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Mariana Mazzucato: The Entrepreneurial State

from Long Now [alt+shift+b] in science

### Government as radical, patient VC The iPhone, Mazzucato pointed out, is held up as a classic example of world-changing innovation coming from business. Yet every feature of the iPhone was created, originally, by multi-decade government-funded research. From DARPA came the microchip, the Internet, the micro hard drive, the DRAM cache, and Siri. From the Department of Defense came GPS, cellular technology, signal compression, and parts of the liquid crystal display and multi-touch screen (joining funding from the CIA, the National Science Foundation, and the Department of Energy, which, by the way, developed the lithium-ion battery.) CERN in Europe created the Web. Steve Jobs’ contribution was to integrate all of them beautifully. Venture Capitalists (VCs) in business expect a return in 3 to 5 years, and they count on no more than one in ten companies to succeed. The time frame for government research and investment embraces a whole innovation cycle of 15 to 20 years, supporting the full chain from basic research through to viable companies. That means they can develop entire new fields such as space technology, aviation technology, nanotechnology, and, hopefully, Green technology. But compare the reward structure. Government takes the greater risk with no prospect of great reward, while VCs and businesses take less risk and can reap enormous rewards. “We socialize the risks and privatize the rewards.” Mazzucato proposes mechanisms for the eventual rewards of deep innovation to cycle back into a government “innovation fund”---perhaps by owning equity in the advantaged companies, or retaining a controlling “golden share” of intellectual property rights, or through income-contingent loans (such as are made to students). “After Google made billions in profits, shouldn’t a small percentage have gone back to fund the public agency (National Science Foundation) that funded its algorithm?” In Brazil, China, and Germany, state development banks get direct returns from...
25th Mar 2014

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