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This is not a textual record. This is used as an
administrative marker by the William J. Clinton
Presidential Library Staff.
Collection/Record Group:
Clinton Presidential Records
Subgroup/Office of Origin:
Speechwriting
Series/Staff Member:
Lowell Weiss
Subseries:
17198
OA/ID Number:
FolderlD:
Folder Title:
IT - Economic Gains
Stack:
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�Jeffrey M. Smith
02/24/2000 07:11:31 AM
Record Type:
To:
Record
Lowell A. Weiss/WHO/EOP@EOP
cc:
Henry C. Kelly/OSTP/EOP@EOP, Lori A. Perine/OSTP/EOP@EOP, Anthony J.
Gibson/OSTP/EOP@EOP, Neal Lane/OSTP/EOP@EOP
Subject: additional IT examples
Lowell - it may be too late to consider these... but we're passing them along in any event,
perhaps you might consider using them in a future speech
"Prior to the introduction of supecomputers in the mid 1980s, leadtime from
concept to production of a new vehicle was about 60 months. By the
beginning of 1998, with the aid of supercomputers, lead time at U.S. car
companies has been cut to half to 24 to 30 months."
"It could take up to 3 months to build a prototype that would be destroyed
in less than 80 milliseconds, and the cost for that single test would range
from about $30,000 for an existing production vehicle to $1M for a
non-production vehicle. Each design required multiple tests, resulting in
a very expensive and time consuming process. Well-integrated computer
modeling at the beginnin of a design cycle can reduce the number of planned
protypes by as much as 50%."
Source HPC Contributions to Society.
from testamony of Federick Hausheer, MD BioNumerik Pharmaceutical, Inc to
the House Science Committee March 1999 (on IT 2)
A
"We have a dedicated on-site lab facility that is fully integrated with the
on-site supercomputer facility. It is important to note that this new
approach has been validated by the discovery and translational development
of 3 new cancer drugs aimed at addressing large unmet needs from our
supercomputer into the lab and into human clinical testing with an average
time of 18 - 24 months per drug. The industry average for taking a new
drug from synthesis to the first testing in humans in 6 years."
use of supercomputer by the aluminum industry
Of 100B beverage cans made in the US each year, about 95% are aluminum.
Aluminum costs more than steel and the price has been rising. There is a
need to find ways to make cans lighter - which mean lower prices to the
�consumer. ALCOA'S anser is lightwieghting, designing cans to use the
thinnest aluminum possible within the constraints of strength and
appearance. Andy Trageser, of ALCOA estimates that to develop a new can
design in the lab costs about $100,00 compared to $2,000 with computer
modeling.
source HPC Contributions to Society
�Page 3
6 5TH STORY o f L e v e l 1 p r i n t e d i n FULL f o r m a t .
C o p y r i g h t 1999 Business Communications Co.
DRUG DISCOVERY/TECHNOLOGY NEWS
March, 1999
SECTION: SCREENING; V o l . 2, No. 3
LENGTH: 323 words
HEADLINE: S i l i c o n - C o n t a i n i n g Drug by Supercomputer
BODY:
BioNumerik Pharmaceuticals announced t h e i n i t i a t i o n o f Phase I t r i a l s a t t h e
U n i v e r s i t y o f Chicago Medical c e n t e r s f o r k a r e n i t e c i n , t h e t h i r d drug t h e
company has brought from d i s c o v e r y t o t h e c l i n i c w i t h t h e a s s i s t a n c e o f
supercomputer s i m u l a t i o n s . The development time f o r BioNumerik's drugs has
ranged trom l U t o ^4 months compared t o a c u r r e n t i n d u s t r y average o f s i x y e a r s .
K a r e n i t e c i n i s a n o v e l , s i l i c o n c o n t a i n i n g , ^QtTcancer^ompound o f t h e
c a m p t o t h e c i n c a t e g o r y . The compound has been demonstrated t o have a n t i - t u m o r
a c t i v i t y a t p a r t s p e r t r i l l i o n i n l a b o r a t o r y t e s t i n g w i t h human cancer c e l l
l i n e s and i n animals b e a r i n g human tumors. The drug was designed t o a v o i d
problems w i t h b i o a v a i l a b i l i t y , u n f a v o r a b l e metabolism, t o x i c i t y and drug
r e s i s t a n c e t h a t have been a s s o c i a t e d w i t h o t h e r camptothecins.
^•
" K a r e n i t e c i n was d i s c o v e r e d and developed by o u r r e s e a r c h team u s i n g h i g h
performance S i l i c o n Graphics and Cray supercomputers." s a i d F r e d e r i c k Hasheer,
l e a d e r o f t h e d i s c o v e r y team a t BioNumerik. "To engineer k a r e n i t e c i n , we
s i m u l a t e d more t h a n 12 t r : 11 • p" p o n s ^ l e drug candidates u s i n g SGI/Cray
»
supercomputing t e c h n o l o g y i n l e s s t h a i ^ o n e year."
Through an a l l i a n c e w i t h S i l i c o n u r a p h i c s and i t s s u b s i d i a r y , Cray Research,
BioNumerik has two supercomputers o n / s i t e , which a r e capable o f c o n d u c t i n g an
aggregate o f 12.8 b i l l i o n o p e r a t i o n ^ p e r second and h o l d more t h a n one t r i l l i o n
b y t e s o f d a t a . BioNumerik used suparcomputer s i m u l a t i o n s t o c o n s t r u c t a
d e t a i l e d c o m p u t a t i o n a l model i n v o l v ng t h e key m o l e c u l a r i n t e r a c t i o n s o f
k a r e n i t e c i n w i t h human cancer c e l l pNA and topoisomerase I , an enzyme i n v o l v e d
i n DNA s y n t h e s i s and r e p l i c a t i o n .
Tfargn-i i-oni n i o r h n mi",nt- po t e n t c i m p t o t h e c i n y e t i n t r o d u c e d i n t o t h e c l i n i c . "
«*. p
n o t e d R i c h a r d L. S h i l s k y , l o i r e c t o r d f t h e U n i v e r s i t y o f Chicago Cancer Center.
" I t s OLurtJ upmLTtim o f a n t i - t u m o r a d t i v i t y and p o t e n t i a l f o r o r a l a d m i n i s t r a t i o n
make i t v e r y e x c i t i n g . "
LANGUAGE: ENGLISH
LOAD-DATE: March 26, 1999
�SGI and BioNumerik Pharmaceuticals...e Rapid Cures tor Today's Disjesiseyg://127/http://www.sgi.com/chembio/cust_success/bionumerik.html
HOME SEARCH
HOW TO BUY
r
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sgv
* Chem/Bio
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Overview
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Modern drug discovery can be a tedious
and expensive process. Often, five years
or more can pass before a drug is
conceived, synthesized, tested, and
finally made available to patients. These
long development cycles can not only
make drugs very expensive for patients,
they also delay a drug's
availability—delays that could be
life-threatening.
:.*r
QpenGL®
BioNumerik Pharmaceuticals is using Cray supercomputing technology
to create a drug development method that produces more quality drugs at
a much faster rate. "Our collaboration with SGI is allowing us to develop
drugs in a whole new way," said Dr. Fred Hausheer, M.D., the founder of
BioNumerik. "Cray's supercomputers allow us to process literally
trillions of calculations in the development of a single drug. That ability
gives our researchers unprecedented flexibility and creativity in
engineering new drug combinations. This allows us to find safer and
more effective drugs in much less time."
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BioNumerik is putting Cray's supercomputers to work in a new
drug-development approach called "mechanism-based drug discovery."
The computer simulates a drug's interactions not only with its
biochemical target inside the body, but also with all the other, healthy
cells that it encounters before reaching the target. Using the
computational power of the Cray computers, these analyses can be done
before committing significant laboratory resources to synthesizing the
drug. The process can be compared to an auto maker simulating the
safety performance of a new car before building an expensive prototype,
which can take upwards of eight months. By simulating the properties
and behavior of the drug on the computer, pharmaceutical researchers
save much ofthe cost and time traditionally associated with drug
discovery.
Why Use a Supercomputer?
Mechanism-based drug discovery requires huge numbers of calculations
to successfully simulate possible drug interactions and conversions in the
body. For example, in the development of BNP7787, a new
cancer-fighting BioNumerik drug currently in FDA trials, BioNumerik
calculated more than 12 trillion possible chemical interactions. That is
where Cray supercomputers come in. Using two CRAY J90™ series
supercomputers, BioNumerik can process more than 26 billion
calculations per second. These computational speeds are absolutely
necessary for the mechanism-based approach to work. The
computational speeds are also imperative for researchers analyzing
1 of 2
2/23/2000 4:32 PM
�SGI and BioNumerik Pharmaceuticals...e Rapid Cures for Today's Dis)csjscyg://127/littp://www.sgi.com/chembio/cust_success/bionumerik.html
trillions of chemical possibilities to look at the various ways the drug
will react under certain situations and allow optimization of the design
for a more effective drug.
As a more cost-effective alternative to traditional supercomputers, the
CRAY J90 supercomputers provide this level of computing power to a
new category of customers, including smaller firms such as BioNumerik.
The computers do not require expensive computer-room environments,
as they are air-cooled and plug into standard power outlets.
A New Way to Fight Cancer
Cray supercomputers and mechanism-based drug discovery are making a
significant difference in how drugs are developed. For example, in the
span of 18 months, BioNumerik developed the drug BNP7787, which is
designed to block the harmful side effects of cisplatin and carboplatin,
two widely used tumor-fighting drugs used in cancer chemotherapy.
BNP7787 may allow chemotherapy patients to take otherwise lethal
doses of cis/carboplatin, while preventing the kidney and bone marrow
damage, nausea, vomiting, and other side effects normally associated
with these anticancer drugs. Clinical trials of BNP7787 will commence
this year on a worldwide basis at leading cancer treatment centers,
including The Johns Hopkins Oncology Center and University of
Chicago, and leading centers in Europe and Japan.
According to Hausheer, the rapid discovery and development of this drug
would not have been possible without the computational power of Cray
supercomputers. "We look forward to making the drug available as soon
as we receive final FDA approval and authorization," he said.
"Nobody can match the track record or the performance of SGI in this
field," said Hausheer. "Cray offers the leading edge and reliable
computational capabilities to get the job done, as well as its hard-won
experience in real-world, production-computing environments. No other
company can come close."
For more mformation about BioNumerik and its research, please call
(210)614-1701.
privacy policy | questions/comments
Copyright © 2000 Silicon Graphics, Inc. All rights reserved. I Trademark Information
2 of 2
2/23/2000 4:32 PM
�. Rachel S.'Turow
Record Type:
To:
i
Record
Lowell A. Weiss/WHO/EOP@EOP
cc:
Subject: pharmaceutical bottom line
^
Pharmaceutical companies are using powerful computer simulations to screen trillions of new drug
candidates - cutting down development time for new anti-cancer drugs by 9 years or more.
As an aside:
A good chemist takes 3 months and $25,000 to synthesize one drug. Multiply this by a trillion and you get
what the supercomputer does. It completely removes the obstacle of chemical synthesis. They could
not possibly reduce cost and time as much without the super computer. It's not humanly possible.
�Audrey Choi
02/18/2000 06:00:58 PM
Record Type:
To:
Record
Mara A. Silver/WHO/EOP@EOP
cc:
Lowell A. Weiss/WHO/EOP@EOP
Subject: penn speech.
Mara - here is an initial installment of some grist for the mill, a few more messages to follow shortly,
sorry it's not as fully synthesized as we might have hoped but hopefully it will help for starters and we can
help refine further as you go forward, thanks,
Attributable to analysis by the CEA:
Information technology has enabled businesses to manage their inventory stocks more efficiently. The
reduced level of inventories has made the economy less susceptible to recession. The dynamics of a
recession are that demand starts to tail off. Producers keep producing for a while and inventories pile up.
Then companies realize they are in trouble and they cut back drastically. Output has to fall not only
because demand is down but to work off the excess inventories. Inventories, in short, accentuate and
worsen the business cycle.
Some examples of how specific industries benefit: (from industry case studies).
1. Airlines. The hub and spoke system has allowed much more frequent service between destinations and
makes it economic to serve more destinations. This kind of system can not operate without IT to help
coordinate this complex system. IT also used in computerized reservation systems and e-ticketing.
Computers allow companies to adjust fares on short notice to fill up planes and increase load factors.
Allows more intensive use of aircraft (increased block hours)
2. Retailing. Large retailing stores have increased their efficiency and their profit margins by having
integrated inventory management systems that links each customer purchase back to the central
warehouse. As aresult, as soon as a customer buys a product, information immediately feeds back
through the system, providing information on what item was purchased from which store and
automatically start a chain reaction that leads to that store being restocked at the perfect time to
consumer demand.
3. Telecommunications. IT has transformed the telecom industry. Initially the shift was the basic
transition from mechanical switching of calls to electronic switching. THis has enabled increased services
and efficiency that have helped fuel the explosion ofthe telecommunications setor. Now IT enables the
provision of new services, including call waiting, call forwarding, caller ID, cell phones require complex IT
to as customers move from cell to cell.
4. New ways of reaching markets. IT now allows purchases to lower their procurement costs by holding
online auctions. Rather than sending out a paper request for proposals and obtaining a single bid from
each potential contractor, buyers holding online auctions can allow bidders to observe how their bids
compare with those of their peers.
�Audrey Choi
02/18/2000 06:13:27 PM
Record Type:
To:
Record
Mara A. Silver/WHO/EOP@EOP, Lowell A. Weiss/WHO/EOP@EOP
cc:
Subject: IT & Inventory Management
below are some excerpts from our Economic Report of the President that discusses IT's role in inventory
management and productivity enhancement. I've marked in blue, some parts that might be especially helpful
One area in which information technology can enhance productivity is
the management of inventories. For example, electronic scanners have
been a familiar sight in grocery checkout lines for some time, but
some retailers have begun to adopt new and more efficient distribution
methods that rely on these scanners and the wealth of transactions data
they can provide. One large retailer with a chain of grocery superstores
has used information technology to track what is selling in its stores and
to use that information to build a more efficient distribution system.
This firm uses its buying power to generate large orders to manufacturers,
which then deliver the demanded goods to the firm's warehouse distribution centers. Those centers, in turn, are responsible for resupplying
the individual retail stores. To keep revenue high and costs low, the
firm also analyzes its scanner data on sales to maximize the use of its
shelf space. Detailed information captured by scanners at each store track
how fast products are selling, so that stores can be resupplied at
frequent intervals from the distribution centers. This avoids the need to
keep large and expensive inventories at the stores themselves. In total,
this company has reduced its operating costs to a mere 17.5 percent of
sales, compared with 22 percent for a traditional supermarket.
The increased investment in information technology by companies has
coincided with a reduction in the economy-wide ratio of inventories to
sales during the current economic expansion (Chart 3-6). Although, to be
sure, information technology is used in many areas besides inventory
management, some of those investments may have helped businesses to
better manage inventory growth and improve productivity during the
current expansion.
Information technology is also being used to better manage information
flows between firms, such as between a final-goods manufacturer and
the different levels of its supplier chain. In the automobile industry,
for example, one recent report notes that companies have largely
replaced paper drawings with digital representations as a means of
storing, analyzing, and communicating data on products and parts. One original equipment
manufacturer estimated that it exchanges product data both within the
. J)
company and with its suppliers as many as 453,000 times a year.
VcX^f
Retail E-Commerce
J)
�Information technology is having an impact on how businesses do
business in yet another way, through the growing use ofthe Internet
by firms as a communications tool. The Internet is already
revolutionizing distribution technology at both the retail and the
wholesale level. With millions of people now online, the potential to
use the Internet as a low-cost means to communicate information to
customers and receive orders for products is growing ever larger. At
the retail level, new firms are springing up to market a whole range
of consumer products from books and music CDs to cars. E-commerce
retailing has several potential advantages over traditional retailing,
some of which it shares with traditional mail-order firms. Like a mailorder firm, a firm with a website may be able to offer more products
online than a traditional brick-and-mortar store, because it is far
less limited by shelf space constraints. It can make extensive
product information available to interested customers around the country
and the world, who can then make their selections automatically, without
the need for a salesperson.
For e-retailers, the Internet replaces paper catalogs as the medium
used to distribute information to customers, but these retailers still
face some ofthe same challenges as traditional catalog and storefront retailers in delivering the goods. In response, some large
electronic retailers have now begun building their own warehouse distribution centers, providing a real infrastructure to complement their
virtual one. At present, the Internet is so new that no one can predict
which business strategies and which retailers will succeed in the new
medium. Many Internet retailers continue to lose money as they build
their businesses and strive for the economies of scale needed to survive
in a marketplace shared with both other Internet rivals and
traditional competitors.
Unfortunately, despite a proliferation of anecdotes, hard data on the
importance of e-commerce and the digital economy more generally remain
scant. This lack of appropriate data hampers analysis of the impact of
the digitization of the economy. For example, it is not currently possible
to separate out e-commerce activities from other types of commercial
activities in the statistical series produced by the Federal Government.
Data specific to e-commerce currently come, for the most part, from
market research firms, which use divergent definitions and methodologies.
To address this problem, major Federal statistical agencies (the Bureau
of Economic Analysis, the Bureau ofthe Census, and the Bureau of
Labor Standards) are working together to formulate an e-commerce
initiative that will help ensure that official government statistics
accurately reflect the new digital economy.
Using private data for 1998, estimates ofthe value of online
retailing range from $7 billion to $15 billion; even taking the high
end of this range, e-commerce would account for only about 0.5 percent
of retail sales. In one 1998 survey, however, nearly half of households
with Internet access had made online purchases within 6 months of the
survey. In addition, a much larger quantity of sales is influenced in
some way by the Internet. For example, many consumers research their
�purchases, such as automobiles or books, online before buying them
offline, through traditional outlets. By one estimate, roughly $50 billion
in offline retail sales was influenced by the Internet in 1998.
Business-to-Business E-Commerce
The Internet plays a significant role today in providing new distribution channels for wholesale transactions between businesses. By
one estimate, business-to-business e-commerce is expected to grow from
$43 billion in 1998 to over $1.3 trillion by 2003 (Chart 3-7). Using the
World Wide Web, companies can automate the Aider nroc££S_arid_[edLjr:e costs
One major supplier of computer components had routinely been receiving
orders by phone or facsimile from several hundred customers all over
the world. Processing these orders was cumbersome, and moving several
hundred of these customers to a web-based solution promised to improve customer service
and give managers better access to information on the status of orders.
The company built a website targeted to these customers and soon was able
to move $1 billion in orders per month online.
Another firm that sells networking hardware also uses the Internet to
reduce its costs. Many of the company's products are built to order from
customers' specifications. The firm routinely checks those specifications
to make sure the product will work as configured, but it found that nearly
one in four orders taken by phone, fax, or e-mail contained errors that
caused the order to be rejected or required additional customer contact.
After moving the process of configuration and pricing online, the company
now reports that 98 percent of orders pass through the system without
an error, saving Both the Mmpany and its customers valuable time and'
expense. Across all its operations, having moved more of its technical
support and marketing functions online, the company estimates that it
now saves more than $300 million per year.irioperating costs. _
Business-to-business e-commerce is also resulting in new and more
competitive markets. The Internet's size and reach have created
deeper markets, with larger pools of both buyers and sellers, for many
basic commodities. Where before specialized brokers were needed to
match buyers and sellers in transactions, new websites today allow
multiple buyers and sellers to find each other and enter into
transactions quickly and efficiently. In the steel industry, for example,
the electronic equivalent of a spot market now matches customers and
suppliers for surplus quantities of steel of various types. One firm that
provides such a virtual marketplace for transactions in this industry has
seen both the number of suppliers and the volume of product offered on
its site expand substantially. In just one year, offerings on the site
rose from about 20,000 tons a month to over 120,000 tons.
Purchasing managers are also using information technology to actively
manage and reduce their firms' procurement costs by changing
traditional relationships between the firm and its suppliers. For
example, many manufacturers buy custom-made materials that they
incorporate into finished products. Because these materials are often
made to buyers' specifications, there are no catalogs or price lists to
allow buyers to make price comparisons. Fragmented supply markets and
,
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�the importance of product quality in supplier selection also make
purchasing difficult. Concerns about the quality of new suppliers'
products, for example, may cause a firm to rely instead on existing
suppliers that are known quantities. One company achieves significant
cost savings for the purchasing managers who are its clients by
using electronic bidding technology to conduct auctions among alternative suppliers of a whole range of inputs. The company has
organized auctions for goods ranging from printed circuit boards
to injection-molded plastic parts (Box 3-3).
Although this firm's electronic auction software is an example of
information technology at work, an important part ofthe service that
the firm provides is a detailed, specific analysis of the desired
components, followed by an extensive search for potential suppliers.
In addition to the traditional suppliers that a firm has relied on in
the past, the auction firm may find that other suppliers around the world
can produce the demanded good as well. Working with the buyer, the
company screens these firms to determine whether they are capable of
producing the good that meets the buyer's specific needs. This use
of information technology to cast a wider net poses both challenges
and opportunities for suppliersTFor efficient firms, it offers a way
to compete for business they might not have been able to bid on
previously. But existing suppliers must compete more aggressively than
ever before if they wish to retain or expand their business in an
increasingly global economy.
Box 3-3. Holding an Online Auction
An online auction specialist allows corporate buyers to lower
their procurement costs by providing the technology and support
for computerized auctions. Rather than sending out a paper request
for proposals and obtaining a single bid from each potential
contractor, buyers holding online auctions can allow bidders to observe
how their bids compare with those of their peers. To generate
more competition, however, the auction specialist does more than
simply provide a connection for the client firm's existing suppliers.
The auction specialist also searches out new potential suppliers that
meet the buyer's specifications.
In one such auction for printed circuit boards, the auction specialist
first identified 29 bidders in North America, Asia, and Europe. Eight of
the firms had done business with the buyer before, but the remainder had
not. Each supplier was linked electronically to the auction firm's
computer server, so that it could submit bids online, observe the bids
placed by its competitors, and then decide whether to submit a new, lower
bid of its own. Within 5 minutes after the auction opened, the bids
received for the circuit board contract quickly dropped to 18 percent
below the buyer's historical average cost for such goods. As the auction's
closing time approached, more and more bids were submitted. By the time
the auction had concluded, after about 1 hour, three bidders had submitted virtually identicaUow-bids, and the buyer was able to reduce
its expected cost b^^percent, ob3j6.4 million.
�Audrey Choi
02/18/2000 06:19:38 PM
Record Type:
To:
Record
Mara A. SilverAA/HO/EOP@EOP, Lowell A. Weiss/WHO/EOP@EOP
cc:
Subject: this is somewhat technical, but thought i'd send it to you as well in case you want to quote a recent study
Quotes from Sichel, "Computers and Aggregate Economic Growth: An Update", April 1999
Computer investment has surged in the past few years, increasing much more rapidly than in the
late 1980s and early 1990s. And, since 1995, the nation's productivity performance has
improved. These developments raise the possibility that the contribution of computers to growth
is rising...
In the 1980s, growth of output in the nonfarm business sector averaged about 3 percent per year.
Computer hardware accounted for just over 0.2 percentage point of that growth, while other
capital made a much larger contribution of about 1 percentage point.
However,... extremely rapid growth in the stock of computers generated a surge in their
contributions to growth in the past three years. From 1996-1998^15 contribution is estimated to
be 0.35 percentage point per yea^mSre than double the contribution earlier in the 1990s^nd well
above that of the 1980s.
�Audrey Choi
02/18/2000 06:30:53 PM
Record Type:
To:
Record
Mara A. Silver/WHO/EOP@EOP, Lowell A. Weiss/WHO/EOP@EOP
cc:
Thomas A. Kalil/OPD/EOP@EOP
Subject: a bit more verbiage on IT & productivity growth
Computers and IT contribute to increasing productivity in several ways.
The new "just-in-time" (JIT) inventory control policies enables companies to improve quality control: If
your supplier is sending you a bad part you can let him know right away, instead of piling up and paying
for an large inventory of defective components-which you might feel obligatedJtuise.
Because it enables more efficient inventory management, it helps a company economize on capitalwhich
it in turn can invest productively. (I.E. rather than having money tied up in inventory sitting aroundln
warehouses, tne company can use that money to make capital investments such as computers and other
equipment that can help increase productivity.)
The computer industry itself has also contributed to the increasing productivity growth rate in the economy
in recent years. Since 1995, real prices for computers have been falling at a 27 percent annual rate. This
improved computer quality is estimated to have added a 0.25 percentage point to the productivity
acceleratiorTovaillie lam five years.
"
Other factors in the productivity growth ofthe last few years include increasing capital investment by
business, improved quality ofthe American work force and new efficienes realized from the Internet particularly from business-to-business e-commerce transactions.
4^
�Information Technology for the Twe...ntury: Implications for E-business
information
htt^/www.cj^sp.org/imp/apri^^O^Qkalil.htm
nA C T S
I M P
SUBSCRIBE
April M S I
ISSN 1523-4541
Information Technology for the Twenty-First Century:
Implications for E-business
Thomas A. Kalil
Tom Kalil is Special Assistant to the President for Economic Policy, and the
"point person"for the White House National Economic Council on most
technology and telecommunications issues. He is the author of articles on
distributed learning, the Administration's National Information Infrastructure
agenda, "leveraging cyberspace," U. S.-Japan S& T cooperation, and nuclear
strategy, and a member of the Council on Foreign Relations, the IEEE, the
ACM, and the Internet Society.
Earlier this year, President Clinton and Vice President Gore unveiled a research
initiative known as IT (Information Technology for the Twenty-First
Century).til This initiative will increase IT research by $366 million, a 28
percent increase from the FYI999 budget, and will support investments in three
areas:
2
• Long-term information technology research that will lead to
fundamental advances in computing and communications in the same
way that previous government investments have led to breakthroughs
such as the Internet, time-sharing, artificial intelligence, computer
graphics, and RISC technology.
• Advanced computing for science, engineering and the Nation that will
accelerate the pace of discovery in a number of disciplines, and help
design cleaner, more efficient engines; more accurately predicting
tornadoes; and reduce the time required to develop life-saving drugs.
• Research on the economic and social implications of the Information
Revolution, and efforts to help train additional IT workers at our
universities.
The initiative builds on previous and current programs in computing and
communications, including the High-Performance Computing and
Communications program (authorized by legislation introduced by
then-Senator Gore), and the Next Generation Internet, authorized by the
Congress in 1998. It responds to recommendations made by a private sector
advisory committee requested by the Congress (the President's Information
Technology Advisory Committee), which concluded that the government was
underinvesting in long-term IT research relative to its importance to the Nation.
This committee, which is comprised of leaders from industry and academia,
concluded that the private sector was unlikely to invest in the long-term,
fundamental IT research needed to sustain the Information Revolution. The
initiative also reflects a strong belief in the research community about the
potential of IT to accelerate the pace of discovery in all science and engineering
disciplines.
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The Administration believes that there is a strong case for increased investment
in IT research. The potential benefits of IT are compelling:
2
• The results of past government research have helped strengthen
American leadership in the IT industry, which now accounts for 1/3 of
U.S. economic growth and employs 7.4 million Americans at wages that
are more than 60 percent higher than the private sector average.
• Information technology is changing the way we live, work, leam, and
communicate with each other. Advances in IT can improve the way we
educate our children, allow people with disabilities to lead more
independent lives, and improve the quality of health care for rural
Americans through telemedicine. U.S. leadership in IT is also essential
for our national security.
• Information technology can also contribute to a "golden age" of science
and engineering. Advances in supercomputers, simulation and networks
are creating a new window into the natural world ~ making IT as
valuable as theory and experimentation as a tool for scientific discovery.
With computers that can make trillions of calculations in a second,
scientists and engineers will be able to better predict the impact of
climate change, design more efficient and cleaner energy systems, and
gain new insights into the fundamental nature of matter.
E-business
An additional reason to invest in long-term IT research is its eventual impact on
the productivity and competitiveness of U.S. firms that successfully use
information technology. As the Wall Street Journal recently noted, annual
business investment in IT is up over 300 percent since 1990, and now accounts
for over 50 percent of total private sector investment, t ! Companies are using
information technology to cut costs, increase productivity, reduce the time
required to develop new products, harness the collective expertise of their
employees, and create an "extended enterprise" by forging closer relationships
with their customers, suppliers, and partners. Business-to-business e-commerce
in goods and services is projected to grow to $1.5 trillion by 2003 in the U.S.
alone.[^1 And U.S. companies are projected to increase their Internet-related
spending from $85 billion in 1999 to $203 billion in 2002.14] Below are just a
few of the applications of current information technology that have the
potential to increase U.S. productivity and competitiveness.
2
Electronic marketplaces: A number of companies are creating electronic
marketplaces that allow buyers and sellers to meet to exchange goods and
services.^] These companies (e.g. CommerceOne, Ariba, Chemdex, PartNet,
Metal Site) are offering a range of services, including directories of buyers and
sellers, multi-vendor electronic product catalogues, customized industry
information, online auctions, and support for different phases of a transaction,
including approval, ordering, and payment. Several companies are developing
technology that will make these electronic marketplaces more powerful. Large
corporate buyers are able to aggregate content from multiple suppliers, create
customized sites within their intranets, and integrate Internet-based
procurement into theirfinancialand accounting systems. Tools for value-based
comparison shopping will allow vendors to compete not only on the basis of
price, but performance, warranties, and delivery. Industry agreements on
common definitions for products, partners, and business transactions will
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greatly enhance the ability of e-business to be done on a computer-to-computer
basis, without the need for human intervention.^] Although companies are just
beginning to purchase goods and services electronically, those that do report
product costs that are 5 to 15 percent lower, a 70 percent reduction in
administrative costs, and a reduction in the cycle time from ordering to
fulfillment from 7 to 2 daysJZ] Prequalification of market participants can also
reduce transaction costs by increasing trust.
Knowledge management: Manyfirmshave recognized that the knowledge of
their employees is one of their biggest assets, and have launched initiatives to
"manage" it. These efforts include creating, identifying, collecting and
organizing internal knowledge, sharing it within the firm (or with customers
and suppliers), and encouraging the adaptation and use of that knowledge. IT
helps enable knowledge management initiatives, such as databases of "best
practices," electronic discussion groups to support communities of practice
within the firm, and search engines. One new product reads e-mail questions
and automatically sends it to the person within the firm who is most likely to be
able to answer it. The product also tracks success, failure, forwarding behavior,
and the usefulness of each answer, and automatically adds each successfully
answered question to its reference library. These knowledge management
efforts can have significant payoffs. For example, Texas Instruments reports
that it generated $1.5 billion in savings by comparing and transferring "best
practices" among its 13 semiconductor fabrication facilities.^]
Data mining: Many companies are using using "data mining" tools to analyze
large data sets, and finding patterns and trends that might otherwise go
undiscovered. Wal-Mart, for example, has a 24 terabyte data warehouse that it
uses to collect and analyze buying trends in 2,900 stories. Wal-Mart has the
ability to track purchases at the department, shelf, and individual item. Data on
inventory, sales forecasts, markdowns, returns, and market baskets is also
collected, and is made available to Wal-Mart buyers and 3,500 vendor partners.
This information allows Wal-Mart to do replenishment of products at the
store-level, and to target the "right products to the right store at the right time."
Wal-Mart's data mining initiative has increased "in-stock" percentage by 10
points to 96 percent, one of the highest in the retail industry.[?] Obviously, data
mining raises serious privacy issues, especially since companies may be
making decisions about whether to extend credit on the basis of data mining.
Furthermore, most consumers are not even be aware that these data warehouses
exist, which may prevent them from accessing and correcting the
information. QiU
Technology-based training: The market for technology-based training is
growing rapidly. Managers are finding that technology-based training can allow
workers to leam at a time, place and pace that is convenient for them, and can
be more cost-effective than traditional classroom based instruction.
Instructional material can also be broken up into "learning objects" ~ allowing
workers to learn "just-in-time, just enough." However, some researchers believe
that most uses of technology-based training are not based on a sound theory of
how people actually learn, and that putting a training manual on the Web and
adding some multimedia does not represent real progress. Roger Schank, for
example, believes that people learn most effectively by doing, failing, and
practicing ~ and that the most effective educational software provides the
learner with a "goal-based scenario." Researchers at Northwestern University
teamed up with Arthur Andersen to develop software for its management
consultant trainees. In one simulation, students assume the role of a human
resources executive, and have to decide who to train, what to do with
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unproductive workers, and what to do when key employees suddenly resign. As
the scenario unfolds, experts appear on the screen to tell users stories related to
the decisions they have to make or their consequences.[ill
Modeling and simulation: Modeling and simulation technology is enabling
companies to develop products more rapidly and to use the same factory to
manufacture a broader range of products. Using factory simulation software,
IBM was able to use a plant that had been making banking systems to also
manufacture voice-messaging systems, bar-code readers, and devices for
programming pacemakers.U ! Modeling and simulation is also viewed as a key
to one of the grand challenges of manufacturing - concurrent manufacturing.
The goal is for conceptualization, design and production of goods to be done in
parallel, rather than sequentially. As the National Research Council noted, this
will require that "all aspects of manufacturing. . . be networked so that informed
decisions concerning one activity can be made based on knowledge and
experience from all aspects of the enterprise."til]
2
Condition-based maintenance: Improvements in the ability to continuously
monitor the condition of power plants, vehicles, aircraft engines, and
manufacturing equipment will increase reliability, improve energy efficiency,
indicate when and what kind of preventative maintenance is required, and save
lives. Companies such as Caterpillar are installing sensors in earth-moving
equipment to monitor engine temperature, oil pressure, and metal shavings in
the oil. This information is transmitted to corporate headquarters, so that
technicians can nip problems in the bud. Low-cost wireless sensors could
significantly increase the cost-effectiveness of condition-based maintenance.
Despite these and many other examples, not all analysts are persuaded that
information technology is making a significant contribution to U.S.
productivity growth. As MIT professor and Nobel prizewinner Robert Solow
has said, we see computers everywhere except in the productivity statistics.[141
Thomas Landauer argues that computers and software have not boosted
productivity in the service sector because of they are expensive (especially
when maintenance, customization, and user training is included), incompatible,
unreliable, complex, and difficult to use. Moreover, most business processes are
not re-engineered to take advantage of IT, computers are overused to generate
reports that are not really needed, and software is not always designed with user
requirements in mind.[ill
Information Technology Research and the Next Generation of E-business
Applications
Currently, there are only a few government IT research programs that have as
an explicit goal advancing e-commerce and e-business applications, such as
NlST's Systems Integration for Manufacturing Applications, or government
research on computer security. One question for policy-makers is whether the
government should increase research on e-commerce technologies, as
recommended by workshops sponsored by NIST and NSF.tl^l In any event,
many of the technical goals of the IT initiative will clearly have an impact on
e-commerce and e-business. Although Tim Berners-Lee and Marc Andreesen
did not develop the World Wide Web or a graphical Web browser to promote
e-commerce, it has certainly had that effect! Below are a few examples of
advanced e-business applications that could flow from the I T initiative.
2
2
• Research on the economic, legal and social impacts of information
technology: Some of the most important issues facing e-commerce today
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are political or legal in nature, such as privacy, intellectual property,
taxation of Internet transactions, consumer protection, the legal status of
electronic signatures, and the clash between the geographical boundaries
of nation-states and the inherently global nature of cyberspace.
Interdisciplinary research involving computer and social scientists may
be able to shed new light on the impact of IT on the nature of work, the
organization of firms, and the structure of markets. Furthermore, it may
be possible to develop technologies that at least partially address some of
the policy issues raised by electronic commerce. One example is the
efforts by the World Wide Web Consortium to develop a Platform for
Privacy Preferences, which could make it easier for consumers to control
their personal information. The IT initiative will help support research in
these and other areas.
2
• The Next Generation Internet: Working with the university consortia
"Internet2" - the federal government is connecting universities and
national labs at speeds that are 100 to 1,000 times faster than today's
Internet, and investing in long-term networking research. The widespread
availability of this kind of bandwidth, and the ability to provide
differentiated services, will enable a new class of broadband applications
for e-business. One example is Caterpillar/NCSA Collaborative Virtual
Prototyping Environment, which allows engineers in Peoria, Houston and
Germany to work together in the same virtual reality environment to
design new tractors.
• Autonomous software: Pattie Maes, a researcher at the MIT Media Lab,
has said that " I want to be able to take my portable network device and
tell it that I need translation services from Italian to English right now,
[and] that I'm willing to pay a dollar a word." Advances in multi-agent
systems could allow people to offload some of the tasks of information
discovery and contract negotiation.
• Computational grid: Computing should be like the electric power grid invisible to the end user and easy to tap into. A computational grid could
make the benefits of high-end computing for modeling and simulation
and other applications accessible to a much broader range of companies.
We can see the first small steps in this direction with "application service
providers" -firmsthat host enterprise applications on remote servers for
small and medium-sized companies.
• Information management: Coping with information overload, and
finding, filtering, analyzing, classifying and storing information is critical
to e-commerce. For e-commerce to succeed, people need to be able to
easily find information about potential suppliers, products, services, and
customers. Current search mechanisms will not scale, as more and more
businesses publish information on the Web.
• Translingual information management and real-time translating
telephony: Already, almost half of 159 million Internet users are outside
of North America, 1121 and this percentage is likely to increase as Internet
use picks up in countries like China and India. More accurate translation
technology and the ability to conduct searches in a foreign language
database will be important technologies for global electronic commerce,
and for fostering collaboration between U.S. and foreign firms.
• Component-based software engineering: Currently, the software industry
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lacks the equivalent of inter-changeable parts. Many software
applications are written from scratch, with little reuse of existing code.
Research is needed to make it easier to find the right software
component, accurately predict the behavior of a system assembled from
smaller components, and to support an electronic marketplace in software
components. Success in this area would allow for much more rapid and
cost-effective development of e-commerce applications. Indeed, some in
industry have suggested that businesses could become component-based,
as shipping, electronic catalogues, finance, and recommender services,
become "components" for other services.till
***
Although support for increased government support for IT research has come
primarily from the IT industry and the computer science research community, it
is clear that the next wave of IT innovation will have an impact on all
industries. In the same way that the Internet, intranets and extranets are having
a dramatic impact on the way that firms are organized internally and interact
with their partners, customers, and suppliers — future advances in IT will
change the way firms compete in global markets. The potential for IT to have a
broader impact on U.S. growth and productivity provides another compelling
reason to increase IT research. It is important for the businesses that use
information technology to become more engaged in the debate about the future
of IT research.
Notes
HI National Science and Technology Council (NSTC). 1999. Information
Technology for the Twenty-First Century. Working Draft. Washington, DC,
January 29. Available online at http://www.ccic.gov/it2/initiative.pdf
PI Anders, George and Thurm, Scott. "The Rocket Under the Tech Boom:
Heavy Spending by Basic Industries," Wall Street Journal, March 30, 1999.
3
i ! Thompson, Maryann Jones. "Corporate E-commerce Kicks into Gear," The
Industry Standard, March 22, 1999.
4
11 International Data Corporation. "E-commerce Stimulates a Corporate
Internet Spending Frenzy," February 23, 1999.
5
t ! Segev, Arie, Gebauer, Judith, and Farber, Frank. "Internet-based Electronic
Markets." Working Paper 98-WP-1036. Fisher Center for Management and
Information Technology: University of California at Berkeley. January, 1999.
6
t ! See http://www.rosettanet.org for an example of an effort to do this in the IT
supply chain.
7
t ! Vigoroso, Mark. "Lots of interest, little action," Purchasing Magazine,
March 25, 1999.
[8] O'Dell, Carla and Grayson, C. Jackson, Jr. 1998. If Only We Knew What
We Know. The Free Press, New York.
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9
t ] NCR. "Wal-Mart relies on NCR data warehouse to help manage its
business." Available online at
http://www3.ncr.com/product/case studies/wal-mart/.
t'O] Cavoukian, Ann. "Data Mining: Staking a Claim on Your Privacy."
Information and Privacy Commissioner/Ontario. January 1998. Available
online at
http://www.ipc.on.ca/Web site.ups/Matters/Sum Pap/PAPERS/datamine.htm.
[' H Schank, Roger. 1997. Virtual Learning. McGraw Hill, New York.
12
t ! Deutsch, Claudia. "Digital Polish for the Factory Floor: Software
Simulations Lead to Better Assembly Lines." New York Times, March 22,
1999.
13
t ! Commission on Engineering and Technical Systems, National Research
Council. Visionary Manufacturing Challenges For 2020. 1998. Available
online at http://www.nap.edu/readingroom/books/visionary/notice.html.
1 4
I ! Although for signs that the debate among professional economists may be
shifting, see Lohr, Steve. "Computer Age Gains Respect of Economists." New
York Times, April 14, 1999.
['5] Landauer, Thomas. 1995. The Trouble With Computers. MIT Press,
Cambridge MA.
6
t ' ! See Center for Research in Electronic Commerce, "NSF Workshop:
Research Priorities in Electronic Commerce, Final Draft," January 25, 1999.
Available online at http://cism bus.utexas.edu. Also see Hurwitz, Shirley.
"Interoperable Infrastructures for Distributed Electronic Commerce," National
Institute of Standards and Technology. Available online at
http://www.atp.nist.gov/atp/98wp-ecc.htm.
17
t ! Nua Internet Surveys. "How Many Online?" March 1999. Available online
at http://www.nua.ie/surveys/how many online/index.html.
8
t ' ] Meltzer, Bart. "Enabling the Network Economy." Presentation at
International Workshop on Component-based Electronic Commerce, Fisher
Center for Management and Information Technology, July 25, 1998. Available
online at http://www.haas.berkeley.edu/~citm/CEC/.
Released: April 22, 1999
iMP Magzine, http://www.cisp.org/imp/april 99/04 99kalil.htm
ptl Previous Focus Story
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�Page 3
6 5TH
STORY o f Level 1 p r i n t e d i n FULL format.
C o p y r i g h t 1999
Business Communications Co.
DRUG DISCOVERY/TECHNOLOGY NEWS
March, 1999
SECTION: SCREENING; V o l . 2, No. 3
LENGTH: 32 3 words
HEADLINE: S i l i c o n - C o n t a i n i n g Drug by Supercomputer
BODY:
BioNumerik Pharmaceuticals announced the i n i t i a t i o n o f Phase I t r i a l s a t t h e
U n i v e r s i t y o f Chicago Medical c e n t e r s f o r k a r e n i t e c i n , the t h i r d drug t h e
company has b r o u g h t from d i s c o v e r y t o the c l i n i c w i t h the a s s i s t a n c e o f
supercomputer s i m u l a t i o n s . The development time f o r BioNumerik's drugs has
ranged trom I t ! t o
months compared t o a c u r r e n t i n d u s t r y average o f s i x years.
K a r e n i t e c i n i s a n o v e l , s i l i c o n c o n t a i n i n g , ^RQtTcancer^ompound o f t h e
c a m p t o t h e c i n c a t e g o r y . The compound has been demonstrated t o have a n t i - t u m o r
a c t i v i t y a t p a r t s per t r i l l i o n i n l a b o r a t o r y t e s t i n g w i t h human cancer c e l l
l i n e s and i n animals b e a r i n g human tumors. The drug was designed t o a v o i d
problems w i t h b i o a v a i l a b i l i t y , u n f a v o r a b l e metabolism, t o x i c i t y and drug
r e s i s t a n c e t h a t have been a s s o c i a t e d w i t h o t h e r camptothecins.
" K a r e n i t e c i n was d i s c o v e r e d and developed by our r e s e a r c h team u s i n g h i g h
performance S i l i c o n Graphics and Cray supercomputers." s a i d F r e d e r i c k Hasheer,
l e a d e r o f t h e d i s c o v e r y team a t BioNumerik. "To engineer k a r e n i t e c i n , we
s i m u l a t e d more t h a n 1 2 t r i l l i o n p o s s i b l e drug candidates u s i n g SGI/Cray
supercomputing t e c h n o l o g y i n l e s s t h a i ^ o n e year."
^
Through an a l l i a n c e w i t h S i l i c o n Gfraphics and i t s s u b s i d i a r y , Cray Research,
BioNumerik has two supercomputers o n / s i t e , which are capable o f c o n d u c t i n g an
aggregate o f 12.8 b i l l i o n o p e r a t i o n s per second and h o l d more than one t r i l l i o n
b y t e s o f d a t a . BioNumerik used sup rcomputer s i m u l a t i o n s t o c o n s t r u c t a
d e t a i l e d c o m p u t a t i o n a l model i n v o l v .ng the key m o l e c u l a r i n t e r a c t i o n s o f
k a r e n i t e c i n w i t h human cancer c e l l :)NA and topoisomerase I , an enzyme i n v o l v e d
i n DNA s y n t h e s i s and r e p l i c a t i o n .
Kareru-teriin—is the—mo»4 p o t e n t c, m p t o t h e c i n y e t i n t r o d u c e d i n t o the c l i n i c . "
noted R i c h a r d L. S h i l s k y , ( D i r e c t o r c f the U n i v e r s i t y o f Chicago Cancer Center.
" I t s Inroad opeirtrrunPof a n t i - t u m o r a d t i v i t y and p o t e n t i a l f o r o r a l a d m i n i s t r a t i o n
make i t v e r y e x c i t i n g . "
LANGUAGE: ENGLISH
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SEND TO: GOTTHEIMER, JOSH
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High-tech accomplishments
1. Why information and communications technology has been a priority for the
Administration
The IT industry is driving U.S. economic growth. In the last three years, IT has
accounted for almost 1/3 of U.S. economic growth. Declining prices in the IT industry
have lowered inflation by almost a full percentage point - and have helped the U.S.
economy maintain this terrific combination of rapid growth, low unemployment, low
inflation, and higher productivity.
Second, the IT industry is generating high-wage, high-skill jobs. Wages in the IT
sector are almost 80 percent higher than the private sector average.
Third, information technology is changing the way all companies do business. IT
now accounts for 1/2 of business investment. Companies are using IT to tailor their
products and services to the needs of individual customers, forge closer relationships with
their suppliers, and deliver just-in-time training to their employees. Customers can name
a price they are willing to pay for a hotel or airline reservation - and force companies to
compete for their business. Business-to-business e-commerce in the U.S. alone could
reach $1.3 trillion by the year 2003.
Fourth, the Internet is becoming a new communications medium in addition to a
commercial marketplace. It is different from radio, TV and print medium because it
allows individuals to be producers as well as consumers of information, and it allows
"many to many" interaction as opposed to the "one-to-many" communication of the
broadcast medium. This has allowed for the formation of tens of thousands of
"communities of interest" — such as caregivers for people with Alzheimers disease. And
unlike the traditional telecommunications network, which only allowed new services like
call waiting and voice mail to be introduced by a few industry players ~ the Internet has
created an open platform for innovation.
Fifth, we are just at the beginning of the Information Revolution. Although 200
illion people are connected to the Internet, half of the world's popnJatinn hag ppypr
madfiajThone call. Only 1 million American households have broadband Internet access.
AncTtKere is every reason to believe that the incredible improvements in our ability to
store, process and move information will continue for at least another 20 years. For
example, the government is funding long-term research that could allow us to make
transistors out of individual molecules - and store trillions of bits of information in a
square centimeter.
\
These technologies have the potential to deliver social as well as economic benefits.
Using distance learning, working adults can acquire new skills at a time, place and pace
that is convenient for them. Telemedicine can improve the quality of health care in
under-served rural communities. Technologies such as speech recognition and text-tospeech can allow people with disabilities participate in the workforce, and lead more
independent lives. And IT can make help government at all levels more open, responsive
and efficient.
�•
Personal interest of the Vice President -- long-standing interest and support for the
"information superhighway" long before anyone outside ofthe research community was
taking it seriously.
2. Actions the President and Vice President have taken to strengthen America's high-tech
competitiveness and promote e-commerce and the Internet
•
The Administration has opened up foreign markets for high-tech goods and services
and cracked down on foreign piracy. The Administration has negotiated a number of
important trade agreements, including:
The Information Technology Agreement (ITA), which will eventually eliminate tariffs on
$600 billion worth of goods: 95 percent of the world production of semiconductors,
computers, telecom equipment, and other high-tech products.
The World Trade Organization's Basic Telecommunications Agreement, which will
promote competition and privatization in a global telecommunications services market
worth $1 trillion.
^—-^
Strong intellectual property protection as part of the GATT, NAFTA, and bilateral
agreements.
President Clinton and Vice President Gore have liberalized export controls on
computers and telecommunications equipment. These decisions have increased U.S.
high-tech exports while maintaining controls on those items that are truly important for
U.S. national security.
* /
v
Administration pushed for longer-extension of the R&E credit - and got 5 year
extension as part of the final tax package.
y Administration also succeeded in getting patent reform passed — which will be good for
inventors, entrepreneurs, and innovation.
President Clinton and Vice President Gore fought for the first comprehensive
telecommunications reform legislation in over 60 years - the Telecommunications Act
of 1996. This Act is designed to promote competition in the telecommunications industry
- which will lead to lower prices, more customer choice, and faster deployment of an
advanced telecommunications infrastructure.
Although it is taking longer than any of us would like - competition is beginning to
emerge. Using the pro-competition provisions ofthe Act, new carriers have entered the
market for voice and high-speed data and Internet access - attracting over $30 billion in
capital investment. The U.S. has much lower prices for advanced telecommunications
services than virtually any other country - giving American companies a
tremendous competitive advantage.
The Administration has also transferred large blocks of spectrum from government to
private sector use - creating new digital wireless industries. More than 80 million
m
�Americans now subscribe to wireless services - up from 16 million in 1993, and many
Americans can chose from 4 or more wireless telecommunications companies.
The President and the Vice President have announced a framework for global
electronic commerce that relies on market forces and private sector leadership
whenever possible. Since the framework was unveiled in 1997, we've made significant
progress in implementing it, including:
A new export control regime that will allow U.S. companies to export encryption of
unlimited bit-length, following a one-time technical review. Controls on export to
terrorist nations and foreign governments would remain.
International agreements with other heads of state that adopt the Administration's marketled approach to e-commerce
- . Mi
hree-year moratorium on Internet access taxes and taxes that discriminate against
^H-commerce - to avoid 30,000 different state and local jurisdictions each taxing the
Internet in a different way
*
Passage of legislation that requires government agencies to recognize digital signatures
for online transactions (note: this is legislation passed in 1998 - not the Bliley bill that the
Administration opposed this year)
A growth in the number of e-commerce companies that have agreed to protect the
privacy of their consumers through meaningful self-regulation, and targeted
legislation to protect children's privacy online.
The transfer of the technical management of the Internet to an international non-profit
organization
A temporary agreement to make cyberspace a duty-free zone, which we hope to make
permanent at the Seattle WTO Ministerial
Ratification of the intellectual property treaties the Administration negotiated in Geneva
The Administration has worked to increase investment in long-term research that is
beyond the 3-5 year time horizons of corporations. Government-supported research,
particularly in our nation's leading research universities, has played a critical role in the
development of information technology. For example:
0^. ^
g,lcjL^
Government investment in the ARPANET beginning in 1969 led to today's Internet.
The first graphical Web browser, Mosaic, was developed by Marc Andreesen at an NSFsponsored supercomputer center
Many of the Internet search engines are outgrowths of the Digital Library Initiative jointly supported by NSF, DARPA and NASA
�The President and the Vice President have bejzn champions of research initiatives such as
the Next Generation Internet and "Infornjation Technology for the 21 Century."
The IT initiative is based on the recommendations of the President's Information
Technology Advisory Committee, which is composed of leading academic researchers
and industry executives from companies such as Sun, IBM, 3Com, Intel and Microsoft.
Although the results of these research initiatives are impossible to predict ~ it could lead
to computers that use DNA, an Internet that can connect billions of devices as opposed to
just millions of computers, and computers that can more accurately predict tornadoes and
st
3. Connecting our children to the future:
[/ V
•
President and Vice President have set a national goal of ensuring that every child is
technologically literate.
•
That means that children will understand the mechanics of using computers and the
Internet, but also be able to use it to improve their performance in all academic subjects and be able to acquire and synthesize information from multiple sources.
•
In addition to preparing children for the high-tech workplace of the 21 century, it's an
opportunity to change the way teachers teach and students leam. Teachers can
communicate morefrequentlywith parents, keep up with the latest developments in their
field, and exchange lesson plans with their colleagues. Students can conduct research
using primary source material, leam the principles of genetics by breeding virtual fruit
flies, and leam astronomy by using a professional telescope located 3,000 miles from
their classroom.
•
Our educational technology strategy has four "pillars"
81
Connecting every classroom and library to the Internet by the year 2000.
Technology training for teachers
Modem computers in the classroom
High-quality educational software/content
•
As a result of the Clinton-Gore educational technology initiative:
The number of classrooms connected to the Internet has increased from 4 percent
in 1994 to 51 percent in 1998.
The "e-rate", part of the Telecommunications Act of 1996, is providing $2.25
billion in 20% - 90% discounts to connect schools and libraries to the Internet,
with the deepest discounts going to the poorest schools that need it most. Our
total investment in educational technology at the federal level (including the
e-rate) has increased from $23 million in 1993 to over $3 billion today.
�Grants supported by the Department of Education are training 400,000 new
teachers to use technology effectively in the classroom.
4. From "digital divide" to "digital opportunity":
•
Currently, households with more than $75,000 and higher are twenty times more likely to
have access to the Internet than those at the lowest income levels, and more than nine
times as likely to have a computer at home.
•
In addition to ensuring that all schools and libraries are connected to the Internet,
President Clinton and Vice President Gore have also taken other steps to bridge the
digital divide, including:
•
Increased investment in Community Technology Centers: The President's
FY2000 budget calls for $65 million to support Community Technology Centers
in low-income urban and rural neighborhoods, up from $10 million in FY99.
[Final approps was $32.5 million.]
•
Supporting innovative applications of information technology for low-income
families through the Department of Commerce. Examples include the use of
telemedicine for prenatal care, telementoring for at-risk youth, a national
computer network for local food banks, and distance learning for people who
have lost their jobs.
•
Challenging the private sector to develop new business models for low-cost
computers and Internet access ~ to make universal access at home affordable for
all Americans.
�Thomas A. Kalil
W 8/2000 11:57:51 AM
Record Type:
To:
Record
Lowell A. Weiss/WHO/EOP@EOP
cc:
Jason Furman/OPD/EOP@EOP
Subject: Inventories
Here's an explanation of the theory
Jason: Do you know who would be able to get
something more concrete?
http://www-hoover.stanford.edu/publications/digest/982/henderson2.html
The second way the IT revolution has made recessions
less severe is by allowing for the reduction of
inventories. For decades, macroeconomists have noted
the crucial role of inventories in the businesscycle. In
1976, tor exarhfils, Harvard economists Martin Feldstein
and Alan Auerbach (the latter is now at the University of
California at Berkeley) wrote that fully 75 percent of t h e ^
cyclical downtumj" grofifi d f l i n P ^ prnriurt from the
peak of a business cycle to its trough could be accounted
for by tne reduction in business~inventories. The
pxplanation- Whftn demand_fnr the gnnds fell
companiee. stilTsittiriglM-ia pile of goods, would lav off
workers. Because firms often detected decreases in final
demand only after a long lag, the drop in production due
to, say, a 10 percent drooin finaTdemand could easily
have been 20 percent orrpore. Firms wnnlH thpg have
hadiolay off even moreworkers.
8
But now, databases produced by Oracle, Informix, and
Sybase allow companies to relate salespeople's orders to~
data^rTthe'inventory of products that are ready to ship.
The correspondence_between final demand and
production is therefore much tighter, enabling companies
to work with lower ratios of inventories to sales . —
Although a decline in demand for a company with lean
inv^torieB~CouTcrstill leadjo layoffs, the layoffs would
be less severe tnan wTferTinventories were high. To the
extent thafCffmpdniui. tlnuuyliuul thu ULOfiCmy are
holding smaller inventories, recessions caused by
declines in demand will be shorter and shallower.
•iewr^ 'R-^Z ^K^xr
3.
t&U^L e
rh>~L\/S •
�Hoover Digest- 1998 no. 2
http://www-hoover.stant'ord.edu/publications/digest/982/henderson2.html
Homel About Hooverl Library & Archives! Research! Publications! Campaign
HOOVER INSTITUTION
HOOVER DIGEST
1998 No. 2
David R. Henderson
Kinder, Gentler Recessions
The high-tech revolution is giving us a permanently higher rate of
economic growth while muting business downturns. David R.
Henderson on why even the bad economic news isn't as bad as it
used to be.
Lately various magazines have been
suggesting that future recessions will be
less severe and shorter than past
recessions. Are they onto something?
Actually, yes, and the information
technology (IT) revolution deserves
some ofthe credit for the shift.
The optimists say that the IT revolution
allows annual economic growth to
average 4 to 5 percent, rather than the 2
to 3 percent to which we are
accustomed. There is a plausible case for
this view. Current government measures
understate the actual growth of the
economy. In other words, an apparent
Illustration by Michael Thornton
growth of 2.5 percent in the gross
domestic product may in reality be 1 or 2 points higher.
That higher average growth by itself makes recessions less likely.
Why? Because the seat-of-the-pants definition of a recession is at
least two quarters in a row of negative economic growth. If the
economy were growing at a rate of 4 percent, then a recession could
occur only if the growth rate declined by more than 4 percentage
points. That's a pretty steep, and unusual, drop. To put it in
perspective, during the deepest recession of the last fifty years—the
period from November 1973 to March 1975~the real gross national
product declined by 4.9 percent. In no other recession during those
fifty years did it fall by more than 3.3 percent.
Of course, if economic growth, measured year in and year out,
exceeds 4 percent, the definition of a recession will probably
change, and we will come to think of 1 percent growth as indicating
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recession. But if we keep the same definition, if we measure
economic growth correctly, and if that economic growth averages 4
to 5 percent, then recessions will be much less likely.
Derivative Art
Even if you discount the increase in long-term economic growth, the
IT revolution has made recessions less severe. It has done so in two
ways. First, it facilitated financial derivatives. Most of the negative
press on financial derivatives is written by people who don't
understand the subject. What gets their attention is the scoundrels in
Orange County's government and elsewhere who use derivatives to
make risky bets. It might come as a surprise, then, that the vast
majority of firms find financial derivatives attractive for one main
reason: to reduce risk. Firms typically use derivatives to hedge
themselves against adverse changes in monetary and fiscal policy.
The optimists say that the information revolution allows annual
economic growth to average 4 to 5 percent, rather than the 2 to 3
percent to which we are accustomed. There is a plausible case for
this.
The economist J. W. Henry Watson and the former Wall Street
Journal reporter Ida Walters point out in the July 1997 issue of
Liberty that financial newspapers in the 1970s often carried stories
of major firms whose earnings were zapped by movements in
exchange rates, interest rates, and prices of key raw materials. Such
stories, they note, have virtually disappeared. What caused the
change? The vast majority of large companies and even many small
ones now use financial derivatives to insulate themselves from such
unfavorable movements. As a result, the whole economy has
become much less vulnerable to changes in interest rates, one of the
traditional causes of recessions.
The computer revolution helped make financial derivatives easier to
manage by reducing transaction and computation costs. Before
financial economists Fischer Black and Myron Scholes published
their 1972 paper on valuing options, for example, no one had a good
idea how to estimate the value of a stock option. Now traders on the
floor of the Chicago Board Options Exchange carry calculators with
the Black-Scholes model programmed into them.
Shrink to Fit
The second way the IT revolution has made recessions less severe is
by allowing for the reduction of inventories. For decades,
macroeconomists have noted the crucial role of inventories in the
business cycle. In 1976, for example, Harvard economists Martin
Feldstein and Alan Auerbach (the latter is now at the University of
California at Berkeley) wrote that fully 75 percent of the cyclical
downturn in gross domestic product from the peak of a business
2 of 5
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�Hoover Digest- 1998 no. 2
http://www-hoover.stant'ord.edu/publications/digest/982/henderson2.html
cycle to its trough could be accounted for by the reduction in
business inventories. The explanation: When demand for the goods
fell, companies, still sitting on a pile of goods, would lay off
workers. Because firms often detected decreases in final demand
only after a long lag, the drop in production due to, say, a 10 percent
drop in final demand could easily have been 20 percent or more.
Firms would then have had to lay off even more workers.
But now, databases produced by Oracle, Informix, and Sybase allow
companies to relate salespeople's orders to data on the inventory of
products that are ready to ship. The correspondence between final
demand and production is therefore much tighter, enabling
companies to work with lower ratios of inventories to sales.
Although a decline in demand for a company with lean inventories
could still lead to layoffs, the layoffs would be less severe than
when inventories were high. To the extent that companies
throughout the economy are holding smaller inventories, recessions
caused by declines in demand will be shorter and shallower.
Thinking Thin
The IT revolution is not the only cause of today's lower inventories.
One other important factor is U.S. manufacturing companies'
increasing adoption of the Toyota production system of "lean
thinking." In their book of that name, James P. Womack and Daniel
T. Jones define lean thinking as the determination to optimize the
whole enterprise to eliminate waste—one major factor of which is
inventories. This process sometimes involves increased use of
computers but sometimes doesn't.
A second factor—the government deregulation of transportation in
the late 1970s and early 1980s—made it easier for companies to use
just-in-time methods of production, an element of lean thinking, by
making the shipping of goods by truck and rail cheaper, more
reliable, and more responsive to customers' demands. Between
1981, when deregulation had just begun, and 1987, inventories fell
from 14 percent of gross domestic product to 10.8 percent. Of
course, some of this reduction was explained by the fact that 1981
was a recession year and 1987 a boom year. But transportation
economists, such as my Hoover colleague Thomas G. Moore, also
believe that deregulation allowed companies to pare inventories
substantially.
Even if IT isn't solely responsible for lean thinking and
transportation improvements, it has played a role in implementing
both. Sophisticated IT now lets companies reroute trucks while
they're on the road so that they can deliver shipments to a
higher-valued customer and let a lower-valued customer wait a little
longer. And improvements in manufacturing often involve the use
of computers. Lumber mills, for example, have changed
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dramatically. Almost no one works there anymore. Instead of
human sawyers, computers size up trees and estimate the best cuts
to make to minimize waste, then guide lasers in making the cuts.
Future Recessions
The increased use of financial derivatives and decreased inventories
have made the traditional recession—one caused by unanticipated
changes in monetary or fiscal policy—less likely. Traditional
recessions featured high cyclical unemployment: Firms with excess
inventories laid off workers with the intent of rehiring them when
business picked up. Recessions now are more likely to be part of
what economists call "real" business cycles. Such recessions occur
when some factor that's unrelated to monetary policy changes.
Examples include the OPEC-engineered increase in the price of oil
and, more recently, the decline in defense spending, increasing
competition resulting from newly liberated economies in the Third
World and Eastern Europe, and the computer revolution.
The information revolution made possible the emergence of
financial derivatives, which in turn have made the whole economy
less vulnerable to changes in interest rates, one ofthe traditional
causes of recessions.
Take the decline in defense spending over the last ten years.
Adjusted for inflation, defense spending peaked in 1987 at $372.3
billion (in 1996 dollars) and fell to $265.7 billion in 1996, a decline
of 29 percent. As a share of gross domestic product, defense
spending declined even more steeply, from a peak of 6.2 percent in
1986 to just 3.5 percent in 1996.
This drop, of course, has reduced the demand for goods produced by
defense industries. Although the biblical notion of beating swords
into plowshares can work in the long run, experience shows that
defense contractors just don't do well at shifting over to civilian
production. In the transition, therefore, structural unemployment
was high: Many specialized workers lost jobs that they never
returned to. In fact, the decline in defense spending was a major
factor in the last recession, July 1990 to March 1991.
But such a recession is the healthy outcome of a free economy, not
one to be avoided. However painful the transition is for the workers
involved, it is a necessary part of a dynamic, growing economy. The
government could have prevented a recession only by maintaining
the level of defense spending. But then resources spent on defense
would not have been available for other uses, uses in which these
resources are now more valued. Keeping defense workers in
make-work jobs would have been no more justified than subsidizing
buggy manufacturers in the face of Henry Ford's awesome
productivity. Just as a person is sometimes better off taking a salary
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cut to retool for higher-paying work later, so too is the economy
better off in 1997 because of the 1990-91 recession.
Long-Term Investment
Another factor that could cause a true, healthy recession is,
ironically, the computer revolution itself. That revolution has
allowed banks and insurance companies to merge their operations
and fire many white-collar workers who have been made redundant
by database software. Ford used computers to reduce the number of
employees in its accounts payable department by 75 percent. For a
while, people put out of work by this improvement in productivity
did not find jobs, which drove up the unemployment rate, one of the
traditional indicators of a recession. But it had to be higher—until
these people found new work, which they did.
Will there ever be recessions in the future? I guarantee that there
will, but they are less likely to be as severe as those in the past.
Moreover, those that do occur are more likely to be healthy
adjustments to changes inevitable in a dynamic economy. And part
of the credit for this belongs to the digital revolution.
Reprinted from Red Herring, November 1997. Used with
permission.
Available from the Hoover Press are the Hoover Essays in Public
Policy The Ten Causes ofthe Reagan Boom, 1982-1997, by Martin
Anderson, and Inflation and Its Discontents, by Michael J . Boskin.
Forthcoming from the Hoover Press is Capital for Our Time: The
Economic, Legal, and Management Challenges of Intellectual
Capital, edited by Nicholas J . Imparato.
David R. Henderson is a research fellow at the Hoover Institution, a
professor of economics at the Naval Postgraduate School in
Monterey, California, and a contributing editor at Red Herring
magazine.
Top
5 of 5
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�Audrey Choi
02/18/2000 06:49:15 PM
Record Type:
To:
Record
Lowell A. Weiss/WHO/EOP@EOP, Mara A. Silver/WHO/EOP@EOP
cc:
Thomas A. Kalil/OPD/EOP@EOP
Subject: a bit more
here's a bit more, some of it encapsulates things sent in previous shipments, but this is more a review of
recent studies and synthesizes a bit some of the things we've evaluated, hope that these shipments
contain something helpful to you. please page me if you have any questions or if there is anything else
you need right away, if there are any particular facts or numbers that you need, please let us know and we
can try to crunch whatever the particular thing is thatyou are looking for. THanks, ac
IT has been an important contributor to the strong recent performance of the U.S. economy, particularly to
the acceleration of productivity since the mid-1990s. There have been a number of theoretical research
papers that have attempted to model the dynamics of IT and productivity, and this research has.identified
three ways that IT can contribute to labor productivity:
- First, IT industries have been experiencing the most rapid rates of technological advance, so that
growth in production of IT products has far outpaced the growth in the inputs of capital and labor used
to produce them. In this way, growth in IT products leads directly to increases in GDP and overall
total factor productivity.
- Second, industries have invested heavily in IT, meaning that workers in those industries have more
capital to work with, making them more productive.
- Third, IT helps businesses innovate and reorganize, transforming the way they do business and the
products and services they provide.
There remains no consensus on the relative magnitudes of these three factors. However, analysis by the
CEA estimates the relative importance of the first two. The available data suggest that these have played
a major role in the acceleration in productivity. There is less evidence to date on the importance of the
third factor. However, after accounting for the first two factors, there remains an acceleration in
productivity, supporting the notion that the third factor may be starting to play a role.
One overriding difficulty in studying issues of productivity is the proper measurement of output of goods
and, especially, services. Many experts have argued that the national accounts severely understate
productivity growth in the service sector-estimates of total factor productivity growth in the services sector
show virtually no growth after 1973, compared with 2 percent annual growth in manufacturing. Service
sectors have also invested very heavily in IT: Five main service industries (financial services, insurance,
wholesale trade, business services, and communications) account for more than 50 percent of U.S.
purchases of computers. Many of these industries are, anecdotally, highly innovative - for example,
banks offer myriad new and improved products.
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Dublin Core
The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/.
Title
A name given to the resource
Lowell Weiss
Creator
An entity primarily responsible for making the resource
Lowell Weiss
Office of Speechwriting
Date
A point or period of time associated with an event in the lifecycle of the resource
1997-2001
Is Part Of
A related resource in which the described resource is physically or logically included.
<a href="http://clinton.presidentiallibraries.us/items/show/36408">Collection Finding Aid</a>
<a href="https://catalog.archives.gov/id/7431951">National Archives Catalog Description</a>
Identifier
An unambiguous reference to the resource within a given context
2006-0470-F
Description
An account of the resource
This collection consists of the speechwriting files of Lowell Weiss. Lowell Weiss worked as a Special Assistant to the President, Presidential Speechwriter from June 1997 - August 2000. Weiss traveled and wrote speeches for President Clinton on domestic issues. His speeches cover a broad array of topics. Major issues he wrote on concern the environment, education, the economy, and race relations. He wrote weekly radio addresses; commencement speeches; and remarks for bill signings, events, and conferences. The records consist of speeches, drafts, memoranda, correspondence, schedules, event and travel arrangements, notes, articles, and printed email.
Provenance
A statement of any changes in ownership and custody of the resource since its creation that are significant for its authenticity, integrity, and interpretation. The statement may include a description of any changes successive custodians made to the resource.
Clinton Presidential Records: White House Staff and Office Files
Publisher
An entity responsible for making the resource available
William J. Clinton Presidential Library & Museum
Extent
The size or duration of the resource.
464 folders in 36 boxes
Text
A resource consisting primarily of words for reading. Examples include books, letters, dissertations, poems, newspapers, articles, archives of mailing lists. Note that facsimiles or images of texts are still of the genre Text.
Original Format
The type of object, such as painting, sculpture, paper, photo, and additional data
Paper
Dublin Core
The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/.
Title
A name given to the resource
IT Econ Gains
Creator
An entity primarily responsible for making the resource
Office of Speechwriting
Lowell Weiss
Identifier
An unambiguous reference to the resource within a given context
2006-0470-F
Is Part Of
A related resource in which the described resource is physically or logically included.
Box 18
<a href="http://clinton.presidentiallibraries.us/items/show/36408">Collection Finding Aid</a>
<a href="https://catalog.archives.gov/id/20761017">National Archives Catalog Description</a>
Provenance
A statement of any changes in ownership and custody of the resource since its creation that are significant for its authenticity, integrity, and interpretation. The statement may include a description of any changes successive custodians made to the resource.
Clinton Presidential Records: White House Staff and Office Files
Publisher
An entity responsible for making the resource available
William J. Clinton Presidential Library & Museum
Format
The file format, physical medium, or dimensions of the resource
Adobe Acrobat Document
Medium
The material or physical carrier of the resource.
Preservation-Reproduction-Reference
Source
A related resource from which the described resource is derived
20761017
42-t-7431951-20060470-F-018-010-2015