Commentary Magazine


Topic: business innovation

Government Didn’t Build That Internet

The shooting attack in Aurora, Colorado, was the sort of news event that stopped the political world dead in its tracks. Despite the initial attempts of some foolish journalists and politicians, the slaughter didn’t fit into any convenient political narrative, but it did benefit President Obama in two ways. The first was that it demonstrated again the advantage of incumbency in which a sitting president is called upon to represent the feelings of all Americans. In this case, Obama’s performance as mourner-in-chief reminded us of his rhetorical strengths as well as the potent symbolism of his presidency.

The other benefit he received was that the killings pushed his “you didn’t build that” gaffe out of the spotlight for at least a couple of days. That relieved liberal pundits of the burden of twisting themselves into pretzels while attempting to argue that Obama didn’t really mean that the government was more important than individual effort in creating businesses. The pause in the parsing of the president’s all-too-revealing comment will only be temporary, as the Romney campaign will be reminding us of it for the next three months. But just as important as the “what did he mean by that” debate is an effort to understand just how wrong the president is about big government’s role in paving the way for business success. Gordon Crovitz writes today in the Wall Street Journal, taking aim at one of the central planks in Obama’s spiel in which he claimed “Government research created the Internet so that all companies could make money off the Internet.” Not true. The Internet was primarily the work of private business initiative in which federal involvement was conspicuous by its absence.

As Crovitz writes:

It’s an urban legend that the government launched the Internet. The myth is that the Pentagon created the Internet to keep its communications lines up even in a nuclear strike. The truth is a more interesting story about how innovation happens—and about how hard it is to build successful technology companies even once the government gets out of the way.

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The shooting attack in Aurora, Colorado, was the sort of news event that stopped the political world dead in its tracks. Despite the initial attempts of some foolish journalists and politicians, the slaughter didn’t fit into any convenient political narrative, but it did benefit President Obama in two ways. The first was that it demonstrated again the advantage of incumbency in which a sitting president is called upon to represent the feelings of all Americans. In this case, Obama’s performance as mourner-in-chief reminded us of his rhetorical strengths as well as the potent symbolism of his presidency.

The other benefit he received was that the killings pushed his “you didn’t build that” gaffe out of the spotlight for at least a couple of days. That relieved liberal pundits of the burden of twisting themselves into pretzels while attempting to argue that Obama didn’t really mean that the government was more important than individual effort in creating businesses. The pause in the parsing of the president’s all-too-revealing comment will only be temporary, as the Romney campaign will be reminding us of it for the next three months. But just as important as the “what did he mean by that” debate is an effort to understand just how wrong the president is about big government’s role in paving the way for business success. Gordon Crovitz writes today in the Wall Street Journal, taking aim at one of the central planks in Obama’s spiel in which he claimed “Government research created the Internet so that all companies could make money off the Internet.” Not true. The Internet was primarily the work of private business initiative in which federal involvement was conspicuous by its absence.

As Crovitz writes:

It’s an urban legend that the government launched the Internet. The myth is that the Pentagon created the Internet to keep its communications lines up even in a nuclear strike. The truth is a more interesting story about how innovation happens—and about how hard it is to build successful technology companies even once the government gets out of the way.

It was researchers at the Xerox Corporation who developed the Ethernet to link different computer networks, the first personal computer and the first graphical user interface. They did so because they couldn’t wait for the government to connect the different computer networks that existed in the 1970s. Government researchers were burdened by regulations and rules that inhibited innovation and flexibility that private companies did not — and still don’t — suffer from.

But, as Crovitz points out, Xerox’s failure to profit from its innovation highlights why the top-down government model doesn’t create business success. Solely focused on promoting its lucrative copier business, Xerox didn’t know what it had and wound up letting Steve Jobs and Apple take advantage of the concepts they had created.

As Crovitz concludes:

As for the government’s role, the Internet was fully privatized in 1995, when a remaining piece of the network run by the National Science Foundation was closed—just as the commercial Web began to boom. Economist Tyler Cowen wrote in 2005: “The Internet, in fact, reaffirms the basic free market critique of large government. Here for 30 years the government had an immensely useful protocol for transferring information, TCP/IP, but it languished. … In less than a decade, private concerns have taken that protocol and created one of the most important technological revolutions of the millennia.”

It’s important to understand the history of the Internet because it’s too often wrongly cited to justify big government. It’s also important to recognize that building great technology businesses requires both innovation and the skills to bring innovations to market. As the contrast between Xerox and Apple shows, few business leaders succeed in this challenge. Those who do—not the government—deserve the credit for making it happen.

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