Last December, Bill George, the best-selling author and noted professor of management practice at Harvard Business School gave the commencement address at his alma mater, Georgia Tech.  In that speech, recounted in BusinessWeek,¹ George proposed what he called “the innovation economy” as the most reasonable plan for putting the American economy back on its feet.

He advised the new administration to concentrate its efforts on rebuilding the American economy around its unique advantage in creating high-tech products and innovative services. As George accurately reminds us, no country is as adept at entrepreneurship as the United States, and in that ability lies the way forward.  Only through such a process can the companies arise that will achieve two important objectives:

1. Creating the new jobs this country needs.
2. Developing and exporting new, innovative products and services that will balance the trade deficit. 

George outlined a seven-point plan by which the administration can encourage entrepreneurs to create new businesses that will address the problems of health care, education, energy, the environment, and more in the coming years.  The seven steps are: 

• First, encourage scientific discovery aimed at solving the related problems of energy and the environment.  George proposes boosting funds for the National Institutes of Health and establishing a separate entity he calls the National Institute for Energy and the Environment.
• Second, increase funding for the National Science Foundation, which would, in turn, provide more scholarships to students pursuing advanced degrees in math, science, and engineering. 
• Third, establish free trade agreements with all of our major trading partners around the world. 
• Fourth, change the tax laws to provide incentives for maximizing long-term capital gains.  True innovation takes time.  By lowering the tax on capital gains on investments that are held for longer periods of time, the government can encourage “deep innovation” that creates lasting wealth. 
• Fifth, eliminate the tax on capital gains for the founders and initial investors ...