Gates in Wonderland

I just watched an online interview by the New York Times‘ Tom Friedman with Bill Gates. Friedman notes that as recently as six years ago there was no Facebook, no cloud, barely a Twitter, no iPad, and 4G was a parking place. Gates nods emphatically and says this shows that America is still number one in innovation. Indeed, he emphasizes that more innovation occurs in America than in the rest of the world combined. Then he gives a puzzled face and says that in view of all this innovation, he can’t understand why poll after poll now shows Americans to be worried about their future and that of the United States. He adds that he guesses it must be because of uncertainty created by the political gridlock in Washington.

Well, it’s always safe to blame Washington, but what I wonder is what Gates knows about innovation or worry. Don’t get me wrong, I admire Gates as one of the great business minds of our time. But he’s no Steve Jobs. Jobs knew about innovation. Gates knows about negotiation and standard setting and business strategy, but he’s never been an innovator. The original MS DOS personal computer operating system on which the Microsoft empire is based was bought by Gates from a friend and then licensed by Microsoft to IBM. Gates bamboozled IBM by persuading it to take only non-exclusive rights to the system, but he didn’t invent the system.

Or take the Microsoft Explorer browser. Mosaic and Netscape were the first browsers. Microsoft had no clue and was scared to death when Netscape debuted. Gates bundled Explorer to his Windows monopoly operating systems and, with the help of sleepy U.S. government anti-trust oversight and friendly courts, killed off Netscape. Brilliant, perhaps, but not innovative. More a copy of the Rockefeller Standard Oil model than of Apple.

Gates also doesn’t know much about worry because he’s a rich kid who always had a job and then bargained his way into one of the history’s greatest monopolies. Again, let’s give him credit for single-minded drive and focus, clever bargaining, and great business strategy. But he never had to worry. He never had to look at life through the eyes of an everyday American.

He does, however, present a perfect view of the world as seen through the eyes of the American elite. It worships at the alter of innovation and sees the future as an endless series of Facebooks, Twitters, and Groupons. If America is suffering from declining competitiveness and rising trade deficits, innovation, according to the elite, is the philosopher’s stone that will turn everything around.

Well, as Santayana said, "Those who cannot remember the past are condemned to repeat it." The British have a long tradition of innovation. Indeed, Japan’s Ministry of International Trade and Industry (MITI) once found that 54 percent of the world’s most important inventions were British while only 25 percent were American and 5 percent Japanese. The first commercial jet liner was the British Comet. The first digital audio system was British, as was the first operating television system. I could go on and on, but the point is that British industry wound up far behind U.S. industry in all of these sectors, and in many more as well. The British economy reaped very little benefit from these innovations because it did not fully commercialize or mass produce them. They created nice jobs for a relatively few brilliant scientists and engineers in Britain, but none for the average bloke. It was the American companies who came along behind and copied the Brits that garnered most of the sales and profits, American workers who got most of the jobs, and the American economy that gained most of the GDP growth from the innovations.

This history is now being repeated between the United States and Asia with the United States in the role of Great Britain. Average Americans are worried because they can see that, even as the elite is blinded by its own brilliance.

Another great American business leader has been making this point recently from his base in Silicon Valley. Former Intel CEO and Chairman Andy Grove, whose company accounts for half of the WinTel standard that has dominated the PC industry for the past thirty years, wrote in Bloomberg BusinessWeek a bit over a year ago that innovation without follow-up on scale and production is not a great wealth producer. In short, it is a necessary but not sufficient generator of jobs, wealth, and economic growth.