It’s a Myth That Entrepreneurs Drive New Technology

Chomsky has been making this case for years. It's no fallacy. Every grant application I have submitted has a provision for transferring research products to business. Just fill out the appropriate entry. It is understood that you don't talk about how the government takes the risk out of business by funding R&D efforts through taxpayer-funded grant allocations to research institutions, subsidies to business, generous patent monopoly grants and other measures. The taxpayer funds business innovation but receives no equity. Downvote me libertarians: I will have a mathematical treat for you non-mathematical political pundits, in good time.

This article is an example of the worst political commentary. It presents the context for this "observation" as being a decrease in both public debt and the size of the government. No such thing has happened or is likely to happen any time soon. The US federal government is the largest and most powerful state in the history of the world. There is no "cut" that could make that less true coming in the next few years at least.

The core issue is that while it may be true that the state does have initiatives to fund business innovation there is a false choice being presented. The example of Apple suggests that if the government didn't give them a grant they wouldn't exist. The problem is that we can't say that for certain at all. We don't know the outcomes in a world where the taxes or loans taken to pay for those grants didn't happen. It's not possible to say if the outcomes would be better or worse (for the cause of Apple Computer at least) had that grant not existed.

The state is a mixed bag. They currently take 15% of my income to pay for my "retirement" when if I had been able to save that I'd end up far more secure in my retirement than I will with social security. But that said they are using that money to pay for the life support that a lot of people need. Mix that with the constant wars and you can understand why crediting the state for its' light in a world of darkness is misguided.

There are a lot of other odd statements in here too such as describing the state as a risk taker as if the state is ever punished for its' failures. People don't even remember most of the CIA's failures as they line up for war behind its' current allegations in Syria.

>Whether an innovation will be a success is uncertain, and it can take longer than traditional banks or venture capitalists are willing to wait. In countries such as the United States, China, Singapore, and Denmark, the state has provided the kind of patient and long-term finance new technologies need to get off the ground.

This is the crux of the problem and why the OP makes a compelling argument.

We live in a world of "innovation" where the driving force behind it is a conglomerate of VC's whose primary concerns are their multiples and the next fund. They are people without long-term vision.

We also live in a world where political are small men and women proposing small ideas because their primary concern is the next election cycle.

What ever happen to greatness?

"We're putting a man on the moon in 10 years." "We're building a national highway system." "We're building a weapon that will end wars."

Where did the will go? Where are the cries of:

"We'll be free of fossil fuels in 10 years." "We're sending a person to Mars by 2020."

Or if you like wars on abstract combatants that never end:

"The war on ignorance"

Someone needs some vision. And right now, nobody has it.

Martin Wolf reviewed Mazzucato's book in the Financial Times a couple weeks ago:

http://www.ft.com/intl/cms/s/2/32ba9b92-efd4-11e2-a237-00144...

HN discussion at https://news.ycombinator.com/item?id=6194175.

I'm surprised at how controversial it is. The facts aren't in dispute. Are they?

This essay makes a fallacy case, "it is this way, therefore it must be this way". It takes a lot of liberties with evidence to come to a crazy conclusion.

I grew up in a small state in Australia. Business there keeps close with state government: there is a stench of cronyism about much of what goes on. The standard business model there is to wait for a state government grant structure, and then weasel up to it with the right paperwork and hand-shaking to get what you want. Within the bureaucracy you have people lining themselves up to bounce out into firms.

The government maintains high taxes, and then spends those taxes either tying itself to emerging business like this, or propping up failing business like car companies. And it needs a large, skilled public service to keep it all moving. The result is that labour that could be used doing something people want is wasted, and it's harder to operate free business due to the high taxation and bureaucracy. It's not a stalled situation: many good people do still find good, rewarding local jobs creating real value despite this. But a lot of talent drains away, and there's not much innovation despite a healthy university culture.

The way things work in world cities is different and better. For the most part, the more government stays out of business, the more success there is.

Perhaps Apple did receive some benefits in the early years. Where benefits are there for the taking, it is rational to take them. But it is not evidence that such benefits were critical to the success.

Governments don't pick winners - only their mates. For progress, look elsewhere.

As an example of a paragraph that just doesn't work, "Other ways include giving the state bank or agency that invested a stake in the company. A good example is Finland, where the government-backed innovation fund SITRA retained equity when it invested in Nokia. There is also the possibility of keeping a share of the intellectual property rights, which are almost totally given away in the current system."

* Repeatedly we see state investments in companies pursuing political objectives with their shareholding at the expense of development or the company's interest. Look at the way Lower Saxony hampers Volkswagen's development. Or oil companies anywhere they have been nationalised (Venezuela, Mexico, Russia).

* Picking Nokia as an example of innovation?

* Intellectual property is an idea created entirely by government for the purpose of picking winners. It has no philosophical underpinning - it's just arbitrary regulation.

* "which are almost totally given away in the current system" - what does this even mean?

Awful article.

Most companies drive what I like to call dipshit innovation. You know what I'm talking about. The new X sandwich from McDonalds. The new X flavor from Coca Cola. Repackaged servers from Amazon. The new X phone from Apple. A variant of an already existing drug X with a different name by Pfizer. These things are not hard to develop, and that makes sense, since a company's return horizon must be on the order of 7 years or less to stay in business. Things that only take 7 or so years to develop just cannot be that hard to do. To make real impact requires sustained investment at a loss over decade to century level time spans, a space in which only the largest companies in existence, namely nation states, can compete.

Now, that's not to say that we don't need dipshit innovation. Dipshit innovation does in fact serve a very useful purpose: it helps to reduce costs by forcing a diverse group of small agents to survive by maximizing short term profits, whilst simultaneously minimizing short term costs. Some of these profits can then be pushed back into creating the next wave of things that nation states help develop. This next wave can then be fed right back into the free market where once again a diverse group of capitalistic agents can copy, scale up and reduce the costs of the next generation of tech.

Problems seem to occur when there is too much of a focus on long term investment (Communist China's/Russia's fascination with producing iron), or when there is too much of a focus on short term investments (The world's fascination with short term leveraged trades before the global financial crisis).

You really want something of a 40-60 split of resources, with 40 being pushed back into government/public institutes for long term societal level investments, and the remaining 60 going back to the free market as an incentive for further cost reductions.

We need both types, in the right amounts, to keep the economy chugging along. We also need competent people working on both sides of the split for us to move forward. What we don't need is to deify one to the exclusion of the other.

Addendum: This talk is an amazing discussion of the ideas listed in my above hypothesis: http://www.youtube.com/watch?v=jyp3Bw5H0VA which was tipped to me from here: https://news.ycombinator.com/item?id=6310207.

It's always nice when others back up what you say. But it seems that I'm always a year late with said ideas (talk is from 2012, and I hadn't previously seen it).

I blame the state for funding such radical research. I blame YouTube for not showing me it earlier.

Terrence Kealey would disagree: http://www.scientificamerican.com/article.cfm?id=the-economi...

I don't really have that much to add, this just stood out to me as slimy:

"...the contract should have said: If and when the beneficiaries of the grant make $X billion, a contribution will be made back to the NSF."

This by definition would not be a grant. If you want to eliminate grants then by all means say so... Sometimes I look at the State as just another modern deity, and it demands worship and tribute. Especially for things it claims to have done in the past.

I highly, highly recommend Doing Innovation in the Innovation Economy by William Janeway to anyone who wants to truly understand the nature of our economy. It's basically this piece elaborated in exhaustive detail by a Ph.D economist and 40+ year veteran of the finance world. To me, it's at once a thorough investigation of the history of markets and the boom/bust cycle, a defense of Keynesianism and the State as an economic player, and a memoir of a pioneer of the modern venture capital industry.

Even more importantly, I think it's an incredible analysis of the actual nature of our economy. We've never actually been any sort of ideologically pure system, and Janeway argues that there's actually something very important about how our system historically has been, as opposed to what purist capitalists and socialists might have it be.

The biggest flaw of the book is that it really needed a gifted editor. There's a lot to the book, and it could have benefited from much more careful organization. Janeway seems to presume a great deal of familiarity with economics and the financial industry, and it made the book challenging for me to fully comprehend without taking notes and looking up unknown terms myself. But it was well worth the effort.

The premise of this article seems to be that since the government funding of scientific research has bore fruits, then it must be justified. The ole saying "a blind squirrel finds an acorn every once in a while" comes to mind. It's worth entertaining the idea that public funding displaces private funding (at a net loss). Burt Rutan makes this argument in his Ted talk on the space industry (http://www.ted.com/talks/burt_rutan_sees_the_future_of_space...).

In college I came across "The Economic Laws of Scientific Research" by Terence Kealey. It's a great read for anyone interested.

The "state" also has access to FAR more assets than any single company ever will. The "state" can very easily define what IS the economy itself unlike a business which is dependent on whatever the economic architecture of the "state" is.

The reason why a lot of shit is invented by the "state" is because they can very easily justify doing whatever they want either via big budgets or big guns. Various "states" have chosen various justification routes in history.

When you look at the "state" as the largest and most powerful business in the land you will realize why they try to hog up "innovation" or at least control it.

What about the cooling effect of government spending on private sector innovation. Nobody can compete with the government, since it has unlimited pockets and the ability to legislate, so it would be irrational for any company to try. How do you account for that when you try to measure how much potential the private sector has for major innovations?

Rubbish some Entrepreneurs are really just me to copy cats but real ones are innovative take Woz's inspired hardware hacking on the original apple or Clive Sinclair even Alan Sugar with the cpc pcw and the pc 1512 - if only he had paid more attention to quality control he could have had a UK equivalent of Dell.

If you define "innovation" narrowly as basic research, then sure, funding for that typically comes from DARPA, NSF, and big corporations. Being science, it doesn't even have to work out, let alone have immediate applications, let alone have a way to make money from it, let alone pursue it.

If you take someone's money by force, you're a thug, not an entrepreneur.

What about Bell Labs?

Innovation can be done by the private sector. Just avoid going public so that your company can make long term investments without Wall Street pressuring your short-term results.

Hey, nobody said funding can't come from the government, it's just that private companies and individuals seem to do more with less...

What's going on at Slate? First the public school article and then this?

What a huge insult to people like Steve Jobs.

People who think this way and write these kinds of articles are beyond ignorant. They are dangerously ignorant. They probably lived their entire lives inside a reality distortion field and actually believe this shit.

Here's what I find very interesting: None of these people will ever write an article pointing out how badly government/the state has fucked us over. They go out of their way to attribute visionary status to the government but never bring them to task for what they've done to society.

Examples:

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They'll print this: The government created the Internet (false, private enterprise took it from a limited use experiment into what it is today), you should all bow and be thankful.

They'll never say this: The government created the internet with the goal of creating the perfect surveillance tool to actively violate everyone's privacy across the globe by monitoring your every move.

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This: We owe the government for creating the GPS system.

Not this: The military created the GPS system to be able to kill people with more efficiency and develop ever more deadly weapons. They did not create it for you to be able to go hiking or find directions to your friends house. In fact, they didn't even envision the possibility of something like an iPhone ever even existing.

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This: DARPA funds great projects and helps entrepreneurs.

Not this: DARPA is a military organization throwing money at efforts that will help create a more powerful military and, in turn, kill people with greater efficiency. The ultimately business of the military is to kill people when they are asked to do so and to do it as efficiently as possible. Their business isn't to create technology for us to enjoy while we go fishing.

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This: Government built roads, plans cities and infrastructure and we all benefit from this.

Not this: The US government seriously fucked up nearly all urban planning in the US by not focusing the effort on long-term efficient mass transit. They created abominations such as Los Angeles, where it is nearly impossible to exist without a car. Their actions have created untold amounts of environmental pollution, health problems and inefficiencies because we have to live with millions of unnecessary cars and trucks on the road. This failing has cost us for generations and will likely continue to cost us for generations to come.

Through this horrible failure in planning they have enslaved us to our vehicles. Nearly every working person in the US has to own a car. Families spend tens of thousands of dollars purchasing and maintaining them as well as thousands of dollars a year in fuel. Massive numbers of trucks on the road are added for good measure. The environmental pollution is of monumental proportions. The human loss is also hard to measure. With efficient and ubiquitous mass transit people would have the opportunity to make use of their commute time for purposes other than being a control system. Perhaps read a book and learn something.

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This: Our government wisely spends billions a year in foreign aid.

Not this: Our government has caused us to lose standing and respect in the world by irresponsibly throwing money around to buy friendships and, often-times, support brutal regimes. Some of these actions have led to increased anger towards the US and have turned the focus of terrorists towards our shores.

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This: Governments look after our safety and freedom.

Not this: Governments world wide are responsible for HUNDREDS OF MILLIONS of people killed in military conflicts. Governments start wars, not people, not the local butcher, baker or teacher. Governments. They have killed hundreds of millions of people with almost no consequence to themselves. When did you last see a president or a sentator take their own life for launching us into a bullshit failed war and killing people for no good reason?

No, it's "we the people" who have to live with the consequences of their actions, it isn't "we the ruling party". They've made a mess out of the world. Period. The mess the UK and the US have made out of the Middle East is hard to understand. Go back and read about how some of those countries came to be.

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This: Our government wisely makes economic rules and creates programs that benefit us all.

Not this: The US government is absolutely responsible for the economic collapse of 2008. Their rules created the framework that allowed the real-estate market to devolve and ultimately derail. Without their "regulation" it would have been absolutely impossible for the series of events that ultimately took down the world to have taken place.

Furthermore, as things were devolving our all-knowing, all-seeing, wise and learned government never took a step towards fixing the problem and stopping what was coming.

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This: Government social programs are great. We should be thankful.

Not this: Government social programs have created generations of people with no drive to succeed, educate themselves and contribute to society in any meaningful manner. It is, in many ways, economic slavery of the worst possible kind.

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This: Governments promote travel, tourism and business at an international level.

Not this: https://news.ycombinator.com/item?id=6309618

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This: The State looks after it's citizens.

Never this: Hitler. The treatment of women in the Arab world. Genocide. The Soviet Union. Cuba. Dictators. Kings. Gay rights. Abortion. Never being able to truly own your home because you owe them taxes. The IRS. NSA.

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Don't get me wrong. We need small and limited government. We simply don't need what most have turned into. It is a huge monster that gobbles it all up and, ultimately, does little to make our lives better in the long term.

"With great power comes great responsibility" often derails into "With great power come greater abuses to humanity".

People that champion the idea that we owe almost everything to the State seldom take the time to bring the State to task for what maladies they've inflicted upon the people. If they do it at all it is very rare and lacking intensity and longevity.

They truly think that the State is great. Lots of us see that the emperor has no clothes and that the State needs to have as small a part in our lives as possible. Not sure what it will take for others to see this short of a total collapse, which is in our future if things don't change. Get ready to learn a painful lesson.