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  • Dec 28, 2014
  • Updated: 1:32am
Jake's View
PUBLISHED : Sunday, 20 April, 2014, 5:33am
UPDATED : Sunday, 20 April, 2014, 5:33am

Why going to college isn't the answer to China's hi-tech dilemma

Close to seven million Chinese this year will graduate from college, up from 1.1 million in 2001. By 2020, China’s college-educated pool is expected to number 195 million people, more than the entire labour force in the United States that year.

Bloomberg, SCMP, April 18


I think I have mentioned before that I am not the world’s biggest believer in education, certainly not the college sort that now wastes the key years of young peoples’ lives in a go-nowhere debt trap.

What I have in mind in particular at the moment is a book I am reading – the autobiography of Steve Wozniak, who designed the break-through Apple 2 computer and only got his college degree years later.

Why he bothered is a mystery, the college degree, I mean. He learned engineering from his father, refined his knowledge with his friends and there wasn’t much that formal education did for him other, I suppose, than help him learn to read, write and take an interest in numbers in primary school.

It was 10-year-olds he went to when he wanted to pass on his learning. But now college is to be the answer for China.

The problem, we are told, is that foreign companies have taken advantage of plentiful low-paid and unskilled labour to keep China in the cheap and nasty stage of industrial development.

That is why the world’s biggest producer of consumer goods still has so very few consumer brand names recognised around the world.

But now China is to have more college graduates than the entire US workforce in just six years and everything will change. The Chinese are now going to be the world’s hi-tech leaders. Someone obviously hasn’t noticed that the engineering and design facilities of big tech companies worldwide already employ a disproportionately large number of Chinese engineers.

They are already the hi-tech leaders, but outside of China. There is a reason for this, and it has nothing to do with education. The reason the country with the world’s biggest production of hi-tech wares is not also the place  where it is predominantly designed or branded has to do with market economics.

Simply put, if you cannot properly price the work you do relative to competing demands for the money you need, then you can never bring much innovation to your business. Someone else with little knowledge of what you do is making your most critical decisions.

And this is what is still happening in China. At its most critical, the state still decides  who will get what amount of money for what purpose and at what price. It also still plays a role in allocating who will get what physical resources at what price and what other commercial advantages they may be given. No one will ever turn a great idea like the Apple 2 into a commercial success in a system like this. The bureaucrats who make the critical decisions will never recognise it, are not able to recognise it, and will starve it of resources.

The money and the other opportunities will instead go to yesterday’s big ideas, not today’s, and nothing is likely to come of them because, by definition, they are yesterday’s and that’s in the past.

If someone in China does come up with today’s new Apple 2, he will probably have to develop it and look for the backing in the United States, as usual, returning to China only later for the mass assembly.

As I say, lots of Chinese people are at the leading edge of technology, but Chinese industry itself lags there.

The only workable prescription for fixing this and going upmarket in industrial effort is market pricing of that effort. If it involves export industry, as it does in this case, then it needs an open capital account and a free floating currency. In talk alone have either of these reforms really gone anywhere.

And now it looks like the authorities in Beijing are chasing the wrong remedy again. Their idea is to condemn Chinese youth to further boredom in that intellectual desert of academia under the illusion that a college ticket is worth the price of the wasted years.

If only college did anything else as well as it does alcoholism training.


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This article is now closed to comments

Jake hit the bull's eye.
Education is not everything that the Chinese, Koreans, etc. love to make it out. It's Confucianism from more than 2500 years ago, emphasis on education and strict submission to social hiearchy (a.k.a. Feudalism). To be sure, the level of literacy in China at that time is low compared to today so education was highly priced. But once a nation attained the acceptable level of education and literacy, education becomes less important. The successful people in the 21st century are not people armed with several degress or Phds, but people who are able to THINK. That has always been the case throughtout thie history of mankind. Sucess does not belong to the educated elite, but to the individual who able to Think Ahead and Innovate. Most of the educated and highly educated are salarymen, working for people wth basic education. It's EQ not IQ. I always advise my children that education is only a first step into the real world and Success depends not on your degreee but your ability to Think and Act. I further remind them the MBAs and PHDs are all working for the lesser educated. I know because I am in that position
Agree. I said the similarly thing to my kid. I worked for 2 bosses, same industry. The one with a Primary 6 education literally built a mint. The other is an Ivy Leaguer who bankrupted one and has just made another in financial difficulty.
It's the person more than the education.
Jake talks sense about China's weird post-socialist command economy.
But he also has to rail, for the umpteenth time, about the toxic waste that is a university education. He's been off-the-rails loony on this topic for many years. Jake, we're sorry you had a crummy time on that idyllic Canadian campus, but you have to realize that this is YOUR pathology. The rest of us are waiting for crazy Uncle Jake to get back on topic.
And would either one of these two bosses given you your job if you hadn't had a university degree?
If going to college isn't the answer to China's hi-tech dilemma what is? A college education is only the start for learning the basics and not an end. It is only the start to whatever you are going to do next.
Did you read the article?!
China's economy favors maximum market competition AND thus innovation, I would argue. Doing R&D in China costs only 1/5th what it does in the West. What is lacking is not innovation, but a system for capturing the value created, and to direct the resources (only government or quasi government bodies such as trade bodies can do that effectively) to modify company behavior.
For example, think of a Copyright regime in which:
1. There is a standardized data collection on authorship (which individuals were invovled, copies of the relevant employment contracts vesting rights in the companies), the creation docs to proof independent creation, or derivation history as appropriate.
2. A Pool vehicle in which the company/owner can "contribute" new copyrighted works in exchange for:
(a) % of licensing and enforcement revenues realized from the work(s);
(b) Registration, Licensing and enforcement to be undertaken by the Pool, with professional management and centralized selection and engagement of contingency lawyers worldwide;
(c) 3rd party Investors fund the efforts and participate in returns.
(d) Tiered licensing rates to protect sales in early years for the innovator companies.
Separation of the ownership and the creation further defeats the oppressive contracts of adhesion by international behemoths (in their oppressive vendor agreements). The Pools go around to big retailers and demand payment of royalties in lieu of IP enforcement lawsuits.
Beijing is already taking some steps in helping developing China's own IP. For example, there is funding provided to assist Chinese companies to file their patents in foreign countries. YET there is little quality control (patent applications originating from China is notorious for having very narrow claims and inadequate disclosures), the true measure of value of such patents in foreign markets (as measured in damages recovered in litigation and licensing) shows miserable returns.
Yet patents are not the be all and end all, or even the biggest chuck of China's innovation. For example, today China is already the biggest copyright nation in the world. YET because the ownership is fragmented and knowledge about how to perfect and enforce these copyrights, value is not efficiently realized, and innovators are not compensated. The typical Chinese consumer product factory cranks out hundreds, if not thousands of new designs EACH YEAR. Yet because there is little expertise in perfecting (keeping good records of authorship and ownership) rights in the works or in enforcement, value remains uncaptured.
Great opportunities exist for China, AND Hong Kong (because of its tax free advantages, and deal making and fund raising expertise), to come up with a Copyright Pool regime to maximize value capture (through licensing and contingency litigation through vetted counsel worldwide) based on China sourced copyrights. THEN the innovation can be properly encouraged.
I beg to differ. The "market" is clearly not the be all and end all. The "market", which favors disproportionately the international behemoths with their patent pools (think the JP companies plus Phillips, collecting $5 to $10 a DVD player, more than the profits left for the actual Chinese manufacturer) and contracts of adhesion (think Walmart with "standard" vendor agreements that practices "what is yours is mine, what's mine remains mine" (trade secrets) and automatic license of IP after purchase for a period of time). Chinese entities are simply to small and fragmented to benefit from this "system", especially with focused distortions such as the TPP.
Moreover, the IP game the world over remains a rich men's game. Most Chinese players are too small to afford the multiple million dollar patent lawsuits (no enforcement means no rights in practice), or even the many hundred thousand dollar copyright and trademark lawsuits.
China should pursue innovation with Chinese characteristics, balancing the need to compensate Chinese innovators, enabling more Chinese sales vis-a-vis technology competitors, AND help Chinese companies to combat against foreign competition around the world.
1. Facilitate formation of IP pools - come up with formula to make enforcement efficient and cost effective WHILE compensating the originators or the IP.
2. Educate companies to make full use of the system.
3. Bring in Universities to be part of the system.
It is typical for a journalist to underestimate or fail to understand the value of expert education.

A lot can be said whether the Chinese education policy is a delivering the right kind of workforce for its economy now, and/or for the coming decades. And it is certainly debatable whether to some degree the every level of college graduates is not at least putting the cart before the horse to some (college) degree. This kind of over-education is typical though of many middle income economies though, and China is definitely not alone in having a . Many Filipino domestic helpers in Hong Kong for instance have university degrees, but are doing unskilled labour because there aren't enough skilled jobs at home.

As a whole though, it is much better to have an over-educated workforce than an under-educated one, especially if you are determined to move your economy towards higher added-value areas, which China certainly is. Whether they will succeed in that, whether they are doing it the right way, and how long it will take if they do... we could debate that ad infinitum.

On an individual level, and certainly in China, getting a university degree remains the best way to spend your early 20s - in terms of future chances of employment, lifetime earnings and personal growth. Mr van der Kamp's general dislike of university education is extremely odd. Telling 18-year olds that they can just skip that 'nonsense' and become outliers like Wozniak is hugely irresponsible.




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