The biggest economic scandal of this
decade has gone unremarked upon.
That is the inability of American
technology companies to show stock market leadership.
Tech stocks have been in the doldrums
since the Internet bubble collapsed. Intel is now down nearly 40%
from its 2001 level, and remember that the bubble burst nearly 18
months before then. Microsoft is also worth less, despite an enormous
campaign of stock buybacks.
You can say similar things about Cisco,
or Applied Materials. AMD is an exception, up nearly 20% in part on
Intel’s weakness, and in part of the success of its Dresden, Germany
foundry. The Philidelphia Exchange SOX index, which tracks the
semiconductor industry as a whole ,
is still at near the level it achieved after an early 2001 collapse.
As goes the stock market so goes
employment. Young people today are much less-likely to major in
computer science than they were. American programmers are aging,
fast. China and India are out-producing us in engineers, and will
soon be out-engineering us (if they aren’t already).
The only sector which has kept America
afloat has been our Venture Capitalists. They have pushed many
companies that launched in Europe to re-launch here, especially open
source companies. But that success is limited. I was talking to Larry
Augustin, still chair of VA Software (Slashdot) but now mainly a VC
and company director. He confirmed that Chinese and Indian VC funds
are growing fast, getting smarter, investing wisely. You just don’t
hear about them. Because they don’t want the publicity.
The problem is not just that our big
tech companies are slowing. It is that they are not being replaced.
New “fab-less” companies like Atheros
(Wi-Fi chips) and nVidia
(graphics chips) are nice to talk about. But these are
onesie-twosies. We need sevensies-eightsies. And a decade ago we were
getting new outfits like this in the dozens. Worse, these companies,
and the giants, are increasingly relying on foreign operations for
their future. They’re investing heavily in India and China and Taiwan
and even Japan. They’re not investing here. (That’s an early drawing of the AMD Dresden plant. Think Kurt Vonnegut might want to visit?)
The fact that we’ve had a few successes
in social networking – MySpace, YouTube – doesn’t make me feel
all warm-and-fuzzy. These folks are re-using and marketing
technology, not creating new breakthroughs.
It’s true that Moore’s Second Law
bites. This holds that, as chips become more complex, the cost of
getting production lines running rises. (Thus the fab-less fabs.) But
even Moore’s Second does not completely explain what is happening on
the ground.
America is falling behind. If real
estate and heavy equipment and defense contracting is what works,
you’re eating your seed corn. You’re late-Roman empire, not early
Roman empire. The world knows this.
And the day of reckoning on all this
won’t be pretty.
Your argument assumes that some new nation (usually China) will replace the US as The Superpower. What if, instead, we are heading into a new era? Perhaps there will truly be a global economy and the ability to have a good job will not be based solely on which country you inhabit. It would be best for the US if we are neither of the Roman empires and instead no empire at all.
Your argument assumes that some new nation (usually China) will replace the US as The Superpower. What if, instead, we are heading into a new era? Perhaps there will truly be a global economy and the ability to have a good job will not be based solely on which country you inhabit. It would be best for the US if we are neither of the Roman empires and instead no empire at all.