Capitalizing on foundations of innovation



Two of the most important technological advances that helped fueled much of the country’s record economic growth in the post-WW II era were ubiquitous computing devices and modern communications technologies.

Indeed, most of the companies covered on TechCrunch certainly would not exist if not for the development and commercialization of microprocessors and the internet.

In my opinion, insufficient attention in the current ideological debate taking place in Silicon Valley and around the country has been given to the important role that government played throughout the lifecycle of these technologies. Understanding how these relatively mature technologies and industries were initially spawned and encouraged is critical to developing a strategy to empower the next generation of entrepreneurs in capital- or R&D-intensive industries with high growth potential.

ENIAC was the first “programmable, general purpose, electronic digital computer,” and is widely regarded as the first modern general-purpose computing device. Its construction was financed by the U.S. Army beginning in 1943; the project was completed in 1946 at a total cost of $400,000.

Only after the government’s investment in the research and development of the first ENIAC did similar vacuum tube-based computers find their way into industry. These machines were enormous, however, and the microelectronics we take for granted today would not have been possible without subsequent innovations.

The modern integrated circuit (IC) was developed by Jack Kilby while at Texas Instruments. He was working on a project sponsored by the U.S. Army Signal Corps to develop a way to use smaller transistors as a replacement for the bulky vacuum tubes; he developed the integrated circuit as an alternative approach. However, the cost of Texas Instruments’ early integrated circuits were high; a single IC cost $450 in 1960. As a result,industry reacted coolly to the introduction and it was the military that was the technology’s early adopter.

After reading the paragraphs above, it may seem less surprising that the first computer processors based on ICs were developed for NASA’s Apollo Guidance Computer, and many of the basic protocols and technologies at the foundation of the modern internet were invented by researchers working for the Defense Advanced Research Projects Agency (DARPA).

As Isaac Newton wrote, “if I have seen further, it is by standing on the shoulders of giants.” In the case of the tech industry, it is not only past innovations, but the cumulative investment in developing and commercializing those innovations that provide both inspiration and a platform for future innovation.

The smartphone owes its existence to the early research on ENIAC, the IC and the microprocessor. Some tech entrepreneurs may have a visceral reaction to Elizabeth Warren’s assertion that “you didn’t build that alone,” but the tech industry owes an enormous debt to the government for its early sponsorship of the predecessor and enabling technologies that make the modern high-tech economy possible.

We can either come together to reinvest … or we can take profits and fall behind.

The innovations that are likely to be responsible for substantial economic growth for the next century include enabling technologies for clean, efficient energy production and personalized medicine. In fact, government investment in basic research, such as its expenditure of $2.7 billion 1991 dollars over the more than decade-long Human Genome Project, and commercial subsidies, such as federal and state renewable energy tax credits, have already played a critical role in kick-starting these industries.

While some argue that we can cut our way to long-term growth by lowering taxes, it is worth noting that between 1943 and 1980, when most of the innovations described above were developed, marginal federal income tax rates on the highest earners were among the highest in our country’s history.

It is also worth noting that government investment in research and development, and renewable energy tax credits, are “subsidies” that have allegedly been the target of well-funded and well-organized opposition by fossil fuel interests who masquerade as Libertarians(the Koch Brothers). Other countries are not hamstrung by ideological opposition to clean energy investment. In fact, China, not the U.S., is the world’s largest investor in renewable energy.

The stakes could not be higher; nothing short of America’s long-term economic competitiveness is at stake. In my opinion, the choice is clear: We can either come together to reinvest in growth and maintain our leadership in an increasingly competitive global economy — or we can take profits and fall behind.

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