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In the previous chapters, I showed why both classic economic theory and the inherent strengths of the American economy have convinced me that American individuals have nothing to worry about from a flat world-provided we roll up our sleeves, be ready to compete, get every individual to think about how he or she upgrades his or her educational skills, and keep investing in the secrets of the American sauce. Those chapters were all about what we must do and can do.
This chapter is about how we Americans, individually and collectively, have not been doing all these things that we should be doing and what will happen down the road if we don't change course.
The truth is, we are in a crisis now, but it is a crisis that is unfolding very slowly and very quietly. It is “a quiet crisis,” explained Shirley Ann Jackson, the 2004 president of the American Association for the Advancement of Science and president of Rensselaer Polytechnic Institute since 1999. (Rensselaer is America's oldest technological college, founded in 1824.) And this quiet crisis involves the steady erosion of America's scientific and engineering base, which has always been the source of American innovation and our rising standard of living.
“The sky is not falling, nothing horrible is going to happen today,” said Jackson, a physicist by training who chooses her words carefully. “The U.S. is still the leading engine for innovation in the world. It has the best graduate programs, the best scientific infrastructure, and the capital markets to exploit it. But there is a quiet crisis in U.S. science and technology that we have to wake up to. The U.S. today is in a truly global environment, and those competitor countries are not only wide awake, they are running a marathon while we are running sprints. If left unchecked, this could challenge our preeminence and capacity to innovate.”
And it is our ability to constantly innovate new products, services, and companies that has been the source of America's horn of plenty and steadily widening middle class for the last two centuries. It was American innovators who started Google, Intel, HP, Dell, Microsoft, and Cisco, and it matters where innovation happens. The fact that all these companies are headquartered in America means that most of the high-paying jobs are here, even if these companies outsource or offshore some functions. The executives, the department heads, the sales force, and the senior researchers are all located in the cities where the innovation happened. And their jobs create more jobs. The shrinking of the pool of young people with the knowledge skills to innovate won't shrink our standard of living overnight. It will be felt only in fifteen or twenty years, when we discover we have a critical shortage of scientists and engineers capable of doing innovation or even just high-value-added technology work. Then this won't be a quiet crisis anymore, said Jackson, “it will be the real McCoy.”
Shirley Ann Jackson knows of what she speaks, because her career exemplifies as well as anyone's both why America thrived so much in the past fifty years and why it won't automatically do the same in the next fifty. An African-American woman, Jackson was born in Washington, D.C., in 1946. She started kindergarten in a segregated public school but was one of the first public school students to benefit from desegregation, as a result of the Supreme Court ruling in Brown v. Board of Education. Just when she was getting a chance to go to a better school, the Russians launched Sputnik in 1957, and the U.S. government became obsessed with educating young people to become scientists and engineers, a trend that was intensified by John F. Kennedy's commitment to a manned space program. When Kennedy spoke about putting a man on the moon, Shirley Ann Jackson was one of the millions of American young people who were listening. His words, she recalled, “inspired, assisted, and launched many of my generation into science, engineering and mathematics,” and the breakthroughs and inventions they spawned went well beyond the space program. “The space race was really a science race,” she said.
Thanks in part to desegregation, both Jackson's inspiration and intellect were recognized early, and she ultimately became the first African-American woman to earn a Ph.D. in physics from MIT (her degree was in theoretical elementary particle physics). From there, she spent many years working for AT&T Bell Laboratories, and in 1995 was appointed by President Clinton to chair the U.S. Nuclear Regulatory Commission.
As the years went by, though, Jackson began to notice that fewer and fewer young Americans were captivated by national challenges like the race to the moon, or felt the allure of math, science, and engineering. In universities, she noted, graduate enrollment in science and engineering programs, having grown for decades, peaked in 1993, and despite some recent progress, it remains today below the level of a decade ago. So the science and engineering generations that followed Jackson's got smaller and smaller relative to our needs. By the time Jackson took the job as Rensselaer Polytechnic's president to put her heart and soul into reinvig-orating American science and engineering, she realized, she said, that a “perfect storm” was brewing-one that posed a real long-term danger to America's economic health-and she started speaking out about it whenever she could.
“The phrase 'the perfect storm' is associated with meteorological events in October 1991,” said Jackson in a speech in May 2004, when “a powerful weather system gathered force, ravaging the Atlantic Ocean over the course of several days, [and] caused the deaths of several Massachusetts-based fishermen and billions of dollars of damage. The event became a book, and, later, a movie. Meteorologists observing the event emphasized... the unlikely confluence of conditions... in which multiple factors converged to bring about an event of devastating magnitude. [A] similar worst-case scenario could arrest the progress of our national scientific and technological capacity. The forces at work are multiple and complex. They are demographic, political, economic, cultural, even social.” Individually, each of these forces would be problematic, added Jackson. In combination, they could be devastating. “For the first time in more than a century, the United States could well find itself falling behind other countries in the capacity for scientific discovery, innovation and economic development.”
The way to avoid being caught in such a storm is to identify the confluence of factors and to change course-even though right now the sky is blue, the winds are gentle, and the water seems calm. But that is not what has been going on in America in recent years. We are blithely sailing along, heading straight for the storm, with both politicians and parents insisting that no dramatic changes or sacrifices are required now. After all, look how calm and sunny it is outside, they tell us. In the fiscal year 2005 budget passed by the Republican-led Congress in November 2004, the budget for the National Science Foundation, which is the federal body most responsible for promoting research and funding more and better science education, was actually cut by 1.9 percent, or $105 million. History will show that when America should have been doubling the NSF funding, its Congress passed a pork-laden budget that actually cut assistance for science and engineering.
Don't be fooled by the calm. That's always the time to change course-not when you're just about to get hit by the typhoon. We don't have any time to waste in addressing the “dirty little secrets” of our education system.
Dirty Little Secret #1: The Numbers Gap
In the Cold War, one of the deepest causes of American worries was the so-called missile gap between us and the Soviet Union. The perfect storm Shirley Ann Jackson is warning about could best be described as the confluence of three new gaps that have been slowly emerging to sap America's prowess in science, math, and engineering. They are the numbers gap, the ambition gap, and the education gap. In the Age of Flatism, these gaps are what most threaten our standard of living.
Dirty little secret number one is that the generation of scientists and engineers who were motivated to go into science by the threat of Sputnik in 1957 and the inspiration of JFK are reaching their retirement years and are not being replaced in the numbers that they must be if an advanced economy like that of the United States is to remain at the head of the pack. According to the National Science Foundation, half of America's scientists and engineers are forty years or older, and the average age is steadily rising.
Just take one example-NASA. An analysis of NASA records conducted by the newspaper Florida Today (March 7, 2004), which covers the Kennedy Space Center, showed the following: Nearly 40 percent of the 18,146 people at NASA are age fifty or older. Those with twenty years of government service are eligible for early retirement. Twenty-two percent of NASA workers are fifty-five or older. NASA employees over sixty outnumber those under thirty by a ratio of about three to one. Only 4 percent of NASA workers are under thirty. A 2003 Government Accounting Office study concluded that NASA was having difficulty hiring people with the sufficient science, engineering, and information-technology skills that are critical to its operations. Many of these jobs are reserved for American citizens, because of national security concerns. Then-NASA administrator Sean O'Keefe testified before Congress in 2002: “Our mission of understanding and protecting our home planet and exploring the universe and searching for life will not be carried out if we don't have the people to do it.” The National Commission on Mathematics and Science Teaching for the Twenty-first Century, chaired by the former astronaut and senator John Glenn, found that two-thirds of the nation's mathematics and science teaching force will retire by 2010.
Traditionally we made up for any shortages of engineers and science faculty by educating more at home and importing more from abroad. But both of those remedies have been stalled of late.
Every two years the National Science Board supervises the collection of a very broad set of data trends in science and technology in the United States, which it publishes as Science and Engineering Indicators. In preparing Indicators 2004, the NSB said, “We have observed a troubling decline in the number of U.S. citizens who are training to become scientists and engineers, whereas the number of jobs requiring science and engineering (S&E) training continues to grow.” These trends threaten the economic welfare and security of our country, it said, adding that if the trends identified in Indicators 2004 continue undeterred, three things will happen: “The number of jobs in the U.S. economy that require science and engineering training will grow; the number of U.S. citizens prepared for those jobs will, at best, be level; and the availability of people from other countries who have science and engineering training will decline, either because of limits to entry imposed by U.S. national security restrictions or because of intense global competition for people with these skills.”
The NSB report found that the number of American eighteen-to-twenty-four-year-olds who receive science degrees has fallen to seventeenth in the world, whereas we ranked third three decades ago. It said that of the 2.8 million first university degrees (what we call bachelor's degrees) in science and engineering granted worldwide in 2003, 1.2 million were earned by Asian students in Asian universities, 830,000 were granted in Europe, and 400,000 in the United States. In engineering specifically, universities in Asian countries now produce eight times as many bachelor's degrees as the United States.
Moreover, “the proportional emphasis on science and engineering is greater in other nations,” noted Shirley Ann Jackson. Science and engineering degrees now represent 60 percent of all bachelor's degrees earned in China, 33 percent in South Korea, and 41 percent in Taiwan. By contrast, the percentage of those taking a bachelor's degree in science and engineering in the United States remains at roughly 31 percent. Factoring out science degrees, the number of Americans who graduate with just engineering degrees is 5 percent, as compared to 25 percent in Russia and 46 percent in China, according to a 2004 report by Trilogy Publications, which represents the national U.S. engineering professional association.
The United States has always depended on the inventiveness of its people in order to compete in the world marketplace, said the NSB. “Preparation of the S&E workforce is a vital arena for national competitiveness. [But] even if action is taken today to change these trends, the reversal is 10 to 20 years away.” The students entering the science and engineering workforce with advanced degrees in 2004 decided to take the necessary math courses to enable this career path when they were in middle school, up to fourteen years ago, the NSB noted. The students making that same decision in middle school today won't complete advanced training for science and engineering occupations until 2018 or 2020. “If action is not taken now to change these trends, we could reach 2020 and find that the ability of U.S. research and education institutions to regenerate has been damaged and that their preeminence has been lost to other areas of the world,” the science board said.
These shortages could not be happening at a worse time-just when the world is going flat. “The number of jobs requiring science and engineering skills in the U.S. labor force,” the NSB said, “is growing almost 5 percent per year. In comparison, the rest of the labor force is growing at just over 1 percent. Before September 11, 2001, the Bureau of Labor Statistics (BLS) projected that science and engineering occupations would increase at three times the rate of all occupations.” Unfortunately, the NSB reported, the average age of the science and engineering workforce is rising.
“Many of those who entered the expanding S&E workforce in the 1960s and 1970s (the baby boom generation) are expected to retire in the next twenty years, and their children are not choosing science and engineering careers in the same numbers as their parents,” the NSB report said. “The percentage of women, for example, choosing math and computer science careers fell 4 percentage points between 1993 and 1999.”
The 2002 NSB indicators showed that the number of science and engineering Ph.D.'s awarded in the United States dropped from 29,000 in 1998 to 27,000 in 1999. The total number of engineering undergraduates in America fell about 12 percent between the mid-1980s and 1998.
Nevertheless, America's science and engineering labor force grew at a rate well above that of America's production of science and engineering degrees, because a large number of foreign-born S&E graduates migrated to the United States. The proportion of foreign-born students in S&E fields and workers in S&E occupations continued to rise steadily in the 1990s. The NSB said that persons born outside the United States accounted for 14 percent of all S&E occupations in 1990. Between 1990 and 2000, the proportion of foreign-born people with bachelor's degrees in S&E occupations rose from 11 to 17 percent; the proportion of foreign-born with master's degrees rose from 19 to 29 percent; and the proportion of foreign-born with Ph.D.'s in the S&E labor force rose from 24 to 38 percent. By attracting scientists and engineers born and trained in other countries we have maintained the growth of the S&E labor force without a commensurate increase in support for the long-term costs of training and attracting native U.S citizens to these fields, the NSB said.
But now, the simultaneous flattening and wiring of the world have made it much easier for foreigners to innovate without having to emigrate. They can now do world-class work for world-class companies at very decent wages without ever having to leave home. As Allan E. Goodman, president of the Institute of International Education, put it, “When the world was round, they could not go back home, because there was no lab to go back to and no Internet to connect to. But now all those things are there, so they are going back. Now they are saying, 'I feel more comfortable back home. I can live more comfortably back home than in New York City and I can do good work, so why not go back?'” This trend started even before the visa hassles brought on by 9/11, said Goodman. “The brain gain started to go to brain drain around the year 2000.”
As the NSB study noted, “Since the 1980s other countries have increased investment in S&E education and the S&E workforce at higher rates than the United States has. Between 1993 and 1997, the OECD countries [Organization for Economic Co-operation and Development, a group of 40 nations with highly developed market economies] increased their number of S&E research jobs 23 percent, more than twice the 11 percent increase in S&E research jobs in the United States.”
In addition, it said, visas for students and S&E workers have been issued more slowly since the events of September 11, owing to both increased security restrictions and a drop in applications. The U.S. State Department issued 20 percent fewer visas for foreign students in 2001 than in 2000, and the rate fell farther in subsequent years. While university presidents told me in 2004 that the situation was getting better, and that the Department of Homeland Security was trying to both speed up and simplify its visa procedures for foreign students and scientists, a lot of damage has been done, and the situation for foreign students or scientists wanting to work in any areas deemed to have national security implications is becoming a real problem. No wonder New York Times education writer Sam Dillon reported on December 21, 2004, that “foreign applications to American graduate schools declined 28 percent this year. Actual foreign graduate student enrollments dropped 6 percent. Enrollments of all foreign students, in undergraduate, graduate and postdoctoral programs, fell for the first time in three decades in an annual census released this fall. Meanwhile, university enrollments have been surging in England, Germany and other countries... Chinese applications to American graduate schools fell 45 percent this year, while several European countries announced surges in Chinese enrollment.”
Dirty Little Secret #2: The Ambition Gap
The second dirty little secret, which several prominent American CEOs told me only in a whisper, goes like this: When they send jobs abroad, they not only save 75 percent on wages, they get a 100 percent increase in productivity. Part of that is understandable. When you take a low-wage, low-prestige job in America, like a call center operator, and bring it over to India, where it becomes a high-wage, high-prestige job, you end up with workers who are paid less but motivated more. “The dirty little secret is that not only is [outsourcing] cheaper and efficient,” the American CEO of a London-headquartered multinational told me, “but the quality and productivity [boost] is huge.” In addition to the wage compression, he said, one Bangalore Indian re-trained will do the work of two or three Europeans, and the Bangalore employees don't take six weeks of holidays. “When you think it's only about wages,” he added, “you can still hold your dignity, but the fact that they work better is awful.”
A short time after returning from India, I was approached in an airport by a young man who wanted to talk about some columns I had written from there. We had a nice chat, I asked him for his card, and we struck up an e-mail friendship. His name is Mike Arguello, and he is an IT systems architect living in San Antonio. He does high-end IT systems design and does not feel threatened by foreign competition. He also teaches computer science. When I asked him what we needed to do in America to get our edge back, he sent me this e-mail:
I taught at a local university. It was disheartening to see the poor work ethic of many of my students. Of the students I taught over six semesters, I'd only consider hiring two of them. The rest lacked the creativity, problem-solving abilities and passion for learning. As you well know, India's biggest advantage over the Chinese and Russians is that they speak English. But it would be wrong to assume the top Indian developers are better than their American counterparts. The advantage they have is the number of bodies they can throw at a problem. The Indians that I work with are the cream of the crop. They are educated by the equivalents of MIT back in India and there are plenty of them. If you were to follow me in my daily meetings it would become very obvious that a great deal of my time is spent working with Indians. Most managers are probably still under the impression that all Indians are doing is lower-end software development-“software assembly.” But technologies, such as Linux, are allowing them to start taking higher-paying system design jobs that had previously been the exclusive domain of American workers. It has provided them with the means to move up the technology food chain, putting them on par with domestic workers. It's brain power against brain power, and in this area they are formidable. From a technology perspective, the world is flat and getting flatter (if that is possible). The only two areas that I have not seen Indian labor in are networking architects and system architects, but it is only a matter of time. Indians are very bright and they are quickly learning from their interaction with system architects just how all of the pieces of the IT puzzle fit together... Were Congress to pass legislation to stop the flow of Indian labor, you would have major software systems that would have nobody who knew what was going on. It is unfortunate that many management positions in IT are filled with non-technical managers who may not be fully aware of their exposure... I'm an expert in information systems, not economics, but I know a high-paying job requires one be able to produce something of high value. The economy is producing the jobs both at the high end and low end, but increasingly the high-end jobs are out of reach of many. Low education means low-paying jobs, plain and simple, and this is where more and more Americans are finding themselves. Many Americans can't believe they aren't qualified for high-paying jobs. I call this the “American Idol problem.” If you've ever seen the reaction of contestants when Simon Cowell tells them they have no talent, they look at him in total disbelief. I'm just hoping someday I'm not given such a rude awakening.
In the winter of 2004 I had tea in Tokyo with Richard C. Koo, chief economist for the Nomura Research Institute. I tested out on Richard my “coefficient of flatness”: the notion that the flatter one's country is-that is, the fewer natural resources it has-the better off it will be in a flat world. The ideal country in a flat world is the one with no natural resources, because countries with no natural resources tend to dig inside themselves. They try to tap the energy, entrepreneurship, creativity, and intelligence of their own people-men and women-rather than drill an oil well. Taiwan is a barren rock in a typhoon-laden sea, with virtually no natural resources-nothing but the energy, ambition, and talent of its own people-and today it has the third-largest financial reserves in the world. The success of Hong Kong, Japan, South Korea, and coastal China can all be traced to a similar flatness.
“I am a Taiwanese-American with a father from Taiwan and with a Japanese mother,” Koo told me. “I was bom in Japan and went to Japanese elementary school and then moved to the States. There is a saying in China that whatever you put in your head and your stomach, no one can take away from you. In this whole region, that is in the DNA. You just have to study hard and move forward. I was told relatively early by my teachers, 'We can never live like Americans and Canadians. We have no resources. We have to study hard, work hard, and export hard.'”
A few weeks later I had breakfast in Washington with P. V. Kannan, CEO of 24/7 Customer. When it comes to the flat world, said P.V., he had just one question: “Is America prepared? It is not... You've gotten a little contented and slow, and the people who came into the field with [the triple convergence] are really hungry. Immigrants are always hungry-and they don't have a backup plan.”
A short time later I read a column by Steven Pearlstein, The Washington Post's business columnist/reporter, under the headline “Europe's Capitalism Curtain.” From Wroclaw, Poland (July 23, 2004), Pearlstein wrote: “A curtain has descended across Europe. On one side are hope, optimism, freedom and prospects for a better life. On the other side, fear, pessimism, suffocating government regulations and a sense that the best times are in the past.” This new curtain, Pearlstein argued, demarks Eastern Europe, which is embracing capitalism, and Western Europe, which is wishing desperately that it would go away.
“This time, however, it is the East that is likely to prevail,” he continued. “The energy and sense of possibility are almost palpable here... Money and companies are pouring in-not just the prestige nameplates like Bombardier, Siemens, Whirlpool, Toyota and Volvo, but also the network of suppliers that inevitably follows them. At first, most of the new jobs were of the semi-skilled variety. Now they have been followed by design and engineering work that aims to tap into the largest concentration of university students in Eastern Europe... The secret isn't just lower wages. It's also the attitude of workers who take pride and are willing to do what is necessary to succeed, even if it means outsourcing parts production or working on weekends or altering vacation schedules— things that would almost certainly trigger months of acrimony and negotiation in Western Europe. 'The people back home, they haven't got any idea how much they need to change if they want to preserve what they have,' said Jose Ugarte [a Basque who heads the appliance manufacturing operations of Mondragon, the giant Spanish industrial cooperative]. 'The danger to them is enormous. They don't realize how fast this is happening...' It's not the dream of riches that animates the people of Wroclaw so much as the determination to work hard, sacrifice what needs to be sacrificed and change what needs to be changed to close the gap with the West. It is that pride and determination, says Wroclaw's mayor, Rafal Dutkiewicz, that explain why they are such a threat to the 'leisure-time society' on the other side of the curtain.”
I heard a similar refrain in a discussion with consular officials who oversee the granting of visas at the U.S. embassy in Beijing. As one of them put it to me, “I do think Americans are oblivious to the huge changes. Every American who comes over to visit me [in China] is just blown away... Your average kid in the U.S. is growing up in a wealthy country with many opportunities, and many are the kids of advantaged educated people and have a sense of entitlement. Well, the hard reality for that kid is that fifteen years from now Wu is going to be his boss and Zhou is going to be the doctor in town. The competition is coming, and many of the kids are going to move into their twenties clueless about these rising forces.”
When I asked Bill Gates about the supposed American education advantage-an education that stresses creativity, not rote learning-he was utterly dismissive. In his view, those who think that the more rote learning systems of China and Japan can't turn out innovators who can compete with Americans are sadly mistaken. Said Gates, “I have never met the guy who doesn't know how to multiply who created software... Who has the most creative video games in the world? Japan! I never met these 'rote people'... Some of my best software developers are Japanese. You need to understand things in order to invent beyond them.”
One cannot stress enough: Young Chinese, Indians, and Poles are not racing us to the bottom. They are racing us to the top. They do not want to work for us; they don't even want to be us. They want to dominate us-in the sense that they want to be creating the companies of the future that people all over the world will admire and clamor to work for. They are in no way content with where they have come so far. I was talking to a Chinese-American who works for Microsoft and has accompanied Bill Gates on visits to China. He said Gates is recognized everywhere he goes in China. Young people there hang from the rafters and scalp tickets just to hear him speak. Same with Jerry Yang, the founder of Yahoo!
In China today, Bill Gates is Britney Spears. In America today, Britney Spears is Britney Spears-and that is our problem.
Dirty Little Secret #3: The Education Gap
All of this helps to explain the third dirty little secret: A lot of the jobs that are starting to go abroad today are very high-end research jobs, because not only is the talent abroad cheaper, but a lot of it is as educated as American workers—or even more so. In China, where there are 1.3 billion people and the universities are just starting to crack the top ranks, the competition for top spots is ferocious. The math/science salmon that swims upstream in China and gets itself admitted to a top Chinese university or hired by a foreign company is one smart fish. The folks at Microsoft have a saying about their research center in Beijing, which, for scientists and engineers, is one of the most sought-after places to work in all of China. “Remember, in China when you are one in a million— there are 1,300 other people just like you.”
The brainpower that rises to the Microsoft research center in Beijing is already one in a million.
Consider the annual worldwide Intel International Science and Engineering Fair. About forty countries participate by nominating talent through local affiliate affairs. In 2004, the Intel Fair attracted around sixty-five thousand American kids, according to Intel. How about in China? I asked Wee Theng Tan, the president of Intel China, during a visit to Beijing. In China, he told me, there is a national affiliate science fair, which acts as a feeder system to select kids for the global Intel fair. “Almost every single province has students going to one of these affiliate fairs,” said Tan. “We have as many as six million kids competing, although not all are competing for the top levels... [But] you know how seriously they take it. Those selected to go to the international [Intel] fair are immediately exempted from college entrance exams” and basically get their choice of any top university in China. In the 2004 Intel Science Fair, China came home with thirty-five awards, more than any other country in Asia, including one of the top three global awards.
Microsoft has three research centers in the world: in Cambridge, England; in Redmond, Washington, its headquarters; and in Beijing. Bill Gates told me that within just a couple of years of its opening in 1998, Microsoft Research Asia, as the center in Beijing is known, had become the most productive research arm in the Microsoft system “in terms of the quality of the ideas that they are turning out. It is mind-blowing.”
Kai-Fu Li is the Microsoft executive who was assigned by Gates to open the Microsoft research center in Beijing. My first question to him was, “How did you go about recruiting the staff?” Li said his team went to universities all over China and simply administered math, IQ, and programming tests to Ph.D.-level students or scientists.
“In the first year, we gave about 2,000 tests all around,” he said. From the 2,000, they winnowed the group down to 400 with more tests, then 150, “and then we hired 20.” They were given two-year contracts and told that at the end of two years, depending on the quality of their work, they would either be given a longer-term contract or granted a postdoctoral degree by Microsoft Research Asia. Yes, you read that right. The Chinese government gave Microsoft the right to grant postdocs. Of the original twenty who were hired, twelve survived the cut. The next year, nearly four thousand people were tested. After that, said Li, “we stopped doing the test. By that time we became known as the number one place to work, where all the smart computer and math people wanted to work... We got to know all the students and professors. The professors would send their best people there, knowing that if the people did not work out, it would be their credibility [on the line]. Now we have the top professors at the top schools recommending their top students. A lot of students want to go to Stanford or MIT, but they want to spend two years at Microsoft first, as interns, so they can get a nice recommendation letter that says these are MIT quality.” Today Microsoft has more than two hundred researchers in its China lab and some four hundred students who come in and out on projects and become recruiting material for Microsoft.
“They view this as a once-in-a-lifetime income opportunity/' said Li of the team at Microsoft Research Asia. ”They saw their parents going through the Cultural Revolution. The best they could do was become a professor, do a little project on the side because a professor's pay is horrible, and maybe get one paper published. Now they have this place where all they do is research, with great computers and lots of resources. They have administrators-we hire people to do the dirty work. They just could not believe it. They voluntarily work fifteen to eighteen hours a day and come in on weekends. They work through holidays, because their dream is to get to Microsoft.“ Li, who had worked for other American high-tech firms before coming to Microsoft, said that until starting Microsoft Research Asia, he had never seen a research lab with the enthusiasm of a start-up company.
“If you go in at two a.m. it is full, and at eight a.m. it is full,” he said.
Microsoft is a stronger American company for being able to attract all this talent, said Li. “Now we have two hundred more brilliant people building [intellectual property] and patents. These two hundred people are not replacing people in Redmond. They are doing new research in areas applicable worldwide.”
Microsoft Research Asia has already developed a worldwide reputation for producing cutting-edge papers for the most important scientific journals and conferences. “This is the culture that built the Great Wall,” he added, “because it is a dedicated and direction-following culture.”
Chinese people, explained Li, have both a superiority and an inferiority complex at the same time, which helps explain why they are racing America to the top, not the bottom. There is a deep and widely shared view that China was once great, that it succeeded in the past but now is far behind and must catch up again. “So there is a patriotic desire,” he said. “If our lab can do as well as the Redmond lab, that could be really exciting.”
That sort of inspired leadership in science and engineering education is now totally missing in the United States.
Said Intel chairman Craig Barrett, “U.S. technological leadership, innovation, and jobs of tomorrow require a commitment to basic research funding today.” According to a 2004 study by the Task Force on the Future of American Innovation, an industry-academic coalition, basic research performed at leading U.S. universities-research in chemistry, physics, nanotechnology, genomics, and semiconductor manufacturing-has created four thousand spin-off companies that hired 1.1 million employees and have annual world sales of $232 billion. But to keep moving ahead, the study said, there must be a 10 to 12 percent increase each year for the next five to seven years in the budgets of key research-funding agencies: the National Institute for Science and Technology, the National Science Foundation, the Department of Energy's Office of Science, and the Department of Defense research accounts.
Unfortunately, federal funding for research in physical and mathematical sciences and engineering, as a share of GDP, actually declined by 37 percent between 1970 and 2004, the task force found. At a time when we need to be doubling our investments in basic research to overcome the ambition and education gaps, we are actually cutting that funding.
In the wake of the Bush administration and the Republican Congress's decision to cut the National Science Foundation funding for 2005, Republican congressman Vern Ehlers of Missouri, a voice in the wilderness, made the following statement: “While I understand the need to make hard choices in the face of fiscal constraint, I do not see the wisdom in putting science funding behind other priorities. We have cut NSF despite the fact that this omnibus bill increases spending for the 2005 fiscal year, so clearly we could find room to grow basic research while maintaining fiscal constraint. But not only are we not keeping pace with inflationary growth, we are actually cutting the portion basic research receives in the overall budget. This decision shows dangerous disregard for our nation's future, and I am both concerned and astonished that we would make this decision at a time when other nations continue to surpass our students in math and science and consistently increase their funding of basic research. We cannot hope to fight jobs lost to international competition without a well-trained and educated workforce.”
No, we cannot, and the effects are starting to show. According to the National Science Board, the percentage of scientific papers written by Americans has fallen 10 percent since 1992. The percentage of American papers published in the top physics journal, Physical Review, has fallen from 61 percent to 29 percent since 1983. And now we are starting to see a surge in patents awarded to Asian countries. From 1980 to 2003, Japan's share of world industrial patents rose from 12 percent to 21 percent, and Taiwan's from 0 percent to 3 percent. By contrast, the U.S. share of patents has fallen from 60 percent to 52 percent since 1980.
Any honest analysis of this problem should note that there are some skeptics who believe that the sky is not falling and that scientists and the technology industry might be hyping some of this data, just to get more funding. A May 10, 2004, article in the San Francisco Chronicle quoted Daniel S. Greenberg, former news editor of the journal Science and author of the book Science, Money and Politics, who argues that “inside-the-Beltway science (lobbying) has always been insatiable. If you double the NIH (National Institutes of Health) budget in five years (as recently happened), they're (still) screaming their heads off: 'We need more money.'” Greenberg also questioned the science lobbyists' interpretation of a number of statistics.
Quoting Greenberg, the Chronicle said, “To put scientific publishing trends in context... it's important to look not only at overall percentiles but also at the actual numbers of published papers. At first, it may sound startling to hear that China quadrupled its scientific publication rate between 1986 and 1999. But it sounds somewhat less startling if one realizes that the actual number of Chinese papers published rose from 2,911 to 11,675. By comparison, close to a third of all the world's scientific papers were published by Americans-163,526 out of 528,643. In other words, China, a nation with almost four times the population of the United States, published (as of 1999) only one-fourteenth as many scientific papers as the United States.”
While I think a dose of skepticism is always in order, I also think the skeptics would be wise to pay more heed to the flattening of the world and how quickly some of these trends could change. It is why I favor Shirley Ann Jackson's approach: The sky is not falling today, but it might be in fifteen or twenty years if we don't change our ways, and all signs are that we are not changing, especially in our public schools. Help is not on the way. The American education system from kindergarten through twelfth grade just is not stimulating enough young people to want to go into science, math, and engineering. My wife teaches first-grade reading in a local public school, so she gets Education Week, which is read by educators all over America. One day she pointed out an article (July 28, 2004) headlined, “Immigrants' Children Inhabit the Top Ranks of Math, Science Meets.”
It went on to say, “Research conducted by the National Foundation for American Policy shows that 60 percent of the nation's top science students and 65 percent of the top mathematics students are children of recent immigrants, according to an analysis of award winners in three scholastic competitions... the Intel Science Talent Search, the U.S. team for the International Mathematical Olympiad, and the U.S. Physics Team.” The study's author attributed the immigrant students' success “partly to their parents' insistence that they manage study time wisely,” Education Week said. “Many immigrant parents also encouraged their children to pursue mathematics and science interests, believing those skills would lead to strong career opportunities and insulate them from bias and lack of connections in the workplace... A strong percentage of the students surveyed had parents who arrived in the United States on H-1B visas, reserved for professional workers. U.S. policymakers who back overly restrictive immigration policies do so at the risk of cutting off a steady infusion of technological and scientific skill,” said the study's author, Stuart Anderson, the executive director of the foundation. The article quoted Andrei Munteanu, eighteen, a finalist for the 2004 Intel competition, whose parents had moved from Romania to the United States five years earlier. Munteanu started American school in the seventh grade, which he found a breeze compared to his Romanian school. “The math and science classes [covered the same subject matter] I was taking in Romania... when I was in fourth grade,” he said.
For now, the United States still excels at teaching science and engineering at the graduate level, and also in university-based research. But as the Chinese get more feeder stock coming up through their improving high schools and universities, “they will get to the same level as us after a decade,” said Intel chairman Barrett. “We are not graduating the volume, we do not have a lock on the infrastructure, we do not have a lock on the new ideas, and we are either flatlining, or in real dollars cutting back, our investments in physical science.”
Every four years the United States takes part in the Trends in International Mathematics and Science Study, which assesses students after fourth grade and eighth grade. Altogether, the most recent study involved roughly a half million students from forty-one countries and the use of thirty languages, making it the largest and most comprehensive international study of education that has ever been undertaken.
The 2004 results (for tests taken in 2003) showed American students making only marginal improvements over the 2000 results, which showed the American labor force to be weaker in science than those of its peer countries. The Associated Press reported (December 4,2004) that American eighth-graders had improved their scores in science and math since 1995, when the test first was given, but their math improvement came mainly between 1995 and 1999, and not in recent years. The rising scores of American eighth-graders in science was an improvement over 1999, and it lifted the United States to a higher ranking relative to other countries. The worrying news, though, was that the scores of American fourth-graders were stagnant, neither improving nor declining in science or math since 1995. As a result, they slipped in the international rankings as other countries made gains. “Asian countries are setting the pace in advanced science and math,” Ina Mullis, codirector of the International Study Center at Boston College, which manages the study, told the AP. “As one example, 44 percent of eighth-graders in Singapore scored at the most advanced level in math, as did 38 percent in Taiwan. Only 7 percent in the United States did.” Results from another international education test also came out in December 2004, from the Program for International Student Assessment. It showed that American fifteen-year-olds are below the international average when it comes to applying math skills to real-life tasks.
This chapter is about how we Americans, individually and collectively, have not been doing all these things that we should be doing and what will happen down the road if we don't change course.
The truth is, we are in a crisis now, but it is a crisis that is unfolding very slowly and very quietly. It is “a quiet crisis,” explained Shirley Ann Jackson, the 2004 president of the American Association for the Advancement of Science and president of Rensselaer Polytechnic Institute since 1999. (Rensselaer is America's oldest technological college, founded in 1824.) And this quiet crisis involves the steady erosion of America's scientific and engineering base, which has always been the source of American innovation and our rising standard of living.
“The sky is not falling, nothing horrible is going to happen today,” said Jackson, a physicist by training who chooses her words carefully. “The U.S. is still the leading engine for innovation in the world. It has the best graduate programs, the best scientific infrastructure, and the capital markets to exploit it. But there is a quiet crisis in U.S. science and technology that we have to wake up to. The U.S. today is in a truly global environment, and those competitor countries are not only wide awake, they are running a marathon while we are running sprints. If left unchecked, this could challenge our preeminence and capacity to innovate.”
And it is our ability to constantly innovate new products, services, and companies that has been the source of America's horn of plenty and steadily widening middle class for the last two centuries. It was American innovators who started Google, Intel, HP, Dell, Microsoft, and Cisco, and it matters where innovation happens. The fact that all these companies are headquartered in America means that most of the high-paying jobs are here, even if these companies outsource or offshore some functions. The executives, the department heads, the sales force, and the senior researchers are all located in the cities where the innovation happened. And their jobs create more jobs. The shrinking of the pool of young people with the knowledge skills to innovate won't shrink our standard of living overnight. It will be felt only in fifteen or twenty years, when we discover we have a critical shortage of scientists and engineers capable of doing innovation or even just high-value-added technology work. Then this won't be a quiet crisis anymore, said Jackson, “it will be the real McCoy.”
Shirley Ann Jackson knows of what she speaks, because her career exemplifies as well as anyone's both why America thrived so much in the past fifty years and why it won't automatically do the same in the next fifty. An African-American woman, Jackson was born in Washington, D.C., in 1946. She started kindergarten in a segregated public school but was one of the first public school students to benefit from desegregation, as a result of the Supreme Court ruling in Brown v. Board of Education. Just when she was getting a chance to go to a better school, the Russians launched Sputnik in 1957, and the U.S. government became obsessed with educating young people to become scientists and engineers, a trend that was intensified by John F. Kennedy's commitment to a manned space program. When Kennedy spoke about putting a man on the moon, Shirley Ann Jackson was one of the millions of American young people who were listening. His words, she recalled, “inspired, assisted, and launched many of my generation into science, engineering and mathematics,” and the breakthroughs and inventions they spawned went well beyond the space program. “The space race was really a science race,” she said.
Thanks in part to desegregation, both Jackson's inspiration and intellect were recognized early, and she ultimately became the first African-American woman to earn a Ph.D. in physics from MIT (her degree was in theoretical elementary particle physics). From there, she spent many years working for AT&T Bell Laboratories, and in 1995 was appointed by President Clinton to chair the U.S. Nuclear Regulatory Commission.
As the years went by, though, Jackson began to notice that fewer and fewer young Americans were captivated by national challenges like the race to the moon, or felt the allure of math, science, and engineering. In universities, she noted, graduate enrollment in science and engineering programs, having grown for decades, peaked in 1993, and despite some recent progress, it remains today below the level of a decade ago. So the science and engineering generations that followed Jackson's got smaller and smaller relative to our needs. By the time Jackson took the job as Rensselaer Polytechnic's president to put her heart and soul into reinvig-orating American science and engineering, she realized, she said, that a “perfect storm” was brewing-one that posed a real long-term danger to America's economic health-and she started speaking out about it whenever she could.
“The phrase 'the perfect storm' is associated with meteorological events in October 1991,” said Jackson in a speech in May 2004, when “a powerful weather system gathered force, ravaging the Atlantic Ocean over the course of several days, [and] caused the deaths of several Massachusetts-based fishermen and billions of dollars of damage. The event became a book, and, later, a movie. Meteorologists observing the event emphasized... the unlikely confluence of conditions... in which multiple factors converged to bring about an event of devastating magnitude. [A] similar worst-case scenario could arrest the progress of our national scientific and technological capacity. The forces at work are multiple and complex. They are demographic, political, economic, cultural, even social.” Individually, each of these forces would be problematic, added Jackson. In combination, they could be devastating. “For the first time in more than a century, the United States could well find itself falling behind other countries in the capacity for scientific discovery, innovation and economic development.”
The way to avoid being caught in such a storm is to identify the confluence of factors and to change course-even though right now the sky is blue, the winds are gentle, and the water seems calm. But that is not what has been going on in America in recent years. We are blithely sailing along, heading straight for the storm, with both politicians and parents insisting that no dramatic changes or sacrifices are required now. After all, look how calm and sunny it is outside, they tell us. In the fiscal year 2005 budget passed by the Republican-led Congress in November 2004, the budget for the National Science Foundation, which is the federal body most responsible for promoting research and funding more and better science education, was actually cut by 1.9 percent, or $105 million. History will show that when America should have been doubling the NSF funding, its Congress passed a pork-laden budget that actually cut assistance for science and engineering.
Don't be fooled by the calm. That's always the time to change course-not when you're just about to get hit by the typhoon. We don't have any time to waste in addressing the “dirty little secrets” of our education system.
Dirty Little Secret #1: The Numbers Gap
In the Cold War, one of the deepest causes of American worries was the so-called missile gap between us and the Soviet Union. The perfect storm Shirley Ann Jackson is warning about could best be described as the confluence of three new gaps that have been slowly emerging to sap America's prowess in science, math, and engineering. They are the numbers gap, the ambition gap, and the education gap. In the Age of Flatism, these gaps are what most threaten our standard of living.
Dirty little secret number one is that the generation of scientists and engineers who were motivated to go into science by the threat of Sputnik in 1957 and the inspiration of JFK are reaching their retirement years and are not being replaced in the numbers that they must be if an advanced economy like that of the United States is to remain at the head of the pack. According to the National Science Foundation, half of America's scientists and engineers are forty years or older, and the average age is steadily rising.
Just take one example-NASA. An analysis of NASA records conducted by the newspaper Florida Today (March 7, 2004), which covers the Kennedy Space Center, showed the following: Nearly 40 percent of the 18,146 people at NASA are age fifty or older. Those with twenty years of government service are eligible for early retirement. Twenty-two percent of NASA workers are fifty-five or older. NASA employees over sixty outnumber those under thirty by a ratio of about three to one. Only 4 percent of NASA workers are under thirty. A 2003 Government Accounting Office study concluded that NASA was having difficulty hiring people with the sufficient science, engineering, and information-technology skills that are critical to its operations. Many of these jobs are reserved for American citizens, because of national security concerns. Then-NASA administrator Sean O'Keefe testified before Congress in 2002: “Our mission of understanding and protecting our home planet and exploring the universe and searching for life will not be carried out if we don't have the people to do it.” The National Commission on Mathematics and Science Teaching for the Twenty-first Century, chaired by the former astronaut and senator John Glenn, found that two-thirds of the nation's mathematics and science teaching force will retire by 2010.
Traditionally we made up for any shortages of engineers and science faculty by educating more at home and importing more from abroad. But both of those remedies have been stalled of late.
Every two years the National Science Board supervises the collection of a very broad set of data trends in science and technology in the United States, which it publishes as Science and Engineering Indicators. In preparing Indicators 2004, the NSB said, “We have observed a troubling decline in the number of U.S. citizens who are training to become scientists and engineers, whereas the number of jobs requiring science and engineering (S&E) training continues to grow.” These trends threaten the economic welfare and security of our country, it said, adding that if the trends identified in Indicators 2004 continue undeterred, three things will happen: “The number of jobs in the U.S. economy that require science and engineering training will grow; the number of U.S. citizens prepared for those jobs will, at best, be level; and the availability of people from other countries who have science and engineering training will decline, either because of limits to entry imposed by U.S. national security restrictions or because of intense global competition for people with these skills.”
The NSB report found that the number of American eighteen-to-twenty-four-year-olds who receive science degrees has fallen to seventeenth in the world, whereas we ranked third three decades ago. It said that of the 2.8 million first university degrees (what we call bachelor's degrees) in science and engineering granted worldwide in 2003, 1.2 million were earned by Asian students in Asian universities, 830,000 were granted in Europe, and 400,000 in the United States. In engineering specifically, universities in Asian countries now produce eight times as many bachelor's degrees as the United States.
Moreover, “the proportional emphasis on science and engineering is greater in other nations,” noted Shirley Ann Jackson. Science and engineering degrees now represent 60 percent of all bachelor's degrees earned in China, 33 percent in South Korea, and 41 percent in Taiwan. By contrast, the percentage of those taking a bachelor's degree in science and engineering in the United States remains at roughly 31 percent. Factoring out science degrees, the number of Americans who graduate with just engineering degrees is 5 percent, as compared to 25 percent in Russia and 46 percent in China, according to a 2004 report by Trilogy Publications, which represents the national U.S. engineering professional association.
The United States has always depended on the inventiveness of its people in order to compete in the world marketplace, said the NSB. “Preparation of the S&E workforce is a vital arena for national competitiveness. [But] even if action is taken today to change these trends, the reversal is 10 to 20 years away.” The students entering the science and engineering workforce with advanced degrees in 2004 decided to take the necessary math courses to enable this career path when they were in middle school, up to fourteen years ago, the NSB noted. The students making that same decision in middle school today won't complete advanced training for science and engineering occupations until 2018 or 2020. “If action is not taken now to change these trends, we could reach 2020 and find that the ability of U.S. research and education institutions to regenerate has been damaged and that their preeminence has been lost to other areas of the world,” the science board said.
These shortages could not be happening at a worse time-just when the world is going flat. “The number of jobs requiring science and engineering skills in the U.S. labor force,” the NSB said, “is growing almost 5 percent per year. In comparison, the rest of the labor force is growing at just over 1 percent. Before September 11, 2001, the Bureau of Labor Statistics (BLS) projected that science and engineering occupations would increase at three times the rate of all occupations.” Unfortunately, the NSB reported, the average age of the science and engineering workforce is rising.
“Many of those who entered the expanding S&E workforce in the 1960s and 1970s (the baby boom generation) are expected to retire in the next twenty years, and their children are not choosing science and engineering careers in the same numbers as their parents,” the NSB report said. “The percentage of women, for example, choosing math and computer science careers fell 4 percentage points between 1993 and 1999.”
The 2002 NSB indicators showed that the number of science and engineering Ph.D.'s awarded in the United States dropped from 29,000 in 1998 to 27,000 in 1999. The total number of engineering undergraduates in America fell about 12 percent between the mid-1980s and 1998.
Nevertheless, America's science and engineering labor force grew at a rate well above that of America's production of science and engineering degrees, because a large number of foreign-born S&E graduates migrated to the United States. The proportion of foreign-born students in S&E fields and workers in S&E occupations continued to rise steadily in the 1990s. The NSB said that persons born outside the United States accounted for 14 percent of all S&E occupations in 1990. Between 1990 and 2000, the proportion of foreign-born people with bachelor's degrees in S&E occupations rose from 11 to 17 percent; the proportion of foreign-born with master's degrees rose from 19 to 29 percent; and the proportion of foreign-born with Ph.D.'s in the S&E labor force rose from 24 to 38 percent. By attracting scientists and engineers born and trained in other countries we have maintained the growth of the S&E labor force without a commensurate increase in support for the long-term costs of training and attracting native U.S citizens to these fields, the NSB said.
But now, the simultaneous flattening and wiring of the world have made it much easier for foreigners to innovate without having to emigrate. They can now do world-class work for world-class companies at very decent wages without ever having to leave home. As Allan E. Goodman, president of the Institute of International Education, put it, “When the world was round, they could not go back home, because there was no lab to go back to and no Internet to connect to. But now all those things are there, so they are going back. Now they are saying, 'I feel more comfortable back home. I can live more comfortably back home than in New York City and I can do good work, so why not go back?'” This trend started even before the visa hassles brought on by 9/11, said Goodman. “The brain gain started to go to brain drain around the year 2000.”
As the NSB study noted, “Since the 1980s other countries have increased investment in S&E education and the S&E workforce at higher rates than the United States has. Between 1993 and 1997, the OECD countries [Organization for Economic Co-operation and Development, a group of 40 nations with highly developed market economies] increased their number of S&E research jobs 23 percent, more than twice the 11 percent increase in S&E research jobs in the United States.”
In addition, it said, visas for students and S&E workers have been issued more slowly since the events of September 11, owing to both increased security restrictions and a drop in applications. The U.S. State Department issued 20 percent fewer visas for foreign students in 2001 than in 2000, and the rate fell farther in subsequent years. While university presidents told me in 2004 that the situation was getting better, and that the Department of Homeland Security was trying to both speed up and simplify its visa procedures for foreign students and scientists, a lot of damage has been done, and the situation for foreign students or scientists wanting to work in any areas deemed to have national security implications is becoming a real problem. No wonder New York Times education writer Sam Dillon reported on December 21, 2004, that “foreign applications to American graduate schools declined 28 percent this year. Actual foreign graduate student enrollments dropped 6 percent. Enrollments of all foreign students, in undergraduate, graduate and postdoctoral programs, fell for the first time in three decades in an annual census released this fall. Meanwhile, university enrollments have been surging in England, Germany and other countries... Chinese applications to American graduate schools fell 45 percent this year, while several European countries announced surges in Chinese enrollment.”
Dirty Little Secret #2: The Ambition Gap
The second dirty little secret, which several prominent American CEOs told me only in a whisper, goes like this: When they send jobs abroad, they not only save 75 percent on wages, they get a 100 percent increase in productivity. Part of that is understandable. When you take a low-wage, low-prestige job in America, like a call center operator, and bring it over to India, where it becomes a high-wage, high-prestige job, you end up with workers who are paid less but motivated more. “The dirty little secret is that not only is [outsourcing] cheaper and efficient,” the American CEO of a London-headquartered multinational told me, “but the quality and productivity [boost] is huge.” In addition to the wage compression, he said, one Bangalore Indian re-trained will do the work of two or three Europeans, and the Bangalore employees don't take six weeks of holidays. “When you think it's only about wages,” he added, “you can still hold your dignity, but the fact that they work better is awful.”
A short time after returning from India, I was approached in an airport by a young man who wanted to talk about some columns I had written from there. We had a nice chat, I asked him for his card, and we struck up an e-mail friendship. His name is Mike Arguello, and he is an IT systems architect living in San Antonio. He does high-end IT systems design and does not feel threatened by foreign competition. He also teaches computer science. When I asked him what we needed to do in America to get our edge back, he sent me this e-mail:
I taught at a local university. It was disheartening to see the poor work ethic of many of my students. Of the students I taught over six semesters, I'd only consider hiring two of them. The rest lacked the creativity, problem-solving abilities and passion for learning. As you well know, India's biggest advantage over the Chinese and Russians is that they speak English. But it would be wrong to assume the top Indian developers are better than their American counterparts. The advantage they have is the number of bodies they can throw at a problem. The Indians that I work with are the cream of the crop. They are educated by the equivalents of MIT back in India and there are plenty of them. If you were to follow me in my daily meetings it would become very obvious that a great deal of my time is spent working with Indians. Most managers are probably still under the impression that all Indians are doing is lower-end software development-“software assembly.” But technologies, such as Linux, are allowing them to start taking higher-paying system design jobs that had previously been the exclusive domain of American workers. It has provided them with the means to move up the technology food chain, putting them on par with domestic workers. It's brain power against brain power, and in this area they are formidable. From a technology perspective, the world is flat and getting flatter (if that is possible). The only two areas that I have not seen Indian labor in are networking architects and system architects, but it is only a matter of time. Indians are very bright and they are quickly learning from their interaction with system architects just how all of the pieces of the IT puzzle fit together... Were Congress to pass legislation to stop the flow of Indian labor, you would have major software systems that would have nobody who knew what was going on. It is unfortunate that many management positions in IT are filled with non-technical managers who may not be fully aware of their exposure... I'm an expert in information systems, not economics, but I know a high-paying job requires one be able to produce something of high value. The economy is producing the jobs both at the high end and low end, but increasingly the high-end jobs are out of reach of many. Low education means low-paying jobs, plain and simple, and this is where more and more Americans are finding themselves. Many Americans can't believe they aren't qualified for high-paying jobs. I call this the “American Idol problem.” If you've ever seen the reaction of contestants when Simon Cowell tells them they have no talent, they look at him in total disbelief. I'm just hoping someday I'm not given such a rude awakening.
In the winter of 2004 I had tea in Tokyo with Richard C. Koo, chief economist for the Nomura Research Institute. I tested out on Richard my “coefficient of flatness”: the notion that the flatter one's country is-that is, the fewer natural resources it has-the better off it will be in a flat world. The ideal country in a flat world is the one with no natural resources, because countries with no natural resources tend to dig inside themselves. They try to tap the energy, entrepreneurship, creativity, and intelligence of their own people-men and women-rather than drill an oil well. Taiwan is a barren rock in a typhoon-laden sea, with virtually no natural resources-nothing but the energy, ambition, and talent of its own people-and today it has the third-largest financial reserves in the world. The success of Hong Kong, Japan, South Korea, and coastal China can all be traced to a similar flatness.
“I am a Taiwanese-American with a father from Taiwan and with a Japanese mother,” Koo told me. “I was bom in Japan and went to Japanese elementary school and then moved to the States. There is a saying in China that whatever you put in your head and your stomach, no one can take away from you. In this whole region, that is in the DNA. You just have to study hard and move forward. I was told relatively early by my teachers, 'We can never live like Americans and Canadians. We have no resources. We have to study hard, work hard, and export hard.'”
A few weeks later I had breakfast in Washington with P. V. Kannan, CEO of 24/7 Customer. When it comes to the flat world, said P.V., he had just one question: “Is America prepared? It is not... You've gotten a little contented and slow, and the people who came into the field with [the triple convergence] are really hungry. Immigrants are always hungry-and they don't have a backup plan.”
A short time later I read a column by Steven Pearlstein, The Washington Post's business columnist/reporter, under the headline “Europe's Capitalism Curtain.” From Wroclaw, Poland (July 23, 2004), Pearlstein wrote: “A curtain has descended across Europe. On one side are hope, optimism, freedom and prospects for a better life. On the other side, fear, pessimism, suffocating government regulations and a sense that the best times are in the past.” This new curtain, Pearlstein argued, demarks Eastern Europe, which is embracing capitalism, and Western Europe, which is wishing desperately that it would go away.
“This time, however, it is the East that is likely to prevail,” he continued. “The energy and sense of possibility are almost palpable here... Money and companies are pouring in-not just the prestige nameplates like Bombardier, Siemens, Whirlpool, Toyota and Volvo, but also the network of suppliers that inevitably follows them. At first, most of the new jobs were of the semi-skilled variety. Now they have been followed by design and engineering work that aims to tap into the largest concentration of university students in Eastern Europe... The secret isn't just lower wages. It's also the attitude of workers who take pride and are willing to do what is necessary to succeed, even if it means outsourcing parts production or working on weekends or altering vacation schedules— things that would almost certainly trigger months of acrimony and negotiation in Western Europe. 'The people back home, they haven't got any idea how much they need to change if they want to preserve what they have,' said Jose Ugarte [a Basque who heads the appliance manufacturing operations of Mondragon, the giant Spanish industrial cooperative]. 'The danger to them is enormous. They don't realize how fast this is happening...' It's not the dream of riches that animates the people of Wroclaw so much as the determination to work hard, sacrifice what needs to be sacrificed and change what needs to be changed to close the gap with the West. It is that pride and determination, says Wroclaw's mayor, Rafal Dutkiewicz, that explain why they are such a threat to the 'leisure-time society' on the other side of the curtain.”
I heard a similar refrain in a discussion with consular officials who oversee the granting of visas at the U.S. embassy in Beijing. As one of them put it to me, “I do think Americans are oblivious to the huge changes. Every American who comes over to visit me [in China] is just blown away... Your average kid in the U.S. is growing up in a wealthy country with many opportunities, and many are the kids of advantaged educated people and have a sense of entitlement. Well, the hard reality for that kid is that fifteen years from now Wu is going to be his boss and Zhou is going to be the doctor in town. The competition is coming, and many of the kids are going to move into their twenties clueless about these rising forces.”
When I asked Bill Gates about the supposed American education advantage-an education that stresses creativity, not rote learning-he was utterly dismissive. In his view, those who think that the more rote learning systems of China and Japan can't turn out innovators who can compete with Americans are sadly mistaken. Said Gates, “I have never met the guy who doesn't know how to multiply who created software... Who has the most creative video games in the world? Japan! I never met these 'rote people'... Some of my best software developers are Japanese. You need to understand things in order to invent beyond them.”
One cannot stress enough: Young Chinese, Indians, and Poles are not racing us to the bottom. They are racing us to the top. They do not want to work for us; they don't even want to be us. They want to dominate us-in the sense that they want to be creating the companies of the future that people all over the world will admire and clamor to work for. They are in no way content with where they have come so far. I was talking to a Chinese-American who works for Microsoft and has accompanied Bill Gates on visits to China. He said Gates is recognized everywhere he goes in China. Young people there hang from the rafters and scalp tickets just to hear him speak. Same with Jerry Yang, the founder of Yahoo!
In China today, Bill Gates is Britney Spears. In America today, Britney Spears is Britney Spears-and that is our problem.
Dirty Little Secret #3: The Education Gap
All of this helps to explain the third dirty little secret: A lot of the jobs that are starting to go abroad today are very high-end research jobs, because not only is the talent abroad cheaper, but a lot of it is as educated as American workers—or even more so. In China, where there are 1.3 billion people and the universities are just starting to crack the top ranks, the competition for top spots is ferocious. The math/science salmon that swims upstream in China and gets itself admitted to a top Chinese university or hired by a foreign company is one smart fish. The folks at Microsoft have a saying about their research center in Beijing, which, for scientists and engineers, is one of the most sought-after places to work in all of China. “Remember, in China when you are one in a million— there are 1,300 other people just like you.”
The brainpower that rises to the Microsoft research center in Beijing is already one in a million.
Consider the annual worldwide Intel International Science and Engineering Fair. About forty countries participate by nominating talent through local affiliate affairs. In 2004, the Intel Fair attracted around sixty-five thousand American kids, according to Intel. How about in China? I asked Wee Theng Tan, the president of Intel China, during a visit to Beijing. In China, he told me, there is a national affiliate science fair, which acts as a feeder system to select kids for the global Intel fair. “Almost every single province has students going to one of these affiliate fairs,” said Tan. “We have as many as six million kids competing, although not all are competing for the top levels... [But] you know how seriously they take it. Those selected to go to the international [Intel] fair are immediately exempted from college entrance exams” and basically get their choice of any top university in China. In the 2004 Intel Science Fair, China came home with thirty-five awards, more than any other country in Asia, including one of the top three global awards.
Microsoft has three research centers in the world: in Cambridge, England; in Redmond, Washington, its headquarters; and in Beijing. Bill Gates told me that within just a couple of years of its opening in 1998, Microsoft Research Asia, as the center in Beijing is known, had become the most productive research arm in the Microsoft system “in terms of the quality of the ideas that they are turning out. It is mind-blowing.”
Kai-Fu Li is the Microsoft executive who was assigned by Gates to open the Microsoft research center in Beijing. My first question to him was, “How did you go about recruiting the staff?” Li said his team went to universities all over China and simply administered math, IQ, and programming tests to Ph.D.-level students or scientists.
“In the first year, we gave about 2,000 tests all around,” he said. From the 2,000, they winnowed the group down to 400 with more tests, then 150, “and then we hired 20.” They were given two-year contracts and told that at the end of two years, depending on the quality of their work, they would either be given a longer-term contract or granted a postdoctoral degree by Microsoft Research Asia. Yes, you read that right. The Chinese government gave Microsoft the right to grant postdocs. Of the original twenty who were hired, twelve survived the cut. The next year, nearly four thousand people were tested. After that, said Li, “we stopped doing the test. By that time we became known as the number one place to work, where all the smart computer and math people wanted to work... We got to know all the students and professors. The professors would send their best people there, knowing that if the people did not work out, it would be their credibility [on the line]. Now we have the top professors at the top schools recommending their top students. A lot of students want to go to Stanford or MIT, but they want to spend two years at Microsoft first, as interns, so they can get a nice recommendation letter that says these are MIT quality.” Today Microsoft has more than two hundred researchers in its China lab and some four hundred students who come in and out on projects and become recruiting material for Microsoft.
“They view this as a once-in-a-lifetime income opportunity/' said Li of the team at Microsoft Research Asia. ”They saw their parents going through the Cultural Revolution. The best they could do was become a professor, do a little project on the side because a professor's pay is horrible, and maybe get one paper published. Now they have this place where all they do is research, with great computers and lots of resources. They have administrators-we hire people to do the dirty work. They just could not believe it. They voluntarily work fifteen to eighteen hours a day and come in on weekends. They work through holidays, because their dream is to get to Microsoft.“ Li, who had worked for other American high-tech firms before coming to Microsoft, said that until starting Microsoft Research Asia, he had never seen a research lab with the enthusiasm of a start-up company.
“If you go in at two a.m. it is full, and at eight a.m. it is full,” he said.
Microsoft is a stronger American company for being able to attract all this talent, said Li. “Now we have two hundred more brilliant people building [intellectual property] and patents. These two hundred people are not replacing people in Redmond. They are doing new research in areas applicable worldwide.”
Microsoft Research Asia has already developed a worldwide reputation for producing cutting-edge papers for the most important scientific journals and conferences. “This is the culture that built the Great Wall,” he added, “because it is a dedicated and direction-following culture.”
Chinese people, explained Li, have both a superiority and an inferiority complex at the same time, which helps explain why they are racing America to the top, not the bottom. There is a deep and widely shared view that China was once great, that it succeeded in the past but now is far behind and must catch up again. “So there is a patriotic desire,” he said. “If our lab can do as well as the Redmond lab, that could be really exciting.”
That sort of inspired leadership in science and engineering education is now totally missing in the United States.
Said Intel chairman Craig Barrett, “U.S. technological leadership, innovation, and jobs of tomorrow require a commitment to basic research funding today.” According to a 2004 study by the Task Force on the Future of American Innovation, an industry-academic coalition, basic research performed at leading U.S. universities-research in chemistry, physics, nanotechnology, genomics, and semiconductor manufacturing-has created four thousand spin-off companies that hired 1.1 million employees and have annual world sales of $232 billion. But to keep moving ahead, the study said, there must be a 10 to 12 percent increase each year for the next five to seven years in the budgets of key research-funding agencies: the National Institute for Science and Technology, the National Science Foundation, the Department of Energy's Office of Science, and the Department of Defense research accounts.
Unfortunately, federal funding for research in physical and mathematical sciences and engineering, as a share of GDP, actually declined by 37 percent between 1970 and 2004, the task force found. At a time when we need to be doubling our investments in basic research to overcome the ambition and education gaps, we are actually cutting that funding.
In the wake of the Bush administration and the Republican Congress's decision to cut the National Science Foundation funding for 2005, Republican congressman Vern Ehlers of Missouri, a voice in the wilderness, made the following statement: “While I understand the need to make hard choices in the face of fiscal constraint, I do not see the wisdom in putting science funding behind other priorities. We have cut NSF despite the fact that this omnibus bill increases spending for the 2005 fiscal year, so clearly we could find room to grow basic research while maintaining fiscal constraint. But not only are we not keeping pace with inflationary growth, we are actually cutting the portion basic research receives in the overall budget. This decision shows dangerous disregard for our nation's future, and I am both concerned and astonished that we would make this decision at a time when other nations continue to surpass our students in math and science and consistently increase their funding of basic research. We cannot hope to fight jobs lost to international competition without a well-trained and educated workforce.”
No, we cannot, and the effects are starting to show. According to the National Science Board, the percentage of scientific papers written by Americans has fallen 10 percent since 1992. The percentage of American papers published in the top physics journal, Physical Review, has fallen from 61 percent to 29 percent since 1983. And now we are starting to see a surge in patents awarded to Asian countries. From 1980 to 2003, Japan's share of world industrial patents rose from 12 percent to 21 percent, and Taiwan's from 0 percent to 3 percent. By contrast, the U.S. share of patents has fallen from 60 percent to 52 percent since 1980.
Any honest analysis of this problem should note that there are some skeptics who believe that the sky is not falling and that scientists and the technology industry might be hyping some of this data, just to get more funding. A May 10, 2004, article in the San Francisco Chronicle quoted Daniel S. Greenberg, former news editor of the journal Science and author of the book Science, Money and Politics, who argues that “inside-the-Beltway science (lobbying) has always been insatiable. If you double the NIH (National Institutes of Health) budget in five years (as recently happened), they're (still) screaming their heads off: 'We need more money.'” Greenberg also questioned the science lobbyists' interpretation of a number of statistics.
Quoting Greenberg, the Chronicle said, “To put scientific publishing trends in context... it's important to look not only at overall percentiles but also at the actual numbers of published papers. At first, it may sound startling to hear that China quadrupled its scientific publication rate between 1986 and 1999. But it sounds somewhat less startling if one realizes that the actual number of Chinese papers published rose from 2,911 to 11,675. By comparison, close to a third of all the world's scientific papers were published by Americans-163,526 out of 528,643. In other words, China, a nation with almost four times the population of the United States, published (as of 1999) only one-fourteenth as many scientific papers as the United States.”
While I think a dose of skepticism is always in order, I also think the skeptics would be wise to pay more heed to the flattening of the world and how quickly some of these trends could change. It is why I favor Shirley Ann Jackson's approach: The sky is not falling today, but it might be in fifteen or twenty years if we don't change our ways, and all signs are that we are not changing, especially in our public schools. Help is not on the way. The American education system from kindergarten through twelfth grade just is not stimulating enough young people to want to go into science, math, and engineering. My wife teaches first-grade reading in a local public school, so she gets Education Week, which is read by educators all over America. One day she pointed out an article (July 28, 2004) headlined, “Immigrants' Children Inhabit the Top Ranks of Math, Science Meets.”
It went on to say, “Research conducted by the National Foundation for American Policy shows that 60 percent of the nation's top science students and 65 percent of the top mathematics students are children of recent immigrants, according to an analysis of award winners in three scholastic competitions... the Intel Science Talent Search, the U.S. team for the International Mathematical Olympiad, and the U.S. Physics Team.” The study's author attributed the immigrant students' success “partly to their parents' insistence that they manage study time wisely,” Education Week said. “Many immigrant parents also encouraged their children to pursue mathematics and science interests, believing those skills would lead to strong career opportunities and insulate them from bias and lack of connections in the workplace... A strong percentage of the students surveyed had parents who arrived in the United States on H-1B visas, reserved for professional workers. U.S. policymakers who back overly restrictive immigration policies do so at the risk of cutting off a steady infusion of technological and scientific skill,” said the study's author, Stuart Anderson, the executive director of the foundation. The article quoted Andrei Munteanu, eighteen, a finalist for the 2004 Intel competition, whose parents had moved from Romania to the United States five years earlier. Munteanu started American school in the seventh grade, which he found a breeze compared to his Romanian school. “The math and science classes [covered the same subject matter] I was taking in Romania... when I was in fourth grade,” he said.
For now, the United States still excels at teaching science and engineering at the graduate level, and also in university-based research. But as the Chinese get more feeder stock coming up through their improving high schools and universities, “they will get to the same level as us after a decade,” said Intel chairman Barrett. “We are not graduating the volume, we do not have a lock on the infrastructure, we do not have a lock on the new ideas, and we are either flatlining, or in real dollars cutting back, our investments in physical science.”
Every four years the United States takes part in the Trends in International Mathematics and Science Study, which assesses students after fourth grade and eighth grade. Altogether, the most recent study involved roughly a half million students from forty-one countries and the use of thirty languages, making it the largest and most comprehensive international study of education that has ever been undertaken.
The 2004 results (for tests taken in 2003) showed American students making only marginal improvements over the 2000 results, which showed the American labor force to be weaker in science than those of its peer countries. The Associated Press reported (December 4,2004) that American eighth-graders had improved their scores in science and math since 1995, when the test first was given, but their math improvement came mainly between 1995 and 1999, and not in recent years. The rising scores of American eighth-graders in science was an improvement over 1999, and it lifted the United States to a higher ranking relative to other countries. The worrying news, though, was that the scores of American fourth-graders were stagnant, neither improving nor declining in science or math since 1995. As a result, they slipped in the international rankings as other countries made gains. “Asian countries are setting the pace in advanced science and math,” Ina Mullis, codirector of the International Study Center at Boston College, which manages the study, told the AP. “As one example, 44 percent of eighth-graders in Singapore scored at the most advanced level in math, as did 38 percent in Taiwan. Only 7 percent in the United States did.” Results from another international education test also came out in December 2004, from the Program for International Student Assessment. It showed that American fifteen-year-olds are below the international average when it comes to applying math skills to real-life tasks.