A lesson from the tech industry

Good news for the tech industry: I'm finally going to break down and buy a smartphone.

For years, I've resisted the lure of the cell phone, the Palm Pilot, the BlackBerry and the iPod, content to muddle through life without the ability to connect to everyone and everything anytime and anywhere. And as amazing as it may sound, I still have a family, friends, a job and some general familiarity with what's going on in the world.

But with Monday's launch of Apple's new iPhone, even I have to admit that it's time to let go of this inner Luddite. In the space of only a few years, these ingenious contraptions have become so affordable, so easy to use, so compact, so reliable and so all-in-one that it's worth the time and hassle of reorienting my comfortable systems and routines. And, anyway, they're so elegant and cool-looking, how can I resist?

It's not just Apple that's brought me to this point of capitulation. Palm, Nokia, Samsung, Research in Motion, Google and Microsoft are scrambling to bring out new hardware and software for smartphone 2.0. Having invested billions of dollars building bigger and faster wireless networks, AT&T, Sprint, Verizon and T-Mobile are tearing up their old business models. And there isn't a Hollywood studio, television network, music publisher, Web portal, search engine or online publisher not trying to figure out how to adapt its content.

All this is a glorious example of how free markets are supposed to work: fostering innovation, increasing productivity, driving down costs, creating jobs, generating wealth and improving quality of life. It is a case study of what people can accomplish in a relatively short time when a sense of competitive urgency forces them to think creatively and focus on pleasing and delighting customers. And much of it is being driven by individuals and companies here in the United States.

Then compare that to how things work – or, more precisely, how they don't work – these days in Washington.

Consider the fate of a patent reform bill that has been on the agenda after years of complaints from inventors and high-tech companies about frivolous patents, endless litigation, excessive court judgments and conflicting signals from the federal courts.

Last year, the House reported out a bill that would make it harder to get a patent but easier to challenge one, while changing U.S. law to a “first-to-file” system that conforms more closely to patent rules in the rest of the world. The legislation was a response to widespread complaints that by tilting too heavily in favor of existing patent holders, a patent system meant to encourage innovation was beginning to stifle it. To most neutral observers, the bill seemed to strike a reasonable balance between the need of industries that have business models based on breakthrough products that take decades to develop and those in which innovation tends to be incremental and products very quickly become obsolete.

So where is patent reform? Like so much other policy, it is stuck in the Senate despite having been reported out of the Senate Judiciary Committee with bipartisan support. The problem is with a single line in the massive legislation that requires any damages awarded in a patent infringement case be roughly proportionate to the importance of the disputed patent to the success of the overall product. This seemingly reasonable idea is adamantly opposed by the biotech and pharmaceutical industries, which argue that anything short of financial capital punishment for patent infringers will undermine the entire patent system and bring medical progress to a screeching halt. They have used their considerable political influence to block the Senate, under its arcane and undemocratic rules, from even considering patent reform.

If this were an isolated case, you might write it off as a bit of bad luck or a testament to the political clout of drug companies with too much money to spread around. Unfortunately, however, it is the norm. Immigration reform, a major energy bill, global warming legislation, the housing bill, overhaul of the aviation system and fixes for the alternative minimum tax have all been bottled up in the Senate, thanks to those quaint rules that effectively require 60 votes even to take up legislation, let alone pass it. As long as this arrangement persists, it will be impossible for the country to simplify the tax code, reform the health care system, restructure financial regulation, fix the tort system, rebuild the nation's infrastructure or put a brake on runaway entitlements.

Although you rarely hear this from economists and business leaders, one big reason for the strength of the U.S. economy over the years has been that we have had a government willing to fix mistakes, respond to crises and adapt to changing conditions. Or to put it another way: As a country, we had a public sector that was as smart and quick and innovative in developing economic policies as our private sector was in developing and embracing technologies like the smartphone. Unless we recapture that ability to make Washington work again, it is a pretty good bet that, a generation from now, the next new thing will be developed somewhere else.