Shapiro: Innovation can shape the future

 

Gary Shapiro, president and CEO of the Consumer Electronic Association, speaks Monday morning in the Amphitheater. Photo by Demetrius Freeman.

Nick Glunt | Staff Writer

Gary Shapiro sat with a Chinese politician in Tsingtao, China. Their translators worked to convey their thoughts — after all, neither spoke the others’ language very well.

Shapiro soon learned that gestures don’t need to be translated.

The Chinese politician showed a thumbs-up, saying in his very minimal English, “China.” Shapiro nodded at the man. It was impossible not to be impressed with the skyscrapers, new highways, high-speed railway systems and ongoing construction.

Then the politician showed a thumbs-down, saying, “U.S.”

And that was like a jab to the gut. Shapiro felt chills.

He didn’t retaliate, but he thought maybe he should. He opted just to submit to being upset.

“That one incident, to me, summarized frankly where we are as a nation,” Shapiro said during his lecture at 10:45 a.m. Monday in the Amphitheater. “It bothered me at the beginning, because I was irritated that he would be so rude, but then it bothered me over time because I realized he was correct, and he was correct if we don’t do anything different.”

Shapiro said the U.S. needs to be moving up in the world, but right now, it is falling. The government is making “fundamentally bad decisions,” resulting in this rising failure, he added.

Shapiro was the opening speaker in Week Eight. The theme, “Sparking a Culture of Creativity and Innovation,” is designed to showcase some of the best in innovative thinking.

Shapiro is the CEO and president of the Consumer Electronics Association, which represents 2,000 American companies and hosts one of the largest trade shows in North America, the International Consumer Electronics Show.

“The reason (innovation) is important to me, frankly, is that we have to think about the future of our nation, because we are Americans,” Shapiro said, “and every generation of Americans has done one thing: They’ve lived the American dream, which does not guarantee prosperity for anyone, but what it does is it guarantees opportunity for everyone.”

He said there are three solutions to the economic turmoil: cutting spending, raising taxes and growing the economy. The first two options are talked about more than the third, Shapiro said. Thus, he talked about the third topic: growth.

The sources of economic growth are innovation and increasing both exports and productivity, he said.

At this point in history, the U.S. can’t keep everything it’s committed to: Social Security, Medicaid, Medicare, “two and a half” wars and Cash for Clunkers, Shapiro said. If it does, he said, future generations will have less.

“We are taking from our children,” he said, “and it is, by every mathematical definition, unsustainable.”

He said the solution lies in coming up with a strategy. If the U.S. has a firm goal in mind, it can take steps to get there.

The U.S.’s immigrant past is a positive influence toward innovation, he said. American immigrant ancestors had nothing to lose when they arrived; thus, they could be adventurous with minimal risk.

The same applies to modern immigrants. However, when foreigners come to the U.S. for school and then leave with their diplomas, he said, those American-educated foreigners become competitors to the U.S.

Taking risks can end in failure — but, Shapiro said, it’s failure that humans learn from. Finding something that doesn’t work should inspire someone to find a way to make it work, he said.

Despite Shapiro’s call for innovation, he did admit that most of the innovation in the world comes from the U.S. However, he said it should be even greater.

“I am absolutely convinced,” Shapiro said, “that we are still at the beginning — we are still toddlers — in this tremendous wave of innovation, involving digital and biotechnology, robotics, nanotechnology, sensing technology (and home health care).”

As part of the fight for innovation, Shapiro and the CEA started the Innovation Movement. Followed by 120,000 companies, the movement proposes the cultivation of innovation as a major tool in recovering from the current financial dip.

“This is something Republicans and Democrats have now agreed upon,” Shapiro said. “The math is very clear, and the math is harmful to us, so we have to do something different.”


Q: Isn’t innovation in creativity really driven by companies and the cultures within companies versus government policy, and are we kind of chasing the wrong dog in this hunt or not?

A: That’s a great question. I do not believe the government creates jobs or creates innovation. … What government does is they create an environment conducive to innovation. What we haven’t talked about is education. Clearly, you need kids that have a basic amount of education in a whole range of areas, and they have to be questioning and willing to believe that they could do something different. If they’re too saddled by school loans or things like that or life circumstances that don’t allow them to try something new, it’s a challenge. We’re fortunate to live in an age, frankly, where anyone with a computer and Internet service can become an innovator. I mean, it’s as unprecedented in the history of the world. It’s just unbelievable that there are so many innovators out there, and we’re so fortunate that so many of them are Americans, but it’s because of the assets we have. So the government role is to allow innovation to occur in a way without burdening it down, without protecting all technologies, without over-regulating it, and that’s what we have to do. We also have to make it so you can manufacture in the United States. That’s something that’s important. My wife has a patent on a child care product, and we’re trying to decide whether to manufacture it in China or the United States, and it’s a very tough decision, because the U.S. is definitely more costly; you could face union issues; there’s a lot of rules and regulations, but you could have flexibility and great workmanship, so the role of government cannot be overstated, and there could be innovation in government, which is an important thing, which is a whole separate subject.

Q: Can you be a little bit more specific in specific platforms you support that you think drive innovation in creativity? Is it tax rate? Is it bonus structures in companies? Is it subsidies? Are there more specifics in that declaration you might want to talk about?

A: Definitely. The first thing is: We have to deal with the deficit. The more I read about this 12-person, dirty-dozen commission — actually, it’s not as bad as I thought it was. They are going to deal with it, or there’s going to be some pretty draconian cuts going on, and it’s not just important to deal with it; it’s important to have that level of certainty going forward that we know we’re dealing with it. They can instill business confidence and instill investment in the United States and to make sure that, frankly, we’re not on our $15 or $16 or soon $20 trillion debt. You know, if that’s a high interest rate, if we’re paying 5 percent on $20 billion, that’s $1 trillion a year in interest payments. One trillion a year in interest payments is a good portion of our budget, so we have to be very careful about how we’re scored and how we’re viewed and that we deal with it, but the second thing is, as I indicated earlier, is free trade; the third is immigration, attacking the best and the brightest; the fourth is a quality education for every American so they have the opportunity to go forward, and that, by the way, doesn’t mean a college education for every American. I think we have to recognize that this whole “college for everybody” thing is a little overrated. We need highly skilled vocational people, and I give the example of Germany. Germany is a country which is very strategic. They are focused and they are a precision manufacturer, whether it’s in medical equipment or child’s toys or pingpong tables, automotive — so many different areas, and they have a real focus on what kind of skilled people they need. We have to take away this concept of vocational education as somehow beneath a four-year degree, which might not be worth getting a job for, and that requires a fundamental shift in how we treat education. The fourth thing is we have all this spectrum that’s being underused by broadcasters, and we need to repurpose some of it so it can be used by wireless companies, because all this great broadband — and many of you may have smartphones or iPads — that uses 25 to 125 the data stream as an existing phone five years ago, and we’re going to start hitting a wall where innovation will stop in that area because people’s products won’t work.

Q: What jobs do your high-tech companies create for the half of the population who are below average?

A: Below average is a very difficult thing. There are people who can fix cars, and I can’t fix cars. There are people who have a sense of direction, and I’d be lost without my GPS. I don’t think they’re below average. I think everybody is above average in something. It’s just a matter of finding it. I’m below average in just about everything. I have one ability: to somehow talk about stuff, so I’m very sensitive to that below-average claim. First of all, high-tech companies create things that help people — help autistic kids, for example — learn, help people communicate who have challenges. There are so many societal problems that are being resolved by high-tech companies that, you know, it’s a matter of helping everyone at least have a chance. What I also think the jobs they’re creating, obviously the programming jobs, the manufacturing jobs, distribution jobs, sales jobs, help desk jobs — but there will always be a component of society which has to serve everyone, and the fact is we still need our grass cut, our crops watered; we need so many things to be done for us that people do for us and we sometimes don’t even see them. A lot of these people are immigrants being sustained as a society, and those are real jobs.

Q: In the short term, will innovation destroy jobs faster than it adds jobs, and is that one of the issues?

A: Innovation definitely destroys jobs. There’s no question about it. I mean, if you think back over 100 years ago, all those people who were making horse and buggy whips were put out of business except in the Amish country. That was an entire infrastructure of people who made everything connected, and they went away, and that was the challenge. But every time there’s been a new technology, it’s threatened the status quo. When radio came out, it was opposed because it was going to affect those people who performed live. When television came out, the radio people went crazy. When the “talkies” came out, that’s the movies with sound, the people who played the piano in movie theaters were justifiably concerned about their jobs. And when the VCR, as I earlier indicated, came out, Hollywood was wrongly concerned that they would lose their business. Obviously, it’s helped them tremendously. Every new technology affects somebody, every new innovation, and that short-term dislocation, but that is what makes America great. It is a tragedy to the individuals involved who lose their jobs. It always is a tragedy to people losing their jobs. On the other hand, they may go on to something better. The question is, what’s the role of government there? Is it to train those people? Is it to guarantee them a job? Is it, under today’s society, to give them two years worth of pay for doing nothing with unemployment? Those are difficult questions to address. I would submit to you that it’s a good thing to have some dislocation, because people do go on to the next thing, and it moves society forward. And I would submit to you that as difficult as it is to pay two years of unemployment compensation, I would rather those people volunteer at a non-profit like a church or an organization like this one or a local government and do something after a few weeks of unemployment and get paid for 20 hours of work a week. That’s what I would prefer.

Q: What are your thoughts about the role of our aging infrastructure on our ability to innovate at the rate of other countries like China?

A: That is a terrific question, and I’m sorry to address that the infrastructure is one of the saddest things in the United States right now. I mean, you truly see we are underinvesting in infrastructure, and I wish the stimulus package had focused on our infrastructure and been thought out rather than all this money we just gave away, and there’s nothing today to show for it except some asphalt on some roads and a little bit of broadband deployed. You know, we gave a third of the money to the states so they wouldn’t go bankrupt, a third of the money in the form of kind of an insignificant tax return that people didn’t really notice, and a third went to a bunch of projects, which there’s very little to show for. So I would have taken that money — $880 billion, almost a trillion dollars — and I would have really thought through what we needed. One of my favorite books of all time is about the New York state. It’s The Power Broker by Robert Caro. It’s a Pulitzer Prize-winning book, and it talks about how Robert Moses built a large part of New York state, mostly downstate New York and New York City in the 30s and 40s, through a fairly interesting program, designed to put a beautiful face on New York, and it’s made a different — but I think we have to invest in infrastructure. What I would advocate, frankly — again, this may not be popular with this group — is that you take the gasoline tax, you add to it 5 cents every six months, and I would put that money toward infrastructure, and also it would basically encourage people to buy more energy-efficient vehicles and live closer to where they work and do some basic things. At my company, we try to make a different — we give every one of our employees $25,000 to buy a place in the county where we’re based, and it’s in the form of a three-year forgivable loan, and what that does is it cuts down on the commute, because the commute’s a huge problem in the Washington, D.C., area. It’s the number one thing our employees complain about. It allows young people to buy their first home. It instills loyalty. Where Europe has it over us is that they basically have an infrastructure living closer to where they work. They have smaller cars. Part of it is they have a structure where you can’t get big cars through a lot of those little towns. But we really have to cut down on our fossil fuel use; it’s destroying our country.

Q: How are electronic companies going to change from planned obsolescence to sustainable products?

A: I appreciate that question. The truth is that it’s really not planned obsolescence. The way you make money in the electronics industry is you come out with something first and innovative, or you make it cheaper. There are at least three things going on in the environmental area that are very significant. One is the concept of energy usage, and I’ve been working on this one for at least 15 years. We’re just convincing the leaders around the world to focus on the fact that it’s important, which they have, and then measure it, which, believe it or not, is more difficult, agree on how it’s measured worldwide, which I think we’ve done, except the United States, which is trying to reinvent the wheel thanks to our government spending money. We have a standard video. It’s about me speaking and Michael Dell speaking and some sports. How do you measure how much energy a TV set uses? Well, we’ve agreed on that worldwide, and then to communicate that to the public so they can make informed buying decisions, and also keep reducing the amount. Now a TV set uses less energy than two light bulbs, so we’re kind of there with TV sets. I think we’re good with energy usage; we just have to get people to focus and understand and be able to monitor how much they use, and now when they’re using a product. The other area of sustainability is when you have a product that has a lot of rare earth minerals; it has a lot of different things in it to make it work. How do you reuse that product? How do you recycle it? It’s just not a matter of taking it back and recycling it. It’s a matter of building it so it can be recycled, and that’s the next big wave of where we’re going as an industry, and we want to do it. Every manufacturer wants to be more green than the next one, and it’s difficult. And the third is actually some of the harmful chemicals and things that are being used, how do we get away from those, which is an ongoing process. You know, now that China has cut off rare earth minerals to the world, and prices have gone up like tenfold. There’s a lot of focus on that right now, frankly, is how you can be a manufacturer in the United States and do something in a way that you have choices of the components you use. So we’re getting there. It’s a matter of time, and it’s really not a matter of planned obsolescence; it’s a matter of sheer competition and making money. No one wants to buy a black-and-white TV set, a four-by-three set. No one wants to buy a Sony Walkman anymore; they’ve stopped making them. It’s a matter of coming up with something better that people will buy. They marketplace is so harsh; it’s a very, very difficult business. I love representing the 2,000 companies. A lot of them started out as entrepreneurs. We actually run our big event in Las Vegas and design it so that anyone with an idea can get access to the 150,000 people. For just a few thousand dollars, they buy an exhibit, and that’s how the whole event is run, but the truth is we want to make it easy to enter and easy to manufacture as well, and that’s a challenge, and that does require focusing on the environment and focusing on ease of entry to the marketplace.

Q: How do we deal with China’s penchant to violate patent protection, and is this an area where the government should redouble its efforts?

A: Well, we have an agreement with China. When they entered an agreement for permanent normal trade relations — PNTR — probably a dozen years ago, they agreed to follow intellectual property laws, and what’s interesting about China is you realize the federal government, they really do want to follow it, but when it comes to a lot of the decision-making, what we don’t understand is we view them as a monolith, and they’re really not a monolith. They’re a whole bunch of series of independent little fiefdoms and governments, and in the patent area and in the copyright area, it’s very difficult. There are different cities that follow the law, and there are those that don’t. I was in China last summer with Sue Schwab, who was the United States trade representative, and she and I were talking with the head of a section government there, and they were arguing that they should not have to pay Microsoft for each copy they use; it’s too expensive. And of course, my answer was, “Don’t buy it then,” and it’s very difficult for companies like Microsoft to protect their intellectual property, and it’s something that’s going to be a constant errand. Our whole relationship with China, actually, is very difficult, and I applaud President Bush and President Obama for walking a very delicate line. It started really with Nixon in a sense. China is such an important country, we can’t ignore them, but their culture and their morays and ethics are very different than ours. Sometimes you have to draw the line and say, “This is the law, and this is what you’ve agreed to,” but other times, we have to recognize that they have a different worldview of harmony and feeding their people, and they think some of the things we do are pretty crazy. My wife loves putting pictures on Facebook and showing the people in China that they can’t have access to the pictures she just took of them because they restrict access to Facebook, they’ve done a lot of the tough things in Tibet and elsewhere, and they definitely restrict religion, but they are feeding their people, so we have to walk on the leash of intellectual property. We have to negotiate and fight tough, but not walk away.

Q: You mentioned early in your speech that the government should not pick winners and losers. How do you then justify government policy on choosing whom to admit into this country?

A: When I said they shouldn’t pick winners and losers, it’s putting money into different industries that some will succeed and some will not. It’s not fair. It’s not fair that the vegetable and fruit growers get no money from the government while those that have some crops do. It makes no sense, but in terms of who we allow in the country — this is our country. We should determine who we allow in it. The alternative is to just either put of a fence and not let anyone in or to let everyone in, so we have to choose who we allow in. The fact that we do it randomly, to me, is the least desirable way.

Q: How does innovation find its way into mature companies? Do you have examples of that?

A: You know, that’s the toughest thing. The CEOs of the big, mature companies, including some of the ones we’ve been talking about, that is their biggest issue: how they allow innovation into their companies. How do they allow something that’s so that someone with an idea like ten levels below gets it past middle management who’s risking their jobs and maybe their pension by just presenting it? It is something that CEOs struggle with all the time, and frankly, there’s a lot of research by the Kauffman Foundation, which shows that most of the innovation comes from the smaller companies and smaller businesses and entrepreneurs and start-ups. On the other hand, these big companies do hire a lot of people, and they do often buy companies that are start-ups, so they give a way out for start-ups, and they do some innovation themselves. I mean, if you look at the largest grant of patents in the United States, on that list, you’ll see companies like Intel and IBM and others that are big companies. So these big companies are innovating and in every one of them, it’s a matter of corporate culture and how they decide and how the leaders decide and what kind of examples they set and what kind of examples they set for when someone fails, how they treat them as a leader. A lot has to do with leadership in our country and setting examples, and that’s what distinguishes the successful companies from the unsuccessful ones.

Q: When discussing sweeping spending cuts earlier, why do you make an exception for military spending?

A: I don’t know if I made an exception for military spending. Since I did an interview earlier today, I’m not sure what I said all morning, but military spending, what I was talking about is first of all, the number one role of government is to defend ourselves, and you know, we have been attacked in various ways over the years, so we have to do it, and the question is, how do we do it smart? Do we still need bases around the world? Do we still need bases in Korea, for example, the 30 or 40 thousand troops there when Korea is very healthy financially, and they could afford to spend a little money, and the same for Europe even? You know, so why are we doing it is a question that I have. It’s a matter of priority setting. It’s a tough question. The challenge I have, even with the war we’re in, is basically these are rural kids — I don’t know how many of you know someone actually serving in Afghanistan or Iraq — but basically, it’s a phenomenon. It’s not like Vietnam, where we all knew somebody. This is a war where only a few people are sacrificing. Earlier, at the end of 2010 when everyone was debating the Bush tax cuts and whether they should be extended, I wrote a commentary in the New York Post, which suggested that we should not extend the tax cuts, and they should be eliminated, and we should call it a war tax, and everyone should sacrifice for everybody, and actually, that’s what I did really want to share is that we do have to address a time of shared sacrifice, and that’s what leaders should do. We’ve been electing leaders in both parties, not only with their extreme views, but frankly, both of them give only silver-bullet solutions which are unrealistic, which don’t require any of us to sacrifice, and that’s not being responsible American citizens, and we should hold our leaders accountable. What I’m hoping to see in the next few elections is that we really start asking tough questions of our leaders and we force them to make the tough decisions, because there are decisions that have to be made, and as a country, we’ve gotten along for a long period of time without making them, and that’s why we’re in the situation we’re in. So that requires decisions about our military; that requires decisions about subsidies for various things; it requires how we spend our fundamental money; it requires whether we have means to have social security; it require if social security should be looked at; it requires how we do health care; how we reward doctors; how we do so many different things that should be looked at. That’s why when I hear people say, “No more taxes” or “You can’t cut entitlements,” my blood boils over, because that is not an adult view, and it’s time our nation put on its adult pants. I think I have a column coming out, which has to get past one of the females in my office, that basically the headline is, “It’s time we man up.”

— Transcribed by Taylor Rogers