On April Fools’ Day of 1976, two very different businesses were launched:
Perhaps no day illustrates the rate that varying institutions change better than April Fool’s Day 1976, when two divergent businesses began operation. The government-funded, rustbelt-oriented Conrail began operations on the same day that a corporation called Apple Computer was formed by three young Californians: Steve Jobs, Steve Wozniak, and Ronald Wayne (who left shortly thereafter, becoming the computer industry’s equivalent of The Beatles’ Pete Best). And it’s been the computer that has transformed how wealth is created in the last 40 years, just as the railroad did in the 19th century.
Besides tremendous changes in the economy and wealth creation, the 1970s was a decade full of fuzzyheaded thinking, and a load of doomsday books predicting economic and environmental doomsday. The Tofflers’ 1980 book, The Third Wave (the concepts of which Revolutionary Wealth builds on) bucked this trend. In the midst of the hyperinflation, astronomical interest rates, and rampant unemployment of the Carter-era 1970s, the Tofflers were able to look past that to see the actual long-term causes of many of these trends: much of the free world was making the transition from what a rustbelt mass-production assembly line economy of heavy manufacturing to a high-tech, on demand, service-oriented economy.
That’s from my Tech Central Station review of Alvin Toffler’s most recent book to date, Revolutionary Wealth, published in 2006, when it seemed like the mid-20th century smokestack era was finally bested by high-tech demassified Internet-based entrepreneurialism.
So much for that idea. Two years after Toffler’s book hit the streets, America would elect a president whose mindset is trapped somewhere between 1933 and 1968. Or as Michael Barone wrote last year, Obama offers “Industrial Age Solutions to Information Age Challenges.”
Which is but one reason why Glenn Reynolds is asking this week in USA Today, “Where are the start-ups?”
A new report from JPMorgan economist Mike Feroli indicates that employment in start-ups is plunging. New jobs in the economy tend to come from new businesses, but we’re getting fewer new businesses. That doesn’t bode well.
In fact, it is yet another sign of a United States that is looking more like Europe: A society in which big businesses have cozy relationships with big government, while unemployment remains comparatively high. If you’re fortunate enough to have a job at one of those government-connected businesses, GE, for example, your situation is pretty good. If you’re a recent college graduate looking for work, your situation is not so great. If you’re a low-skilled worker, your situation is dreadful.
So what’s to blame for this change? A lot of things, probably. One reason, I suspect, for a job market that looks more like Europe is a regulatory and legal environment that looks more like Europe’s. High regulatory loads — the product of ObamaCare and numerous other laws — systematically harm small businesses, which can’t afford the personnel needed for compliance, to the benefit of large corporations, which can.
Likewise, higher taxes reduce the rewards for success, making people less likely to invest their money (or time) into new businesses. And local regulatory bodies, too, make starting new businesses harder.
But I wonder if the biggest problem isn’t cultural. Since 2008, this country hasn’t celebrated achievement or entrepreneurialism. Instead, we’ve heard talk about the evils of the “1%” ” about the rapaciousness of capitalism, and the importance of spreading the wealth around. We’ve even heard that work in the public sector is somehow nobler than work in the private sector.
If, as Glenn writes, the US is looking more like Europe, it’s worth looking back at a snapshot of Europe’s business community at the start of the 21st century, focusing on its own lack of entrepreneurial start-ups.
As Orson Welles said in 1941′s Citizen Kane, “How did I find business conditions in Europe? With great difficulty!” Six decades later, based on this Steven Den Beste post from December of 2002, very little had changed there to alter that formula; “Europe is a high-tech disaster area,” he wrote:
It’s a desert pock-marked with occasional oases. For an area with the kind of overall education level Europe has, and the kind of industrialization Europe has, and the overall average wealth that Europe has, and the transportation and communication infrastructure that Europe has, the amount of ground-breaking work in science and technology happening on the continent is embarrassingly small.
It’s not that they cannot do it. There are significant examples which demonstrate otherwise. The Ariane program has been a substantial technical success. Airbus is the only company in the world which is even challenging Boeing in the passenger jet business (though Airbus only was able to get going through substantial subsidies by the French and British governments). Philips has been creating cutting edge technology for years. At least three major pharmaceutical companies are headquartered in Switzerland. CERN is doing good work, and has one of the world’s best particle accelerators. And I have only the highest regard for the engineering which is being done by the European Southern Observatory for its sites in Paranal and La Silla, (not to mention their full intention of creating a telescope with a one hundred meter main mirror).
But what these few successes show is that the potential is there and that it is not being realized very broadly. The Europeans can do this stuff, but it seems as if they mostly don’t bother. You have a small number of companies which are competitive in production of high technology, but most of Europe’s companies seem to produce rather prosaic me-toos, using fundamental technology developed elsewhere (usually the US).
If you ask someone with any kind of technical background to list high-tech Japanese companies, they’ll have no trouble at all reeling off several names immediately (often brandnames chosen for the American market, like Pioneer), and several more after a few seconds of thought: Sony, Toshiba, Matsushita; the only reason there aren’t more names on the list is because of the Japanese zaibatsu system. Ask pretty much anyone to list American high tech companies and they may come up with 50 names before they have to slow down.
But ask people to list high-tech companies from continental Europe, and I think most people would have to think hard to list even one. I, myself, having been in the industry for 25 years can only list a few: Nokia, Ericsson, Siemens, Alcatel, Philips and then I run out, and honestly can’t think of any more right now. And among them, Philips as the only one actually doing cutting-edge research. (They developed the laserdisc, which led to the CD and DVD, among other interesting things.)
What the Europeans seem to spend most of their time doing is to refine or develop or apply basic technology coming from other places. Americans created the transistor, the laser, the MOSFET, the integrated circuit, the LED, the first computer built out of transistors, the first microprocessor, the hard disk, television, wide area networks, cell phones. Europe uses computers, but the only major contribution from Europe in my field is the development of the first block-structured programming language, ALGOL, which influence later languages like C but which itself was too bloated to really be very useful. And in general, I’m really pretty hard pressed to think of anything (except the laserdisc) which has come from the continent which ranks the same as that long list of American innovations, which is far from complete.
Where is Europe’s Intel? Where is Europe’s Microsoft? Where is their IBM? Their Dell? Their Applied Material?
On the next page, some thoughts on what Europe does export all too well.