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Monday, August 07, 2006

Beyond "techno-fetichism & -nationalism": God Bless America´s Venturesome Consumers

I came across a refreshing article in the Economics Focus column of this Friday´s issue of the opinion-shaping, free-market, weekly, British magazine The Economist.

Amar Bidhé, a Professor of entrepreneurship at Columbia University´s business school, explained in a recent paper why mushrooming alarming reports stating that the US economy will suffer from a shortcoming of engineering graduates are mistaken.

Bidhé distinguishes upstream (R&D offsprings, inventions) and downstream (a service or product) innovations, and demonstrates that good managers, able for instance to bring a patent to the market, matter as much if not more than good engineers. Bidhé also advocates the Wal Mart case, striking a positive opinion about a company that has optimized its operational processes (downstream innovation) to lower prices and attract more consumers.

I recommend you to read Bidhé´s paper as well as The Economist´s column, which ends with Amar Bidhé´s main idea: there is no added value without a transaction, and since American consumers often lead the use of innovation products & services, the more innovation in China & India, the better for the United States. Consumers, not technologists, reap off the benefits of innovation. Hence the whole point of the demonstration: "America´s policymakers should worry more about how to keep consumers consuming than about the number of science and engineering graduates, at home or in the East" (source: The Economist).


  • Hi Jeremy,

    I don't see the connection between worrying about less engineers and a more consuming society. I agree that more innovation elsewhere will also - within a limited time-frame - affect the American consumer, and companies that form the link in the distribution of these products and services, positively.

    However, looking at a longer time-frame, the lack of 'inhouse' innovation means that the high margins that can only be earned from disruptive innovation are not earned by US companies, which will eventually translate negatively down to the consumer.

    This, to me, explains why basically every country worries, and should worry about getting more engineers and other producers of high-tech innovations.

    That being said, countries like China and India benefited from representing a large consumer-market, because that meant that eventually there could be a spillover-effect from more advanced technology-producers being located there. If the US does start to suffer from a lack of innovation, it would not surprise me if this would be one of the strategies they would use. But them getting to that point will require some serious f**k-ups, and I doubt it will come to that.

    By Blogger Vincent van Wylick, at 8/08/2006 02:07:00 AM  

  • Hey Vincent,

    On your two points:

    - I´m glad you don´t see the connection between less engineers and a better (not "more") Consumers Society, since there is no such connection.

    - About the high-margin thing. You´re totally right. For instance, the French luxury industry has a positive impact on the French economy, although its n.1 market is Japan.
    However, if you have consumers, it means they can afford purchasing. And if people can afford purchasing, it implies they have a job. And if they have a job, it means companies pay them, and if they pay them, it means such companies are profitable or they wouldn´t exist. Since these organizations are profitable, they pay taxes, enriching the Nation they live in. Such a Nation may invest in better infrastructure to connect the country to others, easing business in general.
    Furthermore, being Indian working in India doesn´t mean you´re working for the Indian government or an Indian company. Such phenomena as outsourcing or foreign direct investments, and clever taxation-shield strategies, lowers the impact of not "producing locally" many technologists anymore.

    By Blogger Jeremy Fain, at 8/08/2006 11:42:00 AM  

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