China and India Lack "Software" and the Decline of American Competitiveness Is Overstated

So says the Council of Foreign Relations's Adam Segal in his new book, "Advantage: How American Innovation Can Overcome the Asian Challenge."

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Everyone these days seems to be talking about the rise of Asia over the West and the decline of America's competitiveness. Few people would probably use the words "hardware" and "software" in those conversations. Adam Segal of the Council of Foreign Relations, however, has a new framework for thinking about the East-West innovation competition—which he details in his recently released book, Advantage: How American Innovation Can Overcome the Asian Challenge—and it indeed involves a discussion of software and hardware.

While other scholars and practitioners focus on "hardware" achievements, such as number of patents and scientific publications, Segal says that the "software" of the rising countries of China and India is actually under-developed and is where the United States has a competitive role to play. Software, in Segal's book, is a metaphor that refers to social capital, connectedness, and collaborations between governments, institutions, and universities. It touches cross-cultural alumni networks and the high numbers of Indian and Chinese students who were educated in the United States.

"The Chinese and Indians are actually envious of the connections we have in place in the United States," Segal tells Fast Company. In his research, Segal spent extensive time on the ground interviewing people in China and India about their feelings toward the global innovation race.

"When you talk to people in China they talk about the true barriers for innovation," says Segal. "Some patents have nothing to do with breakthroughs. China's published papers are on the rise, but they're not cited globally. And there's lots of reports coming out about China's plagiarism."

Segal says the important aspects of "software" to focus on are "social capital, tolerance for risk, willingness to leave jobs, ability to criticize superiors, the regulatory environments."

People often ask about the numbers of engineers in a country. But, "I don't think that's the right debate to have," says Segal. "The question is more—what skills do those engineers have? Do they have interdisciplinary training?"

Segal cites the examples of Austin, Texas, and Silicon Valley as having interdisciplinary networks of collaboration and the strength of those networks is what makes the United States more competitive than some may realize. And it's that strength that is making our competitors envious.

"This is a re-framing. It's often framed that the rise of China and India is a threat to the United States, but the U.S. is well positioned to take advantage of this. It's not a game or a battle. This is going to create lots of opportunities."

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[Image credit: Matt Richman]

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  • Sam Samelson Jr.

    Adam seagull is a bit naive and the fallacies of his logic are the following:

    1.If he thinks, U.S. education is helping the interdisciplinary interactions and the Silicon Valley innovations, he better go through the resume of the real innovators of Silicon Valley. Yes, U.S. education at the graduate level is superior. Until then, they are the worst in the developed world. A few that survive the system and reaches the pinnacles are indeed great. But, the great innovators of the Silicon Valley are people from other lands who had the benefit of both type of education and the real desire to excel.
    2.There are real barriers to innovations in China and India. However, a few who escape from there become real innovators taking advantage of the freedom for innovation in this country. If one of these is a Chinese, he/she returns to China and becomes a real success.
    3.If Seagull thinks his interviews in China and India are revelations, he is pretty dumb. People from China and India tell Yankees what they want to hear and they are very well aware of the prejudices and attitudes of Yankees who go for interviews
    4.Chinese do publish a lot. They may not always be the best in innovations. But, most of their publications are in Chinese and Americans are too uppity to learn Chinese and they generally ignore literature not originating in America.

    Yes, the U.S. can still lead the world if our private enterprise becomes a little patriotic and honest in their dealings. In general it is the U.S. private enterprise responsible for the U.S. decline. They are only interested in their bottom line and not the Nation as a whole and especially its education system. I agree with one of the earlier commentators who labeled the U.S. enterprise as the most unethical.

    Most of the world tries to live within their means and try to create some savings. In the U.S. this habit of the world war generations have disappeared and everyone wants to live on someone else’s wealth and they think it is smart.

  • Partho Choudhury

    About a 100 years ago, they used to say and write in the same tone about Great Britain as Segal does in his book about the USA. We all know how the "Empire Where The Sun Never Sets" ended up in the trash bin of history. Hell, they actually now call the UK as "The Empire Where The Sun Never Rises". Going by current trends, it would be long before they say the same about the US too. Amen.

  • Karthik Venkateswaran

    If one can apply the concept of disruptive technologies and disruptive innovation that Clayton M. Christensen talks in books (Innovators Dilemma, Innovators Solution), I think what China and India are doing is actually disrupting everything, starting from the low end, and slowly working their way up. For example, at the beginning, India has established itself as the No1. player in low cost, low end of innovation BPO sector. But as time progresses, Indian companies will crawl up to play a big role in sectors that involve medium level innovation such as software/products developed entirely by R&D workforce based in India. Ofcourse, the slow pace of this trend might conceal the actual rot that is setting in the American innovation ecosystem, nevertheless, if this trend continues, soon India will steal more jobs from the US.

    In order to maintain competitiveness, many US companies are forced to look for options to reduce cost, and India and China are the obvious destination. But as more and more people are qualified and trained by nature of performing outsourced US jobs, the quality of the workforce increases. Also, there is a large scale transference of this soft skill, especially when many qualified people return to home countries to start their own business. As Indian economy and infrastructure improves, many people will consider moving back because of a basic indian trait - love for family system and family oriented environment. This is not true in case of western societies. So this leads to a virtuous cycle for India (more outsourcing-->improvement in quality of workforce, economic development, improved standard of living ---> more outsourcing at higher end jobs, more innovation at grassroots ---> attractive proposition for Indians employed in US to return to India ---> improved quality of workforce in India ----> more innovation ----> move up the innovation disruption curve

    We have already seen the parallel in manufacturing sector in China. It was initially components outsourcing, but now entire products are manufactured in China, and as China becomes competitive, jobs are shifting to other low cost destinations such as Vietnam. Surely, America cannot expect these jobs to move back. And other countries will only keep progressing and moving up the value chain. China has announced its own passenger jet manufacturing, and of all the companies, GE is its first customer. What happened to US protectionism for Boeing? China has launched its satellite killer missile, 5th generation stealth aircraft, built high speed rails on impossible terrains using 'original' architectural principles suitable for that kind of terrain. But USA keeps complaining about chinese plagiarized papers.

    In the end, i feel that whosoever is arguing on case for the US, is probably severely underestimating the underlying rot that is the US education system, and the misplaced sense of entitlement of the american population. Unless there are fundamental changes to the american society, this rot is all set to spread.
    At some point it may not be in the interest of China and India to let USA crash because of huge amount of dollars those countries are holding in foreign exchange. But sure, US could fall to Number 5th in the world. Nevertheless, USA will be a rich country even without jobs, rich because of the petro dollar cycle that lets USA have an economic free lunch even with trillions of dollars of trade deficit.

    USA must shape up, or ship out. And most likely, even if it shapes up, it will be forced to ship out.

  • Chris Reich

    This piece overlooks what I have identified as the three crumbling block's in America's foundation:
    1. The decline of ethics in American business
    2. The shrinking of of the U.S. industrial base
    3. The failure of the American education system to keep pace

    The components Mr. Segal labels as "software" are as easily copied as real software. China's rapid rise is in direct proportion to their government's loosening of control. As China further loosens the reins, their economy will boom. India is just now getting a very chaotic country somewhat organized.

    China will continue to pirate intellectual property until they have a base of qualified engineers and researchers.

    Keep in mind that the former Soviet Union conducted both competitive space and arms races with the U.S. The former Soviet Union lost the money race. Now consider the U.S. debt and China's huge cash surplus. Who will win the next race?

    The U.S. is in decline and lacks the will and drive to reverse the fall. It could be done but I do not see enough outrage to do it. We're not demanding a better education for our children or demanding U.S. made goods such as televisions or even pet toys! We have accepted "made in China" as the only buying option available. We would rather have free health care than a good job to pay for health care, an unthinkable notion 50 years ago.

    Chris Reich (Please help stop the decline)

  • Milton Camilo

    Here are the Effects of Globalism and what does America do start comparing themselves with countries who are trying to level the playing field and create a middle class for their nation. China and India are trying to change the frustration and poverty and ignorance their nation encompasses.

    And then Americans say why do other nations hate our country well this is it let China and India prosper and develop themselves to become a colossus like America.

    There are millions of people in the world such customers that could purchase items from international businesses yet still we have poverty in the world. We take American photographers to such countries to take pictures so we could see the horror that is poverty while eating our breakfast and then we turn away and completely forget.

    I truly hope when Latin America gets to such a level to gain our attention we do not start competing with them because this could ruin the future our children could live in.

  • Scott Byorum

    This is not a rise of Asia or a fall of America. This is a leveling out. That's what globalism is. In 100 years there won't be any countries... at least, not in the traditional sense.

  • Douglas Wolf

    This is whistling in the graveyard of the American Empire. The conditions that make India and China the eventual winners are no longer present here. Both countries have an esprit that Americans used to have and no longer do-they actually believe that their personal achievements benefit the country as a whole and are very proud to contribute.

    2nd, you can read British newspapers from the time of pre WW-1 and they said the same about their IP (banking and finance) compared to the upstart Americans building dirty factories.

  • Chris Reich

    Douglas: You are correct. The article is evidence of its own fallacy. After all, if the future looked bright would Segal be able to sell a book about how the U.S. is not in decline?

    Chris Reich

  • Ron Guerriero

    While this may be true, the long term picture is not as rosy. Enrollments at the higher levels of engineering and science have been declining since the early 90s. And, 50% of all undergrads that enter engineering programs in the US leave within two years (some flunk, most are bored or discouraged by 2 years of math and science).
    In other words, this is not a simple issue.