Green Economy recession cause

Published on October 31st, 2011 | by Guest Contributor


Great Recession? My Fault.

October 31st, 2011 by  

recession cause

From one of the 400.
To the other 399.

The great recession is my fault.

This was the news flash that dawned on me in January this year.

Ok, its not just me, but it is the fault of somewhere between just 0.008% of the US population on the high side and 400 American individuals on the low side. It’s us, the tiny percentage of all Americans that are prolific inventors.

As an inventing nation we are #1 with more that 60% of the patents worldwide.

With that much raw material, we should be the manufacturing center of the planet, No?

What if some percentage of American inventors suddenly picked up a new trait?


What would our manufacturing base look like then?

Since the 70s, there has been a search for why America’s great middle class of manufacturing has been destroyed to be reconstituted by our trading partners with their citizens.

Is it the fickle US Consumer that insists on buying the lowest cost product? No.
Greedy US business owner that ships the jobs to the lowest bidder? No.
Shortsighted US board that demands the last bit of margin from its executives? No.
Passive US shareholders that demand the best return and don’t care how? No. No. No…

It is a fairly unique trait of American inventors that we do not care where anything gets made. Once we conceive of it, we have not considered it our job what happens next. Most inventors I know are in it for the accomplishment of creating something unique, something that did not exist before.

In my circles I am considered a bit materialistic because I am part of the less than 1% of prolific inventors that actually create companies. Mostly, we just let someone else figure out where to create the jobs. Even in my case, the business culture strongly suggests “let the investors choose where to build it, it’s their money.”

A patent can only be issued to a human. For 20 years, it conveys the exclusive right to: make, have made, sell, or use the patented invention to that individual.

At that moment, between conception and disclosure, 60% of all the patents on earth are exclusively American.

But then the moment passes. Over 85% of all American patents are issued to employees of US enterprises and virtually every enterprise requires, as a condition of employment, that the inventor execute an “invention assignment agreement” conveying all rights in the invention to the Enterprise.

At the moment that all rights pass to the Enterprise, competitive forces dictate that the invention MUST be built at the lowest labor and capital costs. Period. If the inventor does not decide, the market will.

What if some American inventors picked up a new trait?

What if American inventors became, Nationalistic.

What if the standard form of invention assignment was that for the first 7 years of an invention’s existence, it must be Made in the United States, by Americans.

The free market still functions. It is just that for the first third of an invention’s existence it must be made in the US.

What happens to an invention is an individual human choice.

For our country to get back in the game, no treaties must be negotiated, no laws need be changed, no meddling in the markets.
It may be simply each American inventor making a choice, for the sake of the other 99.992% of Americans that depend on them. The 99.992% of Americans that created the opportunity for each inventor to practice their gift.

Would US enterprises go along with an inventor whose position was: “Make anything I conceive of in the US for the first seven years”? I think yes.
It is a matter of supply and demand. The very limited supply of prolific inventors and the demand for the enterprise value they create.

In 1995, Narin and Breitzman published “highly prolific inventors.” In it, they state, “One, two or three individuals are really driving their laboratory…companies should make effort to retain and nurture these key contributors.”

In 1998, the USPTO published a paper listing all the inventors worldwide that had accumulated 70 or more patents between 1988 and 1997. 40 were Americans. (Source: PROLIFIC INVENTORS RECEIVING UTILITY PATENTS 1988 – 1997, 1998 By US Patent & Trademark Office)

In 2010, ICR published a paper that set the threshold for prolific inventor at 15 patents (5 times the average) between 1975-2002. The paper counted just 26,279 Americans (0.008% of the population of the US). (Source: PROLIFIC INVENTORS: WHO ARE THEY AND WHERE DO THEY LOCATE? EVIDENCE FROM A FIVE COUNTRIES US PATENTING DATA SET, Working Paper No. 14/2010)

The same paper describes: “The distribution is skewed to the right with a long tail (but rather thin).” “The main characteristic of ‘long-tailed’ distributions is that a high-frequency or high-amplitude population is followed by a low-frequency or low-amplitude population, which gradually ‘tails off’ asymptotically.” Prolific inventors are in the tail of the distribution of all inventors.

My own calculations based on publications are that, if my 43 were the bar between prolific and ordinary, just 400 Americans would reach that level between 2001 and 2011.

What I am proposing is not new. It an updated version of Henry Ford’s “Fordism.” In my version:

“If a good depends on labor for its demand, the labor that produces the good must be capable of acquiring the good.”

This presents a simple test: If none of the people who make the goods for an economy can afford to buy the goods they make, there will ultimately be no demand and the economy will fail.

-QED (thus it is proven)

Kent Kernahan
Managing Partner, Locally Grown Power

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  • euroflycars

    Maybe corporations tend to delocalize production of their inventors’ goods because most of these goods are not responding to real demand and therefore have to be sold at very low prices — and even then only by means of sophisticated and expensive advertizing.

    From this I tend to conclude that the production system of our capitalist society is much more a matter of keeping the masses locked-up in factories rather than producing really needed goods.

    In medieval times the tenants of power locked-up themselves in castles because they feared the uncontrollable masses surrounding them.

    Having become highly mobile, our actual tenants of power seem to prefer locking-up the masses they fear to loose control of.

    Highest priority should therefore be given to inventions likely to boost individual mobility to an extent that would equate the mobility of the tenants of power with their corporate jets and helicopters.

    The reasoning behind this is that airborne individual mobility (or call it individual aeromobility) is the only type of mobility ensuring real freedom of movement — and once real freedom of movement affordable to everyone, the 99% will bring the 1% to capitulate without even fighting.

    Corporations may also promote invention proliferation to get the patent administration system completely oversized and clogged in order to increase the cost and time involved with the patenting of game-changing inventions needing worldwide protection, so as to encur as little risk as possible to see one of these game-changers rendering obsolete their own blockbusters together with the respective production and market monopolies — whereby this is especially true for the heirs of such monopolies, who, out of fear that a genuine inventor might overshadow their privileged corporate status, prefer investing into rationalization, automation, and publicity for their inherited product-lines and goods, rather than into game-changing inventions.

    Whereas, seen from the standpoint of the “scarce” inventor, prolific inventors tend to flood the market with too many inventions, thus taking away development funding and purchase power as well as attention from the really relevant (and, alas, rare) break-through inventions.

  • Unctuouspuppy

    It’s a bit naive to think that the average “prolific inventor” in a large corporation has any say at all as to where the invention will be made. The standard response to not signing your rights away is “The door is right over there”.

    Aside from that, I’ve seen my fair share of “prolific inventors”. They main goal seems to be to get as many patents as possible without regard to quality of ideas. In previous incarnations of my present company people were paid handsomely to get patents so they did. There was also the large tendency for the review boards to say “This inventor has lots of patents so ALL of his ideas are worth patenting!”, leading to yet more dubious applications and the squeezing out of genuinely good ideas. Finally, in the corporate world patents for the most part are used as legal armor to make it easier to license the few profitable patents that exist.

    • The fact that an inventor has control over what rights are given in their invention is a matter of law. Both IP and contract. Whether an enterprise negotiates with its prolific inventors or not is a matter of business judgment.

      I do point out that a public enterprise may not feel it has an option to choose to support its national work force over incremental profit absent any other cost. A key contributor who is a prolific inventor can bring a retention benefit to choosing the workforce allowing management to do the right thing by their country and not violate their duty to their shareholders.

      The notion that high inventive output means poor quality (value) is false. Inventor output continues to be a well studied key economic indicator. One Citation:

      “He performs a patent citations analysis on a random sample of 45 prolific inventors and finds that there is no statistically significant differences as far as the average citations across the range of inventor patent outputs. This is interpreted as follows: the value of patent (patent quality) does not decrease as the quantity of patent per inventor increases”. (Source: page 2, Prolific inventors and their mobility: scale, impact and significance. What the literature tells us and some hypotheses by Christian Le Bas).

      As a practical matter, prosecuting a patent application resembles an adversarial trial process with the patent examiner (representing the US government) trying to prevent issuance with evidence, arguments and opinions with the inventor defending. Unlike a trial, the examiner is permitted to make arguments such as “this is obvious”. A poor quality invention can take years of arguing back and forth. If an inventor were to turn out junk, they would be consumed by “office actions”.

      Most inventors have a “day job”, running a lab, conferences, publishing. The generation of patents is generally at the end of the to do list.

      In my case, I was president of my last company, recruited the team, was closer on key customers, a board member, financial analyst, fund raiser, architect and arbiter. I also made time to file 8 patents before and during forming and funding of the company and more than a dozen after funding. The only way I can be this productive is to very selective and have a high rate of absolute novelty patents (no prior art) and single office action patents. The average for absolute novelty patents is 10%, I am over 30% on absolute novelty and in the high 90s for issuance overall. Producing high quality IP “one and done” is the way Prolific inventors come to be..

      My call here is to the prolific inventors of our country to recognize the need for and support of a manufacturing middle class of their county.

      Because there are so few prolific inventors, I think job opportunities will not be their biggest concern.

      Companies that choose to damage their ability to create Intellectual Property in favor of slightly lower manufacturing cost may be treated harshly by the market. Stock analysis and underwriters may not understand the contents of a Patent, but they do count them. There are expert systems such as patentriver that objectively assess patent value for them.

  • Anonymous

    How about we let nationalism die with the previous century?

    We all live on the same ball of dirt. Nature does not create lines that determine where one country ends and another begins. The pollution and greenhouse gases each country creates stops at no boarder.

    Here in America we’ve got multiple problems that we need to address. Loss of manufacturing jobs is one, but one that is starting to reverse itself. Rising labor prices and rising shipping costs are making it possible to once again make things in the US. We need to concentrate on those things which we can manufacture competitively.

    Then we need to reconfigure how we distribute the gains from manufacturing and other activities. We’ve got our salary schedules all out of alignment. The CEO of a large company may be the brightest and most capable person in the company but is he/she 300x to 400x brighter and more capable than the person who earned a good degree from a decent university and puts in an honest work week making the company function?

    Who the hell is really worth $30 million a year?

    Then we need to look at “unearned income”. Why should someone who does little but let their accumulated wealth (or inherited wealth) not pay the same tax rate as someone who is working for their income? If anything, shouldn’t we tax those who work and produce less than those who live off stock and bond capital gains?

    Now, as to your idea of stuff has to be manufactured where it is invented for seven years. China is investing very heavily in their intellectual resources. They are being very serious about educating a generation of scientists and engineers while we are starving our system with high tuition and onerous student loan programs. We built our technology strength largely on the GI Bill when we took a very large group of serious people and gave them a first class education and then turned them loose to create. We don’t do that sort of thing any longer.

    You want to keep other people from using our inventions? They will keep us from using theirs.

    We do seven. China does seven. We lose.

    • Prolific Invention is fact of American Exceptionalism.

      Some feel the disproportionate invention rate of the US is in our culture of personal freedom.

      Many of our iconic inventors and entrepreneurs are not the product of advanced degrees. As far as I know, inventorship is an inborn gift that is enabled or crushed by ones society.

      From my experience with our trading “partners” around the world, their enterprises are proudly nationalistic. Many of the most advanced features in mobile phones such as TV and social networks were available in Asia a decade before being released here. Today, China, allocates rare earth elements used in hybrid cars and batteries first to its production, then to ours.

      I am all for exports of products, however, for the first third of an inventions existence, its creator has every right to be a proud nationalist too.

      The point here is individual responsibility to ones own country is a virtue.

      • Anonymous

        Prolific Invention was fact of American Exceptionalism.

        If you look at where current inventions are coming from you will see a lot occurring off our shores. We probably still have the advantage of larger numbers, but the gap is certainly shrinking.

        There was a time at which our depth of knowledge was so shallow that an intelligent person could be quite well founded in several branches of science. That was certainly the case when some of our most famous inventors like Edison and Bell were producing.

        But that’s no longer the case. Now it can take not only a doctorate, but some years of post doctoral training/experience to get on top of only a small bit of our knowledge base. And if you look at the makeup of our graduate school science departments there are large numbers of non-Americans filling those seats of learning. Other countries are paying their best to rise to the top, we’re charging our best a steep entry fee.
        Some loyalty to ones country is virtuous, but loyalty needs to be tempered with wisdom. It doesn’t matter where the next great technology is invented, just that it is invented. Throwing up a wall to keep our wisdom in will only serve to keep larger amounts of wisdom out.

        We need to fix the structural problems we have, not create new problems.

        • Akbweb2

          Agree with the sentiment, but the fact is that the playing field is not level. China, and Japan before it, and the British Empire before it, etc. thrived by instituting a form of mercantilism and protecting local industries. China remains a largely centralized, government-owned and controlled economy. It’s about time the US government and people stood up for their own.

          • Anonymous

            The playing field is never quite level. Remember, we subsidized our corn growers and that ruined thousands of small Mexican farmers.

            I think we let China engage in unfair practices as a way to give them time to get their economy up and standing on its own two feet. Those days are over and we’re starting to demand that they give up their advantages. It will take a while to even things up.

            I’m less worried about China than I am about Congressional Republicans who have chosen to damage America for political gain. They’ve become the enemy within….

  • like i’ve been saying… it’s really 99.99% vs. the .01%. thanks for this post.

    • Prolific Inventors may not understand that they have the power to do something about the outsourcing of the middle class.

      The officers and directors of corporations have a duty to seek the best return for their shareholders AND recruit and retain key contributors. The first is about now, the second is literally the future value and possibly survival of their enterprise.

      A request by a key prolific inventor may be just the justification that a CEO in 1% needs to do the right thing by the 99% without getting shot by his board for doing it.

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