HUMMONEY - Innovation = Empolyment (Perspective)

--- By Greg Lewin

A wonderful interview with Andy Grove, former CEO of Intel, appeared in the July 1st edition of BusinessWeek. In this piece Mr. Grove strings together the following logic:

- Today, manufacturing employment in the US computer industry is lower than when the first PC was put together in 1975.

- For each US computer manufacturing employee there exists 10 in China.

- Not surprisingly, when looking at other emerging/important industries such as alternative energy and batteries the numbers are roughly the same.

- Why does this happen? In part because the US is willing to trade high value-added jobs in design and development for manufacturing. More importantly, the US undervalues manufacturing.

- Mr. Grove contends that without manufacturing experience we break the chain that is so important in technological evolution. Abandoning today’s “commodity” manufacturing can lock you out of tomorrow’s emerging industry. Important linkages between innovation and manufacturing, customers and suppliers, and scaling are effectively lost. As a result, we fall further behind the innovation cycle.

- And of course, any policies which promote a highly paid knowledge class and a large unemployed group are fundamentally unstable.    

Mr. Grove’s insights are incredibly important at this juncture in our world economy, and therefore, our country. In my opinion, one of the core virtue’s of the US has been its ability to foster a climate and culture of innovation. I always believed it stemmed from our beginnings as a young nation of immigrants less attached to the cultural anchors of a long history. It promoted a culture of “what’s next” and from that spawned an avalanche of creative spirit that could be found everywhere from the arts to the sciences. This is why talent always wanted to come here first.  Now Mr. Grove postulates that in the sciences we could be permanently impairing our ability to innovate, our creative spirit. And if that were to happen I fear that could spread.

As an investor I have obsessed about the long term impact of debt and unemployment. But as a technologist, I always felt that one way out might be through our ability to innovate, to create new platforms for productivity, employment and economic leadership. If Mr. Grove is right, the path may be increasingly less clear. As the US celebrates Thanksgiving this past weekend and the world begins the traditional holiday season over the next month, we may want to pay careful attention to his warnings if we want to keep our collective spirit vibrant.   

---The views expressed here are of the author, HUMMoney contributor Greg Lewin; currently a General Partner at TLF Capital, an investment management firm. During the past 26 years he has been a senior money manager or partner in Wall Street firms including Neuberger Berman, Charter Oak Partners and Sailfish Capital.