Tag Archives: innovation

One More Time

Yesterday, I posted about Trump’s attacks on the basic research that generates medical breakthroughs, and the critical importance of the government grants that fund that research. Medical advances are obviously salient to the general public; we care about cures for the diseases that cause death and suffering, and when we understand the significance of assaults on the research that makes those breakthroughs possible, we oppose them.

What is less well understood is that basic research funded by government has given America its global dominance in technology and innovation.

A recent essay from the Washington Post reminds readers what is at stake as Musk and Trump wreak havoc with those research grants.  reminding us that “we are the nation that spawned the internet and GPS, and has the most Nobel laureates curing deadly diseases, making intelligent machines and shedding light on the dark secrets of the universe.”

Whether they are geeks in garages or eggheads in university labs, American entrepreneurs have built their ideas and fortunes on the back of basic research supported by taxpayers, who then reap the rewards. It’s not an accident of geography or artifact of culture that the United States has bred some of the best inventors of the 20th and 21st century. The hidden engine of the country’s illustrious track record has been the grants given to academic researchers by federal agencies that the U.S. DOGE Service has been decimating and that President Donald Trump proposes to shrink catastrophically in the next budget.

Lithium-ion batteries that power your smartphone and computer, weather forecasts that help you figure out what to wear, wings of airplanes that take you on vacation and all the messaging you do online can be traced to the symbiosis between research funded by government and private industry, the scaffolding for mind-melds of scholars and entrepreneurs. Moderna’s multibillion-dollar coronavirus vaccine that saved millions of lives owes its origins to decades of research on mRNA, viruses and vaccines that was funded by the National Institutes of Health and the Defense Advanced Research Projects Agency (DARPA). Google arose from a National Science Foundation digital libraries grant that supported then-Stanford University graduate student Larry Page. We have QR codes, barcodes and MRIs today because of basic research investments in mathematics and physics.

The essay explains why the free market will not fill the gap. Corporate and business research understandably has a narrower focus and shorter time horizon than the basic research funded by government. Its timelines are adequate for building a somewhat better gadget, but there is no business purpose to be served for funding open-ended questions with no immediate, obvious payoff–questions that, over time, have yielded the big breakthroughs.

Giving out grants for what might look frivolous or wasteful on the surface is a feature, not a bug, of publicly funded research. Consider that Agriculture Department and NIH grants to study chemicals in wild yams led to cortisone and medical steroids becoming widely affordable. Or that knowing more about the fruit fly has aided discoveries related to human aging, Parkinson’s disease and cancer.

We all benefit greatly from what the author calls “America’s innovation engine.” Yet Congress is about to allow the Trump administration to break it, because most of the general public doesn’t yet see–or understand– what’s being lost.

The most profitable companies in the country continue to trade on investments in research made decades ago, while political leaders strip the next generation of the chance to become groundbreaking inventors and innovators. Preventing such entrepreneurs from rising might even protect the big companies’ profits. Little wonder, then, that many of the richest men in the world — men who call themselves innovators — have done little to protect the invention engine from Trump’s havoc. Or that the richest of them, Elon Musk, has even been an architect of its destruction. Meanwhile, Musk keeps boosting his own companies with public funds, proving that at least his private-sector innovation depends on the government he is stripping for parts.

In the late 20th century, the United States invested in knowledge while other countries invested  in infrastructure projects that were more visible and politically palatable. As a result, their growth stagnated while America’s thrived. America’s investments in research built great universities that became magnets for the world’s brightest minds– and for the immigrants who founded major companies in the United States.

As the author concluded,

There is no plainer betrayal of the MAGA promise to restore the nation’s storied past than to destroy this legacy of invention. What we’re losing is far more important, however, than the pride one felt being part of that America. We’re losing the country’s future.­

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Yes!!

Ready for something different? (It really gets depressing writing about war and political dysfunction. Besides, all the news isn’t bad, although it sometimes seems that way…)

There is a mystifying (at least to me ) disconnect between the truly remarkable ability of humans to create tools–technologies that make our lives immeasurably better–and our evident inability to engage in rational self-government. That said, it’s worth exploring some of those technological breakthroughs, and the policy decisions they enable, if only to remind ourselves that we humans can, on occasion, be productive, rational beings.

A recent example, courtesy of the New York Times: Vermont, where Green Mountain Power is asking state regulators to let it buy batteries it will install at customers’ homes, saying doing so will be cheaper than putting up more power lines.

Many electric utilities are putting up lots of new power lines as they rely more on renewable energy and try to make grids more resilient in bad weather. But a Vermont utility is proposing a very different approach: It wants to install batteries at most homes to make sure its customers never go without electricity.

The company, Green Mountain Power, proposed buying batteries, burying power lines and strengthening overhead cables in a filing with state regulators on Monday. It said its plan would be cheaper than building a lot of new lines and power plants.

The plan is a big departure from how U.S. utilities normally do business. Most of them make money by building and operating power lines that deliver electricity from natural gas power plants or wind and solar farms to homes and businesses. Green Mountain — a relatively small utility serving 270,000 homes and businesses — would still use that infrastructure but build less of it by investing in television-size batteries that homeowners usually buy on their own.

“Call us the un-utility,” Mari McClure, Green Mountain’s chief executive, said in an interview before the company’s filing. “We’re completely flipping the model, decentralizing it.”

This plan has all kinds of benefits, not least because providing batteries to customers turned out to be cheaper than paying recovery costs when lines went down and building more power lines to improve the system.

About those power lines: I have often wondered why utilities don’t bury them. They are not only ugly blights on the visual environment, they are vulnerable to all kinds of damage–high winds, fires, even automobiles crashing into the poles. I realize that burying the lines would be more expensive “up front,” but  it has always seemed to me that burying them in accessible conduits would save the costs and time expended when those lines went down, or had to be replaced for other reasons.

The battery idea is even better.

Critics of the industry have pointed out that utilities haven’t been particularly innovative; instead, they’ve continued to spend large sums on new long-distance power lines, that–as the linked article notes– can take years or even decades to build because of environmental reviews and local opposition.

A May report by the Brattle Group, a research firm based in Boston, concluded that utilities could save up to $35 billion a year if they invested in smaller-scale energy projects like home batteries and rooftop solar panels that can be built more easily and quickly.

Green Mountain’s proposal seems to recognize that reality, said Leah Stokes, an associate professor of environmental politics at the University of California, Santa Barbara. “It really is the model, especially if you’re worried about power outages,” she said. “It really could become the example for the rest of the country.”

Ms. McClure said the high cost of large-scale power projects threatened to raise electricity rates so much that many customers might struggle to pay for energy.

According to the article, power outages cost utilities in the United States about $150 billion a year. Experts have projected that modernizing U.S. electric grids could cost “well into the trillions of dollars.” Green Mountain has been spending roughly $20 million to $25 million  each year just managing trees and other vegetation around its power lines. In an omen of climate change to come, the utility spent about $55 million on storm recovery this year–far more than the less than $10 million a year it averaged between 2015 and 2022.

Batteries will massively reduce outages and save maintenance dollars. Getting rid of those ugly power lines is just the cherry on top of the sundae.

If we could only apply these same sorts of innovative ideas to our political system….

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Supply And Demand

Understanding supply and demand is at the very basis of Economics 101, and thanks to the pandemic, we are seeing a “real world” example of what happens when demand surges, outstripping supply–or at least, outstripping the ability to satisfy demand promptly. For example, the supply-chain problems that have raised prices and fears of inflation have been exacerbated by the gusher of spending that is attributed to demand that was pent-up due to COVID restrictions.

Ezra Klein recently revisited the consequences of imbalances between supply and demand in a column for the New York Times. He focused on the dilemma posed by subsidies–not the pernicious subsidies of corporate farmers or fossil-fuel companies, but well-meaning efforts to help needy American families.

Many of progressivism’s great dreams linger on the demand side of the ledger. Universal health care promises insurance that people can use to buy health care. Food stamps give people money for food. Housing vouchers give them money for rent. Pell Grants give them money for college. Social Security gives them money for retirement. The child tax credit gives them money to care for their children. The minimum wage and the earned-income tax credit give workers more money. A universal basic income would give everyone more money.

Great. Or maybe not…

The problem is that if you subsidize the cost of something that there isn’t enough of, you’ll raise prices or force rationing. You can see the poisoned fruit of those mistakes in higher education and housing…

Klein quotes from a recent paper issued by the Niskanen Center–a think tank I have previously cited, and one  that consistently turns out clear-eyed, impressive research.

We are in an era of spiraling costs for core social goods — health care, housing, education, child care — which has made proposals to socialize those costs enormously compelling for many on the progressive left,” Steven Teles, Samuel Hammond and Daniel Takash write.

There are sharp limits on supply in all of these sectors because regulators make it hard to increase supply (zoning laws make it difficult to build housing), training and hiring workers is expensive (adding classrooms means adding teachers and teacher aides, and expanding health insurance requires more doctors and nurses) or both. “This can result in a vicious cycle in which subsidies for supply-constrained goods or services merely push up prices, necessitating greater subsidies, which then push up prices, ad infinitum,” they write.

The Niskanen paper advises Republicans to stop focusing on “backward-looking deficit reduction strategies based on budgetary gimmicks or dead-on-arrival cuts to existing entitlements.” Instead, it urges conservatives to tackle costs, pointing out that, far too often, Republican proposals to cut government spending “are just shell games that shift costs onto individuals.”

The conservative enthusiasm for moving Medicare beneficiaries onto (often more expensive!) private plans “risks being little more than an accounting trick — a purely nominal change in ‘who pays’ that would do little to address the underlying sources of cost growth.

What is needed, according to Klein, the Niskanen authors and others quoted in the article, is a new focus on innovation, and public policies that encourage it.

Klein says progressives are finally figuring this out, most  clearly when it comes to climate.  Biden’s agenda would increase the supply of renewable energy and advanced batteries and build the supply of carbon-neutral transportation options. Environmentalists understand that markets alone cannot solve the climate crisis, and Democrats are coming to recognize that the same is true for much else on the progressive docket.

Klein shares a quote from a member of Biden’s Council of Economic Advisors.

The transportation, rail, public transit and port investments will reduce efficiency-killing frictions that keep people and goods from getting to markets as quickly as they should,” they wrote. “The child and elder care investments will boost the labor supply of caretakers. The educational investments in pre-K and community college will eventually show up as higher productivity as a result of a better-educated work force.”

As he concludes:

A list like this could go on. It’s not clear whether it’ll be in the reconciliation bill, for instance, but Biden has proposed an expansive plan to increase housing supply in part by pushing local governments to end exclusionary zoning laws. And in California, that’s exactly what’s happening, as I wrote a few weeks back. A decade ago, progressives talked often of making housing affordable, but they didn’t talk much about increasing housing supply. Now they do. That’s progress.

Yes. As Aaron Bastani, another author Klein quotes, puts it, “the world we should want requires more than redistribution. It requires inventions and advances that render old problems obsolete and new possibilities manifold.”

Getting to that world will require overcoming the fear of change that is roiling the world we currently inhabit.

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File Under: We Ain’t Seen Nuthin’ Yet…

A business school colleague of mine recently drew my attention to an article predicting how our lives will change in the next twenty years.

The changes that are predicted are all consequences of technology–mostly existing technology– and they are entirely plausible. If even half of them come to pass, however, we are likely to experience an economic and social upheaval that will far surpass the dislocations of the industrial revolution.

A few of those predictions:

  • Software will disrupt most traditional industries within the next 5-10 years. (We already see this with retailing.)
  •  Online legal advice (already widely available on the internet) will reduce the number of lawyers by 90%–only specialists will remain.
  • Self driving cars will be available in 2018;  by 2020, the entire auto industry will begin to be disrupted. People won’t own personal vehicles; they’ll call a car on the phone, it will show up and drive to the specified destination. (“You will not need to park it, you only pay for the driven distance and can be productive while driving. Our kids will never get a driver’s licence and will never own a car.”) The implications are enormous: fewer accidents will reduce the need for insurance–and the companies that sell it; many car companies will go bankrupt, millions of jobs (truck drivers, taxi drivers, etc.) will disappear. Land used for parking will be redeveloped. There’s much more.
  • Electricity will become incredibly cheap and clean: We will see the true impact of solar production, which has “been on an exponential curve for 30 years.”
  • Companies will introduce a medical device (called the “Tricorder” from Star Trek) that works with your phone, takes your retina scan and your blood sample and analyzes your breath.  It will then analyze 54 biomarkers that identify nearly any disease. It will be inexpensive enough to give everyone on the planet access to world-class medical analysis, nearly for free.
  • 3D printing will be ubiquitous. The price of the cheapest 3D printer went from $18,000 to $400 within 10 years, and over that same timeframe it became 100 times faster. Major shoe companies have already started 3D printing shoes; spare airplane parts are already 3D printed in remote airports, and the space station now has a printer that eliminates the need to stockpile large amount of spare parts as before. The Chinese have already 3D printed/built a 6-story office building.  By 2027, 10% of everything that’s being produced will be 3D printed.

These are just a few of the changes the article lists–there are many more.

It is difficult to envision the combined impact of these technologies; the author predicts that 70-80% of today’s jobs will disappear in the next 20 years. There will be new ones, of course, but it is unlikely that there will be enough new jobs to replace those going the way of the dinosaurs.

During my own lifetime, the pace of change has steadily accelerated. Much of the social and economic dysfunction we are currently experiencing is a direct outgrowth of that change–not just the economic stresses involved, but the disorientation people suffer as cultural attitudes shift and expectations about their future lives are upended.

If there is one thing that’s clear, it is that our current political system is not capable of meeting the challenges we will face. How will ideologues like Paul Ryan and those like him–lawmakers who think unemployed folks can just “pull themselves up by their own bootstraps”– react to massive joblessness? What about the “alt-right” bigots who justify their anti-immigrant rhetoric with the claim that the newcomers are taking American jobs? What will those on the left do when they can no longer blame job losses on outsourcing and trade? Where will all these culture warriors turn without their overly-simplified, convenient culprits? And who will they turn on?

And a far, far more important question: how will the fortunate remnant–the still-employed, highly skilled specialists–respond to the needs of the suddenly un- and under-employed? What policy interventions will they support? What sort of social contract will they recognize?

Twenty years isn’t a long time. It’s practically tomorrow.

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I Guess This Doesn’t Include Indiana

Macleans has identified cities it dubs a “new brain belt.”

These are the places where they think the greatest innovation is happening today. Sometimes they are classic rust-belt cities but mostly they are university or hospital towns in the vicinity: Waterloo, Ont., instead of Windsor.

They identify characteristics of such places: high-tech facilities, quality educational institutions, taxpayer support for research, appealing living conditions and, most important for them, cultures of free thinking, in contrast to the “hierarchical, regimented thinking so prevalent in Asian and MIST [Mexico, Indonesia, South Korea and Turkey] countries.”

Or states like Indiana.

We have had several robust discussions on this blog about my theory of “paradigm shift.” Call it that, or focus on the narrower question (posed by MacLeans) whether your own city or state is “innovative” or “future oriented”–the question is one with which every Chamber of Commerce and Economic Development organization is wrestling: how does my city/ metropolitan area/state continue to compete and thrive in a world that is constantly changing? How do we get from here (wherever that is) to there (wherever that is)?

I was struck by the list of characteristics identified by MacLeans: of the five, four focused on human capital–more precisely, the development of an intellectual culture.

  • High tech facilities are built in places having workforces that can operate and manage them, places where both technical skills and comfort with technical innovation are plentiful.
  • The phrase “quality educational institutions” suggests the sort of yeasty and challenging environment that deals in questions, not answers–the sort of educational environment that produces new ideas and new ways of thinking about the traditional ones. (Quality is not defined by job placement statistics–sorry, Indiana Commission on Higher Education.)
  • “Taxpayer support for research” certainly doesn’t call to mind the penny-pinching, “I’ve got mine, Jack, and I’m holding onto it” attitude that has long characterized my own state of Indiana. It certainly doesn’t describe a state that would constitutionalize a cap on property taxes, lest those taxes somehow get raised and then–horrors!–spent on a common civic good like education. Or a better quality of life.
  • When you think about it, a culture of “free thinking”–the fourth intellectual attribute of forward-looking places–really leads to the only characteristic listed that doesn’t immediately connect to the life of the mind: a good quality of life. I don’t think you can have a good quality of life without such a “free thinking” culture.

People who enjoy engaging with ideas, with the arts, with people unlike themselves–people interested not only in acquiring new skills but in using those skills to improve their communities–are people who understand the organic nature and human importance of those communities, and the importance of their own connections to them.

There are people in my city–and I’d wager in yours–who are working hard to create a community that looks like that.

But at this point, my city– and most definitely my state— have a long way to go.

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