Vijay V. Vaitheeswaran  is an award-winning global correspondent for the Economist magazine and author of the new book, “NEED, SPEED, AND GREED:  How the New Rules of Innovation Can Transform Businesses, Propel Nations to Greatness, and Tame the World’s Most Wicked Problems” (HarperBusiness, March 2012).

The book claims to debunk the following myths:

• Invention, intellectual property rights, and cutting-edge technology are the key to innovation.
• The rise of China and India as innovation powerhouses will inevitably come at the West’s expense.
• Resource wars, be they over petroleum or fresh water, are unavoidable.
• Global trends point to a “population bomb” that will make sustainable development impossible.
• Free markets would solve even difficult global problems such as climate change if only meddling politicians kept out of the way.
• Western health firms and systems are so well financed and technologically superior that they have nothing to fear or learn from poor-world upstarts.
• Innovation is always good for society.

I was looking forward to discussing some ideas with him, especially how the rise of India and China as increasingly better innovators will not come at the West’s expense. During a summer when President Obama slams Mitt Romney over outsourcing jobs to India, reflecting the silly season and the generally dour mood of America perfectly, this is a message that needs to get out and at least receive a fair hearing in the court of public opinion. Vaitheeswaran has recently helped set up a new China bureau for the Economist based in Beijing.  On April 2oth, United States – India Monitor conducted an interview with him while he was in Hong Kong.  Vaitheeswaran was able to speak prolifically and knowledgeably on everything asked of him, and has clearly thought out his theories and writing well.  Below is an excerpt of that conversation.  The quotable quotes flowed throughout, and hopefully you will take some of them with you and put them in the bank. For the most part, we think he is right.

As somebody who has read the Economist religiously since college I’m very pleased to interview with you.  Why are you all opening a new bureau in Shanghai, and what changes can Economist readers expect from this development?

Vaitheeswaran: The magazine is taking on a big expansion into China-  covering greater China and what China means for the world. Our vision is to cover this incredibly complex, continental scale country with many new boots on the ground, more regional coverage, and more resources than we ever have before.  The model we are using is the United States, a time of major expansion when we opened new bureaus across the United States, including correspondents and freelancers in the Deep South, the Rockies, East Coast.  This is the kind of aspiration we have with China, not just to print the political story of the week, but get deeper into the country’s events.  For example, we want to cover the issues related to coffee growers in Western China.

Your bio is quite global in nature: born in India, raised in England, higher education in the United States, a career encompassing Latin America and China.  To what extent has your study of innovation been shaped by your travels and identity?

Vaitheeswaran: There’s no doubt that having the opportunity to travel has informed and colored my view.  It’s impossible to be xenophobic or nativist when you’ve traveled as much as I have.  One problem I find among some of my fellow Americans is that American-centric view.  So you can say I have had the privilege of picking and choosing the best aspects of different societies.

It’s also taught me that a country’s topography or geography is not the same as its destiny.  That it’s important to keep an open flow of people as well as ideas to go with it.  For example, India,  China, and Brazil are very dynamic economies coming up with frugal engineering best practices that are helping them as they’re leapfrogging ahead, indeed ahead of where the rich world is in some regards.  The West can learn from that. The idea that any one country is going to innovate the future by itself is arcane.

I heard you call yourself an American somewhere in there.

Vaitheeswaran: Yes, I’m an American citizen, I did grow up chiefly in Connecticut and my parents still live there.

Does possessing an engineering, science, or comp-sci degree give a leg up to an aspiring innovator?

Vaitheeswaran: Not at all.  It could be a handicap actually.  While math or science are important subjects to learn,  innovation is not fundamentally about technology.  Technology and invention are not the same thing.  PhDs and engineering students will always have a lot to do with technology.

In my opinion technology is part of the innovation process but not the most important part.  Creating value is the harder part of the equation.  Think of all the gadgets and gizmos that the Japanese have come up with over the last few decades that are generally useless for society.

Too often we are seeing a technology fetish- and people are not asking: What’s most important for society, for customers, for citizens, or for governments?  Mentally, innovation is really about figuring out the harder parts of connecting new technologies or ways of doing something that people want.  Entrepreneurship is more of a mindset than a pedigree.  I say this with great respect and praise for people who pursue difficult technical programs.

It may be true that Americans don’t want to do the hard work of getting difficult technical degrees but that’s not the end of the story. A PhD in aerospace engineering is not enough.  You need creativity and you need to take risks.  Simply put, we need to open wisely, move nimbly, and fail gracefully.  If you fail and you don’t try again then you’re a failure.  There are some cultural pockets or crucibles of innovation where the culture supports trying again like Silicon Valley, but that’s not the case in other parts of the United States.  As a counterpoint you can go to Israel which has an exraordinary culture of innovation and entrepreneurship, one which also exists in South India.  There are pockets in Taiwan which are coming up with the dynamism to be part of innovation.

We need to encourage experimentation, risk taking, and having a bit of resilience to move on quickly if things go wrong.  We’re a world of 7 billion innovators in waiting, but we are held back by culture.  In France or Germany, if you start a company and fail and you’re between jobs, you don’t get invited to dinners by your aunty.  These are cultural barriers that need to be overcome.  Most places are like this.  Entrepreneurial hot spots are the exception and not the norm.

The next Silicon Valley will  not come because government decides it’s going to happen.  It’s much more serendipitous, bottom up.  Government has an important role but not picking which technology is next or which spot on earth it will come from.  Silicon Valley was much more chaotic and spontaneous at its inception.

Many American politicians, journalists, and citizens on both sides of the aisle decry the outsourcing of jobs to places like India.  What would you tell an unemployed American worker who lost his job to outsourcing that might make him feel better about his future and that of the US economy long-term?

Vaitheeswaran: Back in the 80’s it was very popular to say that the rise of Japan would crush America.  Red Storm Rising and other movies about Japan rising and the giant sucking sound as America’s jobs all moved to Japan came out.

Innovation is not a zero sum game.  Just because India comes up does not mean that America comes down.  America has done far better over the last few decades despite the rise of other nations.  And American companies are now learning from the Japanese. American consumers in fact benefited from Japanese car companies directly setting up operations in the United States, and many new jobs were created in the South.  These companies were able to redeploy assets to help America’s economy as well as Japan’s.

America has led when it comes to the inventions created in the last 30 years with the Internet, software, genomics, social networks, and 10 others that are probably in “stealth mode” and we don’t even know about yet.   We’ve become the most advanced innovation economy on earth.  As long as labor and capital systems are free, it will lead to the better jobs of the future.

Complaining about what’s happening in the world today is like saying 100 years ago that if motorcars take off, it’ll put the horse and buggy out of business.  At the time you could have said that, but it would have worked out far better to invest in re-training.

Do you believe America is in decline or relative decline specifically when it comes to innovating?

Vaitheeswaran: No, I don’t believe that America is in decline at all.  What made America great will continue to make it great in the 21st century.

Again, innovation is not a zero-sum game.  The rise of China is a rising tide that can lift life on many boats that patch the holes in the their vessel first.   But there are many holes- bad immigration policy, education system, we’ve certainly gotten immigration wrong since 9/11.

So are we or are we not at a “Sputnik moment” as President Obama would have us believe?

Vaitheeswaran: Sputnik is the wrong analogy for this moment of time.  I do understand why it’s attractive- Sputnik helped galvanize the nation when it comes to science and technology.

Solving difficult problems like climate change are not Sputnik challenges.  It’s a whole lot harder to get energy to 7 billion people cleanly than to get a man on the moon.  We have to involve trial and error.  Business models that are sustainable and convertible for 7 billion people can only be done by markets and entrepreneurship.  No individual government is equipped to tackle these problems.

Other difficult challengs of the future, the food/water/energy nexus- climate, diseases, pandemics, are global problems at this point.  Even if innovation happens in one lab in one country, I think solutions are much more likely to be shared in the future.

Pharmaceutical companies are collaborating across borders.   Only the networked innovation model has a chance of succeeding.

Do governments encourage innovation or hinder it by and large?  When looking toward capitals like Washington or New Delhi I largely see historic dysfunction among politicians and vast outdated bureaucracies ill-equipped to respond to a fast-changing world.  How can the public help push our governments into solving complex problems when there is such strong disagreement on the issues themselves- take for example human dependence on fossil fuels?

Vaitheeswaran: I think there is a role for government but I’m very reluctant to ask the government for lots of help.  The rule of law matters.  Government is the only sector able to enforce the rule of law through the court system.  Sitting in Hong Kong right now, as I look across the bay to Kowloon and then mainland China, on this side the rule of law prevails, and on the other side it does not.  Culturally the values are similar but the laws are enforced very differently.

Asking government to subsidize certain industries is bound to fail.  If you ask them to capture the industry of the future, they would get it wrong.

This is what’s known as industrial policy, right?

Vaitheeswaran: Industrial policy- that’s exactly right.

That’s not to say that government can’t help.  Sergey Brin, one of the co-founders of Google gave specific mention to the National Science Foundation for research on applications that he was working on.

I was on Capitol Hill in March on behalf of leading scientific societies making the case to a skeptical audience that we need to invest more in R&D even in a time of economic recession.  My argument was that great companies that invest in a downturn come out stronger.

When it comes to spending, I’d cut defense, cut entitlement spending but not infrastructure spending, education, because that cuts future innovators, future economic potential.  It’s the things only government can do that I strongly support.  It’s not fundamentally about government, it’s about the process.

Our increasing dependence on networked infrastructure makes us vulnerable to hackers or cyber warfare.  Attacks on interconnected systems such as national power grids could create massive and crippling loss.  Do you think that the potentially devastating powers brought by the information age will be mitigated by the benevolent forces of technological progress?

Vaitheeswaran: I’m not deterministic of the future, nor am I pessimistic or optimistic.  I think of myself as an impatient realist.

It’s a great race.  It’s always been a great race between invention on one side and degradation on the other.   The same tool- let’s say fire- did we borrow this powerful force from nature to do good, or is it a destructive force?  The answer is, it was both.  Nuclear technology, biotechnology, synthetic biology- when Craig Venter invented life through synthetic technology, he played God, he basically invented it from scratch, which holds extra promise but it was controversial.

Bioterror and other challenges are arising from it.  The global reach and rapid spread of these technologies is greater than it was 1000 years ago when only a few elites had access to the latest.   Soon everyone will have access with the negative consequences.  The Internet can be both a tool for good education, enlightenment, but also a force to undermine societies.  It’s the malicious viruses, the cyber warfare that we need to work on.  But the system so far has proven robust; the Internet has never been taken down.

Humans possessed the knowledge to mass-produce electric vehicles almost a century ago.  Why aren’t all of us driving them already?

Vaitheeswaran: We did.  In 1900, there were ten times the number of electric vehicles on the roads of New York than gasoline.   Thomas Edison thought the future belonged to electric cars but he was wrong.  What’s different this time?  Cars and oil are headed for a divorce.  It may take us 50 years, and the principal leading contender is electric but there are other options.

We’re not going to run out of oil for the foreseeable future.   The oil age will end long before we run out of oil.  Instead it’s innovation that will lead that transition.  We’ll find something that works better, better on the security front and on the environmental front.  The answer may be different in different part of the world.  Every car in Brazil can run on Brazilian ethanol.  Second generation or cellulosic ethanol is even better for the environment.  In the future we are going to ask, how do you make electricity?  Coal is not so great.  There are renewables like natural gas which are better.  But it will take time.

How would you encourage the US government to reform its school system for the 21st century?  The Indian government?

Vaitheeswaran: We are seeing inadequate federal spending for vocational technology lifelong training.   We need continuous improvement of current skills as well as safety net skills.  It’s quite possible your industry won’t even exist for the rest of your life.  We need to keep re-learning how to learn instead of being afraid of it.  The very ways in which we learn are being fundamentally transformed.  Taking the big yellow bus to school isn’t the extent of education anymore.   American education doesn’t prepare us for the 21st cent economy- this is even truer of India and China today.  Our educational systems are based on the industrial model suited for factories.

But 80% of GDP in America, and a rising share in all countries is derived from brain, not brawn.  Every worker can be an ideas worker but you need education systems that encourage creativity and the ability to challenge authority.

The whole Tiger Mom phenomenon everyone’s excited about is fundamentally wrong.  Rote memory and deference to authority come at the expense of creativity and ability to challenge authority to move ahead.  Obviously we all need reading, writing, and arithmetic, but that’s only the minimum ticket of entry.  The harder skill to learn is to be willing to challenge the professor and later the boss-man. You need ideas workers for the ideas economy to work.  I hope the people out there are listening to this at home.

Many in India and other third-world countries cannot participate in the global marketplace because they live in villages which are “off the grid” – or without basics like electricity, running water, phone lines, and Internet connectivity.  Can we claim to be a connected world undergoing an innovation revolution when so many are offline?

Vaitheeswaran: I think the problem of lack of access to modern energy is powerful and connected to all manner of social problems.  I wrote a book on that topic called Power to the People.

Waiting for the power authorities is not the solution.  There are solutions that are off-grid, for example solar panels connected to micro finance and other models.    There’s a company called Selco working on a business model called social entrepreneurship.  They’ll sell you clean energy and give you micro finance to help pay for it- and pay for someone in the village to learn how to fix it.  There are impressive ways for clean energy to get out there.

Another part of government failure is the way it subsidizes electricity in the Indian setting, and also water in name of the poor.  The people who benefit are the elite, the wealthy farmers or rich city people.   If you’re an individual farmer working like a serf you don’t even have a house or land to benefit from the water.   So it’s not the genuinely poor who benefit.

People abuse it, waste the water, waste money- and it’s not helping the genuinely poor.  Energy poor countries provide twice as many subsidies as rich countries for the most part.  I have great respect for the argument that basic services have not reached everyone but innovation is the answer even for this.

I have long argued that cities are the best level at which to measure innovation, not nations.  Any thoughts?

Vaitheeswaran:  I think cities are the crucibles of innovation in the 21st century.   We are going to see extraordinary dynamism from cities in the future.   An example is public health in Hong Kong, and how it’s now a global pioneer in pandemic response.   Michael Bloomberg has led a climate change effort of 30 cities that affect a lion’s share of the world’s population.

Humans are an urban species for the first time in history.  And the mega-cities of developing nations will lead the way, because they are still growing.

So where does American health care go from here in the long term?

Vaitheeswaran: If you look at the long term of US health care there are 2 problems that need to be addressed.  One, that all people have access.  This issue is being worked out as we speak.

The bigger problem is distorted incentives in the system which lead to unsustainable costs.  That needs to be resolved.  Individual doctors and hospitals have every incentive to over-use healthcare not for health but for business transactions.  It’s no surprise that Americans have more physician visits, scans, and tests.  You also have a culture of litigation- a cover my behind culture.  There are many, many problems.  Our system is about services, not outcomes.

We need to move toward an integrated model.  There are examples like Cleveland Clinic, Kaiser Permanente, and Mayo Clinic where there are integrated services, where insurers and providers are the same, doctors are on salary, there’s every incentive to cooperate with specialists, at no extra expense.  Single payer systems are fine, in fact very good for aligning incentives.  But the National Health Services are terribly inefficient because they are government-run.  Kaiser Permanente is more efficient and in fact the UK’s National Health Service is observing what Kaiser does.  If you believe in the power of capitalism, you have to believe in power of incentives.

I’ve argued for reforms but we have to see.  This is a political question- it’s almost 20%of GDP, there’s a lot of inertia with the way we are doing things.  As an aging population comes up against not only a bankrupt social security and medicare system, but also a tidal wave of chronic diseases, we’re not coming to grips with the problem.

Mahanth S. Joishy is Editor-in-Chief of United States – India Monitor.