Designed in California; Assembled in China

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So now I know why I haven’t heard anything definite about the iPhone 5.  Joking aside, it is sad to see Steve Jobs leave the innovation sector.  My last post about innovation and patent reform should have just been about Steve Jobs.  He has been the leading innovator in our country over the past thirty years and his loss to the industry will be significant.  That being said, I am sure we all wish him health and happiness in his retirement.

The New York Times has an interactive review of Steve Jobs’ patents.  I found this great picture from a 1980s patent and could not stop thinking about playing Oregon Trail on this computer in fifth grade (when floppy disks were actually floppy… and existed).  Nevermind the elegant simplicity of the first generation ipods or the intuitiveness of our iPhones.

Earlier this week I was using our family’s new iPad, and noticed the text “designed in California, and assembled in China.”  I thought this was a great way to overcome the standard argument to buy USA only products.  Many advocates of USA only manufactured goods forget that the products being made overseas were invented in the United States and free markets pushed the assembly labor to China; we are not just buying the stuff China is sending us.

In any case, Steve Jobs has been on the cusp of innovation in America and although he is stepping down, I’m sure Apple with continue to provide the United States with the cutting edge technology we crave.  While Steve Jobs will no longer be the face of Apple, he will go down in history as the face of innovation in the United States.

Government Sponsored Innovation Can Improve our Economy

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Technology drives the economy.  Strictly speaking, technology is any improvement to the status quo.  Economic production functions display economic growth as driven by technology, or in more common terms, innovation.

Throughout the world and throughout time, innovation is not solely the responsibility of the private sector.  A common misconception is that privately owned corporations, through research and development, propel innovation.  Yes, Google (a private company) is touted as the leader in innovation and Facebook, Microsoft, and Apple are all private firms on the cutting edge of technology and innovation, but the government has and should continue to provide both protection and incentive for innovation.  In a time when the loudest voices are calling for smaller government as a solution to economic woes, government activism focused on innovation is the solution.

Governments drive innovation and technology, which subsequently drive economic growth in two major ways.  The first is to protect intellectual property and the subsequent profits through the patent system, which provides value to ideas.  If a patent is granted in The United States, the owner of the patent is granted a monopoly over the innovation for a set number of years (roughly 20 years).  Currently, many rival companies are purchasing patents and creating legal troubles for their competitors (mostly wasting resources: time and money). 

 The current patent law is dated and does not facilitate innovation growth as intended.  There is a distinct difference in ideas as inventions and ideas that are methods.  The former deserve protection; a patent on a new drug provides incentive for the development of the drug and new programs (Microsoft’s Windows or Office computer programs) will only be created if financial protection exists.  But methods and processes should be allowed to flourish and facilitate more growth, not be held back by court proceedings.  In the words of President Obama:

“Through patent reform, we can cut the red tape that stops too many inventors and entrepreneurs from quickly turning new ideas into thriving businesses — which holds our whole economy back.”

Along with financial protection through patents, the government can directly sponsor innovation.  There would be no Google, Microsoft, Apple, or Facebook without the government’s Defense Advanced Research Projects Agency (DARPA)… they were responsible for the internet.  Check out what DARPA is currently working on.

Government intervention to create innovation is nothing new.  Never mind the advances of government agencies such as DARPA and NASA, consider the eighteenth century problem of determining a ship’s longitude at sea (the North Star took care of Latitude).  The problem had been around even before Columbus thought he landed in India, but in the mid 1700s, “the rulers of Spain, Holland, and Britain offered large monetary prizes for the solution.  [The  problem was solved] by a poorly educated but eminently skilled clockmaker.”  He used the chronometer (from a watch) to set two watches: one to Greenwich Time and one to noon on the ship when the sun was directly overhead. Nevertheless, government sponsored financial incentive was the means of innovation.  (Anecdote from Charles Jones’ “Economic Growth”) 

 This primitive version of “crowd sourcing” should be replicated today.  We have problems in this country… too many to name, but the government should provide a means for entrepreneurs and innovators to find solutions and reap financial rewards.