transplants, but soon, by osmosis, these plants become the creations of their native lands.

It's not just China, either: Thailand is the No. 1 producer of hard drives, according to Joel Weiss, president of the International Disk Drive Equipment and Materials Association.

• U.S. universities are going international. Cornell has a medical school in Qatar, and Carnegie Mellon and Texas A&M have four-year engineering programs there. The Massachusetts Institute of Technology is currently helping Abu Dhabi build a graduate school dedicated to alternative energy. In Singapore, the government has enticed several big-name professors to come to its Biopolis biotech hub and has enlisted Duke University to build a United States-style medical school.

For the universities, this is a way to get students who otherwise couldn't get to the States because of financial issues or visa problems. It's also a way to take advantage of well-known brand names in nations filled with ambitious and wealthy people. But for U.S. citizens, it's not the best news: now you don't have to live here to attend our best schools.

• Pop culture has gone global. Except for a few weird exceptions, like ABBA and that Turkish guy who played ping-pong, cheesy pop culture has been a monopoly of the English-speaking peoples. Not anymore.

Anime dominates cartoons. In China, more than 200 companies have taken the YouTube model and outdone it. Google is losing to Baidu there. That golden opportunity to expand into emerging markets has already vanished.

Because I'm a San Francisco journalist, some of you will conclude that I'm inherently biased against America. You couldn't be more wrong. When I come through customs, I want to hug the security guards. In Dubai, citizens have to deal with an omnipresent secret-police force. (A plainclothes agent even followed me one morning.) In India, there's relentless bureaucracy. China has aggravating censorship. And in Germany, they are still trying to wrap their minds around the convenience store concept.

I grew up in Reno, Nevada, land of the free and home of the 99 cent breakfast. There's a lot that the world can learn from us. Is there any way out? Here are some ideas:

1. Embrace failure. In Silicon Valley, venture capitalists and others often say, "Failure is a badge of honor." Failure, it's said, teaches an entrepreneur how to avoid mistakes on the next start-up. In reality, it means, "We went to Stanford B-school together, and he needs a job."

The failures I'm talking about are real mistakes or setbacks: a sketchy job history, a restaurant that went under because of a change in commuting patterns, getting laid off.

In the United States, you can recover from all of these. Getting laid off isn't even stigmatized anymore. Drilling in the idea that this is a country that lets people take a mulligan will make it a hotbed of innovation.

2. Issue green cards like mad. One of the more forward-looking proposals now being bandied about Congress would give green cards to foreign students in Master's or Ph.D. programs in the sciences, engineering or math. In some cases, green cards can be given to undergraduates too. Last year, Scalise gave speeches at Tsinghua University and Fudan University. At both places, the first questions from students were the same: how can we obtain visas?

By giving gifted students green cards, they can hunt for jobs in the United States and plan their future. At the same time, we will deprive foreign nations of their smartest people. Plus, with green cards, the problem of employers offering lowball salaries to H-1B visa holders erodes.

3. Emphasize how easy our school system is. The U.S. school system is in shambles, and it needs to be improved. But it's also not as stentorian as many of those overseas, which can be a big selling point.

In some countries, class rankings are posted on the wall as early as first grade. I met a woman once who said her whole life changed after her family moved to Canada: it gave her an out from the South Korean school system. Here, you can graduate high school without knowing how to spell correctly or multiply in your head.

Getting into universities, particularly the best ones, is no easy task overseas, either. In some nations, students take multiple-day tests. In India, more than 100,000 college students compete in rounds of tests and interviews for a few hundred spots at the Indian Institute of Science, a graduate school. The acceptance rate is 0.3 percent.

The U.S. State Department needs to issue a pamphlet saying, "Ohio State: we accept 75.6 percent."

4. Give subsidies and tax breaks to businesses. Giving money to billionaires is never a popular political program, but since every other nation does it, we need to as well.

Scalise at the SIA points out that building a chip factory overseas costs as much to build overseas as it does to build in the States. Running a fab with foreign labor cuts operating costs only by about 8 percent, or nearly nothing.

The big draw in foreign nations are the 10-year tax holidays, newly paved roads and other subsidies. "Over a 10-year period, you will earn $1 billion more," Scalise said. "The aggressiveness of our trading partners is increasing."

The choice is ours.

Michael Kanellos is editor at large at CNET News.com, where he covers hardware, research and development, start-ups and the tech industry overseas. He has worked as an attorney, travel writer and sidewalk hawker for a time share resort, among other occupations.

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