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 open courseware 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 OpenCourseWare 00:00:16.620 --> 00:00:17.992 at ocw.mit.edu. 00:00:22.670 --> 00:00:25.810 WILLIAM BONVILLIAN: So I'm just putting In-Q-Tel out 00:00:25.810 --> 00:00:29.530 there as probably the most extreme example 00:00:29.530 --> 00:00:35.630 of governmental willingness to intervene in territories 00:00:35.630 --> 00:00:37.690 we thought the government really wouldn't do. 00:00:37.690 --> 00:00:39.340 Right? 00:00:39.340 --> 00:00:45.870 And, again, it's an example of this national security state 00:00:45.870 --> 00:00:48.930 doctrine that David Hart told us about. 00:00:48.930 --> 00:00:53.350 Whatever is needed for national security, we're going to do, 00:00:53.350 --> 00:00:55.030 however interventionist it might be. 00:00:55.030 --> 00:00:56.690 And this is a good example. 00:00:56.690 --> 00:01:00.790 So Ruth David, a very talented former CIA Director 00:01:00.790 --> 00:01:04.720 for Science and Technology, comes up 00:01:04.720 --> 00:01:12.650 with the idea of creating this entity to sponsor IT research. 00:01:12.650 --> 00:01:15.540 Because the CIA realized it was falling behind. 00:01:15.540 --> 00:01:17.810 It wasn't part of the IT revolution. 00:01:17.810 --> 00:01:20.172 It didn't understand, wasn't a participant, 00:01:20.172 --> 00:01:22.130 and yet it was going to be absolutely critical. 00:01:22.130 --> 00:01:25.075 And, of course, virtually no day passes 00:01:25.075 --> 00:01:26.450 without reading in the newspapers 00:01:26.450 --> 00:01:30.110 about some latest cyber security set of issues. 00:01:30.110 --> 00:01:36.440 So In-Q-Tel is set up as a government venture capital 00:01:36.440 --> 00:01:41.030 firm, a completely unique model. 00:01:41.030 --> 00:01:45.730 And it's aimed at early stage technology development. 00:01:45.730 --> 00:01:49.780 So the CIA is not new to technology development. 00:01:49.780 --> 00:01:53.710 I mean, in aerospace, the U2 and SR-71 blackbird 00:01:53.710 --> 00:01:58.920 are two of the most famous and spectacular aircraft ever put 00:01:58.920 --> 00:01:59.420 together. 00:01:59.420 --> 00:02:03.560 They were put together by Lockheed skunk works. 00:02:03.560 --> 00:02:08.840 But In-Q-Tel really is a very different model. 00:02:08.840 --> 00:02:16.280 So Norm Augustine, who had been CEO of Lockheed-- 00:02:16.280 --> 00:02:20.000 and is the winner of the president's National Medal 00:02:20.000 --> 00:02:22.370 of Technology, by the way, so a great technologist 00:02:22.370 --> 00:02:25.660 in his own right-- 00:02:25.660 --> 00:02:27.660 he helps in the founding of this. 00:02:27.660 --> 00:02:31.140 And they pick a CEO right out of Silicon Valley. 00:02:31.140 --> 00:02:35.790 And they've got a board with ties to IT innovators, 00:02:35.790 --> 00:02:38.850 as well as economic researchers, and VC firms, 00:02:38.850 --> 00:02:40.570 and tech companies. 00:02:40.570 --> 00:02:47.750 So In-Q-Tel is allowed to enter into joint ventures, i.e. 00:02:47.750 --> 00:02:51.620 In effect, it can co-own the companies 00:02:51.620 --> 00:02:55.040 that it's nurturing to bring along IT technologies 00:02:55.040 --> 00:02:57.650 that the CIA is going to be interested in. 00:02:57.650 --> 00:03:00.170 It can use sole source grants. 00:03:00.170 --> 00:03:02.240 It can set up open competitions. 00:03:02.240 --> 00:03:05.330 It can award sole source development contracts. 00:03:05.330 --> 00:03:07.610 It's got a set of powers here that are really quite 00:03:07.610 --> 00:03:10.700 interventionist in the model. 00:03:10.700 --> 00:03:13.420 And the CIA itself doesn't review its business deals. 00:03:13.420 --> 00:03:16.340 It's because it's a bit offshore. 00:03:16.340 --> 00:03:20.930 So it collaborates with the CIA, but it's independent of it. 00:03:20.930 --> 00:03:23.183 It has this set of characteristics. 00:03:23.183 --> 00:03:25.100 And we're going to talk more about these kinds 00:03:25.100 --> 00:03:27.500 of characteristics when we do the great groups 00:03:27.500 --> 00:03:31.370 class, the seventh class. 00:03:31.370 --> 00:03:34.850 But agile, problem-driven, solutions-focused, 00:03:34.850 --> 00:03:40.340 team-oriented, technology aware, output measured, innovative. 00:03:40.340 --> 00:03:44.930 These are all kind of characteristics 00:03:44.930 --> 00:03:48.260 that In-Q-Tel likes to say that it's capable of. 00:03:48.260 --> 00:03:50.370 And these are some of the technology areas 00:03:50.370 --> 00:03:54.560 that In-Q-Tel, in its earlier stages, worked on. 00:03:54.560 --> 00:03:59.600 So a whole suite of IT-related and software-related tech 00:03:59.600 --> 00:04:01.200 capabilities. 00:04:01.200 --> 00:04:07.170 So that's the model, and it's different. 00:04:07.170 --> 00:04:09.930 So, Chris, do you want to bring us through it quickly. 00:04:12.720 --> 00:04:14.670 CHRIS: So this is a pretty unique situation. 00:04:14.670 --> 00:04:17.519 Basically, it's kind of posed as a win-win. 00:04:17.519 --> 00:04:21.390 Like the CIA gets new tech that they are kind of 00:04:21.390 --> 00:04:23.400 behind in producing. 00:04:23.400 --> 00:04:26.430 And then, these tech companies, or In-Q-Tel, 00:04:26.430 --> 00:04:28.320 has the opportunity to get exposure 00:04:28.320 --> 00:04:32.550 to potential big next problems that they could develop 00:04:32.550 --> 00:04:34.970 commercial products for. 00:04:34.970 --> 00:04:38.460 So one question that was posed was, 00:04:38.460 --> 00:04:40.530 are there other such private enterprises 00:04:40.530 --> 00:04:41.980 funded by the government? 00:04:41.980 --> 00:04:44.370 And if not, what is preventing these partnerships 00:04:44.370 --> 00:04:46.900 from happening. 00:04:46.900 --> 00:04:49.770 I think Bill mentioned that the Supreme unique case 00:04:49.770 --> 00:04:51.900 so, probably, I don't think there's 00:04:51.900 --> 00:04:53.610 any other such partnerships. 00:04:53.610 --> 00:04:58.020 But why is that, maybe? 00:04:58.020 --> 00:04:59.730 AUDIENCE: They're still around, are they? 00:04:59.953 --> 00:05:01.120 WILLIAM BONVILLIAN: Oh yeah. 00:05:01.120 --> 00:05:04.140 AUDIENCE: They re-branded as IQT. 00:05:04.140 --> 00:05:05.305 AUDIENCE: Ah, thank you. 00:05:09.960 --> 00:05:15.017 I do remember there was one, maybe it was similar to DARPA, 00:05:15.017 --> 00:05:17.100 I remember in DARPA, at least in the next reading, 00:05:17.100 --> 00:05:19.530 there was something that was similar. 00:05:19.530 --> 00:05:20.470 Oh, that's right. 00:05:20.470 --> 00:05:22.650 So I remember that one of the points they mentioned 00:05:22.650 --> 00:05:24.150 in this reading, there was some sort 00:05:24.150 --> 00:05:26.850 of licensing that corporations needed 00:05:26.850 --> 00:05:28.503 to work with the government. 00:05:28.503 --> 00:05:29.670 Do you remember what it was? 00:05:29.670 --> 00:05:30.503 Like, FRC licensing. 00:05:30.503 --> 00:05:32.587 AUDIENCE: I think we were just talking about that. 00:05:32.587 --> 00:05:34.920 Like, level of strictness of the contracts. 00:05:34.920 --> 00:05:37.870 And how In-Q-Tel works to restructure 00:05:37.870 --> 00:05:41.583 how that contract works so that they could encourage smaller 00:05:41.583 --> 00:05:43.000 companies that didn't want to deal 00:05:43.000 --> 00:05:46.385 with overwhelming bureaucracy to join the party. 00:05:46.385 --> 00:05:47.510 WILLIAM BONVILLIAN: Thanks. 00:05:47.510 --> 00:05:47.930 [INAUDIBLE] 00:05:47.930 --> 00:05:48.430 Good. 00:05:51.250 --> 00:05:55.510 AUDIENCE: I was going to say, I think agencies similar 00:05:55.510 --> 00:05:58.480 to In-Q-Tel might be a hard sell, 00:05:58.480 --> 00:06:00.880 because if you think about-- 00:06:00.880 --> 00:06:05.080 they probably have a pretty large employee base, 00:06:05.080 --> 00:06:09.355 and they're privy to information leak. 00:06:12.070 --> 00:06:14.090 Also, it's going-- kind of directly 00:06:14.090 --> 00:06:19.223 flying in the face of our aversion to industrial policy. 00:06:19.223 --> 00:06:20.890 So we are picking winners, in this case. 00:06:20.890 --> 00:06:23.290 So those two things I think make it really difficult 00:06:23.290 --> 00:06:25.762 to have other agencies like this ourselves. 00:06:25.762 --> 00:06:27.970 WILLIAM BONVILLIAN: Right, because really, in effect, 00:06:27.970 --> 00:06:30.260 In-Q-Tel is a venture capital firm. 00:06:30.260 --> 00:06:31.882 It's not doing its own research. 00:06:31.882 --> 00:06:33.340 It's a venture capitalist, and it's 00:06:33.340 --> 00:06:36.940 taking positions in companies and helping 00:06:36.940 --> 00:06:40.150 drive those companies towards technology work 00:06:40.150 --> 00:06:45.828 that's going to be relevant to concerns that the CIA has got. 00:06:45.828 --> 00:06:46.370 Sorry, Chris. 00:06:46.370 --> 00:06:47.540 Go ahead. 00:06:47.540 --> 00:06:48.370 CHLOE: Oh, no, I-- 00:06:48.370 --> 00:06:49.620 WILLIAM BONVILLIAN: Oh, Chloe. 00:06:52.420 --> 00:06:55.600 CHLOE: I think it's interesting to think about why this would 00:06:55.600 --> 00:06:57.100 or wouldn't work for other agencies, 00:06:57.100 --> 00:06:58.475 because personally, I'm surprised 00:06:58.475 --> 00:07:01.930 that it has been such a successful model for the CIA, 00:07:01.930 --> 00:07:05.440 of all government agencies, on several levels. 00:07:05.440 --> 00:07:07.120 The article says that they didn't 00:07:07.120 --> 00:07:09.950 deal with any classified work or contracts, 00:07:09.950 --> 00:07:12.340 but I don't understand how such a firm could 00:07:12.340 --> 00:07:15.400 exist in partnership with an agency that does any classified 00:07:15.400 --> 00:07:16.150 work. 00:07:16.150 --> 00:07:19.110 I don't see how-- 00:07:19.110 --> 00:07:20.620 I'm surprised that that happened. 00:07:20.620 --> 00:07:24.100 I am surprised, also, a bit that that was able to-- 00:07:24.100 --> 00:07:24.640 yeah. 00:07:24.640 --> 00:07:25.430 Start with that. 00:07:25.430 --> 00:07:27.790 AUDIENCE: Which part are you surprised by-- the fact 00:07:27.790 --> 00:07:30.610 that they work so much on non-classified stuff? 00:07:30.610 --> 00:07:31.200 CHLOE: No, no. 00:07:31.200 --> 00:07:31.790 They didn't. 00:07:31.790 --> 00:07:32.870 In-Q-Tel, at least-- 00:07:32.870 --> 00:07:33.520 WILLIAM BONVILLIAN: Yeah, they didn't 00:07:33.520 --> 00:07:34.562 work on classified stuff. 00:07:34.562 --> 00:07:35.950 CHLOE: So I'm surprised that-- 00:07:35.950 --> 00:07:37.907 I think, of all agencies that I think 00:07:37.907 --> 00:07:40.240 this model could work for, I'm surprised that it works-- 00:07:40.240 --> 00:07:40.720 AUDIENCE: For someone who-- 00:07:40.720 --> 00:07:41.496 CHLOE: --the CIA. 00:07:41.496 --> 00:07:42.460 AUDIENCE: --who compartmentalizes 00:07:42.460 --> 00:07:43.210 their information. 00:07:43.210 --> 00:07:45.380 CHLOE: Yeah, compartmentalizes information. 00:07:45.380 --> 00:07:47.505 They were probably-- they mentioned also, oh, there 00:07:47.505 --> 00:07:48.922 will definitely be people who will 00:07:48.922 --> 00:07:50.530 raise questions about ethics concerns 00:07:50.530 --> 00:07:54.993 and the government meddling in funding technologies 00:07:54.993 --> 00:07:56.660 that they might simply be interested in. 00:07:56.660 --> 00:08:02.098 And feel like the CIA is just the worst possible-- 00:08:02.098 --> 00:08:02.890 AUDIENCE: Customer? 00:08:02.890 --> 00:08:04.390 CHLOE: Yeah. 00:08:04.390 --> 00:08:05.670 It's really surprising to me. 00:08:05.670 --> 00:08:07.420 AUDIENCE: I think-- yeah, it's really cool 00:08:07.420 --> 00:08:10.060 that it works, and also kind of shows that private enterprise 00:08:10.060 --> 00:08:11.453 work with government. 00:08:11.453 --> 00:08:13.870 Private enterprise has a strong incentive to move quickly, 00:08:13.870 --> 00:08:15.828 but I also think it's a case study in terms of, 00:08:15.828 --> 00:08:17.170 it was an IT revolution. 00:08:17.170 --> 00:08:20.020 Their business is information like information in general. 00:08:20.020 --> 00:08:22.775 And if anybody's kind of better than us, then we're screwed. 00:08:22.775 --> 00:08:24.400 So they're like, we really need to win. 00:08:24.400 --> 00:08:25.317 We really need to win. 00:08:25.317 --> 00:08:26.740 So I think there's a strong stress 00:08:26.740 --> 00:08:28.030 to actually make it work. 00:08:28.030 --> 00:08:29.810 So there's probably a lot of issues. 00:08:29.810 --> 00:08:31.780 And I'll look from a management perspective, a lot of times, 00:08:31.780 --> 00:08:33.070 you don't say about the bad things 00:08:33.070 --> 00:08:34.480 when they write stories about it. 00:08:34.480 --> 00:08:37.429 So their-- I feel like, yeah, it was really stressful probably, 00:08:37.429 --> 00:08:38.400 the people from the-- 00:08:38.400 --> 00:08:40.400 because it's going to be an old wing who's like, 00:08:40.400 --> 00:08:41.608 yo, we don't want to do this. 00:08:41.608 --> 00:08:42.983 And there was a new wing who were 00:08:42.983 --> 00:08:44.410 like, no, we need to do this. 00:08:44.410 --> 00:08:47.170 So I think it might have been a pretty stressful thing. 00:08:47.170 --> 00:08:49.060 I can see how it works, but I can also 00:08:49.060 --> 00:08:50.990 see how they made it work. 00:08:50.990 --> 00:08:51.490 CHLOE: Yeah. 00:08:51.490 --> 00:08:52.360 AUDIENCE: That's my point. 00:08:52.360 --> 00:08:53.777 AUDIENCE: Which means that if it's 00:08:53.777 --> 00:08:57.340 such a difficult situation, and if they were still 00:08:57.340 --> 00:09:00.700 able to make it work just out of necessity, then [INAUDIBLE] 00:09:00.700 --> 00:09:02.680 probably any other government agency 00:09:02.680 --> 00:09:06.010 could do something similar. 00:09:06.010 --> 00:09:08.680 WILLIAM BONVILLIAN: So in order that we get through everything, 00:09:08.680 --> 00:09:10.388 I'm going to push this ahead on this one. 00:09:10.388 --> 00:09:14.710 But first, just a closing thought, Chris, on this one? 00:09:14.710 --> 00:09:17.290 CHRIS: I think the central idea here, 00:09:17.290 --> 00:09:19.480 that you can maybe outsource what 00:09:19.480 --> 00:09:23.650 you may be a little bit behind in or aren't so good at, 00:09:23.650 --> 00:09:27.790 is really interesting, so that the CIA can effectively 00:09:27.790 --> 00:09:31.360 focus on its core business, which is gathering 00:09:31.360 --> 00:09:34.150 and maintaining intel. 00:09:34.150 --> 00:09:36.520 And this goes back to our previous discussion 00:09:36.520 --> 00:09:39.890 about the government choosing winners and losers, 00:09:39.890 --> 00:09:43.090 and it's really interesting that this case has emerged 00:09:43.090 --> 00:09:47.560 as the real case that they've chosen a clear winner here, 00:09:47.560 --> 00:09:51.160 and they're actually forging a pretty strong 00:09:51.160 --> 00:09:53.830 public-private partnership that seems to work. 00:09:53.830 --> 00:09:55.890 So yeah, this is a pretty interesting article. 00:09:55.890 --> 00:09:58.390 WILLIAM BONVILLIAN: And I wanted to have Sarah Jane Maxted-- 00:09:58.390 --> 00:10:01.260 that is, our distinguished visitor in our class today-- 00:10:01.260 --> 00:10:02.760 just introduce herself briefly. 00:10:02.760 --> 00:10:05.600 And maybe, Sarah Jane, you can tell the team some things 00:10:05.600 --> 00:10:06.350 you're working on. 00:10:06.350 --> 00:10:07.350 SARAH JANE MAXTED: Sure. 00:10:07.350 --> 00:10:10.040 I'm Sarah Jane Maxted, also SJ. 00:10:10.040 --> 00:10:11.765 [INAUDIBLE] refer to me. 00:10:11.765 --> 00:10:14.440 I might pop in a few other times as well. 00:10:14.440 --> 00:10:15.903 I work at MIT. 00:10:15.903 --> 00:10:18.070 I run a program called the Regional Entrepreneurship 00:10:18.070 --> 00:10:19.840 Acceleration Program. 00:10:19.840 --> 00:10:22.240 We work with global regions all over the world 00:10:22.240 --> 00:10:24.430 to accelerate their innovation ecosystem. 00:10:24.430 --> 00:10:26.870 So my background-- I'm not that old, 00:10:26.870 --> 00:10:30.100 but my specialization is in innovation ecosystems. 00:10:30.100 --> 00:10:34.960 Specifically, my background's most directly related 00:10:34.960 --> 00:10:35.958 to the energy space. 00:10:35.958 --> 00:10:37.750 So I worked in the US Department of Energy, 00:10:37.750 --> 00:10:39.530 and I worked for a US senator, and I 00:10:39.530 --> 00:10:43.900 worked in the private sector as well, all in relation 00:10:43.900 --> 00:10:46.450 to energy and innovation ecosystems. 00:10:46.450 --> 00:10:48.790 So how do you cultivate-- 00:10:48.790 --> 00:10:50.830 how do you deal with this valley of death? 00:10:50.830 --> 00:10:52.420 And so it was so interesting being 00:10:52.420 --> 00:10:54.003 in the beginning of this conversation, 00:10:54.003 --> 00:10:57.580 talking about not using market terms. 00:10:57.580 --> 00:10:59.830 And when I worked in the federal government, 00:10:59.830 --> 00:11:02.560 we were not allowed to say commercialization. 00:11:02.560 --> 00:11:04.320 It was the death word. 00:11:04.320 --> 00:11:05.210 It was ridiculous. 00:11:05.210 --> 00:11:06.850 I was like, why can't we just use it? 00:11:06.850 --> 00:11:08.615 To your point, that helps clarify. 00:11:08.615 --> 00:11:10.470 So it was very frustrating. 00:11:10.470 --> 00:11:11.830 It's been really great to hear. 00:11:11.830 --> 00:11:14.090 AUDIENCE: What words did you use as an alternative? 00:11:14.090 --> 00:11:15.625 SARAH JANE MAXTED: Tech to market. 00:11:15.625 --> 00:11:18.590 [LAUGHTER] 00:11:18.722 --> 00:11:20.430 We also weren't allowed to say marketing. 00:11:20.430 --> 00:11:22.390 Marketing was absolutely not OK. 00:11:22.390 --> 00:11:24.040 AUDIENCE: What about tech transfer? 00:11:24.040 --> 00:11:24.300 SARAH JANE MAXTED: Yeah. 00:11:24.300 --> 00:11:25.450 [INTERPOSING VOICES] 00:11:25.450 --> 00:11:26.830 SARAH JANE MAXTED: That was OK. 00:11:26.830 --> 00:11:29.640 Congressmen didn't love it. 00:11:29.640 --> 00:11:32.350 But it's really fascinating to hear each of you guys. 00:11:32.350 --> 00:11:34.120 You guys are very well-versed. 00:11:34.120 --> 00:11:35.237 I'm quite impressed. 00:11:35.237 --> 00:11:36.820 But yeah, any questions on that front. 00:11:36.820 --> 00:11:39.130 And what I'm doing here at MIT, I also 00:11:39.130 --> 00:11:41.803 work with the Innovation Initiative. 00:11:41.803 --> 00:11:43.220 I think somebody mentioned earlier 00:11:43.220 --> 00:11:46.540 some of the educational things related to innovation 00:11:46.540 --> 00:11:49.450 entrepreneurship and business, and being 00:11:49.450 --> 00:11:51.440 able to have multiple skill sets. 00:11:51.440 --> 00:11:53.050 And I am interested at some point 00:11:53.050 --> 00:11:55.425 to hear what you guys think about the minor in innovation 00:11:55.425 --> 00:11:57.970 and entrepreneurship, which was launched last year. 00:11:57.970 --> 00:12:00.000 Maybe some of you are part of it. 00:12:00.000 --> 00:12:02.460 But anyways, that's what I [INAUDIBLE].. 00:12:02.460 --> 00:12:02.880 WILLIAM BONVILLIAN: Thank you. 00:12:02.880 --> 00:12:03.616 SARAH JANE MAXTED: You're welcome. 00:12:03.616 --> 00:12:05.050 Thank you for having me. 00:12:05.050 --> 00:12:06.300 WILLIAM BONVILLIAN: All right. 00:12:06.300 --> 00:12:08.842 Now we're going to crash through the last couple of readings. 00:12:12.350 --> 00:12:14.690 This is a piece I did in 2014. 00:12:14.690 --> 00:12:19.680 And essentially, I began to realize 00:12:19.680 --> 00:12:23.100 that there were different periods at which point 00:12:23.100 --> 00:12:28.770 we began to reorient in the US our understanding 00:12:28.770 --> 00:12:31.860 and the organization of our innovation system 00:12:31.860 --> 00:12:36.180 towards, heaven forbid, commercialization. 00:12:36.180 --> 00:12:40.530 And I roughly delineated five periods-- 00:12:40.530 --> 00:12:43.860 the immediate postwar, the Sputnik period, 00:12:43.860 --> 00:12:47.850 the 1980s competitiveness period, and then more recently, 00:12:47.850 --> 00:12:50.370 these new potential innovation waves 00:12:50.370 --> 00:12:52.590 that are coming in-- energy for sure, 00:12:52.590 --> 00:12:56.040 I think, but also potentially advanced manufacturing. 00:12:56.040 --> 00:13:01.410 And the US essentially had to rethink the Vannevar Bush 00:13:01.410 --> 00:13:05.760 disconnected model that it brought into place in the early 00:13:05.760 --> 00:13:11.190 postwar, and create a more connected model. 00:13:11.190 --> 00:13:14.280 And each one of these stages presents 00:13:14.280 --> 00:13:17.250 movement towards more connected kinds of systems. 00:13:17.250 --> 00:13:20.270 So the postwar period you're familiar with. 00:13:20.270 --> 00:13:22.710 That's Vannevar Bush himself. 00:13:22.710 --> 00:13:26.310 And he creates a highly connected model during the war, 00:13:26.310 --> 00:13:30.150 as we've discussed, and then disconnects it 00:13:30.150 --> 00:13:32.790 as we've gone through and talked about-- 00:13:32.790 --> 00:13:36.262 particularly from the Stokes reading-- 00:13:36.262 --> 00:13:37.470 at the close of World War II. 00:13:37.470 --> 00:13:40.870 So this is where, as we said before, 00:13:40.870 --> 00:13:44.130 our great, strong, and certainly very important 00:13:44.130 --> 00:13:46.260 basic research organizations come from. 00:13:46.260 --> 00:13:51.330 And as we've talked before, we get a lot out of that model. 00:13:51.330 --> 00:13:53.610 But Sputnik is an attempt-- 00:13:53.610 --> 00:13:56.640 led by the Defense Department, but embracing other pieces 00:13:56.640 --> 00:13:57.990 like NASA and NSF-- 00:14:00.580 --> 00:14:03.310 where the Defense Department pushes 00:14:03.310 --> 00:14:05.620 on that disconnected model. 00:14:05.620 --> 00:14:08.430 The Defense Department can't take a disconnected model. 00:14:08.430 --> 00:14:09.910 It just won't work. 00:14:09.910 --> 00:14:13.080 It's got to have fairly rapid movement 00:14:13.080 --> 00:14:14.690 towards actual technology development. 00:14:14.690 --> 00:14:16.830 And to an extent a system is disconnected, 00:14:16.830 --> 00:14:19.600 it's not going to serve DoD well. 00:14:19.600 --> 00:14:22.600 So DoD, in the course of the Cold War-- and certainly, 00:14:22.600 --> 00:14:24.910 this is rampant by 1957-- 00:14:24.910 --> 00:14:27.820 is rebuilding its much more connected, World War 00:14:27.820 --> 00:14:32.710 II-like system, with deep ties between industry, university 00:14:32.710 --> 00:14:39.820 research systems and efforts, and the defense lab system. 00:14:39.820 --> 00:14:44.350 So DoD plays a pervasive role at every stage of the pipeline, 00:14:44.350 --> 00:14:46.490 as we've talked about previously. 00:14:46.490 --> 00:14:50.790 So if that's the innovation pipeline, 00:14:50.790 --> 00:14:53.130 our classic basic research agencies 00:14:53.130 --> 00:14:57.930 are playing, at this stage, research and maybe 00:14:57.930 --> 00:14:59.640 invention of early-stage prototypes, 00:14:59.640 --> 00:15:02.486 maybe into early-stage development, but that's it. 00:15:02.486 --> 00:15:05.170 Whereas the Defense Department, as we've talked about, 00:15:05.170 --> 00:15:09.330 will perform the research, the development, 00:15:09.330 --> 00:15:12.030 fund the prototype, fund the demonstration, 00:15:12.030 --> 00:15:16.260 fund the test bed, and move into actual production, 00:15:16.260 --> 00:15:19.800 often creating initial markets for new technologies. 00:15:19.800 --> 00:15:22.990 That's the IT story that we've begun to tell. 00:15:22.990 --> 00:15:25.380 We'll tell a little more when we talk more about DARPA. 00:15:25.380 --> 00:15:28.860 So DoD has got a much more connected system, because 00:15:28.860 --> 00:15:30.630 of its potential-- and it doesn't always 00:15:30.630 --> 00:15:33.710 play a role at every one of these stages, 00:15:33.710 --> 00:15:36.300 but it potentially plays a role at all of them. 00:15:36.300 --> 00:15:39.140 So it's a very different organizational model, 00:15:39.140 --> 00:15:41.780 as we've been talking about today. 00:15:41.780 --> 00:15:45.760 DARPA comes right out of the Sputnik challenge. 00:15:45.760 --> 00:15:47.090 It's set up in '58. 00:15:47.090 --> 00:15:48.060 Sputnik is '57. 00:15:51.740 --> 00:15:54.260 President Eisenhower had been completely frustrated 00:15:54.260 --> 00:15:57.930 that the three separate service space 00:15:57.930 --> 00:16:01.240 programs were not talking to each other 00:16:01.240 --> 00:16:03.700 and not sharing ideas. 00:16:03.700 --> 00:16:06.970 Each of the services was pursuing a rival effort 00:16:06.970 --> 00:16:10.930 to capture what was then known as the higher ground, 00:16:10.930 --> 00:16:12.790 and put that higher ground project 00:16:12.790 --> 00:16:14.500 into its own procurement program. 00:16:14.500 --> 00:16:16.990 So the Army and the Air Force and Navy all 00:16:16.990 --> 00:16:19.180 had their own separate missile programs. 00:16:19.180 --> 00:16:22.690 Eisenhower wakes up, stuck with Sputnik, 00:16:22.690 --> 00:16:24.790 appropriately blames the services 00:16:24.790 --> 00:16:26.710 for not having undertaken collaboration. 00:16:26.710 --> 00:16:30.040 Eisenhower decides, I'm taking space away from you. 00:16:30.040 --> 00:16:32.502 We're going to create this DARPA thing, 00:16:32.502 --> 00:16:34.710 and it's going to report to the Secretary of Defense, 00:16:34.710 --> 00:16:36.980 and we're going to run it as a unified program. 00:16:36.980 --> 00:16:41.740 That only lasts a few months, because there's a big movement 00:16:41.740 --> 00:16:45.670 to have a civilian agency led in space, not a military agency. 00:16:45.670 --> 00:16:50.620 So then NACA-- which was the Aeronautical Research Agency 00:16:50.620 --> 00:16:53.320 that, actually, Vannevar Bush led in the 1930s, 00:16:53.320 --> 00:16:55.870 which is where he learns his innovation organization 00:16:55.870 --> 00:16:57.460 lessons-- 00:16:57.460 --> 00:17:01.990 that becomes NASA, and becomes aeronautics and space, 00:17:01.990 --> 00:17:08.810 and is essentially created around the Apollo mission. 00:17:08.810 --> 00:17:09.310 Max? 00:17:09.310 --> 00:17:12.990 MAX: Quick question regarding the previous slide. 00:17:12.990 --> 00:17:15.839 You mentioned that the DoD is basically involved 00:17:15.839 --> 00:17:18.329 in all of these steps, whereas places like the DoE 00:17:18.329 --> 00:17:19.319 are not involved. 00:17:19.319 --> 00:17:21.397 Why isn't the DoE involved? 00:17:21.397 --> 00:17:23.230 WILLIAM BONVILLIAN: The Department of Energy 00:17:23.230 --> 00:17:24.033 doesn't have a-- 00:17:24.033 --> 00:17:25.450 Sarah Jane can tell us about this, 00:17:25.450 --> 00:17:27.400 but it doesn't have a procurement budget, 00:17:27.400 --> 00:17:30.920 so it doesn't buy stuff. 00:17:30.920 --> 00:17:35.460 So DoD buys its stuff. 00:17:35.460 --> 00:17:38.430 It will buy the technology advances that it's supporting. 00:17:38.430 --> 00:17:39.720 It will buy aircraft. 00:17:39.720 --> 00:17:42.960 It will buy IT systems. 00:17:42.960 --> 00:17:44.370 It will create the initial market 00:17:44.370 --> 00:17:49.180 for the integrated circuit for its own computer needs. 00:17:49.180 --> 00:17:51.970 The Department of Energy doesn't have a procurement budget, 00:17:51.970 --> 00:17:55.030 therefore it's limited in its ability 00:17:55.030 --> 00:17:58.870 to do this creation of initial markets 00:17:58.870 --> 00:18:01.360 and undertake support of the production stage. 00:18:04.610 --> 00:18:07.110 It's hard-- look, in the end, the energy technology-- 00:18:07.110 --> 00:18:08.318 we're going to talk about it. 00:18:08.318 --> 00:18:10.760 We'll do a whole case study on energy, which I 00:18:10.760 --> 00:18:13.040 hope will sort of satisfy you. 00:18:13.040 --> 00:18:17.030 But in the end, we're going to stand up 00:18:17.030 --> 00:18:20.060 an energy technology revolution in the private sector. 00:18:20.060 --> 00:18:22.730 There's no pretending that a government contract 00:18:22.730 --> 00:18:25.160 model is going to achieve that revolution. 00:18:25.160 --> 00:18:27.910 It's gotta get stood up in the private sector. 00:18:27.910 --> 00:18:31.350 So I don't think it solves our problem. 00:18:31.350 --> 00:18:33.690 I think that we have to recognize 00:18:33.690 --> 00:18:38.760 the reality that 12% of the economy is in energy. 00:18:38.760 --> 00:18:40.380 It's going to be a civilian sector. 00:18:40.380 --> 00:18:43.100 Let's figure out how to stand those technologies up 00:18:43.100 --> 00:18:46.528 in that civilian sector, because that's the lasting model. 00:18:46.528 --> 00:18:47.570 I mean, it wouldn't hurt. 00:18:47.570 --> 00:18:49.350 The DoE would buy certain stuff. 00:18:49.350 --> 00:18:53.010 But Congress is just not going to give it the power. 00:18:53.010 --> 00:18:56.100 And Sarah Jane's comments about the unwillingness 00:18:56.100 --> 00:18:58.740 to talk about, God forbid, commercialization, 00:18:58.740 --> 00:19:01.470 is symptomatic-- 00:19:01.470 --> 00:19:04.980 much less initial market creation. 00:19:04.980 --> 00:19:08.400 So it's a challenge in other organizations. 00:19:08.400 --> 00:19:11.320 Third period is around competitiveness. 00:19:11.320 --> 00:19:13.910 So from 1973 to 1991-- 00:19:13.910 --> 00:19:17.170 and we talked about this in the first class-- 00:19:17.170 --> 00:19:21.940 the US economy significantly slowed. 00:19:21.940 --> 00:19:26.410 And this is where the Rust Belt comes from. 00:19:26.410 --> 00:19:30.320 This is the first great job disruption in manufacturing. 00:19:30.320 --> 00:19:32.440 This is Japan's brilliant quality production 00:19:32.440 --> 00:19:36.670 model coming to bear against an earlier model of US 00:19:36.670 --> 00:19:39.320 mass production, and quality production 00:19:39.320 --> 00:19:42.350 proved the better model. 00:19:42.350 --> 00:19:45.785 And US GDP growth historically is around the 3% level. 00:19:45.785 --> 00:19:47.390 It came down to the 2% level. 00:19:47.390 --> 00:19:49.730 US productivity growth, historically 00:19:49.730 --> 00:19:53.450 around the 2% level, comes down to the 1% level. 00:19:53.450 --> 00:19:58.270 Lower productivity growth means a lower GDP growth. 00:19:58.270 --> 00:20:01.290 This is not a happy time. 00:20:01.290 --> 00:20:03.690 This is a tough time in the United States. 00:20:03.690 --> 00:20:06.810 By the way, current growth rate in the United States is 2%. 00:20:06.810 --> 00:20:08.880 Productivity rate is 1%. 00:20:08.880 --> 00:20:11.430 Comparable economic problem. 00:20:11.430 --> 00:20:14.920 Economists now call this secular stagnation. 00:20:14.920 --> 00:20:18.070 We had that period for an extended period of time. 00:20:18.070 --> 00:20:22.150 and the US had organized its economy 00:20:22.150 --> 00:20:28.713 around frontier innovation, but it missed an innovation wave. 00:20:28.713 --> 00:20:30.130 And when you organize your economy 00:20:30.130 --> 00:20:32.680 around frontier innovation and you miss a wave, 00:20:32.680 --> 00:20:34.300 it's a problem. 00:20:34.300 --> 00:20:37.180 So when Japan-- and, to some extent, 00:20:37.180 --> 00:20:42.420 Germany as well-- leads this manufacturing revolution, 00:20:42.420 --> 00:20:46.120 a real innovation wave around quality production, 00:20:46.120 --> 00:20:49.930 the US misses the wave and has to catch up. 00:20:49.930 --> 00:20:51.960 So in this time period, particularly 00:20:51.960 --> 00:20:55.610 in the '80s It's trying to rethink its model 00:20:55.610 --> 00:20:59.300 and figure out how to be more competitive, 00:20:59.300 --> 00:21:03.410 with particularly the economies in Japan and Germany. 00:21:03.410 --> 00:21:07.280 And the models that it came up with were the following. 00:21:07.280 --> 00:21:09.860 So a lot of interesting things happened 00:21:09.860 --> 00:21:12.830 that are, in effect, more connected. 00:21:12.830 --> 00:21:14.990 And the government is going to be pushing further 00:21:14.990 --> 00:21:17.400 down the pipeline. 00:21:17.400 --> 00:21:19.920 The Bayh Dole Act. 00:21:19.920 --> 00:21:22.440 The government used to own the intellectual property 00:21:22.440 --> 00:21:25.608 rights to federal research. 00:21:25.608 --> 00:21:27.400 The government is not a company, so it just 00:21:27.400 --> 00:21:30.100 went and sat on the shelf. 00:21:30.100 --> 00:21:34.930 Bayh Dole Act gives intellectual property ownership 00:21:34.930 --> 00:21:37.870 to the universities that are conducting the research, 00:21:37.870 --> 00:21:39.940 and they in turn share it with their researchers. 00:21:43.120 --> 00:21:48.270 It makes the university an economic actor. 00:21:48.270 --> 00:21:50.790 So universities have done education and research 00:21:50.790 --> 00:21:52.440 for a long time. 00:21:52.440 --> 00:21:54.870 Suddenly they've got an economic stake 00:21:54.870 --> 00:21:57.080 in the outcomes of their research. 00:21:57.080 --> 00:22:00.470 So increasingly, we are drawing universities 00:22:00.470 --> 00:22:03.850 in to the economic system and having 00:22:03.850 --> 00:22:05.680 them play an economic role. 00:22:05.680 --> 00:22:08.120 Whole new development. 00:22:08.120 --> 00:22:11.470 And the Bayh Dole Act is not the only thing going on here, 00:22:11.470 --> 00:22:14.160 but it's one significant part of the story. 00:22:14.160 --> 00:22:17.870 We create the Manufacturing Extension Program 00:22:17.870 --> 00:22:20.600 to bring the latest manufacturing 00:22:20.600 --> 00:22:24.980 technologies and processes to small manufacturers. 00:22:24.980 --> 00:22:26.890 So the majority of US production is 00:22:26.890 --> 00:22:29.050 done by small firms and mid-sized firms that 00:22:29.050 --> 00:22:31.450 have less than 500 employees. 00:22:31.450 --> 00:22:34.510 They don't do any R&D. They have a lot of trouble-- 00:22:34.510 --> 00:22:37.210 as we talked about in the manufacturing classes-- 00:22:37.210 --> 00:22:40.000 keeping up with technology advances. 00:22:40.000 --> 00:22:45.440 So the MEP program is an attempt to bring the latest technology 00:22:45.440 --> 00:22:51.860 advances and process advances to small manufacturers. 00:22:51.860 --> 00:22:53.600 And here, there is an explicit attempt 00:22:53.600 --> 00:22:56.150 to understand what Japan is undertaking in quality 00:22:56.150 --> 00:22:59.150 manufacturing and translate that model back 00:22:59.150 --> 00:23:02.370 to small and mid-sized manufacturers. 00:23:02.370 --> 00:23:04.980 We create the advanced technology program NIST. 00:23:04.980 --> 00:23:08.980 That's now over, on precisely the reasons 00:23:08.980 --> 00:23:10.150 we've been talking about. 00:23:10.150 --> 00:23:12.190 That was viewed as too interventionist. 00:23:12.190 --> 00:23:17.530 The Commerce Department was supporting company research 00:23:17.530 --> 00:23:20.260 at the applied level, and it was viewed as too interventionist. 00:23:20.260 --> 00:23:22.480 Eventually, Congress shuts it down. 00:23:22.480 --> 00:23:27.670 The Small Business Innovation and Research Program. 00:23:27.670 --> 00:23:32.410 As we've talked before, when you all set up your startups, 00:23:32.410 --> 00:23:34.870 this is the first place you're going to go for money. 00:23:34.870 --> 00:23:37.210 This is where you go, and you can get up 00:23:37.210 --> 00:23:40.510 to about a million dollars in two different phases 00:23:40.510 --> 00:23:44.320 to really do startup efforts. 00:23:44.320 --> 00:23:48.220 And the number of startups that have used SBIR money-- 00:23:48.220 --> 00:23:49.390 they all use it. 00:23:49.390 --> 00:23:51.040 It's very critical. 00:23:51.040 --> 00:23:53.470 That program comes out of this general era. 00:23:53.470 --> 00:23:56.290 Sematech at DoD, that we've talked about briefly earlier 00:23:56.290 --> 00:23:58.480 today, is another program-- 00:23:58.480 --> 00:24:00.910 also quite interventionist-- where essentially, 00:24:00.910 --> 00:24:05.010 the government attempts an advanced manufacturing project 00:24:05.010 --> 00:24:07.470 in the semiconductor sector. 00:24:07.470 --> 00:24:09.450 So these are all program elements 00:24:09.450 --> 00:24:12.210 that began developing in this period. 00:24:12.210 --> 00:24:17.100 Interestingly, we don't have to follow through, 00:24:17.100 --> 00:24:21.060 because Japan misses the IT revolution that really 00:24:21.060 --> 00:24:24.360 begins to hit at about 1990. 00:24:24.360 --> 00:24:27.100 The US leads it. 00:24:27.100 --> 00:24:30.880 We did very well very quickly starting in that 1990s time 00:24:30.880 --> 00:24:31.430 period-- 00:24:31.430 --> 00:24:33.250 one of the most successful economic periods 00:24:33.250 --> 00:24:38.050 in US 20th century, 21st century economic history. 00:24:38.050 --> 00:24:41.410 So we forgot the problems we had. 00:24:41.410 --> 00:24:43.330 And of course, those manufacturing problems 00:24:43.330 --> 00:24:45.670 are now right back on us, because we didn't fully 00:24:45.670 --> 00:24:47.050 follow through. 00:24:47.050 --> 00:24:51.913 Period 4 is the problem of energy innovation. 00:24:51.913 --> 00:24:53.580 We're going to do a whole class on this. 00:24:53.580 --> 00:24:55.810 I'm not going to spend much time on it. 00:24:55.810 --> 00:25:00.750 But energy is driving the organizational model, 00:25:00.750 --> 00:25:03.465 and an organization like ARPA-E-- 00:25:03.465 --> 00:25:07.860 a DARPA within DoE-- 00:25:07.860 --> 00:25:12.000 explicitly has what Sarah Jane reminded us of-- 00:25:12.000 --> 00:25:16.350 a tech to market outlook that really very much considers 00:25:16.350 --> 00:25:18.810 the possibilities of commercialization before it 00:25:18.810 --> 00:25:20.880 selects the R&D projects it's going to fund. 00:25:20.880 --> 00:25:23.360 Is there a pathway to commercialization? 00:25:23.360 --> 00:25:25.590 There's a conscious attempt there. 00:25:25.590 --> 00:25:28.350 So this is not a curiosity-driven, Vannevar Bush 00:25:28.350 --> 00:25:30.300 basic research agency. 00:25:30.300 --> 00:25:34.200 ERE explicitly works with industry for the great bulk 00:25:34.200 --> 00:25:37.790 of its research portfolio. 00:25:37.790 --> 00:25:38.930 Advanced manufacturing. 00:25:38.930 --> 00:25:40.850 We've talked about this one as well. 00:25:40.850 --> 00:25:46.340 This may be an evolving innovation movement. 00:25:46.340 --> 00:25:48.950 We'll see what the current administration 00:25:48.950 --> 00:25:49.820 wants to do with it. 00:25:49.820 --> 00:25:51.510 It's not clear yet. 00:25:51.510 --> 00:25:53.840 So those are five periods. 00:25:53.840 --> 00:25:54.860 I'll just recap. 00:25:54.860 --> 00:25:56.120 Period 1, the postwar. 00:25:56.120 --> 00:25:58.220 We move from a wartime connected system 00:25:58.220 --> 00:25:59.870 to a disconnected system. 00:25:59.870 --> 00:26:03.050 And then slowly over time we've been, 00:26:03.050 --> 00:26:06.320 creating more and more connections in our system. 00:26:06.320 --> 00:26:10.200 So Sputnik creates DARPA, and we'll 00:26:10.200 --> 00:26:12.060 talk a good bit about DARPA. 00:26:12.060 --> 00:26:15.030 I'm just laying the groundwork here on several topics, 00:26:15.030 --> 00:26:17.250 including this one. 00:26:17.250 --> 00:26:21.970 But a reconnection of the whole Defense innovation system. 00:26:21.970 --> 00:26:24.920 Period 3, around competitiveness. 00:26:24.920 --> 00:26:27.760 We do a series of experiments-- 00:26:27.760 --> 00:26:30.460 which, with one exception, all of which remain in place 00:26:30.460 --> 00:26:32.650 and have been pretty successful over time-- 00:26:32.650 --> 00:26:38.045 to attempt better connections between industry 00:26:38.045 --> 00:26:40.390 and the commercialization efforts and university 00:26:40.390 --> 00:26:41.410 research. 00:26:41.410 --> 00:26:43.750 And then the energy challenge and advanced manufacturing 00:26:43.750 --> 00:26:47.260 challenge push us further down that pipeline. 00:26:47.260 --> 00:26:49.180 The advanced manufacturing institutes 00:26:49.180 --> 00:26:52.370 and manufacturing that we talked about, 00:26:52.370 --> 00:26:54.380 those bring together collaborations 00:26:54.380 --> 00:26:59.720 of private sector firms, government, and university 00:26:59.720 --> 00:27:02.930 researchers for a collaborative effort around developing 00:27:02.930 --> 00:27:04.710 new advanced technologies. 00:27:04.710 --> 00:27:06.140 It's not early-stage technology. 00:27:06.140 --> 00:27:06.920 It's very applied. 00:27:06.920 --> 00:27:08.150 It's quite late-stage. 00:27:08.150 --> 00:27:11.270 A lot of development. 00:27:11.270 --> 00:27:14.470 So these are much-- this is the government supporting an effort 00:27:14.470 --> 00:27:17.020 to move much further down the pipeline 00:27:17.020 --> 00:27:21.820 towards commercialization of these new technologies. 00:27:21.820 --> 00:27:22.870 Who's got this one? 00:27:22.870 --> 00:27:23.650 RASHEED: Me. 00:27:23.650 --> 00:27:24.692 WILLIAM BONVILLIAN: Good. 00:27:26.980 --> 00:27:29.650 RASHEED: So bringing together these five periods, 00:27:29.650 --> 00:27:32.882 I thought these were pretty-- 00:27:32.882 --> 00:27:34.840 these held up pretty well with all the readings 00:27:34.840 --> 00:27:37.180 that we've done so far. 00:27:37.180 --> 00:27:40.570 In particular, I think the postwar and the Sputnik one 00:27:40.570 --> 00:27:42.640 we've kind of gone over in spades. 00:27:42.640 --> 00:27:48.760 But a little bit newer, I think, is the period 3 through 5. 00:27:48.760 --> 00:27:52.640 But particularly, if we focus on '80s competitiveness, 00:27:52.640 --> 00:27:57.090 we see that that's spurred on a little bit towards-- 00:27:57.090 --> 00:28:00.580 with the advent of Sematech and semiconductors, 00:28:00.580 --> 00:28:04.130 and missing its innovation wave with Japan. 00:28:04.130 --> 00:28:07.540 And is there sort of this-- 00:28:07.540 --> 00:28:09.040 so what we want to find out here is, 00:28:09.040 --> 00:28:11.470 is there an idea that globalization 00:28:11.470 --> 00:28:14.210 brings about new forms? 00:28:14.210 --> 00:28:16.300 So now that we have this '80s competitiveness, 00:28:16.300 --> 00:28:17.960 these periods get a lot shorter. 00:28:17.960 --> 00:28:20.020 So the '80s, and the period 4 is in the 2000s, 00:28:20.020 --> 00:28:22.513 and now we're in advanced manufacturing. 00:28:22.513 --> 00:28:24.430 So is there this opportunity for globalization 00:28:24.430 --> 00:28:27.460 to make these innovation waves maybe shorter, 00:28:27.460 --> 00:28:30.340 or add more and make them more compact so more people have 00:28:30.340 --> 00:28:31.570 this opportunity? 00:28:31.570 --> 00:28:33.070 WILLIAM BONVILLIAN: Rasheed, I think 00:28:33.070 --> 00:28:34.903 that's an important point, because actually, 00:28:34.903 --> 00:28:36.970 each one of these stages are driven 00:28:36.970 --> 00:28:42.430 by external developments landing on the US economic situation 00:28:42.430 --> 00:28:44.950 and forcing change. 00:28:44.950 --> 00:28:47.800 So they're just not materializing from within. 00:28:47.800 --> 00:28:49.540 These are all external developments 00:28:49.540 --> 00:28:51.070 that force a US response. 00:28:51.070 --> 00:28:52.800 So you make an important point. 00:28:55.930 --> 00:28:58.830 RASHEED: But is this something that you guys also saw, maybe, 00:28:58.830 --> 00:29:03.720 with the idea that globalization will 00:29:03.720 --> 00:29:06.450 bring more innovation to the forefront-- 00:29:06.450 --> 00:29:09.420 maybe not just in the US, but elsewhere as well, and make 00:29:09.420 --> 00:29:12.060 other people respond in the way that we have? 00:29:12.060 --> 00:29:13.520 MAX: At least intuitively it does, 00:29:13.520 --> 00:29:15.562 because if you have more people that are talking, 00:29:15.562 --> 00:29:18.390 more people that are exchanging ideas through globalization, 00:29:18.390 --> 00:29:20.460 then by extension, you would think 00:29:20.460 --> 00:29:23.850 that would mean that more ideas can get produced 00:29:23.850 --> 00:29:27.417 and people have access to more resources, which 00:29:27.417 --> 00:29:29.250 means that whatever ideas that come up with, 00:29:29.250 --> 00:29:31.236 they can implement better. 00:29:31.236 --> 00:29:32.800 So at least intuitively. 00:29:32.800 --> 00:29:35.355 AUDIENCE: I would challenge the resource point, though, 00:29:35.355 --> 00:29:36.390 because that would trigger [INAUDIBLE].. 00:29:36.390 --> 00:29:37.920 AUDIENCE: No, I was going to talk about everyone talking, 00:29:37.920 --> 00:29:41.060 if that's a good thing, because usually, the best decisions are 00:29:41.060 --> 00:29:45.183 made when everybody's following along the same path, 00:29:45.183 --> 00:29:46.850 and it's also not mainly just one person 00:29:46.850 --> 00:29:47.850 thinking for themselves. 00:29:47.850 --> 00:29:51.060 If you think about Wall Street and speculation-- 00:29:51.060 --> 00:29:52.730 because you get an echo chamber. 00:29:52.730 --> 00:29:55.138 And this was shown by the whole Facebook case 00:29:55.138 --> 00:29:56.555 after the election, where everyone 00:29:56.555 --> 00:29:57.680 was saying the same things. 00:29:57.680 --> 00:29:59.660 So it's usually-- a lot of evasion 00:29:59.660 --> 00:30:02.780 happens when an individual thinks 00:30:02.780 --> 00:30:05.222 of a different perspective and then echoes back 00:30:05.222 --> 00:30:05.930 to the community. 00:30:05.930 --> 00:30:08.263 So if you can have individual figures, it's really good. 00:30:08.263 --> 00:30:11.000 But usually what happens is, because of dogma or just 00:30:11.000 --> 00:30:14.720 the way groups work, there's very few innovative ideas, 00:30:14.720 --> 00:30:16.130 and it's more of an echo chamber. 00:30:16.130 --> 00:30:19.400 AUDIENCE: Well, that's true, but that's been true always. 00:30:19.400 --> 00:30:24.620 So my thought is that having a greater access to more 00:30:24.620 --> 00:30:27.140 communities that have these different ideas, 00:30:27.140 --> 00:30:29.537 then you have more of those Zuckerbergs 00:30:29.537 --> 00:30:33.560 who are thinking of something different. 00:30:33.560 --> 00:30:34.310 AUDIENCE: Perhaps. 00:30:34.310 --> 00:30:35.092 AUDIENCE: Perhaps. 00:30:35.092 --> 00:30:36.550 AUDIENCE: I would say, getting back 00:30:36.550 --> 00:30:39.820 to Rasheed's original question or point, 00:30:39.820 --> 00:30:43.060 I think that we probably are seeing 00:30:43.060 --> 00:30:47.680 a contraction of technology waves, 00:30:47.680 --> 00:30:53.500 or these periods, probably due to just the speed at which 00:30:53.500 --> 00:30:55.390 information can be transferred. 00:30:55.390 --> 00:30:58.590 That might explain it. 00:30:58.590 --> 00:31:00.760 RASHEED: Also, I'll argue that financing 00:31:00.760 --> 00:31:04.150 and getting a reputation for things, that's easier 00:31:04.150 --> 00:31:06.880 now, because back in the day during Edison 00:31:06.880 --> 00:31:10.780 or during Ford's day, getting money 00:31:10.780 --> 00:31:13.607 was a huge problem for an entrepreneur. 00:31:13.607 --> 00:31:15.190 Nowadays, it's very easy to get money. 00:31:15.190 --> 00:31:16.773 And also, you get to keep your equity, 00:31:16.773 --> 00:31:19.030 because back in the day, too, you would create-- 00:31:19.030 --> 00:31:22.060 you could create one of the best technologies, 00:31:22.060 --> 00:31:24.670 and you would give up 1/3 your company or the full company, 00:31:24.670 --> 00:31:26.140 and then they'd kick you out. 00:31:26.140 --> 00:31:27.850 So you came up with this innovation. 00:31:27.850 --> 00:31:30.058 You understand technology, how to bring it to market. 00:31:30.058 --> 00:31:32.308 And now, because this person wants to make more money, 00:31:32.308 --> 00:31:33.070 they kick you out. 00:31:33.070 --> 00:31:34.690 So that's really a good opportunity, 00:31:34.690 --> 00:31:36.760 because now it's really the technologist who 00:31:36.760 --> 00:31:37.527 has more power. 00:31:37.527 --> 00:31:39.360 So that's why these cycles are [INAUDIBLE].. 00:31:39.360 --> 00:31:41.320 AUDIENCE: But see, that's exactly where-- 00:31:41.320 --> 00:31:43.330 the point at which I would challenge Max, 00:31:43.330 --> 00:31:47.472 because just because we have a globalized spread of ideas 00:31:47.472 --> 00:31:49.930 doesn't mean that we have a globalized spread of resources. 00:31:49.930 --> 00:31:52.270 And often our innovation, especially the United States, 00:31:52.270 --> 00:31:53.530 is built on imperialism. 00:31:53.530 --> 00:31:56.320 Dependency theory, borrowing from [INAUDIBLE] economics, 00:31:56.320 --> 00:31:59.590 is one of the reasons why the United States and why colonial 00:31:59.590 --> 00:32:02.040 governments were able to make such incredible gains. 00:32:02.040 --> 00:32:04.890 In particular, we saw this with the Dutch East India Company. 00:32:04.890 --> 00:32:07.000 Their exploitation of Southeast Asia 00:32:07.000 --> 00:32:11.530 was exactly what enabled them then to promote, I guess, 00:32:11.530 --> 00:32:15.220 a Marxist society in the Netherlands, 00:32:15.220 --> 00:32:18.460 and then enabled the spread of colonization in the New World. 00:32:18.460 --> 00:32:22.780 And so what we're seeing now, especially with the innovate 00:32:22.780 --> 00:32:25.602 here, produce there paradigm is, I think-- 00:32:25.602 --> 00:32:28.060 and the sort of detriments that we talked about maybe three 00:32:28.060 --> 00:32:30.640 classes ago, about the ways in which countries are now 00:32:30.640 --> 00:32:33.700 understanding how to innovate there as well-- 00:32:33.700 --> 00:32:38.380 is that we may be sharing all of our ideas, 00:32:38.380 --> 00:32:42.070 but there's not going to be a capture of value economically 00:32:42.070 --> 00:32:46.960 or in terms of the practical gain of technological advances, 00:32:46.960 --> 00:32:49.750 because those resources are not local. 00:32:49.750 --> 00:32:52.270 We're going to have to purchase them from other countries. 00:32:52.270 --> 00:32:55.630 And if the United States doesn't have access to those resources 00:32:55.630 --> 00:32:57.400 and production and manufacturing, 00:32:57.400 --> 00:33:00.040 then we're going to miss out on the benefits of having created 00:33:00.040 --> 00:33:01.502 those ideas domestically. 00:33:01.502 --> 00:33:03.460 And that's what I think is so treacherous about 00:33:03.460 --> 00:33:06.790 the international relations landscape 00:33:06.790 --> 00:33:09.430 that the Trump administration is creating for us, 00:33:09.430 --> 00:33:10.930 and why it's really important for us 00:33:10.930 --> 00:33:14.980 to be wary of our reputation on the international plane, 00:33:14.980 --> 00:33:19.120 because we don't have all of the resources necessary 00:33:19.120 --> 00:33:24.100 in order to produce, and if we destroy our reputation abroad, 00:33:24.100 --> 00:33:25.840 people won't want to work with us. 00:33:25.840 --> 00:33:28.150 And if they now have the innovation capacity 00:33:28.150 --> 00:33:31.900 as well, then what is the future for American innovation? 00:33:31.900 --> 00:33:35.310 Imperialism hegemony does not exist for Americans anymore. 00:33:35.310 --> 00:33:38.220 AUDIENCE: But I would argue two points on what you just said. 00:33:38.220 --> 00:33:40.560 One is, the interesting thing about Trump 00:33:40.560 --> 00:33:43.350 is, he became such a polarizing figure that abroad, people 00:33:43.350 --> 00:33:44.380 know we don't like him. 00:33:44.380 --> 00:33:45.630 So it's like, that's just him. 00:33:45.630 --> 00:33:46.690 That's not the US. 00:33:46.690 --> 00:33:48.810 And then two, I think you're thinking 00:33:48.810 --> 00:33:50.760 about-- your framework is based on the past, 00:33:50.760 --> 00:33:51.927 in terms of what's happened. 00:33:51.927 --> 00:33:55.390 And I think in the past, it's been very much-- 00:33:55.390 --> 00:33:56.910 we're a scarcity society. 00:33:56.910 --> 00:33:59.230 So there's a scarce amount of resources, 00:33:59.230 --> 00:34:00.820 so we need to take from somebody else. 00:34:00.820 --> 00:34:01.890 So there's been-- there's a philosopher who 00:34:01.890 --> 00:34:03.598 talked about how we have so many enemies, 00:34:03.598 --> 00:34:06.060 and the US creates so many enemies because we 00:34:06.060 --> 00:34:07.304 used to take, take, take. 00:34:07.304 --> 00:34:09.429 But I think what will change in the next 100 years, 00:34:09.429 --> 00:34:11.969 200 years is that we will get closer 00:34:11.969 --> 00:34:15.960 to like a post-scarcity society so that we have more resources. 00:34:15.960 --> 00:34:18.925 Say people discover a better form of energy, so we have-- 00:34:18.925 --> 00:34:21.699 assume infinite energy, even though that's ideal. 00:34:21.699 --> 00:34:24.420 Assume we have water, because we've figured out desalination, 00:34:24.420 --> 00:34:25.679 so we can get enough food. 00:34:25.679 --> 00:34:27.630 Assume that now we have automation, 00:34:27.630 --> 00:34:29.760 so people don't have to work with their hands 00:34:29.760 --> 00:34:30.920 and more people can think. 00:34:30.920 --> 00:34:33.170 And then assume we're expanding, and we go into space. 00:34:33.170 --> 00:34:36.304 So now we're also-- it's like the American period 00:34:36.304 --> 00:34:38.429 of growth, where people are expanding other places. 00:34:38.429 --> 00:34:41.900 So the game before was to take and take and take. 00:34:41.900 --> 00:34:44.320 And if the game becomes more to, how do you give? 00:34:44.320 --> 00:34:46.520 What becomes valuable once you already-- 00:34:46.520 --> 00:34:48.190 to have money wouldn't be valuable. 00:34:48.190 --> 00:34:49.023 It would be respect. 00:34:49.023 --> 00:34:50.820 It'd be, this person got a Nobel Prize. 00:34:50.820 --> 00:34:54.570 This person did a social initiative. 00:34:54.570 --> 00:34:56.850 That's just an evolution of what you just said. 00:34:56.850 --> 00:34:58.450 WILLIAM BONVILLIAN: So you guys are really leading us out 00:34:58.450 --> 00:34:58.980 of here. 00:34:58.980 --> 00:35:00.450 [LAUGHTER] 00:35:00.450 --> 00:35:02.022 Go off into utopia land. 00:35:02.022 --> 00:35:02.980 AUDIENCE: Yeah, really. 00:35:02.980 --> 00:35:05.188 RASHEED: [INAUDIBLE] That was four individual points. 00:35:05.188 --> 00:35:06.243 [INTERPOSING VOICES] 00:35:06.243 --> 00:35:07.410 AUDIENCE: But the thing is-- 00:35:07.410 --> 00:35:08.485 AUDIENCE: Bring it back. 00:35:08.485 --> 00:35:10.110 AUDIENCE: --from a startup perspective, 00:35:10.110 --> 00:35:11.430 you don't think linearly. 00:35:11.430 --> 00:35:12.490 You think exponentially. 00:35:12.490 --> 00:35:14.240 So we're talking about these contractions. 00:35:14.240 --> 00:35:17.500 That could be a reality in terms of-- 00:35:17.500 --> 00:35:19.320 if you think about how the past used to be, 00:35:19.320 --> 00:35:20.445 that's not the game we're playing anymore. 00:35:20.445 --> 00:35:20.557 RASHEED: Yeah. 00:35:20.557 --> 00:35:22.320 I don't think that's the game we're playing anymore. 00:35:22.320 --> 00:35:23.160 You could probably look at these, 00:35:23.160 --> 00:35:24.510 and that's pretty already-- 00:35:24.510 --> 00:35:25.740 you're already looking exponential. 00:35:25.740 --> 00:35:27.000 AUDIENCE: It could be bioengineering, energy, 00:35:27.000 --> 00:35:28.000 and physics all at once. 00:35:28.000 --> 00:35:31.800 RASHEED: Yeah, which I think offers the opportunity 00:35:31.800 --> 00:35:33.260 to be pretty cool. 00:35:33.260 --> 00:35:34.350 And I think ARPA-E-- 00:35:34.350 --> 00:35:37.490 we can focus on them a little bit now, on period 4-- 00:35:37.490 --> 00:35:40.260 is looking at these interdeparmental collaborative 00:35:40.260 --> 00:35:44.940 mechanisms to spur these short-term, three-to-five-year, 00:35:44.940 --> 00:35:49.980 very industry-focused targeted growth periods. 00:35:49.980 --> 00:35:53.910 And so is that an idea that we want to kind of take back, 00:35:53.910 --> 00:35:57.730 is can we look at-- now that we're so interconnected in all 00:35:57.730 --> 00:36:00.570 of this globalization, [INAUDIBLE] try to create is, 00:36:00.570 --> 00:36:05.520 can we focus all of these things in these targeted areas 00:36:05.520 --> 00:36:07.410 with any degree of success? 00:36:07.410 --> 00:36:11.970 Or are we just playing the game, gambling [INAUDIBLE]?? 00:36:11.970 --> 00:36:14.280 MAX: So you're saying to focus the defense-- 00:36:14.280 --> 00:36:17.200 for example, the Department of Energy, you would say, 00:36:17.200 --> 00:36:19.095 focus it only on one form of energy. 00:36:19.095 --> 00:36:20.220 Is that what you're asking? 00:36:22.828 --> 00:36:24.120 RASHEED: Let me take this back. 00:36:24.120 --> 00:36:25.120 SARAH JANE MAXTED: Hear about the mechanism. 00:36:25.120 --> 00:36:25.550 RASHEED: Yeah. 00:36:25.550 --> 00:36:27.450 So as a mechanism-- does the mechanism work? 00:36:27.450 --> 00:36:28.908 But the mechanism is basically, you 00:36:28.908 --> 00:36:32.210 have this idea for advanced materials, 00:36:32.210 --> 00:36:35.860 and you take a couple of industry partners-- 00:36:35.860 --> 00:36:37.610 the Department of Energy, for example, 00:36:37.610 --> 00:36:41.690 and maybe even an international partner-- and you 00:36:41.690 --> 00:36:44.480 make them all work together on an advanced materials project 00:36:44.480 --> 00:36:45.663 for three to five years. 00:36:45.663 --> 00:36:48.080 Do you think all of these people can get together and work 00:36:48.080 --> 00:36:50.390 effectively in the short time span 00:36:50.390 --> 00:36:52.740 to produce any degree of success? 00:36:52.740 --> 00:36:57.540 MAX: Well, obviously, I have a bit of a pension for fusion, 00:36:57.540 --> 00:37:00.170 so my first thought's going to be here-- 00:37:00.170 --> 00:37:04.430 the International Thermonuclear Experimental Reactor-- 00:37:04.430 --> 00:37:07.060 partially because science and engineering for plasma 00:37:07.060 --> 00:37:09.260 is just really hard, and partially 00:37:09.260 --> 00:37:11.540 because I feel that, at least in my opinion, 00:37:11.540 --> 00:37:13.640 it hasn't been managed as effectively as it 00:37:13.640 --> 00:37:16.260 could have been. 00:37:16.260 --> 00:37:19.140 It was supposed to be the best example 00:37:19.140 --> 00:37:21.420 that I can think of international collaboration 00:37:21.420 --> 00:37:23.610 trying to solve a very big problem. 00:37:23.610 --> 00:37:28.830 And it's more than double its first budget, 00:37:28.830 --> 00:37:33.990 and it's, what, 10, 20 years behind schedule? 00:37:33.990 --> 00:37:36.510 Of course, that's not to say that the approach itself-- 00:37:36.510 --> 00:37:39.300 the fact that you're using international resources-- 00:37:39.300 --> 00:37:42.330 that's not to say that that is inherently flawed. 00:37:42.330 --> 00:37:45.630 But I can't really think of any counterexamples. 00:37:48.580 --> 00:37:51.080 AUDIENCE: The way we think about it as a businessperson is-- 00:37:51.080 --> 00:37:52.520 this a pretty common problem-- 00:37:52.520 --> 00:37:54.200 is, you stress people. 00:37:54.200 --> 00:37:56.373 I gave the case example before of Silicon Valley, 00:37:56.373 --> 00:37:58.040 and how there's not minorities and there 00:37:58.040 --> 00:37:59.060 weren't that many women. 00:37:59.060 --> 00:38:02.420 So sometimes what you do is, you actually make the problem 00:38:02.420 --> 00:38:04.130 be very apparent. 00:38:04.130 --> 00:38:05.600 And so the CEO of a company knows, 00:38:05.600 --> 00:38:06.933 there's a problem in my company. 00:38:06.933 --> 00:38:09.140 They won't announce it, but they'll leak a paper. 00:38:09.140 --> 00:38:11.390 And somebody will be like, oh, there's a real problem. 00:38:11.390 --> 00:38:12.860 And then everyone's like, oh, we need to solve this. 00:38:12.860 --> 00:38:14.277 Oh my god, there's all this press. 00:38:14.277 --> 00:38:17.460 And you use the tools at your disposal. 00:38:17.460 --> 00:38:18.830 And so, yeah, you can-- 00:38:18.830 --> 00:38:20.990 you have to stress them just the right way, 00:38:20.990 --> 00:38:23.270 because people would stay by themselves 00:38:23.270 --> 00:38:24.748 in their own little bubble. 00:38:24.748 --> 00:38:26.540 But if you stress them so it's like, oh no, 00:38:26.540 --> 00:38:28.640 we need to do this, we need this now, 00:38:28.640 --> 00:38:31.690 that's how I think about it. 00:38:31.690 --> 00:38:33.350 MAX: Actually-- oh, sorry. 00:38:33.350 --> 00:38:34.433 SARAH JANE MAXTED: No, no. 00:38:34.433 --> 00:38:40.040 I was just going to say, I think the question that 00:38:40.040 --> 00:38:44.930 gets beyond the mechanism itself of the ARPA-E 00:38:44.930 --> 00:38:50.780 is, how do you monitor or evaluate success? 00:38:50.780 --> 00:38:54.390 So I think-- to your point, some technologies take a lot longer. 00:38:54.390 --> 00:38:57.680 So is three to four or five years a good time horizon? 00:38:57.680 --> 00:39:00.200 And if we keep it at that, that's fine, 00:39:00.200 --> 00:39:03.080 but how do we bundle in all these different energy 00:39:03.080 --> 00:39:03.860 technologies? 00:39:03.860 --> 00:39:06.890 For instance, for some, maybe more building technologies 00:39:06.890 --> 00:39:09.480 are going to be a lot quicker, and then some, like fusion, 00:39:09.480 --> 00:39:10.730 are going to take much longer. 00:39:10.730 --> 00:39:14.120 And how do you identify the right technologies 00:39:14.120 --> 00:39:17.900 or applied research to do in that capacity, 00:39:17.900 --> 00:39:19.400 and how do you evaluate the success? 00:39:19.400 --> 00:39:22.760 And that's the tech to market question as well-- 00:39:22.760 --> 00:39:26.660 what are those points of evaluation?-- which is, 00:39:26.660 --> 00:39:27.950 I think, [INAUDIBLE]. 00:39:27.950 --> 00:39:29.825 WILLIAM BONVILLIAN: Sarah, you're driving us, 00:39:29.825 --> 00:39:32.060 I think, to some additional perceptions 00:39:32.060 --> 00:39:37.400 here given your basic question, Rasheed. 00:39:37.400 --> 00:39:39.740 What are the innovation organization models 00:39:39.740 --> 00:39:42.260 that we're going to use if we're trying 00:39:42.260 --> 00:39:44.150 to take on these bigger tasks? 00:39:44.150 --> 00:39:46.610 In other words, it was straightforward enough 00:39:46.610 --> 00:39:50.630 to do a curiosity-driven research project and fund one 00:39:50.630 --> 00:39:51.830 PI. 00:39:51.830 --> 00:39:56.630 But if we're moving the model to move much further 00:39:56.630 --> 00:40:01.780 down the pipeline, which is what all these stages represent, 00:40:01.780 --> 00:40:04.120 what are the organizational mainstay models 00:40:04.120 --> 00:40:05.900 we're going to use here? 00:40:05.900 --> 00:40:09.430 And then you come to a model like the manufacturing 00:40:09.430 --> 00:40:12.820 institutes, which can typically have 00:40:12.820 --> 00:40:17.300 more than 100 companies; four or five major research 00:40:17.300 --> 00:40:20.210 universities; a comparable number of community colleges, 00:40:20.210 --> 00:40:25.550 if not more; and, potentially, one or more federal agencies 00:40:25.550 --> 00:40:29.660 and five or six states and state economic development 00:40:29.660 --> 00:40:30.890 organizations. 00:40:30.890 --> 00:40:32.692 As some of the Defense Department 00:40:32.692 --> 00:40:35.150 described this to me, standing up a manufacturing institute 00:40:35.150 --> 00:40:39.740 is like standing up a country, compared to funding a single PI 00:40:39.740 --> 00:40:40.940 researcher. 00:40:40.940 --> 00:40:42.980 So these call for-- 00:40:42.980 --> 00:40:45.470 and I think is what Rasheed is driving us to 00:40:45.470 --> 00:40:47.510 and Sarah is driving us to-- 00:40:47.510 --> 00:40:52.850 they call for a much more complex organizational model, 00:40:52.850 --> 00:40:56.690 because the tasks have gotten considerably larger, 00:40:56.690 --> 00:40:58.810 and the number of actors that need to be involved 00:40:58.810 --> 00:41:00.230 is getting considerably larger. 00:41:00.230 --> 00:41:02.498 So these are all lessons learned that I 00:41:02.498 --> 00:41:04.040 think we're going to have to pull out 00:41:04.040 --> 00:41:08.210 of the experiments were running now on energy and potentially 00:41:08.210 --> 00:41:11.030 advanced manufacturing, and really consider 00:41:11.030 --> 00:41:12.202 the models we're using. 00:41:12.202 --> 00:41:13.910 Rasheed, do you want to give us a closing 00:41:13.910 --> 00:41:15.772 thought about this reading? 00:41:15.772 --> 00:41:16.430 RASHEED: Yeah. 00:41:16.430 --> 00:41:19.760 I thought this reading was pretty comprehensive, 00:41:19.760 --> 00:41:23.510 and it seemed very Bill, I would say, 00:41:23.510 --> 00:41:26.900 because it did a good job of starting us 00:41:26.900 --> 00:41:30.260 from the beginning at this postwar system 00:41:30.260 --> 00:41:32.360 and walking us all the way through now 00:41:32.360 --> 00:41:35.180 to advanced manufacturing and the [INAUDIBLE] problems 00:41:35.180 --> 00:41:36.650 that we have today. 00:41:36.650 --> 00:41:37.460 So it was pretty-- 00:41:37.460 --> 00:41:39.590 I felt like I was in class, reading through and-- 00:41:39.590 --> 00:41:40.687 [LAUGHTER] 00:41:40.687 --> 00:41:42.270 AUDIENCE: I felt like, I've done this. 00:41:42.270 --> 00:41:43.490 RASHEED: Yeah, yeah. 00:41:43.490 --> 00:41:45.170 And then you get to the new stuff at the end, and you're-- 00:41:45.170 --> 00:41:46.220 WILLIAM BONVILLIAN: Rasheed, I had 00:41:46.220 --> 00:41:48.595 to write this because I needed it in class, because there 00:41:48.595 --> 00:41:51.200 wasn't anything else that covered this entire panoply. 00:41:51.200 --> 00:41:55.380 So that's really, frankly, the reason why I wrote it. 00:41:55.380 --> 00:41:55.880 All right. 00:41:55.880 --> 00:41:59.780 We're now going to jump to another Bill reading, 00:41:59.780 --> 00:42:02.000 and now we're going to take a deep dive 00:42:02.000 --> 00:42:05.690 into this whole concept of legacy sectors. 00:42:05.690 --> 00:42:08.510 And this will be foundational as we do some of the case studies, 00:42:08.510 --> 00:42:10.861 like in energy, like in health care. 00:42:10.861 --> 00:42:13.120 AUDIENCE: If I could just ask you, 00:42:13.120 --> 00:42:16.040 at the very end of this last [INAUDIBLE] just talking about, 00:42:16.040 --> 00:42:18.733 you have-- 00:42:18.733 --> 00:42:20.150 I guess your driving conclusion is 00:42:20.150 --> 00:42:24.720 that the new model innovation organizations discussed here 00:42:24.720 --> 00:42:26.990 deserve ongoing scrutiny and pragmatic evaluation 00:42:26.990 --> 00:42:29.063 of their performance to refine these models. 00:42:29.063 --> 00:42:30.980 Obviously, you published this three years ago, 00:42:30.980 --> 00:42:33.615 and were probably thinking of this five years ago. 00:42:33.615 --> 00:42:35.990 So I was curious if you could talk a little bit about how 00:42:35.990 --> 00:42:38.420 you've maybe developed that already, 00:42:38.420 --> 00:42:41.880 or if you've been thinking about what a model might look like. 00:42:41.880 --> 00:42:43.625 WILLIAM BONVILLIAN: Well, I learned a lot 00:42:43.625 --> 00:42:47.400 in working on the advanced manufacturing initiative-- 00:42:47.400 --> 00:42:49.160 the Advanced Manufacturing Partnership 00:42:49.160 --> 00:42:51.860 that the President set up, and the Production 00:42:51.860 --> 00:42:54.500 in the Innovation Economy project at MIT, 00:42:54.500 --> 00:42:58.180 because it really forced a lot of thinking 00:42:58.180 --> 00:43:00.760 about what the organizational model was going to be. 00:43:00.760 --> 00:43:02.710 And in turn, I've learned a tremendous amount 00:43:02.710 --> 00:43:04.120 about looking at what the Department of Energy 00:43:04.120 --> 00:43:05.170 has been doing. 00:43:05.170 --> 00:43:08.020 So we'll dive into this in the energy case study, 00:43:08.020 --> 00:43:11.540 but essentially, DoE, at the front end 00:43:11.540 --> 00:43:13.760 of the innovation, the R&D stage, 00:43:13.760 --> 00:43:16.130 has created a whole set of new models. 00:43:16.130 --> 00:43:19.550 It is a very different agency than it was 10 years ago. 00:43:19.550 --> 00:43:22.850 And it's created a host of new pieces 00:43:22.850 --> 00:43:25.280 on the innovation front that enable 00:43:25.280 --> 00:43:27.140 it to do a lot more things. 00:43:27.140 --> 00:43:30.950 So yes, they still have a Vannevar Bush basic research 00:43:30.950 --> 00:43:32.690 agency-- 00:43:32.690 --> 00:43:35.190 the Office of Science, a $5 billion 00:43:35.190 --> 00:43:37.190 basic research organization-- but they've 00:43:37.190 --> 00:43:39.680 got all these other pieces on the table now which 00:43:39.680 --> 00:43:44.190 make the mix quite interesting. 00:43:44.190 --> 00:43:46.728 So we'll have a chance, actually, Steph, 00:43:46.728 --> 00:43:48.770 to dive into what some of those models look like. 00:43:48.770 --> 00:43:53.350 We'll take a particular look at ARPA-E, which is actually maybe 00:43:53.350 --> 00:43:54.850 on the chopping block at the moment. 00:43:54.850 --> 00:43:58.420 So it may turn out to be an historical lesson. 00:43:58.420 --> 00:44:03.070 But a pretty interesting organizational model. 00:44:03.070 --> 00:44:06.010 But let me do another driver here 00:44:06.010 --> 00:44:10.610 that forces us to think about innovation organization, which 00:44:10.610 --> 00:44:14.200 is innovation in legacy sectors. 00:44:14.200 --> 00:44:23.650 So the US is pretty good at doing the next big thing 00:44:23.650 --> 00:44:27.760 and standing up new technologies in frontier territories. 00:44:27.760 --> 00:44:29.170 In other words, in effect-- 00:44:29.170 --> 00:44:31.090 to use a metaphor-- 00:44:31.090 --> 00:44:34.750 we take our new technologies, we put them into covered wagons, 00:44:34.750 --> 00:44:38.020 we go across the mountain, and we open up a new technology 00:44:38.020 --> 00:44:39.370 territory. 00:44:39.370 --> 00:44:43.760 We do frontier innovation, and we're pretty good at this. 00:44:43.760 --> 00:44:49.430 There was nothing really like computing before computing. 00:44:49.430 --> 00:44:51.500 So that would be a good example of opening up 00:44:51.500 --> 00:44:54.700 a whole new territory. 00:44:54.700 --> 00:45:03.230 The US is not good at bringing innovation into legacy sectors. 00:45:03.230 --> 00:45:07.710 The new innovations often have to parachute in, 00:45:07.710 --> 00:45:09.780 and they get shot at on the way down. 00:45:13.740 --> 00:45:15.890 So the US tends to do the next big thing, 00:45:15.890 --> 00:45:19.280 but doesn't tend to go back and fix the old. 00:45:19.280 --> 00:45:25.040 That's why the-- driving from Kennedy Airport into Manhattan 00:45:25.040 --> 00:45:27.500 often is kind of a third-world experience. 00:45:27.500 --> 00:45:30.020 Sometimes you think you could lose an axle on your cab 00:45:30.020 --> 00:45:33.350 before you get into downtown. 00:45:33.350 --> 00:45:37.550 We don't tend to maintain a lot of our existing systems. 00:45:37.550 --> 00:45:39.080 We push on to the next big thing. 00:45:39.080 --> 00:45:40.850 And that's not bad. 00:45:40.850 --> 00:45:43.700 That's not a bad American tendency. 00:45:43.700 --> 00:45:45.805 But we do pay a price for it if we're 00:45:45.805 --> 00:45:47.930 going to have to bring innovation into these legacy 00:45:47.930 --> 00:45:50.430 sectors. 00:45:50.430 --> 00:45:51.930 Just think of the health care debate 00:45:51.930 --> 00:45:54.420 we've been having in recent months. 00:45:54.420 --> 00:45:56.820 The United States does biotech. 00:45:56.820 --> 00:45:59.640 It does not go back and fix the health care delivery system. 00:45:59.640 --> 00:46:00.610 That's a legacy sector. 00:46:00.610 --> 00:46:01.402 That would be hard. 00:46:01.402 --> 00:46:03.660 We'd rather open a new thing. 00:46:03.660 --> 00:46:06.030 So this is a problem in our society. 00:46:06.030 --> 00:46:08.740 Look, every society has got these problems. 00:46:08.740 --> 00:46:11.080 It's hard for anybody to innovate in the legacy sectors. 00:46:11.080 --> 00:46:13.320 But it's particularly tough here, I would argue. 00:46:13.320 --> 00:46:18.240 And the problem is that a lot of our big societal problems 00:46:18.240 --> 00:46:21.360 are tied to these legacy sectors. 00:46:21.360 --> 00:46:25.170 We can't avoid the innovation challenge in these sectors-- 00:46:25.170 --> 00:46:28.440 climate and energy, food and water, 00:46:28.440 --> 00:46:33.460 the problem we've got of quality job creation, health care 00:46:33.460 --> 00:46:38.660 delivery, improving education to address inequality problems. 00:46:38.660 --> 00:46:41.300 These are all profound societal challenges, 00:46:41.300 --> 00:46:45.620 and they all have to be fixed within legacy sectors. 00:46:45.620 --> 00:46:48.950 And to do this, we've got to confront these sectors. 00:46:48.950 --> 00:46:50.513 Frankly, I was-- 00:46:50.513 --> 00:46:53.180 Chuck Weiss and I, my co-author, were amazed we wrote this book. 00:46:53.180 --> 00:46:54.440 There's no literature on this. 00:46:54.440 --> 00:46:56.570 There's no literature in the innovation policy 00:46:56.570 --> 00:46:59.450 field about innovating in legacy sectors. 00:46:59.450 --> 00:47:03.530 It's a problem that's just hidden in plain sight. 00:47:03.530 --> 00:47:05.280 So how would we do this? 00:47:05.280 --> 00:47:06.570 Because we need to do it. 00:47:06.570 --> 00:47:09.620 One example is the revolution in military affairs in the defense 00:47:09.620 --> 00:47:13.470 sector in the 1990s, where we bring 00:47:13.470 --> 00:47:18.210 a raft of new technologies to bear even though the Defense 00:47:18.210 --> 00:47:21.030 Department is one of the most notorious legacy sectors 00:47:21.030 --> 00:47:22.290 around. 00:47:22.290 --> 00:47:25.710 How is it the DoD is able to organize to bring 00:47:25.710 --> 00:47:28.200 these technology advances in? 00:47:28.200 --> 00:47:32.250 But we can start to see a whole set of innovations 00:47:32.250 --> 00:47:34.410 that are starting to move in what 00:47:34.410 --> 00:47:36.000 we can consider legacy sectors. 00:47:36.000 --> 00:47:38.300 So advanced manufacturing. 00:47:38.300 --> 00:47:40.560 Manufacturing is definitely a legacy sector. 00:47:40.560 --> 00:47:42.000 New energy technologies. 00:47:42.000 --> 00:47:44.160 Intelligent cars. 00:47:44.160 --> 00:47:46.470 Higher education for sure is a legacy sector. 00:47:46.470 --> 00:47:49.170 We're starting to see online education. 00:47:49.170 --> 00:47:50.070 Commercial space. 00:47:50.070 --> 00:47:52.410 So there are possibilities here. 00:47:52.410 --> 00:47:56.340 We're starting to see what some of the possibilities might be. 00:47:56.340 --> 00:47:59.710 So learning how to innovate in these sectors is critical. 00:47:59.710 --> 00:48:01.410 What are some of the take-home lessons? 00:48:01.410 --> 00:48:03.240 There are obstacles to innovation 00:48:03.240 --> 00:48:05.280 in the legacy sectors. 00:48:05.280 --> 00:48:10.440 Innovation, by the way, is not just the shiny new lights 00:48:10.440 --> 00:48:12.367 and only the cutting edge. 00:48:12.367 --> 00:48:13.950 There's a lot of innovation that needs 00:48:13.950 --> 00:48:15.570 to land in these legacy sectors that 00:48:15.570 --> 00:48:18.150 are not quite as glamorous. 00:48:18.150 --> 00:48:21.420 Legacy sectors have a lot in common, both in the US 00:48:21.420 --> 00:48:22.780 and abroad. 00:48:22.780 --> 00:48:26.397 So there are definitional aspects of a legacy sector 00:48:26.397 --> 00:48:28.980 that apply to manufacturing, but also to health care delivery. 00:48:28.980 --> 00:48:31.950 We can find commonalities here. 00:48:31.950 --> 00:48:34.800 And legacy sectors in countries here and abroad 00:48:34.800 --> 00:48:37.380 have commonalities. 00:48:37.380 --> 00:48:40.560 And the context of innovation can be every bit as important 00:48:40.560 --> 00:48:43.390 as the innovation system itself. 00:48:43.390 --> 00:48:46.500 So this class is focused on the innovation system, 00:48:46.500 --> 00:48:48.320 but it's within a larger context. 00:48:48.320 --> 00:48:51.530 And I'll explain what that means in a minute. 00:48:51.530 --> 00:48:55.691 Entrenched legacy sectors resist innovation. 00:48:59.930 --> 00:49:03.140 For example, we often provide incentives 00:49:03.140 --> 00:49:05.870 to producers that don't align with societal needs. 00:49:08.690 --> 00:49:15.080 The legacy sectors are defended by a technological, economic, 00:49:15.080 --> 00:49:19.890 political, social, and maybe even cultural paradigm. 00:49:19.890 --> 00:49:22.010 So a legacy sector is a castle, and it's 00:49:22.010 --> 00:49:24.170 got a rich defense system. 00:49:24.170 --> 00:49:27.170 That is, it defends the technology advances 00:49:27.170 --> 00:49:28.220 that it's encouraged. 00:49:28.220 --> 00:49:32.450 It will defend the economic models that it's pursued. 00:49:32.450 --> 00:49:37.700 It will use the political system to block change. 00:49:37.700 --> 00:49:40.550 And it uses societal and educational systems 00:49:40.550 --> 00:49:43.010 to ensure that it gets staffed up 00:49:43.010 --> 00:49:46.070 and has a social outlook that tends to protect it. 00:49:46.070 --> 00:49:51.660 So these legacy sectors tend to share this common paradigm. 00:49:51.660 --> 00:49:57.250 They will resist disruptive innovation, 00:49:57.250 --> 00:50:03.430 and they will be more accepting of innovations that 00:50:03.430 --> 00:50:05.610 fit their own business models. 00:50:05.610 --> 00:50:07.270 And we'll talk about that in a second. 00:50:09.913 --> 00:50:11.330 The features of the legacy sector, 00:50:11.330 --> 00:50:14.780 they get a little definitional, and I 00:50:14.780 --> 00:50:16.780 don't want to go into a lot of details on these. 00:50:16.780 --> 00:50:18.300 But you get the idea. 00:50:18.300 --> 00:50:21.200 And these are characteristics that-- 00:50:21.200 --> 00:50:24.990 a legacy sector will share all of these characteristics, 00:50:24.990 --> 00:50:27.660 but it will typically share many. 00:50:27.660 --> 00:50:29.350 In the characteristics side, there 00:50:29.350 --> 00:50:31.170 are often perverse prices that don't 00:50:31.170 --> 00:50:36.030 reflect externalities-- i.e., like the low cost of gasoline. 00:50:36.030 --> 00:50:38.580 There will be an established infrastructure-- 00:50:38.580 --> 00:50:39.660 gas stations. 00:50:39.660 --> 00:50:42.060 Massive infrastructure system that's got 00:50:42.060 --> 00:50:45.260 to get rethought and overcome if you're going to make change. 00:50:45.260 --> 00:50:48.240 There are strong public expectations 00:50:48.240 --> 00:50:51.540 of low cost of energy in the United States. 00:50:51.540 --> 00:50:53.940 It's very hard to overcome these. 00:50:53.940 --> 00:50:56.640 There are often regulatory requirements 00:50:56.640 --> 00:50:59.370 that block entry of new technology-- 00:50:59.370 --> 00:51:02.400 again, in the energy space. 00:51:02.400 --> 00:51:07.680 Good luck in connecting your out of state new solar system 00:51:07.680 --> 00:51:10.230 with the transmission system across a series of states. 00:51:10.230 --> 00:51:11.855 You've going to have to get the states' 00:51:11.855 --> 00:51:13.040 regulatory systems lined up. 00:51:13.040 --> 00:51:14.910 It's very tough. 00:51:14.910 --> 00:51:16.920 There are career pathways and curricula 00:51:16.920 --> 00:51:21.180 at universities that tend to support the existing system. 00:51:21.180 --> 00:51:24.690 All of these, there's typically very limited R&D 00:51:24.690 --> 00:51:26.380 compared to revenue. 00:51:26.380 --> 00:51:31.760 So in the energy sector, for example, less than 1% 00:51:31.760 --> 00:51:34.460 of annual revenues is spent on research and development 00:51:34.460 --> 00:51:36.120 in the energy private sector. 00:51:36.120 --> 00:51:40.870 An astonishingly low number for a major industry. 00:51:40.870 --> 00:51:43.660 And there are powerful vested interests behind these legacy 00:51:43.660 --> 00:51:46.080 sectors that defend them. 00:51:46.080 --> 00:51:49.600 On terms of-- I'm not going to go into detail 00:51:49.600 --> 00:51:51.520 about these kind of market imperfections, 00:51:51.520 --> 00:51:57.605 but often perverse subsidies, network economies, 00:51:57.605 --> 00:51:59.980 non-appropriability where the developer of the technology 00:51:59.980 --> 00:52:03.220 can't recapture its value. 00:52:03.220 --> 00:52:05.800 There's often problems of collective action. 00:52:05.800 --> 00:52:09.330 So for example, it's tough to introduce technology advance 00:52:09.330 --> 00:52:12.760 into the building sector because it's so totally decentralized. 00:52:12.760 --> 00:52:14.510 There are not major actors. 00:52:14.510 --> 00:52:17.500 There's just lots and lots and lots of little actors. 00:52:17.500 --> 00:52:19.510 So you can't get collective action together 00:52:19.510 --> 00:52:21.640 in a sector that's organized like that. 00:52:21.640 --> 00:52:26.390 There's a short time horizon for financing, 00:52:26.390 --> 00:52:28.550 and that limits the ability to scale up 00:52:28.550 --> 00:52:30.530 new technology advances. 00:52:30.530 --> 00:52:36.470 So these are-- now, in contrast, if you're 00:52:36.470 --> 00:52:40.910 developing a technology that is compatible with the legacy 00:52:40.910 --> 00:52:44.310 sector's paradigm of technology and business model 00:52:44.310 --> 00:52:46.533 and so forth, then you can do it. 00:52:46.533 --> 00:52:48.200 You can do it in relatively short order. 00:52:48.200 --> 00:52:52.800 So fracking was adapted within, really, a 15-year period. 00:52:52.800 --> 00:52:57.350 The original technology advances came out of the national labs 00:52:57.350 --> 00:53:00.140 around things like 3D seismic imaging. 00:53:04.100 --> 00:53:07.370 And they moved very quickly because fracking 00:53:07.370 --> 00:53:11.370 fit the existing fossil fuel economy so nicely. 00:53:11.370 --> 00:53:14.960 If you're doing solar, good luck to you. 00:53:14.960 --> 00:53:18.000 It's a much more complicated adaptation process. 00:53:18.000 --> 00:53:20.032 So if you're doing disruptive technologies, 00:53:20.032 --> 00:53:21.740 that's where the problem really comes in. 00:53:24.420 --> 00:53:30.050 So we have a series of models of the dynamics of innovation, 00:53:30.050 --> 00:53:32.650 and we've been struggling to see these 00:53:32.650 --> 00:53:35.420 in the course of the classes so far. 00:53:35.420 --> 00:53:39.190 But as you think about it, there's really five ways 00:53:39.190 --> 00:53:43.840 that our economy undertakes innovation. 00:53:43.840 --> 00:53:48.310 One, we've spent a lot of time last class and this class-- 00:53:48.310 --> 00:53:50.110 the pipeline. 00:53:50.110 --> 00:53:51.890 Again, the model-- dump basic research 00:53:51.890 --> 00:53:53.765 in the end of the pipeline, mysterious things 00:53:53.765 --> 00:53:55.780 happen, great products emerge. 00:53:55.780 --> 00:53:57.190 That's technology push. 00:53:57.190 --> 00:53:59.950 Federal government is, in effect, 00:53:59.950 --> 00:54:03.130 pushing a new kind of technology or scientific advance 00:54:03.130 --> 00:54:05.740 into the pipeline, and hopefully it 00:54:05.740 --> 00:54:07.130 will emerge from the pipeline. 00:54:07.130 --> 00:54:10.840 It's a technology push model, a technology supply model. 00:54:10.840 --> 00:54:13.630 That's the dominant model underlying US innovation 00:54:13.630 --> 00:54:15.160 policy. 00:54:15.160 --> 00:54:16.840 But there's also induced innovation. 00:54:16.840 --> 00:54:18.400 Remember, Vernon Ruttan came up with 00:54:18.400 --> 00:54:20.410 this theoretical framework. 00:54:20.410 --> 00:54:24.760 Industry does the majority of innovation in our economy. 00:54:24.760 --> 00:54:27.370 Industry will typically see a market niche or a market 00:54:27.370 --> 00:54:31.570 opportunity and will move to fill that opportunity-- 00:54:31.570 --> 00:54:35.900 typically with incremental advances, not radical advances. 00:54:35.900 --> 00:54:38.510 So that is a demand pull. 00:54:38.510 --> 00:54:41.240 Industry is identifying a potential demand 00:54:41.240 --> 00:54:43.670 that can pull the technology into the marketplace. 00:54:43.670 --> 00:54:47.530 That's typically what industry does. 00:54:47.530 --> 00:54:48.780 But then there's other models. 00:54:51.700 --> 00:54:54.670 The extended pipeline, we've just been talking about today. 00:54:54.670 --> 00:54:56.410 That's what the Defense Department does. 00:54:56.410 --> 00:54:59.050 It operates at every stage of the pipeline. 00:54:59.050 --> 00:55:01.510 So in addition to the pipeline model in the US system, 00:55:01.510 --> 00:55:04.910 we have an extended pipeline model in the US system. 00:55:04.910 --> 00:55:09.050 A fourth model is manufacturing-led innovation. 00:55:09.050 --> 00:55:11.520 US doesn't do this one. 00:55:11.520 --> 00:55:13.540 We didn't build this one. 00:55:13.540 --> 00:55:17.970 Countries like Germany and Japan do this model. 00:55:17.970 --> 00:55:21.220 Korea, Taiwan do this model. 00:55:21.220 --> 00:55:24.105 China now jumped on this model. 00:55:24.105 --> 00:55:25.730 In other words, their innovation system 00:55:25.730 --> 00:55:30.990 is led by the creative work, the new engineering, 00:55:30.990 --> 00:55:35.010 the new science that can lead to produce products. 00:55:35.010 --> 00:55:36.830 It's that product design stage that's 00:55:36.830 --> 00:55:42.880 central in a manufacturing-led innovation system. 00:55:42.880 --> 00:55:44.050 US never built one of these. 00:55:44.050 --> 00:55:46.530 So by creating these manufacturing institutes, 00:55:46.530 --> 00:55:52.350 that's an attempt in the US to get this piece into our system. 00:55:52.350 --> 00:55:59.330 Overall, entry into legacy sectors 00:55:59.330 --> 00:56:01.970 is such a complex effort that you're not 00:56:01.970 --> 00:56:06.030 going to do one of these innovation organization models. 00:56:06.030 --> 00:56:09.850 You're going to have to do probably all of them. 00:56:09.850 --> 00:56:12.540 When you think about a sector as complex as energy, 00:56:12.540 --> 00:56:16.000 you've probably got to tackle all of these dynamics 00:56:16.000 --> 00:56:18.240 to get the changes you need. 00:56:18.240 --> 00:56:23.490 So that puts a premium on innovation organization, 00:56:23.490 --> 00:56:26.850 the way in which you organize your innovation system. 00:56:26.850 --> 00:56:29.340 That becomes critical when you're trying 00:56:29.340 --> 00:56:30.840 to tackle a legacy sector. 00:56:30.840 --> 00:56:34.560 Just as we were having that conversation, Steph, 00:56:34.560 --> 00:56:38.040 that you pushed for, what's the new ways 00:56:38.040 --> 00:56:40.450 of organizing around innovation? 00:56:40.450 --> 00:56:42.470 What are the new models? 00:56:42.470 --> 00:56:45.110 If you're trying to innovate in a legacy sector like energy 00:56:45.110 --> 00:56:47.510 or manufacturing, you're going to need new models, 00:56:47.510 --> 00:56:49.760 and you're going to need to think about the innovation 00:56:49.760 --> 00:56:51.680 dynamics at each one of these points. 00:56:54.390 --> 00:56:57.730 Oh, I don't want to forget. 00:56:57.730 --> 00:57:01.390 You need change agents, because legacy sectors will not 00:57:01.390 --> 00:57:02.530 change themselves. 00:57:05.232 --> 00:57:06.690 You're going to have to have people 00:57:06.690 --> 00:57:10.830 prepared to push these legacy sectors to adapt change. 00:57:10.830 --> 00:57:12.330 And maybe it's political leadership. 00:57:12.330 --> 00:57:14.820 Maybe it's new companies and startups 00:57:14.820 --> 00:57:17.040 that are going to be the change agents. 00:57:17.040 --> 00:57:18.870 Maybe it's a new R&D agency. 00:57:18.870 --> 00:57:21.968 Maybe it's a mix of all of the above. 00:57:21.968 --> 00:57:23.760 But you're going to need change agents that 00:57:23.760 --> 00:57:28.460 are prepared to move things in these legacy sectors. 00:57:28.460 --> 00:57:31.070 So those are the five models. 00:57:31.070 --> 00:57:33.440 Some of this calls for us to think about what 00:57:33.440 --> 00:57:35.420 the governmental role is. 00:57:35.420 --> 00:57:38.035 Do we need a more activist governmental role 00:57:38.035 --> 00:57:39.035 in this kind of context? 00:57:41.880 --> 00:57:43.262 What's the process? 00:57:43.262 --> 00:57:44.720 And this is particularly important, 00:57:44.720 --> 00:57:48.390 because this is going to be important in your papers. 00:57:48.390 --> 00:57:51.600 So the stuff we're talking about here is going to be-- 00:57:51.600 --> 00:57:55.780 in terms of launching new technologies, 00:57:55.780 --> 00:57:58.090 this multi-step, five-step process 00:57:58.090 --> 00:57:59.620 is going to be something that I'm 00:57:59.620 --> 00:58:03.700 going to ask you to use as you consider the topics you develop 00:58:03.700 --> 00:58:05.830 in your papers. 00:58:05.830 --> 00:58:09.980 Step one-- you can't innovate without innovation. 00:58:09.980 --> 00:58:14.530 So you're going to need stuff. 00:58:14.530 --> 00:58:16.870 So you're going to have to have a front-end innovation 00:58:16.870 --> 00:58:20.610 system that's giving you creative stuff 00:58:20.610 --> 00:58:24.060 to innovate with. 00:58:24.060 --> 00:58:25.470 Here's some ideas here. 00:58:25.470 --> 00:58:28.170 Form critical innovation institutions. 00:58:28.170 --> 00:58:30.830 Build thinking communities so that you can have a-- 00:58:30.830 --> 00:58:32.970 you got have a community that's big enough 00:58:32.970 --> 00:58:35.550 to really get a lot of ideas on the table for innovation 00:58:35.550 --> 00:58:37.560 to occur. 00:58:37.560 --> 00:58:39.380 It's Romer. 00:58:42.348 --> 00:58:44.280 It's the prospective theory here. 00:58:44.280 --> 00:58:46.350 You've got to have a thinking community that's 00:58:46.350 --> 00:58:49.590 at a big enough scale that they can really work on creating 00:58:49.590 --> 00:58:51.630 innovations in a legacy sector. 00:58:51.630 --> 00:58:54.930 You need to link the technologists to the operators. 00:58:54.930 --> 00:58:56.690 They can't be in isolation from each other 00:58:56.690 --> 00:58:58.695 if you want to implement this stuff. 00:58:58.695 --> 00:59:00.570 And you can use that island and bridge model, 00:59:00.570 --> 00:59:02.850 and we'll talk more about this next week 00:59:02.850 --> 00:59:05.910 when we talk about innovation by great groups. 00:59:05.910 --> 00:59:10.290 But your innovators need to be connected decision-makers 00:59:10.290 --> 00:59:14.710 that can effectuate the changes they're going to propose. 00:59:14.710 --> 00:59:16.525 Some other steps, and then I'll quit 00:59:16.525 --> 00:59:20.950 and we can do some Q&A. Step two is, 00:59:20.950 --> 00:59:24.130 each technology is going to have a different launch path. 00:59:24.130 --> 00:59:29.110 The launch path for batteries for grid storage 00:59:29.110 --> 00:59:32.380 is probably going to be a very different launch path 00:59:32.380 --> 00:59:36.410 than batteries for transport. 00:59:36.410 --> 00:59:37.850 Launching into the utility sector 00:59:37.850 --> 00:59:40.130 versus launching into cars, those 00:59:40.130 --> 00:59:42.350 are different launch pathways. 00:59:42.350 --> 00:59:45.320 So you're going to have to think about what the launch pathway 00:59:45.320 --> 00:59:48.110 is for your technology that you want 00:59:48.110 --> 00:59:50.150 to have enter the marketplace. 00:59:50.150 --> 00:59:54.210 And then you're going to need to tie support packages 00:59:54.210 --> 00:59:56.580 to those launch pathways that fit, 00:59:56.580 --> 01:00:00.030 that are relevant to the particular launch pathways. 01:00:00.030 --> 01:00:04.260 A fourth step is, look at the innovation system and the gaps 01:00:04.260 --> 01:00:05.910 in the innovation system. 01:00:05.910 --> 01:00:08.150 What are the holes in the system? 01:00:08.150 --> 01:00:09.440 Where are things dying? 01:00:09.440 --> 01:00:11.510 For sure it's the valley of death, 01:00:11.510 --> 01:00:13.640 but what are the other gaps in that system? 01:00:13.640 --> 01:00:15.500 Because again, the valley of death 01:00:15.500 --> 01:00:19.760 is only between research and development. 01:00:19.760 --> 01:00:21.260 You've got all kinds of other stages 01:00:21.260 --> 01:00:24.020 to get through, too, all the way up into production. 01:00:24.020 --> 01:00:27.110 What are the gaps in that overall system? 01:00:27.110 --> 01:00:29.500 So think about what the gaps are, and then think 01:00:29.500 --> 01:00:31.270 about institutional fixes-- 01:00:31.270 --> 01:00:33.790 public or private or both-- 01:00:33.790 --> 01:00:37.070 that fill those gaps. 01:00:37.070 --> 01:00:40.900 So this is kind of a menu of how to think about bringing 01:00:40.900 --> 01:00:43.090 innovation into legacy sectors. 01:00:43.090 --> 01:00:45.700 And if you all are going to work in the energy field, 01:00:45.700 --> 01:00:47.910 that's the king of legacy sectors. 01:00:47.910 --> 01:00:50.800 Right if you want to pursue advanced manufacturing, 01:00:50.800 --> 01:00:52.950 that is a big-time legacy sector. 01:00:52.950 --> 01:00:54.700 So we're going to have to have a much more 01:00:54.700 --> 01:00:58.030 sophisticated innovation organization approach. 01:00:58.030 --> 01:01:02.800 We're not going to solve these problems by individual awards 01:01:02.800 --> 01:01:05.290 to individual investigators. 01:01:05.290 --> 01:01:07.880 That's not going to work. 01:01:07.880 --> 01:01:09.230 It's not going to get us there. 01:01:09.230 --> 01:01:12.080 We're going to have to have a whole new delivery system 01:01:12.080 --> 01:01:15.640 for the innovation system. 01:01:15.640 --> 01:01:18.860 Let's see if there's anything else I want to cover. 01:01:18.860 --> 01:01:23.210 Change agent orchestrates the activity here, and therefore 01:01:23.210 --> 01:01:24.450 is a pretty critical player. 01:01:24.450 --> 01:01:26.870 So again, these chapters here are 01:01:26.870 --> 01:01:30.200 pretty important for your paper, and that five-step process 01:01:30.200 --> 01:01:32.060 and understanding the dynamics of innovation 01:01:32.060 --> 01:01:36.390 are pieces that you're going to need in your paper. 01:01:36.390 --> 01:01:38.640 So Rasheed, it's all yours. 01:01:38.640 --> 01:01:40.190 RASHEED: Great. 01:01:40.190 --> 01:01:41.840 That's actually a great place to start, 01:01:41.840 --> 01:01:46.100 because I think a lot of us were pretty much in line 01:01:46.100 --> 01:01:48.890 with what was going on, understanding what a legacy 01:01:48.890 --> 01:01:50.240 sector is and identifying them. 01:01:50.240 --> 01:01:52.380 We're pretty much all OK with that. 01:01:52.380 --> 01:01:55.190 Where I think people started to diverge 01:01:55.190 --> 01:02:00.260 was deciding on who would play the role of these change 01:02:00.260 --> 01:02:01.482 agents. 01:02:01.482 --> 01:02:03.440 A lot of people were looking in their questions 01:02:03.440 --> 01:02:06.080 to figure out who would be the best poised 01:02:06.080 --> 01:02:08.660 in certain situations to play that role of a change agent. 01:02:08.660 --> 01:02:11.960 Would it change for different initiatives? 01:02:11.960 --> 01:02:15.710 And I think one of the interesting things 01:02:15.710 --> 01:02:19.460 was, we tried to identify of this community of change agents 01:02:19.460 --> 01:02:20.240 first. 01:02:20.240 --> 01:02:22.280 We were all looking for this thinking community 01:02:22.280 --> 01:02:24.038 for different individuals. 01:02:24.038 --> 01:02:25.580 So just to start off with, who do you 01:02:25.580 --> 01:02:30.080 think might be able to play a role, in any particular case, 01:02:30.080 --> 01:02:32.810 to be the change agent for a legacy sector? 01:02:32.810 --> 01:02:33.874 And it can be anyone. 01:02:39.121 --> 01:02:41.970 AUDIENCE: I'll start it off. 01:02:41.970 --> 01:02:43.150 This is a complex question. 01:02:43.150 --> 01:02:44.380 There's different answers. 01:02:44.380 --> 01:02:47.710 But I think for energy, I think the big thing would be having 01:02:47.710 --> 01:02:50.610 a breakthrough innovation. 01:02:50.610 --> 01:02:52.330 Because the main issue right now is, 01:02:52.330 --> 01:02:56.150 we are worried about climate change, but solar and-- 01:02:56.150 --> 01:02:59.627 well, solar in general is expensive, and doesn't really 01:02:59.627 --> 01:03:01.960 do what we need to do, because if you look at the energy 01:03:01.960 --> 01:03:05.650 market, how much is solar, it's rather small versus our energy 01:03:05.650 --> 01:03:06.910 needs and also the cost. 01:03:06.910 --> 01:03:08.440 It's hard to innovate there. 01:03:08.440 --> 01:03:10.850 But if you can come up with a much, 01:03:10.850 --> 01:03:14.310 much better innovation-- so maybe fusion. 01:03:14.310 --> 01:03:15.560 Maybe there's something there. 01:03:15.560 --> 01:03:17.102 It'd be the difference between if you 01:03:17.102 --> 01:03:20.290 had to come up with a whole new phone line system versus if you 01:03:20.290 --> 01:03:21.820 create the cell phone. 01:03:21.820 --> 01:03:24.290 You might have a huge opportunity there. 01:03:24.290 --> 01:03:26.950 And the thing that I think is important this issue is-- 01:03:26.950 --> 01:03:28.840 Steve Case, the guy who made AOL, 01:03:28.840 --> 01:03:31.210 has this thin called the third-wave entrepreneur, 01:03:31.210 --> 01:03:32.650 where it's like-- 01:03:32.650 --> 01:03:35.110 the thing about innovating in this sector 01:03:35.110 --> 01:03:37.540 is that, you kind of Uberize it in terms of, 01:03:37.540 --> 01:03:39.540 there's already an existing society. 01:03:39.540 --> 01:03:41.730 There's already all these institutions that people-- 01:03:41.730 --> 01:03:44.500 there's these pathways for this legacy sector. 01:03:44.500 --> 01:03:47.020 So when you innovate in it, the issue 01:03:47.020 --> 01:03:49.655 is going to be that you tear those down. 01:03:49.655 --> 01:03:51.280 And these people will spend their lives 01:03:51.280 --> 01:03:53.552 dedicating themselves to being part of the sector, 01:03:53.552 --> 01:03:54.760 and you just cannibalized it. 01:03:54.760 --> 01:03:56.950 So it's like, how do you really work with it? 01:03:56.950 --> 01:04:00.130 And that's a policy issue, but it's also a whole social issue. 01:04:00.130 --> 01:04:03.910 And I think Uber has been a good preliminary basic example, 01:04:03.910 --> 01:04:04.410 because-- 01:04:04.410 --> 01:04:06.720 it's pretty much an appetizer, or a warm-up example. 01:04:06.720 --> 01:04:09.400 But if somebody did come up with an amazing innovation 01:04:09.400 --> 01:04:12.340 in energy, like fusion that is relatively cheap 01:04:12.340 --> 01:04:15.760 and won't take like 10 years to build a reactor, 01:04:15.760 --> 01:04:18.160 then maybe something like that could happen. 01:04:18.160 --> 01:04:21.060 Any other thoughts? 01:04:21.060 --> 01:04:23.900 AUDIENCE: Maybe another good example, probably almost 01:04:23.900 --> 01:04:24.610 more disruptive. 01:04:24.610 --> 01:04:25.568 You mentioned gasoline. 01:04:25.568 --> 01:04:28.340 It would be-- that's part of what makes Elon Musk a really 01:04:28.340 --> 01:04:30.370 interesting change agent. 01:04:30.370 --> 01:04:33.050 He's not just developing the electrics 01:04:33.050 --> 01:04:36.602 that drive the car, but the charging stations that 01:04:36.602 --> 01:04:38.060 will go in the house, and then even 01:04:38.060 --> 01:04:40.700 connected to the solar roofing that will charge those 01:04:40.700 --> 01:04:41.720 stations. 01:04:41.720 --> 01:04:46.970 I think you put a lot of thought into, basically, the launch 01:04:46.970 --> 01:04:49.100 pathway for that technology. 01:04:51.913 --> 01:04:53.330 STEPH: That's a really good point, 01:04:53.330 --> 01:04:57.377 because I think often about the energy value chain in the oil 01:04:57.377 --> 01:04:59.210 and gas industry-- like upstream, midstream, 01:04:59.210 --> 01:05:03.610 downstream-- and the flow of value within the industry, 01:05:03.610 --> 01:05:04.447 and I feel like-- 01:05:04.447 --> 01:05:06.530 I hadn't thought of that, that Elon is essentially 01:05:06.530 --> 01:05:11.390 creating not only upstream change, but also midstream 01:05:11.390 --> 01:05:15.710 change and downstream change, in that he's comprehensively 01:05:15.710 --> 01:05:17.720 trying to transform the industry and capture 01:05:17.720 --> 01:05:21.040 all of the value for himself. 01:05:21.040 --> 01:05:24.765 But I definitely think that perhaps-- 01:05:24.765 --> 01:05:26.790 or I don't know, maybe I'll pose this question. 01:05:26.790 --> 01:05:31.478 do you feel like change happens more-- 01:05:31.478 --> 01:05:33.270 or change is more feasible on the midstream 01:05:33.270 --> 01:05:36.030 or downstream sector? 01:05:36.030 --> 01:05:38.790 Because I feel like upstream is kind of that disruption. 01:05:38.790 --> 01:05:41.550 It's trying to create fusion, which can be challenging, 01:05:41.550 --> 01:05:44.990 and it can be difficult to have people adopt. 01:05:44.990 --> 01:05:47.240 But then you get stuck at the midstream or downstream. 01:05:47.240 --> 01:05:48.818 Do you want to change infrastructure, 01:05:48.818 --> 01:05:50.610 or do you want to change consumer patterns, 01:05:50.610 --> 01:05:51.770 is my question. 01:05:51.770 --> 01:05:53.560 RASHEED: Steph, quickly define upstream, 01:05:53.560 --> 01:05:56.713 midstream, downstream for me. 01:05:56.713 --> 01:05:57.380 STEPH: Oh, yeah. 01:05:57.380 --> 01:06:00.120 So upstream is just the production aspects of it-- 01:06:00.120 --> 01:06:04.550 so the extraction of natural gas and oil. 01:06:04.550 --> 01:06:07.190 So the derrick systems. 01:06:07.190 --> 01:06:08.980 Midstream is the infrastructure that's 01:06:08.980 --> 01:06:11.110 created in order to transport that-- so, say, 01:06:11.110 --> 01:06:15.310 the railways, the trailers, the trucks, et cetera. 01:06:15.310 --> 01:06:17.440 And then downstream is the consumer aspects of it-- 01:06:17.440 --> 01:06:21.216 so the people buying it in their car at scale. 01:06:26.640 --> 01:06:28.885 RASHEED: So I think what's interesting about this-- 01:06:28.885 --> 01:06:30.260 and maybe particularly in energy, 01:06:30.260 --> 01:06:32.970 but in other fields and other legacy sectors-- 01:06:32.970 --> 01:06:36.160 creating these thinking communities of change agents, 01:06:36.160 --> 01:06:39.150 which is the first step, is something 01:06:39.150 --> 01:06:40.650 that you can't really-- 01:06:44.400 --> 01:06:46.620 is there a way to organically do this? 01:06:46.620 --> 01:06:48.870 Because I don't see getting together 01:06:48.870 --> 01:06:50.850 the heads of all of the big energy 01:06:50.850 --> 01:06:52.440 corporations together in a room. 01:06:52.440 --> 01:06:56.220 They're not going to come up with anything super radical. 01:06:56.220 --> 01:06:59.200 And so there's no-- 01:06:59.200 --> 01:07:01.530 and it's way different from-- 01:07:01.530 --> 01:07:03.697 before you could just get the Comptons, the Vannevar 01:07:03.697 --> 01:07:05.113 Bush in the room, and you're going 01:07:05.113 --> 01:07:06.680 to get something crazy out. 01:07:06.680 --> 01:07:09.060 But now, if you're looking to innovate in a sector, 01:07:09.060 --> 01:07:11.880 you can't really call upon the greatest minds pulled here 01:07:11.880 --> 01:07:13.980 and then get something out. 01:07:13.980 --> 01:07:16.470 AUDIENCE: Can you give me an example [INAUDIBLE] 01:07:16.470 --> 01:07:18.500 just to [INAUDIBLE]? 01:07:18.500 --> 01:07:21.940 AUDIENCE: Well, isn't MIT trying to create a thinking group, 01:07:21.940 --> 01:07:26.070 or a space where thinking groups can occur, with The Engine? 01:07:26.070 --> 01:07:28.900 Isn't that one of-- 01:07:28.900 --> 01:07:31.453 WILLIAM BONVILLIAN: Yeah, or Mighty could be 01:07:31.453 --> 01:07:32.870 and the Energy Initiative could be 01:07:32.870 --> 01:07:35.840 seen as a thinking community. 01:07:35.840 --> 01:07:37.280 It's not simply MIT-based. 01:07:37.280 --> 01:07:41.660 It brings in all kinds of people from various sectors and places 01:07:41.660 --> 01:07:44.360 to think through these big challenges. 01:07:44.360 --> 01:07:47.280 And the big reports that MIT does 01:07:47.280 --> 01:07:50.030 are the products of these thinking communities 01:07:50.030 --> 01:07:52.940 as they attempt to think through a new technology area, 01:07:52.940 --> 01:07:58.400 like solar or the future of the grid. 01:07:58.400 --> 01:08:01.070 STEPH: [INAUDIBLE] did you interact 01:08:01.070 --> 01:08:05.120 at all with the American Petroleum Institute? 01:08:05.120 --> 01:08:07.220 SARAH JANE MAXTED: Well, not really. 01:08:07.220 --> 01:08:08.810 It was there. 01:08:08.810 --> 01:08:10.760 It was affiliated-- 01:08:10.760 --> 01:08:12.063 I don't even know how. 01:08:12.063 --> 01:08:13.730 I think it was out of Office of Science? 01:08:13.730 --> 01:08:14.785 Or was it Fossil? 01:08:14.785 --> 01:08:15.910 WILLIAM BONVILLIAN: Fossil. 01:08:15.910 --> 01:08:16.993 SARAH JANE MAXTED: Fossil. 01:08:16.993 --> 01:08:19.560 I think the Office of Fossil Energy has the relationship. 01:08:19.560 --> 01:08:22.203 But we didn't interact with them at all. 01:08:22.203 --> 01:08:24.370 STEPH: So I think an interesting example for Rasheed 01:08:24.370 --> 01:08:27.109 within the legacy sector of oil and gas, 01:08:27.109 --> 01:08:28.850 because I know API does a lot of work 01:08:28.850 --> 01:08:31.520 in ensuring that the regulatory framework is there 01:08:31.520 --> 01:08:32.840 for all of the oil companies. 01:08:32.840 --> 01:08:34.910 And the heads of all the oil companies 01:08:34.910 --> 01:08:38.540 get together as a group, or provide representatives 01:08:38.540 --> 01:08:40.460 at meetings, and then they go through 01:08:40.460 --> 01:08:45.260 and talk about the potential outcomes for the energy 01:08:45.260 --> 01:08:46.939 industry, and then think collaboratively 01:08:46.939 --> 01:08:50.120 about what that industrial framework might look like. 01:08:50.120 --> 01:08:53.210 And obviously, there's a lot of those industries that 01:08:53.210 --> 01:08:55.231 are trying to create disruptive innovations, 01:08:55.231 --> 01:08:56.689 because that's the only way they're 01:08:56.689 --> 01:08:58.481 going to win in the market in the long run. 01:08:58.481 --> 01:09:00.147 SARAH JANE MAXTED: Well, I think there-- 01:09:00.147 --> 01:09:00.770 so there are-- 01:09:00.770 --> 01:09:03.979 I think something to think about. 01:09:03.979 --> 01:09:06.365 Most applied programs in government have-- 01:09:08.930 --> 01:09:10.760 what do you call them, working sessions 01:09:10.760 --> 01:09:13.020 where they hear industry-- what do they call them? 01:09:13.020 --> 01:09:13.520 Oh my god. 01:09:13.520 --> 01:09:14.145 Peer reviews? 01:09:14.145 --> 01:09:15.020 Oh, not peer reviews. 01:09:15.020 --> 01:09:16.395 I don't know what they call them. 01:09:16.395 --> 01:09:18.290 But it's basically where you bring together 01:09:18.290 --> 01:09:23.263 the community of practice of all of the people 01:09:23.263 --> 01:09:24.680 that make sense to bring together, 01:09:24.680 --> 01:09:27.310 in solar and batteries or whatever, 01:09:27.310 --> 01:09:32.090 and you have a conversation to identify pain points. 01:09:32.090 --> 01:09:34.075 And all of the ERE does this. 01:09:34.075 --> 01:09:35.450 The Energy Efficiency [INAUDIBLE] 01:09:35.450 --> 01:09:38.840 office and I know most other applied programs 01:09:38.840 --> 01:09:41.660 do as well, to kind of do that. 01:09:41.660 --> 01:09:44.720 But I actually think-- to your point about, 01:09:44.720 --> 01:09:47.390 does it really make sense to get all these execs in a room? 01:09:47.390 --> 01:09:49.490 Are they really going to move the ball forward? 01:09:49.490 --> 01:09:51.439 Is actually a really interesting question, 01:09:51.439 --> 01:09:55.550 because I think we're starting to see more of the exevs 01:09:55.550 --> 01:09:58.100 in the room with the midstream and the downstream, 01:09:58.100 --> 01:09:59.650 and all of the-- 01:09:59.650 --> 01:10:02.030 to actually be innovative, it can't just 01:10:02.030 --> 01:10:04.350 be the CEOs of these companies. 01:10:04.350 --> 01:10:06.950 It has to actually be different layers as well. 01:10:06.950 --> 01:10:11.650 And I think that goes to this-- they can do this kind of model. 01:10:11.650 --> 01:10:13.950 I don't know if that answered the question. 01:10:13.950 --> 01:10:15.990 WILLIAM BONVILLIAN: So I'm going to need to-- 01:10:15.990 --> 01:10:18.610 if we're going to get out of here, 01:10:18.610 --> 01:10:21.280 I'm going to need to do a wrap-up of today. 01:10:21.280 --> 01:10:24.600 And then I want to talk about next week's class, 01:10:24.600 --> 01:10:27.022 because seven of you will be presenting, 01:10:27.022 --> 01:10:28.980 and I just want to go through the dynamics of-- 01:10:28.980 --> 01:10:30.195 that's going to be a different kind of class, 01:10:30.195 --> 01:10:31.930 so I just want to talk about that. 01:10:31.930 --> 01:10:33.930 But before we do that, Rasheed, why don't you 01:10:33.930 --> 01:10:37.440 lay out you know some closing thoughts for us on this piece? 01:10:37.440 --> 01:10:38.035 RASHEED: Yeah. 01:10:38.035 --> 01:10:39.660 So I didn't get to it, and I was hoping 01:10:39.660 --> 01:10:40.952 to, actually, another question. 01:10:40.952 --> 01:10:45.180 But another idea that everybody had 01:10:45.180 --> 01:10:48.330 was identifying policy and policymakers 01:10:48.330 --> 01:10:51.540 to give this impetus towards making these changes, 01:10:51.540 --> 01:10:54.090 and making these changes more politically 01:10:54.090 --> 01:10:56.250 favorable and apparent. 01:10:56.250 --> 01:10:58.730 And it's difficult in these legacy sectors 01:10:58.730 --> 01:11:00.480 because, I think, you're facing and you're 01:11:00.480 --> 01:11:02.822 up against powerful vested interests. 01:11:02.822 --> 01:11:04.530 And I think it's just, to Martin's point, 01:11:04.530 --> 01:11:08.190 making the case for, maybe I don't have fusion yet, 01:11:08.190 --> 01:11:11.910 but it's making it socially applicable or politically 01:11:11.910 --> 01:11:16.402 palatable to say, if we invest here and get this fusion, 01:11:16.402 --> 01:11:18.360 we can make this change that can be politically 01:11:18.360 --> 01:11:19.710 favorable for everybody. 01:11:19.710 --> 01:11:23.418 And so I think looking at policy incentives, 01:11:23.418 --> 01:11:24.960 you have to think a little bit bigger 01:11:24.960 --> 01:11:28.770 than just what is scientifically or technologically possible. 01:11:28.770 --> 01:11:31.198 But I think this is a great piece, 01:11:31.198 --> 01:11:33.740 and this is was a great piece for us because it encourages us 01:11:33.740 --> 01:11:37.855 to not only think about innovation systems as being 01:11:37.855 --> 01:11:40.230 differentiating-- you can do different things but achieve 01:11:40.230 --> 01:11:41.160 the same result-- 01:11:41.160 --> 01:11:44.460 but also, a lot of people have to buy into and get on board 01:11:44.460 --> 01:11:46.200 and be coordinated in their actions 01:11:46.200 --> 01:11:49.110 to achieve feasible and long-term change, 01:11:49.110 --> 01:11:50.910 because we have a lot bigger problems 01:11:50.910 --> 01:11:52.998 than we did 50 or 100 years ago. 01:11:52.998 --> 01:11:54.540 WILLIAM BONVILLIAN: And a lot of them 01:11:54.540 --> 01:11:56.940 are tied to these legacy sectors. 01:11:56.940 --> 01:11:58.080 Thank you. 01:11:58.080 --> 01:12:01.320 So I'm going to do a quick wrap-up of this class. 01:12:05.280 --> 01:12:08.880 So our backdrop was Donald Stokes and Pasteur's Quadrant, 01:12:08.880 --> 01:12:12.450 and that led us into Branscomb and Auerswald. 01:12:12.450 --> 01:12:17.650 And their underlying-- the focus of innovation policy, frankly, 01:12:17.650 --> 01:12:22.073 for the last 25 years has been on the problem 01:12:22.073 --> 01:12:24.240 that they write about, this valley of death problem. 01:12:24.240 --> 01:12:26.260 And how do you get across it? 01:12:26.260 --> 01:12:28.390 But one thing I want to be clear about today 01:12:28.390 --> 01:12:32.680 is, the valley of death is only one piece of a larger 01:12:32.680 --> 01:12:35.500 innovation system which stretch a lot further than just 01:12:35.500 --> 01:12:37.570 research and development, and we've 01:12:37.570 --> 01:12:41.350 got to think about the gaps in that system overall. 01:12:41.350 --> 01:12:42.910 But Branscomb and Auerswald really 01:12:42.910 --> 01:12:46.300 lead us into this foundational problem. 01:12:46.300 --> 01:12:51.220 And a valley of death is essentially a linear view, 01:12:51.220 --> 01:12:54.220 and they also point out that, hey, the system is really not 01:12:54.220 --> 01:12:54.820 linear. 01:12:54.820 --> 01:12:56.120 It's more complex than that. 01:12:56.120 --> 01:12:58.660 It's this Darwinian sea. 01:12:58.660 --> 01:13:04.210 Ruttan describes for us this parallel universe. 01:13:04.210 --> 01:13:07.480 We have a set of civilian basic research agencies, 01:13:07.480 --> 01:13:10.510 and then we have a very differently organized set 01:13:10.510 --> 01:13:14.350 of defense R&D agencies and mission agencies. 01:13:14.350 --> 01:13:15.940 And they are very different systems, 01:13:15.940 --> 01:13:18.190 and one is, from an organizational point 01:13:18.190 --> 01:13:20.950 of view purposely disconnected. 01:13:20.950 --> 01:13:23.620 The other is purposely connected, 01:13:23.620 --> 01:13:25.900 and they are different worlds. 01:13:25.900 --> 01:13:29.517 We have gotten a lot out of that defense innovation system. 01:13:29.517 --> 01:13:31.600 We don't normally think about it or talk about it, 01:13:31.600 --> 01:13:34.120 but the results are quite powerful. 01:13:34.120 --> 01:13:37.810 Glenn Fong told us about the models 01:13:37.810 --> 01:13:40.120 that DoD uses when it's actually going 01:13:40.120 --> 01:13:43.690 to play a role in civilian sectors, 01:13:43.690 --> 01:13:46.960 and laid out the byproduct model, the spin-off model, 01:13:46.960 --> 01:13:49.260 the dual-use model, the industrial base model. 01:13:49.260 --> 01:13:53.890 So these are all models the DoD uses in practice. 01:13:53.890 --> 01:13:56.320 We looked at In-Q-Tel, which in some ways 01:13:56.320 --> 01:13:59.560 is the most extreme model of governmental intervention 01:13:59.560 --> 01:14:02.110 into the private sector, because it will actually 01:14:02.110 --> 01:14:04.540 play the role of being a venture capital firm 01:14:04.540 --> 01:14:08.410 and take ownership positions in companies that it wants 01:14:08.410 --> 01:14:12.250 to encourage innovation in. 01:14:12.250 --> 01:14:16.390 We talked about the new model innovation agency piece. 01:14:16.390 --> 01:14:20.830 Essentially, the idea here is that the system isn't static. 01:14:20.830 --> 01:14:23.920 It isn't standing still from the time Vannevar Bush created it. 01:14:23.920 --> 01:14:27.280 It has been changing pretty dynamically over time. 01:14:27.280 --> 01:14:29.800 And these outside crises-- 01:14:29.800 --> 01:14:31.960 the competitiveness challenge in the 1980s, 01:14:31.960 --> 01:14:36.710 the Sputnik challenge of the later part of the '50s, 01:14:36.710 --> 01:14:40.180 the energy technology challenge, now this advanced manufacturing 01:14:40.180 --> 01:14:42.520 challenge-- these are all external elements 01:14:42.520 --> 01:14:45.190 that have been driving change in the US system 01:14:45.190 --> 01:14:50.640 and pushing its model to be more of a connected model. 01:14:50.640 --> 01:14:52.890 And then the final reading was about innovation 01:14:52.890 --> 01:14:56.130 in legacy sectors. 01:14:56.130 --> 01:15:00.450 As we discussed just now, many of our deep societal problems 01:15:00.450 --> 01:15:03.270 are tied up in these legacy sectors. 01:15:03.270 --> 01:15:05.580 And these legacy sectors need innovation, 01:15:05.580 --> 01:15:09.210 and they resist it inherently in their model. 01:15:09.210 --> 01:15:12.120 And how do you think about innovation organization that's 01:15:12.120 --> 01:15:15.970 going to start to bring new technology 01:15:15.970 --> 01:15:18.340 advances, new innovative advances 01:15:18.340 --> 01:15:20.230 into these legacy sectors that they 01:15:20.230 --> 01:15:22.750 will be disruptive of their business models? 01:15:22.750 --> 01:15:24.250 How do we start to think about that? 01:15:24.250 --> 01:15:27.310 Because we're now into that project, 01:15:27.310 --> 01:15:30.520 and we need to much more systematically organize 01:15:30.520 --> 01:15:33.970 our innovation organization approaches to cope with it. 01:15:33.970 --> 01:15:37.550 So that takes us through class 6. 01:15:37.550 --> 01:15:39.928 Next week is going to be a different kind of class, 01:15:39.928 --> 01:15:42.220 because you guys are going to own it much more than I'm 01:15:42.220 --> 01:15:43.360 going to own it. 01:15:43.360 --> 01:15:45.850 So seven of you will be presenters. 01:15:45.850 --> 01:15:48.710 I'm asking that-- and I've got pretty detailed directions 01:15:48.710 --> 01:15:49.710 in describing the class. 01:15:49.710 --> 01:15:51.700 If you've got questions, let me know. 01:15:51.700 --> 01:15:54.880 But divvy up the innovation organization groups 01:15:54.880 --> 01:15:56.200 you want to present on. 01:15:56.200 --> 01:15:59.390 And as we discussed a few weeks ago, 01:15:59.390 --> 01:16:01.990 I'd love to have innovation groups that 01:16:01.990 --> 01:16:04.510 were based on other than dead white males in the group. 01:16:04.510 --> 01:16:08.350 So if somebody can find some, fine. 01:16:08.350 --> 01:16:09.490 And talk to me about them. 01:16:09.490 --> 01:16:11.978 I may be able to help you on sources. 01:16:11.978 --> 01:16:13.270 If you can't, that's fine, too. 01:16:13.270 --> 01:16:16.240 And these are very interesting groups, so it's going to be-- 01:16:16.240 --> 01:16:20.170 whichever one you pick, these are very interesting stories. 01:16:20.170 --> 01:16:22.560 I think we'll have fun with them. 01:16:22.560 --> 01:16:25.330 And the great group model takes us-- 01:16:25.330 --> 01:16:27.910 we've been talking about institutional innovation. 01:16:27.910 --> 01:16:30.430 We talked a lot about that today. 01:16:30.430 --> 01:16:32.740 Innovation at the institutional level. 01:16:32.740 --> 01:16:34.720 But innovation belongs to people, 01:16:34.720 --> 01:16:37.270 and they organize themselves in groups, 01:16:37.270 --> 01:16:39.520 and we have to understand the dynamics of those groups 01:16:39.520 --> 01:16:40.840 as well. 01:16:40.840 --> 01:16:43.400 So that's what the object of the class is. 01:16:43.400 --> 01:16:45.010 So I'm going to ask the presenters 01:16:45.010 --> 01:16:49.900 to do three or four slides on your group, and tell us 01:16:49.900 --> 01:16:52.360 what they accomplished, what they did. 01:16:52.360 --> 01:16:59.670 Tell us what-- the rules that they followed from the Bennis 01:16:59.670 --> 01:17:01.670 and Biederman framework, which is 01:17:01.670 --> 01:17:03.530 one of the several foundational readings 01:17:03.530 --> 01:17:04.940 that everybody should read. 01:17:04.940 --> 01:17:06.920 What were the rules that they followed? 01:17:06.920 --> 01:17:09.520 And then what is a new rule or two 01:17:09.520 --> 01:17:12.590 that you see them doing that's different in the Bennis 01:17:12.590 --> 01:17:13.850 and Biederman rule? 01:17:13.850 --> 01:17:16.670 What's different about your particular group 01:17:16.670 --> 01:17:21.040 that contributes to our thinking about how great groups operate?