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Shaping Innovation Through the Lens of Government Policy

In October, I had the privilege of attending the Tough Tech Summit, hosted by MIT’s The Engine. The summit consisted of talks by some of the biggest industry leaders, including the co-founder of Nest Labs, on building technology for real, long-term change.

One talk in the conference that really stumped me was a fireside chat between Mariana Mazzucato and Tom Kalil, where they discussed the role of government in building an innovation economy beneficial to all. As a high-schooler who spends his time both nerding out over quantum computing and competing in policy debate, it amazed me that I never really thought about the obvious intersection between the two. Immersed in the culture of Silicon Valley, interest in tech always implied founding/working at companies with almost no discussion on how that knowledge could be applied to policy.

image from https://www.ucl.ac.uk/bartlett/public-purpose/people/mariana-mazzucato

Mariana Mazucatto (Ph.D.) is a Professor in the Economics of Innovation and Public Value at University College London, and the Founding Director of the UCL Institute for Innovation and Public Purpose. She has authored numerous books such as The Entrepreneurial State: debunking public vs. private sector myths, The Value of Everything: making and taking in the global economy, and more recently MISSION ECONOMY: A MOONSHOT GUIDE TO CHANGING CAPITALISM (which is more in line with what the article will discuss today). She is a member of the UN’s Committee for Development Policy, OECD Secretary General’s Advisory Group on a New Growth Narrative, South African President’s Economic Advisory Council, and the Scottish Government’s Council of Economic Advisors.

image from https://www.eaglobal.org/speakers/tom-kalil/

Tom Kalil is the Chief Innovation Officer of Schmidt Futures and Entrepreneur-in-Residence at UC Berkeley. He was the previous Deputy Director for Tech and Innovation for the White House Office of Science and Technology Policy and Senior Advisor for Science, Technology, and Innovation for the National Economic Council. He was also appointed by President Clinton to serve on the G-8 Digital Opportunity Task Force (Dot Force).

TL;DR Both are extremely qualified speakers with extensive experience in shaping innovation through the lens of government policy.

Building Back Post-COVID

Following the severe impacts that COVID has brought down upon our economy is an opportunity to restructure recovery funds and the process in which the public sector stimulates the private sector. In the status quo, the perception is that the state funds basic R&D until venture capitalists swoop in and speed up the process. However, according to Mazucatto, the state needs more involvement in the process, such as providing long-term finance to sustain the development of new technology.

The conversation then branched off to tackling higher-level issues and moonshot ideas. Kalil mentioned that these moonshot ideas now seem possible post-COVID. For example, the Obama Administration wanted to reduce the time it took to produce a vaccine, with DARPA looking into antibody-based therapy during the Ebola Outbreak. What seemed like a moonshot idea back then was sped up due to the urgency of the COVID pandemic. The public sector needs this same sense of urgency in tackling long-standing issues like solar energy as well as funding newer ideas/tech (fusion technology).

Now that COVID has increased visibility for high-level issues such as climate change, social justice, and healthcare, the government needs to work with the private sector to set goals and build coalitions in order to solve them.

Issues We Need To Focus On

One issue that both Mazucatto and Kalil agreed on was the fact that the public sector needs to treat social problems with the same urgency as it does with technological problems. This includes issues such as education, workforce development, human services, affordable housing, and reducing the generational transmission of poverty. These social problems aren’t necessarily separate from technology either — for example when addressing stagnant and declining wages of low-skilled workers, one can look into AI tutors to reduce the time/cost to gain a skill that can be applied in a higher-skilled job.

From an implementation standpoint, Mazucatto mentions how tackling the 17 sustainable development goals that every country has signed up for (poverty, hunger, climate change, etc.) should be structured as follows:

image from Grand Challenges: The New Mission-Oriented Innovation Frontier | Interreg Europe

where you start off with a “grand challenge” → a specific goal → specific objectives to reach that goal → initiatives to reach those objectives. When creating these objectives, local voices should be heard in order to bring context to the specific region being addressed.

Restructuring Private Partnerships

An example that Kalil gives of a successful public-private partnership is SpaceX. The US Government wanted to limit spending when sending cargo and astronauts to the International Space Station (paying Russia roughly 80 million dollars per seat), so they partnered with private companies (including SpaceX) with the clear objective of a rocket that could cut down on those costs. With this objective in mind, they set up a series of milestone payments that eventually led to the success of the program.

The private sector isn’t exactly made up of philanthropists, and therefore there are a lot of social issues where modest to no work is being done (i.e. providing vaccines for the poor) Therefore, the public sector must incentivize the private sector with systems similar to milestone payments for reaching specific objectives in a way where the public sector takes the demand risk while the private sector takes the performance risk. Additionally, Mazucatto believes the government needs more regulations on things like patents, pricing, etc. while rethinking contracts that explicitly state risk allocation between the two.

Mazucatto calls for more creativity in downstream investment. For example, instead of having told Tesla, “if you don’t pay back your loan we will take 3 million shares of your company,” structure it as “if you do pay back your loan we will get, for a period, 3 million shares in your company.” That sort of structuring allows for an investment portfolio for the public good where you can combine mission-oriented and financial return mindsets.

Commercializing Breakthrough Tech

A huge problem when attempting to commercialize breakthrough tech is the startup costs to do so. For example with fusion tech, it would probably cost a billion dollars in order to build a power plant. Kalil maintains this idea of an objective-oriented milestone payment system as a way to generate a public-private partnership in that sector. Furthering the example of fusion tech, it would need a lot of support getting off the ground when facing incumbent tech (natural gas, fossil fuel).

Another area of concern is maintaining decentralized networks of innovation rather than one centralized institution. Taking our previous example of fusion tech, Mazucatto points to ITER- a megaproject that holds most of the funds and resources for fusion tech research. Taking from the ideals of her father, she voiced her opinion on the necessity for a decentralized network of well-funded labs rather than one big entity like ITER.

Branching off of the idea of decentralized networks for innovation, I recently had the privilege of getting on a call with Chris Morales, Vice President of AI ventures at Point72 Ventures. During the call, one area of discussion was considering working with a large corporation vs. a smaller startup when developing breakthrough tech. Amidst the conversation arose the innovator’s dilemma, where large organizations are calibrated to make decisions based on profits, not innovation. On the other hand, a small startup that has little to lose is able to build infrastructure incorporating the new tech from the ground up- leading to success stories where the smaller company revolutionizes the industry and takes down the incumbent (i.e. Netflix vs. Blockbuster).

In an episode of the Knowledge Project, Shane Parrish and Roger Martin dive into integrative thinking and mention something that I thought applies really well here. They discuss how in every revolutionary idea/breakthrough piece of technology, there has never been any analytical reasoning/confirmation to prove for certain that it would work, because of the inherent fact that it was unprecedented. Similarly, entities that focus too much on scientifically validating the opportunity for their idea are likely to lean towards to never being able to grow and innovate their solutions.

Generating Interest for Policy in the Next Generations

One area of discussion that surprised me was the issue of the lack of scientific knowledge among politicians. Though the problem itself is by no means a surprise, there is a sub-problem at the root of it which is the lack of incentivization for next-generation technologists/scientists to ever go into policy. In the culture that many of the next-generation STEM workers are immersed in, it is always implied that one would join a STEM company, or form their own. In other words, careers in STEM always imply working in the private sector. However, there is almost little to no emphasis on using that knowledge in policy work

Kalil brought attention to an initiative that onboarded STEM workers to focus on policy for a limited period of time. It turns out that many of them decided to stay, as they saw the work that they were doing far more impactful than what they did on a daily basis. It points to an interesting idea to regularly onboard STEM workers to consult the government in a temporary commitment so that more people join and there is a greater sense of urgency to get something done during the shorter term.

Main Takeaways

  1. Mission-oriented policy-making financed by long-term investment and/or milestone payments
  2. Government key in providing enough funding to properly commercialize breakthrough tech
  3. Can generate interest in policy among STEM workers through temporary consulting for the government

Thank you for reading my article! You can connect with me on my LinkedIn or email me at lohitpotnuru@gmail.com. Sign up for my monthly newsletter here.

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