Saturday, October 08, 2011

Don't Expect Apple-Like Innovation in China

Some interesting quotes from tweets and blogs in China, as featured in the WSJ Asia Technology article "China Frets: Innovators Stymied Here":

"In a society with an authoritarian political system, monopolistic business environment, backward-looking culture and prevalent technology theft, talking about a master of innovation? Not a chance! Don't even think about it."

 "Chinese companies can be expected to have the market valuation and business model like Apple's within a decade, but it will be difficult to expect any type of Apple-like innovation."

"The first thing the teachers do in China is to rub down the edges of those students who are different from the crowd."

"If Apple is a fruit on a tree,  its trunk is a society whose legal system acknowledges the value of intellectual property, its branches are the freedom to think and create, and its root is constitutional democracy. An authoritarian nation may be able to build huge projects collectively but will never be able to produce science and technology giants."

HT: Scott Lincicome

46 Comments:

At 10/08/2011 12:00 PM, Blogger Jon said...

I'd sooner expect innovation from countries that implement industrial policy, like China, India, Japan, South Korea, the United States, Germany, Great Britain, and Switzerland then I would in the unregulated free market capitalist zones, like Haiti, Nicaragua, Panama, the Congo, Tanzania, or the Philippines.

 
At 10/08/2011 1:17 PM, Blogger AIG said...

The US has an "industrial policy"? I think you managed to top your "most ridiculous comment ever" award from yesterday, with this. Congratulations on being totally clueless.

---------

I wouldn't say "never" on China. What China lacks internally, it partially makes up for with its diaspora, and with the people it sends to study in the US.

I agree that their education system simply isn't up to task, but thats why they send them to ours. We, unfortunately, do a poor job at keeping as many of these people here in the US as we should (thanks to the restrictions on hiring foreigners)

 
At 10/08/2011 2:35 PM, Blogger PeakTrader said...

Jon, the U.S. became a superpower, and there was more innovation, when it was much more of an "unregulated free market capitalist zone."

Given China's poor economic policies by the elites, the country may reach its economic peak while still poor, i.e. when most of the population is past "prime-age."

Also, given the E.U.'s lower standard of living, high prices, and the appreciation of the Euro, Western Europeans can raise their living standards substantially by selling their assets, exchanging euros for dollars, and moving to the U.S.

 
At 10/08/2011 2:45 PM, Blogger Buddy R Pacifico said...

This comment has been removed by the author.

 
At 10/08/2011 2:47 PM, Blogger Buddy R Pacifico said...

"An authoritarian nation may be able to build huge projects collectively but will never be able to produce science and technology giants."

China can build science and technology giants, within the context and result of internal competition;

but not if foreign competitors had market access (without forced joint ventures) and valid intellectural property protection.

 
At 10/08/2011 3:02 PM, Blogger PeakTrader said...

China's education system may be worse than India's:

A College Education Without Job Prospects
November 30, 2006

The job market for Indian college graduates is split sharply in two. With a robust handshake, a placeless accent and a confident walk, you can get a $300-a-month job with Citibank or Microsoft.

With a limp handshake and a thick accent, you might peddle credit cards door to door for $2 a day.

But the chance to learn such skills is still a prerogative reserved, for the most part, for the modern equivalent of India’s upper castes — the few thousand students who graduate each year from academies like the Indian Institutes of Management and the Indian Institutes of Technology.

Their alumni, mostly engineers, walk the hallways of Wall Street and Silicon Valley and are stewards for some of the largest companies.

In the shadow of those marquee institutions, most of the 11 million students in India’s 18,000 colleges and universities receive starkly inferior training, heavy on obedience and light on useful job skills.

But as graduates complain about a lack of jobs, companies across India see a lack of skilled applicants. The contradiction is explained, experts say, by the poor quality of undergraduate education.

Teaching emphasizes silent note-taking and discipline at the expense of analysis and debate.

“Out! Out! Close the door! Close the door!” a management professor barked at a student who entered his classroom at Hinduja two minutes late.

Soon after his departure, the door cracked open again, and the student asked if he could at least take his bag.

The reply: “Out! Out! Who said you could stand here?” A second student, caught whispering, was asked to stand up and cease taking notes.

“When we are raising our children,” said Sam Pitroda, a Chicago-based entrepreneur who is chairman of the Knowledge Commission and was an adviser to Prime Minister Rajiv Gandhi in the 1980s, “we constantly tell them: ‘Don’t do this, don’t do that. Stand here, stand there.’

It creates a feeling that if there is a boundary, you don’t cross it. You create boxes around people when we need people thinking outside the box.”

 
At 10/08/2011 5:04 PM, OpenID Sprewell said...

Peak, I attended elementary school in a third-world country and you definitely see a lot of what your excerpt describes. On the other hand, it was also harder there, at least at the better school I attended, so when I moved to the US I had a year or two of goofing off as it was pretty easy when I got here. When I visited that poor country years later, I met a previous acquaintance who was trying to get into one of their top colleges and he was studying pretty advanced technical topics in high school, that would never be taught in high school here, only in colleges (he now works in the US). The truth is that "education" blows almost everywhere, it's just a little easier and less strict here, while a lot of other places make it unnecessarily harder and force more memorization. What will change all this is online learning destroying the existing system and bringing a quality education to anyone anywhere, through their computer. Schools everywhere are ripe to be blown up. :)

 
At 10/08/2011 5:41 PM, Blogger PeakTrader said...

Sprewell, I went to school with top foreign students with excellent technical abilities.

However, it's remarkable, they had little or no creative abilities.

Also, I wouldn't underestimate many native born Americans.

American Leadership in Science, Measured in Nobel Prizes
10/05/2011

The United States has won more Nobel prizes for physics, chemistry, physiology or medicine, and economics since World War II than any other country, by a wide margin.

Of the 314 laureates who won their Nobel prize while working in the U.S., 102 (or 32%) were foreign born, including 15 Germans, 12 Canadians, 10 British, six Russians and six Chinese.

The United States became dominant after a very slow start: no American won a science prize in the first six years of the prize’s existence.

 
At 10/08/2011 6:01 PM, Blogger Innovation rules said...

Best argument for privatizing education.

Not to mention that most of our spectacular success stories, even in finance, did not go to college and hated school.

It is a loud and persistent message.

 
At 10/08/2011 6:10 PM, OpenID Sprewell said...

Peak, most people have no creative abilities. ;) As for native-born Americans, they're probably pretty much the same in capability as people from any other country, but what really hamstrings them is that it's easy to get satisfied and lazy when you're number one and the education system here also blows, just a little less and in different ways. Nobels are a dumb measure of achievement, that's like saying the US is the fittest country because it dominates the Olympics. ;) The US has been the richest country in the post-WWII era, so of course it can afford the luxury of a small minority that chooses to focus on competing for prizes like Nobels or Olympic golds, but those prizes are largely irrelevant, particularly the latter. What matters is what you see in entrepreneurial or highly competitive communities like Silicon valley or Wall Street or important positions at other globally competitive US companies and there is a large foreign contingent at all of those places. Of course, a big part of it is that the world's brightest move here because of the better business environment, but US decline is part of it too.

 
At 10/08/2011 6:24 PM, OpenID Sprewell said...

Innovationrules, the public/private argument is a classic example of fighting the last war. The real fight coming up will be between the current system of schools, whether public or private, and cheap, online learning, at one-tenth of the cost or less. It is a fight the school system cannot win, as you cannot compete with an order of magnitude price decrease, so the schools will be demolished. You will get your wish though, as govt is too dumb to see any of this coming, so education will be privatized out from under it, just like email and FedEx have essentially privatized mail communication and delivery, pushing the US postal service to the verge of bankruptcy.

 
At 10/08/2011 6:48 PM, Blogger AIG said...

Sprewell I had a similar experience to you when I came to this country. However, I think we may be missing the bigger picture here.

Sure there was a lot of "advanced technical topics" studied in high school over there, as opposed to over here. But what good did it do over there? Zimbabwe can have the best nuclear engineering school in the world...it will not do anything. I saw a chart recently of what % of students in China, India and Russia go to engineering vs the US. And it was a landslide. But you have to ask the question...Russia had far greater numbers of engineers than the US had, throughout the last century. What did they do with it?

What's missing in China, or India, or a lot of these other places...is the rest of the equation. The right set of incentives and opportunities need to exist, for someone to take advantage of their knowledge and create something like Apple.

America does this better than anyone else, because it has the free-est economy and education system. Ultimately, even if native-born Americans can't do it, the US attracts others from around the world looking for those incentives and opportunities to express their knowledge.

 
At 10/08/2011 7:44 PM, Blogger Rufus II said...

"What Matters" is the 16.5 Underemployed/Unemployed Rate.

What matters is that Siemens, a company that employs 60,000 Americans, has 3,000 job openings that it just can't fill.

The CEO said that they have hired everyone they can find that's capable of working in a "Modern" factory, and they're 3,000 short.

What matters is the CEOs of Numerous Fortune 500 Companies are saying the same thing.

 
At 10/08/2011 7:49 PM, Blogger Rufus II said...

What Matters is that those wonderful Apple products are being manufactured in China by Foxconn.

What Matters even more is that Foxconn is cutting its workforce by 50% through automation, and efficiency improvements.

 
At 10/08/2011 7:53 PM, Blogger Rufus II said...

And, as far as "What's Missing:" What's "Missing" are those tens of thousands of small factories that were spread out across the U.S. where that 16.5%, that's represented by the term U6, used to work.

They went "Missing" to China.

 
At 10/08/2011 9:12 PM, Blogger Hydra said...

With close to 4000 years of culture, how do you not look back.

And the Chinese have close to 4000 years of case law, where one is expected to look back.

 
At 10/08/2011 9:15 PM, Blogger Hydra said...

Apple made many fortunes enabling people to sit around doing nothing with ear buds in their ears.

Apple may have seen the future better than we know.

 
At 10/08/2011 9:21 PM, Blogger Hydra said...

3000 short and 3 billion available.

Sounds like their expectations are too high.

This is like complaining that you cannot find a backhoe operator when there are 50,000 people standing in front of you with shovels.

 
At 10/08/2011 9:29 PM, Blogger Hydra said...

The right set of incentives?

Abject poverty isn't enough of an incentive?

 
At 10/08/2011 9:34 PM, Blogger Hydra said...

Who will western europeans sell to?

 
At 10/08/2011 10:30 PM, Blogger Rufus II said...

The thing is: Companies that use guys with shovels can't compete against Companies that use Backhoes.

 
At 10/08/2011 10:33 PM, Blogger Rufus II said...

Especially against the Company that uses the "Next Generation" Backhoe that won't even require an operator on board.

 
At 10/08/2011 11:29 PM, Blogger Don Culo said...

"What matters is that Siemens, a company that employs 60,000 Americans, has 3,000 job openings that it just can't fill.

The CEO said that they have hired everyone they can find that's capable of working in a "Modern" factory, and they're 3,000 short.
"

****************

What is a modern factory? Does modern factory worker need much training to push the "Start" and "Stop" push-button on the automated assembly machinery?

 
At 10/08/2011 11:39 PM, Blogger Rufus II said...

Yeah, he writes the instructions for the machine. A little difference from "pushing the red button."

 
At 10/09/2011 4:04 AM, Blogger PeakTrader said...

Sprewell says: "That's like saying the US is the fittest country because it dominates the Olympics."

It's likely, a larger proportion of Americans excel in their fields compared to other countries.

The U.S. has a flatter bell curve, e.g. in education, income, sports, etc.

 
At 10/09/2011 4:09 AM, Blogger PeakTrader said...

Also, Russia, China, India, etc. can graduate all the engineers they want.

However, a small percentage of them are equal or better than an average American engineer.

 
At 10/09/2011 7:40 AM, Blogger ws4whgfb said...

That article is a collection of quotes by Chinese who recognize the problem. There is also a similar recognition among Chinese military analysts and Chinese economists of the strengths of US culture in those fields. Recognition of a problem is a good start to finding a solution. Chinese culture can change.

 
At 10/09/2011 10:04 AM, Blogger Hydra said...

Companies that use guys with shovels can't compete against Companies that use Backhoes.

==============================

They can if the companies that use backhoes cannot find (or pay enough to get) backhoe operators.

 
At 10/09/2011 10:06 AM, Blogger Hydra said...

the Company that uses the "Next Generation" Backhoe that won't even require an operator on board.

================================

Yep.

Saw a construction crew using a tamping machine that was operated by remote control, saving the operator from all that vibration.

Funny thing is, there were two people operating it, or one operating it and one watching.

 
At 10/09/2011 10:10 AM, Blogger Hydra said...

Also saw (a few years ago) a major excavation job that was being done entirely with shovels. There was a line of what must have been 400 people who mostly appeared to be latino, digging a trench.

Probably because a backhoe could not do the job without wrecking whatever else was already buried there.

 
At 10/09/2011 11:10 AM, Blogger Ron H. said...

"They can if the companies that use backhoes cannot find (or pay enough to get) backhoe operators."

Is that a common problem? Try to stay within the bounds of economic reality, rather than just keying your device without thinking.

 
At 10/09/2011 11:29 AM, Blogger Hydra said...

Try to stay within the bounds of economic reality

===============================

You lost track of the analogy.

Siemens claims not to be able to hire enough qualified people.

Probably they just are not willing to pay enough, or to train people.

Sounds like a market failure or a management failure, pick one.

 
At 10/09/2011 12:02 PM, Blogger Rufus II said...

What it sounds like is a company that's liable to build its next plant somewhere else.

 
At 10/09/2011 12:32 PM, Blogger AIG said...

"And, as far as "What's Missing:" What's "Missing" are those tens of thousands of small factories that were spread out across the U.S. where that 16.5%, that's represented by the term U6, used to work."

And? Who says that those...whatever % you want to come up with...had a guaranteed job and a guaranteed "small factory"? If you wain't competitive, make yourself competitive.

"The right set of incentives?
Abject poverty isn't enough of an incentive?"

?? What you said there makes no sense. By your logic, the poorest places on earth, should be the most innovative places on earth. Strangely, it ain't so. By "incentives", I meant the incentives for those who have the knowledge to create.

"However, a small percentage of them are equal or better than an average American engineer."

A lot of them are equal or better than the average American engineer. It doesn't matter. Thats the whole point. That engineer in America is creating 50 times the amount of value than that engineer in Russia or China is. Why do you think that is?

 
At 10/09/2011 12:39 PM, Blogger AIG said...

As for the Siemens anecdote, when you go to their website you see only about 1,800 job postings in the US. The biggest groups are Engineering, Sales and accounting/finance.

They're not lacking "workers" for their "modern factories".

And then you dig deeper to see where those engineering, sales, accounting/finance jobs are located. 95% of them are located in some God-forsaken place in the country that I would never want to go to.

There's lots of jobs out there, and there's lot of people to fill those jobs. However, if Siemens is having trouble hiring engineers, sales and finance people...may I suggest that their problem is :location?

 
At 10/09/2011 1:17 PM, Blogger PeakTrader said...

AIG, the quality of U.S. engineers is better:

U.S. not behind in engineers, study
Disparity against China, India has been exaggerated, data suggests
March 23, 2008

According to a survey of international companies conducted by the McKinsey Global Institute in 2005, 80 percent of U.S. engineers are globally employable, in contrast to 25 percent of Indian and 10 percent of Chinese engineers.

Not only are the international numbers inflated, they also mask a significant deficit in quality, said Vivek Wadhwa, executive-in-residence of Duke's engineering management program.

"Government officials keep talking about competition because of a shortage of engineers in the U.S.," Wadhwa said. "That's all nonsense.

"In the U.S., there's a recognition of the fact that engineering graduates need to integrate their engineering skills with other skills that make them effective in the business world and global economy," Gereffi said.

Transactional engineers "possess solid technical training, but... are less likely to generate out-of-the-box solutions or innovative results," the report reads.

Dynamic engineers, on the other hand, "thrive in teams, work well across international borders... and are in high demand regardless of their location."

 
At 10/09/2011 1:24 PM, Blogger PeakTrader said...

There are many excellent engineering schools in the U.S..

A friend of mine graduated from the Colorado School of Mines with a chemical engineering degree, and he makes a lot of money at an oil company.

 
At 10/09/2011 1:41 PM, Blogger AIG said...

"AIG, the quality of U.S. engineers is better:"

I'm not saying otherwise. I'm an engineer in the US myself. But that is besides the point. Engineers in the US don't create 50 times the value of an equivalent engineer in China, because "we are better". We're not 50 times "better". They "know" the same things we "know". They use the same tools we use.

We can only be "better" if we have access to the opportunities that a free market provides.

 
At 10/09/2011 6:01 PM, OpenID Sprewell said...

AIG, we're on the same page, the freer market here is no doubt a much bigger piece of the equation. As for difficult topics, I did note that the foreign curricula are unnecessarily hard. I actually think too much math/science is currently forced on most students everywhere and that the number of engineers is a useless statistic. Steve Jobs was not an engineer. Unlike Bill Gates, I don't think he ever wrote any code in his life. Instead, he was apparently a business and design-minded guy who learnt enough superficial technical details to get by. Focusing on numbers of engineers is just a dumb way to approach this stuff.

Peak, flatter bell curve also implies more poor or underdeveloped people, as it implies equally flatter on both ends. ;) I think you mean a different kind of curve, one which looks kind of like a bell curve but where the high end is more developed. You are right that the number of foreign engineers doesn't matter, and one reason is because they have a bunch of degree mills that churn a bunch of "engineers," who aren't really prepared for such work. But even if only 10% are as good as an average US engineer, as long as China and India are churning out 20 times the engineering graduates, they have twice the number of decent US engineers. ;) The real reason the number of engineers doesn't matter is because that's not the bottleneck.

The bottleneck is people like Jobs, who can integrate relevant information from a wide array of fields- in his case, tech, media, business- and reason about the best way forward. Gates came out with a tablet PC a decade ago and said they would be dominant by 2006, he was off by a decade. ;) He simply pushed tablets too early, before the hardware was small and light enough and before we had widespread data networks that were fast enough. Jobs waited till all the ingredients were right and made his big push last year, at a very opportune time: Apple still dominates tablets to this day. That didn't take any great technical insight, yet the delicate blend of cross-disciplinary information it took wasn't recognized by anyone else, or at least they certainly didn't act on it. Now that Gates has left Microsoft, nobody there made that big push at the right time, nor did any other major computer manufacturer. In fact, I was wondering what took Apple so long: I was telling people, "Where's Apple's tablet?" a year or two before they finally released it.

 
At 10/09/2011 11:27 PM, Blogger AIG said...

"I think you mean a different kind of curve, one which looks kind of like a bell curve but where the high end is more developed."

Skewed ;)

 
At 10/10/2011 1:23 AM, Blogger PeakTrader said...

When I was in grad econ, almost all of the foreign students, mostly from various Asian and Middle East countries, worked for their governments, while almost none of the American students worked for the government, although many of them didn't have jobs (also, I think, the foreign students were a little older on average).

So, perhaps, a larger proportion of top foreign students or graduates work for their governments, rather than work in private businesses, compared to the U.S..

Also, in the U.S., there are many high quality public and private schools through 12th grade, and also many low quality schools.

However, the U.S. has a vast high quality university system, where even average schools are high quality, unlike in foreign countries, where there are few high quality universities.

 
At 10/10/2011 8:46 AM, Blogger AIG said...

Peak, in your area perhaps that is the case. There aren't many economics jobs that aren't in government in other countries (or in the US for that matter)

Their top students, however, come here. Those that don't come here, don't only because they can't afford it, not for lack of trying. And that, to me, says everything I need to know about where the US education system and economy stands compared to the rest of the world.

 
At 10/10/2011 11:49 AM, Blogger sethstorm said...


What matters is that Siemens, a company that employs 60,000 Americans, has 3,000 job openings that it just can't fill.

The CEO said that they have hired everyone they can find that's capable of working in a "Modern" factory, and they're 3,000 short.

What matters is the CEOs of Numerous Fortune 500 Companies are saying the same thing.

They need to learn how to train people up in the US. The businesses aren't 3000 people short, they're just too picky.



Abject poverty isn't enough of an incentive?

That's the wrong incentive. Forcing or constructing desperation onto the unemployed is no better than creating slavery.

 
At 10/10/2011 5:48 PM, Blogger PeakTrader said...

AIG says: "There aren't many economics jobs that aren't in government in other countries (or in the US for that matter)."

Many private U.S. firms have a chief economist and staff, and many Americans have grad econ degrees they use in private firms, e.g. CEO, investing, consulting, etc..

 
At 10/10/2011 11:36 PM, Blogger truth or consequences said...

guys like AIG and Peak Trader really "kill" me.....and are the reason I visit here to view how warped a vision of the world Americans can actually have.....MAN!...it's constantly entertaining I tell ya:):):)

to wit:

"However, the U.S. has a vast high quality university system, where even average schools are high quality, unlike in foreign countries, where there are few high quality universities."

LOL...."foreign countries"???? like, is that like places you have to fly to???....LOL (clue: other countries ARE foreign, Bubba, end of story)

"Their top students, however, come here. Those that don't come here, don't only because they can't afford it, not for lack of trying. And that, to me, says everything I need to know about where the US education system and economy stands compared to the rest of the world."

Humm...now there's a statement! Sounds good don't it????

Except.....of the 500 BEST rated universities in the WORLD (even including those in "foreign" countries LOL)....168 of them are located in the USA.....yeah!...that rates the US as having the GREATEST number of top 500 universities in the whole world....double yeah!!!!

But you know what???? The US ranks just about in the MIDDLE of the pack when it comes to top 500 universities divided by population for the top seven nations (US, germany, uk, jap, ita, can, france)


Middle of the pack is good. Why Peak Trader and AIG insist the US is MILES ahead in that department is strange...must be an American "thang";) USA USA USA

Come on boys....quit repeating what you've been indoctrinated into thinking in junior high....and get the facts.....

and if you're gonna question my sources......just google CIA (world factbook)....cause that is where I got the information I just posted.....You gonna argue with the CIA?????...LOL

Wake up!...cause the rest of the world needs you awake, wide awake...really I'm serious... TC

 
At 10/11/2011 2:08 AM, Blogger PeakTrader said...

Truth or consequences, using one source, particularly a source that overestimated the Soviet economy for decades, is not the most reliable methodology.

You need to look at actual data in the context of a sound model.

You'll find some realities:

1. There's a positive correlation between education and income. The U.S. has one of the highest per capita incomes and an even higher per capita standard of living than almost every country in the world, which is remarkable for a large country.

2. The U.S. not only leads the world in the Information and Biotech Revolutions (in both revenues and profits), it leads the rest of the world combined (the U.S. has less than 5% of the world's population).

3. Although golf originated in Europe, most of the top 100 golfers in the world are American.

Etc.

 

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