This is the first of a regular series of “Innovation Alerts” that I’ll be sending from time to time, with the aim of calling attention to the growing efforts from many quarters to protect and reinvigorate innovation in the U.S. If you do not wish to receive these alerts in the future, please reply to this email with the word “unsubscribe” in the subject line.  

For this first alert, I would like to call your attention to something surprising that happened at the New York Times last month. Instead of focusing on the typical hot-button issues of tax cuts and healthcare reform, the Times chose to report on a more fundamental economic challenge that is facing the nation: the need to nurture startup job creation and stem the loss of innovation and manufacturing overseas. 

First was a September 6^th piece, “Once a Dynamo, The Tech Sector is Slow to Hire,” which is something that most of us in Silicon Valley have been worried about for some time. The real money shot of the story was this paragraph: 

“There’s been this assumption that there’s a global hierarchy of work, that all the high-end service work, knowledge work, R.&D. work would stay in U.S., and that all the lower-end work would be transferred to emerging markets,” said Hal Salzman, a public policy professor at Rutgers and a senior faculty fellow at Heldrich Center for Workforce Development. “That hierarchy has been upset, to say the least,” he said. “More and more of the innovation is coming out of the emerging markets, as part of this bottom-up push.”

Finally! An article that dared to poke a hole in the notion that America can simply specialize in high-end research and innovation and let other countries do the manufacturing. The facts clearly demonstrate that high-value R&D will - sooner or later - always follow manufacturing.

As even the chief of the Defense Advanced Research Projects Agency (DARPA) told the House Armed Services Committee on March 23^rd, America’s 30-year experiment with the “we don’t need manufacturing” theory has been a total failure. “At DARPA, we have developed a short hand for this,” DARPA chief Regina E. Dugan told the committee. “We say, ‘to innovate, we must make.’” 

The Times then published a September 11^th article, “To Create Jobs, Nurture Start-Ups,” which focused on new research showing that startups in particular are responsible for basically all job creation in the U.S. As the Times noted: 

“Any serious discussion of job creation should look at the business tactics and policy steps that are most likely to nurture more of these promising corporate upstarts.”

The second Times article the same week, “Many Line Up to Go Public, but Market Mood is Iffy,” noted that unfortunately startups are for the most part still unable to go public. And that’s a real problem for the nation, because research shows that 92 percent of startup job creation occurs after an IPO.

The IPO pipeline is filling up fast again, as the article noted, with more than 160 companies filing for initial public offerings this year -- the most since the dot-com glory days of 2000. But as the article points out, today’s IPO candidates are nothing like those of past decades. Instead of startups seeking capital from the public market to scale up their R&D and hiring efforts, “many of the largest I.P.O.’s on the shelf are large, established companies taken private during the buyout boom of 2005 to 2007 [that now want] to return to the public markets.”

We’re talking about firms like Toys“R”Us, Nielsen, Booz Allen and the Hospital Corporation of America. Not exactly the sort of startups whose breakthrough products and services have historically led to the creation of whole new industries and millions of new jobs. 

Finally, here’s an interesting fact about the erosion of job-creating innovation in America that you won’t find in the media: Facebook, with a market value of perhaps $35 billion, employs only 900 or so people worldwide. Sony, with the same market value, employs 120,000. 

In other words, the last decade may have witnessed the birth of a hundred different flavors of social media startups. But where are the jobs? 

Thank you for your interest.  

Hank
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The following are some recent articles that further highlight the ongoing level of national discussion regarding U.S. innovation and job creation: