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McDowell: Sputnik, tech race and former President Lyndon Johnson
ARBOR OUTLOOK

McDowell: Sputnik, tech race and former President Lyndon Johnson

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”What American wants to go to bed by the light of a Communist moon?”

-Former U.S. President Lyndon B. Johnson

In 1957, the Soviets sent a small, unmanned satellite called “Sputnik” into space. Four years later, Soviet cosmonaut Yuri Gagarin completed one orbit around the Earth in a space capsule. So the U.S.S.R. claimed the early lead in the space race. But the U.S. was the first to achieve a lunar landing and on July 20, 1969, Neil Armstrong walked on the moon.

The current economic battlefield between the U.S. and China remains rooted in technology. A recent cover story in The Economist was titled “Is China Winning?” The answer is no, at least when it comes to technology. Facebook, Google, Microsoft, Amazon and other U.S. Big Tech companies may be invasive and maddeningly ubiquitous, but they represent the most pivotal aspect of America’s future economic prospects.

“U.S.-China competition is essentially about who will control the global information technology infrastructure and standards,” says Frank Rose, a senior fellow for security and strategy in the Foreign Policy program of the Brookings Institution.

In 2015, China released details of a plan designed to gain international superiority in high-tech manufacturing by 2025. Two years later, China made its intentions known to become a world leader in researching and developing artificial intelligence. And it is soon to announce “China Standards 2035,” a plan to dominate the global tech market in coming years.

A recent CNBC article by Audrey Cher examines our country’s current position in the global tech race. We’re far and away the world leader, especially in the arena of AI. Our position is bolstered by “AI patents, investments and academic research,” and of course, many of the world’s major software companies are located here. “The ranking was calculated by weighing five factors, namely: academic research, patents, investment, labor and hardware in the field of artificial intelligence,” writes Cher.

Michael Brown, who serves as director of the defense innovation unit at the U.S. Department of Defense, terms our competition with China a “superpower marathon.” And Scott Moore of the Penn Global China Program at the University of Pennsylvania warns that China represents the main challenge to American pre-eminence in technology.

In the Sputnik era, the tech race was government funded. Now it’s in private hands. In China, tech companies explicitly work for the government; here, the relationship is implicit, but no less vital. The cry to “break up Big Tech” sounds good, and in some cases they are monopolistic, but our Big Tech companies also represent our best line of defense in the 21st century. Whoever wins the AI race will enjoy greater economic and military power in the future.

Most investors remember the dot.com boom and ultimate crash in 2000, but Big Tech is now a matter of national security, and is not likely to fade like so many dot.com era startups. The future will likely be commensurate with its importance in the field of international competition in infrastructure, artificial intelligence and more.

Margaret R. McDowell, ChFC®, AIF®, author of the syndicated economic column “Arbor Outlook,” is the founder of Arbor Wealth Management, LLC, (850-608-6121 — www.arborwealth.net), a fiduciary, “fee-only” registered investment advisory firm located near Destin. This column should not be considered personalized investment advice and provides no assurance that any specific strategy or investment will be suitable or profitable for an investor.

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