Barbarians at the gate: Reflections on the decline of American innovation while watching a spectacular sunset at Gantry Park

        Despite the recent spectacular scientific achievement of DARPA (US Defense Advanced Research Projects Agency) on a hypersonic glider traveling at 13,000 miles per hour, American innovation, like this Mach 20 glider, is on a downward path towards unknown depths, with profound ramifications to our economic and political status among nations.  We all know intuitively that the declining trend exists and I am not sure there is a way to reverse that in such a complicated world we live in today.  In my life experience as an American scientists and a former immigrant, I can see it as clearly as the sun sets behind midtown Manhattan from across the East River in Gantry Park. 

        Often, I sit on the bench at Gantry Plaza State Park waiting for sunset, mostly alone or at rare times with my kids or friends.  Just recently I began thinking about my years through graduate school, work, science and the economy.  These thoughts came about after a friend sent me a link to an MSNBC interview with Michael Greenstone, an MIT economist heading the Hamilton Project, on the subject of the Innovation Gap.  It is definitely worth taking time to see the video before reading the rest of my blog.  Here it is http://www.msnbc.msn.com/id/21134540/vp/44041044#44038620

       My career spanned the period from the height of American innovation of the 70’s and 80’s to its post-millennium decline.  Why the decline?  There are already many reasons that pundits, strategists, economists, professors and politicians came up with and you can read them elsewhere.  But, it’s not just because of the rise of China and India as economic powerhouses.  It is not just the decline in American knowhow or enthusiasm for the sciences.  And it is not just outsourcing.  It’s all of these.  Most of all it is about the human element–the scientists.

        Sitting in Gantry Park at sunset is like a metaphor of the waning American supremacy in science and technology.  American innovation is spectacular in its achievements, like the burst of light of the waning sun behind the majestic skyscrapers of Manhattan, slowly fading away to darkness.

       Just to digress for a minute, what’s so special about Gantry Park anyway, you may ask?  I think of it as one of the most beautiful small parks in New York City, with the breathtaking view of Manhattan, especially at dusk.  It is at the waterfront in Hunter’s Point on what used to be an industrial/ warehouse district no one wanted to be caught walking at night years ago; a place to be avoided then, but not anymore.  Once the site of the Pepsi bottling plant, whose sign still remains today as a relic of the past, this waterfront area in the 1920’s serviced  rail cars coming from Manhattan and New Jersey to supply the industrialized Long Island City in the NYC borough of Queens.  Gantry refers to cranes that lift objects by hoists that move horizontally.  Back in the heyday of American industrial might, rail cars were lifted off barges, moved on to rail tracks and hooked on to trains that crisscrossed Long Island.  With the decline of American industries and the pre-eminence of trucking systems, the gantries ceased to serve its purpose and the machines became silent, another testimony to the doomed manufacturing industry.  One can still see the original rail road tracks in between the manicured gardens.

       Now, it is gentrified, with bustling new businesses and pricey condominium buildings mushrooming around the park.  It is one of the those truly wonderful little known places in New York, just a subway stop in Queens Borough on the #7 subway train from Manhattan’s Grand Central Station-42nd Street.  I go there because it is a quiet place to contemplate, work and just simply do nothing or go fishing (I have yet to try that).  As I sit by the fishing pier, I can see where I had been.  From my beginnings as a research intern at Goldwater Memorial Hospital on Roosevelt Island on the right of the East River, through my days in graduate school at New York University, my work at Orentreich Foundation on 72nd Street, my old labs leased by the Foundation at NYU Medical Center Public Health building on 29th Street and the Metro North trains I took from Grand Central Station– all laid out for me just across the East River. 

       In a way, standing there on that pier gives me a quick view of where I had been.  Here I share an anecdote about the multibillionaire, Harry Helmsley, among the great real estate magnates of his time; back in the 1970’s when he used to stand on a waterfront building in New Jersey facing Manhattan.  When asked why he often have luncheons on top of this building.  He replied (from memory), “I am old now. I cannot understand the spreadsheets of real estate properties my accountants carry around.  Standing here, I can see all of Manhattan and I do my own accounting.  I own those buildings there, there and there.  And I can see the buildings I would like to buy over there and there.  Here I take stock of  where I had been, what I have and where I am going.”  In a way, standing on the pier at Gantry Park also shows me where I had been, though not necessarily where my life is heading at the moment.

       Having digressed enough, I would like to tell you what I think about how the decline of American innovation came about.

       In the 70’s and 80’s and certainly even decades before, American innovation in computers, engineering, chemistry and practically all scientific pursuits were in a frenzy.  American technology dominated the world, from soft drinks to blue jeans.  That was also a time when young men and women from foreign lands flocked to American universities to continue graduate school.  That was a time when foremost in the mind among foreign students, who tend to work harder than most, was the dread of having to go back where they came from, where political instabilities, economic issues and lack of opportunities persisted.  Coming back to their home countries was not on their priority list, reaching the American dream was.  That means being sponsored by a company and making big bucks.  I know that for a fact as I had sponsored many during that period.  That also was a time when American businesses need more scientists and the steady flow of foreign student filled that gap. And, talented scientists flocked into America through working visas. 

        In the 1980’s China was just experimenting on private enterprise.  Having visited China in those days, I have seen the change; from the early days with people wearing Chairman Mao style jackets and avoiding contact with Americans to a time when local Chinese students would go out of their way to meet with me just to practice their English. (That was also a time when I was courageous in haggling with a street merchant for a pair of shoes that I know was worth $75 in NY, then coming back to the hotel proudly telling the concierge that I got it for $4 and only deflated when he told me I was cheated—it was only $2 for the locals. I knew then something was very wrong).

       It was the 1990’s when things began to change.  China opened its doors to manufacturing for overseas markets and India slowly made strategic changes in its business laws.  Exports brought wealth and China opened a hybrid enterprise system allowing private ownership.  American and European companies saw the opportunity for cheaper good to be manufactured, increasing their profitability and dooming their own domestic manufacturing industries.  More important, foreign students and foreign workers began to have a change of attitude about coming home.  It is not simply being homesick that drove them back.  Certainly they have the economic capacity to come home for frequent visits.  It was the lure of starting a business in their home countries where economic opportunities began to be rosier than struggling in America.  For these young men and women, it was riskier but the potential opportunities outstrip what they can get here. 

        I know this because I was once one of them.  In 1995, I came back to the old country, started some businesses, did research at a cost of 1/10th it would had I stayed in America.  Though political issues had made me return to New York in 2000, the experience was profound, memorable and productive.  I was able to accomplish much more in that 5 years than I could have possibly done in NYC in 20 years.  The 1990’s also saw countries adjusting to the new-found wealth.  By the turn of the century, opportunities abounded in Asia.  It was no longer a risky experiment for foreign scientists from America to come home.  The infrastructure, though imperfect, was there, waiting for the young scientists/entrepreneur from America.  American knowhow, learned from years of study and hard work are being snapped up by companies in foreign soil.  Is there anything wrong with that?  Absolutely not, as long as they are not bringing patented ideas.  And even so, most of those countries are not places American inventors filed their patents anyway and therefore free for the taking and/or improvements. 

       America is hemorrhaging its talents not just from reverse migration.  American talents from those born here are also being lured by foreign companies and governments with higher wages, better scientific support and a better life style than they could ever imagine at home.  Just simply take the case of Singapore, whose expat communities are bursting at the seams.  American innovations are being sucked out of the country year after year.  You will see great innovations coming out of Asia in the next decade, innovations that would have originated from America had we been able to keep our scientists happier at home.

       These thoughts are from my own personal experiences.  Can I support this point of view?  Absolutely! 

        The backbone of a modern economy is innovation.  In the days of the Spanish, the British and the Portuguese empires, economic wealth came from conquest of new lands and people.  Modern economies, such as the ‘American Empire,’ is built solely in innovation; not the military innovations whose proprietary ownership is often fleeting.  Take the case of the US stealth fighter shot down in Serbia and ended up being reversed engineered by the Chinese who now have stealth technology of their own.  Outsourcing in history is best exemplified by the Roman Empire, whose lack of foresight and need to save money on its military outsourced the defense of its borders to ‘barbarians.’  The Goths, Visigoths and others eventually turned on the Empire, emptying Rome of its 1 million inhabitants down to the size of Google’s workforce of 30,000 by simply destroying its greatest innovation—the Roman aqueducts that brought freshwater to the city.

        The Hamilton Project demonstrated that the loss of America’s innovative edge translated to American workers losing 51% of the value of the dollar compared to the 1970’s.  This loss of purchasing power was made up by credit and eventually led up to our current economic crisis.  There is no direct way to show how innovation’s decline affects our economy.  However, the 2009 article by Vivek Wadha in YaleGlobal served to highlight the impact of migrant workers, foreign students and immigrants on the American economy.  A most telling part of the article described an adhoc question he posed on Indian techies at a conference on who wanted to return home.  Fifty percent raised their hand.  Had I asked the same question in the 1980’s, I would had been lucky to get one!  It is really worth reading his article entitled “Is the US brain drain on the horizon?  Immigrants now see better prospects back home” (see link below).

       Considering that the Chinese and Indian nationalities in the US represent only 3% of the population, over 25% of all patents have ethnic Chinese and Indians listed as inventors. 

Vivek Wadha writes:

      In 2006, immigrants contributed to 72 percent of the total patent filings at Qualcomm, 65 percent at Merck, and 60 percent at Cisco Systems. And contrary to claims that immigrant patent-filers crowd out US-born researchers, emerging research is increasingly showing that immigrants actually tend to boost patent output by their US born colleagues. These immigrant patent-filers emerged from the US university system, where foreigners now dominate the advance degree seeking ranks in science, technology, engineering and mathematical disciplines. For example, during the 2004–2005 academic year, roughly 60 percent of engineering Ph.D. students and 40 percent of Master’s students were foreign nationals. (We don’t know for certain that those who have been leaving are patent-filers but anecdotal evidence suggests this to be the case).

       Beyond intellectual contributions, Chinese and Indian immigrants have been key entrepreneurial drivers in the US. According to another survey we conducted, one-quarter of all technology companies in the US have at least one founder who is a Chinese or Indian immigrant. The concentration is even heavier in certain key industries such as semiconductors and enterprise software. Based on this data, we calculated that in 2005, immigrant-founded tech companies generated $52 billion in revenue nationwide and employed 450,000 workers. This revenue total bridges multiple multi-billion dollar sectors including semiconductors, Internet, software and networking.

…. the Rising East will continue to pull in its fair share of future science and technology rock stars who may build the next Google or Microsoft in Gujarat or Mumbai.

That immigrant-founded tech companies employed 450,000 people with a $52 billion in revenue is awesome to contemplate.  And if 50% of them returned home to their own countries, that’s an economic loss that will never be recovered.

The barbarians are at our gates and they are tearing down our aqueducts. What to do?

       All is not lost of course.  There had been so many suggestion put forth by strategic thinkers.  They range from improving educational opportunities, inviting more foreign techies on H1 visa, providing better business opportunities, relaxing the immigration hurdles for scientists.  All these require a bouncing economy and political will, both simply lacking in our current domestic environment.  Even if those were to be implemented now it is unlikely that the tide will reverse since other countries can offer much more.  And Congress has to debate on that for a while if they ever get to it, unless of course they are distracted by something else like elections or the debt ceiling.

       The answer is through private initiatives, backed by government immigration reforms specifically tailored for inventors.  Here is what I thought of at Gantry Park (I certainly had a lot of free time then):

1.  Have a Gates Foundation type of initiative where a fund is created to entice potentially lucrative inventions from overseas.  Bill Gates can easily do this with his own money besides creating challenge funds for the best ecofriendly toilet for the third world.  (I think toilets are also important.  But as one of the great American inventors, it’s time for him to put in a little for his fledgling inventor colleagues of the new generation).  We have enough billionaires here in the US and each can donate a million or two to this fund if Gates is preoccupied with toilets.  Hey, that’s just your annual budget for fuel for your private jet.  Time to kick in some for your country.  I would like to call this The Great American Enterprise Fund (GAEF) and a billion $ should just about do it.

2.  Winning ideas from anywhere in the world get evaluated by the private sector; not some academics who likely have not made a dollar on his own.  Many great inventions were made in the dining room table or the garage—take the case of Sergey Brin and Larry Page of Google.  Fellow inventors and business people can make the winning technologies much better than any government or academic-led initiative.

3.  Have the winning invention patented in the US and licensed to an American company.  With few exceptions, inventors typically make lousy businessmen anyway (me included in that group).

4.  If the invention makes X amount of money or employs X number of Americans, give the guy or gal (have to be politically correct here) prize money above and beyond the license for the technology.  If he/she is foreign born, give him/her a fast track to citizenship and let him/her invent some more right here in America. 

5.  What does the donor get? Besides the usual tax write off, whoever invests in GAEF has first option to commercialize the new invention (provided the inventor agrees) before anyone else does and the unique opportunity to feel good about being an instrument in reversing this innovation gap.

       For now, that’s all I thought about.  Perhaps, someone already have this idea before and just did not know about it.  Let me know.

I did not want to miss this sunset because the Gantry Park locals say such a view happens only once a year when the sun comes down at the right angle on 42nd Street.  My lucky day!

       Any better ideas or have something to add, just send me a note (use subject heading GAEF) on my email ([email protected]) or send your comments here. 

Jonathan R. Matias, Chief Science Officer

Poseidon Sciences  www.poseidonsciences.com

PS:

This blog is dedicated to my colleagues who loved inventing:  Jason, Mike, Kosta, George, Naftali, Ernie, Saudha, Avelin, Aras, Tim, Coleen, just to name a few.

References:

http://www.qchron.com/news/western/article_5f2a6db9-2e05-5f0d-8c5c-34993b652151.html

http://en.wikipedia.org/wiki/Gantry_crane

http://www.msnbc.msn.com/id/21134540/vp/44041044#44038620

http://www.brookings.edu/opinions/2011/0805_jobs_greenstone_looney.aspx

http://yaleglobal.yale.edu/content/us-brain-drain-horizon

FRACKING Revisited: What lies ahead (or beneath) and the idea of a FRACKING CHALLENGE

Last summer, precisely six month ago, I wrote a blog article on hydraulic fracturing at the height one of the contentious periods between the industry and the public about this issue.  The adversarial relationship between the two groups have not abated since, maybe just dampened for now by the piles of snow on the ground, out of sight and partially out of mind.  This is sure to erupt once again once spring thaw arrives.

Anything good happened in the last 6 months?  Not a thing.  Really!  The same issues remain.  The politics and the drama you can read elsewhere.  The industry continues, bowing to some regulatory pressures in some cases, moratoriums, public discussions, but the business goes on.  Even politicians are divided, some trying to sit on the fence, some seemingly concerned, but wary of the economic repercussions of bringing the industry to a halt.  Both sides have strong convictions and even that is not worth a story line here.

Practically everything humans do, even those done with the best of intentions, carries unintended and often unforeseen consequences.  Even a simple new design for baby cribs get recalled for flaws found only when thousands began using it and accidental deaths occur.  The same happens to new drugs that came into the market, backed with world class research and extensive clinical trials on thousands of patients, only to be withdrawn later because, when millions use it, then other medical problems emerge.  When the spraying of the pesticide, DDT, to kill mosquitoes was banned for the sake of protecting other non-target species from being decimated, millions of Africans died of malaria instead.  Even for the best and noblest of reasons, things happen we never planned for.

I also think that it is an uphill battle for the industry to change public perception that fracking is good for the country and good for the environment at the same time.  Even a billion dollar public relations campaign will not change that. Not that I would want PR executives and lawyers to lose out in this process. Somebody has to spend for the Audis, the Mercedes Benzes, Lear jets and box seats at the Superbowl.  They are part of how our economy flows.

Getting our oil from elsewhere overseas carries an environmental price too.  Do you think it’s OK for some countries to have their aquifers destroyed to extract oil to ship to America, but not OK if ours are damaged?   Does the environmental degradation of the Niger Delta, the deserts of Kuwait, Saudi Arabia, United Arab Emirates or Iraq less important?  There are living things there too besides people.  These organisms may not look so cute or cuddly, but deserve the right to exist.  How about marine life in the Gulf of Mexico and the new gas fields being discovered along the continental shelves and out in the open oceans?  Pollution in China eventually reaches the United States; just takes time to get here.  The same is true that desert storms in Africa bring polluted particles to Europe and beyond.  We live in one Earth, interconnected in so many ways that even pollution is a shared experience for all.  Our Fracking issue is a mirror of what is happening throughout the world and how we deal with this may set the framework on how the rest of world can manage the same issues. 

Human beings are great problem-solving species. That is why we are dominant on Earth. We are also a great problem-making species too—but we have the ability to correct our mistakes.  This Fracking problem is no different.  The Halliburton technology was a ground breaking (pardon the pun) in extracting shale oil.  No one cared about it for decades until when the boom came and thousands of wells start springing up all over the place.  And, just like the crib story, things happen.  Is the contamination problem ubiquitous throughout the industry or is it just a few bad apples spoiling the rest of the bushel?  I can’t say for sure.  Can the technology be improved so that even some bad apples can’t ruin things for the rest of us?  I am sure it can.  This is not rocket science.  We are not curing cancer or growing new hair on balding scalps.  This is engineering, chemistry and geology.  Americans are good at these.  We can certainly make a better mouse trap.  And, we should.

The answer to this problem will not come from tweaking the fracking fluid formula a little or carting them offsite and hoping for the best; and it is not lambasting the industry, yet clamoring for cheap oil and gas at the same time.  The answer lies in collectively finding a better way, another method and an improved ‘out-of-box’ idea that can change the scenario in the years to come.

Yes, there have been some innovations in the past 6 months.  But they are not ground breaking.  They won’t change much how things are done.  Even our work at Poseidon Sciences on developing covalently bound biocides that never leave the ceramic beads (proppants) to keep the fractured shale from clogging with bacterial slime is just part of the incremental step toward eco-safety.  Perhaps the newest idea I have seen from industry is the use of LPG technology (liquid petroleum gas, not propane as one would automatically think, but a mixture of petroleum and natural gas in liquid state) by GASFRAC Energy Services Inc. (Alberta, Canada) instead of the conventional hydraulic fracturing fluid.  The company claims that the new process avoids the contaminations normally associated with fracking fluids since all of the LPG are recovered after the fracture stimulation.  Only time will tell if there might be unintended consequences here too, but certainly it is a step in the right direction, if all goes well.

When it is energy and the environment, time seems to be of the essence.  We don’t always have the luxury to wait.  As I think through these issues tonight, how does one create a ‘crash program’ to solve this issue?  Certainly waiting for the universities to come up with solutions will take time and money too.  To get a grant (assuming there is money appropriated for it) takes at least a year, even if one’s idea is so great and if you are in the right academic environment to get it.   An entrepreneur with a great idea?  Not likely because this project will cost a bundle of personal wealth even to try a simple idea and most entrepreneurs, like yours truly, are always hard up for cash to chase new ideas.  Government?  I think everyone will agree that getting Congress involved is a guarantee of long, bickering rounds of partisanship.  They have to argue about it until they reach consensus and until everyone involved looks great on TV.   By the time it gets voted, if at all, the enthusiasm would have died of old age.  The Industry?  Oil men are great adventurers but hardly guys that do well when put together in the same room, especially if they have to share a single vintage bottle of Bourbon (The standard perception would be: “It works. Why fix when it is not broken—just tweak it a bit and keep the regulators happy.”).  Bill Gates is preoccupied with his obsession with malaria, TB and something else in foreign lands. And Oprah is just way too busy right now.

How to stimulate innovation?

In his State of the Union speech last week, President Obama focused on the need for innovation in America and the need to correct America’s innovation deficit.  With the economy in the toilet right now, we better find a better way to stimulate innovation than the traditional ways it has always been done.   

So, it dawned on me.  (It would have happened earlier if I had that bottle of Bourbon).  We need a FRACKING CHALLENGE.  The same way that my friend, Mike – Dr. Michael A. Champ — has been advocating for A DESALINATION CHALLENGE to develop a low cost, advanced desalination technology to convert seawater into freshwater. Make everyone chip in.  Get Mike to create a combination of Gates Foundation Grand Challenge and a FRACKING X-PRIZE that has an independent, third party judging group with the right expertise to develop the rules, judge the challenge and award cash prizes. 

I always thought that prizes to stimulate innovation is a modern invention until Mike pointed out that it dated as far back as 1714.  Back then, determining the accurate position of a British ship at sea was indeed a challenge and they needed a practical means of determining longitude.  That year, the British Parliament enacted the famed Longitude Act and offered the highest bounty – a prize equal to a king’s ransom (several million dollars in today’s currency) for a “Practicable and Useful” means of determining longitude.   English clock maker John Harrison, a mechanical genius who pioneered the science of portable precision time keeping, invented a clock that would carry the true time from the home port to any remote part of the world, which was considered the greatest scientific problem of his time in measuring longitude.  Harrison was our first true X-Prize winner in recorded history at least.  I would not be surprised if later archaeologists dig up an Egyptian tablet from 5,000 years ago announcing a competition for best design of an above ground pharaoh’s tomb.

How to do it?  Set up a nonprofit foundation with a board comprising industry, academia, environmental groups and government.  Then ask each company involved in hydraulic fracturing to support the program with 1 % of their gross sales over a 3-year period, complemented with the 100% tax free incentive from the government for that funding.  Considering that the projected market value of shale oil by 2015 is estimated at US $12 billion, this will yield at least US $300 million– $100 million to support promising ideas for validation at Phase I; another $100 for field demonstration of those that have real world practical applications on Phase II; and $100 million for the Prize on Phase III.  Any company that pitches in gets to use the technology royalty-free; the rest that didn’t shall pay a price through the nose to use the technology developed from this Challenge.

$300 million is a lot less than the fracking industry likely spends just paying lawyers and PR companies in a single year.  Seems a lot of bucks, doesn’t it?   This project is definitely not simple or cheap.  But, if you look at it from other perspectives, it surely isn’t that much.  The last Megalotto that I (and other friends) sunk $10 for was worth $375 Million!  I did not win even a buck either, but I was willing to fork over $10 for the infinitesimal chance of winning.

Or, let’s assume the industry, according to environmentalists, is just a bunch of lowly ‘pond scum’; only in it for what they can get out of it (I tend to think not).  Then, how about just $1 contribution from every US resident — citizens, legal aliens, illegal aliens and out-of-this-world aliens?  That’s even less than the price of one bottled water.  Or, for a family of 4, just skip one Starbucks coffee for one day this year!  We can make $300 million without government-industry support.

Or better yet, run the fundraising from a special Megalotto for each of the states affected by fracking.  “Hey. You never know,” as the NY lotto advertising says. 

$1 per person in the US is a cheap price for saving our water resources and keep our own oil and gas flowing, isn’t it?  Buy less foreign oil; Keep our men and women in the military from harms way for the sake of protecting our overseas strategic interests in oil.

How about it?  Anyone up to this FRACKING CHALLENGE?

Jonathan R. Matias

Chief Science Officer

Poseidon Sciences Group

www.poseidonsciences.com

Suggested reading:

http://www.poseidonsciences.com/Covalently_bonded_biocides_selenium_environmentally_friendly_hydraulic_fracturing_Poseidon_Sciences.pdf

http://www.poseidonsciences.com/Selenium_environmentally_friendly_biocides-Hydraulic_Fracturing_Poseidon_Sciences.pdf 

http://gasfrac.com/fracturing_process.aspx

Suggested reading on the use of a prize to stimulate innovation:  

Adler, Jonathan. Editorial on Innovation. Prizes are more effective at spurring innovation than federal subsidies.    http://energy.nationalreview.com/post/?q=YTQwNzY2ZGRhMGM5MGQ0NjdmMTlhNjVjZDdkZTY4NjE=

Congressional Research Service, Deborah D. Stine. 2009. Federally Funded Innovation Inducement Prizes.  CRS 7-5700. www.crs.gov.

Diamandis,  P.H. 2007.  X Prize Foundation.  2007.  Offer a prize if you want innovation. Reno Gazette Journal. www.RGJ.com August 13, 2007. 

Debelak, D.  2007. Winning a Contest Can Catapult Your Invention into the Mainstreamwww.entrepreneur.com

McKinsey & Company. 2009.  And the Winner is…Capturing the Promise of Philanthropic Prizes.  124p. http://www.mckinsey.com/clientservice/socialsector/And_the_winner_is.pdf

The Economist. 2010.  Offering a cash prize to encourage innovation is all the rage. Sometimes it works rather well.  http://www.economist.com/node/16740639?story_id=16740639.