Dearth of a Nation

There is a moment in the lifespan of every cool new gadget -- two years after Bill Gates buys one, a year and a half after the popular press gets wind of it -- that its price drops enough to show up in significant numbers on the shelves at Best Buy, the electronic superstore. At this instant, the product becomes accessible for middle-class Americans, something they can imagine themselves buying, and so these electronics stores have become temples to innovation, the place most Americans go to get as close to the cutting edge as most of them dare. On weekend afternoons, Best Buy is as bustling as a souk, full of grandmothers and little kids tooling around with digital video cameras and geeked-out salesmen explaining to the moms that the cell phones in their hands have nearly the computing power of desktop PCs. But it's the men who are the most transported, moving from department to department with gawky reverence. At a Best Buy I visited recently in Alexandria, Va., I watched one dad gaze in wonder at row upon row of giant plasma televisions -- elegant silver-framed screens that seemed not just to capture the way the world looks, but to improve upon it. He watched bees extract honey from flowers, and spiraling footballs drop into the hands of receivers, and you could almost see a two-part thought process play out over his face: First, If I wait a year, these sets will be half the price. Second, Screw it, I'm buying one now!

But there was something else I noticed: Whereas a decade ago the most creative, groundbreaking stuff came from Silicon Valley, now it all seemed to come from overseas. The plasma televisions were from Korea; the computer-like cell phones were from Finland; the feature-packed digital cameras were from Japan.

During the last six months, we have begun, quietly, to enter a newly tense moment, with university presidents, business leaders, and columnists delivering ominous-sounding reports and editorials about the threat to American innovation posed by a freshly competitive world -- the renewed vitality of western Europe, Japan and Korea, and the ravenous growth of China and India. "We no longer have a lock on technology," David Baltimore, a Nobel laureate and the current president of the California Institute of Technology, wrote recently in the Los Angeles Times. "Europe is increasingly competitive, and Asia has the potential to blow us out of the water."

What worriers like Baltimore are beginning to grasp is that these changes are emerging just as the American economy is being made more vulnerable by the movement of manufacturing and service jobs overseas. As a result, we've become increasingly dependent on maintaining our edge in discovering the new technologies and applications that create whole new industries -- just as other countries are closing that gap.

This is a fundamentally new threat. In the '70s and '80s, Japanese and European firms adopted American technology and made key improvements in process and design to shave cost and increase quality. Now, foreign companies are making many of the most important breakthroughs themselves. This shift is part of a change in strategy: instead of copying our innovations, foreign governments have decided to copy our very model of innovating. They have studied our centers of invention, the Silicon Valleys and Research Triangles, where university scientists, venture capitalists, high-tech entrepreneurs, and educated, creative workers, many of them from overseas, congregate. These creative centers, our competitors have learned, were the result of federal policy -- decades of investment in basic scientific research; patent law changes that allowed universities to capitalize on discoveries made in their labs; financial reforms that gave rise to the venture capital industry; and immigration laws that opened the door to talented foreigners.