by Gary Shapiro
Lesson for policy makers: Forcing doctors to follow specific treatment regimens because they save money may dramatically discourage the type of innovation that has made our nation the health-care destination for the world’s wealthiest people. However, doctors should be discouraged from excessive testing by measuring the use of reimbursable tests on doctor-owned equipment and restricting physician liability for not conducting marginally valuable tests.
4. Never go large-scale without testing and proving the concept or model first. No company starts without a prototype. The prototype is tested, researched, and given to carefully chosen users for feedback. Nothing is perfect from the start. It takes time and effort. You need to build market demand, raise production, and listen to the feedback.
Lesson for policy makers: Without a national consensus, radically changing by legislative fiat an industry that consumes 17 percent of GDP is a risk that no rational or strategic business would undertake. Congress should roll back the health-care law and try some pilot projects to evaluate their success.
5. When things are not going well, define the real problem. Companies with declining sales undertake rigorous analysis on what they are doing wrong. It’s a matter of survival and necessity. When Best Buy was financially challenged over a dozen years ago, it brought in teams that honestly assessed the cause of the problems, and the company changed to correct them and succeed. Companies like Apple, Intel, Motorola, and HP have redefined themselves repeatedly by confronting their problems and acting to shift the direction of the company.
Lesson for Congress: Our nation’s health-care costs and large uninsured population are the problems Congress should define and address. The costs stem from a lack of information and competition, an obese population (which reportedly adds $147 billion annually to health-care costs), unnecessary legal fees to avoid litigation, and end-of-life treatment. Take together, this consumes almost half of all health-care spending. My father-in-law, a cardiologist, performed two invasive cardio procedures recently on two terminal Alzheimer patients who were over ninety years old. The patients lacked living wills, and their family members asked that they be kept alive at any cost. Simply encouraging living wills when getting a drivers license could cut health-care costs.
The health-care debate was important but deceptive and sadly divisive. Like a nation going to war, a consensus was needed, and we never had that consensus. The Obama Administration and the Democrats were never clear on what their core objectives were: was it insuring the uninsured or lowering costs? But rather than attack the problem in a piecemeal way, our government thought it could function in the role of the free market. We will be living with the consequences for some time to come.
Congress should borrow a prescription from the most innovative industries and follow market-driven principles. It should acknowledge that innovations from folks like Jim Traficant are the real costreducing tools. Perhaps if we put one hundred government-paid scientists in a room they would eventually have landed upon Jim’s idea. But Jim did it without taxpayer dollars.
Above all, government should also remember the physicians’ adage: First, do no harm.
Conclusion
KATHY GORNIK AND her college friend, Jim Thiel, had an idea for a better loudspeaker. In 1976 they cobbled together a prototype, packed four days worth of sandwiches, and drove to Chicago for the International Consumer Electronics Show. They exhibited their prototype in a small hotel room and got enough interested retailers to place orders that they could go to a bank and get financing to start manufacturing. Today, Thiel Audio sells speakers throughout the world, and the Thiel factory in Lexington, Kentucky, employs dozens of Americans, knowing that their innovation, craftsmanship, quality, and love of product are enhancing people’s lives and contributing to a better world. Kathy is passionate about entrepreneurship, innovation, free markets, capitalism, freedom, and the U.S. Constitution—and the better world they create.
Around the same time Kathy and Jim started Thiel Audio, Loyd Ivey had an idea for better stereo sound. Bored with high school, he dropped out at sixteen, took his ideas and passion for music, and started his sojourn toward producing a better product. He also used CES as a platform to build his business, which became Mitek Corporation, a multi-national audio and electronics company. He has thousands of people employed in the United States and abroad, both imports and exports, and is a huge advocate of free and fair global trade agreements. Loyd’s battle cry is “make trade, not war,” and he believes in the number one rule that you do not shoot your customers.
Darrell Issa, the son of Christian Lebanese-Arab immigrants, served in the military and, upon returning from deployment, had an idea for a new type of car security system. He created the system, patented the technology, and now millions of cars around the world are empowered with Darrell’s voice commanding potential intruders to “get away from the car.” Along with his wife, Kathy, Darrell built up his company and sold it for over $100 million. Darrell now serves the public as a member of Congress who understands that businesses, not government, create jobs. This patent owner now chairs the Congressional Committee charged with overseeing efficiency and accountability in government.
John Shalam, an Egyptian-born Jew, escaped the tide of anti-Semitism in Alexandria in 1948 and came to the United States to start a new life. He began a company focused on the fledgling car stereo market and built it into the publically traded powerhouse Audiovox. Today that company is a leader in mobile and consumer electronics and owns many well-known brands such as RCA, Jensen, and Acoustic Research. John is an avid supporter of free trade, free markets, and American innovation. He remains chairman of Audiovox, where he continues to guide the company in its evolution into new markets, new products, and new ventures.
The first-generation son of Chinese immigrants, Noel Lee was a rocket scientist at Lawrence-Livermore. But he quit this safe job to start a band, which left him penniless and playing before senior-citizen groups in Hawaii. He moved back in with his California parents and had an idea for premium wires to connect products. Thus Monster Cable was born, and Noel became its “Head Monster.” Despite a disability, he uses his Segway to move him around the world.
Randy Fry, his two brothers, and a friend had an idea for a different type of retailer—one for geeks. They created Fry’s Electronics, a huge store in Silicon Valley. The model grew, and they now have thirty-four stores in nine states. Their business model focuses on product selection, service, and merchandising.
Dr. Levy Gerzberg grew up in Israel and received a PhD from Stanford University. He started Zoran Corporation, a Californiabased, NASDAQ-traded semiconductor company that provides consumer electronics products globally. Dr. Gerzberg’s vision was to migrate expensive high-end technology to more affordable system-on-a-chip products, thus bringing the power of high-end technology to consumers. Zoran, under his leadership, developed the camera processor used in the first commercial digital cameras, and Zoran has delivered many innovative, first-to-market technologies for cameras, DVD players, televisions, printers, and other devices.
Blake Krikorian and his brother, grandsons of Armenian immigrants, had an idea for accessing subscription and free television service while away from home. They created Slingbox, and it became a sensation. They sold the company to EchoStar and now spend their time as investors. Blake is passionate about continuing America’s innovation advantage.
Bill Crutchfield proved that it doesn’t take a government mandate to do good for the environment, and that innovation is not just about products but about doing it better for customers. Each week, Crutchfield’s workers in Charlottesville, Virginia, ship thousands of car and home electronics products to customers. Bill started hearing from his customers that they were concerned that the styrofoam packing peanuts used in shipping to protect the products were adding to landfills. Bill sought out alternatives and discovered that cornstarch could be solidified into a type of packaging material using slight modifications to a machine originally designed to m
ake cereal. Moreover, by making the cornstarch peanuts at his facility, he saved several truckloads a month that had been delivering the old-style styrofoam peanuts. Visiting Bill’s facility in 2008, I was delighted to see the cornstarch blower and enjoyed eating a few of these “peanuts” hot from the blower. The innovation was good for business and good for the environment.
CAN WE ADD TO THIS LIST?
This list of great American innovators can be much longer. I simply chose a few present or former CEA volunteer leaders to highlight a point. They all had an idea. They put their heart and soul into it. They invested what they had, and they succeeded, thanks to the strength of the idea, their execution, and their good fortune to be born in or immigrate to America. They are living the American Dream, and they have created thousands of American jobs—and none got a penny from the government. And they have given back. They contribute to their favorite causes.
If I have not yet convinced you that our nation must make tough decisions and fundamental changes to preserve the American Dream for our children, then I have failed.
The year 2010 has proven to be one of frustration and anger. Americans by the millions have voiced their displeasure with President Obama and the Democrats, who are taking the brunt of the blame for the poor economy. Much of this anger is justified. The Obama Administration made huge promises and created expectations that could not be met. More, this administration and Congress have helped make the long-term prospects for jobs and growth worse by vastly expanding the deficit, raising payroll taxes, enacting pro-union legislation, fostering protectionism, and creating massive new bureaucracies for health care. The only jobs added have been government jobs, and these jobs simply take money from productive taxpayers to fund non-productive government bureaucracies.
This administration and Congress have also hindered job growth by demonizing businesses and threatening new higher taxes on corporations. The anti-business climate and threats alone were enough to create massive uncertainty in the markets, as investors feared the direction of government and the likelihood of new taxes.
In addition to this parade of horrors, the job-challenged U.S. economy has huge structural issues that the Obama Administration did not cause—although it may have exacerbated them. We have lost millions of jobs due to an economy that was fueled by sub-prime mortgages. We are now considered, for the first time in our lifetimes, a less attractive slow-growth environment for investment compared to many other countries. We are beginning to wonder if the new unemployment “normal” will be defined as in the high single-digits. This number, of course, excludes an almost equal number of discouraged or under-employed workers.
The challenge we face is not that we need more government programs to create jobs. We need government to get out of the way and allow new businesses to be created, new investment to occur, and innovation to be unleashed. That is what much of this book is about: a framework for competitiveness and innovation.
But today Congress is incapable of addressing the fundamental challenges raised in this book. It is simply impossible in the present environment for Congress to pass legislation focusing on the fundamental problems facing America’s future. Instead, each congressional committee jealously guards its prerogatives and has little desire to be part of any national solutions on innovation or competitiveness. For example, trade legislation is handled in the House by the Ways and Means Committee, immigration is handled by the Judiciary Committee, and government spending by Appropriations and Budget Committees.
To formulate a national strategy addressing our present crisis, one possible solution is for Congress to act with comprehensive legislation, which can be referred to for action by various committees. This was done after 9/11, when several committees contributed to the Patriot Act and the creation of the Homeland Security legislation.
Another approach, would be for the House to create a new committee with broad responsibility for innovation and competitiveness. It would have jurisdiction over many of the issues discussed in this book, including trade, immigration, and investment. If given a mandate to enact serious reform (and if appropriately staffed by responsible lawmakers who were concerned about our children’s future rather than today’s entitlements), it would be possible to find a national solution. Indeed, today the House acts with several committees of experts. Every member has expertise in a certain area, and when bipartisan legislation emerges (which it actually often does), other members defer to the committee composed of experts.
But what we first need is a national debate on priorities. This has not occurred. The debate today is over jobs. Democrats argue for more government spending and programs. Republicans argue for lower taxes. While the Democratic programs provide short-term jobs in government, they create larger deficits, which steal from tomorrow to pay for today. And while lowering taxes will produce economic growth and jobs, that, too, will increase the deficit. The challenge is for government to focus on the long-term deficit and to create a current economic environment favoring job creation and growth. This requires the type of priority-setting described throughout this book.
We are in a crisis, and it won’t be fixed simply by more government spending or by cutting taxes. Our growing sense of entitlement is destroying America’s innovative culture, which is the true engine of economic growth.
In Britain, new Prime Minister David Cameron came into office in early 2010 with a mandate to change the country, which was struggling under a mountain of debt and poor economic growth. Worse, public services were beginning to break down. In a matter of months, Cameron radically cut entitlement programs and government spending while selectively raising taxes, and he successfully put the British back on a course to fiscal sanity.
Cameron’s success shows that a country can come back from the edge if its leaders are willing to make hard decisions and be straight with the public (and themselves). Even though our democracy works a bit differently than the British, real reform is possible. But it requires action. And if our political leaders can’t yet muster the courage to act, then perhaps we need to give them a nudge.
If you are still with me, you can do something. CEA is advocating many of the positions in this book through its Innovation Movement. This grassroots effort is designed to develop a cadre of Americans committed to the future of their children and of their country. It believes our prosperity will come through entrepreneurship, innovation, and free market principles. It does not advocate additional government spending!
You can sign up for this growing movement at www.innovationmovement.com.
Together, we can send the message to Washington that greater prosperity requires innovation. It does not require more government. Government at its best will be neutral. At its worst, it will get in the way and create barriers to innovation, investment, trade, and the creation of long-term jobs.
Innovation is America. It is our special sauce, our destiny, and our best and only hope for escaping the economic malaise, which decades of excessive government spending and intrusion have created. Our best hope is for government to foster innovation by creating a fertile ground for innovation to flourish.
Innovation is a natural by-product of the free market. It is not the result of government coercion. You can’t legislate progress. You can’t will an iPad into existence with committee hearings and tax dollars. It is the innovators’ job to fill a need, whether urgent or unknown, better than an existing competitor. Innovation has winners and losers, and the losers must be allowed to exit quickly so that other entrants can enter the game.
Our nation is looking into the abyss. With a blinding focus on the present, our government is neglecting a future that demands thoughtful action. The only valid government action is that which invests in our children. This requires hard choices. We cannot leave the rising generation with a mountain of bad debt. This will require suffering in the present. We need to cut entitlements, cut government programs, pull back from being the world’s policeman, and reform our “sue everybody” culture. If we
act with a plan that values free market innovation, our children have a chance for a better life.
In 2008, I gave a speech at Wayne State University, right outside Detroit. I addressed it to my unborn son. It read, in part:
Dear Son,
If all goes according to plan, in a few weeks you will be born at Beaumont Hospital. You enter the world at a historic time. It is a time of uncertainty, politically, financially, and internationally. But the history that your children, grandchildren, and their progeny will study about this era will not be about politics or about conflicts; it will be about a fundamental and seismic change in technology.
My great-grandparents talked about the early 1900s being a big shift in the world. They described how they entered a world of huge distances—covered by slow ships at sea and the horse-and-buggy on land. But when they were teenagers, at the turn of the last century, we moved to the smaller world of the car and the airplane. These technologies began the century where our people, our nation, and our world changed. New industries formed. Our possibilities expanded. Our standard of living rose.
But the revolution coinciding with your birth is even bigger. The shift to digital technology is still in its infancy, but the next year marks a huge milestone. It started with big computers and the compact disc in the 1980s. Then PCs, DVDs, and cellular phones became popular in the 1990s. Now we have digital cameras, BluRay, and high-definition televisions.
It’s probably fair to say that you wouldn’t be here without digital TV. I first met your mom when I was sitting next to her on a chair lift and she was talking about HDTV on her cell phone. Even though I knew everything about HDTV, I played innocent and I asked her what HDTV was. She explained it so perfectly that I immediately was enchanted with her. The rest is history.
So, you are a HDTV baby, and you are entering a world that will soon be entirely digital. It is your destiny to live during the digital revolution and to live a very different life than your father.