All for coming for the last talk of a semester in the globalization innovation and developments Yes I'm done it resonates. Professor in the School of International Affairs and Public Policy. And I'm very happy to have as our last speaker. Siegel who is the Maurice R. Greenberg senior fellow senior China fellow at the consul Foreign Relations and has his Ph D. from Cornell and also friend who wrote a book which I think some of my students already know and if not I will make sure that they know next year and that is has come graciously agreed to come in this cold Atlanta wherever that to come and speak with us about his forthcoming book about innovation in Asia. The only person that I would really want to thank for the success of this semester and you live in there in the back and I hope that the next semester will be as successful as this one. Thanks very much. Thanks. Danny and thanks to Georgia Tech for bring me down today and you for enjoying everything and for all of you who are attending not for extra credit my appreciate you showing up as you mentioned this is kind of the first public talk I've given on a on a book that I'm finishing over the next couple weeks and generally in the world that I live in now. It calls you think tank world I'm usually get about ten minutes to talk about something seven. You know if they're being really tight but the only time I can talk got up to forty five minutes which I won't do probably speak about half an hour and I'm looking forward to your comments and feedback. Like all great research projects. This one started in the bathroom. In May of two thousand and six I was visiting Beijing. I went out to the wandering science and tech park which is in the northwest and between the fourth and fifth ring road it's one of the newer parks has a number of multinational telecom and chip companies and I was doing an interview there with a telecom company walked in brand new building automatic immediately impressed by all the young people running around looking very busy did the interview with the two managers to Western managers and then a Chinese manager who had spent time in Silicon Valley. And the interview went you know pretty much as we have grown to expect from reading Business Week or Tom Friedman's book about you know how great it was to be in China costs were so much lower talent was still available Chinese from Beijing University. Were as good as any other graduate student ever seen. Maybe not so great a group projects are kind of developing new projects but had lots of great technical skills. Yeah there were some problems about I.P.R. protection. Maybe the government was interfering but generally things were you know going as we had come to expect about these all these stories and you know about halfway through after my fifth or sixth cup of coffee. I went to the bathroom and I go into the men's bathroom and I'm standing in the or no and then above the Yarnell in in Chinese is this big banner that says please don't worry all toxins have been removed. So of course I see this banner and I begin to worry. So I go into the manager's office and I say. So what's it with the banner. You know like the toxins. They said is a brand new building. And you know it's put up because the government wanted it about six months. And all the people that work in this building. Are you know young people who have just bought their own apartments. And they know that contractors in China. And to cut corners and often when they cut corners doing their apartments they might use some substance that is poisonous and shouldn't be used for indoor use and so even though we've had the building inspected five or six times even though they and we've had the government come in check. Everyone's a little worried in fact if you look around you'll see that's why there are desks there are plants on every single desk and so actually I did look around and there's like five or six kind of green leafy plants on everyone's desk because the argument was with the start kind of funneling the toxins out of the air and in fact every after once I noticed those plants. I noticed that every R. and D. center I went to in China had all of these green plants. All right so this is either a bathroom story or a green plant story but the green plant became kind of a symbol of what I want to talk about today which is this gap between what I call the hardware and innovation in the software of innovation so we've been incredibly focused on expression in China and India and the rest of Asia on the hardware innovation right. The new buildings that have gone up. How much money is flowing into these things but the software which in this story was do you trust the government are regular retore regimes in place. Can you trust the health inspection things all of those things but those take longer to build it's not that they're not going to be built out eventually but they take longer to build and that kind of creates a different story than the one we heard about in the rising a gathering storm the National Capital Report or The World Is Flat which is you know United States will soon lose its innovative capabilities and its innovative edge is to China and India. And we have to just run as fast as we can to catch up. Clearly there is a competitive battle here but I think it's a different kind of battle so for the rest of the talk I'm going to talk about this gap between software and hardware. I'm going to talk about what I think software means and then talk a little bit about where I think it is. Lacking in China and India and even in Japan and Korea. And then the going to cover my butt and give you some kind of qualifications and Cabot's to my argument about the software hardware gap and in kind of beach to the punch where I might be wrong and then I'll end with kind of talking about what that I think what I think that means over policy for US policy abroad and at home might watch what should we be doing at home so as I said that when I once I saw the plans I began thinking about what the software of innovation is here and you know very broadly I'm talking about the institutions in understanding that help move an idea from the lad to the market. Right. So all of those things and as a whole range of them and it's very hard to kind of draw lines between them but I've broken it up into four basically science and generation of ideas education and training new firm creation in government regulation and in. Many of these ideas will blend into one another and some are areas are stronger than others but for all those four areas. I think there are significant barriers and getting all four to work together which is even a larger problem takes even longer to do so. The hardware we know a great deal about and I'll just you know throw out all the numbers that we've we've heard before that the clearest one of course is money right. The Chinese have moved from about point six percent of their G.D.P. on R. and D. spending in one thousand nine hundred six to one point five percent with a goal of two point five percent in the next five to ten years Koreans have gone from two point two five percent to three percent with a goal of five percent by two thousand and twelve. Even the Indians which have tended to hang around one percent have a goal of double that by two percent by two thousand and twelve course the U.S. an absolute number still spends more than everybody the next ten put together but China has gone from being at the bottom two to number two and there's a great deal of clear. For incompetence and what's happening. If you look at venture capital until you know six or eight months ago Chinese V.C. involved in Chinese ventures doubled from about one point six to three point two billion from two thousand and five to two thousand and seven Indians have also doubled by fourteen million to eight hundred million done in V.C. deals. Expansion rapid rapid expansion of education particularly in science and engineering the Chinese have gone from maybe having you know in the tens of Ph D.'s right up to culture allusion to having thirteen thousand and seventy percent of them in science and engineering and Koreans have gone from a few hundred to about three and a half thousand same kind of build out. Occurring in India and then we're beginning to see outcomes or at least metrics that we can all measure of course Diane Hicks here at Georgia Tech have done a lot of work on this looking at patents Taiwan Korea and Japan make up a fourth of U.S. patents China has gone from not not being the top ten to number three in the world international partners Asian. Seventeenth in publication share to fits your so all of these outcomes clearly seem to be moving in the trend but as I said I think there's more clearly to innovation than just the hardware just the labs just the scientists just the money. It is how do you get all of these parts to work together. I'll talk about these four hours and where I think there are some problems. Clearly in science there has been a massive expansion of funding. You've had a reform of all of the state research labs the Chinese Academy of Science has gotten rid of many of its least productive institutes consolidated. The Indians have the problem that the vast majority of their R. and D. goes through state labs about seventy or eighty percent and of that money the majority of it goes through strategic plans either to the weapons programs the missile. Programs but there was a dramatic change under the last director Michel car looking at Patton says another the other things but these are these have been pretty small changes pretty gradual changes and these are still state institutions still directed by the government hiring is often done by political decisions still very much focused on government policy and although certain areas in chemicals and particular have seen a lot of interaction with industry. Most of the state labs. I still don't have very strong connection connections to private industry. And then there's a larger problem of how you actually organize and do science how you train young people how you teach them how to determine which projects they should pursue advising all of these things that are very have interest we've been very weak in the Chinese and Indian system then are growing slowly going strong. There's a great e-mail exchange that. Someone posted on a John University bulletin board. It's not clear to me if it's legit but I'm going to tell you to tell it to you like it is which involves a neuroscientist from the States who is actually returned and he's directing these new labs and he set in place an evaluation a yearly evaluation of the lab and training and visors and have goals been set and one of the scientists the Chinese scientist responds. I am a member of the Chinese Academy of Science. I do not do evaluations. Just the fact that I had been I am in an academician is evaluation enough and certainly I don't have to do this and then the scientist was training the state says no. Everyone has to go through this process we're going to do it where your lab is and you have two choices You can either undergo the about you. Ation or I will make you the honorary head of this department I will give you a raise but you will no longer have anything to do with this lab. So these things are slowly taking place. They're slowly changing but they're going to take time. They're going to take time to build up the second area of. Education. And here again we've you know there was this huge debate about either six hundred thousand engineers in China or India or their four hundred thousand engineers whatever the act actually actual number is but India and China had this huge problem with ramping up quantity while keeping quality which is in the Chinese system you had this massive expansion of education the Chinese are now going the Indians are looking at doubling the number of the Indian Institutes of Technology increasing the number of management but there's no one actually to staff these universities. You know the right now about a third of the positions that I am Delhi in Delhi are open because they can't find Ph D.'s to actually teach these classes so where these people are going to come from is a real issue and we hear a great deal about the success of the I I T's third or fourth the scientists at NASA have been through and I eighty. You know all of these people. In fact do very very little research do very little any kind of producing any papers they have very much. Bask in the glory of their students who've gone off and done great things so that kind of building a university research base is going to take longer and is taking longer in the Chinese case also there is a great deal of pressure for graduate students to succeed to graduate. You have to have a certain number of papers in the highest level journals. But the number of journals has not in fact expanded and so what we see is an explosion of cheating and fake degrees and other types of coffee cations and one survey done by people's daily sixty percent of Ph D.'s admitted to either stealing or using someone else's work which is pretty remarkable. So you have this huge expansion of cheating and the question of integrity and then you have a question. As I mentioned about training which is that specially the most popular high profile Chinese scientists the ones that have come back from the States. They have to figure out how you continually fun race how you manage government expectations and at the same time. Train young scientists so I met a young woman who was working at the National Institute of Biological Sciences in Beijing which is an amazing institute the top four incredible scientist all of these resources. I mean it is pretty amazing building and she said when she arrived as a master's student she had decided that she didn't have to go to the states right. Originally she had thought well one day I'll have to go to the states to finish my training as a scientist. But after the first year she changed her mind because these for scientists were so busy dealing with government agencies going to so many administrative meetings. She felt like she wasn't actually learning how to be a scientist and then she would still have to go to the United States. One day to do a Ph D. program to learn these skills so again all of these kind of software things are not in place although again I don't want to say they're not going to get there. They're just going to take time to be built out the third area is kind of a new firm creation right spinoffs either from universities small startups. How do you actually begin to commercialize new ideas and here again in the Chinese system. There's a huge problem for small companies for private companies to receive start up money or bank lending money eighty percent of all bank lending still goes to state owned enterprises because the government is lending based on social policy not on economic areas and the issue of venture capital in most of these countries I mentioned all these money this is this this money is not going to science based product based innovation. Most of this money is going into what. Some people have called C two C. copy to China. Which is you know the Chinese version of Facebook. His version of My Space and then trying to run up capital or in quite honestly one of the hottest areas is in hotels standardize hotels for Chinese travelers so venture capital is really not funneling money into high risk product innovation in they're not doing it in. Either there is also expression here Korea and Japan are good contrast because Korea and Japan clearly technological power is clearly at the outer edge for many many technologies but they have had their own problems trying to start the small startups trying to create product based innovations that spin off from the universities. My first trip to Japan did a series of interviews and at the time. Everyone was promoting and basically crowing about the success of university industry collaboration and spinoffs or they had reached the number of a thousand. There were a thousand new startups and every meeting I went to every Japanese official every Japanese university official said you know we have a thousand of these new startups in the last I was there. Professor actually who had worked at MIT met me for breakfast and he brought me to copy of McCain weekly and a business weekly in Japanese He said you know do you did you see this. No I don't reach up and translates the cover for me and it said university industry collaboration an unmitigated disaster. So then I asked the guy who is taking you around to all these meetings you know why everyone is meetings when the when the government official or the university official said you know it's been a huge success a thousand startups didn't you kind of you know nudge me in the ribs and suggest some kind of follow on questions like what we all know it's a disaster. Why would we ask any more questions. It's embarrassing. You know I don't know I'm not from Japan so but the problem is that at university. Still they find all their resources to the big labs right to to big Japanese companies and there is still a strong cultural pride. It is against startups and young people especially in Japan. I had spoke to a Japanese twenty two years ago he started his own company first company was eighteen start a second company when he was twenty one and he was the only person that he knew like that because everybody else goes into the big companies and the first company failed. Basically because he had created software for software games for cell phones. He couldn't get any meetings and nobody would meet with him to kind of discuss where this new idea the second idea succeeded because he basically brought in technology from Israel met somebody at a U.S. company based in Japan and they funded it once that happened. He managed to start growing but he said in every meeting he went to when he began to speak people basically thought he was stepping on a line. You know young person should be there to listen and shouldn't speak in the case of Korea there's been this huge push for small startup companies. But again I spoke to a guy who had spent fifteen years in Silicon Valley decided he wanted to go home. And he started a small company from technology he developed at Stanford and his problem was. Every time he tried to offer a job to a young engineer the mother in law would say no because why would you leave a job at Samsung which would guarantee your entire kind of career to go to a new startup so these cultural values towards startups in failure these things again are all changing but they're slowly going to take time and China India are actually I think different in this in this from the Chinese and the Indians are beginning to kind of embrace failure as a sign of entrepreneurship. The final area is in government policy and here in particular the Chinese case is a mixed bag because the Chinese are very hard promoting what they call the trunk scene or in indigenous innovation which is an effort to free China or develop Chinese I.P.R. no actual property in standards so Chinese companies are not caught in this trap in their model that they often give is a D.V.D.. Which is that you know China Chinese companies probably have ninety percent of the world's D.V.D. market but every time a Chinese company sells a D.V.D. It has to pay six or seven dollars to Sheba and Siemens and the other holders of that IP of the of the IP which means that the Chinese company maybe gets a dollar dollar twenty five and profit which is pretty pretty thin with all their other rising costs of the ideas you begin to break these and develop your own new standard your own new technologies and let's pick they also seem to be really stuck in the Chinese crowd is there is that the software to enter Chinese characters on cell phones is also a foreign software and so there's a developed tend to try to develop these things but that what this is meant from a policy framework is that a lot of looking at the already established standards which is where you already know the technology line is right where early. So the Chinese are funneling money into reverse engineering or trying to develop standards where we already know it is not the next next wave more blue sky thinking and so you have young companies that are having problems raising funds and the government shows up and says here's five million dollars to do this project and it's very hard for them to turn it down so they don't do these government projects which may not be a bad thing but also may take them away from the more technologically innovative area the other and you can look also as I mentioned in China in Korea and India is that there is now a huge push on small start up companies incubators science and tech zones all four of the cases now have significant program studying them but there's a huge amount of power policy overlap redundancy bureaucracies competing with each other. Wasted resources and as one Indian analyst said you know the government wants to help it just really has no idea what it should be doing so the government regulation idea. This has pushing it and so these are the four kind of areas where I think. Software is a huge problem in probably more and interacting between the four I think it's been very difficult. Why why I could be wrong and let me just give you a couple the caveats first. I'm talking about product innovation right science base product innovation. It can make the argument and there have been many out there who said you know especially the story of China isn't about product innovation won't be about product innovation for a while. It's about process innovation. I think that's probably true although I think the people who say that China is at the leading edge of process innovation are overstating their case and I think. In fact a lot of the kind of process innovation is just intense competition in the Chinese case and they're sucking the value out of the market in many areas but I'm looking at government policy and my focus is product innovation. The second is I could be I think very wrong about the timeline. So if you ask me how long it's going to take to get the software kind of infrastructure in place in China. I would tell you at least a decade and a half if not two decades but the things that might change that are first Basically this kind of globalization of ex-pat networks right people who are coming back from Silicon Valley route one twenty eight who have experience in Western you know Western universities Western companies and are bringing back the soft skills so we had a wave of Chinese going back in one thousand nine hundred ninety eight ninety nine can for the first Internet boom but those really are just M.B.A.'s and no offense to M.B.A.'s but just having a degree wasn't enough. Right. What you have to also know is you know when you get the first wave of capital when you hire more people when you issue version two point zero and those skills you get after ten or fifteen years people going back now have more of those skills. So this kind of software question could be modified moderated by the fact of these people who are bringing all this you. Tacit knowledge in their mind question is of course where are they working and how are they. How is the Chinese and Indian system absorbing them and we don't know yet. I think it's too early to tell some sectors for example in chip design it seems that they've actually been pretty successful the other area isn't these multinational R. and D. centers that I that I visited and here I think the important thing isn't so much the R. and D. taking place in the because the vast majority of them in the in the Chinese cases it's not are any of it is OUR it's you know very basic very far away from the market and in the Indian case it's all captured by by foreign companies. So it's not an actual kind of research and development in there. It's again it's a training of people so you have individuals who are going through the labs who are learning a new systems of systems integration of different type of products learning the skills. Again the questions where these people go when they leave. And here we have some anecdotal evidence is that if in fact you were at Intel and you leave. You're likely to go to A.M.D. actually and not to a Chinese company because once you're in a western kind of H.R. system which tends to be more transparent than the Chinese companies to be more flat you get used to it and you like it. And so you tend to move in but again this is pretty anecdotal evidence. So this this can. Moderate my time. So the third kind of Cavite I'll give you is that I have a clear a very biased towards a specific model of what innovation should look like which is Silicon Valley kind of twenty eight. Right which is this kind of small startups University and it's a collaboration and I'm not so naive to believe that China and India are going to recreate these look in fact I think we'll see something that looks you know that takes an int into place their own institutions their own cultural traditions their own histories and you can begin to see some examples of those coming in place and I'll just give two examples. In the Chinese case and the kind of state kind of stereotypically following our break up of China has been a top down kind of society being kind of a bottom up as I mentioned earlier the problem of corruption cheating and so the Chinese are very worried about this and have begun the national natural National Science Foundation and the Ministry of Science Technology. All of these other organizations have begun posting scientists named being more transparent on their websites about these kind of issues at the same time you still see some bottom up in China but this Web site called the new threads website which is a website that exposes corruption and fake degrees and there's a very famous case in China with this hunch I chip which was a guy who had been at U.T. Austin and Motorola he came back to Shanghai he introduced what was supposed to be China's first indigenously developed digital processor chip. What in fact he had done was scratched off Motorola and written in one hundred two hundred three and upgraded it was finally exposed on a bulletin board and so new threads is kind of a watchdog group that exposes these kind of things. This being China though you can always see new threats website in China right off and blocked by the by the firewall and that Indian case. There is a real kind of bottoms up networking push on unfair and innovation and here you see a lot of I think probably every young Indian Emperor I spoke to at the end of the interview would be like telling me about all the business plan competitions they are involved in and how they were also mentoring four or five young students and they were involved in this other large project. So you see all of this amazing. Bottom up creation of these. It works and also you see things like. Kaufman has done a study about this question about education and training that it may not be the state who steps into this but the companies themselves in business and Wipro have to do so much training to get people up to speed that they are imparting the skills so those are my of my final caviar is that it's partly related to this issue about the model. It could be that the Silicon Valley based model of innovation made a lot of sense for I.T. and may make sense for biotech and other types of technologies but when you look at robotics or solar cells other areas where you need more massive investment in the front. Maybe the Japanese and Koreans are fine. Right. They have had these large labs. They've managed to keep them into in place even of the last ten years over the over the downturn and they are slowly bringing the price down in these areas so it could be that for these areas. My kind of ideal vision of the Silicon Valley won't really matter for them as much as these these these technology years. Are let me talk a little bit more about a more expansive vision of software and then I'll finish up with the policy. So not only do I think that the software about these institutions that man move these ideas from the lab to the markets are right but I also think missing in the discussions about what's going on in Asia is a kind of software and here I'm using it to mean purpose. Right. What what I actually do the Chinese the Indians the Japanese the Koreans Taiwanese What do they expect to achieve with all this technology development which is I think more than just economic development clearly argument the moment is is part of it sustainable development is part of it but also all of these countries see technology as being central to security to autonomy. Very political processes and once you begin to see those things then things like the standard policy in China which I mentioned earlier which is clearly tied to a techno nationalist sentiment about. Not wanting to be dependent on the west in the United States and Japan in particular have make more sense right. They're not they might not make much sense on an innovative French but they clearly make sense on a political front. And you see the same thing when Japan thinks about cooperation with China right. We're all talking about climate change now. And I think we all are all rightfully I think optimistic about cooperation both with the new Obama administration and I think a kind of heightened awareness in the United States we're thinking about how we can cooperate with the Chinese there's a similar discussion in Japan Japanese are very good at lots of clean technologies and huge market should be a natural fit with the Japanese are very very worried about losing technology to the to the Chinese for being still in China and I had an interview with a Japanese opposition politician who comes from a district with lots of small tech companies he'd been invited to lead the delegation there to China to meet with people and he said that you know athlete through the discussions about the negotiations here ice the Chinese were going to try to buy all those companies and stripped all the technology in his phrase he said you know the Chinese not only want the golden egg they also want to use and so I decided we shouldn't go. So even though there is this huge political party the technology markets are pushing the two together. Then that technology is not going to flow as effortlessly or as flatly as we have kind of been led to believe in a lot of the negotiations that a lot of discussions about these things and it's driven ited States as well. Clearly in the area of security when we look at do export dual use technologies new export controls in United States and this concern about exports right. Foreign students or foreign workers who coming into contact with technology the United States United States is really trying to figure out how you control something ologies and some that don't. Right so let me finish. Given those kind of two software is both the kind of software that creates the gap in the software that I think creates a set of political problems as well as economic problems. Let me finish what I think the policy. Responses are. Domestic and the foreign policy side. I have three kind of. We call them rules of thumbs are or are frameworks about how we should think about how we deal with our trading partners and in Asia and the first one is even though I have consistently used the shorthand of China or India or Japan or Korea. I don't really mean it. It's much better to think of these as kind of fields of energy with competing interests within them as opposed to the kind of realist view of sed billiard balls who bounce into each other and you know the standards which was the competing standard to wife I was a great example. So. The Chinese basically said to Intel and the other companies. We have this new standard we've developed in our own life I have the security problems and to continue selling into the U.S. market. I just get into the Chinese market you're going to have to work with one of these sixteen Chinese companies who have the algorithm for walking which we're not going to share in telling the other company said this is basically a way to kind of force us to transfer technology we're not going to we're not going to do it. And so there was a standoff the United States threatened action in China eventually back down. But the Lobby case is a little bit more complicated in that it wasn't just lobby has a story comes out of the security ministries certainly certain of the Chinese companies pushed it but a lot of Chinese companies did not let the Chinese companies who were already selling into Western markets thought it was a pretty bad idea. Right there already tapped into international standard So this is an example of how there are many different actors of course for around all of these policies and so when the U.S. begins to look at these you know standards policies or intellectual property rights protection. We need to think about who we want to who we want to reach out to who want to punish and came in some cases. Is create a wedge between these different type of interest there. The second area is asked about the security issue that I mentioned which is basically. If the U.S. has a chance to choose between true security by transparency and security by openness security by secrecy. We're always better off by the first. Which is that all of these debates about trying to export control export exports work about deemed deem experts control foreign students access to labs. These are more than likely to cause more harm to us than then good. We are better off being involved in the creation of a new technology than protecting what we already have this is not to say we should go through all doors open. But the types of technology that we're going to protect are pretty narrow and for the most part are already pretty well protected in kind of a top secret. If the final in the U.S. policy side is having a pretty clear sense of where we are and what our interests are and that there's a lot of kind of framing of of this is the U.S. has to remain as a superpower right technological superpower an economic superpower. When you frame it that way then any other countries relative gains. Looks like a threat to the United States and I would argue that the U.S. has the strength that it has and is in a position it has not because it was the biggest Or is the biggest which is clearly part of it but the U.S. is has a central role in this global kind of system of innovation because we are at the center of a very open rules based liberal vision of the economic order. And that's the system we do the best in so when we think about trade agreements we think about broadband for that matter we should think about access to the rest of the world right we want to ensure that we know what's going on in these other places that we clearly have a stake in innovation happening is Min many places in the world as long. We are tied into it right as long as we have a sense of what's going on and so this kind of you can call mountaintop and soon a sort of sense that the US has to remain number one is really very likely to inflict wounds on ourselves. And the home front. I'm working from from two assumptions and that is that more and more things have become movable and clearly are and you can go to China and India even if the software is not there the hardware is there more and more things can move universities are no longer as tethered to places as they were before and competing with these countries on hardware is a losing competition eventually China will probably spend more in the United States on R. and D. and eventually there will be more scientists and engineers so computing long term hardware is is really a losing battle. So that means that we have to figure out which parts of our software which is where I think we clearly have believed is what they are and how to strengthen them and so I think that the debate on rising the gathering storm in the American competitiveness Act has been I think overly focused on hardware you know we need to prime the pump. We need more scientists we need more basic R. and D. which is more basic R. and D. is a good thing but if it moves abroad then we have to figure out about how we localize it how we tie it to place and here I'm looking at things bottom up local initiatives you call clustering but basically efforts to create public private partnerships that time of research in tie innovation to networks of and groups of people right so. The case that I talk about in the book is Phoenix in Arizona Phoenix is efforts of the last ten years to build itself up as a biotech center the changing of Arizona state shifting of the university as an economic driver did. Public private partnerships that have come in and come into place there as well as other kind of multidisciplinary experience based methods of teaching and learning. So actually places like Georgia Tech I talk about in the book but also Harvey Mudd other places where it's not that we don't need more scientists we need more scientists with a certain set of skills which has to do about integration different types of knowledge bringing them all together and playing into this software. So I will stop there. Thank you. Joy. Yeah this is coming from a certain number of sectors. I mean the most developed case study that I've seen is the motorcycle one which is actually why I don't believe it's going to work but the first set of studies in the market motorcycle industry was made the argument that. So the Japanese had dominated the motorcycle market in in China but if you looked at some other places Chinese competitors basically broke up the motorcycle into its modular parts and began competing with each other about producing those parts which drove down price immensely and they got better at figuring out how to make the parts and to put them together and they took a huge amount of market share from Japanese both in China and then in Vietnam in Southeast Asia that they lowered cost and the quality wasn't bad very very quickly. So this is the story that's been spread fairly widely the Japanese actually done a further on study what they have found is that that was true at the beginning but then the Chinese kept competing so intensely that they sucked all of the value out of the market and that none of the Chinese companies were doing any R. and D. about the next wave for the next kind of products and the Japanese continued to do to do that and the quality actually wasn't good. So the things you said about Sigma Six And so when the Japanese introduced a new line of cheap but pretty good motorcycles they recaptured most of a good deal of market share in China and in Vietnam. So I think you're right I think. It's a snapshot Burson kind of moving picture thing right. And I think that the Chinese are clearly aware of that process innovation isn't going to get them that far. And that's why I think they have pushed so hard on this was I mentioned earlier this indigenous innovation that they want to be the ones who you know to move from processed in China to man if. Richard in China to designed and created in China was virtually try to move up at about your surgery. This was your. YES. Well I think I think you put your finger on one of the major problems one of the major issues in this kind of software I was talking about in the US software and traditionally as you mention it with one of the great strengths of the United States has been that we have been able to attract the best and the brightest from abroad have them come here and then neither make them citizens or have them be heavily involved in the U.S. innovation process and you know there is a clearly the U.S. science and innovation press would pretty much collapse if we could not continue to draw on these these people and I think you know look there have been these debates as you mention it became harder for people to get in after nine eleven the State Department actually has done a pretty good job. And improving some of those I don't want to say too. So it's probably had a bad experience recently but the numbers actually show that the State Department responded that pretty quickly. Graduate for graduate of Rome and it has gone up after nine eleven not back to where it was exactly but it's starting to move the trend is at least in the right direction. You know the ideas. You talk about. They're not in this political environment. I just don't see very much traction for them. We had a you know the immigration debate we had was dominated by the eleven million low skilled illegal immigrants. We have this debate every year about H one B. visas H one B. visas and are there enough. You know I grew with you expect to see on the sense of people that have come out of and universities. We should be fast tracking them to citizenship. I think that you know we have at least a couple of government numbers a million a couple million people who are waiting in that process those people are in a kind of limbo they are more likely to go home. If they're in that limbo and they can't kind of start their life that strikes me as an area where we really could make some pretty quick policy improvements but you know part of it is people want to go home. I don't think there's anything we can do about that because I can should do about it. I mean people like to grow up and raise their families in their own cultures. You know other countries. I think are unlikely to as open be as open as we are now and eventually would be but you know I think your ideas have have have merit I just think politically they're not going to go. They're not going to bring much traction. I do I think you know given how as I said both reliant we are on people. The best the brightest coming here and as you know this kind of model that I sketched of we're not going to be the biggest forever. And so our innovation is is going to come from the ability to integrate different knowledge from different places and. Move forward on those kind of softer skills then we're going to have to continue and yes having more people can use me. You know. You know they're there. All these geographers now doing studies about are there a glamour ation of facts in art or spillovers and in my first book I actually was on this and I haven't kept up to date with the geographers and in there I go mission effects. My sense is that clearly there is something happening in the in the Senate especially in Beijing around the Science Park. You know there is there's a large number of companies. Again the metrics are kind of bad right that and the number of companies has has increased. You know I hear things about other clusters out in the West that there's people have said there is interesting things happening. Gen is working very hard spending a lot of money trying to develop their cluster you know we haven't seen the big breakout companies yet we haven't seen the products. And there have been problems. You know clearly from from the Ching Hai to Beijing University side there. I think is a sense that they went too far. In encouraging universities to start up companies and they have actually started to rein that in some because of you know the obvious kind of conflicts that have happened between managing a company and the universities but I haven't seen anything recently that that suggests that there is it's all about potential still I think there's a. You know. Now it's on the on the first question as you mentioned always mentioned food is always mentioned. And if you look what I mean I think even with the Shanghai job Tang in the times that every supplement kind of rankings of Chinese universities. I'm pretty sure there's no Chinese university that has broken top fifty and maybe even the top one hundred still so within within you'd have to check in that in that for sure but within that universities there are clearly departments right that are world class and I think the universities themselves. It's going to take a while in the sense that. I don't think the it's going to be much harder for the social sciences right in the Chinese cases to be able to develop their freedom and their kind of ability to have critical debate over a whole range of topics under the current political system. So I think it's hard to have a world class university just based on the sciences where all of that excellence is focused there without all the other social sciences falling into place. So I would expect that that will only begin to happen once we begin to see movement along the lines of greater transparency greater accountability greater rule of law greater kind of further removal of the state from those from those range of life on the second question about what you can learn. You know I. I think the Chinese are are learning it all the time right. They there's so many of the Chinese who are who are coming back and forth between Silicon Valley. You know I just. When I was doing the research for that for my Ph D. which was my first book which is looks at these high tech parks and clustering in local policy in Shanghai and Beijing and going on and that was around the time that only sextillion had published her. Comparison of one twenty eight in Silicon Valley. And I used to bring copies of it and give it to people after I you know became friends with them and as a kind of gift to thank them for and they always said I have it's been translated It's in our planning document. Right. We have the right to innovation networks we have that are planning documents. So I think the Chinese you know they know they've looked at Silicon Valley and studied Silicon Valley to death right in fact this kind of nine hundred eighty four June one soon. You know Star eighty two started because somebody from the Chinese Academy of Sciences was supposed to go to a physics lecture but instead saw what was happening in some valley and came back and started talking about you know we need to have these science parks. I think you know the. The problem with all cluster is is that they are put into place by government policy or in China. And they are attempts even though the case I'm talking about in Arizona or Maine right it's very hard to build a cluster. Nobody knows what it is it's it's much as much art as it is science and so for the case of Beijing. I think Beijing is getting there not because of anything. The university administrators are doing or the local governments doing anything to get there. Just because of the scale right there having they're getting so many people there are so many different ways of experience that eventually as long as the government doesn't get in the way it should start to happen. Well it's part of the void and in some cases beneficial competitive kind of competition among local governments. When I was there doing the interview for the first book and I would when I go see a government official one of my early questions were to kind of test to see how sincere they were going to be with me what it would be to ask them. You know what do you think is going on in the Tibetan high tech park is there going to be any major breakthroughs there. And if they started saying yes you know we were working on deer antlers and we think this can be a major biotech breakthrough there that I pretty much knew that they were going to give me this general line about how great all these parts were but if they said you know it's a waste of resources and I don't know why we have a park there. Then I pretty much at a sense that they were going to going to be honest with me. It's going to this is as I said it. This is going to continue happen at the Chinese system is that local governments they see what succeeds in one place and they decide they're going to do it themselves and they just build it as quickly as they can right in with the high tech parks. You know you're supposed to give a three year tax three year tax holiday followed by three years and have tax all these places started saying you know we're going to be five years in five years or ten years in ten years. In this economic downturn. It may matter more right. Given that infrastructure is going to be all this money going into infrastructure on the west in research is going to be more constrained. It could matter more on the plus side I think it is one of the strength of the Chinese system. Which is that like the United States. You know China is a continental economy that really is decentralized and the Chinese have lots of things going on at the same time. So maybe there is nothing going on it into that but what was happening in Shanghai was very different than what's happening in Beijing and Ground Zero and she on these other places. So the Chinese could look at all of these different things that were happening. And many of them kind of took their own trajectory and say. Actually that's working pretty well let's apply that you know she has a similar industrial structure to. You know younger some place and maybe there's some lesson we can learn there. You know you. Well I mean part of that is true. I actually don't think things are as bad. Well this is I read a lot of this before the financial crisis. I mean. You know the economy collapsed but putting that aside I actually don't think that things were as bad as we were being told they were clearly that you know I guess I can say your physical spending on physical sciences has been flat since the seventy's yes we should put more resources in there. I think what I asked us to do is not just look to the federal government to put more money into into sciences or to you know get say to people you know graduate student or undergraduate you need to study science and I think it puts more of the responsibility on places like Georgia Tech and to figure out to him to do a lot of things with Georgia Tech is doing but other places aren't doing as well about you know they're actually lots of Americans who want to study science and a third of the freshmen who when you ask. I want to be science majors but they drop out because the teaching writer because they decide that there's more money to be made in investment banking so this crisis actually may be very good for sites. So I think there's a lot of that has to happen at that level right at companies and universities and local governments. So if we ask anything of us there. It's at that level not necessarily Washington. Again I you know it's important we spend more at the National Science Foundation but I just think that we you know and also this question about given our changing demographics more is going to have to be done with under-represented minorities in the sciences and again Georgia Tech is a is a leader on that front as well but those are kind of also the same sort of things we know we know what works right to help someone enter a career in science and it's pretty labor and capital labor certainly labor intensive right. Mentoring and summer internships and tracking and all of these things so some of the money in the American Competes Act has some does in that but that's not what everybody is talking about but there's the really hard things that kind of face to face interaction and those are the things that I think are going to take more of a commitment. Yes or. No call you actually didn't go up as much as people were saying it was going up and the competition became so intense that nobody had anything to invest in the future so. And there were so many actors margins became so small that in fact. The value for the consumer was was clearly there but the producers were having more and more and more competition in the Japanese because they had basically temporally pulled out could really insert with better quality products and the Chinese have been to catch up again. So the structure of the Chinese competition at that time made it difficult for the Chinese producers continue competing. You know. The market is you know people are still buying motorcycles. You know. Yes it's not we haven't been there. Yes.