i4j Beginnings: INNOVATION AND JOB CREATION Workshop 3 March 2011 at Stanford University
Here are the notes from the workshop at Stanford University that planted the seed that was to become i4j
INNOVATION AND JOB CREATION
3 March 2011 at Wallenberg Hall, Stanford University
Organized and chaired by
- Sven Otto Littorin, Visiting Scholar, and
- David Nordfors, Ph.D., Founding Executive Director, Stanford Center for Innovation and Communication (SCIC), Stanford University.
Purpose: To discuss how innovation and jobs can create each other, and how to make policies for it.
- Anders Flodström (Vice-Chairman, EIT-European Institute for Innovation and Technology. Former University Chancellor, Swedish National Agency for Higher Education.)
- Sven Otto Littorin, (Visiting Scholar, SCIC, former Minister for Employment, Swedish Government)
- Håkan Eriksson, (SVP and General Manager, Group Function Technology, and CTO at Ericsson..)
- Keith Devlin, (Co-founder, Executive Director, HSTAR, Stanford University)
- Henry Etzkowitz, (President, Triple-Helix Association, Visiting Scholar, SCIC, H-STAR institute, Stanford)
- Mei Lin Fung, (Chairman, Inst f Organization Excellence; board member Nat. Univ.of Singapore America Foundation)
- Stig Hagström, (Professor, Stanford University)
- Richard Horning, (Counsel, Venture Technology Group at SNR Denton)
- Chuck House, (Executive Director, Media X, Stanford University)
- Niklas Lundblad, (Senior Policy Counsel at Google in Mountain View.)
- Peter S. Magnusson, (Director of Engineering, Google)
- Dan Maydan, (President Emeritus, Applied Materials, Inc.)
- Marina Ranga, (Visiting Scholar, Stanford Center for Innovation and Communication, H-STAR Institute, Stanford)
- Martha Russell, (Associate Director, Media X, Stanford University)
- Robert M. White, (Consulting Professor, Material Science and Eng., Lecturer in Public Policy, Stanford University)
- Joseph Yang, (Director, Science and Technology Division, Taipei Economic and Cultural Office, San Francisco)
Moderator: David Nordfors, Executive Director, Center for Innovation and Communication
Notes taken by John Joss
Summary from Discussions
Some key ideas:
- Innovation and Job creation are different silos in Governments as well as in Companies
- Innovation and Job creation are different languages spoken by different people
- Common language and informed ‘horizontal’ reporting needed to connect all stakeholders;
- Job issues are global, systemic and interrelated, not local or isolated;
- Innovation and transition are historically integral to the job process;
- Education to meet future job-skills requirements is and will remain essential;
- Measuring/matching job needs to resources is vital and needs geographic flexibility;
- The politics/business/academia ‘triple helix,’ working in unison, can address the jobs issues.
Ideas for Continuing the Discussion
- Create a seminar on Innovation-Job Creation
- Invite leaders in politics, business and academia to join. Both Innovation and Jobs experts.
- A international, neutral meeting place for discussing Innovation-Job Creation
DISCUSSION WITH PANEL AND ATTENDEES
(These are not conclusions, They are selection of various thoughts exchanged among participants )
Silo separation equals stagnation: Power is vertical. Potential is horizontal. The ‘powers’ (political, economic, academic) are vertical, the opportunities horizontal. Innovation policy is one vertical, labor policy is another one. They don’t mix. They have different languages. The challenge: connect innovation and labor policies. Innovation requires inter-silo communication. What form can new communications language take? What projects can bridge the silos?
Governments are here to stay. As long as they have the monopoly on taxation and violence they will remain important. What should they stay away from? Governments are by their nature conservative but we must learn how to handle them.
Government is constructed to do big things well —transcontinental railroads, rural electrification, the Euro, etc.—and small things badly, vice-versa for corporations. Government lacks political flexibility, quality standards and feedback to improve outcomes. The U.S. Government lacks the imagination to project the future. It would be a net ‘win’ to move production [of products] to ‘best done.’ One dramatic thing that the U.S. and EU should be doing is to improve labor flexibility.
Challenge: Government needs to innovate. Every skills gap is affected by technology innovation, and we must always reorganize and process in new ways. We say this is a task for government. But government itself is inefficient, it needs to transition itself. How can it transition others?
Innovation destroys existing jobs while creating new jobs. The timing and duration of innovation/economic/demographic cycles, and the mobility of people and jobs, are chasing each other. Employees with top skills can get jobs anywhere, while the rest get less and less opportunity.
Universities need better connection between research, innovation, and education. In many universities, research is only loosely connected to education, thus does not connect to the labor market. Often, researchers and teachers are different people. In some places—e.g. the UK and EU, lack of mobility between universities and the commercial sector has meant that entrepreneurs had to leave their university posts to start companies. Students are not in contact with the research or the innovation, and are educated to the textbooks. But the essential skills needed for the next 10-20 years may not have entered the textbooks yet. The EU needs 50 “M.I.T.s” and created just one.
To base innovation and labor-policies on multiplier effects, reliable statistics are needed. Innovative billion-user-companies, like Google or Facebook, employ comparatively small numbers of people. Proponents of innovation point out that their work produces many more new jobs through the multiplier, new companies are formed around them and ‘cascade’ in many areas, partly via tax offsets. Google’s 25,000 employees don’t include those who left to create startups. The same effect could be seen at Stanford, at M.I.T. [and other places] as co-creators of new jobs. Typically, ministries of finance in western democracies need strong, quantitative arguments to allocate large budgets. So numbers are important. “The Computational Revolution of Sociology” may offer new possibilities. Social science can now quantify things unmeasureable before. Google and similar companies could produce such statistics.
People hiring people is a part of the multiplier effect—A lot of work can be created by letting people perform services for each other. For example, people working for high wages in high-performing industry can engage many other people in their private lives. This adds to the multiplier effect.
Not all jobs created by innovation are counted as jobs in the statistics. An example was given of a virtual company in the digital sector, founded six years ago, repackaging data from and via the Internet, with (now) 20 workers, of whom eight are Ph.D.s, none of whom would now be counted as ‘employed’ using Government metrics.
Innovation creates, destroys and displaces jobs. Tractors and combine harvesters destroyed millions of jobs. But innovation also creates jobs and wealth, and should ideally produce wide benefits. Trying to keep jobs in America or in any one country won’t work. American can’t compete with China or Taiwan in labor costs. But consider: most of the money made on the iPhone and iPad is being made in the U.S. How can labor policies take advantage of this? It is a complex situation when jobs move across borders.
Large innovative companies are restructuring and spreading workforces worldwide. When the first IT-bubble burst, to survive, Ericsson halved its employment, from 100,000 to 50,000. Then, half the work force was in Sweden. Ericsson rebuilt with a different workforce focused on services rather than manufacturing, at a time when the time/cost to manufacture a mobile phone fell from 10 hours to five seconds through advances in manufacturing technology. Most job creation was outside Sweden—today, 80% of Ericsson’s work force is outside Sweden. There is a similar trend in many multinational companies, also in the US.
Keeping a close geographical distance between invention and commercialization supports both competitiveness and job creation. If invention/innovation is done in the same place as manufacturing, this can raise the competitiveness of both the company and the region, and create jobs. Innovation plus commercialization —the process of innovation, product development, manufacturing and revenue production–can therefore be the goal of innovation-jobs policies. The “Triple-Helix” concept of the construction of regional innovation systems can be useful a useful mindset for policy makers, for developing this aspect of combined innovation-job creation.
Will loss of manufacturing lead to a bipolar society? U.S. export capability has shifted from manufacturing and materials to licensing intellectual property, now 25% of all U.S. exports. China exceeded the U.S. in production in 2010. Part of the problem, at greater societal cost, will be the creation of a ‘bipolar’ society of the focused, funded working population (one in five) and the rest, left without dreams, hopes or expectations (note, in context: U.N. world population predictions show the current 6.5 billion rising to 7.2/7.7/8.0 billion (low/medium/high) by 2020 and ~10.5 billion by 2050, calling for large numbers of jobs and raising the pressure on scarce resources).
Innovation creates a new urgency for labor force transitions. WWI and WWII created mass education of the disenfranchised (in context, agricultural mechanization—driven by technological innovation and rapid job obsolescence—where 98 people had been employed on farms, the same work was now being done by four, but the transition was accomplished; similarly with weaving). Populations must be helped to transition into the digital economy, via a clearly explained vision.
Quality of people is the key to both innovation and jobs based on education. We need to know what types of skills and learning are needed to create jobs. ‘Separate’ brain functions can be trained. Young people will not be helped unless they can have access to the appropriate education.
Innovation always destroys jobs, labor policy can support transitions instead of holding on to the old jobs. Politicians have tried to prop up dying industries without considering the transitions that are occurring. When Sweden’s shipbuilding industry was declining, the Government tried (unsuccessfully) to support it by subsidizing it. The same is true of the U.S. corn industry. So: how can the inevitable transitions be subsidized, rather than trying to keep dying industries alive?
What happens when the retraining cycle is longer than the innovation cycle? In every major wave of innovation, old jobs are destroyed and new jobs are created. First there is unemployment, when the old jobs are lost, then re-employment, when people retrain to do the new jobs. But innovation is accelerating. Soon we may be in a world were by the time people have retrained, the new job might also be obsolete.
How do we match labor resources with innovative job opportunities? Lots of ‘jobs’ are available – but maybe not at the right place and right time with the right workers with the right skills. Governments tend to look at institutions and people as statistics. Market forces often drive the result. An international brain drain can happen. How do we balance people moving to places where there are jobs, and jobs moving to places there are people?
Is Innovation spurring job growth in Silicon Valley? Andy Grove’s 2010 article on PCs, born in Silicon Valley, stated that Silicon Valley had not had a net job increase since 1979. President Reagan’s Council on Competitiveness, founded in 1986 was created to raise U.S. competitiveness in world markets, raise U.S. workers’ standard of living. In context, the top U.S. companies have in recent years suffered a 62% lowering in profits, while experiencing zero revenue growth.
Managing change is politically difficult in a democracy. Sweden must create at least 300,000 new jobs in the next 10 years as well as attract people across borders. to keep a large enough active labor force to keep the country going. This is hard to do, because voters say “We have 6% unemployment, so why bring in immigrants?” In such environments, innovation increases the political complexity.
Differences are increasing between people in welfare countries. A larger proportion of Swedes under the age of 15 are illiterate. How can such a problem be addressed?
CEOs need incentives to create jobs. CEOs today are motivated primarily to create short-term value and money. How about giving them incentive to create jobs?
Control Data and Tracor implemented their own systems with their own money as Intel does today, spending $100m on outside education. Both companies guaranteed an early education so critical to preparing people for new job opportunities. In context, it is now a major concern in the national-security arena when 27% of U.S. military job applicants do not qualify either because of obesity, substance abuse or lack of appropriate education.
Vs. the skill sets for employees or leaders, people are not getting the right education and cannot meet the new challenges. So we need, implicitly, new college degrees to broaden individuals’ focus compared with current education that trains in specialties, plus training that helps develop entrepreneurial drives and social skills—a sort of educational ‘triple helix’ itself. A business-school student with wide skills is better equipped to create innovative new entities via travel, understanding different cultures and managing vertical ‘experts.’
We need to create and spread the vision of innovation and its relationship to jobs]and enable the co-creation of new opportunities. Young people should be empowered to identify emerging ‘stars’ and future potential as it applies to them. Journalism can help tell these stories.
Littorin/Nordfors: “Innovation policies must support job growth”
Littorin/Nordfors op-ed and the introductory presentation by Mr. Littorin, integrated.
Sweden handled the latest financial crisis well. Its growth rate is among the OECD’s highest, the budget deficit should become a surplus in 2011, and unemployment is declining to 5%. How did they do it? Sweden combined fiscal prudence with labor activism.
Politicians have started to discuss innovation, the principal driver of economic growth, as a job creator, generating an estimated 75% of growth and prosperity. But are countries organized to do anything about it? Mature economies have ageing populations. Labor markets are growing too slowly to meet future job needs. But innovation economists don’t manage jobs and labor economists don’t handle innovation. Links or common language do not exist in the literature.
How should governments help people create wealth for each other? We ‘only’ need an economy that permits it.Today, many people who can and want to create value cannot enter the labor market: economies are not organized to include them. Resources, needs and the system are mismatched. So it is as vital to unleash human resources excluded from the economy as it is to innovate, turning ideas into new marketplace value. Yet powerful stakeholders resist innovation.
Innovation’s importance for technological growth has come to overshadow its importance for economic growth. Gadgets seem cooler than their meaning for nations’ economic futures.
Nations are struggling to implement major, politically difficult reforms to increase their labor pools. After the 2006 election, the Swedish government introduced a system of earned tax credits. The unemployment-insurance and social-security systems were reformed to get people back to work. Major pension reform helped increase older populations in the labor market.
These reforms were controversial. Reforms are rarely introduced in good economic times—public support for their perceived negative social consequences is negligible. In bad times, governments must solve other, short-term problems. Reforms generate similar public reactions: demonstrations, labor-market conflicts, poor opinion polls and election defeat for incumbents.
Sweden’s lesson: reforms work best if introduced early in the election cycle. But reforms to increase the labor supply are not enough. Economic theory shows that technological improvements and innovation determine long-term growth. So: can innovation-driven productivity growth translate into job growth? What policies are needed? What are the long-term effects on growth, prosperity and government finances?
A main reason for the lack of benefits from innovation lies in failing institutions and how we organize innovation policies. In most countries politics is ‘vertical;’ departments and ministries separate; budgeting is vertical—ministries asking Ministries of Finance for funds.
Innovation policies fall between vertical ministries. For example, innovation policies within a Ministry of Education are lost in the academic maze while innovation strategies in a Ministry for Industry often faces tougher short-term issues. In both cases, theories on how and why innovations evolve have superseded their effects on growth and political impact.
Journalism is also ‘vertical,’ drive by ‘beats.’ Verticals in politics and journalism reinforce each other, making it harder to bridge innovation and labor markets for the common good.
Without horizontal political debate and enlightened journalism to create bridges of common language, innovation has become too theoretical. Policy—political, commercial and academic—is needed that is relevant to all essential stakeholders. Understanding technological growth has overshadowed its importance for economic growth. This gap must be bridged.
Combining innovation and labor policies is a complex, open-ended challenge, undefined and unsolved. Finding the right questions is as hard as finding convincing answers. For example, do innovative companies hire many workers?—Google, 25,000, Facebook 2,000, all Sweden’s biotech industry, 10,000, or <0.2% of the labor force. Without them, we would be worse off, but what job growth emanates from these innovation hubs? Is ‘innovation war’ pending?
The EU Flagship Initiative “Innovation Union” to fight the current crisis and strengthen long-term EU competitiveness aims to generate 3.7 million new jobs by 2025, but the people outside the regular labor market number >100 million.
So decision-making systems offering solutions, tailored by and for existing silos, executing these solutions linearly, top-down, will likely fail. Policy makers must interface specialized knowledge with broader perspectives, mix disciplines and bridge cultures. The challenge is like innovative product design, continuously defining, researching, prototyping, choosing, implementing and learning. By iterating in multi-disciplinary teams, working across borders of innovation and labor policy, problems are framed, questions asked, ideas created and the best answers chosen.
Collaboration can integrate innovation and labor policies, and make a democracy competitive in the global innovation economy. Innovation needs investment, in R&D as well as in people. Job creation delivers ROI by letting more people create more value, for mutual benefit.
SUGGESTIONS FOR BRIDGING INNOVATION AND LABOR POLICIES
For innovation policymakers: We need reliable, quantifiable ways to agree on the success of innovative entrepreneurship in sustainable improvement in job creation and job satisfaction.
For labor policymakers: We need sound, measurable ways to agree on the power of job creation to improve economic growth and fiscal balance.
For politicians and economists: We must agree on and calibrate the success of combined innovation and job creation as long-term improvements in family life, harmonious communities, physical and mental health, lifelong learning, creativity, aesthetics, and happiness.
For communicators: common, relevant, simple language for discussing the link between innovation, labor and quality of life, to enable constructive interaction across silos, and help democratic and business leadership compete for mandate from citizens, shareholders and customers, maintaining checks and balances, and improving value creation for constituents.
It’s ‘us and them,’ not ‘us or them.’ Creativity and innovation work best and yield the highest returns when borders are minimized. Protectionism and barriers to the flow of ideas and people should be dismantled. Combining innovation and job creation is the opposite of a zero-sum game. A competitive creative player will benefit from interactions, even if some encounters deliver a loss. A set of competitive creative players can all win, if a zero-sum game is avoided.