I'm pissed off today.  I'm pissed off because our elected officials continue to denigrate entrepreneurs and business people.  Yesterday Nancy Pelosi, the democratic demogoge of Hollywood, lectured people about the iPhone.  Steve Jobs and Apple, she claimed, did not create the iPhone.  If this is true you must be wondering, well, how did they get all that revenue and profit then?  Pelosi went on to say that everything in the iPhone, all the technology, design, software integration, and all the rest, was a result of investments by the government.

I pause for a minute to relate a joke that will have some meaning at this point.  Bill Gates used to crack jokes about the automotive industry, saying that if GM and others had kept up with technology we'd be driving cars that get 100 miles per gallon and cost $1000.  GM responded that if Microsoft built cars then they would all crash twice a day for no reason whatsoever.

Perhaps we'll all stick to what we are good at and let others do what they do well - you know, Ricardo's Comparative Advantage?

At any rate, Pelosi, like a broken clock, is occasionally and partially correct.  The federal government, through a number of different research grants and, of course, a huge military budget that she abhors, drives a lot of primary research.  Some of that research led to things like software and hardware, although much of the semiconductor research that she claims for the government was done by Robert Noyce and Jack Kilby, working for private companies whose customers were primary the military.

So, as anyone who relies on the internet or semiconductors should readily admit, federal government investments in science and research are vital to driving new discoveries, and we rely far too heavily on investments made in the past and are shortchanging those research dollars now.  If Pelosi is so concerned about claiming the rights to new technologies and products perhaps she'll work more assiduously to fund more research dollars.

But I display my spleen and miss the larger point:  so what?  The Soviet Government paralleled the US Government during the space race.  It had thousands of its own scientists creating fascinating new research, as well as a number of German scientists it kidnapped (we did the same) after World War II.  The Soviets got to space first, which pushed the US into greater research.  If governments are responsible for innovation, we would all have thrived in the Soviet Union in the 1960s and 1970s, right?  Hmm.  History doesn't seem to reflect that.

The point is that good research and even basic discoveries, while valuable, are inert without individuals and companies to convert them into valuable products.  Discovery of the transistor and semi-conducting materials isn't valuable unless someone takes a risk and creates new products or services based on those discoveries.  This is the difference between research, invention and innovation.

Pelosi and others may grind their teeth when Jobs claims to have invented the iPhone.  Well, as far as I can tell, he and others did, by combining a number of basic elements of science and integrating them into a package of solutions that people desired.  While Jobs may or may not have been particularly nice, he did create a product people wanted and were willing to spend money on.  Instead of denigrating him, she and others should celebrate the success and seek thousands of other innovators to translate raw science and research into new products and services.

What people like Pelosi don't understand is the distance from raw research to a product that people can use or purchase.  The government funded some research into semi-conducting materials, but private companies created the first transistors.  From there, other research indicated how to put more transistors on a chip, allowing engineers to shrink the package so we can actually carry equipment around with millions of transistors on it.  Of course there was also research into screen technology, battery technology, cooling technology and many other technologies.  None of this research is valuable until someone combines it into a product or service that people can use or benefit from.


And doing all that combining and integrating, as well as offering a product to the market, requires funding and risk.  Just ask Nokia, which had a perfectly good little near monopoly on cell phone handsets until Apple came along.  Apple took a big risk, bringing a product to market that competed with the largest firm in the sector at the time.  Like Jobs, hate him or be neutral about him, he saw an opportunity and created a product that stole share and claimed outsized revenues against an embedded competitor.