WEBVTT 00:00:00.090 --> 00:00:02.430 The following content is provided under a Creative 00:00:02.430 --> 00:00:03.820 Commons license. 00:00:03.820 --> 00:00:06.030 Your support will help MIT OpenCourseWare 00:00:06.030 --> 00:00:10.120 continue to offer high-quality educational resources for free. 00:00:10.120 --> 00:00:12.660 To make a donation or to view additional materials 00:00:12.660 --> 00:00:16.620 from hundreds of MIT courses, visit MIT Open CourseWare 00:00:16.620 --> 00:00:17.992 at ocw.mit.edu. 00:00:21.550 --> 00:00:24.300 WILLIAM BONVILLIAN: All right, we're going to do two in a row. 00:00:24.300 --> 00:00:26.470 And Kevin has got these. 00:00:26.470 --> 00:00:29.490 So first we're going to do a snapshot on, gee, could 00:00:29.490 --> 00:00:31.410 the Defense Department-- 00:00:31.410 --> 00:00:33.930 you remember those guys, with that connected model. 00:00:33.930 --> 00:00:35.190 Could they play a role, here? 00:00:35.190 --> 00:00:37.790 Is there something useful they can do, here? 00:00:37.790 --> 00:00:41.130 And then the second is on this new RPG-- 00:00:41.130 --> 00:00:43.710 fairly new-- ARPA-E model that's come about. 00:00:43.710 --> 00:00:45.510 So this is Dorothy Robyn. 00:00:45.510 --> 00:00:47.215 She was the former Deputy Undersecretary 00:00:47.215 --> 00:00:51.000 of Defense for something called Facilities and Environment. 00:00:54.180 --> 00:00:57.390 And she worked for, you know, Ash Carter. 00:00:57.390 --> 00:00:59.970 DOD had the largest-- 00:00:59.970 --> 00:01:04.660 it's the largest facilities owner in the United States. 00:01:04.660 --> 00:01:08.460 507 installations and bases, 300,000 buildings, 00:01:08.460 --> 00:01:11.280 2.2 billion square feet of space. 00:01:11.280 --> 00:01:12.430 That's interesting. 00:01:12.430 --> 00:01:12.930 Right? 00:01:12.930 --> 00:01:14.760 Maybe they're a test bed. 00:01:14.760 --> 00:01:17.220 Right? 00:01:17.220 --> 00:01:19.333 And, you know, they do consume more oil 00:01:19.333 --> 00:01:21.000 than anybody else in the United States-- 00:01:21.000 --> 00:01:21.990 1.7%. 00:01:21.990 --> 00:01:25.520 That's not a lot, but still it's a lot of oil. 00:01:25.520 --> 00:01:29.130 And they spend a lot on energy every year. 00:01:29.130 --> 00:01:33.120 So maybe they've got an interest in some of this. 00:01:33.120 --> 00:01:36.540 So, sure enough, DOD actually thinks 00:01:36.540 --> 00:01:38.370 it's got an energy problem-- 00:01:38.370 --> 00:01:40.170 for some pretty good reasons. 00:01:40.170 --> 00:01:43.530 They understand that they have a strategic problem 00:01:43.530 --> 00:01:45.470 having to do with worldwide energy supply. 00:01:48.490 --> 00:01:55.800 The United States is profoundly dependent on its oil supply. 00:01:55.800 --> 00:01:59.640 And that is an international market. 00:01:59.640 --> 00:02:05.730 We probably spend a third to a half of our defense 00:02:05.730 --> 00:02:11.190 budget on protecting what the military calls 00:02:11.190 --> 00:02:14.070 their "lines of communication" around oil-- 00:02:14.070 --> 00:02:16.530 i.e., their oil-supply system. 00:02:16.530 --> 00:02:18.690 So, cleverly, the oil industry has 00:02:18.690 --> 00:02:23.460 managed to get the American taxpayers to foot at least $250 00:02:23.460 --> 00:02:26.070 billion a year, protecting their supply system. 00:02:26.070 --> 00:02:29.670 That's pretty clever-- a signal of a politically powerful 00:02:29.670 --> 00:02:32.790 legacy system. 00:02:32.790 --> 00:02:36.180 So there is a deep strategic problem around oil supply. 00:02:36.180 --> 00:02:40.040 And then there's a profound tactical set of problems that-- 00:02:40.040 --> 00:02:43.680 you know, they've been engaged in two Middle Eastern 00:02:43.680 --> 00:02:51.840 wars in the past decade, largely around related to oil supply. 00:02:51.840 --> 00:02:56.070 And their own internal energy supply 00:02:56.070 --> 00:03:00.220 lines created most of their casualties. 00:03:00.220 --> 00:03:00.720 Right? 00:03:00.720 --> 00:03:05.400 That's why we lose people, in these painful supply convoys. 00:03:05.400 --> 00:03:08.640 It forces the army in particular into a terrible tactical 00:03:08.640 --> 00:03:12.300 position of having to defend these fixed points 00:03:12.300 --> 00:03:15.090 and concentrate forces to defend these fixed points, 00:03:15.090 --> 00:03:17.830 in an asymmetric war where you don't want to have fixed 00:03:17.830 --> 00:03:18.330 points. 00:03:18.330 --> 00:03:21.390 You want to be part of communities and populations. 00:03:21.390 --> 00:03:23.880 So essentially the oil-supply problem 00:03:23.880 --> 00:03:26.520 has completely counterdicted everything 00:03:26.520 --> 00:03:28.410 the army knows about how it should 00:03:28.410 --> 00:03:31.110 fight asymmetric conflicts. 00:03:31.110 --> 00:03:33.510 It's forced it into offending long supply chains 00:03:33.510 --> 00:03:35.990 to fixed points, which is not a tactical position it 00:03:35.990 --> 00:03:37.140 wants to be in. 00:03:37.140 --> 00:03:41.140 And it's, in turn, forced many casualties, as a result. 00:03:41.140 --> 00:03:44.820 So the Army and the Marine Corps wants to get out of this box. 00:03:44.820 --> 00:03:49.920 They want more mobile, flexible, tactically free forces, 00:03:49.920 --> 00:03:51.870 to be able to sustain the kind of models 00:03:51.870 --> 00:03:56.400 they've developed for optimizing their warfaring capabilities. 00:03:56.400 --> 00:03:58.770 So they've got a strategic problem, a tactical problem, 00:03:58.770 --> 00:04:01.890 and then they've got a big facilities problem. 00:04:01.890 --> 00:04:05.700 DOD has lots of aging, old facilities, 00:04:05.700 --> 00:04:09.300 on old, long-established bases, often built 00:04:09.300 --> 00:04:13.530 in the World War II time period or the Cold War time period. 00:04:13.530 --> 00:04:17.120 They have been, for the last-- since the end of the Cold War-- 00:04:17.120 --> 00:04:19.620 under a significant amount of cost pressure. 00:04:19.620 --> 00:04:23.400 How can they get their facilities' cost down? 00:04:23.400 --> 00:04:26.700 So that's where Dorothy Robyn, who 00:04:26.700 --> 00:04:29.580 has the facilities responsibility at DOD, where 00:04:29.580 --> 00:04:32.520 she came in. 00:04:32.520 --> 00:04:36.000 Interestingly, DOD every year gets $20 billion 00:04:36.000 --> 00:04:40.170 in something called "milcon"-- 00:04:40.170 --> 00:04:41.310 military construction. 00:04:41.310 --> 00:04:44.460 That's for rehabbing, repairing, upgrading, 00:04:44.460 --> 00:04:47.820 and undertaking new construction for its facilities and bases. 00:04:47.820 --> 00:04:51.720 That's, like, a guaranteed revenue stream. 00:04:51.720 --> 00:04:53.503 And you can do a lot of interesting things 00:04:53.503 --> 00:04:55.170 with a pretty guaranteed revenue stream. 00:04:55.170 --> 00:04:57.780 So one of the things that the Defense Department was 00:04:57.780 --> 00:05:00.690 attempting to do is really take advantage of this revenue 00:05:00.690 --> 00:05:04.080 stream to do significant facilities upgrades, 00:05:04.080 --> 00:05:05.400 in terms of energy uses. 00:05:05.400 --> 00:05:10.770 And so that was one of her major projects, there. 00:05:10.770 --> 00:05:16.200 So DOD could be a very interesting testbed 00:05:16.200 --> 00:05:21.420 and a very interesting initial market for a suite 00:05:21.420 --> 00:05:22.630 of new energy technologies. 00:05:22.630 --> 00:05:23.130 Right? 00:05:23.130 --> 00:05:26.410 So DOD Is not going to do carbon capture and sequestration. 00:05:26.410 --> 00:05:26.910 Right? 00:05:26.910 --> 00:05:29.070 That's not its problem. 00:05:29.070 --> 00:05:32.050 But it sure is interested in getting off the grid. 00:05:32.050 --> 00:05:32.610 Right? 00:05:32.610 --> 00:05:35.280 It believes it has a terrible cyber security 00:05:35.280 --> 00:05:37.170 problem, by being on the grid. 00:05:37.170 --> 00:05:39.390 It wants off. 00:05:39.390 --> 00:05:42.360 It significantly wants to reduce its energy costs. 00:05:42.360 --> 00:05:45.420 It's ready to experiment with renewables, 00:05:45.420 --> 00:05:46.920 partly because of the grid strategy, 00:05:46.920 --> 00:05:51.290 probably to establish more mobility 00:05:51.290 --> 00:05:55.280 and get off fossil fuels line of supplies. 00:05:55.280 --> 00:05:58.800 It's got an incredible number of vehicles, 00:05:58.800 --> 00:06:02.240 both for military purposes and unmilitary purposes. 00:06:02.240 --> 00:06:04.220 That again is another testbed opportunity. 00:06:04.220 --> 00:06:08.510 So the idea here, as her testimony laid out, 00:06:08.510 --> 00:06:10.760 to one of the armed-services committees, 00:06:10.760 --> 00:06:16.310 is that DOD actually could be a partner 00:06:16.310 --> 00:06:18.980 in an energy-technology strategy, 00:06:18.980 --> 00:06:21.800 as a demonstration and testbed kind of center 00:06:21.800 --> 00:06:24.470 and an opportunity to introduce certain kinds of new energy 00:06:24.470 --> 00:06:26.030 technologies. 00:06:26.030 --> 00:06:29.200 Huge interest in batteries, for example. 00:06:29.200 --> 00:06:35.690 So ARPA-E was a gap-filling attempt. 00:06:35.690 --> 00:06:40.203 The Department of Energy innovation system, 00:06:40.203 --> 00:06:42.620 it's kind of what it looked like before ARPA-E came along. 00:06:42.620 --> 00:06:43.120 Right? 00:06:43.120 --> 00:06:45.410 The red stuff is the new stuff. 00:06:45.410 --> 00:06:48.920 The black and white slides or boxes 00:06:48.920 --> 00:06:50.150 are what was there before. 00:06:50.150 --> 00:06:53.030 So, before the new stuff arrived, 00:06:53.030 --> 00:06:57.230 the Department of Energy had big, fundamental research 00:06:57.230 --> 00:06:59.390 organization, very basic research 00:06:59.390 --> 00:07:01.880 in areas like particle physics and chemistry. 00:07:01.880 --> 00:07:04.770 Famous Vannevar Bush basic research entity-- 00:07:04.770 --> 00:07:07.280 the DOE Office of Science. 00:07:07.280 --> 00:07:09.770 The great bulk of the energy laboratories 00:07:09.770 --> 00:07:12.410 reported through the DOE Office of Science. 00:07:12.410 --> 00:07:15.540 They took up about 60% of DOE Office of Science budget. 00:07:15.540 --> 00:07:17.680 It was about $5 billion a year. 00:07:17.680 --> 00:07:21.560 The energy labs-- one of the largest armies 00:07:21.560 --> 00:07:22.640 PhDs in the world. 00:07:22.640 --> 00:07:23.352 Right? 00:07:23.352 --> 00:07:27.820 An incredible 12,000 army-- 00:07:27.820 --> 00:07:29.700 great majority, physicists. 00:07:29.700 --> 00:07:33.820 There may be some engineers in there. 00:07:33.820 --> 00:07:35.260 It was on the wrong problem. 00:07:35.260 --> 00:07:35.830 Right? 00:07:35.830 --> 00:07:41.770 It was on the historical nuclear-weapons problem. 00:07:41.770 --> 00:07:47.380 So, of the 14 energy labs, the nuclear-weapons laboratories 00:07:47.380 --> 00:07:52.720 had about 5,000 of that army of PhDs. 00:07:52.720 --> 00:07:56.800 The NREL laboratory, renewable-energy laboratory, 00:07:56.800 --> 00:07:59.630 had 340 of the PhDs. 00:07:59.630 --> 00:08:00.130 Right? 00:08:00.130 --> 00:08:02.890 You can see what the imbalance here is. 00:08:02.890 --> 00:08:04.457 It's not the right lineup. 00:08:04.457 --> 00:08:06.040 So it was kind of, a lot of the talent 00:08:06.040 --> 00:08:07.990 was on the wrong set of issues-- or at least 00:08:07.990 --> 00:08:09.370 not the new set of issues. 00:08:12.310 --> 00:08:15.670 There was an energy-efficiency and renewable-energy entity, 00:08:15.670 --> 00:08:17.230 had about a $2 billion budget. 00:08:17.230 --> 00:08:20.320 There was some other applied-energy offices. 00:08:20.320 --> 00:08:21.610 That was the landscape. 00:08:21.610 --> 00:08:25.420 And then a huge nuclear security kind 00:08:25.420 --> 00:08:30.442 of weapons-oriented part and a big cleanup, nuclear-cleanup, 00:08:30.442 --> 00:08:31.400 part of the department. 00:08:31.400 --> 00:08:33.940 That was kind of the department. 00:08:33.940 --> 00:08:36.159 Something that happened under Sam Bodman and then 00:08:36.159 --> 00:08:38.620 Steve Chu and then Ernie Moniz is 00:08:38.620 --> 00:08:43.669 that that whole picture of that department got reorganized. 00:08:43.669 --> 00:08:46.910 One of those pieces was ARPA-E. We'll come back 00:08:46.910 --> 00:08:49.200 to this slide in a minute. 00:08:49.200 --> 00:08:54.550 ARPA-E was organized to bring a DARPA-like model-- 00:08:54.550 --> 00:08:56.480 a breakthrough energy research-- 00:08:56.480 --> 00:08:59.290 into a structure that didn't do that. 00:08:59.290 --> 00:09:00.140 Right? 00:09:00.140 --> 00:09:02.510 The applied agencies worked primarily 00:09:02.510 --> 00:09:04.700 with established industry. 00:09:04.700 --> 00:09:07.250 There was nobody really working on the breakthrough side. 00:09:07.250 --> 00:09:09.023 So, if you happened to think that you 00:09:09.023 --> 00:09:10.940 need a lot of breakthrough energy technologies 00:09:10.940 --> 00:09:13.880 to solve the climate problem, you probably 00:09:13.880 --> 00:09:15.290 need something like this. 00:09:15.290 --> 00:09:18.650 So an interesting process got put together, 00:09:18.650 --> 00:09:21.968 to get that assembled. 00:09:21.968 --> 00:09:24.260 You know, Max, you asked a very good question earlier-- 00:09:24.260 --> 00:09:27.950 how come it's only $300 million, when DARPA's $3 billion? 00:09:27.950 --> 00:09:32.450 Those of us who were involved in advocating and supporting 00:09:32.450 --> 00:09:37.590 the legislation, we wanted a much larger budget, frankly, 00:09:37.590 --> 00:09:40.740 a $1-billion kind of budget for ARPA-E-- 00:09:40.740 --> 00:09:43.770 and have never politically been able to get there. 00:09:43.770 --> 00:09:47.000 But, nonetheless, I would argue that ARPA-E has actually 00:09:47.000 --> 00:09:52.400 been a pretty remarkably successful entity. 00:09:52.400 --> 00:09:54.890 So ARPA-E does all this stuff that we've 00:09:54.890 --> 00:09:56.450 talked about for DARPA. 00:09:56.450 --> 00:09:58.790 It's got that model down-- 00:09:58.790 --> 00:10:02.120 flat, nonhierarchical, empowered program managers. 00:10:02.120 --> 00:10:04.450 They're called "project directors." 00:10:04.450 --> 00:10:07.220 Streamlined approval process for both hiring 00:10:07.220 --> 00:10:08.990 and for contracting. 00:10:08.990 --> 00:10:10.160 It's right-left. 00:10:10.160 --> 00:10:12.030 It's challenge-based. 00:10:12.030 --> 00:10:14.810 It only wants to do breakthroughs. 00:10:14.810 --> 00:10:17.720 It's not going to do incremental work. 00:10:17.720 --> 00:10:20.210 It uses island/bridge. 00:10:20.210 --> 00:10:24.350 In fact, Arun Majumdar, who was the first head of ARPA-E, 00:10:24.350 --> 00:10:27.350 who's one of the most talented science leaders I've ever 00:10:27.350 --> 00:10:28.340 seen-- 00:10:28.340 --> 00:10:31.880 remarkably talented guy-- he had been-- 00:10:31.880 --> 00:10:33.660 Steve Chu, the energy secretary-- 00:10:33.660 --> 00:10:37.400 he'd been Steve Chu's deputy at Lawrence Berkeley Laboratory. 00:10:37.400 --> 00:10:41.270 So, when Arun moved to Washington, 00:10:41.270 --> 00:10:44.580 he lived in Steve Chu's basement for six months. 00:10:44.580 --> 00:10:46.540 So there was no island/bridge problem there. 00:10:46.540 --> 00:10:47.040 Right? 00:10:47.040 --> 00:10:49.940 [LAUGH] You know, they were only a floor away. 00:10:49.940 --> 00:10:54.020 There was extremely good communication between the two. 00:10:54.020 --> 00:10:56.490 That's the best island/bridge example I know of. 00:10:56.490 --> 00:11:00.350 [LAUGH] So I try to bring it up. 00:11:00.350 --> 00:11:03.830 But, interestingly, ARPA-E, it didn't 00:11:03.830 --> 00:11:09.410 have that connected energy system for innovation. 00:11:09.410 --> 00:11:10.100 Right? 00:11:10.100 --> 00:11:12.600 Because the Department of Energy doesn't do any procurement. 00:11:12.600 --> 00:11:14.060 They don't buy batteries. 00:11:14.060 --> 00:11:16.370 They don't buy electric cars. 00:11:16.370 --> 00:11:18.410 You know, they don't buy this stuff. 00:11:18.410 --> 00:11:21.260 So DOD buys their first round of products. 00:11:21.260 --> 00:11:23.750 It can be an initial market creator. 00:11:23.750 --> 00:11:25.880 That's one of the advantages DARPA's got. 00:11:25.880 --> 00:11:28.640 How does ARPA-E function, when it 00:11:28.640 --> 00:11:31.280 doesn't have that follow-on capability embedded 00:11:31.280 --> 00:11:33.660 in the department, which it's located? 00:11:33.660 --> 00:11:37.370 So it's had to come up with a whole bunch of new approaches 00:11:37.370 --> 00:11:39.060 that have really been quite interesting. 00:11:39.060 --> 00:11:42.350 And I list some of them in this piece 00:11:42.350 --> 00:11:46.340 that I did with a friend and a DARPA expert, Dick VanAtta. 00:11:46.340 --> 00:11:48.200 They did a lot of work on how to sharpen 00:11:48.200 --> 00:11:50.960 their research-visioning process. 00:11:50.960 --> 00:11:55.070 They definitely followed that research-visioning model. 00:11:55.070 --> 00:11:59.210 It's not only, is this a cool technology, 00:11:59.210 --> 00:12:02.090 but is this a technology that is not only 00:12:02.090 --> 00:12:05.360 potentially a breakthrough, but could it actually scale up? 00:12:05.360 --> 00:12:08.720 Is it plausible-- do we have a plausible pathway, 00:12:08.720 --> 00:12:11.330 by which this technology could come into the marketplace? 00:12:11.330 --> 00:12:14.360 And that's definitely part of the research visioning 00:12:14.360 --> 00:12:18.020 that ARPA-E undertakes, in a way that DARPA doesn't really 00:12:18.020 --> 00:12:21.740 have to because it's got military customers often. 00:12:21.740 --> 00:12:24.560 It's done a remarkable job at building a support community. 00:12:24.560 --> 00:12:28.190 So ARPA-E, just for one example, it 00:12:28.190 --> 00:12:32.480 does what's now become probably the most important US energy 00:12:32.480 --> 00:12:34.640 technology summit every year. 00:12:34.640 --> 00:12:37.760 They get 2,000 to 3,000 people showing up at this. 00:12:37.760 --> 00:12:40.208 Every major energy firm, every venture-capital firm, 00:12:40.208 --> 00:12:42.250 they're all there for, like, a three-day session. 00:12:42.250 --> 00:12:45.050 They have great speakers-- and amazing technology. 00:12:48.070 --> 00:12:50.120 In other words, if you do technology for ARPA-E, 00:12:50.120 --> 00:12:51.860 it's going to get showcased. 00:12:51.860 --> 00:12:55.925 It's going to get presented to this energy world. 00:12:55.925 --> 00:12:57.050 It's going to be shown off. 00:12:57.050 --> 00:12:59.240 They're going to help you take that next step. 00:12:59.240 --> 00:13:03.050 And, interestingly, in the first summit, 00:13:03.050 --> 00:13:06.140 when they put out their first, you know, offer of-- you know, 00:13:06.140 --> 00:13:08.060 for proposals-- 00:13:08.060 --> 00:13:10.310 which didn't specify areas they wanted to research in; 00:13:10.310 --> 00:13:12.440 they just had an open proposal. 00:13:12.440 --> 00:13:13.970 Hi, energy community, out there-- 00:13:13.970 --> 00:13:16.190 send us your best stuff-- 00:13:16.190 --> 00:13:18.560 they expected to get about 400 proposals. 00:13:18.560 --> 00:13:20.700 Instead, they got 4,000. 00:13:20.700 --> 00:13:21.200 Right? 00:13:21.200 --> 00:13:22.617 Because there was so much interest 00:13:22.617 --> 00:13:25.880 in working with a DARPA-like thing. 00:13:25.880 --> 00:13:26.815 So they were drowning. 00:13:26.815 --> 00:13:28.190 They had to invent a whole review 00:13:28.190 --> 00:13:30.843 process, to manage all that. 00:13:30.843 --> 00:13:32.510 But, interestingly-- and they could only 00:13:32.510 --> 00:13:36.540 approve a modest number. 00:13:36.540 --> 00:13:42.890 But they invited all the best proposals-- 00:13:42.890 --> 00:13:44.660 a much larger number-- 00:13:44.660 --> 00:13:49.160 to show up to their first summit and present. 00:13:49.160 --> 00:13:52.520 Which helped build a community. 00:13:52.520 --> 00:13:54.420 You know, the community felt, hey, 00:13:54.420 --> 00:13:56.930 these guys are going to look out for us. 00:13:56.930 --> 00:14:01.700 And it created a whole community interest 00:14:01.700 --> 00:14:04.640 in what this thing was going to be that has been really quite 00:14:04.640 --> 00:14:05.330 successful. 00:14:05.330 --> 00:14:07.460 So they've got a strong support community 00:14:07.460 --> 00:14:11.660 in the venture-capital community. 00:14:11.660 --> 00:14:13.430 They've got strong university support. 00:14:13.430 --> 00:14:14.900 They've got established companies 00:14:14.900 --> 00:14:17.450 that are working with DARPA-- 00:14:17.450 --> 00:14:21.680 supported research and firms. 00:14:21.680 --> 00:14:23.270 It's pretty interesting. 00:14:23.270 --> 00:14:25.250 The most interesting thing they've been doing 00:14:25.250 --> 00:14:30.020 is on the technology-implementation side. 00:14:30.020 --> 00:14:35.780 And here, they created their own commercialization team. 00:14:35.780 --> 00:14:41.130 So there are these project managers, and they-- 00:14:41.130 --> 00:14:44.660 you know, they're empowered, DARPA-like project managers. 00:14:44.660 --> 00:14:47.990 But, on their team, they pull in somebody 00:14:47.990 --> 00:14:51.570 from ARPA-E's commercialization group. 00:14:51.570 --> 00:14:53.390 And these are people with, like, expertise 00:14:53.390 --> 00:14:56.570 in getting venture capital and commercializing technology. 00:14:56.570 --> 00:15:01.010 They know how larger firms do technology commercialization. 00:15:01.010 --> 00:15:03.770 They even have somebody who's expert at military contracting, 00:15:03.770 --> 00:15:07.300 so you might sell it to a DOD market. 00:15:07.300 --> 00:15:11.000 The commercialization team has a member that's 00:15:11.000 --> 00:15:13.200 part of the technology group. 00:15:13.200 --> 00:15:14.000 Right? 00:15:14.000 --> 00:15:17.990 So commercialization is thought through from the outset 00:15:17.990 --> 00:15:20.100 of an ARPA-E technology project. 00:15:20.100 --> 00:15:22.600 Because, again, they don't have this big procurement budget. 00:15:22.600 --> 00:15:25.580 They've got to find more creative ways around it. 00:15:25.580 --> 00:15:30.680 And the greatest compliment so far to ARPA-E and its success-- 00:15:30.680 --> 00:15:33.650 DARPA has now copied the model. 00:15:33.650 --> 00:15:36.830 So, like, the parent has now copied the child. 00:15:36.830 --> 00:15:42.290 And DARPA, earlier this year-- or last year-- 00:15:42.290 --> 00:15:45.590 hired ARPA-E's head of their commercialization team 00:15:45.590 --> 00:15:48.110 to set up a commercialization team at DARPA. 00:15:48.110 --> 00:15:50.260 So, interesting. 00:15:50.260 --> 00:15:51.440 Right? 00:15:51.440 --> 00:15:56.540 So those are some of the efforts that ARPA-E has been making. 00:15:56.540 --> 00:15:58.700 And Kevin and I were talking, earlier, 00:15:58.700 --> 00:16:04.130 but ARPA:E did a very thorough, tough-minded evaluation of all 00:16:04.130 --> 00:16:06.920 of its research budgets and then issued reports in August 00:16:06.920 --> 00:16:08.230 and September. 00:16:08.230 --> 00:16:10.047 And it's a pretty fascinating story. 00:16:10.047 --> 00:16:11.630 You know, as we know from this class-- 00:16:11.630 --> 00:16:13.547 and Kevin and I were just talking about this-- 00:16:13.547 --> 00:16:15.890 technology standup takes a long time. 00:16:15.890 --> 00:16:17.010 Right? 00:16:17.010 --> 00:16:20.710 1947, we do the first mainframe computer. 00:16:20.710 --> 00:16:26.150 You know, 1993, the internet and desktop computing are scaling. 00:16:26.150 --> 00:16:27.520 That's a long time. 00:16:27.520 --> 00:16:28.430 Right? 00:16:28.430 --> 00:16:32.200 Fracking happened a lot faster than most technology standups. 00:16:32.200 --> 00:16:33.790 That was a 15-year project. 00:16:33.790 --> 00:16:37.430 It's paradigm-compatible with the legacy sector, 00:16:37.430 --> 00:16:39.720 so that helped, but that was still a 15-year project. 00:16:39.720 --> 00:16:42.530 So seven years is much too short a timetable 00:16:42.530 --> 00:16:45.920 to be evaluating whether these energy technologies are 00:16:45.920 --> 00:16:47.300 going to scale. 00:16:47.300 --> 00:16:48.930 But, in terms of technology advance, 00:16:48.930 --> 00:16:51.590 and in terms of attracting additional funding from 00:16:51.590 --> 00:16:56.020 nongovernmental sources, ARPA-E has had a very good track 00:16:56.020 --> 00:16:57.140 record-- 00:16:57.140 --> 00:17:00.260 as evidenced in these August and September reports 00:17:00.260 --> 00:17:02.180 they've put out. 00:17:02.180 --> 00:17:03.570 All right. 00:17:03.570 --> 00:17:05.783 All yours, sir. 00:17:05.783 --> 00:17:07.200 MARTHA: Can I just ask a question? 00:17:07.200 --> 00:17:08.325 WILLIAM BONVILLIAN: Please. 00:17:08.325 --> 00:17:10.940 MARTHA: Didn't they announce that basically the companies 00:17:10.940 --> 00:17:14.359 had attracted about as much outside funding as they had 00:17:14.359 --> 00:17:15.785 spent since our ARPA-E began? 00:17:15.785 --> 00:17:16.785 WILLIAM BONVILLIAN: Yes. 00:17:16.785 --> 00:17:19.220 And that was composed of two sources-- other federal R&D, 00:17:19.220 --> 00:17:19.720 or-- 00:17:19.720 --> 00:17:20.660 MARTHA: OK, OK. 00:17:20.660 --> 00:17:24.770 WILLIAM BONVILLIAN: --financial support from allied companies 00:17:24.770 --> 00:17:26.128 or from venture-capital firms. 00:17:26.128 --> 00:17:28.420 And we're going to talk about the venture-capital model 00:17:28.420 --> 00:17:28.950 in a bit. 00:17:28.950 --> 00:17:29.690 MARTHA: OK. 00:17:29.690 --> 00:17:30.140 Sorry for interrupting. 00:17:30.140 --> 00:17:32.520 WILLIAM BONVILLIAN: No, but it was a good point to make. 00:17:32.520 --> 00:17:34.260 Thank you, Martha. 00:17:34.260 --> 00:17:41.390 KEVIN: OK, so, going back to the testimony by Dr. Robyn, 00:17:41.390 --> 00:17:46.430 she stated that all these critical facilities 00:17:46.430 --> 00:17:50.240 that the DOD depends on for running operations 00:17:50.240 --> 00:17:54.720 across the board are so vulnerable. 00:17:54.720 --> 00:17:58.280 Why did they let it get to such a point 00:17:58.280 --> 00:18:00.150 where, you know, someone needs to tell them, 00:18:00.150 --> 00:18:02.790 like, hey, you know, we should innovate in this regard, 00:18:02.790 --> 00:18:04.970 to prevent all that from happening. 00:18:04.970 --> 00:18:07.010 And, taking those lessons learned, 00:18:07.010 --> 00:18:09.470 how should the DOD or any department 00:18:09.470 --> 00:18:13.747 really prioritize any proposals that come forward to it? 00:18:17.987 --> 00:18:19.820 PERSON: Do you mind rephrasing the question? 00:18:19.820 --> 00:18:20.320 KEVIN: Yeah. 00:18:20.320 --> 00:18:25.600 So she said these critical systems are really vulnerable. 00:18:25.600 --> 00:18:27.760 Here's my proposal. 00:18:27.760 --> 00:18:30.370 In the future, or in anyone's opinion, 00:18:30.370 --> 00:18:34.450 how should any department and particularly the DOD 00:18:34.450 --> 00:18:41.110 prioritize its resources, based on these proposals that they 00:18:41.110 --> 00:18:45.940 get, in order to prevent such vulnerabilities from occurring? 00:18:45.940 --> 00:18:47.650 STEPH: I can't imagine that this was 00:18:47.650 --> 00:18:50.825 published without some of those vulnerabilities being patched. 00:18:53.097 --> 00:18:54.680 MARTHA: What do you mean by "patched"? 00:18:54.680 --> 00:18:57.263 STEPH: Like, it does not occur to me that the government would 00:18:57.263 --> 00:18:59.340 allow-- or, you know, the-- what is she-- 00:18:59.340 --> 00:19:01.025 the Deputy Undersecretary of Defense-- 00:19:01.025 --> 00:19:01.900 MARTHA: To publicly-- 00:19:01.900 --> 00:19:05.790 STEPH: --to publicly announce that these vulnerabilities 00:19:05.790 --> 00:19:09.540 exist within their system, in their infrastructure, 00:19:09.540 --> 00:19:11.210 without them first being patched. 00:19:11.210 --> 00:19:11.710 Right? 00:19:11.710 --> 00:19:13.545 And I know that a lot-- 00:19:13.545 --> 00:19:15.420 could you talk a little bit about that, Bill? 00:19:15.420 --> 00:19:15.800 Because-- 00:19:15.800 --> 00:19:16.410 WILLIAM BONVILLIAN: Well, I mean, she's-- 00:19:16.410 --> 00:19:17.610 STEPH: --it says that it's hold until released. 00:19:17.610 --> 00:19:17.860 WILLIAM BONVILLIAN: Right. 00:19:17.860 --> 00:19:20.340 She's testifying in front of the Armed Services Committee, 00:19:20.340 --> 00:19:22.620 and they want to know what's going on. 00:19:22.620 --> 00:19:25.620 And a witness has got an obligation 00:19:25.620 --> 00:19:29.470 to come forward with what the state of affairs is. 00:19:29.470 --> 00:19:33.510 You know I don't think these were probably classified-- 00:19:33.510 --> 00:19:37.020 I know these weren't classified issues, because this 00:19:37.020 --> 00:19:39.960 was an open hearing. 00:19:39.960 --> 00:19:44.010 But she's got a responsibility, as a governmental official, 00:19:44.010 --> 00:19:46.260 to tell a congressional committee what 00:19:46.260 --> 00:19:49.140 in fact is going on and what the issues and vulnerabilities are. 00:19:49.140 --> 00:19:52.530 So I think she's doing her job, and the congressional committee 00:19:52.530 --> 00:19:53.500 is doing its job. 00:19:53.500 --> 00:19:56.073 It's got to probe and find out what the problems are. 00:19:56.073 --> 00:19:58.240 I'm not sure that's a great answer to your question. 00:19:58.240 --> 00:19:59.573 STEPH: I guess-- does that not-- 00:19:59.573 --> 00:20:01.287 I guess, to follow up, would that not 00:20:01.287 --> 00:20:02.745 set us up for more vulnerabilities, 00:20:02.745 --> 00:20:04.740 if we openly acknowledge that that's something 00:20:04.740 --> 00:20:06.450 that we're concerned about? 00:20:06.450 --> 00:20:09.270 Just-- and would it not be a problem 00:20:09.270 --> 00:20:11.250 that we will find ourselves more into, 00:20:11.250 --> 00:20:12.960 if we admit to such vulnerabilities 00:20:12.960 --> 00:20:14.842 in a public setting? 00:20:14.842 --> 00:20:16.300 MARTHA: Maybe it's already obvious, 00:20:16.300 --> 00:20:20.610 if it's been in the press, et cetera. 00:20:20.610 --> 00:20:21.730 People dying-- yeah. 00:20:21.730 --> 00:20:26.640 STUDENT: And then what they do is particularly surprising. 00:20:26.640 --> 00:20:28.140 STEPH: I don't disagree, but I think 00:20:28.140 --> 00:20:32.300 it's different to have a deputy undersecretary admitting it-- 00:20:32.300 --> 00:20:34.300 is my point. 00:20:34.300 --> 00:20:36.970 KEVIN: I think, following up on that, if, you know, 00:20:36.970 --> 00:20:39.910 it's not a surprise to anyone, why 00:20:39.910 --> 00:20:44.380 are other projects prioritized over preventing this 00:20:44.380 --> 00:20:47.110 from happening? 00:20:47.110 --> 00:20:49.238 If it's like, oh, well, of course, they're 00:20:49.238 --> 00:20:51.280 vulnerable to cyber attacks, and these facilities 00:20:51.280 --> 00:20:53.930 are falling apart. 00:20:53.930 --> 00:20:57.550 You know, we were just talking about, the dependence on oil 00:20:57.550 --> 00:20:59.090 causing a lot of problems. 00:20:59.090 --> 00:21:02.223 Why not innovate in that area? 00:21:02.223 --> 00:21:04.681 STUDENT: Well, I think part of it goes back to the funding, 00:21:04.681 --> 00:21:05.985 from that graph. 00:21:05.985 --> 00:21:09.780 You remember that graph, the graph about funding and oil 00:21:09.780 --> 00:21:13.050 prices that [INAUDIBLE] follow the same trend? 00:21:13.050 --> 00:21:15.010 So, like, if funding isn't really steady, 00:21:15.010 --> 00:21:17.950 you can't really innovate very well. 00:21:17.950 --> 00:21:19.810 It's hard to maintain facilities. 00:21:19.810 --> 00:21:22.580 KEVIN: But you said they get a $20 billion-- 00:21:22.580 --> 00:21:24.830 WILLIAM BONVILLIAN: They do have an annual $20-billion 00:21:24.830 --> 00:21:27.802 military-construction appropriation 00:21:27.802 --> 00:21:30.010 that's potentially an interesting revenue stream that 00:21:30.010 --> 00:21:31.755 you could finance off of. 00:21:31.755 --> 00:21:33.270 STUDENT: But that's just DOD. 00:21:33.270 --> 00:21:35.630 Like, other departments, they still have these problems. 00:21:35.630 --> 00:21:37.650 WILLIAM BONVILLIAN: Right, But DOD is the monster in the room. 00:21:37.650 --> 00:21:39.692 They're the ones that really have the facilities. 00:21:42.090 --> 00:21:44.670 STUDENT: Also, I wonder about the distribution 00:21:44.670 --> 00:21:49.290 of the quality, I guess, in facilities or infrastructure. 00:21:49.290 --> 00:21:52.350 So I can imagine, not all these 300,000 buildings 00:21:52.350 --> 00:21:54.800 are really falling apart and in disrepair. 00:21:54.800 --> 00:21:57.810 But I think maybe it's just, they 00:21:57.810 --> 00:22:01.010 don't like that there are a number of buildings sort 00:22:01.010 --> 00:22:03.270 of on this lighter end of-- 00:22:03.270 --> 00:22:05.070 kind of built in World War II-esque, 00:22:05.070 --> 00:22:06.870 and they haven't really been upgraded from a construction 00:22:06.870 --> 00:22:08.180 or systems point of view. 00:22:08.180 --> 00:22:11.625 And I would argue that, like, the $20 billion 00:22:11.625 --> 00:22:13.000 or however they're getting yearly 00:22:13.000 --> 00:22:16.800 to upgrade these services is adequate or kind of serving 00:22:16.800 --> 00:22:22.140 them well, such that those are-- like, that's your patch. 00:22:22.140 --> 00:22:27.720 And it's not really an issue of national security, in a sense, 00:22:27.720 --> 00:22:31.147 because this is a distributed problem, kind of over the DOD 00:22:31.147 --> 00:22:32.730 network, rather than, like, all right, 00:22:32.730 --> 00:22:36.780 all of our systems in Virginia or in this particular area 00:22:36.780 --> 00:22:40.110 are subject to cyber attack and are vulnerable. 00:22:40.110 --> 00:22:42.360 It seems like-- like, it's too big of a problem for it 00:22:42.360 --> 00:22:46.782 to be actual information for her, you know, 00:22:46.782 --> 00:22:48.240 not to be able to testify about it. 00:22:48.240 --> 00:22:49.907 This isn't a national-security interest, 00:22:49.907 --> 00:22:51.540 in that it has to be protected. 00:22:51.540 --> 00:22:52.080 STEPH: Yeah. 00:22:52.080 --> 00:22:54.080 And, to your point about the size of the budget, 00:22:54.080 --> 00:22:57.440 I'm looking at the 2017 report on infrastructure management, 00:22:57.440 --> 00:22:59.190 from the Government Accountability Office. 00:22:59.190 --> 00:23:02.670 And it says that they expect the DOD estimated replacement 00:23:02.670 --> 00:23:05.310 value to be $880 billion. 00:23:05.310 --> 00:23:07.260 So. 00:23:07.260 --> 00:23:07.760 That's a-- 00:23:07.760 --> 00:23:09.470 STUDENT: What do you mean by "replacement value"? 00:23:09.470 --> 00:23:11.220 STEPH: Well, that's what they're-- for the 00:23:11.220 --> 00:23:13.845 infrastructure, for the DOD, that they need to improve 00:23:13.845 --> 00:23:14.345 [INAUDIBLE]. 00:23:14.345 --> 00:23:15.732 STUDENT: That's a lot of money. 00:23:15.732 --> 00:23:17.080 [LAUGHTER] 00:23:17.080 --> 00:23:17.830 So that was just-- 00:23:17.830 --> 00:23:20.277 I guess that was just released for fiscal year 2017. 00:23:20.277 --> 00:23:20.860 STUDENT: Yeah. 00:23:20.860 --> 00:23:22.350 I mean, I don't think it's too much an issue 00:23:22.350 --> 00:23:23.080 that they released this. 00:23:23.080 --> 00:23:24.880 There's this other thing called Zero Days, which 00:23:24.880 --> 00:23:26.380 is actually things that you can hack 00:23:26.380 --> 00:23:27.940 into infrastructure systems. 00:23:27.940 --> 00:23:29.170 And that's more serious. 00:23:29.170 --> 00:23:33.690 What they do is, they will report it to the agency. 00:23:33.690 --> 00:23:35.733 And, because they know agencies will get lazy, 00:23:35.733 --> 00:23:37.900 if you say you're not going to do anything they say, 00:23:37.900 --> 00:23:41.522 I'll give you x amount of time until I do report it publicly. 00:23:41.522 --> 00:23:43.480 And I think this was an issue that they already 00:23:43.480 --> 00:23:45.280 knew it was OK to say publicly. 00:23:45.280 --> 00:23:48.400 And so I'm not too concerned with that. 00:23:48.400 --> 00:23:51.850 On the issue of actual, oh, this is a problem, 00:23:51.850 --> 00:23:54.050 I think it's just more that it's a big government. 00:23:54.050 --> 00:23:56.230 There's a lot of problems. 00:23:56.230 --> 00:23:58.170 And there isn't really going to be-- you know, 00:23:58.170 --> 00:23:59.680 nothing's going to be perfect. 00:23:59.680 --> 00:24:01.750 And so they're just trying to bring light to it, 00:24:01.750 --> 00:24:04.390 so they can put funds to it. 00:24:04.390 --> 00:24:06.110 And things do precipitate, especially 00:24:06.110 --> 00:24:07.870 with organizations where-- 00:24:07.870 --> 00:24:08.950 I mean, this happens with people all the time. 00:24:08.950 --> 00:24:09.090 Right? 00:24:09.090 --> 00:24:10.000 You really don't know what you're going 00:24:10.000 --> 00:24:11.110 to do, like, a day from now. 00:24:11.110 --> 00:24:11.640 Right? 00:24:11.640 --> 00:24:13.432 Or a lot of things will add up, and they'll 00:24:13.432 --> 00:24:16.250 get past saturation points. 00:24:16.250 --> 00:24:18.140 And it's also just a big legacy sector, 00:24:18.140 --> 00:24:20.938 so there is going to be issues. 00:24:20.938 --> 00:24:22.480 AUDIENCE: Didn't you ask the question 00:24:22.480 --> 00:24:24.210 of how should they prioritize? 00:24:24.210 --> 00:24:24.990 KEVIN: [INAUDIBLE] 00:24:24.990 --> 00:24:26.150 MARTHA: Yeah. 00:24:26.150 --> 00:24:28.665 KEVIN: [LAUGH] You know, where should those $20 billion 00:24:28.665 --> 00:24:29.290 go, every year? 00:24:29.290 --> 00:24:29.790 MARTHA: Mhm? 00:24:32.608 --> 00:24:34.900 WOMAN: I just think it's hard, because, to most people, 00:24:34.900 --> 00:24:37.720 $20 billion seems like it could solve a lot of problems. 00:24:37.720 --> 00:24:39.620 Like, that seems like a lot of money. 00:24:39.620 --> 00:24:42.850 But, I guess, when you spread it across all the facilities 00:24:42.850 --> 00:24:45.725 that they have, to make a real impact 00:24:45.725 --> 00:24:48.940 you really need to pick specific things to focus on. 00:24:48.940 --> 00:24:52.180 And then, I think, a lot of politics can come into, like, 00:24:52.180 --> 00:24:55.150 who's getting the money and how they're allocating it, 00:24:55.150 --> 00:25:00.050 because there's not enough for every base to get an upgrade. 00:25:00.050 --> 00:25:02.350 And so I'm sure that's an additional challenge. 00:25:02.350 --> 00:25:07.670 STEPH: The report says 562,000 facilities worldwide, 00:25:07.670 --> 00:25:09.730 at 4,800 sites. 00:25:09.730 --> 00:25:12.785 So that's steep. 00:25:12.785 --> 00:25:13.660 STUDENT: $20 billion? 00:25:13.660 --> 00:25:14.160 STEPH: Yeah. 00:25:17.998 --> 00:25:19.440 STUDENT: It's not too much money. 00:25:19.440 --> 00:25:21.690 WILLIAM BONVILLIAN: Kevin, how about a closing thought 00:25:21.690 --> 00:25:25.705 on Dorothy Robyn's testimony? 00:25:25.705 --> 00:25:30.270 KEVIN: Well, I'm curious to see how the proposal she laid out 00:25:30.270 --> 00:25:34.260 has progressed since it was made in 2012. 00:25:34.260 --> 00:25:39.735 I would hope that more people bring attention 00:25:39.735 --> 00:25:41.110 to this-- like, hey, you know, we 00:25:41.110 --> 00:25:45.430 should innovate in these other things that aren't just, like, 00:25:45.430 --> 00:25:46.870 weapons. 00:25:46.870 --> 00:25:50.990 Because the development of other projects 00:25:50.990 --> 00:25:54.667 depends on the development of those, as well. 00:25:54.667 --> 00:25:55.750 WILLIAM BONVILLIAN: Right. 00:25:55.750 --> 00:25:59.470 And I think it's fair to say that she and colleagues at DOD 00:25:59.470 --> 00:26:03.400 actually made significant progress in using 00:26:03.400 --> 00:26:06.460 these facilities as, in effect, test beds and demonstration 00:26:06.460 --> 00:26:10.060 centers for new technologies. 00:26:10.060 --> 00:26:13.450 And, because this is essentially cost-saving and 00:26:13.450 --> 00:26:16.780 security-related issues, there's good reason 00:26:16.780 --> 00:26:20.020 to think that, under the new administration, a lot of this 00:26:20.020 --> 00:26:23.020 will continue. 00:26:23.020 --> 00:26:24.575 Let me turn to the ARPA-E piece. 00:26:28.460 --> 00:26:31.320 Questions for us, on that one? 00:26:31.320 --> 00:26:35.500 KEVIN: So, you know, since you said they just 00:26:35.500 --> 00:26:38.860 released a report, analyzing [INAUDIBLE] projects 00:26:38.860 --> 00:26:41.850 on the research and the relative success of that, 00:26:41.850 --> 00:26:45.910 and because we have evidence files [INAUDIBLE] DARPA 00:26:45.910 --> 00:26:49.570 has been, why don't we really hear 00:26:49.570 --> 00:26:51.150 about any other DARPA qualms? 00:26:51.150 --> 00:26:54.400 You know, they mentioned that the Department of Education was 00:26:54.400 --> 00:26:57.815 considering ARPA-E, that the NIH was considering their research 00:26:57.815 --> 00:27:00.093 models depending on-- 00:27:00.093 --> 00:27:04.540 [LAUGH] that sort of mimic DARPA. 00:27:04.540 --> 00:27:07.090 Why aren't innovation models like 00:27:07.090 --> 00:27:12.170 the ones in DARPA and ARPA-E being utilized in other fields? 00:27:12.170 --> 00:27:13.410 STUDENT: It's possible that-- 00:27:13.410 --> 00:27:16.040 this is just an opinion, and I have no facts to back it up-- 00:27:16.040 --> 00:27:16.540 but-- 00:27:16.540 --> 00:27:17.330 [LAUGHTER] 00:27:17.330 --> 00:27:21.230 --it's possible that maybe some of the challenges that 00:27:21.230 --> 00:27:25.100 are solved by DARPA and ARPA-E, they don't necessarily 00:27:25.100 --> 00:27:26.840 translate as well to social problems, 00:27:26.840 --> 00:27:28.820 like Department of Education. 00:27:28.820 --> 00:27:34.010 So with education, it's less of a technical problem. 00:27:34.010 --> 00:27:36.780 And maybe a lot of it's more, how do we manage people, 00:27:36.780 --> 00:27:40.910 how do we determine what's a good versus a bad student, good 00:27:40.910 --> 00:27:42.870 versus bad teacher, et cetera. 00:27:42.870 --> 00:27:47.350 So I'm not sure if it would fit as well. 00:27:47.350 --> 00:27:48.932 Again, opinion. 00:27:48.932 --> 00:27:52.100 KEVIN: To add, I think education in particular 00:27:52.100 --> 00:27:54.240 would also be considered a legacy sector. 00:27:54.240 --> 00:27:57.410 And to stand up, you know, a DARPA-like model for education 00:27:57.410 --> 00:27:59.390 would be to completely undermine the education 00:27:59.390 --> 00:28:00.980 system in the United States. 00:28:00.980 --> 00:28:04.190 And that would require the undertaking 00:28:04.190 --> 00:28:08.810 of not only the education system in terms of national standards 00:28:08.810 --> 00:28:11.510 but also a reframing fundamentally 00:28:11.510 --> 00:28:15.200 at the state level of the ways in which we conduct education 00:28:15.200 --> 00:28:16.310 policy. 00:28:16.310 --> 00:28:20.510 And that, I think, from a reframing the conversation 00:28:20.510 --> 00:28:22.490 nationally, would be an immensely difficult 00:28:22.490 --> 00:28:23.060 undertaking. 00:28:23.060 --> 00:28:24.230 It would be politically-- 00:28:24.230 --> 00:28:26.272 I mean, I don't know if "politically unviable" is 00:28:26.272 --> 00:28:27.950 the right word, but it seems to me 00:28:27.950 --> 00:28:30.050 like it would be politically insurmountable. 00:28:30.050 --> 00:28:33.290 Because you're now threatening, you know, states' rights. 00:28:33.290 --> 00:28:34.790 PERSON: Why does it-- 00:28:34.790 --> 00:28:37.910 why is it an undermining of the education system I mean, the-- 00:28:37.910 --> 00:28:39.500 STEPH: [INTERPOSING VOICES] 00:28:39.500 --> 00:28:40.542 PERSON: --defense system. 00:28:40.542 --> 00:28:42.583 WILLIAM BONVILLIAN: Let me just give a little bit 00:28:42.583 --> 00:28:44.900 of background, because I was involved in some of this. 00:28:44.900 --> 00:28:45.870 And it never happened. 00:28:45.870 --> 00:28:47.995 And Congress was never interested in funding in it. 00:28:47.995 --> 00:28:50.780 And part of it was, you know, what does the Department 00:28:50.780 --> 00:28:52.640 of Education-- which is essentially 00:28:52.640 --> 00:28:55.740 an entitlement-administration organization-- 00:28:55.740 --> 00:28:58.860 what do they know about technology policy in education? 00:28:58.860 --> 00:28:59.390 Right? 00:28:59.390 --> 00:29:01.790 But, with the development of online capability 00:29:01.790 --> 00:29:04.730 and computer-gaming technologies, 00:29:04.730 --> 00:29:07.430 a whole new raft of technology options 00:29:07.430 --> 00:29:09.140 has entered the education field. 00:29:09.140 --> 00:29:13.550 So there was a fair amount of thinking that maybe there 00:29:13.550 --> 00:29:16.760 was room for a technology-breakthrough entity 00:29:16.760 --> 00:29:17.960 in the education space. 00:29:17.960 --> 00:29:21.470 The education space is also notorious 00:29:21.470 --> 00:29:24.440 for conducting almost no R&D. Right? 00:29:24.440 --> 00:29:25.980 Almost zero. 00:29:25.980 --> 00:29:26.480 Right? 00:29:26.480 --> 00:29:27.313 It's tragic. 00:29:27.313 --> 00:29:27.980 KEVIN: I would-- 00:29:27.980 --> 00:29:28.760 WILLIAM BONVILLIAN: And how are you 00:29:28.760 --> 00:29:31.152 going to transform a sector without, you know, 00:29:31.152 --> 00:29:33.110 undertaking technology development and research 00:29:33.110 --> 00:29:34.250 and development on it? 00:29:34.250 --> 00:29:37.310 So, agree, it's threatening, right? 00:29:37.310 --> 00:29:39.050 Online education and blended learning 00:29:39.050 --> 00:29:41.390 are threatening models to establish systems-- 00:29:41.390 --> 00:29:44.210 no question about it. 00:29:44.210 --> 00:29:48.400 But this was actually, I think, an interesting idea. 00:29:48.400 --> 00:29:52.330 The problem was, who's going to find the right technology 00:29:52.330 --> 00:29:54.760 crowd that would really create the kind of breakthroughs 00:29:54.760 --> 00:29:56.355 that a DARPA-like entity could do? 00:29:56.355 --> 00:29:58.147 And I think that was more of the challenge. 00:29:58.147 --> 00:29:59.980 KEVIN: And you're saying it's making threats 00:29:59.980 --> 00:30:02.060 to establish education models. 00:30:02.060 --> 00:30:05.340 Is that necessarily a bad thing, wherein, you know, 00:30:05.340 --> 00:30:06.923 we see the US rankings are way below-- 00:30:06.923 --> 00:30:09.548 WILLIAM BONVILLIAN: No, I'm not saying it's a bad thing at all. 00:30:09.548 --> 00:30:11.430 I think the whole system needs to be changed. 00:30:11.430 --> 00:30:14.060 But I agree with you, Kevin. 00:30:14.060 --> 00:30:16.458 And this would be a tool to try some of that with. 00:30:16.458 --> 00:30:18.250 STUDENT: And it's the big disruption thing. 00:30:18.250 --> 00:30:19.980 It's like-- it's like Uber. 00:30:19.980 --> 00:30:23.700 So imagine, like, if you really affect the teachers' jobs, 00:30:23.700 --> 00:30:24.840 there's all these unions. 00:30:24.840 --> 00:30:25.350 Right? 00:30:25.350 --> 00:30:27.257 So, like, now a kid can go and, like, 00:30:27.257 --> 00:30:28.840 he doesn't-- he still needs a teacher, 00:30:28.840 --> 00:30:31.075 but now you've kind of made them very uncomfortable. 00:30:31.075 --> 00:30:32.700 So you can get the amount of push-back. 00:30:32.700 --> 00:30:33.830 So, when you create this system, you 00:30:33.830 --> 00:30:35.288 have to figure out how you're going 00:30:35.288 --> 00:30:37.496 to make it so that the teacher doesn't feel offended. 00:30:37.496 --> 00:30:39.621 I mean, Kahn Academy did a really good job of this, 00:30:39.621 --> 00:30:41.910 of, like, OK, well, now you can spend your time doing 00:30:41.910 --> 00:30:44.010 what you do, in the classroom. 00:30:44.010 --> 00:30:46.635 But even then, how are you going to get mass support? 00:30:46.635 --> 00:30:48.760 And I still don't know what their numbers are like. 00:30:48.760 --> 00:30:49.980 STUDENT: Why is the kid uncomfortable? 00:30:49.980 --> 00:30:51.570 STUDENT: Not the kid, the teacher. 00:30:51.570 --> 00:30:52.528 Because there's unions. 00:30:52.528 --> 00:30:54.965 So this is especially important in, like, the-- 00:30:54.965 --> 00:30:56.340 Steve Case, the guy who made AOL. 00:30:56.340 --> 00:30:59.080 He made a book called The Third Wave, which is, like, you know, 00:30:59.080 --> 00:31:00.910 the internet entrepreneurs that will affect 00:31:00.910 --> 00:31:03.840 physical structures and not just web 2.0 that is on Facebook 00:31:03.840 --> 00:31:06.090 and Snapchat, the people that would create systems 00:31:06.090 --> 00:31:08.910 that interact with people like Uber, 00:31:08.910 --> 00:31:10.450 they don't just make a technology. 00:31:10.450 --> 00:31:14.250 They have to focus on the legacy history of the people 00:31:14.250 --> 00:31:15.280 in that organization. 00:31:15.280 --> 00:31:16.230 So, when you make an Uber, you have 00:31:16.230 --> 00:31:18.522 to worry about the taxi-cab drivers who paid $1 million 00:31:18.522 --> 00:31:19.350 for a medallion. 00:31:19.350 --> 00:31:21.267 And this is how they're supporting themselves, 00:31:21.267 --> 00:31:23.320 and now you're going to disrupt it. 00:31:23.320 --> 00:31:25.403 And also, what's going to happen to these drivers? 00:31:25.403 --> 00:31:27.600 What about union problems? 00:31:27.600 --> 00:31:31.517 How do you ensure safety, as there's been several concerns. 00:31:31.517 --> 00:31:32.350 So it's not a tech-- 00:31:32.350 --> 00:31:35.585 These aren't-- I think for DARPA and ARPA-E, 00:31:35.585 --> 00:31:36.710 there's a technology issue. 00:31:36.710 --> 00:31:39.180 Let's do the technology. 00:31:39.180 --> 00:31:40.800 For these issues, it's more of a, 00:31:40.800 --> 00:31:42.510 this is very much a people technology. 00:31:42.510 --> 00:31:43.010 Right? 00:31:43.010 --> 00:31:45.460 Like-- And most politicians-- 00:31:45.460 --> 00:31:48.347 Michael Bloomberg, Bill Gates, who's a billionaire, 00:31:48.347 --> 00:31:49.180 which you all know-- 00:31:49.180 --> 00:31:53.070 WILLIAM BONVILLIAN: But, Martín, there still have been-- 00:31:53.070 --> 00:31:56.220 look, I mean, how many technological disruptions 00:31:56.220 --> 00:31:57.750 of education have there been? 00:31:57.750 --> 00:32:01.316 I mean, we came up with the printing press in, what, 1562? 00:32:01.316 --> 00:32:02.130 [LAUGHTER] 00:32:02.130 --> 00:32:02.820 Right? 00:32:02.820 --> 00:32:03.850 That was a big one. 00:32:03.850 --> 00:32:04.670 Right? 00:32:04.670 --> 00:32:06.270 Books-- we figured out books. 00:32:06.270 --> 00:32:07.330 That's about it. 00:32:07.330 --> 00:32:07.890 Right? 00:32:07.890 --> 00:32:09.870 That's pretty much the change. 00:32:09.870 --> 00:32:13.110 So applying this whole new information-technology online 00:32:13.110 --> 00:32:18.460 world to the education system, those are profound technology-- 00:32:18.460 --> 00:32:22.530 and, I agree, social and learning challenges 00:32:22.530 --> 00:32:23.387 go with those. 00:32:23.387 --> 00:32:25.470 And they are threatening to establish communities. 00:32:25.470 --> 00:32:26.640 I agree completely. 00:32:26.640 --> 00:32:29.340 But I do think, interestingly, certainly 00:32:29.340 --> 00:32:31.740 for the first time in my lifetime, 00:32:31.740 --> 00:32:35.760 I've seen an opportunity for significant technology entry 00:32:35.760 --> 00:32:39.310 into a classic legacy sector. 00:32:39.310 --> 00:32:43.146 And so the idea of putting a DARPA-like thing around that, 00:32:43.146 --> 00:32:45.220 that was an interesting idea. 00:32:45.220 --> 00:32:45.720 Right? 00:32:45.720 --> 00:32:48.145 It just hasn't happened. 00:32:48.145 --> 00:32:49.770 STUDENT: I think I'm going to push back 00:32:49.770 --> 00:32:50.480 on this a little bit-- 00:32:50.480 --> 00:32:50.780 WILLIAM BONVILLIAN: Please. 00:32:50.780 --> 00:32:52.530 STUDENT: --the idea that education doesn't 00:32:52.530 --> 00:32:54.930 have a DARPA-like model. 00:32:54.930 --> 00:32:57.240 Like, the rise of charter schools, I think, 00:32:57.240 --> 00:33:01.020 has really disrupted how we think about the system 00:33:01.020 --> 00:33:01.878 of public education. 00:33:01.878 --> 00:33:04.170 And you used to really just have public versus private, 00:33:04.170 --> 00:33:07.620 but now you have private and, like, quasi public 00:33:07.620 --> 00:33:11.040 charter schools that receive federal and state funding 00:33:11.040 --> 00:33:14.820 but, like, do state testing but don't do some other things. 00:33:14.820 --> 00:33:16.710 And they have the elements that you 00:33:16.710 --> 00:33:18.877 think you get in a public education, which is, like, 00:33:18.877 --> 00:33:22.092 the group environment, but they focus their classes 00:33:22.092 --> 00:33:23.550 and they structure them differently 00:33:23.550 --> 00:33:24.630 and they do a whole bunch of other stuff, 00:33:24.630 --> 00:33:26.005 because they don't have to adhere 00:33:26.005 --> 00:33:28.920 to kind of all of the regulations that 00:33:28.920 --> 00:33:31.870 come from the state and the federal government. 00:33:31.870 --> 00:33:35.160 And so I would say that education has-- 00:33:35.160 --> 00:33:37.500 it's like a distributed-- it is a distributed system, 00:33:37.500 --> 00:33:39.260 because it gets, like, more state by state 00:33:39.260 --> 00:33:40.968 than, like, really the Federal Department 00:33:40.968 --> 00:33:42.810 of Education-mandated things. 00:33:42.810 --> 00:33:46.140 But also, in charter schools and things like this, 00:33:46.140 --> 00:33:48.498 you have opportunities for different models that are-- 00:33:48.498 --> 00:33:50.040 like, people are already testing out, 00:33:50.040 --> 00:33:53.370 and you're already seeing this disruption that Martín is 00:33:53.370 --> 00:33:56.700 talking about, where you have these entrenched 00:33:56.700 --> 00:33:59.790 public-education systems, but now you're having this rival 00:33:59.790 --> 00:34:03.240 charter school that now comes in and kind of disrupts 00:34:03.240 --> 00:34:04.823 teachers' unions and things like that. 00:34:04.823 --> 00:34:06.990 WILLIAM BONVILLIAN: All right, so I'm going to-- you 00:34:06.990 --> 00:34:09.070 know, I'm going to halt our education discussion. 00:34:09.070 --> 00:34:09.570 Right? 00:34:09.570 --> 00:34:10.230 [LAUGHTER] 00:34:10.230 --> 00:34:13.440 Because we're going to have a whole class, next week, 00:34:13.440 --> 00:34:14.310 on education. 00:34:14.310 --> 00:34:18.960 So we can pursue this at length. 00:34:18.960 --> 00:34:21.630 This is kind of a breath of what's to come, 00:34:21.630 --> 00:34:23.500 in next week's experiment. 00:34:23.500 --> 00:34:27.300 But, Kevin, why don't you close out our ARPA-E discussion 00:34:27.300 --> 00:34:27.840 with-- 00:34:27.840 --> 00:34:30.132 maybe summarize what you thought some of the key points 00:34:30.132 --> 00:34:30.870 are about ARPA-E? 00:34:34.197 --> 00:34:35.280 KEVIN: It's still growing. 00:34:35.280 --> 00:34:39.520 I think-- well, it might not be growing [LAUGH] anymore. 00:34:39.520 --> 00:34:44.060 But it's a good proof of concept that the DARPA model and models 00:34:44.060 --> 00:34:50.760 like it are good change agents, when they're needed. 00:34:50.760 --> 00:34:53.560 Especially in a really established legacy sector 00:34:53.560 --> 00:34:56.489 like energy is. 00:34:56.489 --> 00:34:59.990 My personal opinion-- I'd like to see these kind of models 00:34:59.990 --> 00:35:01.272 applied elsewhere. 00:35:01.272 --> 00:35:03.480 You know, I was reading, here, that Homeland Security 00:35:03.480 --> 00:35:08.000 intelligence and others were planning their own ARPA models. 00:35:08.000 --> 00:35:10.635 And, even on smaller scales, I feel like this innovation model 00:35:10.635 --> 00:35:13.303 could be really beneficial. 00:35:13.303 --> 00:35:14.345 WILLIAM BONVILLIAN: Good. 00:35:14.345 --> 00:35:14.660 OK. 00:35:14.660 --> 00:35:15.080 STUDENT: I have one more question, 00:35:15.080 --> 00:35:16.700 because we were talking about innovation organizations. 00:35:16.700 --> 00:35:17.990 I was wondering if there was an innovation 00:35:17.990 --> 00:35:20.110 organization for manufacturing, because that's 00:35:20.110 --> 00:35:21.952 a focus of yours. 00:35:21.952 --> 00:35:24.410 WILLIAM BONVILLIAN: There are these brand-new manufacturing 00:35:24.410 --> 00:35:25.130 institutes. 00:35:25.130 --> 00:35:26.880 And there's 14 of these. 00:35:26.880 --> 00:35:31.130 And they are organized around major technology challenges 00:35:31.130 --> 00:35:32.525 in the manufacturing space. 00:35:32.525 --> 00:35:33.650 STUDENT: Could you specify? 00:35:33.650 --> 00:35:35.710 WILLIAM BONVILLIAN: So, 3D printing. 00:35:35.710 --> 00:35:38.780 You know, what technology advances are we going to get 00:35:38.780 --> 00:35:40.250 out of that, whether it's-- 00:35:40.250 --> 00:35:43.847 there's an institute around tissue engineering 00:35:43.847 --> 00:35:44.930 and regenerative medicine. 00:35:44.930 --> 00:35:46.710 There's an institute around photonics. 00:35:46.710 --> 00:35:49.610 There's an institute around power electronics 00:35:49.610 --> 00:35:51.070 and wideband-gap semiconductors. 00:35:51.070 --> 00:35:54.690 There's an institute around advanced composites. 00:35:54.690 --> 00:35:57.680 So, in 14 different interesting technology areas 00:35:57.680 --> 00:36:02.480 that could be quite powerful, across a range of manufacturing 00:36:02.480 --> 00:36:04.910 sectors, we are attempting an innovation model. 00:36:04.910 --> 00:36:06.830 It's a public-private collaboration. 00:36:06.830 --> 00:36:08.900 STUDENT: So they try to do best practices in standardization? 00:36:08.900 --> 00:36:10.442 WILLIAM BONVILLIAN: Well, no, they're 00:36:10.442 --> 00:36:12.210 attempting to do technology development. 00:36:12.210 --> 00:36:13.490 So, TRA level-- 00:36:13.490 --> 00:36:19.100 TRL levels 4 through 7, kind of, mid- to later-stage technology 00:36:19.100 --> 00:36:22.215 development efforts, tying that to the communities that 00:36:22.215 --> 00:36:24.090 would have to be involved if these models are 00:36:24.090 --> 00:36:25.820 going to get picked up. 00:36:25.820 --> 00:36:29.100 So it's an interesting-- it's the first attempt, really, 00:36:29.100 --> 00:36:33.560 in the US, other than SEMATECH, to bring an innovation model 00:36:33.560 --> 00:36:35.000 to the manufacturing sector. 00:36:35.000 --> 00:36:36.980 STUDENT: Do these manufacturing institutes 00:36:36.980 --> 00:36:39.290 follow one general innovation model? 00:36:39.290 --> 00:36:42.270 Or does each one cater to whatever-- 00:36:42.270 --> 00:36:44.610 WILLIAM BONVILLIAN: Each one is-- 00:36:44.610 --> 00:36:46.100 they share a lot of similarities. 00:36:46.100 --> 00:36:47.060 They're all cost-share. 00:36:47.060 --> 00:36:48.710 They involve small and large firms. 00:36:48.710 --> 00:36:51.230 They involve university with strong technology 00:36:51.230 --> 00:36:52.670 and engineering programs. 00:36:52.670 --> 00:36:54.077 They involve community colleges. 00:36:54.077 --> 00:36:55.660 They have workforce-development model. 00:36:55.660 --> 00:36:57.690 So they share those pieces. 00:36:57.690 --> 00:36:59.570 But then the particular technology area 00:36:59.570 --> 00:37:01.408 they're pursuing means they're going to be 00:37:01.408 --> 00:37:02.700 organized somewhat differently. 00:37:02.700 --> 00:37:06.590 So the one MIT is leading, on revolutionary fibers, 00:37:06.590 --> 00:37:09.500 that's got a different approach and a different kind of sector, 00:37:09.500 --> 00:37:13.370 frankly, than the composite sector. 00:37:13.370 --> 00:37:15.770 So it's an interesting attempt to bring innovation 00:37:15.770 --> 00:37:20.210 into a long-standing legacy sector where the federal 00:37:20.210 --> 00:37:22.610 innovation system never really played any role-- 00:37:22.610 --> 00:37:24.330 except for SEMATECH. 00:37:24.330 --> 00:37:29.450 So let me turn to this kind of Plan B idea. 00:37:29.450 --> 00:37:33.080 The idea here was, you know, we're 00:37:33.080 --> 00:37:37.250 not going to do a cap-and-trade proposal anytime soon. 00:37:37.250 --> 00:37:38.800 So what do we do? 00:37:38.800 --> 00:37:41.630 You know, what's the menu of options, if we actually want 00:37:41.630 --> 00:37:43.220 to deal with climate change? 00:37:43.220 --> 00:37:45.680 And one of the problems-- look, I 00:37:45.680 --> 00:37:50.630 was involved in drafting the original Senate climate-change 00:37:50.630 --> 00:37:51.298 legislation. 00:37:51.298 --> 00:37:53.090 And one of the problems in that legislation 00:37:53.090 --> 00:37:57.710 was, we were attempting an economy-wide fix, 00:37:57.710 --> 00:38:01.880 based upon a neoclassical economic concept 00:38:01.880 --> 00:38:05.900 that you could alter prices and drive change. 00:38:05.900 --> 00:38:09.930 And it turned out to be more complicated than that. 00:38:09.930 --> 00:38:11.150 Right? 00:38:11.150 --> 00:38:14.640 First of all, it's hard to get an economy-wide model imposed. 00:38:14.640 --> 00:38:16.640 It's hard to nail everybody at the same time. 00:38:16.640 --> 00:38:17.140 Right? 00:38:17.140 --> 00:38:20.300 The political system tends to resist this. 00:38:20.300 --> 00:38:22.100 In economic terms, it's very interesting 00:38:22.100 --> 00:38:25.200 to impose an economy-wide model, but it's hard. 00:38:25.200 --> 00:38:29.900 And then, secondly-- well, I had actually 00:38:29.900 --> 00:38:35.070 worked on the original acid-rain provisions 00:38:35.070 --> 00:38:37.670 the Clean Air Act of 1990, legislation 00:38:37.670 --> 00:38:40.730 to develop a cap-and-trade system there. 00:38:40.730 --> 00:38:43.340 It worked brilliantly, and it was a stalking horse 00:38:43.340 --> 00:38:46.800 for what we knew we were going to do on the climate layer. 00:38:46.800 --> 00:38:49.560 And cap-and-trade worked brilliantly, there. 00:38:49.560 --> 00:38:52.470 It worked brilliantly, because we already had the technology 00:38:52.470 --> 00:38:54.840 solutions at hand. 00:38:54.840 --> 00:38:56.565 They could be the scrubbers that we 00:38:56.565 --> 00:39:00.120 were going to put on smokestacks in Midwestern power plants. 00:39:00.120 --> 00:39:02.250 We knew the technology was there. 00:39:02.250 --> 00:39:05.730 So a pricing system could really drive, very quickly, 00:39:05.730 --> 00:39:08.940 the forced adoption of that technology. 00:39:08.940 --> 00:39:13.410 When we did cap-and-trade, it took us a while 00:39:13.410 --> 00:39:16.770 to understand that a lot of the technologies were not close. 00:39:16.770 --> 00:39:18.840 They were still a considerable distance away. 00:39:18.840 --> 00:39:21.570 We've talked about carbon capture and sequestration. 00:39:21.570 --> 00:39:22.450 It's a good example. 00:39:22.450 --> 00:39:22.950 Right? 00:39:22.950 --> 00:39:26.820 It's not ready for deployment at large scale, at this point. 00:39:26.820 --> 00:39:28.740 It's still experimental. 00:39:28.740 --> 00:39:31.980 So it wasn't a great fit. 00:39:31.980 --> 00:39:33.773 So obviously the industries that were 00:39:33.773 --> 00:39:35.190 going to be affected by this, they 00:39:35.190 --> 00:39:37.470 didn't know what their pathways were going to be, 00:39:37.470 --> 00:39:38.940 in many cases. 00:39:38.940 --> 00:39:39.630 Right? 00:39:39.630 --> 00:39:41.753 And, look, in many sectors, look at transport. 00:39:41.753 --> 00:39:43.545 We don't know if it's going to be biofuels. 00:39:43.545 --> 00:39:45.100 We don't know if it's going to be electrics. 00:39:45.100 --> 00:39:46.980 We don't know if it's going to be hybrids. 00:39:46.980 --> 00:39:48.420 We don't know what it's going to-- or maybe just 00:39:48.420 --> 00:39:50.760 significant improvements to internal combustion engines. 00:39:50.760 --> 00:39:53.382 All those pieces are still very much on the table, 00:39:53.382 --> 00:39:54.840 in the transport sector-- obviously 00:39:54.840 --> 00:39:56.530 a huge economic sector. 00:39:56.530 --> 00:40:01.862 So one of the problems with cap-and-trade and neoclassical 00:40:01.862 --> 00:40:04.320 model was that it didn't have a sophisticated understanding 00:40:04.320 --> 00:40:06.180 of the technology policy side. 00:40:06.180 --> 00:40:09.080 And I wish I had understood that then, but-- 00:40:09.080 --> 00:40:09.663 WOMAN: [LAUGH] 00:40:09.663 --> 00:40:11.205 WILLIAM BONVILLIAN: --and obviously I 00:40:11.205 --> 00:40:12.480 wasn't the only actor. 00:40:12.480 --> 00:40:16.923 And, overall, I think a price solution 00:40:16.923 --> 00:40:18.090 is going to be needed, here. 00:40:18.090 --> 00:40:20.170 But meanwhile, can we make progress? 00:40:20.170 --> 00:40:22.830 So part of the way in which we can make progress 00:40:22.830 --> 00:40:25.830 is by a considerably more sophisticated and effective 00:40:25.830 --> 00:40:28.500 technology strategy. 00:40:28.500 --> 00:40:30.210 After this book was-- 00:40:30.210 --> 00:40:34.197 after the book that this chapter appeared in was written, 00:40:34.197 --> 00:40:36.030 obviously there was a major political change 00:40:36.030 --> 00:40:37.073 in the United States. 00:40:37.073 --> 00:40:38.490 So the changes we're going to have 00:40:38.490 --> 00:40:40.680 to think about, if we're going to do a Plan B 00:40:40.680 --> 00:40:44.010 and I just sit on our hands for the next decade, 00:40:44.010 --> 00:40:45.720 I think that's a really important task. 00:40:45.720 --> 00:40:49.290 And we're going to have to think about who the actors are 00:40:49.290 --> 00:40:52.050 going to be that are prepared to take on climate change. 00:40:52.050 --> 00:40:54.900 Because we can't just afford to wipe off 00:40:54.900 --> 00:40:57.990 4, 8, 10 years of progress. 00:40:57.990 --> 00:40:59.970 We've got to figure out what to do so. 00:40:59.970 --> 00:41:01.770 There's a new menu of actors, here, that's 00:41:01.770 --> 00:41:06.510 potential-- at state level, and in regions, and in companies. 00:41:06.510 --> 00:41:10.050 Because I do think this innovation wave is under way. 00:41:10.050 --> 00:41:12.810 And Martín's point about niche players, 00:41:12.810 --> 00:41:14.463 that's an important economic point. 00:41:14.463 --> 00:41:16.380 You can move ahead with that kind of approach, 00:41:16.380 --> 00:41:18.570 in a number of technology spots. 00:41:18.570 --> 00:41:21.205 So, arguably, we're going to need a Plan B, 00:41:21.205 --> 00:41:23.830 and we're going to have to think about who the actors are going 00:41:23.830 --> 00:41:28.740 to be in Plan B. One thing which we did 00:41:28.740 --> 00:41:32.040 do in the Department of Energy, over the last 10 years, 00:41:32.040 --> 00:41:35.580 is make it a much more sophisticated 00:41:35.580 --> 00:41:38.460 technology-implementation organization, 00:41:38.460 --> 00:41:40.390 through work of Sam Bodman and Steve Chu 00:41:40.390 --> 00:41:43.600 and Ernie Moniz over the past decade. 00:41:43.600 --> 00:41:47.490 So all these new pieces, including ARPA-E, 00:41:47.490 --> 00:41:49.200 Energy Frontier Research Centers, 00:41:49.200 --> 00:41:52.590 to kind of turn the focus of the Office of Science 00:41:52.590 --> 00:41:56.370 onto new energy technology advances. 00:41:56.370 --> 00:41:58.800 There's 45 of these centers, now, at universities 00:41:58.800 --> 00:42:00.500 across the country. 00:42:00.500 --> 00:42:02.490 Office of Science is now really focused 00:42:02.490 --> 00:42:06.000 on new technology advances. 00:42:06.000 --> 00:42:08.820 EERE, Energy Efficiency and Renewable Energy, 00:42:08.820 --> 00:42:12.030 has developed a major focus on advanced manufacturing 00:42:12.030 --> 00:42:15.420 as a way of driving down entry costs for new energy 00:42:15.420 --> 00:42:16.110 technologies. 00:42:16.110 --> 00:42:17.568 That's really important, if they're 00:42:17.568 --> 00:42:20.205 going to get in range of price. 00:42:20.205 --> 00:42:22.830 They've created something we'll talk about in the last reading. 00:42:22.830 --> 00:42:26.700 They have created a whole new way of getting, in effect, 00:42:26.700 --> 00:42:31.200 substituting space for capital, at the site of three 00:42:31.200 --> 00:42:33.858 historic energy laboratories. 00:42:33.858 --> 00:42:35.400 We'll talk about in the last reading. 00:42:35.400 --> 00:42:39.150 They have a much stronger technology-transition office. 00:42:39.150 --> 00:42:41.730 They have innovation hubs that, when your technology is 00:42:41.730 --> 00:42:43.890 ready to kind of scale up, you can actually 00:42:43.890 --> 00:42:46.260 get a substantial amount of implementation 00:42:46.260 --> 00:42:49.380 and late-stage applied research money focused 00:42:49.380 --> 00:42:52.110 on areas like batteries, fourth-generation nuclear 00:42:52.110 --> 00:42:55.470 power, and a series of other technology areas. 00:42:55.470 --> 00:42:58.380 So all these new innovation pieces 00:42:58.380 --> 00:43:00.780 have been added to the Department of Energy. 00:43:00.780 --> 00:43:03.510 So it's much more technology-ready 00:43:03.510 --> 00:43:04.960 than it was a decade ago. 00:43:04.960 --> 00:43:08.520 It's much more in position to be able to work on the energy 00:43:08.520 --> 00:43:10.830 tasks that it was assigned. 00:43:10.830 --> 00:43:11.820 So that's-- 00:43:11.820 --> 00:43:13.380 Obviously, these could be curtailed 00:43:13.380 --> 00:43:14.640 by the current administration. 00:43:14.640 --> 00:43:16.128 That's a genuine challenge, here. 00:43:16.128 --> 00:43:17.670 But at least we've got experience now 00:43:17.670 --> 00:43:19.980 with what some of these issues are. 00:43:19.980 --> 00:43:22.235 There's still big gaps in the system. 00:43:22.235 --> 00:43:23.610 The front end is much better now, 00:43:23.610 --> 00:43:25.527 at the Department of Energy, but there's still 00:43:25.527 --> 00:43:28.440 big gaps-- areas like, how do you do test beds? 00:43:28.440 --> 00:43:31.980 How are we going to do a technology strategy that 00:43:31.980 --> 00:43:34.380 cuts across public and private sectors, 00:43:34.380 --> 00:43:36.390 for a common strategy across players? 00:43:36.390 --> 00:43:38.550 We haven't done that yet. 00:43:38.550 --> 00:43:42.870 We need new financing mechanisms for technology implementation. 00:43:42.870 --> 00:43:44.610 So there's a lot of pieces that-- 00:43:44.610 --> 00:43:48.480 there still remain gaps on the back end of the system. 00:43:48.480 --> 00:43:49.725 But we have made progress. 00:43:52.087 --> 00:43:54.170 And, look, let me put the other piece on the table 00:43:54.170 --> 00:43:55.665 and we'll do them both. 00:43:55.665 --> 00:43:57.075 Are both of these yours, Chris? 00:43:57.075 --> 00:43:57.575 CHRIS: Yep. 00:43:57.575 --> 00:43:58.533 WILLIAM BONVILLIAN: OK. 00:44:03.230 --> 00:44:14.360 So this is a chapter in a piece that just came out last month. 00:44:14.360 --> 00:44:21.790 The US is very reliant on entrepreneurial startups 00:44:21.790 --> 00:44:23.490 to bring innovation into its system. 00:44:26.550 --> 00:44:29.940 That's been a key innovation organizational accomplishment 00:44:29.940 --> 00:44:33.660 of the last 30 or 40 years, actually. 00:44:33.660 --> 00:44:37.170 So we developed a $60-billion venture-capital support system 00:44:37.170 --> 00:44:38.670 to support startups. 00:44:38.670 --> 00:44:39.420 It's how we do it. 00:44:39.420 --> 00:44:42.540 It's a very interesting part of our system. 00:44:42.540 --> 00:44:45.570 No other country really has a system as strong as ours. 00:44:45.570 --> 00:44:47.835 The legacy sectors are like protected castles. 00:44:52.050 --> 00:44:56.040 VCs don't like to take the castles on. 00:44:56.040 --> 00:44:57.780 You can understand why. 00:44:57.780 --> 00:45:00.270 They like to innovate in new frontier areas, where 00:45:00.270 --> 00:45:02.062 there are not incumbents, where they're not 00:45:02.062 --> 00:45:03.390 going to get opposition. 00:45:03.390 --> 00:45:08.070 So, back in 2008, when it looked like energy prices were going 00:45:08.070 --> 00:45:12.090 to be high and cap-and-trade was coming along, 00:45:12.090 --> 00:45:15.240 VCs began to ramp up their investments 00:45:15.240 --> 00:45:18.062 in new energy technologies. 00:45:18.062 --> 00:45:19.020 And they've now walked. 00:45:21.760 --> 00:45:26.110 So let's look at venture-capital investment, nationwide. 00:45:26.110 --> 00:45:29.680 This is what venture capital spent in 2015 00:45:29.680 --> 00:45:31.531 its money on-- its $60 billion. 00:45:31.531 --> 00:45:34.180 Right? 00:45:34.180 --> 00:45:35.450 Software. 00:45:35.450 --> 00:45:36.240 Right? 00:45:36.240 --> 00:45:37.710 That's the long and short of it. 00:45:37.710 --> 00:45:39.780 They did a fair amount of biotech. 00:45:39.780 --> 00:45:41.040 Software was about 40%. 00:45:41.040 --> 00:45:43.530 That's about 13%. 00:45:43.530 --> 00:45:47.730 A bunch of services, media entertainment, 00:45:47.730 --> 00:45:50.760 IT services-- that was the bulk of the rest. 00:45:50.760 --> 00:45:52.860 Now, you look at this little piece down here, 00:45:52.860 --> 00:45:53.970 right, this piece. 00:45:53.970 --> 00:45:55.890 That's 5%. 00:45:55.890 --> 00:45:58.440 That's hard technologies. 00:45:58.440 --> 00:46:01.290 That's energy and industrial. 00:46:01.290 --> 00:46:03.000 Right? 00:46:03.000 --> 00:46:05.623 This has profound implications, absolutely 00:46:05.623 --> 00:46:06.540 profound implications. 00:46:06.540 --> 00:46:08.457 So the way in which we stand up new innovation 00:46:08.457 --> 00:46:12.430 is going to be through this venture-capital finance system. 00:46:12.430 --> 00:46:16.030 And all they're going to do is software and biotech 00:46:16.030 --> 00:46:18.342 and a few services. 00:46:18.342 --> 00:46:20.050 We've got a serious problem on our hands. 00:46:20.050 --> 00:46:23.290 We're not going to have an energy-technology revolution. 00:46:23.290 --> 00:46:27.670 But we're also not standing up innovations 00:46:27.670 --> 00:46:30.100 in hard technologies. 00:46:30.100 --> 00:46:32.650 Software and biotech are not particularly 00:46:32.650 --> 00:46:33.760 job-creating areas. 00:46:33.760 --> 00:46:36.060 Software maybe negative job creating. 00:46:36.060 --> 00:46:36.992 Right? 00:46:36.992 --> 00:46:38.950 Are we going to have any jobs, in this economy? 00:46:38.950 --> 00:46:40.492 I mean, what's going to happen, here? 00:46:40.492 --> 00:46:43.205 These are really, really serious problems. 00:46:43.205 --> 00:46:45.580 OK? 00:46:45.580 --> 00:46:47.610 We tried to do the same chart for 2016, 00:46:47.610 --> 00:46:49.960 but [LAUGH] the Venture Capital Association [LAUGH] 00:46:49.960 --> 00:46:52.543 changed the way they collected their numbers, because software 00:46:52.543 --> 00:46:54.903 was so pervasive that they couldn't separate it out 00:46:54.903 --> 00:46:55.570 anymore [LAUGH]. 00:46:55.570 --> 00:46:56.100 Right? 00:46:56.100 --> 00:46:57.670 It was in every sector. 00:46:57.670 --> 00:46:59.710 So [LAUGH] 15 is the last good set 00:46:59.710 --> 00:47:03.670 of numbers we're going to get around software investment. 00:47:03.670 --> 00:47:05.980 So, who comes to the rescue, here? 00:47:05.980 --> 00:47:08.260 So Rafael comes to the rescue. 00:47:08.260 --> 00:47:09.010 I didn't get this. 00:47:09.010 --> 00:47:10.540 I mean, this is his thinking. 00:47:10.540 --> 00:47:15.940 And I had this conversation with him. 00:47:15.940 --> 00:47:17.315 We had been struggling with this, 00:47:17.315 --> 00:47:19.023 in the Advanced Manufacturing Partnership 00:47:19.023 --> 00:47:21.010 program, the President's advanced manufacturing 00:47:21.010 --> 00:47:22.390 innovation effort. 00:47:22.390 --> 00:47:23.920 How are we going to get financing 00:47:23.920 --> 00:47:25.840 for companies that are going to manufacture in the United 00:47:25.840 --> 00:47:26.470 States? 00:47:26.470 --> 00:47:28.810 Because they're not getting venture finance. 00:47:28.810 --> 00:47:30.850 And we looked at the other potential sources-- 00:47:30.850 --> 00:47:36.100 you know, private equity, M&A in existing company financing. 00:47:36.100 --> 00:47:40.330 They're just not significant for innovative new companies. 00:47:40.330 --> 00:47:42.580 Venture capital is pretty much the story. 00:47:42.580 --> 00:47:46.983 And, you know, Rafael-- 00:47:46.983 --> 00:47:48.400 I was thinking about, how could we 00:47:48.400 --> 00:47:50.880 do some kind of new financing, or how could we 00:47:50.880 --> 00:47:54.382 create incentives for venture capital to change all its rules 00:47:54.382 --> 00:47:55.840 and go after these harder problems? 00:47:58.620 --> 00:48:03.300 He basically said, venture capital is doing good stuff. 00:48:03.300 --> 00:48:05.980 Software and biotech are important things. 00:48:05.980 --> 00:48:07.600 They're going to do what they can do. 00:48:10.390 --> 00:48:13.440 Substitute space for capital. 00:48:13.440 --> 00:48:14.940 That wasn't quite the way he put it, 00:48:14.940 --> 00:48:16.898 but that was the essence of what he was saying. 00:48:16.898 --> 00:48:20.640 And I said, Rafael, what are you talking about? 00:48:20.640 --> 00:48:21.930 Never had dawned on me. 00:48:21.930 --> 00:48:22.800 Right? 00:48:22.800 --> 00:48:27.560 Basically what he said was, let's create really 00:48:27.560 --> 00:48:32.450 technology-equipment, know-how-rich spaces and get 00:48:32.450 --> 00:48:36.350 a bunch of very interesting hard-technology startups-- 00:48:36.350 --> 00:48:37.850 in other words, the biotechs are OK, 00:48:37.850 --> 00:48:39.560 and the software companies are OK. 00:48:39.560 --> 00:48:42.080 Let's get some of the rest of the crew in 00:48:42.080 --> 00:48:46.280 and create places where they get really advanced equipment 00:48:46.280 --> 00:48:46.950 and know-how. 00:48:46.950 --> 00:48:47.450 Right? 00:48:47.450 --> 00:48:49.760 So there's a lot of technology incubators out there, 00:48:49.760 --> 00:48:51.260 and we've got probably eight of them 00:48:51.260 --> 00:48:53.603 right in our Boston neighborhood, here, 00:48:53.603 --> 00:48:55.020 and some of which are very strong. 00:48:55.020 --> 00:48:58.160 They tend to be earlier-stage. 00:48:58.160 --> 00:49:02.780 They tend to-- they capture you when you're new 00:49:02.780 --> 00:49:04.580 and you're really at the business-plan, 00:49:04.580 --> 00:49:07.370 business-development kind of stage. 00:49:07.370 --> 00:49:09.590 There isn't really a model to help you, 00:49:09.590 --> 00:49:12.140 when you've got to start to scale up-- 00:49:12.140 --> 00:49:14.600 and with that scale-up proposition. 00:49:14.600 --> 00:49:19.360 So that's what his concept is. 00:49:19.360 --> 00:49:21.850 And it happens to speak, I think profoundly, 00:49:21.850 --> 00:49:25.165 to this energy-technology space, if we 00:49:25.165 --> 00:49:26.290 could create some of these. 00:49:26.290 --> 00:49:29.680 The engine that he's now led the creation of 00:49:29.680 --> 00:49:33.580 is exactly an attempt to solve this problem. 00:49:33.580 --> 00:49:35.950 In other words, his view is, we're 00:49:35.950 --> 00:49:38.970 leading a lot of science-based innovation developed in MIT, 00:49:38.970 --> 00:49:41.080 just sitting on the table. 00:49:41.080 --> 00:49:43.090 Because we don't have a scale-up mechanism. 00:49:43.090 --> 00:49:49.090 Can we work on trying to create a space where that could occur? 00:49:49.090 --> 00:49:52.480 So, in effect, what venture capital would finance-- 00:49:52.480 --> 00:49:55.090 that equipment, that technology, that know-how, 00:49:55.090 --> 00:49:57.560 for the scale-up-- 00:49:57.560 --> 00:50:00.200 can we contribute that, create that, 00:50:00.200 --> 00:50:03.020 and then invite the startups in that are 00:50:03.020 --> 00:50:04.880 doing hard-technology startups? 00:50:04.880 --> 00:50:06.410 So there's a bunch of other models. 00:50:06.410 --> 00:50:08.660 DOE got this, big-time. 00:50:08.660 --> 00:50:11.210 ARPA-E began running into a wall. 00:50:11.210 --> 00:50:12.990 ARPA-E had assumed venture capital 00:50:12.990 --> 00:50:15.302 was the way in which its startups were going to work. 00:50:15.302 --> 00:50:17.510 And then they realized their startups weren't getting 00:50:17.510 --> 00:50:19.730 venture money, when venture-capital funding 00:50:19.730 --> 00:50:21.110 in energy collapsed-- right? 00:50:21.110 --> 00:50:23.810 Went down 80%. 00:50:23.810 --> 00:50:31.810 So this band of characters took some space right 00:50:31.810 --> 00:50:34.480 at the Lawrence Berkeley Laboratory, 00:50:34.480 --> 00:50:38.020 up on top of the hill, up above the Berkeley campus, 00:50:38.020 --> 00:50:39.850 on Cyclotron Road. 00:50:39.850 --> 00:50:43.000 And they created a technology, equipment, 00:50:43.000 --> 00:50:47.990 know-how-rich space and provided salaries-- 00:50:47.990 --> 00:50:49.990 for a couple of years, which could be extended-- 00:50:49.990 --> 00:50:52.730 for a crew of startups. 00:50:52.730 --> 00:50:54.430 They're now in their third tranche. 00:50:54.430 --> 00:50:56.530 Very interesting. 00:50:56.530 --> 00:50:58.750 Very interesting companies. 00:50:58.750 --> 00:51:01.000 And it's a whole new technology transition model 00:51:01.000 --> 00:51:03.400 for the Department of Energy. 00:51:03.400 --> 00:51:06.070 So, for possibly 40 years, the Department of Energy 00:51:06.070 --> 00:51:10.390 has been trying to get these big, famous energy 00:51:10.390 --> 00:51:13.960 laboratories that are on mesas, behind barbed wire, 00:51:13.960 --> 00:51:17.410 to transfer their technology out. 00:51:17.410 --> 00:51:20.170 And the folks that work there are paid, you know, 00:51:20.170 --> 00:51:22.300 guaranteed salaries for life. 00:51:22.300 --> 00:51:25.030 And they get entitlement-funded research. 00:51:25.030 --> 00:51:27.490 They're guaranteed interesting scientific work. 00:51:27.490 --> 00:51:30.130 And we want them to walk out of there 00:51:30.130 --> 00:51:33.250 and, you know, not be paid in a stand-up company? 00:51:33.250 --> 00:51:34.540 I mean, good luck. 00:51:34.540 --> 00:51:35.260 Right? 00:51:35.260 --> 00:51:37.960 It's not an optimal technology transfer model. 00:51:37.960 --> 00:51:42.910 And, look-- technology transfers with people that walk, right? 00:51:42.910 --> 00:51:44.560 Technology transfer doesn't happen 00:51:44.560 --> 00:51:49.060 by developing a list or a plan and handing it to someone. 00:51:49.060 --> 00:51:51.760 Technology transfer works through people. 00:51:51.760 --> 00:51:54.460 You've got to really encourage people to emigrate and move 00:51:54.460 --> 00:51:57.310 with the ideas, because they have the tacit knowledge 00:51:57.310 --> 00:51:58.510 to make these things happen. 00:51:58.510 --> 00:52:01.568 Well, this may be a much better technology-transfer model 00:52:01.568 --> 00:52:03.610 for the Department of Energy than the one they've 00:52:03.610 --> 00:52:04.818 been working on for 40 years. 00:52:04.818 --> 00:52:07.390 So two other labs, Argon and Oak Ridge, 00:52:07.390 --> 00:52:09.990 have now picked up the same model. 00:52:09.990 --> 00:52:10.900 Steph? 00:52:10.900 --> 00:52:12.820 STEPH: One of the elements I didn't 00:52:12.820 --> 00:52:14.340 see in the analysis of the models 00:52:14.340 --> 00:52:16.360 was the importance of competition 00:52:16.360 --> 00:52:22.420 or having that sort of truncated time frame. 00:52:22.420 --> 00:52:24.948 How is it that they sort of put pressure on them to deliver? 00:52:24.948 --> 00:52:26.740 WILLIAM BONVILLIAN: Well all of these teams 00:52:26.740 --> 00:52:28.750 had to compete, to get in there. 00:52:28.750 --> 00:52:30.600 So that was a very tough composition-- 00:52:30.600 --> 00:52:33.430 more than 100 actors, 100 different teams, 00:52:33.430 --> 00:52:36.280 were competing to be part of the first eight. 00:52:36.280 --> 00:52:38.860 So that was a highly competitive process. 00:52:38.860 --> 00:52:41.320 Look, if you've got an interesting startup idea 00:52:41.320 --> 00:52:43.960 and you're just out of grad school or, for that matter, 00:52:43.960 --> 00:52:45.850 just out of undergrad school, and you've 00:52:45.850 --> 00:52:49.300 got a really interesting, small group and idea 00:52:49.300 --> 00:52:51.190 and you want to move it, the fact 00:52:51.190 --> 00:52:53.650 that somebody would give you space, incredible equipment, 00:52:53.650 --> 00:52:56.170 and technology, incredible know-how, 00:52:56.170 --> 00:52:58.360 and pay you a salary for a couple of years, 00:52:58.360 --> 00:52:59.810 what could be better? 00:52:59.810 --> 00:53:00.310 Right? 00:53:00.310 --> 00:53:04.090 This is really good news, for hard-technology startups 00:53:04.090 --> 00:53:05.090 in the energy space. 00:53:05.090 --> 00:53:06.798 So it's been very attractive, and there's 00:53:06.798 --> 00:53:09.250 a lot of competition to get into these places. 00:53:09.250 --> 00:53:12.850 So competition is embedded right at the heart of the model. 00:53:12.850 --> 00:53:13.460 Martha? 00:53:13.460 --> 00:53:15.670 MARTHA: So, Bill, do you have any sense-- 00:53:15.670 --> 00:53:18.190 well, first of all, I can't remember how old they are 00:53:18.190 --> 00:53:20.652 and what kind of track record they have, at this point in-- 00:53:20.652 --> 00:53:22.610 WILLIAM BONVILLIAN: So these are all brand-new. 00:53:22.610 --> 00:53:24.070 This is a brand-new model. 00:53:24.070 --> 00:53:24.610 Right? 00:53:24.610 --> 00:53:24.960 MARTHA: Cyclotron-- 00:53:24.960 --> 00:53:26.668 WILLIAM BONVILLIAN: So they just accepted 00:53:26.668 --> 00:53:28.130 their third round of teams. 00:53:28.130 --> 00:53:29.290 So they're two years old. 00:53:29.290 --> 00:53:29.998 AUDIENCE: Got it. 00:53:29.998 --> 00:53:30.570 OK. 00:53:30.570 --> 00:53:32.000 I wasn't really clear. 00:53:32.000 --> 00:53:34.930 So are they going to be able to expand, 00:53:34.930 --> 00:53:37.240 under this new political climate, to other labs? 00:53:37.240 --> 00:53:38.490 WILLIAM BONVILLIAN: We'll see. 00:53:38.490 --> 00:53:43.532 I think-- from the sense I have in talking to DOE friends-- 00:53:43.532 --> 00:53:44.740 what's wrong with this model? 00:53:44.740 --> 00:53:48.550 I mean, you're in effect repurposing an established 00:53:48.550 --> 00:53:50.097 model at extremely modest costs. 00:53:50.097 --> 00:53:50.680 MARTHA: Right. 00:53:50.680 --> 00:53:51.100 So, in other words-- 00:53:51.100 --> 00:53:52.642 WILLIAM BONVILLIAN: Lawrence Berkeley 00:53:52.642 --> 00:53:54.360 Lab's an $800-million-a-year operation. 00:53:54.360 --> 00:53:55.960 You know, salaries, for these folks? 00:53:55.960 --> 00:53:57.070 That's not much. 00:53:57.070 --> 00:53:57.670 Right? 00:53:57.670 --> 00:53:59.400 And yet the opportunities of standing up 00:53:59.400 --> 00:54:01.608 with new technologies are really pretty significant, 00:54:01.608 --> 00:54:02.650 supporting entrepreneurs. 00:54:02.650 --> 00:54:04.750 So I think this one is a viable model, 00:54:04.750 --> 00:54:06.212 in either political climate. 00:54:06.212 --> 00:54:07.920 PERSON: Right, so who makes the decision? 00:54:07.920 --> 00:54:11.298 And what stage is the technology, when they enter? 00:54:11.298 --> 00:54:13.090 WILLIAM BONVILLIAN: So, you know, this guy, 00:54:13.090 --> 00:54:17.830 Ilan Gur is right out of ARPA-E. So he's very used to-- he 00:54:17.830 --> 00:54:19.450 understands really well-- 00:54:19.450 --> 00:54:21.640 he came through a whole startup experience, himself. 00:54:21.640 --> 00:54:27.820 He's had startup experiences and has his PhD in science, 00:54:27.820 --> 00:54:29.890 from Berkeley-- 00:54:29.890 --> 00:54:31.870 very talented young technologist, 00:54:31.870 --> 00:54:34.270 very sharp, able guy. 00:54:34.270 --> 00:54:36.850 He's got a whole team, there, that's also quite able. 00:54:36.850 --> 00:54:38.890 And strong support from the lab. 00:54:38.890 --> 00:54:39.550 Right? 00:54:39.550 --> 00:54:41.490 So the lab likes this. 00:54:41.490 --> 00:54:44.350 This is a way of getting their stuff out. 00:54:44.350 --> 00:54:46.840 Look-- it's a new model, right? 00:54:46.840 --> 00:54:52.630 The model is, have a competition for, an effect, 00:54:52.630 --> 00:54:55.340 a nerd motorcycle gang. 00:54:55.340 --> 00:54:59.440 Park them outside the barbed wire. 00:54:59.440 --> 00:55:02.680 Give them a home, and give them the keys to go in 00:55:02.680 --> 00:55:03.670 and loot the place. 00:55:03.670 --> 00:55:05.510 I mean, that's essentially the model. 00:55:05.510 --> 00:55:06.205 Right? 00:55:06.205 --> 00:55:07.460 That's what they're doing. 00:55:07.460 --> 00:55:10.295 PERSON: So, when you say "park them outside the fence," 00:55:10.295 --> 00:55:11.160 is that literal? 00:55:11.160 --> 00:55:11.660 Or-- 00:55:11.660 --> 00:55:12.740 STEPH: Yeah, that's literal. 00:55:12.740 --> 00:55:13.450 WILLIAM BONVILLIAN: That's literal. 00:55:13.450 --> 00:55:16.480 They're immediately adjacent to these highly secure facilities. 00:55:16.480 --> 00:55:17.700 PERSON: Why don't they just put them inside? 00:55:17.700 --> 00:55:18.280 WOMAN: But allowed in. 00:55:18.280 --> 00:55:19.840 WILLIAM BONVILLIAN: Well, they are allowed in. 00:55:19.840 --> 00:55:20.440 Yeah. 00:55:20.440 --> 00:55:20.940 Right. 00:55:20.940 --> 00:55:22.650 There are just some security issues, and-- 00:55:22.650 --> 00:55:24.060 STEPH: --side of a mountain, literally? 00:55:24.060 --> 00:55:25.143 WILLIAM BONVILLIAN: Right. 00:55:25.143 --> 00:55:26.510 STEPH: And it's quite steep. 00:55:26.510 --> 00:55:28.340 So, if you're walking and you trip, like, 00:55:28.340 --> 00:55:30.113 you would fall very [LAUGH] heavily. 00:55:30.113 --> 00:55:31.780 WILLIAM BONVILLIAN: It's very beautiful. 00:55:31.780 --> 00:55:32.412 Great views. 00:55:32.412 --> 00:55:34.620 STEPH: They have a great view the bay and the bridge. 00:55:34.620 --> 00:55:36.160 WILLIAM BONVILLIAN: Remember, we talked about Ernest Lawrence? 00:55:36.160 --> 00:55:37.500 This is his lab. 00:55:37.500 --> 00:55:38.500 Right? 00:55:38.500 --> 00:55:41.800 Lawrence Berkeley Laboratory. 00:55:41.800 --> 00:55:43.660 STUDENT: My only concern would be, 00:55:43.660 --> 00:55:47.180 if the technology's too early, they'll be based on, like, 00:55:47.180 --> 00:55:48.850 the people who they know, instead of 00:55:48.850 --> 00:55:50.900 the actual technology. 00:55:50.900 --> 00:55:53.800 So what would be interesting is if it's already technology that 00:55:53.800 --> 00:55:55.330 shows some promise, that way it's 00:55:55.330 --> 00:55:57.190 kind of like a pseudo right-before scale-up, 00:55:57.190 --> 00:56:00.130 where it's, I need to get my technical abilities scaled up? 00:56:00.130 --> 00:56:00.390 WILLIAM BONVILLIAN: Yeah. 00:56:00.390 --> 00:56:01.723 STUDENT: That'll be really good. 00:56:01.723 --> 00:56:04.160 But the issue is, like, this happens kind of like at MIT 00:56:04.160 --> 00:56:06.370 with, like, Delta-V, where it's like, 00:56:06.370 --> 00:56:08.580 it's kind of become a Sloane-y kind of like hub, 00:56:08.580 --> 00:56:11.468 where it's like, there's people who don't have great ideas, 00:56:11.468 --> 00:56:13.885 but they apply because they know the right person who does 00:56:13.885 --> 00:56:15.302 if they go through, versus, like-- 00:56:15.302 --> 00:56:17.677 WILLIAM BONVILLIAN: This is a very tough-minded selection 00:56:17.677 --> 00:56:18.180 process. 00:56:18.180 --> 00:56:19.320 You know? 00:56:19.320 --> 00:56:21.370 Ilan is a real talent. 00:56:21.370 --> 00:56:23.800 He's running a good process, here. 00:56:23.800 --> 00:56:27.010 Look, we're kind of running out of time, here, so let me just 00:56:27.010 --> 00:56:28.270 get the rest of the story out. 00:56:28.270 --> 00:56:30.580 Because part of it, Martín, speaks to the next issue 00:56:30.580 --> 00:56:32.080 we've got, which is-- 00:56:32.080 --> 00:56:35.080 one of the issues here is, these are all early stage. 00:56:35.080 --> 00:56:36.010 Right? 00:56:36.010 --> 00:56:38.470 These are very talented technology teams, right out 00:56:38.470 --> 00:56:40.790 of university laboratories. 00:56:40.790 --> 00:56:42.340 Here's a different model. 00:56:42.340 --> 00:56:44.830 TechBridge, right here in Boston, 00:56:44.830 --> 00:56:47.710 is part of the Boston Fraunhofer system. 00:56:47.710 --> 00:56:50.260 And they have a different model, but they're similarly 00:56:50.260 --> 00:56:54.670 providing this technology, equipment, know-how-rich space 00:56:54.670 --> 00:56:57.130 as a substitute for VC money. 00:56:57.130 --> 00:57:03.010 And the idea here is, Cyclotron Road 00:57:03.010 --> 00:57:05.830 starts with the technology group and then 00:57:05.830 --> 00:57:08.170 tries to nurture the technology. 00:57:08.170 --> 00:57:11.470 TechBridge starts with large regional companies. 00:57:11.470 --> 00:57:14.840 And it goes to them, and it says, what do you want? 00:57:14.840 --> 00:57:15.620 Right? 00:57:15.620 --> 00:57:17.620 And, typically, they don't want disruptive stuff 00:57:17.620 --> 00:57:19.120 that's going to wreck their business 00:57:19.120 --> 00:57:20.470 model-- for obvious reasons. 00:57:20.470 --> 00:57:23.012 And they don't want to bother with stuff that they're already 00:57:23.012 --> 00:57:24.460 doing, that they understand well. 00:57:24.460 --> 00:57:29.080 But there are substantial groups of adjacent energy technologies 00:57:29.080 --> 00:57:32.950 that fit with their model, that would be interesting to them. 00:57:32.950 --> 00:57:35.770 And that's what TechBridge tries to find out. 00:57:35.770 --> 00:57:39.550 So it gets a list of, what do you folks want? 00:57:39.550 --> 00:57:42.490 And then it goes to find talented startups in the Boston 00:57:42.490 --> 00:57:46.780 area, of which there's a lot, and connect the right startup 00:57:46.780 --> 00:57:50.720 to the right industry player, for a collaborative project. 00:57:50.720 --> 00:57:51.430 OK? 00:57:51.430 --> 00:57:52.510 Very different model. 00:57:52.510 --> 00:57:54.250 Very interesting. 00:57:54.250 --> 00:57:57.070 The most interesting part of it is 00:57:57.070 --> 00:58:00.720 that those folks work together for a little while. 00:58:00.720 --> 00:58:02.850 They come up with kind of the prototype together. 00:58:02.850 --> 00:58:04.510 Right? 00:58:04.510 --> 00:58:06.388 But industry doesn't quite trust the startup. 00:58:06.388 --> 00:58:07.930 The startup doesn't know whether it's 00:58:07.930 --> 00:58:10.060 going to get robbed by the big company. 00:58:10.060 --> 00:58:11.440 Who knows, right? 00:58:11.440 --> 00:58:14.350 They bring in the Fraunhofer laboratories, 00:58:14.350 --> 00:58:18.250 this famous laboratory system, and the Fraunhofer labs 00:58:18.250 --> 00:58:21.730 do, for the startup-industry combo, 00:58:21.730 --> 00:58:24.280 what they do for German companies. 00:58:24.280 --> 00:58:28.360 They do a very tough-minded technology assessment. 00:58:28.360 --> 00:58:31.030 They break down the technology, they evaluate it-- 00:58:31.030 --> 00:58:32.710 Can this technology be manufactured? 00:58:32.710 --> 00:58:34.030 How would you manufacture it? 00:58:34.030 --> 00:58:35.613 Can you manufacture it at a price that 00:58:35.613 --> 00:58:37.090 would actually be saleable? 00:58:37.090 --> 00:58:39.580 You know, is this resilient technology? 00:58:39.580 --> 00:58:42.060 All the kind of stuff they do for German companies, 00:58:42.060 --> 00:58:43.930 they're doing for the startup. 00:58:43.930 --> 00:58:48.708 It's a very rich, sophisticated technology evaluation process. 00:58:48.708 --> 00:58:50.500 We don't really have anything in our system 00:58:50.500 --> 00:58:52.690 like it, so it's pretty intriguing. 00:58:52.690 --> 00:58:54.970 And, in effect, they certify to the company-- 00:58:54.970 --> 00:58:57.880 I mean, they may say, this stuff is worthless, throw it away, 00:58:57.880 --> 00:59:00.983 or they could say, this is actually very interesting. 00:59:00.983 --> 00:59:02.650 Here's how you could make it, and here's 00:59:02.650 --> 00:59:04.858 the components you ought to use and the materials you 00:59:04.858 --> 00:59:10.282 ought to think about, and here's a pathway to a marketplace. 00:59:10.282 --> 00:59:11.740 The company, the big company, loves 00:59:11.740 --> 00:59:13.657 this, because they realize the startup may not 00:59:13.657 --> 00:59:14.690 be totally crazy. 00:59:14.690 --> 00:59:17.350 And then the startup likes it because, in effect, it's 00:59:17.350 --> 00:59:21.220 certified their technology. 00:59:21.220 --> 00:59:24.400 So this puts both players into a much more informed space. 00:59:24.400 --> 00:59:26.260 And that's been very-- 00:59:26.260 --> 00:59:28.180 it's been very intriguing, sort of adding 00:59:28.180 --> 00:59:30.220 this technology-validation piece to this. 00:59:30.220 --> 00:59:33.280 Remember, we talked about the role of FDA 00:59:33.280 --> 00:59:37.230 in certifying technology, which guarantees a market? 00:59:37.230 --> 00:59:39.700 This is the first time I've seen this played out 00:59:39.700 --> 00:59:41.050 in a US kind of model. 00:59:41.050 --> 00:59:42.840 And it's kind of intriguing. 00:59:42.840 --> 00:59:44.740 And I'll put one more on the table for you. 00:59:50.300 --> 00:59:55.070 That's Greentown Labs, a respected, quite capable energy 00:59:55.070 --> 00:59:58.050 incubator, full of folks like you-- 00:59:58.050 --> 01:00:00.560 you know, off the lab bunch at a school, 01:00:00.560 --> 01:00:02.370 with cool energy technology ideas. 01:00:05.860 --> 01:00:09.570 Greentown began understanding that there 01:00:09.570 --> 01:00:15.690 are 60-odd teams, had a lot of neat research ideas. 01:00:15.690 --> 01:00:17.650 They had no idea to make anything. 01:00:17.650 --> 01:00:18.150 Right? 01:00:18.150 --> 01:00:20.140 No idea. 01:00:20.140 --> 01:00:23.097 You know, you weren't taught how to make things, here at MIT. 01:00:23.097 --> 01:00:25.097 Although it is changing with the Maker movement. 01:00:25.097 --> 01:00:25.597 But-- 01:00:29.480 --> 01:00:31.850 University-lab-originated technology teams 01:00:31.850 --> 01:00:34.820 don't know anything about manufacturing. 01:00:34.820 --> 01:00:36.860 So they had an interesting idea. 01:00:36.860 --> 01:00:39.040 There's a manufacturing extension program. 01:00:39.040 --> 01:00:41.540 Every state has one, sponsored by the Department of Commerce 01:00:41.540 --> 01:00:43.880 NIST. 01:00:43.880 --> 01:00:46.100 Massachusetts happens to have a good-- 01:00:46.100 --> 01:00:49.225 quite a good manufacturing extension program. 01:00:52.600 --> 01:00:55.970 Greentown and the MEP got together. 01:00:55.970 --> 01:00:57.720 And the MEP said, hmm, that's interesting. 01:00:57.720 --> 01:00:59.387 We've never worked with startups before. 01:00:59.387 --> 01:01:02.710 We work with small manufacturers. 01:01:02.710 --> 01:01:06.970 But maybe we could link small manufacturers and the startups. 01:01:06.970 --> 01:01:10.030 And Massachusetts happens to have still a pretty strong base 01:01:10.030 --> 01:01:12.220 of small manufacturers. 01:01:12.220 --> 01:01:14.530 They work for the defense sector, the growing robotics 01:01:14.530 --> 01:01:16.060 sector, the medical-device sector-- which 01:01:16.060 --> 01:01:17.477 are big sectors, in Massachusetts, 01:01:17.477 --> 01:01:21.010 and there's some talented small companies. 01:01:21.010 --> 01:01:27.400 The MEP ran a survey of its capable small manufacturers. 01:01:27.400 --> 01:01:30.760 And the survey results came back. 01:01:30.760 --> 01:01:35.170 83 were interested in talking to startups. 01:01:35.170 --> 01:01:37.240 Why? 01:01:37.240 --> 01:01:42.737 These small manufacturers are tied to existing supply chains. 01:01:42.737 --> 01:01:43.570 They don't innovate. 01:01:43.570 --> 01:01:46.060 They don't do R&E. They don't have access to innovation. 01:01:46.060 --> 01:01:48.310 How are they going to grow their market significantly? 01:01:48.310 --> 01:01:50.860 They're kind of locked into a pathway. 01:01:50.860 --> 01:01:53.020 This is a route out, for some of them. 01:01:53.020 --> 01:01:56.335 In addition, others like the startup culture. 01:01:56.335 --> 01:01:57.710 They thought, that's pretty cool. 01:01:57.710 --> 01:01:59.620 Let's get my employees feeling like that. 01:01:59.620 --> 01:02:00.120 Right? 01:02:00.120 --> 01:02:02.140 Maybe we'll get some stuff done. 01:02:02.140 --> 01:02:04.580 And some others thought, gee, the startup culture's 01:02:04.580 --> 01:02:06.580 important, now, in Massachusetts, to its feature 01:02:06.580 --> 01:02:06.870 acc-- 01:02:06.870 --> 01:02:08.203 [AUDIO OUT] We're good citizens. 01:02:08.203 --> 01:02:09.700 We're going to help them. 01:02:09.700 --> 01:02:14.170 So they created this complex process 01:02:14.170 --> 01:02:17.740 of how to arrange these exchanges. 01:02:17.740 --> 01:02:25.628 Now, the startups, they communicate by internet things 01:02:25.628 --> 01:02:27.420 that you all understand and I have no idea. 01:02:27.420 --> 01:02:27.830 Of. 01:02:27.830 --> 01:02:28.240 Right? 01:02:28.240 --> 01:02:29.157 I don't what they are. 01:02:29.157 --> 01:02:31.425 But that's how they communicate. 01:02:31.425 --> 01:02:32.800 You know, I'm exaggerating, here, 01:02:32.800 --> 01:02:36.030 but the startups by and large voted for Bernie, 01:02:36.030 --> 01:02:38.490 and the small manufacturers-- 01:02:38.490 --> 01:02:41.580 I'm exaggerating-- probably voted for Donald. 01:02:41.580 --> 01:02:44.670 And they worked by face-to-face meetings-- 01:02:44.670 --> 01:02:46.270 things like telephones. 01:02:46.270 --> 01:02:47.500 You know? 01:02:47.500 --> 01:02:48.600 You remember landlines? 01:02:48.600 --> 01:02:50.323 They still exist. 01:02:50.323 --> 01:02:51.990 These are completely different cultures. 01:02:51.990 --> 01:02:54.750 How are they going to fall in love with each other 01:02:54.750 --> 01:02:56.940 and be able to trust each other to do technology 01:02:56.940 --> 01:02:57.940 development together? 01:02:57.940 --> 01:03:00.600 And there were no incentives, here. 01:03:00.600 --> 01:03:02.770 There were no subsidies. 01:03:02.770 --> 01:03:04.590 The startup had to come up with money, 01:03:04.590 --> 01:03:08.010 to fund the advanced prototype or the pilot production they 01:03:08.010 --> 01:03:09.420 wanted to undertake. 01:03:09.420 --> 01:03:11.760 So there were no giveaways to incentivize people. 01:03:11.760 --> 01:03:14.310 This was real money, and both sides were at stake. 01:03:14.310 --> 01:03:16.950 So they arranged this four-step process, 01:03:16.950 --> 01:03:20.500 to try and bring about communication. 01:03:20.500 --> 01:03:24.090 43 startups were interested. 01:03:24.090 --> 01:03:27.870 After a year of pilot projects, 19 deals. 01:03:27.870 --> 01:03:29.100 Money changed hands. 01:03:29.100 --> 01:03:30.660 Things were being made. 01:03:30.660 --> 01:03:31.800 Pretty interesting. 01:03:31.800 --> 01:03:34.140 So this is another piece. 01:03:34.140 --> 01:03:37.180 We've now collected a bunch of ideas, here. 01:03:37.180 --> 01:03:38.220 Right? 01:03:38.220 --> 01:03:40.500 Bunch of ideas, here, that are potentially relevant-- 01:03:40.500 --> 01:03:46.050 From Cyclotron Road, repurposing an existing source 01:03:46.050 --> 01:03:49.260 of strong technology equipment and know-how, 01:03:49.260 --> 01:03:50.735 repurpose these energy labs. 01:03:50.735 --> 01:03:52.110 That's a really interesting idea, 01:03:52.110 --> 01:03:53.840 because that's fairly cheap. 01:03:53.840 --> 01:03:54.660 Right? 01:03:54.660 --> 01:03:56.850 You don't have to build all this new equipment. 01:03:56.850 --> 01:03:58.600 MIT is doing the same thing with equipment 01:03:58.600 --> 01:04:02.040 it's got, for the engine. 01:04:02.040 --> 01:04:05.543 From TechBridge, the idea of, maybe you 01:04:05.543 --> 01:04:07.710 could do this-- maybe you could connect up companies 01:04:07.710 --> 01:04:09.930 at the outset, with startups. 01:04:09.930 --> 01:04:10.800 That's interesting. 01:04:10.800 --> 01:04:13.200 And maybe you could do a technology validation step. 01:04:13.200 --> 01:04:15.300 And then this third piece, here-- 01:04:15.300 --> 01:04:19.590 and then I'll call it a day and let Chris lead some questions. 01:04:19.590 --> 01:04:21.870 But this third piece, here, is, maybe 01:04:21.870 --> 01:04:24.733 you could tie small manufacturers and startups, 01:04:24.733 --> 01:04:27.150 because they both have a problem that the other side could 01:04:27.150 --> 01:04:27.650 solve. 01:04:27.650 --> 01:04:28.740 Right? 01:04:28.740 --> 01:04:32.580 So you start to see a pretty interesting model 01:04:32.580 --> 01:04:38.520 for Rafael's idea of substituting space 01:04:38.520 --> 01:04:39.570 for venture funding. 01:04:39.570 --> 01:04:40.860 This is an interesting model. 01:04:40.860 --> 01:04:42.650 Universities could do this model. 01:04:42.650 --> 01:04:45.180 MIT is trying to experiment to show other schools that it 01:04:45.180 --> 01:04:46.740 could be done. 01:04:46.740 --> 01:04:50.010 Federal labs are already pursuing this. 01:04:50.010 --> 01:04:53.100 And the DOD has 67 of these, and Lincoln Lab 01:04:53.100 --> 01:04:56.760 is extremely interested in this model, for example. 01:04:56.760 --> 01:04:59.790 So is Draper, just up the street. 01:04:59.790 --> 01:05:02.860 So, in other words, there are ways this thing could scale. 01:05:02.860 --> 01:05:03.660 Right? 01:05:03.660 --> 01:05:06.300 So, between universities and existing laboratory 01:05:06.300 --> 01:05:09.120 capabilities-- and then MIT's got the idea of connecting you 01:05:09.120 --> 01:05:12.480 to companies and nodes that could help you 01:05:12.480 --> 01:05:15.300 as you develop a more sophisticated product line. 01:05:15.300 --> 01:05:16.920 So there could be a new model, here, 01:05:16.920 --> 01:05:19.440 that would really help with what's 01:05:19.440 --> 01:05:22.377 become now a very significant gap in US innovation system, 01:05:22.377 --> 01:05:24.210 over the collapse of venture-capital funding 01:05:24.210 --> 01:05:27.850 for other than software, biotech, and certain service 01:05:27.850 --> 01:05:30.233 sectors. 01:05:30.233 --> 01:05:31.150 Chris, it's all yours. 01:05:31.150 --> 01:05:32.080 CHRIS: Awesome. 01:05:32.080 --> 01:05:35.080 So I thought this is a really interesting article, 01:05:35.080 --> 01:05:39.030 because you often hear about, oh, energy, funding, 01:05:39.030 --> 01:05:40.780 and the whole system's not really working, 01:05:40.780 --> 01:05:43.780 but it was kind of hard for me, at least, to see why, 01:05:43.780 --> 01:05:47.340 and, like, the discussion of the neoclassical economic model 01:05:47.340 --> 01:05:49.480 and why that doesn't really work out, 01:05:49.480 --> 01:05:51.580 especially for this kind of industry, 01:05:51.580 --> 01:05:53.560 was pretty interesting to me. 01:05:53.560 --> 01:05:56.250 So the way I saw it was that-- 01:05:56.250 --> 01:05:58.010 So there's kind of a twofold problem. 01:05:58.010 --> 01:06:03.160 Like, we have problems in energy revolution and the technology 01:06:03.160 --> 01:06:05.560 space and then also, like, implementing 01:06:05.560 --> 01:06:06.880 those technologies. 01:06:06.880 --> 01:06:11.260 And Reif presents this innovation-orchards kind 01:06:11.260 --> 01:06:13.510 of framework, which is really interesting. 01:06:13.510 --> 01:06:17.590 And, as Bill mentioned, we have a somewhat robust kind 01:06:17.590 --> 01:06:23.710 of model for early, maybe like incubator-type startups. 01:06:23.710 --> 01:06:27.480 And then we have to somehow bridge that gap to innovation. 01:06:27.480 --> 01:06:30.220 I was just wondering, what are your thoughts on how 01:06:30.220 --> 01:06:33.340 we can kind of create that smooth transition 01:06:33.340 --> 01:06:37.300 between institutions that might be providing some early seed 01:06:37.300 --> 01:06:39.730 funding and then how to transition those 01:06:39.730 --> 01:06:42.490 into later stage, whether those be connected 01:06:42.490 --> 01:06:46.660 to, like, TechBridge or those other models that have kind 01:06:46.660 --> 01:06:50.980 of demonstrated some pretty good ways to bring 01:06:50.980 --> 01:06:54.994 that implementation process into play. 01:06:59.430 --> 01:07:00.890 RASHID: I think two things. 01:07:00.890 --> 01:07:05.720 One, I was pretty astonished at the first piece, 01:07:05.720 --> 01:07:08.062 particularly taking this neoclassical view of, 01:07:08.062 --> 01:07:10.270 hey, should we do cap-and-trade instead of carbon tax 01:07:10.270 --> 01:07:13.140 [INAUDIBLE] for curbing emissions? 01:07:13.140 --> 01:07:15.980 And I think it did a pretty good job of saying that maybe, like, 01:07:15.980 --> 01:07:19.850 it's more complicated than that, but also like the fact that we 01:07:19.850 --> 01:07:24.350 were still looking to do sort of a cap-and-trade system, 01:07:24.350 --> 01:07:27.500 even in 2010, which is relatively recent, 01:07:27.500 --> 01:07:31.370 and classical economics has existed for a while now-- 01:07:31.370 --> 01:07:34.250 made me think, like, is economics-- 01:07:34.250 --> 01:07:36.820 Are the solutions that we think theoretically, 01:07:36.820 --> 01:07:39.740 like, in economics, are they effectual? 01:07:39.740 --> 01:07:42.230 And are they just kind of limiting us, because we only 01:07:42.230 --> 01:07:43.730 have this school of economic thought 01:07:43.730 --> 01:07:45.860 that says this is sort of our solution subset, 01:07:45.860 --> 01:07:47.750 this is the answer? 01:07:47.750 --> 01:07:49.610 And are there economists out there 01:07:49.610 --> 01:07:51.440 aren't neoclassical economists, that 01:07:51.440 --> 01:07:55.100 may have solutions for us that exist outside of-- 01:07:55.100 --> 01:07:57.410 that probably would be a lot more palatable and useful 01:07:57.410 --> 01:08:00.190 than a carbon tax or a cap-and-trade system. 01:08:00.190 --> 01:08:01.690 WILLIAM BONVILLIAN: So, Rasheed, let 01:08:01.690 --> 01:08:03.870 me build on that for a second and just-- 01:08:03.870 --> 01:08:06.590 and, just to be clear, don't get me wrong, 01:08:06.590 --> 01:08:08.750 I do think a pricing mechan-- there is definitely 01:08:08.750 --> 01:08:10.100 a place for a pricing mechanism. 01:08:10.100 --> 01:08:12.120 It can help a lot. 01:08:12.120 --> 01:08:14.047 I think part of the problem, here, 01:08:14.047 --> 01:08:16.130 is that neoclassical economics, as we talked about 01:08:16.130 --> 01:08:24.410 in the first class, hasn't been able to develop an outlook that 01:08:24.410 --> 01:08:33.915 enables it to treat technology innovation as endogenous 01:08:33.915 --> 01:08:35.390 to economic-growth theory. 01:08:35.390 --> 01:08:35.890 Right? 01:08:35.890 --> 01:08:38.100 So SOLO announces it's exogenous, 01:08:38.100 --> 01:08:42.962 because it's too complex a model for us to track the variables. 01:08:42.962 --> 01:08:44.670 And, as we've talked about in this class, 01:08:44.670 --> 01:08:47.310 it involves history and culture and organization theory 01:08:47.310 --> 01:08:49.020 and all kinds of other things that 01:08:49.020 --> 01:08:51.569 are kind of outside the parameters of what economics 01:08:51.569 --> 01:08:54.060 is normally able to track in its curves. 01:08:54.060 --> 01:08:56.430 So that's a genuine problem. 01:08:56.430 --> 01:09:04.939 So when neoclassical economics comes up with a fix to climate, 01:09:04.939 --> 01:09:08.038 it misses the technology side. 01:09:08.038 --> 01:09:09.580 Because it doesn't have sophisticated 01:09:09.580 --> 01:09:10.580 handles to deal with it. 01:09:10.580 --> 01:09:12.979 Now, obviously economists like Romer and others 01:09:12.979 --> 01:09:16.939 are attempting to make technology theory endogenous, 01:09:16.939 --> 01:09:18.710 part of economic theory, but that's still 01:09:18.710 --> 01:09:20.210 an ongoing project. 01:09:20.210 --> 01:09:22.720 But that's where we ran into trouble, 01:09:22.720 --> 01:09:26.930 was that the technology need over an extended period of time 01:09:26.930 --> 01:09:30.470 didn't match the timetable on cap-and-trade. 01:09:30.470 --> 01:09:32.779 And the solution there was to push off cap-and-trade. 01:09:32.779 --> 01:09:35.602 And that's, in effect, what we've done. 01:09:35.602 --> 01:09:37.310 I still think we need to come back to it, 01:09:37.310 --> 01:09:39.080 but I think the project at hand is 01:09:39.080 --> 01:09:41.390 a technology-development project and really 01:09:41.390 --> 01:09:44.370 a state and local government technology-implementation 01:09:44.370 --> 01:09:47.420 alternatives, where we could come up 01:09:47.420 --> 01:09:50.898 with a Plan B that helped make progress for the next decade 01:09:50.898 --> 01:09:51.398 or so. 01:09:53.920 --> 01:09:56.942 STEPH: I also, to add to Rasheed's point, 01:09:56.942 --> 01:09:58.900 I think that's what I was getting at last week, 01:09:58.900 --> 01:10:04.030 with my point about nonmarket solutions to market-- 01:10:04.030 --> 01:10:05.680 to problems that we're approaching 01:10:05.680 --> 01:10:10.348 through the lens of economics, in the sense that, perhaps 01:10:10.348 --> 01:10:11.140 if we think about-- 01:10:14.740 --> 01:10:20.050 if we start our problem-solving from a lens of promoting 01:10:20.050 --> 01:10:24.163 social good, rather than increasing capital gain, 01:10:24.163 --> 01:10:26.830 then we might be able to come up with alternative and innovative 01:10:26.830 --> 01:10:27.850 solutions. 01:10:27.850 --> 01:10:28.768 Right? 01:10:28.768 --> 01:10:30.310 And so I think that's sort of where-- 01:10:30.310 --> 01:10:31.767 Reif? 01:10:31.767 --> 01:10:32.350 STUDENT: Reif. 01:10:32.350 --> 01:10:35.700 STEPH: Reif was coming from, that this model-- 01:10:35.700 --> 01:10:38.290 and I mentioned this on our very first day of class-- 01:10:38.290 --> 01:10:40.150 very much is similar to the model 01:10:40.150 --> 01:10:42.250 that nongovernmental organizations and nonprofits 01:10:42.250 --> 01:10:44.890 have been using for a very long time, in sort 01:10:44.890 --> 01:10:48.700 of trading or leveraging the kindness of individuals 01:10:48.700 --> 01:10:51.250 and their willingness to let them participate 01:10:51.250 --> 01:10:52.090 in their spaces. 01:10:52.090 --> 01:10:54.610 And you see this happen for political campaigns. 01:10:54.610 --> 01:10:56.170 Volunteer fellows will go, and they 01:10:56.170 --> 01:10:57.880 will live in a supporter's house, 01:10:57.880 --> 01:11:00.088 and then they will go on and knock on people's doors 01:11:00.088 --> 01:11:00.880 for that candidate. 01:11:00.880 --> 01:11:03.088 And they will do so for very little money or no money 01:11:03.088 --> 01:11:03.640 at all. 01:11:03.640 --> 01:11:06.640 And so, as someone who comes from the nonprofit and NGO 01:11:06.640 --> 01:11:10.270 sector, and I've been you know volunteering 01:11:10.270 --> 01:11:12.470 in politics since I was really little, 01:11:12.470 --> 01:11:17.260 the ways in which you can leverage on the sort of good 01:11:17.260 --> 01:11:21.010 and ethics of people seems to me a much more interesting place 01:11:21.010 --> 01:11:23.770 to start for research and development 01:11:23.770 --> 01:11:26.260 and for hardware technologies than people would think. 01:11:26.260 --> 01:11:29.890 Because, if you approach it from a lens of economics, 01:11:29.890 --> 01:11:31.690 it's very difficult to make the case, 01:11:31.690 --> 01:11:33.940 oftentimes, that your technology could be disruptive 01:11:33.940 --> 01:11:34.917 and could pay off. 01:11:34.917 --> 01:11:37.000 But if you approach it from a lens of social good, 01:11:37.000 --> 01:11:38.458 it's possible that you could appeal 01:11:38.458 --> 01:11:40.330 to the ethos of a venture capitalist. 01:11:40.330 --> 01:11:42.400 Because, for example, someone like Bill Gates 01:11:42.400 --> 01:11:44.230 is more likely to say, I want to do this 01:11:44.230 --> 01:11:46.190 because I think it's the right thing to do, 01:11:46.190 --> 01:11:49.450 than to make the argument that it's a good investment for him 01:11:49.450 --> 01:11:51.440 and that the ROI will be greater. 01:11:51.440 --> 01:11:55.690 So I think that there is a benefit to sometimes pivoting 01:11:55.690 --> 01:11:59.320 away from market-oriented problem-solving 01:11:59.320 --> 01:12:02.930 and to view it from a different sort of lens of ethics 01:12:02.930 --> 01:12:04.930 or social-good promotion. 01:12:04.930 --> 01:12:08.210 Obviously that won't always work, but there are instances, 01:12:08.210 --> 01:12:10.000 and I think this is one, in which that 01:12:10.000 --> 01:12:12.620 is where we are leaning toward. 01:12:12.620 --> 01:12:15.700 WILLIAM BONVILLIAN: And I will add, Steph, to your point, 01:12:15.700 --> 01:12:18.610 that part of what has come with the engine 01:12:18.610 --> 01:12:21.670 is a bridge fund available to those startups. 01:12:21.670 --> 01:12:25.870 So Rafael and colleagues have been 01:12:25.870 --> 01:12:29.250 able to raise over, I think, $150 million, 01:12:29.250 --> 01:12:31.905 now, for commitments to a bridge fund. 01:12:31.905 --> 01:12:33.280 Because, you know, these startups 01:12:33.280 --> 01:12:34.572 are going to need some funding. 01:12:34.572 --> 01:12:35.072 Right? 01:12:35.072 --> 01:12:35.930 It's not going to-- 01:12:35.930 --> 01:12:38.545 they save huge expenses by equipment and technology 01:12:38.545 --> 01:12:41.290 and know-how savings, in this new space, 01:12:41.290 --> 01:12:43.970 but they still are going to need to get funding. 01:12:43.970 --> 01:12:46.390 And so this bridge fund could really help them. 01:12:46.390 --> 01:12:50.870 That money was raised from, essentially, 01:12:50.870 --> 01:12:54.750 generous rich people in this region, who 01:12:54.750 --> 01:12:59.270 were prepared to, in effect, make a charitable donation 01:12:59.270 --> 01:13:01.040 towards this thing, thinking that it might 01:13:01.040 --> 01:13:02.660 be helpful to the overall innovation 01:13:02.660 --> 01:13:05.570 economy in the Massachusetts area. 01:13:05.570 --> 01:13:10.010 And they have an opportunity for return. 01:13:10.010 --> 01:13:11.950 So, if these startups take off, there 01:13:11.950 --> 01:13:13.490 is an opportunity for return. 01:13:13.490 --> 01:13:15.520 But, frankly, they're not expecting it. 01:13:15.520 --> 01:13:16.860 So that has actually worked. 01:13:16.860 --> 01:13:18.710 And Rafael has just been able to demonstrate 01:13:18.710 --> 01:13:23.235 that you can raise money on the basis of that kind of approach. 01:13:23.235 --> 01:13:25.610 STEPH: And I think they're one of the interesting models. 01:13:25.610 --> 01:13:26.690 And perhaps you've looked at this. 01:13:26.690 --> 01:13:27.458 Maybe you haven't. 01:13:27.458 --> 01:13:29.000 But it's the way in which art museums 01:13:29.000 --> 01:13:30.833 and, in particular, contemporary art museums 01:13:30.833 --> 01:13:33.620 pursue funding from philanthropists. 01:13:33.620 --> 01:13:36.510 Because it's often that a lot of the contemporary artists that 01:13:36.510 --> 01:13:38.690 are sort of on the leading edge are something 01:13:38.690 --> 01:13:40.635 that people are very reticent to adopt. 01:13:40.635 --> 01:13:42.260 So the museums that purchase their art, 01:13:42.260 --> 01:13:43.843 either for their permanent collections 01:13:43.843 --> 01:13:45.560 or for their temporary exhibits, often 01:13:45.560 --> 01:13:48.620 allow their philanthropists to gain some sort of benefit 01:13:48.620 --> 01:13:51.560 or value from having hosted that and having 01:13:51.560 --> 01:13:52.880 attached their name to it. 01:13:52.880 --> 01:13:54.890 And, later on, it is that, because art 01:13:54.890 --> 01:13:57.110 is seen as a commodity and luxury good, 01:13:57.110 --> 01:14:00.580 they're able to sort of gain capital return on it, as well. 01:14:00.580 --> 01:14:02.330 So I think it could be interesting to look 01:14:02.330 --> 01:14:05.150 at the ways in which museums and art museums specifically 01:14:05.150 --> 01:14:07.536 do their philanthropy for technology. 01:14:10.360 --> 01:14:10.860 CHRIS: Sure. 01:14:10.860 --> 01:14:11.370 Go ahead. 01:14:11.370 --> 01:14:11.690 STUDENT: Well, I think there's-- 01:14:11.690 --> 01:14:12.840 OK. 01:14:12.840 --> 01:14:15.420 There is also, like, purely private-sector 01:14:15.420 --> 01:14:17.370 market-driven models. 01:14:17.370 --> 01:14:22.230 I think a really good example is Autodesk., so right down here 01:14:22.230 --> 01:14:23.230 by the seaport. 01:14:23.230 --> 01:14:23.730 And-- 01:14:23.730 --> 01:14:24.860 WILLIAM BONVILLIAN: Why don't you describe it. 01:14:24.860 --> 01:14:25.443 STUDENT: Yeah. 01:14:25.443 --> 01:14:27.720 So, Autodesk, they basically want 01:14:27.720 --> 01:14:31.110 to become the software company for any CAD, CNC, 01:14:31.110 --> 01:14:33.090 anything that you want to make. 01:14:33.090 --> 01:14:36.490 And so they have a fellowship program here, and then-- 01:14:36.490 --> 01:14:39.240 so Auto-- they're MIT startups who work in their 01:14:39.240 --> 01:14:41.700 build space at the innovation building. 01:14:41.700 --> 01:14:45.798 And they also-- like, Pier 9 is, like, probably the best maker 01:14:45.798 --> 01:14:46.590 space in the world. 01:14:46.590 --> 01:14:48.630 And they have [INAUDIBLE] come in. 01:14:48.630 --> 01:14:50.880 For them, they get a lot of value out of it, 01:14:50.880 --> 01:14:56.460 because these innovators are testing their software 01:14:56.460 --> 01:14:58.380 and pushing it to its limits and giving them 01:14:58.380 --> 01:14:59.930 ideas for new features. 01:14:59.930 --> 01:15:03.960 Also, when those startups hit market, 01:15:03.960 --> 01:15:06.660 Autodesk really helped make that possible. 01:15:06.660 --> 01:15:08.460 So there's a lot of benefit to them. 01:15:08.460 --> 01:15:12.790 And they give these people working on hard technologies 01:15:12.790 --> 01:15:14.998 a really great working space to develop their stuff. 01:15:14.998 --> 01:15:17.040 WILLIAM BONVILLIAN: Chris, do you want to give us 01:15:17.040 --> 01:15:18.570 a few closing thoughts on this? 01:15:18.570 --> 01:15:19.320 CHRIS: Yeah, sure. 01:15:19.320 --> 01:15:21.653 WILLIAM BONVILLIAN: You had some very perceptive opening 01:15:21.653 --> 01:15:22.500 comments. 01:15:22.500 --> 01:15:23.000 CHRIS: Cool. 01:15:23.000 --> 01:15:23.500 Yeah. 01:15:23.500 --> 01:15:28.500 So, I think one thing we didn't really get a chance to touch on 01:15:28.500 --> 01:15:34.050 was that climate change and, like, the whole energy sector 01:15:34.050 --> 01:15:37.110 is kind of a different beast from a lot of different kind 01:15:37.110 --> 01:15:40.860 of sectors, because the way you evaluate 01:15:40.860 --> 01:15:45.645 how "good" a technology is, is kind of a much longer time 01:15:45.645 --> 01:15:49.590 span than, say, I don't know, biotech, where you can 01:15:49.590 --> 01:15:52.230 immediately see the impacts. 01:15:52.230 --> 01:15:53.670 I mean, the drug works or not. 01:15:53.670 --> 01:15:54.170 Right? 01:15:54.170 --> 01:15:55.260 You can immediately tell. 01:15:55.260 --> 01:15:58.110 But, for climate change, sure, you can, I don't know, 01:15:58.110 --> 01:16:01.650 measure carbon emissions year by year or something like that. 01:16:01.650 --> 01:16:05.250 But then you run the risk of, policies, 01:16:05.250 --> 01:16:07.710 social mindset, or whatever, shifting, 01:16:07.710 --> 01:16:11.880 once maybe you get on a trend of seeing some improvement, 01:16:11.880 --> 01:16:15.210 and then you might just shift and completely erase 01:16:15.210 --> 01:16:18.490 what you've done in the past year or so. 01:16:18.490 --> 01:16:21.840 So, definitely, the longer time span makes it more difficult, 01:16:21.840 --> 01:16:24.930 not only for funding but also, like, development, 01:16:24.930 --> 01:16:25.920 implementation. 01:16:25.920 --> 01:16:30.390 And I think a lot of these new models, 01:16:30.390 --> 01:16:32.970 like the innovation orchards, TechBridge, 01:16:32.970 --> 01:16:35.760 these models are really cool and should 01:16:35.760 --> 01:16:38.487 be interesting to see how they play out. 01:16:38.487 --> 01:16:39.570 WILLIAM BONVILLIAN: Great. 01:16:39.570 --> 01:16:42.237 Martha, do you want to give us a thought from MITI's perspective 01:16:42.237 --> 01:16:46.110 about some of these new models? 01:16:46.110 --> 01:16:51.743 MARTHA: So-- well, I guess that-- 01:16:51.743 --> 01:16:53.410 Bill, you kind of caught me by surprise. 01:16:53.410 --> 01:16:54.120 I've been holding back-- 01:16:54.120 --> 01:16:54.395 WILLIAM BONVILLIAN: Sorry. 01:16:54.395 --> 01:16:55.145 MARTHA: That's OK! 01:16:55.145 --> 01:16:57.103 That's all right. 01:16:57.103 --> 01:16:58.770 I think-- well, first of all, Chris just 01:16:58.770 --> 01:17:00.353 touched on something really important, 01:17:00.353 --> 01:17:02.880 which is that one of the big challenges-- 01:17:02.880 --> 01:17:04.560 and I think I've mentioned this before-- 01:17:04.560 --> 01:17:07.140 is that, traditionally, energy technologies take 01:17:07.140 --> 01:17:09.010 decades to get adopted. 01:17:09.010 --> 01:17:12.690 And just the pie chart on the VCs [LAUGH] 01:17:12.690 --> 01:17:17.310 tells you something about what energy technologies are 01:17:17.310 --> 01:17:19.840 competing against for capital. 01:17:19.840 --> 01:17:22.440 I guess that this is a great model, 01:17:22.440 --> 01:17:24.480 if it could get replicated, you know, 01:17:24.480 --> 01:17:27.180 and even break through energy ventures, which 01:17:27.180 --> 01:17:28.530 is a different model. 01:17:28.530 --> 01:17:33.640 I mean, this is an earlier stage, helping people get past. 01:17:33.640 --> 01:17:38.570 It feels like things move slowly. 01:17:38.570 --> 01:17:43.050 And, like everything related to this whole energy challenge, 01:17:43.050 --> 01:17:45.750 we need to kind of pick up the pace. 01:17:45.750 --> 01:17:47.760 And, Bill, you talked about the states 01:17:47.760 --> 01:17:49.780 and that there's different players. 01:17:49.780 --> 01:17:50.530 It's challenging. 01:17:50.530 --> 01:17:51.030 Right? 01:17:51.030 --> 01:17:54.150 I mean, the states just don't have the kind of-- 01:17:54.150 --> 01:17:56.480 first of all, they compete against each other. 01:17:56.480 --> 01:17:58.220 They also just don't have the resources. 01:17:58.220 --> 01:18:00.970 So we'll see where we end up.