CES: Innovation Under ThreatCES: Innovation Under Threat

The video that opened the Innovation Power Panel at the Consumer Electronics Show (CES) on Friday morning would have played well at a Tea Party rally.

America's "culture of freedom and innovation is under threat like never before," the narrator declared. "Bail-outs for supposedly too-big-to-fail firms are punishing competition."

And then the kicker, an Ayn Rand nightmare: "The American dream, the dream of progress on your own terms and merits, is in peril."

But the call to storm Washington with constitutionally-protected firearms never came. Once moderator Gary Shapiro, president and CEO of the Consumer Electronics Association, introduced the panelists -- GE CEO Jeffrey Immelt, Cisco CEO John Chambers, and Xerox CEO Ursula Burns -- the morning settled into a discussion of the state of innovation in America and what can be done to improve it.

A debate it was not. The panelists were so often in agreement that they could have finished each other's sentences. And panel moderator Gary Shapiro could hardly have been expected to differ, having staked out a like-minded position in his recent book, The Comeback: How Innovation Will Restore the American Dream.

But it was an informative discussion nonetheless given that everyone seemed to feel that the business community has been remiss or ineffective in communicating its views on innovation, education, immigration, jobs, and taxes to the American public.

Burns said she was optimistic but nervous about the state of innovation, noting that America's K-12 education system is failing to produce students with the skills to compete in the global market and to work at high-tech companies.

Chambers concurred. "I think education is the most important long-term challenge we have to do in this country," he said.

"As a country, the rest of the world is moving faster than we are," said Immelt, who worried that state budget problems will hurt state universities, from which GE draws significant engineering talent. "...There ought to be a call-to-arms around education in this country."

No one offered a sure-fire fix, however. Chambers suggested better measurements; Immelt suggested applying a structured business methodology like Six Sigma to schools. Shapiro wondered whether lack of parental involvement or disengaged teachers might undermine any attempt to fix the system. Burns countered it's not as simple as that.

If a path to better K-12 education wasn't immediately apparent, the panelists were clearer about the need for graduate and post-graduate talent. Chambers chided the government for hanging out an unwelcome sign that deters foreign students from coming to the U.S. and staying.

"We're kicking out students as soon as they graduate," concurred Shapiro, a practice Burns called "an absolutely horrible idea."

Immelt recounted how he has been visiting customers at the Saudi Electricity Company for years and observed that they all used to be educated in the U.S. Today's Saudi students, he said, are studying in Canada and Australia, a trend that's eroding the common ground upon which successful business relationships are often built.

"Our immigration policy used to encourage the best and brightest to start companies and stay here, now it's the reverse," bemoaned Chambers.

Burns suggested that the economic downturn has made it easy to demonize foreigners and suggested that the heated border control debate has ended up harming businesses that depend on foreign talent. Shapiro wondered whether the business community can get past the emotional aspect of immigration to make people understand that no country can innovate as an island today.

Burns said business leaders have to do so. Chambers called for easing the path to citizenship to keep talent here.

Casting access to talent as an existential issue, Immelt said, "We've got to fight for our future,"

The panelists were equally in agreement about the need for more business-friendly tax rules. Burns said that U.S. policies discourage the hiring of Americans because the cost burden of U.S. employees is so high.

Chambers decried U.S. tax rules which effectively impose a double tax on revenue earned abroad and brought back to the U.S. His company, he said, had $40 billion in overseas subsidiaries. It can't bring the money back to the U.S. unless it wants to be taxed a second time. So Cisco is likely to invest that money abroad, creating jobs abroad.

"What good is it doing the U.S. to have a trillion dollars overseas?" he asked.

Burns scolded the government for its export policy, calling it illogical. "I'm on the President's Export Council and I was amazed at the illogic," she said, pointing to trade restrictions with South Korea as an example.

The general sentiment was the that U.S. cannot close itself off; rather it has to be more open to remain competitive in the global market.

Immelt framed the issue quite simply: "Technology innovation is what creates wealth," he said.