This book titled "Innovation Nation - How America is Losing Its Innovation Edge, Why it Matters, and What We Can Do to Get it Back" by John Kao is a little dated, since it was published in 2007, considering its topic/content is not as timeless as say "Origin of the Species". I remember reading it a while back but didn't finish it then thanks to some distraction that popped up to turn me away. Got the second book titled, "Breakout Nations - In Search of the Next Economic Miracle" by Ruchir Sharma published in 2012 as a gift few years back.Started reading promptly and again got distracted. Both books were lot more interesting to read now with dozen additional years of developmental perspective we all have gathered. While both books are focused on nation level innovation, Kao's book is more US focused comparing it to other countries that are keen on overtaking US in their own progress. Kao argues that while we love a national narrative of a good come-from-behind story and are generally confident that US will prevail, we tend to drift along in our current direction, which happens to be sideways! Since there is no national consensus about what US stands for as a country, there is no vital sense of purpose. This sounds all the more appropriate today in 2020 compared to 2007. His solution is to develop a national agenda around innovation that will bring in cohesion and propel the nation forward. But right off the bat he points to microlending as a major recent innovation, that has since been debunked by books like Due Diligence by David Roodman that said while it is useful, microlending is not all that it cracked up to be. I wouldn't have had that insight if I had read this book in 2007. :-)
In the initial chapters, Kao delves into national innovation agendas set forth by countries like China, how much each industrialized country spends on R&D, how they differ or appear more coordinated than what is going on in the US. In this non-fiction book, he has two sections where he had tried to be a story spinner. In the first story he paints a dystopian version of the future US where due to a lack of innovation, US has lost its preeminence and so an average Joe struggles to find work to support a decent family life.. In the second version, with a perfect agenda in place, US is leading the world and so Joe is doing swimmingly well. It is amusing to read these two story lines interspersed in a book rest of which is totally non-fiction. He is all praise for Singapore and Finland, claiming they got the formula right, countering them with Soviet Union's five year plans that didn't work very well. He doesn't think China's efforts & progress will amount to much, which is puzzling to read even with the 2007 mindset.
His prescription for ailing US is to put together a Government initiated agenda to drive innovation with 20 innovation hubs spread across the country each designed to tackle one big, wicked problem, with a billion dollar funding for each hub. He asks those who may roll their eyes about another big bureaucratic government initiative to go back and evaluate how successful were the Manhattan project that created the atomic bomb during the second world war and the mission to the moon that put the first man on the moon in the late 60's. Both are huge government initiated projects that brought the nation together with a large cohesive vision and drove the country forward in multiple fronts. If $20B funding sounds too big to you, he counters pointing out the $800B US spends on military alone. Thus, $20B funding may not be a big deal and is needed to kick start the process. I am with him on these points since politicians who cry wolf on deficit spending are willing to push it up considerably when they want, with the recent $2T stimulus package being a good example. He does conclude the book saying we need to get out of the what is good for America is good for the world cockiness and get into the mindset of what is good for the world is good for America so that we can learn from other countries.
While Kao is an academic, Ruchir Sharma is an investment manager. He claims that he spends a month or so each year in a different country to get a good view of how things work there. The Breakout Nations book is his attempt to talk about a dozen or so such countries he has spent time on. When I started reading the initial chapters that focused on China, India, Brazil, Mexico, Russia, and so on with one chapter dedicated to each country, I thought that the whole book may turn out to be a collection disconnected reports on various nations. I was getting ready to feel a bit disappointed. Still since the writing was lucid, kept going thinking that I'd imbibe ideas similar to the ones mutual funds prospects may provide on whether to invest in and travel to that country. :-) But I was pleasantly surprised to see Sharma tie them all together in the last couple of chapters providing a coherent narrative.
In discussing each country, he throws around a lot of interesting nuggets based on his time there. For example with the roads so congested and traffic so chaotic, Brazilian cities like Sao Paulo, have a helicopter network used by corporate CEOs that jump from one roof top to another to get to their next appointment on time. In a totally different domain, China that wants to encourage capitalism, lets multi billionaires pop-up one by one. But it doesn't want anyone becoming way too rich as it may lead to social unrest brought in by income inequalities. So, once someone's net worth crosses ten billion, they are on the government's cross hair and are either forced to keep their net worth well below the $10B mark or be charged with some crime and thrown behind bars! Of course this is not true anymore since there are very notable exceptions now like Jack Ma, who is worth $45B.
I loved many lines of Sharma's second-order analysis that look at details beyond the first order factors like a countries GDP. There are several examples including the following few:
- Churn rate of the wealthiest people in a country (more churn indicates dynamism in the country's economy that allows newer individuals to come to the top, while no change for decades may indicate corruption, entrenched privileges for a few)
- Shifts in commodity prices yielding highly lopsided and skewed valuations projecting incorrect pictures (e.g. Brazilian oil giant Petrobas alone reaching a valuation of $300B, while the entire stock market of Turkey amounting only to $200B)
- South Africa having come out of apartheid thanks to ANC, not being in any hurry to improve the economy resulting in high income inequalities, since ANC can't be challenged
- Which country in the world is the biggest market for armored cars, as it indicates lack of systemic security despite individuals being rich.
Each one of these bullets run into few pages of intriguing discussions.
In Sharma's analysis Indonesia is rated high as one of the best run commodity economies. He is iffy on China. With my advantage of additional eight years of hindsight, neither one appears accurate. He does a nice comparison of Taiwan and South Korea, two tiger economies, saying Taiwan actually has the recommended set of ingredients, like welcoming immigrants, open corporate books, no family run conglomerates but is not doing as well as S. Korea which is on the opposite end of the spectrum but is thriving. He finds it counter-intuitive but accepts that the S. Korea model could work since it has been on the raise for decades now, establishing brands that are well recognized all over the world.
In the end he looks at countries that are potentially going to increase the per-capita income range substantially over the next decade (i.e. current decade coming to an end since the book is almost a decade old) as a mark of overall growth that points to a breakout nation. In the $20K to $25K range, he lists Czech Republic and South Korea. He places Turkey and Poland in the $10K to $15K range, and Thailand in the $5K to $10K range. Below that range, he places China hesitantly and lists India, Sri Lanka and Nigeria as other potential break outs. He places many of the countries where the data available are unreliable combined with a level of opaqueness due to corruption that makes objective analysis difficult in the "Fourth World" bucket. His assessment is that as they straighten out their act, any of them may suddenly turn out to be a great break out nation. Makes sense.
It was nice to read two different books more or less simultaneously as they both covered overlapping domains by happenstance. Neither one is a difficult read. Material being a bit dated, instead of making them feel less useful, gave me the feeling of having an advantage over the authors that made the read more enjoyable. :-)
Regards.
-sundar.
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