But it's different with China. They have a total addressable market of 400 million upper- to middle-class spenders they can sell to without ever having to touch the U.S. And another thing China has done, just like we did during the Industrial Revolution: learning from the mistakes of others who have gone before you, and also learning from the things that work.Unfortunately, you need to go read the whole thing.
One of the things they found that works is stock options. And so stock options are very lucrative in China now, and there is no capital-gains tax. Now, do I think our politicians understand this? Absolutely not. And yet daily our politicians enact legislation without fully comprehending what's really going on in China at all.
What should politicians be doing to protect the U.S. technological lead?
Eliminate the cap on H1-B visas, because we don't grow enough math and science graduates here internally. We've got to increase research funding at the National Science Foundation. We've got to extend DARPA's (the Defense Advanced Research Projects Agency, the R&D arm of the U.S. Defense Dept.) horizon from 18 months to a longer time, because there's no Bell Labs doing basic research anymore.
And we've got to find a way to get kids interested in math and science. When I talk to people in the tech industry, we're all in such agreement, and yet nothing is happening.
The problem is that we're all in California and Texas and Massachusetts and New York. Beyond that, nobody cares. And not only do they not care, but they also think the people in the (tech) industry are a bunch of crooks and that their stock options are tools used by evil people for evil deeds. Tech people know tech issues.
But the President and the Congress aren't going to allocate dollars to Corporate America for something that people in the Midwest doesn't care about. They're looking for votes. You can explain textiles and farming. But almost everyone in Minnesota and Iowa has a cell phone and LCD TV or are about to get one. And they say we're still the leader in technology.
Did I mention that China has no capital gains tax? Oh, yeah, I did.
But I forgot to tell you that China is now graduating approximately 3 TIMES as many engineers as the U.S.
It's looking more and more like adopting the "Fair Tax" and its elimination of the capital gains tax may be yet another "world historical" decision for us...
UPDATE: I hesitated to emphasize this since I work for Agilent but on further thought this is just so shocking I can't have you miss it:
Does China have an educational advantage?Does that open your eyes just a bit? Is a third world America on the horizon?
I often tell a story that illustrates this. There's a major university in the (San Francisco) Bay Area that you would have thought was one of the best-funded universities in the world. And one of our fellows at National is a professor there. And he said they just got a new gift of a network analyzer from Agilent (NYSE:A - News). It's worth about $110,000 and they put it on a metal cart, and professors will hide it away and hoard it. And to use it, you have to sign up for it days in advance, and they roll it around from lab to lab.
And then he was invited over to China to give a speech and was given a tour of Tsinghua University. And he was shocked and amazed that every lab had one of those very same Agilent network analyzers. Some of them had never been used or turned on, but they had them just in case they ever needed one. The funding is incredible, and meanwhile we're sitting here thinking we're doing fine.
I think our politicians believe that that the leadership we have enjoyed since Sputnik has been God-ordained. It's not. Someone has to fund it. We're not asking for handouts for companies. But the vast majority of companies these days don't do R&D, they just do D. And we work with universities to get the R, and now the universities are saying that they can't do basic research anymore.
Look at Bell Labs back in the 1940s. It was very unsuccessful in that only 1 of 20 projects was successful. But look at the successes: the transistor, the laser, the Telstar satellite, stereophonic sound. That's my long-winded way of saying funding needs to increase for basic research.
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