The Catalyst Code

You’d think that America’s days were numbered from all the doom and gloom talk coming out of Davos this year. Some of the complaints about the States have merit. At least with the benefit of hindsight there seems to have been an incredible amount of bad judgment in the massive amount of subprime lending and the ease with which we cut taxes without cutting spending hasn’t helped either. Nor has a very expensive war which, depending on your perspective, is either an enormous waste of money or a brilliant endeavor that others should have helped pay for.

But the folks at Davos who are bemoaning—or crowing about—the end of America’s world reign, about the country’s coming irrelevance to the global economy, and how India and China are the world’s future are, in my humble opinion, sipping too much Bordeaux and getting too little oxygen.

The one thing everyone ought to be able to agree on is that we are in a period of breathtaking innovation as the Internet revolution has followed the microprocessor one. The world looks so different from one year to the next. Have you noticed how weird it is to watch movies that are just 5 or 10 years old? They seem so dated—people typing at clunky computers and using landlines. If the histories of other introductions of disruptive technologies such as electricity are any indication, we are in for many years of incredible advances in productivity and new creations as the Internet and related inventions work their way through the economy.

Where is the hotbed of that innovation? It sure isn’t Switzerland nor any of its neighbors in the European Union. Nor for that matter is it China or India. Incredible success stories are coming out of China. Take Baidu—the search engine company that even Google can’t beat is heading to Japan to do battle with Yahoo. Then there’s Alibaba. And many more. I don’t want to take anything away from the entrepreneurs that created these great companies, but they are copycats of inventions that came out of Silicon Valley. They’ve succeeded largely because China is a protected market and, just as importantly, Google and many other successful American companies aren’t great at character-based languages.

It isn’t that Americans are more innovative. Forget all that stuff about the Protestant ethic. Some of the greatest entrepreneurs in the last 20 years have been foreigners who came to America to make their fortunes. Pierre Omiyard who started eBay is a Frenchman and there are lots of other Frenchies who’ve done well. What makes America great—and what continues to be our source of strength—is a cultural, social, and economic environment that stimulates creativity—no matter your race, culture, creed, or place of birth—and gives you the opportunity to build a business that will succeed or fail based entirely on its merits. That’s why so many people from other countries have flocked to Silicon Valley, to Boston, to Austin, Texas and other places in America to seek their fortunes. And some of those people have returned to China and India to bring the same entrepreneurial values back there.

Of course America doesn’t have a monopoly over entrepreneurship. I’ve been to China several times now. What has struck me about Shanghai and Beijing is the incredible energy and entrepreneurship. People working tremendous hours to advance themselves. So many are starting businesses. But then I pinch myself. China isn’t America yet. The entrepreneurship is below the surface and it’s bubbling. On top, though, China remains a single-party country—communist at least in name—dominated by state-owned companies and a political elite that is interested in preserving itself. There’s an open question on how long economic freedom will last in China. I hope it does, but so much needs to change at a fundamental social and economic level for one to have any confidence in that. India and many other countries have their own issues.

And Europe. I’ve been starting businesses in Europe now for the last seven years. It never ceases to amaze me how difficult most countries make it to create jobs or start businesses. Making a decision to hire a worker is almost as much of a commitment as most of us (putting the Britney set aside) make in choosing a spouse. You better be sure because untying the knot is a major expense. That’s why country after country has massive unemployment. Starting businesses is tough in almost all of them. If anyone needs to be worried about the future, it’s all those countries you can see through a telescope from Davos.

America has its problems for sure. And our country has no guarantee that it will retain economic hegemony through the 21st century. Nor should it. The world will be a better place if all countries experience economic prosperity and with it, political stability. We’ll do just fine. But don’t let the plummeting and gyrating stock market let you lose faith in the United States. Our strength emanates from our dedication to personal freedom, giving people opportunities to pursue their hopes and dreams, and keeping the government out of the way of almost all personal and business decisions. That strength comes from bedrock principles. Republicans and Democrats want to tinker with that in different ways. But no one wants to tamper with what has made this country the birthplace of two massive industrial revolutions—the personal computer and the commercial Internet—and the vast amounts of social wealth that has flowed from them.