(April 2005)

          (condensed version originally appeared in Business Week 3/2005)

America remains the world's cultural and economic engine- chalking up consistent gains in productivity and leading the globe in new technologies and market innovations. Is this success due to our geographic isolation? To our democratic history? To our capitalistic system?

All of the above, and more. But when you boil these reasons down to just one, the answer turns out to be "people"-innovative, driven, educated people, who, given the right conditions and sufficient critical mass, can turn exciting new ideas into economic reality. The ability to mobilize people to innovate on a mass scale has been a great, enduring strength of the United States since it's founding.

Today, however, we stand on the verge of losing that critical advantage. Other countries, most notably China and India, have grafted enough technical and business-formation know-how onto their national cultures to potentially shift the center of economic innovation away from the U.S. These countries have the added advantage of being able to tap into the tremendous emotional drive that transforms a population when enough people suddenly realize a mere engineering degree opens the way to a spectacular, immediate leap out of village poverty.

How can we, with our much more satiated society, hope to compete? The answer is, once again: investing in people. We must see to it that we have the smartest, most motivated people on earth. To do that, we need to adopt three complementary policies. We must return to our historic willingness to import the smartest, most motivated people from around the globe. We must make sure that the people we already have become smarter. And we must find new ways to motivate the population as a whole.

I would label these policy choices as the Three "I's:" immigration, immunization and inspiration.

Immigration. Ask any of the foreign-born entrepreneurs we have financed-whether from China, Russia, England, Israel, Iran, France or India-why they have relocated to the U.S. and you'll get various predictable answers: "opportunity," "freedom to innovate," or "best education in the world".

Yet, all those inducements are being overwhelmed by this country's post-9/11 restrictions on foreigners entering this country. We've made it too hard for the world's best graduate scientists and engineers to attend university or settle here. The critical mass of scientific talent that we have always taken for granted is dissipating right before our eyes. According to the American Association for the Advancement of Science, visa applications are substantially down, and many students now look to the EU for higher education. Twenty years ago, immigrants came to the US, started a company and stayed. Ten years ago they came, started a company, and a few returned home with their skills to compete against the US. Now they don't even bother to apply for visas- something that would have been unthinkable four years ago.

In another four years, we will likely find that the momentum of scientific and technological out-migration is irreversible. We must rethink our barriers to immigration and implement more effective ways of attracting and holding onto talented foreigners now.

Our almost-willing acquiescence to the loss of such foreigners underscores how little we appreciate the role immigrants play in creating economic opportunity for all. Immigrants have proven themselves, time and again, more loyal, more motivated and more valuable to the economy than the native-born.From the Scottish-born Alexander Graham Bell to the Russian-born Sergey Brin, entrepreneurial immigrants have formed the core of the U.S.'s continuing economic vitality and optimism for the future.

Immunization. Even as we re-engage talented immigrants, we need to turn our attention to the people already here. There, our best point of leverage is pre- and post-natal care. That means shots, but it also means better nutrition. Overwhelmingly, studies show that early care for mothers and children can raise the latter's IQs by a minimum of 10 points, and dramatically reduce later behavioral problems. The children are healthier and contribute more to themselves and to society.

What is striking about all such programs is how little investment is required to produce outsized returns. Various administrations-Bush, Clinton, even Canadian-- have all agreed on its importance, but this creeping crisis has been met with inaction.

Instead, the U.S. has remained remarkably content to trail others -ranking, according to various studies, anywhere from the bottom half to the bottom quartile among all nations. Such low performance evidences itself throughout both urban and rural America, but those of us who are economically better off tend to dismiss it as the problem of "others." Only years later do we rouse ourselves to address poor natal care's clear aftereffects. Thus, for example, the remedial literacy and numeracy programs at both community colleges and large corporations (or, for that matter, at our exploding number of prisons). Building a smarter American starts before birth.

Inspiration. Even as we develop a new critical mass of educated, technically adept people, we need to inspire them to rise to new challenges. Great technical challenges that offer the prospect of clearly tangible results lend themselves to just this kind of effort. Many of us recall how our national response to the launching of Sputnik galvanized millions of people around both the space program and scientific education- contributing to today's technological leadership. So did the challenge of opening the American frontier lead to our agricultural and transportation revolutions. Every child became an inventor - every adult an optimist about the future.

Today, we see American students lagging their international brethren on key mathematical and reasoning skills. Indirectly, we also feel the business impact in short-sighted buying behavior and values-our current "twitch" life style that leads to the seductions of instant gratification. We're breeding a society that is forgetting that sometimes it takes a long time and a lot of hard work to achieve something of real value. But an inspiring "grand challenge" can wake us up from our complacency

Think, to take just one example, what the impact would be if we as a nation would set the goal of becoming energy-independent by 2030? It would galvanize the nation, simplify the international political landscape, and reduce the threat of terrorism. Everyone would know what their job was the next day when they woke up. Some people would say that the answer is "conservation," and some people would say that the answer is "nuclear policy," and that would be a valuable debate. But at least we would all know that we were working toward a common goal-one that would require no explanation of its value.

Pursuing these Three "I's" simultaneously would give the U.S. a good shot at maintaining its technological and economic leadership. We have inherent strengths-from our capital markets to our tradition of democracy-that other countries will still find difficult to completely emulate and that would automatically enhance the policies I have outlined. Even so, it will take a generation, I believe, to restore our clear leadership in rebuilding a skilled, motivated workforce. As a VC who works constantly with high-velocity money, I say it's time for U.S. to invest some serious, patient capital.

Greg Blonder is a general partner at Morgenthaler Ventures and is based in Princeton, NJ.

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