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4 Things We Need To Do To Boost Innovation And Entrepreneurship

2016 August 28
by Greg Satell

The writer Andrew Solomon has said that travel gives you both a window and a mirror. You encounter people and ideas very different than your own, which makes you aware of new possibilities that never occurred to you before. At the same time, these new experiences give you a different perspective of your own culture.

That’s certainly what I found in my 15 years living and working overseas. As I learned to operate in different cultures and contexts, I often found myself facing questions I never had to answer before and, cut off from my native environment, I had to hack together solutions from bits and pieces I picked up along the way.

But mostly I gained an appreciation for the unique combination of scientific leadership and entrepreneurial energy that has made America the exceptional nation. If we are to continue to dominate in the 21st century, we need to leverage those core assets, while minimizing our capacity for self-destruction. Here are four things we need to do to achieve that:

1. Restore Our Commitment To Basic Science

In 1940, Vannevar Bush, who at the time was serving as President of the Carnegie Institution, went to see President Roosevelt. His message was twofold. First, that the war that was ravaging Europe would soon include the United States—a point that Roosevelt did not need to be convinced of. Second, that it would not be won with bombs and bullets alone, but with science as well.

The conversation eventually led to the establishment of the Office of Scientific Research and Development (OSRD, which mobilized the country’s scientific resources by extending grants to outside researchers to develop technology for the war effort. It was, by all accounts, a resounding success, resulting in breakthroughs such as radar, the proximity fuse and, most famously, the atomic bomb.

As the war came to a close, Roosevelt asked Bush to make recommendations to extend federal funding of science in peacetime. The report, titled Science, The Endless Frontier, led to the establishment of the NSF, NIH and DARPA and became the blueprint for America’s technological dominance in the post-war era.

Yet now, we’re facing a veritable war on science, with politicians finding it expedient to deny even the most basic principles and cutting budgets to the same scientific programs which made us a technological superpower. More recently, Congress has taken to  grilling researchers on the validity of peer reviewed scientific studies. That has to stop.

As Bush himself put it, “there must be a stream of new scientific knowledge to turn the wheels of private and public enterprise” and it has been America’s federal government that has funded that stream. Our scientific architecture is the envy of the world. We should be strengthening and expanding it, not hollowing it out.

Some progress has been made in this area and funding to the NIH has been largely restored, but other programs, such as the NSF and science programs at the Department of Energy are still operating below historical levels.

2. Build An Open Ecosystem Of Technology And Talent

In the 1980’s, with firms like DEC and Apollo Computer, as well as world class research universities like MIT and Harvard, the Route 128 corridor outside of Boston seemed poised to dominate the technology industry. Yet by the 1990’s, it was clear that leadership in technology had passed to Silicon Valley.

In Regional Advantage, AnnaLee Saxenian explains why. While route 128 firms like DEC and Apollo were vertically integrated firms that bound employees through non-compete contracts, their Silicon Valley competitors such as Hewlett Packard and Sun Microsystems embraced open technologies, built alliances and allowed their people to job hop.

What Saxenian found in Silicon Valley is not specific to technology industry, but can be seen just about anywhere. Studies have found similar patterns in the German auto industry, among currency traders and even in Broadway plays. Small, tight clusters of people, loosely connected through more distant ties, can dramatically increase information flow and enhance innovation.

Yet as Will Wilkinson explains in an illuminating article on Vox, for many occupations today, from dentistry to cosmetology, economic mobility is greatly hampered by unnecessary licensing regulations. This limits opportunities for many, while at the same time reduces the services available to everyone. We desperately need to deregulate trade licensing.

3. Deepen and Widen The Creative Class

In The Rise of the Creative Class, urbanist Richard Florida made the case that attempting to create innovation hubs in sterile office parks is counterproductive. After all, if young, tech savvy professionals can work anywhere, why wouldn’t they want to work someplace fun, with a thriving music and art scene, underground bars and cafes?

He points to Pittsburgh as an example, where he was once a Professor at Carnegie Mellon University, one of the world’s premier research institutions. However, for all the great technical talent that comes through, few stay. They leave to places like the Bay Area, Austin and the Research Triangle in North Carolina.

In Florida’s view, building an innovative place requires three elements: talent, technology and tolerance. Places like Beijing, Moscow and Dubai have an abundance of the first two, but a gaping void in the third, which makes it difficult for them to achieve a decent return on their investment in technology.

While Florida has his detractors, after spending most of my adult life in Eastern Europe, I find that his ideas ring true. There was never a lack of technical talent in the Soviet Bloc, but the sense of intolerance was (and, increasingly, still is) palpable. Countries like Russia can invest in innovation centers like Skolkovo, but it won’t halt—or even slow—the brain drain.

As John Mannes recently reported in TechCrunch, we saw this same effect at work when “religious freedom” laws were passed in Indiana. Tech companies like SalesForce and Angie’s List immediately pulled back on investments there, both to protect employees and to ensure that they would continue to be able to access top talent.

4. Invest in Narrowing The “Valley of Death”

One of the lesser known barriers to advancement is the “Valley of Death,” the notorious gap between the discovery of a new insight and its commercialization. Government programs like the SBIR and ARPA-e have helped close that gap by extending a small grants for entrepreneurs to advance new discoveries to the point where they can attract private funding.

Another promising example was SEMATECH, which established a partnership between government labs, academic institutions and semiconductor manufacturers to revive an industry being pummeled by cheap Japanese imports. The federal commitment was only for five years, but the effect is still being felt today and US firms now dominate the industry.

More recently, the SEMATECH model has been expanded to programs that are creating a new breed of innovators, such as the JCESR program at Argonne National Laboratory that is building next generation batteries and the National Network for Manufacturing Innovation that is setting up manufacturing hubs around the country.

We need to recognize that a free enterprise system is merely a starting point. You don’t build innovation and entrepreneurship in a vacuum. Investment in programs such as these is not a serious fiscal issue. They represent a mere rounding error in the federal budget. It is ideology, rather than finances, that holds us back.

The truth is that America became the exceptional nation by being open to new ideas, testing them to see which succeed and putting resources behind the ones that do. We can only win the future if we invest in it.

– Greg

4 Responses leave one →
  1. August 29, 2016

    I love this piece! It encompasses many of what I call in my own book, “the million reasons why entrepreneurship is good for you.” Bravo!

    Steven Koltai
    Author: “Peace through Entrepreneurship: Investing in a Startup Culture for Security and Development” Brookings Institution Press, August, 2016

  2. August 31, 2016

    Thanks Steve!

  3. September 7, 2016

    Paul Graham (Y Combinator) would disagree with you/Florida about Pittsburgh. See:

    Perhaps the two of you haven’t been there recently — I had some business there last year, and found it dramatically different than the last time I was there 15 years ago. It’s vibrant, full of young people, has great food (as Paul’s article notes), strong culture and a great university (and several next tier schools). And, it’s relatively inexpensive and close to lots of things to do. I think you’d find that Pittsburgh is on the verge of becoming, and is actually a model for other moribund cities intent on reinventing themselves and becoming innovation hubs.

  4. September 8, 2016

    Thanks for sharing.

    – Greg

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