Laissez Faire in Hi Tech

With an economy burdened by a slow recovery from the great recession and the government hamstrung by skyrocketing deficits, the suggested solutions for getting us back on track seem to be coming from all directions. The thing is, the answer for hi-tech lies in the same model it has operated on for the last few decades, not a new plan based on theoretical economics.

This model is based purely on building the best mousetrap possible, and if there is intense competition, so be it. Using this model, U.S. companies kept high value talent in-house and outsourced the lower value skill sets. In this model, product designers would stay in-house while tasks like assembly would be outsourced.

The environment in hi-tech has always been one of high risk and high reward with promising companies attracting funding from venture capital firms and the like. Successful companies reaped huge rewards as they either went public or were acquired by other hi-tech companies. This bred an environment that encouraged risk taking with rewards that reached into the billions of dollars.

The highly competitive nature of the field meant that there were losers in the process as well. For the uninitiated, the industry felt like it was made up of parts from the Wild West combined with a healthy serving of anarchy. The system worked however, enabling start ups to get to market and then compete and win against slower moving competitors.

The foundation of this model is still basically intact, but the recession and credit crunch have tamed the industry to an extent. With capital more difficult to come by, the appetite for risk has been muted as well. The financial crisis has changed the political winds as well with a seeming preference to focus resources on past industries as opposed to advancing tomorrow’s technology winners.

At this point, the best thing that can happen is for small innovative companies with great products to rack up a few “wins” to start re-building that appetite for risk which will in turn start bringing capital back to market.

It’s quite possible that the environment could remain somewhat muted as confidence is rebuilt in the industry but once it begins building momentum money will surely start flowing back in. America has the talent, the capital, and the guts to innovate our way back in hi-tech. As soon as the industry is being compared to the Wild West again we’ll know we’re back in full swing.