Wednesday, August 4, 2010

First-to-market with Democracy

People like Wilbur Ross, who argue America is about to become a "second-rate country," are wrong. It's not that the United States is slipping into mediocrity; rather, America's failure has become more interesting than America's success. In reality, the United States is the most prosperous nation on the planet, and that's unlikely to change anytime soon.

So why do people constantly make this argument? Aside from the fact that it's always easier to see your own flaws than anyone else's - that's the "grass is always greener in China" argument - the reason is simple: America has been so successful for so long that American success isn't fun to talk about anymore. People prefer reading about some young upstart working their ass off to steal first place than they do reading the same story about the frontrunner maintaining their lead.

In a sense, America has been the frontrunner for a very long time - you could date it all the way back to our founding at the end of the century. As the first large-scale democratic country, we've been the model for countries and revolutions for three centuries now. We weren't the richest or most powerful country on earth for the first two centuries of our existence, but we were always the first democracy. And that was both a blessing (then) and a curse (now).

As George Packer's recent New Yorker article demonstrates, our governing institutions are largely operating under rules that have been in place for, literally, centuries. When we were competing with countries ruled by kings, that was less of an issue. But now, other countries have remade themselves in our image, decades and centuries after we first did, and were able to take our best ideas while discarding our worst. In essence, they're running more recent upgrades of our democratic operating system, while we're still running the original version with some patches here and there - a system that was state-of-the-art 200 years ago, but that is beyond showing its age today.

There are many examples of these phenomena in today's technology industry, where change happens with a rapidity that seems like history on fast-forward. Microsoft, for instance, was first to market with a cheap personal computer operating system. They minted money for decades, but the initial blessing of being first-to-market became a burden, as they remained tied to decisions made in the 1980s - or at least to perceptions formed of them at that time. They continue to mint money today, but are struggling with a corporate culture that's become ossified and a series of products that have all sorts of legacy problems baked into them. If they could start over from scratch today, without any of their dominant positions in software but also without all the strategy taxes and legacy issues that plague a company that's been releasing products for decades, they'd be a totally different institution.

There's another similarity between Microsoft and the US: Microsoft has an ungodly amount of money, and is bringing in ridiculous amounts even today. The technology press loves to write stories about their demise, and has largely written them off, but in reality 99% of companies in America would absolutely love to be in the position Microsoft is in. In Microsoft's case, the story that's fun to read and write isn't the same as the story that resembles reality, however dull.

The same is true of Google (my employer). As the first company to really make money off the Internet, Google was a really great story for years - a fast-growing, hungry tech wunderkind that could do no wrong. But after a while, the sheen wore off, and the same company that inspired such glowing press started inspiring legions of articles about how it had lost its edge, was being supplanted by competitors like Facebook and Twitter, and just wasn't cool anymore. And yet, Google makes tons of money, and 99% of American companies would love to be Google.

So it is with the United States. We're an enormous country, operating on a scale matched only by China and India, but we're also totally industrialized and extremely prosperous. Demography alone guarantees that our economy will be the biggest in the world for at least another decade or two, and unless we totally melt down, we should be the biggest for longer than that. But people love to write about our decline, because it's so much more interesting than our maintenance of a dominant position. You can't be the young upstart forever - we were once, but are no longer, and until we have another revolution and become reborn, we're only going to be getting older and older (until we have a "second act" and briefly become sexy to write glowingly about.)