Innovation Is Driven By Government Policy


Two early programmers (Gloria Ruth Gordon [Bolotsky] and Ester Gerston) at work on the ENIAC

The first electronic general-purpose computer was the ENIAC or Electronic Numerical Integrator And Computer. The ENIAC was designed to calculate artillery firing tables. ENIAC’s design and construction was financed by the United States Army, Ordnance Corps, Research and Development Command which was led by Major General Gladeon Marcus Barnes. The construction contract was signed on June 5, 1943, and work on the computer began in secret by the University of Pennsylvania’s Moore School of Electrical Engineering [I am a graduate of the Moore School].

Grace Hopper

Grace Hopper

The inventor of the first compiler for a computer programming language was an officer of the U.S. Navy named Grace Hopper. She popularized the idea of machine-independent programming languages, which led to the development of COBOL, one of the first high-level programming languages. In 1982, Admiral Hopper gave a speech to my plebe class at the U.S. Naval Academy.

Bardeen, Shockley & Brattain

John Bardeen, William Shockley and Walter Brattain at Bell Labs, 1948. All three were awarded the 1956 Nobel Prize in Physics.

The transistor is the fundamental building block of modern electronic devices, and is ubiquitous in modern electronic systems. The transistor was develop in 1947 at AT&T’s Bell Laboratories by American physicists John Bardeen, Walter Brattain, and William Shockley, the transistor revolutionized the field of electronics, and paved the way for smaller and cheaper radios, calculators, and computers, among other things. At the time of the develop of the transistor, AT&T was a government sanctioned telephone monopoly.

Jack Kilby

Jack Kilby with the first palm-sized calculator. Kilby was awarded the Nobel Prize in physics in 2000.

Integrated circuits are used in virtually all electronic equipment today and have revolutionized the world of electronics. Computers, mobile phones, and other digital home appliances are now inextricable parts of the structure of modern societies. Jack Kilby at Texas Instruments demonstrated the first working example of an integrated circuit on 12 September 1958. The first customer for the new invention was the US Air Force. The NASA’s Apollo guidance computer led and motivated the integrated-circuit technology, and the Minuteman missile forced it into mass-production. The Minuteman missile program and various other Navy programs accounted for the total $4 million integrated circuit market in 1962, and by 1968, U.S. Government space and defense spending still accounted for 37% of the $312 million total production.

The Mother of All Demos” is a name given retrospectively to Douglas Engelbart’s December 9, 1968, computer demonstration at the Fall Joint Computer Conference in San Francisco. The live demonstration featured the introduction of a complete computer hardware and software system called the oN-Line System or more commonly, NLS. The 90-minute presentation essentially demonstrated almost all the fundamental elements of modern personal computing: windows, hypertext, graphics, efficient navigation and command input, video conferencing, the computer mouse, word processing, dynamic file linking, revision control, and a collaborative real-time editor (collaborative work). Engelbart’s presentation was the first to publicly demonstrate all these elements in a single system. The funding for Engelbart’s work at the Augmentation Research Center (ARC) was provided by the Department of Defense’s Advanced Research Projects Agency (ARPA) [currently DARPA, the “D” is for Defense].

Douglas Engelbart

Douglas Engelbart

ARPANETThe Advanced Research Projects Agency Network (ARPANET) was one of the world’s first operational packet switching networks, the first network to implement TCP/IP, and one of the progenitors of what was to become the global Internet. The network was initially funded by the Department of Defense’s Advanced Research Projects Agency (ARPA). The packet switching of the ARPANET, together with TCP/IP, would form the backbone of how the Internet works.

Frederick Terman is widely credited (together with William Shockley) with being the father of Silicon Valley. During World War II, Terman directed a staff of more than 850 at the Radio Research Laboratory at Harvard University. After the war Terman returned to Stanford and was appointed dean of the School of Engineering. In 1951 he spearheaded the creation of Stanford Industrial Park (now Stanford Research Park), whereby the University leased portions of its land to high-tech firms. Companies such as Varian Associates, Hewlett-Packard, Eastman Kodak, General Electric, and Lockheed Corporation moved into Stanford Industrial Park and made the mid-Peninsula area into a hotbed of innovation which eventually became known as Silicon Valley.

R&D Funding

Our modern world is built on the back of government policy and funding, but most Silicon Valley-types do not acknowledge this legacy. Venture capitalist Peter Thiel is a co-founder of PayPal and the first outsider investor in Facebook. In an essay for CATO Unbound, he wrote:

I no longer believe that freedom and democracy are compatible….

Since 1920, the vast increase in welfare beneficiaries and the extension of the franchise to women — two constituencies that are notoriously tough for libertarians — have rendered the notion of “capitalist democracy” into an oxymoron.

Peter Thiel

Peter Thiel was portrayed by Wallace Langham in the film The Social Network and he is also the co-founder and chairman of a company called Palantir. From 2005 to 2008 the CIA was Palantir’s patron and only customer. The NYPD and LAPD [police departments are funded by taxpayers] both use Palantir’s technology to access data obtain with license plate scanners. Palantir didn’t receive its first commercial customer until 2010 when customers at the New York Police Department referred JPMorgan to Palantir. Palantir’s latest round of funding was worth $107.5 million, which valued the company at $9 billion.

Considering the ideas of Peter Thiel, allowing the type of work that is done by Palantir to be dominated by his company is potentially very dangerous. In contrast, research has shown that diversity has the potential to drive innovation:

We refer to companies whose leaders exhibit at least three inherent and three acquired diversity traits as having two-dimensional diversity.

By correlating diversity in leadership with market outcomes as reported by respondents, we learned that companies with 2-D diversity out-innovate and out-perform others.

Steve Denning’s Forbes article, “Roger Martin: How ‘The Talent’ Turned Into Vampires:”

How did America—a country dedicated to the proposition that all men are created equal—become one of the most unequal countries on the planet? Why do the nation’s leaders now spend so much of their time feeding at the trough and getting ever more for themselves? Why has public-mindedness in our leaders given way in so many instances to limitless greed?

These questions are being raised, not in some anti-capitalist rag from the extreme Left, but in the staid pro-business pages of the Harvard Business Review, in a seminal article by Roger Martin, the former dean of the Rotman School of Business and the academic director of the Martin Prosperity Institute: “The Rise and (Likely) Fall of the Talent Economy.

One key factor, argues Martin, is a fundamental shift in nature of the economy. Fifty years ago, “72% of the top 50 U.S. companies by market capitalization still owed their positions to the control and exploitation of natural resources.” But in the latter part of the 20th century, a new kind of organization began to emerge: an organization that prospered not by natural resources but through “the control and exploitation of human talent.”

If we are not utilizing over 50% of the population to their full capacity then how can we expect to thrive and prosper nationally or globally?

  • There are currently only 15 women CEOs of Fortune 500 companies this is less than 4%.
  • Women make up only 3% of clout executives of media, telecom and e-companies.
  • Women hold 17% of the seats in the House of Representatives.
  • Only 34 women have ever served as governors compared to 2319 men.
  • In 2011, women comprised 18% of all directors, executive producers, producers, writers, cinematographers, and editors working on the top 250 domestic grossing films.

Lean In by Sheryl Sandberg

In Lean In, Sheryl Sandberg writes:

Conditions for all will improve when there are more women in leadership roles giving strong and powerful voice to their needs and concerns.


From Winner-Take-All Politics: How Washington Made the Rich Richer—And Turned Its Back on the Middle Class by Jacob S. Hacker and Paul Pierson:
Practically every aspect of labor and financial markets is shaped by government policy, for good or ill. As the great political economist Karl Polanyi famously argued in the 1940s, even the ostensibly freest markets require the extensive exercise of the coercive power of the state—to enforce contracts, to govern the formation of unions, to spell out the rights and obligations of corporations, to shape who has standing to bring legal actions, to define what constitutes an unacceptable conflict of interest, and on and on. The libertarian vision of a night-watchman state gently policing an unfettered free market is a philosophical conceit, not a description of reality.
The intertwining of government and markets is nothing new. The frontier was settled because government granted land to the pioneers, killed off, or rounded up Native Americans, created private monopolies to forge a nationwide transportation and industrial network, and linked the land settled with the world’s largest postal system. Similarly, the laissez-faire capitalism of the early twentieth century was underpinned by a government that kept unions at bay, created a stable money supply, erected trade barriers that sheltered the new manufacturing giants, protected entrepreneurs from debtors’ prison and corporations from liability, and generally made business the business of government.

"Winner-Take-All Politics"

When the political economy of the Gilded Age collapsed, it was government that reinvented American capitalism. With the arrival of the New Deal, the federal government took on a much more active role in redistributing income through the tax code and public programs. But the activist state that emerged did not just involve a new layer of redistribution. It fundamentally recast the national economy through the construction of a new industrial relations system, detailed and extensive regulation of corporations and financial markets, and a vast network of subsidies to companies producing everything from oil to soybeans. It also made huge direct investments in education and research—the GI Bill, the National Science Foundation, the National Institutes of Health—promoting the development of technological innovations and a skilled workforce that continue to drive American economic productivity….
Once we see policy, rather than electoral victory, as the grand prize of political conflict, we see politics for what it is: a contest with big and often enduring stakes—a contest more like the one that gladiators played in the Roman Colosseum than the one the Celtics and Lakers play in the Staples Center. And who are the contestants? Who are the political gladiators? They are not, for the most part, atomized voters. The main competitors, the ones in the ring from start to finish wielding their weapons and enduring each other’s blows, are organized groups….
What does it take for weakly informed and aware voters to attract Washington’s sustained notice? It takes organization. To be more than bystanders in American politics wondering whom to shoot, voters need strong organizational mooring and consistent cues to recognize and respond to changes in public policy.

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