Here's How America Is Killing Innovation

The reality is that America is not investing in human capital, the intangible from which all success emanates. University, high school and elementary school budgets are cut, financial support for student loans is reduced, teachers are underpaid. And many families in the US cannot consistently put food on the table.

Smart companies - and countries - recognize that to build for the future you have to invest in talent as early and often as possible. JL

Greg Satell reports in Digital Tonto:

Too often, we see innovation as strictly a matter of startup companies and R&D labs. So we invest in science and entrepreneurship to fuel technology. Yet those don’t drive advancement by themselves. We need normal, everyday people to make the most out of their potential. The truth is that America’s human capital is being hollowed out. Innovation a process of discovery, engineering and transformation. The transformational part is often overlooked, because it relies not on a single entrepreneur, but on an ecosystem to support it. Our most valuable resource is human capital. If we can’t feed, educate and nurture that talent, our future will not be bright.
Throughout America’s history, technological innovation has been key to security and prosperity. Whether it was through entrepreneurs like Thomas Edison, Henry Ford and Thomas Watson, or government programs like the Manhattan Project, the Apollo Program and the Human Genome Project, The United States has been on the cutting edge.
Today, as we enter a new era of innovation, America remains at the forefront of scientific discoveries in advanced areas such as artificial intelligence, synthetic biology, new computing architectures and materials science. Continued investment in science, both public and private, provides the “seed corn” for continued dominance in the 21st century.
Still, scientific advancement is not enough. We need entrepreneurs to start companies and mid-level technicians and engineers to implement technologies. The truth is that America’s human capital is being hollowed out and that’s becoming a serious problem that we need to address. Once we lose our competitive edge, we might never get it back.

1. Food Insecurity

Awhile back I was speaking to a group of community college administrators and I asked them what their biggest challenge was. I was shocked when every single one of them told me that it was food insecurity. Apparently, it is the number one reason that kids drop out. Only about 20% of students at community colleges earn a degree.
I was even more surprised that there are similar trends at four-year institutions. In fact, a recent study found that about half of all college students struggle with food insecurity. This number becomes even harder to stomach when you consider that there is also an unprecedented construction boom on college campuses.
So colleges are spending billions to build fancy dorms and rec centers while half of their students don’t have enough to eat. Is it any wonder that they are dropping out? In Weapons of Math Destruction, Cathy O’Neil points out that much of university spending is driven by college rankings like those published by US News & World Report. Maybe a “food insecurity index” should be included?
Any way you look at it, we are undermining a significant portion of our most ambitious young people because we can’t provide them with enough to eat. How can we expect to win the future when kids are dropping out of school to get a meal?
2. Tuition And Student Loans
One of the most important factors that led to American technological and economic dominance has been our commitment to higher education. The Morrill Acts in the 19th century created land grant universities that trained students in agriculture and engineering in every state. Later, the G.I. Bill helped an entire generation go to college and became the basis for a new era of prosperity.
This commitment to education made America the most educated country in the world. More recently, however, we’ve fallen to fifth among OECD countries for post-secondary education. This hasn’t been because less Americans are going to college, in fact, more people go to college today than in 2000. It’s just that the rest of the world is moving faster than we are.
A big factor in our decline has been tuition, which has risen from an average of $15,160 in 1988 to 34,740 in 2018. Not surprisingly, student debt is exploding. It has nearly tripled in the last decade. In fact student debt has become so onerous that it now takes about 20 years to pay off four years for college and even more to pursue a graduate degree.
So the bright young people who we don’t starve we are condemning to decades of what is essentially indentured servitude. That’s no way to run an entrepreneurial economy. In fact, a study done by the Federal Reserve Bank of Philadelphia found that student debt has a measurable negative impact on new business creation.
3. A Broken Healthcare System
There has long been a political debate about whether health care is a right or not and there are certainly moral issues that deserve attention. When I travel internationally, it is not uncommon for people to comment on how barbaric they find our healthcare system, where the uninsured die from treatable diseases and many go bankrupt due to medical costs.
Leaving the moral concerns aside though, our healthcare system represents a huge economic burden. Consider that in the US healthcare expenditures account for roughly 18% of GDP. Most countries in the OECD spend roughly half that. To add insult to injury, healthcare outcomes in the US are generally worse than the OECD average. In fact, the CDC reports that life expectancy is actually declining in America.
Think about trying to run a business that not only produces an inferior product, but also gives up 9 points of margin due to higher costs. Clearly that’s untenable. A study in the Journal of Health Economics also found that, much like student debt, concerns about health insurance inhibits entrepreneurship.
It’s important to note that each of these are uniquely American problems. No other developed country has the same issues with healthcare or student debt. While food insecurity is an issue in some developed countries, it is far more severe in the US. All of this represents a significant competitive disadvantage.

There’s Plenty Of People At The Bottom

Far too often, we see innovation as strictly a matter of startup companies and R&D labs. So we invest in science and entrepreneurship programs to fuel technology. Yet while those things are surely important, they don’t drive advancement by themselves. We need normal, everyday people to make the most out of their potential.
As I explained in Mapping Innovation, developing breakthrough technologies is a process of discovery, engineering and transformation. The transformational part is often overlooked, because it relies not on a single entrepreneur or company, but on an ecosystem to support it. That takes networks of firms working together, each forming a piece of the overall puzzle.
Most of these companies are not household names. They supply components, implement solutions, create complementary goods and so on. Many are small businesses. We need not only geniuses to create the future, but also technicians, consultants and service providers.
In 1959 the physicist Richard Feynman gave a famous talk titled There’s Plenty of Room at the Bottom to alert the scientific community to the possibilities of nanotechnology. I think the same can be said of innovation in America today. Our most valuable resource is our human capital. If we can’t feed, educate and nurture that talent, our future will not be bright.
There’s plenty of people at the bottom with almost limitless potential to increase our national capacity for prosperity, security and well being. Yet instead of empowering them, we undermining them and, in doing so, assuring our own decline.