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Reporter's Notebook
by Chris Farrell

Chris Farrell

Every once in a great while, the global economy is transformed. Within a span of decades, technological advances, organizational innovations, and new ways of thinking transform economies. Steam power, the factory system, and the Enlightenment combined to create the 18th century Industrial Revolution. The startling innovations of electric power, mass production, and mass democracy fueled extraordinary growth rates among the major industrial powers in the late 19th century. World economic history is going through another tectonic shift in an era of defined by global telecommunications, quicksilver capital markets, expanding world trade, and the spread of market capitalism. The signs are all around us: Chinese capitalists, Indian entrepreneurs, the Internet, the offshoring of skilled jobs.

One company at the epicenter of the new economy is Intel, the chipmaking colossus. Founded in 1968 by Silicon Valley pioneers Robert Noyce, Gordon Moore, and Andrew Grove, Intel's stunning innovations in chips over the past three decades have changed the world. Indeed, if you're reading this article on a PC, it's highly likely that the chips powering your computer are made by Intel.

Producer John Biewen and I spent a day at the company's corporate headquarters in Santa Clara, California. I was surprised at how nondescript the company's main building is; a six-story blue glass edifice nestled alongside Highway 101, the road that runs through Silicon Valley. In New York, London, and other business capitals of the world, successful companies build trophy offices towering over everyone else. There are also no lavish corner offices here. Just grey cubicles and bland conference rooms. Among the people we met with while at Intel was Mario Paniccia, director of Intel's photonics technology lab. In many ways, his story is quintessential Intel.

Since 2001, Paniccia has led a team of researchers based largely in the U.S. and Israel. Their task, considered quixotic at the time, was to create an all-silicon laser that would allow for the transmission of vast amounts of data with light waves rather than the current standard of electrical currents. Laser chips had been created before, but they were expensive and relied on exotic materials. Paniccia believed a continuous laser could be built out of cheap silicon and mass produced by the company's existing global chipmaking infrastructure. He got senior management to fund his effort. The laser chip is still in the very early stages. Nevertheless, the research suggests a photonic silicon chip will eventually offer another step-up in computing performance and efficiency. Once again, Intel is poised to come out with a product that renders its previous engineering accomplishments obsolete. The trick, of course, is to create the innovations yourself rather than lose out to a bolder competitor.

Key to the development of the laser chip was a group of engineers and researchers in Israel. For one thing, working with the Israelis allowed for 24-hour research and development. For another, Intel's research fabrication facility in Israel has the expertise for experimenting with different materials and manufacturing techniques. But most important, says Paniccia, was the talent. The skilled workers wanted to live in Israel, so the work went to them. By working with the Israelis, Paniccia not only took "advantage of a talent pool" but a "diversity of people and perspective."

The dynamism of capitalist competition has always been devastatingly painful. While 17th century textile makers in Britain built the factory system, middle-class weavers in Yorkshire sank into poverty. The 1950s and 1960s were an era of U.S. economic dominance, but many Midwestern and Northern industrial workers never recovered from losing the well-paying manufacturing jobs when their companies moved to cheaper sites in the South and West. Now that companies can tap into a global talent pool, Paniccia believes the upheavals are coming faster than ever. "You can't just rest on your laurels and say, that isn't fair," says Mario. "Innovation is what drives competition."

His answer: Get used to it and prepare for change. His parents are first generation immigrants from Italy that moved to Endicott, New York. It's the birthplace of IBM, and has gone through hard times ever since the PC revolution disrupted the mainframe business. But his father and mother, with a 5th and 4th grade education respectively, stressed the importance of education. Sad to say, the education system and the resources devoted to it aren't anywhere near enough to meet the new challenge of the global economy.

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